Law and Reliability

Product Liability

Product liability is the area of law in which manufacturers, distributors, suppliers, retailers, and others who make products available to the public are held responsible for the injuries those products cause. Although the word “product” has broad connotations, product liability as an area of law is traditionally limited to products in the form of tangible personal property.

In India, product liability law governs the liability of manufacturers, wholesalers, distributors, and vendors for injury to a person or property caused by dangerous or defective products. Product liability in India is governed by:

• The Consumer Protection Act, 1986.
• The Sales of Goods Act, 1930.
• The law of Torts.
• Special statutes pertaining to specific goods.

Previously, the Monopolies and Restrictive Trade Practices Act, 1969 (hereinafter referred to as the “MRTP Act”) dealt with provisions in respect of unfair trade practices.  The Act now stands repealed and the pending cases of unfair trade practices have been transferred to National Commission set up under Consumer Protection Act, 1986.

Any person who trades in the goods (manufacturers, importers, distributors, wholesalers, etc.) may be made liable under Indian law. As per the Consumer Protection Act, the definition of trader (Section 2(1) (q)) and manufacturer (Section 2(1) (j)) is exhaustive and includes: any person who sells or distributes any goods for sale; manufacturers; assemblers; dealers; or any person who causes his or her own mark to be put on any goods made or manufactured by any other manufacturer and claims such goods to be goods made or manufactured by himself or herself.

Bearing in mind the law on privity of a contract, if a consumer finds a defect in the goods, he or she usually sues the person from whom he or she has bought the goods. However, if the defect is a manufacturing defect, then the consumer may sue the manufacturer along with the seller, particularly under law of tort. This is an option for the consumer.

Section 14(1) (h) states that the District Forum under the Consumer Protection Act can require direct withdrawal of all hazardous goods from the market and direct compensation to be paid to affected parties. As per Section 27 of the Consumer Protection Act, if a trader fails or omits to comply with any order of the District Forum, such person shall be punishable with a term of not less than one month, but which may be extended to three years or a fine of 2,000 rupees, but which may be extended to 10,000 rupees, or both.  Also, Section 25 of the said Act empowers the District Forum or State Commission or National Commission, as the case may be, to attach property of the person who does not comply with its orders.  If a person fails to pay an amount as per an order passed by a district court, then such person may move an application before the District Forum which shall issue a certificate to the collector of the district and such collector shall proceed to recover the said amount from such person as arrears of the land revenue.

Under the Consumer Protection Act, as per Section 27, 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, such trader, person or complainant shall be punishable with: imprisonment for a term of not less than one month, but which may be extended to three years; a fine, which shall not be less than 2,000 rupees, but which may be extended to 10,000 rupees; or both. Criminal sanctions may also be imposed under other statutes specifically providing for such sanctions.

The Burden of Proof generally lies on the party who is alleging the fault/defect and damage or who initiates the civil action (plaintiff). In order to recover damages under tort of negligence, a plaintiff must prove the following:

• the manufacturer owed a duty to the plaintiff;
• the manufacturer breached a duty to the plaintiff;
• the breach of duty was the actual cause of the plaintiff’s injury;
• the breach of duty was also the proximate cause of the injury; or
• the plaintiff suffered actual damages as a result of the negligent act.

The law requires that a manufacturer exercises a reasonable degree of standard of care akin to those who are manufacturing similar products. In case the plaintiff can prove that a manufacturer has failed to exercise the reasonable standard of care, the plaintiff still needs to prove two parameters of causation. The plaintiff must first show injury was caused to the plaintiff due to the manufacturer’s negligence and further that the defendant could have foreseen the risks that led to such an injury. In a contract, the plaintiff is required to prove that the breach of contract was the actual and effective cause of the loss which has been sustained.

When goods are transferred under a contract, the liability of parties is governed by the contract itself. In certain cases, there is an implied condition that goods will be reasonably fit for the purpose for which they are required by the buyer. If, while selling goods under a contract, the defendant expressly excludes his liability, he cannot be made liable for the loss caused to plaintiff. Liability may arise.

Section 16 of the Sale of Goods Act prescribes implied conditions as to quality or fitness.  Section 16(1) requires that the goods shall be reasonably fit for the purpose, made known to the seller by the buyer expressly or by implication. Section 16(2) requires only that the goods should be of merchantable quality. Secondly, Section 16(1) is excluded where the buyer does not rely on seller’s skill or judgment.  Section 16(2) is not so limited, although it does not apply when the buyer examines the goods with regards to defects and such examination ought to have revealed the defects. Where a defect is revealed to the buyer, not only is Section 16(2) excluded, but that fact will normally indicate that it is unreasonable for the buyer then to rely on the seller for the purposes of Section 16(1).

In addition, liability may be found under tort law.  When a tin had a defective lid to the knowledge of the seller and he failed to warn the buyer about it, the defendant will be liable for injury caused to the buyer as a consequence thereof (Clarke v Army and Navy Cooperative Society ltd [1903] 1 K.B. 155).

A probable defence could be that the defect had occurred due to the negligence or contributory negligence of the buyer.  An additional defence would be that the buyer had examined the goods prior to purchase.  Also, the parties can rely on contractually agreed warranties or waivers or disclaimers and clauses on limitation of liability.  The expiration of limitation periods for filing or initiating claims can also be a defence. In general, in the Consumer Protection Act, onus is on the plaintiff to prove fault could have been discovered by the manufacturer.

Yes, if the product complies with statutory standards relating to manufacturing, licensing, marketing and supplying, then the same can be argued as a defence.

The Consumer Protection Act requires the district forum to decide a complaint within a period of three months from the date of receipt of the notice by the opposite party where the complaint does not require analysis or testing of commodities, and within five months if it requires analysis or testing of commodities.  Further, the Consumer Protection Act prescribes that an appeal filed before the state commission or the National Commission shall be heard and finally disposed of within a period of 90 days from the date of its admission.

In an action under the Consumer Protection Act, the District Forum, the State Commission or the National Commission shall not admit consumer complaints unless they are filed within two years from the date on which the cause of action has arisen. Whereas, in an action under the Indian Contract Act, Sale of Goods Act and other applicable statutes, a person will not be able to initiate a product liability claim after three years from the date of which the cause of action (product defect) which gives the right to initiate a product liability claim occurs.

Example Cases

In M/s Avery India limited vs M/s kaybee Sulphates limited, MANU/CF/0002/2014 Respondent/Complainant filed a consumer complaint against the petitioner alleging deficiency in service in not setting up the weigh-bridge at his Industrial Unit and supplying him a defective transfer lever.  The National Consumer Rights Redressal Commission held that the respondent did not qualify as a Consumer since it runs a Sulphate industry and had purchased the weighbridge from the petitioner for the purpose of above industry only. Further, the commission observed that it was a commercial transaction between the petitioner and the respondent and the same is not a Consumer dispute.

In another case, Tata Motors v Rajesh Tyagi, and HIM Motors Showroom, I(2014)CPJ132(NC), the Commission held that it was the duty of both the manufacturer and dealer to attend to the defect when a consumer complained of the defect in a vehicle and make it defect-free and if they were not in position to do so, they should either refund the cost of vehicle or provide a new vehicle to the consumer.

In the matter of Rediff.com India limited versus M/s Urmil Munjal,II(2013)CPJ522(NC) the Commission held  that both the District Forum and State Commission did not hold the Respondent, an online shopping platform, liable for any defects in the goods supplied, but for failure to inform the Complainant about the manner in which defective goods were to be returned to their seller and the Commission upheld the decision of the forum.

Courts in India have upheld the limitation of liability clauses, which parties have specifically agreed to in the contract, as recognised by the Supreme Court in Bharathi Knitting Company v DHLWorldwide Express Courier (1996) 4 SCC 704. Nonetheless, such clauses may be struck down if found to be unconscionable in nature.