Product liability – which enables consumers to initiate actions against sellers, and, or, manufacturers for harm caused by defective products – has implicitly existed in India even prior to the Consumer Protection Act, 1986. This article traces the evolution of product liability law vis-à-vis manufacturers in India and the adoption of strict liability into the prevailing regime, and suggests protective safeguards that manufacturers may employ.
India is expected to become the 3rd largest consumer market in the world by 2026. Rising consumerism has led to an increase in consumer and product liability claims. Although consumers do not usually have a contractual or direct relationship with manufacturers, they have, historically, been able to seek recourse against them. Product liability law for manufacturers was first codified under the Consumer Protection Act, 1986 (1986 Act) and has since evolved under its successor, the Consumer Protection Act, 2019 (2019 Act). However, that is not to say that the principles of product liability did not exist in India prior to the 1986 Act; their origin can be traced back to the Sale of Goods Act, 1930 (SGA) and tort law.
Evolution under Consumer Protection Laws
The 1986 Act
The 1986 Act laid the foundation for India to become 1 of the first developing countries to codify the principles of ‘product liability’. Under the 1986 Act, a consumer could file a complaint before the appropriate consumer forum if the goods purchased by him suffered from 1 or more defects. The term ‘defect’ was defined as including “…any fault, imperfection or shortcoming in the quality, quantity, potency, purity or standard…” which was claimed by traders (including manufacturers) in relation to any goods supplied.
In a number of cases on product liability action under the 1986 Act, Indian courts have held manufacturers and dealers to be jointly and severally liable for defects. Where a consumer brought a product liability action against the dealer and manufacturer of a defective car sold to him, not only did the Supreme Court find it shameful that the dealer and manufacturer decided to contest the claims but also held them jointly and severally liable to pay the cost of repairs and compensation claimed.1 Likewise, the National Consumer Disputes Redressal Commission (National Commission) has also upheld the joint and several liability of the dealer and manufacturer where a consumer claimed deficiency in service for failure to rectify defects in the generators manufactured.2
There have, however, been instances where the manufacturer has been held to be solely liable for product liability because of the terms of that arrangement between the dealer and the manufacturer. In a case where multiple customers booked cars but were not provided timely deliveries, the National Commission only ordered the manufacturer (and not the dealer) to be deficient in service. By distinguishing this case based on facts, the National Commission noted that the terms of the arrangement specifically provided that the manufacturer will be liable to refund the monies with interest if the booking is cancelled. Consequently, the National Commission observed that a dealer is not always an agent and joint and several liability cannot be fastened upon a dealer in all cases, and the terms of their appointment and their role must be examined in each case.3
In sum, it may be said that Indian courts have consistently pinned joint and several liability on manufacturers and dealers in product liability actions under the 1986 Act4 except in cases where the facts ex facie suggested that the liability is to be borne solely by one party.
The 2019 Act
The 2019 Act, which replaced the 1986 Act, expressly defines ‘product liability’ and outlines specific grounds available to consumers to initiate product liability actions against manufacturers and specific defences available to manufacturers in such cases.
While the grounds mentioned in Section 84(1) of the 2019 Act have not been reproduced in this article, they broadly enable consumers to proceed against manufacturers for a manufacturing defect, a defective design or if the product does not conform to the manufacturing specifications or warranties. As compared to the 1986 Act, the 2019 Act also holds manufacturers liable if the product fails to contain adequate instructions regarding correct usage to prevent any harm.
Sections 87(2) and 87(3) of the 2019 Act lay down defences available to manufacturers in case of a product liability action. These primarily comprise situations where manufacturers had provided necessary warnings, prescriptions or instructions: (i) to an employer who had purchased the product for use at the workplace; (ii) in respect of a product that was sold as a component to be used in another product (but the harm was caused to the complainant by use of the end product); (iii) to an expert under whose supervision that product was meant to be used. Where there was a common or obvious danger that consumers ought to have known of the characteristics of a product, manufacturers can be excused for their failure to warn or instruct the consumers about such dangers.
Illustratively, a steel manufacturer whose material is used to build an automobile can claim to be exempt from a product liability action initiated by a consumer for injury caused in a car accident, provided it had given necessary warnings or instructions for the use of such steel. Similarly, the manufacturer of a pharmaceutical drug can claim exemption for harm caused to a patient for consuming more than the recommended dosage on the package; consumers ought to know that exceeding recommended dosages is harmful and, in some circumstances, could also be fatal. Likewise, consumers who purchase hot beverages are understood to be aware of the associated risks from handling such beverages, including potential harm from spillage.5
Perhaps the primary difference between the 1986 Act and the 2019 Act is the fact that the 2019 Act has introduced the concept of strict product liability for manufacturers.
Strict Product Liability
In 1994, the Karnataka High Court had expressly acknowledged that strict product liability did not exist in India. Although not defined or substantiated in caselaw, ‘strict product liability’ is generally understood as the liability of manufacturers for the loss suffered by consumers irrespective of whether the consumer has proved that the manufacturer was negligent or failed to exercise reasonable care.6 Under the 1986 Act, manufacturers could claim an exemption by proving that they were not negligent; however, the 2019 Act formally codifies strict product liability and holds manufacturers liable regardless of their proving that they were not negligent or fraudulent in making an express warranty of a product.7
How can Manufacturers deal with Product Liability?
Product liability, as a principle, is designed to enhance consumer protection, and manufacturers owe a duty of care to potential consumers. Manufacturers may, therefore, need to take steps to minimize their liability in respect of defective products and, consequently, consider:
1. Contractually limiting their liability under supply and distribution arrangements with sellers by seeking specific indemnities from the sellers for product liability actions relating to products sold by the sellers;8
2. Expressly stipulating that its supply and distribution arrangements are on a principal-toprincipal basis;9
3. Availing product liability insurance; and, or,
4. Displaying customary disclaimers on their products regarding proper handling so as to intimate consumers regarding their usage.10
Concluding Comments
The 2019 Act expands on the existing product liability regime in India and codifies strict product liability. Consequently, the existing regime tightens the noose on manufacturers as the defence of proving that a manufacturer was not negligent is no longer available to them. This could potentially expose them to an increased number of product liability claims – both, legitimate and frivolous – which they will be obliged to defend. Manufacturers are likely to avoid expending valuable resources like time and money if they employ some safeguards in anticipation to protect themselves.
