In today’s dynamic and innovative business environment, every day a new product is conceptualized by designers/ manufactures and is put to display for sale to attract customers and earn huge profits. However, in this pursuit, it may happen that the said product develops a defect for any reason which may have been overlooked by the designers/ manufacturers in the hurry to launch the said product. Such situations result in cases where due to a faulty or a damaged product the consumer suffers a loss or an injury. The said situation coupled with an educated consumer (i.e. one who is aware of his rights) gives rise to a product liability claim makes the situation difficult for the companies whose products are deficient.
The jurisprudence relating to product liability in India has been constantly evolving and in the recent times the Indian courts have also adopted a pro-consumer approach while deciding on product liability claims. The courts in India are generally guided by the principles of justice, equity and good conscience. Following the way paved by an English case of Donoghue v Stevenson which provided the principle of ‘duty of care’, Indian Laws are also conditioned for protecting the consumers from any damage or injury caused due to such faulty or dangerous products and holding the manufacturers and/ or distributors and/ or retailers and/ or packers responsible for any such damage or injury.
The term product liability may be understood to be the liability of any or all of the parties along the manufacturing and supply chain of a product, arising due to any damage or injury caused by such product. Products containing inherent defects that cause harm to a consumer of the product are the primary subject matter of product liability claims.
In India there is no specific statute which governs the product liability claims and the term product liability is also not defined under any Indian statute. In the absence of any specific Indian statute the Indian product liability law can be said to have been emerging from different Indian statues and the product liability claims could be ascertained under the following Indian statutes/ laws (hereinafter together referred to as “Indian Laws”): the Consumer Protection Act, 1986 (CPA); the Sale of Goods Act, 1930 (SGA); The Indian Contract Act, 1872 (ICA); Specific statutes pertaining to specific goods such as the Food Safety and Standards Act, 2006, the Drugs and Cosmetics Act, 1940, the Legal Metrology Act, 2009, etc. (hereinafter together referred to as Specific Statutes); and the Common Law principles.
Based on this legal framework, a product liability claim may be based on negligence, strict liability or breach of warranty of fitness, depending on the respective law under which the claim is based. The most essential aspect of product liability claim is that the defect must be proved. These defects can be broadly categorized as design defects (i.e. inherent defects in the design of the product), manufacturing defects (i.e. defects which occur during the manufacturing process of the product) or marketing defects (i.e. relating to wrong or incomplete instructions/ warnings on the packaging of the product).
The availability of the right to claim product liability inter alia depends on the respective law under which the case is proposed to be filed.
Under the CPA , a complainant has been defined as a consumer, or a registered voluntary consumer association or Central Government or the State Government, or more than one consumers (where there are more than one consumers) having the same interest, and the legal heir or representative of the consumer (in the event of the consumer’s death), who or which makes a complaint. The CPA defines a consumer as a person who buys goods or hires/avails of any service for a consideration, including any user/ beneficiary of the goods/services other than the person who buys such goods/hires or avails such services for a consideration, when such use is made/services are availed of with the approval of the first mentioned person. It does not include a person: (i) who obtains such goods for resale or for any commercial purpose; or (ii) who avails of such services for any commercial purposes . However, under the terms of the SGA and the ICA, the ‘buyer’ and the ‘party to the contract’, respectively have the right to file a product liability claim.
It is important to note that the defect and standard of defect pertaining to a product inter alia depends and varies from one law to another. It is, therefore, possible that a claim relating to a particular defect may not be covered under one law but squarely fall under the purview of the other. For example, the CPA defines the term ‘defect’ as any fault, imperfection or shortcoming in the quality, quantity, potency, purity or standard which is required to be maintained by or under any law for the time being in force or under any contract, express of implied, or as is claimed by the trader in any manner whatsoever in relation to any goods. Therefore, a complaint in respect of any other defects which do not fall within the scope of the above definition cannot be made under the CPA.
Under other laws, a product may be considered defective if: (i) an implied warranty or condition as to the quality or fitness for any particular purpose for the product is breached; or (ii) the seller fails to fulfill its fundamental obligation under a contract; in which case no term of the contract can relieve the seller of its respective fundamental duty; or (iii) the statues governing specific goods require certain specific compliances like branding, labeling etc., then, any breach or noncompliance of such requirements. Further, the standards by which a product may be deemed to be defective also depends upon the terms and conditions of the contract along with any warranties or guarantees provided under such contract.
The appropriate forum for filing a product liability claim inter alia depends on the respective law under which the consumer wishes to file the complaint as well as the monetary relief sought. A claim under the CPA is required to be filed in the District Consumer Forum/State Commission/National Commission, which have been constituted under the CPA, depending on their respective jurisdiction. Under any other law, the basic structure/hierarchy of the Indian courts will have to be followed. It may be noted that irrespective of the forum, the burden of proof lies on the party alleging the defect. Further, the limitation period for filing a product liability claim shall depend on the respective law under which the claim is sought. While the CPA provides the limitation period of two years, other laws give three years from the date on which the cause of action (product defect) has arisen.
Once the claim has been initiated by a consumer in an appropriate forum, the accused person may take defenses such as: (i) product being compliant with statutory standards prescribed for the said product; (ii) defect being caused by negligence of the consumer/ buyer; (iii) consumer/buyer had examined the goods prior to purchase; (iv) contractually agreed warranties, waivers, disclaimers and limitation on liability; or (v) expiration of limitation periods. It is important to note that the permissibility of any of the aforesaid defenses shall be at the sole discretion of the appropriate forum and also depend on the respective case.
The court /forum may award compensation to the consumer/buyer for any loss or injury suffered due to the negligence of the seller.
Under the terms of the ICA, the party who suffers loss on account of breach of contract by the other party is entitled to receive, from the party who has breached the contract, compensation for any loss or damage caused to it, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, likely to result from the breach of it. As per the Indian law, indirect or consequential damages cannot be awarded. Moreover, damages such as incidental, special, punitive and exemplary are not specifically provided for under the Indian law.
In terms of the applicable Indian Laws, any aggrieved party may claim for: (i) removal of defect from the respective product; (ii) replacement of the product with a new product of similar description which shall be free from any defect; (iii) refund of the purchase price; (iv) discontinuance of unfair trade practice or restrictive trade practice, as the case may be; (v) cease and desist orders in the manufacturing of hazardous goods; or (vi) withdrawal of hazardous goods from being offered for sale.
The CPA provides that where a trader or a person against whom a complaint is made or the complainant fails or omits to comply with any order made by the District Forum, the State Commission or the National Commission, as the case may be, then, such trader or person or complainant be punished with imprisonment for a term which shall not be less than one month but which may extend to three years; a fine, which shall not be less than 2,000 rupees but which may extend to 10,000 rupees; or both. Further, the provisions of the India Penal Code 1860 are also enriched by the elements of cheating and fraud that are attributed to the defects in the products supplied to the consumers. It is important to note that criminal liability may also arise in terms of the specific statues depending on from case to case.
Product recall is a request to return to the maker a batch or an entire production run of a product, usually due to the discovery of safety issues. The recall is generally an effort to limit liability for corporate negligence (which can cause costly penalties) and to improve or avoid damage to publicity. However, product recalls are costly to a company because they often entail replacing the re-called product or paying for damage caused by use, although possibly less costly than the costs caused by damage to brand name and reduced trust in the manufacturer. Presently, India does not have any specific law or statute or provision which may mandatorily require a product recall exercise to be undertaken.
A product liability claim has the potential of overthrowing any business. It is, therefore, essential for every company to take adequate measures to shield itself from such potential damage. One of the means adopted by companies across the globe is by procuring a product liability insurance cover. This protects the respective companies from and against any losses suffered due to a product liability claim. It is, however, essential to read and understand the exclusions provided under such insurance covers before purchasing them. The premiums to be paid to the insurers in relation to such insurance covers are primarily based on the nature of the product (as the risk and liability is directly linked to the nature of the product) and its sales volume (as this reflects the reach of the product). This means that every company discloses the correct details of a respective product at the time of procuring the respective product liability insurance cover.
The Indian government is taking significant measures to make consumers aware of their rights with respect to any loss or injury caused due to a defective product, irrespective of their educational credentials. The ‘Jago Grahak Jago’ campaign was aimed at enhancing consumer awareness by advertizing the rights available to them. The Union Ministry of Consumer Affairs also started the National Consumer Helpline Project (NCH Project), a telephone helpline, to help consumers deal with a multitude of problems arising in their day-to-day dealings with business and service providers. On a national toll-free number, a consumer can seek information, advice or guidance for his/her queries, complaints and guidance. The NCH Project supports the consumers by: (i) guiding consumers in finding solutions to problems related to products and services; (ii) providing information related to companies and regulatory authorities; (iii) facilitating consumers in filing complaints against defaulting service providers; (iv) empowering consumers to use available consumer grievances redressal mechanisms; and (v) educating consumers about their rights and responsibilities.
In the light of the above discussion, it should be noted that it is important for a consumer to identify the correct law before filing a product liability claim. If chosen wrongly, the claim may not be sustained in the respective court or forum. It should also be kept in mind that the time taken by a respective court or forum in deciding the claim may run into a couple of years inter alia. This should, however, not discourage the consumer to file a product liability claim. Further, considering that damages such as incidental, special, punitive and exemplary are not specifically provided for under the Indian law, the compensation amount which the customer receives may at times be insignificant compared to the hardship suffered in pursuing the case. In this situation, one can say that the initiatives being taken by the Indian government, which are playing an important role in educating the consumers about their rights, may fall short of the desired result predominantly for two reasons — (i) they are CPA centric; and (ii) they do not provide a solution to the above issues/concerns.
One may, therefore, conclude this article stressing on the urgency to codify and consolidate the law governing product liability under one specific statute.
www.grandmasters.in | 8 Years & Counting
www.rcls.in | 8 Years & Counting
www.itlegalsummit.com | 8 Years & Counting
www.bfls.in | 8 Years & Counting
www.maels.in | 8 Years & Counting
www.plcs.co.in | 8 Years & Counting
Copyright © 2020 Lex Witness - India's 1st Magazine on Legal & Corporate Affairs Rights of Admission Reserved
