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Even though some aspects are unclear, the new regime under the Consumer Protection Act, 2019 is set to change the legal landscape of India pertaining to product liability.
Prior to 2019, India did not have a specific legal regime relating to product liability. It also did not have a statutory regime of “lemon law”, as in some other countries such as the United States.
A product liability claim was lodged within the existing laws of contract and tort. Absent a specific regime governing product liability, such claims were founded and derived from legislations such as the Sale of Goods Act, 1930; the Consumer Protection Act, 1986; and the Indian Contract Act, 1872. These claims were also based on case laws, both in the civil and criminal aspects, leading to much confusion and different approaches.
Certain sector-specific laws touching upon principles of product liability such as the Drugs and Cosmetics Act, 1945 and the erstwhile Prevention of Food Adulteration Act, 1954 (which stood repealed by the Food Safety and Standards Act, 2006) were also relied upon.
Until recently, there was no comprehensive legislation to cover the aspect of product liability.
This has now been addressed to a large extent by The Consumer Protection Act, 2019 (CPA 2019). CPA 2019 was passed by the Indian Parliament on August 6, 2019 and received Presidential assent on August 9.
Vide a recent notification issued on July 15, the Central government has appointed July 20 as the date on which several provisions (if not all) of the CPA 2019 will come into force. Most notable of these are the provisions concerning product liability. The present write-up provides a primer on these new provisions of product liability.
Product liability under the CPA 2019
Sections 82 to 87, appearing in Chapter VI of CPA 2019, provide an all-encompassing scheme which would apply to every claim for compensation under a product liability action.
CPA 2019, expressly or by necessary implication, does not indicate that these new provisions of product liability will also apply to product liability actions already pending before various consumer fora. However, since these provisions create new rights and liabilities, there is a presumption in law that they are prospective in operation.
CPA 2019 defines product liability 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”.
A product liability action can be filed against a ‘product manufacturer’ or a ‘product service provider’ or a ‘product seller’, as the case may be. CPA 2019 defines each of these expressions in very wide terms to bring within their fold every possible aspect of a product liability claim. CPA 2019 also delineates the situations in which they will be held liable.
Few such situations are summarized below. While the situations envisaged under the CPA 2019 are quite exhaustive, there is nothing to indicate that these would be the only situations where liability will arise. It, however, remains to be seen how the courts will interpret these provisions.
A product manufacturer shall be liable, if –
(i) the product contains a manufacturing defect; or
(ii) the product is defective in design; or
(iii) there is a deviation from manufacturing specifications; or
(iv) the product does not conform to the express warranty; or
(v) the product fails to contain adequate instructions of correct usage to prevent harm or any warning regarding improper or incorrect usage.
A product seller (who is not a product manufacturer) shall be liable, if –
(i) he has exercised substantial control over the designing, testing, manufacturing, packaging or labelling of a product that caused harm; or
(ii) he has altered or modified the product and such alteration or modification was the substantial factor in causing the harm; or
(iii) he has made an express warranty of a product independent of any express warranty made by a manufacturer and the product failed to conform to such warranty; or
(iv) 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
(v) he failed to exercise reasonable care in assembling, inspecting or maintaining such product.
A product service provider shall be liable, if –
(i) the service provided by him was faulty in quality, nature or manner of performance; or
(ii) there was an act of omission or commission or negligence or conscious withholding of any information which caused harm; or
(iii) the service provider did not issue adequate instructions or warnings to prevent any harm; or
(iv) the service did not conform to express warranty or the terms and conditions of the contract.
CPA 2019 also envisages some specific defences to a product liability action. Few of the defences are summarized below:
(i) The product was misused, altered or modified at the time of harm. Curiously, as per this exception, there cannot be a product liability action against a product seller. This is somewhat intriguing, since this exception should equally apply to a product manufacturer or a product service provider.
(ii) In any product liability action based on the failure to provide adequate warnings or instructions, the product manufacturer will not be liable, if-
The product was purchased by an employer for use at the workplace and the product manufacturer had provided warnings or instructions to the employer; or
The product was sold as a component or material to be used in another product and necessary warnings or instructions were given by the product manufacturer to the purchaser of such component or material, but the harm was caused to the complainant by use of the end product in which such component or material was used; or
The product ought to have been used only by or under the supervision of an expert; or
The complainant, while using the product, was under the influence of alcohol etc.
(iii) A product manufacturer will not be liable for failure to instruct or warn about a danger which is obvious or commonly known to the user of such product.
Even prior to CPA 2019, in most product liability actions, one or more of the above defenses were taken. These defenses now have statutory recognition. CPA 2019 does not say that the defences set out are the only defenses to any product liability action. It, however, remains to be seen how the courts will interpret these provisions.
When compared to the earlier Act of 1986, CPA 2019 is far more comprehensive and in tune with the consumer protection regimes elsewhere around the world. The introduction of a product liability regime is a welcome change and will streamline product liability actions. There is a clear shift in principle of buyer beware to seller beware. Even though some aspects are unclear, the new regime is set to change the legal landscape of India pertaining to product liability. The ease of approaching consumer forums and the strict regime will only push consumers to experiment with these provisions to a new high.
Product manufacturers, sellers and service providers will need to ensure that they have done their due diligence properly to be compliant with the various requirements under different legislations. A checklist of such compliances backed with proper legal and technical advice would go a long way in protecting their interest and the interest of the consumers.
Sidharth Sethi is a Partner at J Sagar Associates and Bindu Janardhanan, is a Registered Foreign Lawyer at Squire Patton Boggs (Hong Kong). Inputs from Avinash Das, Associate at J Sagar Associates.