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Product Liability vis-a -vis the Consumer Protection Act, 2019

In India, we do not have one specific statute which covers the legal framework for product liability claims.

Product Liability prior to the Consumer Protection Act, 2019

Prior to the Consumer Protection Act, 2019 (“New Act”) there was no specific product liability theory in India. In the absence of a statutory law, courts were guided by the principles of justice, equity and good conscience and more than often guided by the provisions of English Law. The often cited case of Donoghue v. Stevenson[i] lay down the position where one owes a duty of care to another, and if such duty of care is breached, there is negligence irrespective of whether any contractual relationship exists between the parties or not.

Before we proceed with understanding the concept of product liability as mentioned in the New Act, we make it evident that there were certain laws in India which protected the interests of the consumers against faulty products. Some of the laws which have protected the interest of the consumers against faulty products would include, among others:

  • The Consumer Protection Act, 1986;
  • The Indian Contracts Act 1872;
  • The Sale of Goods Act 1930;
  • The Drugs and Cosmetics Act, 1945; and
  • The Prevention of Food Adulteration Act, 1954.

Though these laws touched on product liability to some extent, none of them could lay a comprehensive legal framework. These statutes were not able to identify a particular individual or entity in the supply chain against whom a consumer could raise a complaint. Thus, it was the need of the hour to establish a detailed product liability doctrine which would safeguard the interest of the consumers.

Product liability under the Consumer Protection Act, 2019

To strengthen the safeguards guaranteed to a consumer, the President gave his assent to the Consumer Protection Act, 2019 on 9th August, 2019. The New Act, introduces the concept of product liability, seeks to revamp the process and settlement of consumer disputes, establishes a Central Consumer Protection Authority as a central authority and Consumer Protection Councils at the district, state and national level, introduces penalties, covers unfair trade practices, unfair contracts, broadens the definition of a “consumer”, among other changes.

The New Act defines product liability[ii] as “the responsibility of a product manufacturer or product seller, of any product or service, to compensate for any harm caused to a consumer by such defective product manufactured or sold or by deficiency in services relating thereto.” The impact is that it is not only the manufacturer who will be liable to compensate a consumer but also the seller if it fulfils the conditions mentioned in the New Act[iii]. The New Act allows a person to raise a product liability action by means of filing a complaint before a District Commission or State Commission or National Commission[iv].

Manufacturer Liabilities

The New Act sets out the following scenarios in which a product manufacturer shall be liable:

  • the product contains a manufacturing defect, or
  • the product has a defective design, or
  • there is a deviation from the manufacturing specifications, or
  • the product does not conform to an express warranty given by the manufacturer (even when the manufacturer proves that it was not negligent or fraudulent in making the express warranty for the product), or
  • the product does not contain adequate instructions or any warning regarding improper or incorrect usage of correct usage to prevent harm.

Service Provider Liabilities

Similarly, a service provider shall be liable for:

  • providing services which were faulty, imperfect, deficient or inadequate, or
  • proving inadequate instructions and warning to prevent harm, or
  • providing services which do not conform to the warranty or the terms and conditions mentioned in the contract.

Seller Liabilities

The New Act even makes a product seller liable for a product liability claim if:

  • it has exercised substantial control over the designing, testing, manufacturing, packaging or labelling of the product, or
  • it altered or modified the product and such alteration or modification was a substantial factor in causing the harm, or
  • it has made an express warranty which is independent of the warranty made by a manufacturer and such product failed to conform to such express warranty made by the product seller which caused the harm, or
  • the identity of the manufacturer is not known or if known the service of notice or process or warrant cannot be affected on the manufacturer or it the manufacturer is not subject to the law which is force in India, or
  • the product seller has failed to exercise reasonable case in assembling, inspecting or maintaining the product or it did not follow the warnings or instructions for the product provided by the manufacturer while selling such product and such failure was the proximate cause of the harm caused to such product.

Exceptions to a product liability action claim

The New Act envisages certain scenarios where a product liability action cannot be brought against the product seller. No liability will be fastened on the product seller if at the time of harm, the product was misused altered or modified.

Further, a product liability action will not be fastened on the product manufacturer if it fails to provide adequate warnings or instructions, if:

  • the product was purchased to be used at a workplace and the product manufacturer had provided warnings to such employer, or
  • the product was sold as a component to be used in another product and necessary instructions and warnings had been given by the manufacturer, and the harm was caused to the complainant from the use of the end product, or
  • the product was one which was legally meant to be used under the supervision of an expert or a class of experts and the product manufacturer had employed reasonable means to give warnings or instructions for usage to such expert or class of experts, or
  • the complainant was under the influence of alcohol or any prescription drug while using the product which was not prescribed a medical practitioner, or
  • such instructions or warnings are obvious or commonly known to a user or a consumer of such product or which the consumer should have known, taking into account the characteristics of such product.

Implications

As per the New Act if the central authority is satisfied on the basis of investigation that there is sufficient evidence to establish violation of consumer rights or unfair trade practices, it may pass an order which could include:

  • recalling of goods or withdrawal of the goods;
  • reimbursement of the price of the products or services so recalled to the purchaser; and
  • discontinuation of practices which may be unfair and prejudicial to the consumers interest.

In addition, if the central authority is satisfied after investigation that any advertisement is false or misleading or is in contravention to consumer rights, it might issue a direction to the manufacturer or endorser or advertiser or publisher to discontinue such advertisement or modify the same.

Therefore, we see that the New Act is being cautious to employ responsibilities even on the endorsers or publishers of an advertisement. In this regard, the central authority may impose a penalty on a manufacturer or an endorser which may extend to Rs. Ten lakhs (Rupees One million). A subsequent contravention may result in levying the penalty to the tune of Rs. Fifty lakhs (Rupees Five million).

Further, the central authority may also prohibit the endorser from making endorsements of any product or service which may extend to one year and on a subsequent contravention to the tune of three years.

Additional safeguards placed for e-commerce companies

The central authority with a view to protect the interest of the consumers from the e-commerce entities who make direct sales to the consumers will provide for measures in the future which will protect the consumer from unfair trade practices in e-commerce.

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[i] [1932] UKHL 100

[ii] Section 2(34) of the Consumer Protection Act, 2019

[iii] Section 82 of the Consumer Protection Act, 2019

[iv] Section 2(35) of the Consumer Protection Act, 2019

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