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Reinforcing consumer’s interest: Introduction of product liability

by Sonia Abrol Kritika Krishnamurthy

The Consumer Protection Act, 2019 (“New Regime”) finally replaces and overhauls the Consumer Protection Act, 1986 (“Erstwhile Legislation”) by making various amendments to the Erstwhile Legislation and by introducing many new provisions and concepts. Although repeated attempts were made from time to time during the past few years to amend the Erstwhile Legislation by introducing the Consumer Protection Bill 2011, the Consumer Protection Bill 2015 and the Consumer Protection Bill 2018, each time these bills lapsed and could not see the light of day until the New Regime came into effect.

While keeping the text of the preamble of the New Regime similar to that of the Erstwhile Legislation, the New Regime enhances the scope of ‘protection accorded to the interests of consumers’ by way of inserting new provisions related to (i) product liability i.e. where liability of the product manufacturer, product seller and product service provider in case of any defect found in the product has been determined separately; (ii) unfair contracts i.e. when rights of the consumers are significantly altered where a contract exists between manufacturer or trader or service provider on the one hand and a consumer on the other; (iii) setting up of separate regulatory body, i.e. Central Consumer Protection Authority for promoting, protecting and enforcing the rights of consumers as a class which may be violated due to unfair trade practices and misleading advertisements; (iv) establishment of mediation as an alternate and quick dispute resolution mechanism; and (v) preventing unfair trade practices of goods and services by covering e-commerce transactions.

Amongst all the significant and essential additions in the New Regime as highlighted above and for which no specific provisions were present in the Erstwhile Legislation, this article will specifically examine the concept of ‘product liability’ as being one of the foremost, prime and required additions. So far in India, no separate comprehensive legal framework or specific statute capturing the concept of product liability exists and the term has been understood in general parlance to mean liability of such party (i.e. manufacturer or vendor of the product or any person who is part of the chain of distribution of products from manufacturer to end consumer) from whom defective product has been sourced and then sold to the consumer. Also, certain statutes in India have in general safeguarded the interests of the consumers in connection with faulty or defective products i.e. the Indian Contract Act, 1872, the Sale of Goods Act, 1930 and the Drug and Cosmetics Act, 1940, etc. Since there is no particular statute for this and only sector specific laws with regard to the same exist, it is pertinent to note that reliance has always been placed on the principle of natural justice, equity and good conscience and upon the decisions of the English landmark judgements. A prominent judgement from which Indian courts have also taken guidance often is ‘Donoghue v. Stevenson’ wherein the principle of ‘duty to care’ was established.

Understanding product liability viz-a-viz the New regime:

Although the Erstwhile Legislation touches upon product liability, no detailed doctrine was laid down for the same. Earlier, the principles governing treatment of product liability evolved through judgements of the Indian Courts. The New Regime, however, has come up with an independent chapter altogether, thereby broadening the horizon of the concept. Prior to examining what product liability actually is, it is important to note that term such as ‘product’, ‘product liability’, ‘product liability action’, ‘product manufacturer’, ‘product seller’ and ‘product service provider’ have also been introduced in the New Regime for ease of understanding. It even defines what constitutes ‘harm’ in relation to product liability. With such clearly defined terms, the New Regime has left no scope for ambiguity of any sort.

The New Regime bifurcates the responsibility of the product manufacturer, product service provider and that of the product seller and provides clarity as to when any or all of them would be held liable, respectively, for any harm caused to or injury suffered by the consumer on account of defective products manufactured or sold or by deficiency in the services provided. Furthermore, it takes a step forward and gives protection to such consumers or complainants by firstly, granting them a right to file a complaint against any of the above, as the case may be, and secondly, by allowing them to make a claim for compensation before a District Commission or State Commission or National Commission, as the case may be, for such harm caused. Additionally, the New Regime sets out various conditions under which the product manufacturer, product service provider and the product seller would be held responsible and when product liability action can actually be initiated against each one of them respectively.

  • In case of a manufacturer of a product, the circumstances under which he shall be held liable in a product liability action are, if the product (a) contains a manufacturing defect; or (b) is defective in design; or (c) suffers from a deviation from manufacturing specifications; or (d) does not conform to the express warranty; or (e) fails to contain adequate instructions of correct usage to prevent any harm or any warning regarding improper or incorrect usage. Also, even if the manufacturer proves that there was no negligence on his part in making express warranty of a product, he shall still be responsible in a product liability action.
  • Similarly, the grounds on which a service provider of a product shall be responsible in a product liability action are, if (a) the service provided are faulty or imperfect or deficient or inadequate in quality, nature or manner of performance which is required to be provided by or under any law for the time being in force, or in accordance with any contract or otherwise; or (b) there has been an act of omission or commission or negligence or conscious withholding any information which caused harm; or (c) the service provider did not issue adequate instructions or warnings to prevent any harm; or (d) the service did not conform to express warranty or the terms and conditions of the contract.
  • Lastly, the scenarios under which a product seller who is not a product manufacturer shall be accountable are, if (a) he has exercised substantial control over the designing, testing, manufacturing, packaging or labelling of a product that caused harm; or (b) he has altered or modified the product and such alteration or modification was the substantial factor in causing the harm; or (c) he has made an express warranty of a product independent of any express warranty made by a manufacturer and such product failed to conform to the express warranty made by the product seller which caused the harm; or (d) the product has been sold by him and the identity of product manufacturer of such product is not known, or if known, the service of notice or process or warrant cannot be effected on him or he is not subject to the law which is in force in India or the order, if any, passed or to be passed cannot be enforced against him; or (e) he failed to exercise reasonable care in assembling, inspecting or maintaining such product or he did not pass on the warnings or instructions of the product manufacturer regarding the dangers involved or proper usage of the product to the consumer.

In addition to the aforesaid provisions, the New Regime provides exceptions to product liability action against product seller and product manufacturer. Where the product would have been misused, altered, or modified at the time of the harm caused, no product liability action will be taken against the product seller. Similarly, certain events have been envisaged when no product liability action will be imposed on the product manufacturer, if it fails to provide adequate warnings or instructions, in case where (a) the product was purchased by an employer to be used at a workplace and the product manufacturer had provided warnings to such employer; or (b) 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 (c) 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 (d) the complainant was under the influence of alcohol or any prescription drug while using the product which was not prescribed a medical practitioner; or (e) 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.

Conclusion

In comparison to the Erstwhile Legislation, it is evident that the Government vide the New Regime has come up with extended definitions, endeavoured to tighten the erstwhile provisions and has introduced many new concepts as outlined above in the first section of this article. It has specifically widened the extent of ‘product liability’ with a view to streamline and provide sufficient safeguard to the end consumers of the products, bearing in mind the principles laid down by the Indian courts in the past while considering cases involving ‘product liability’. Nonetheless, the New Regime is still at a nascent stage and how successful it will prove in providing systematic, timely and effective implementation of the intention of the legislature is to be seen.

The authors are Joint Partner and Associate, respectively, in Corporate Advisory team, Lakshmikumaran & Sridharan, New Delhi