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Product Liability Under Consumer Protection Act, 2019

Rajesh Kumar & Rupali Singh
23 Dec 2019 1:44 PM GMT
Product Liability Under Consumer Protection Act, 2019
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Products liability refers to the liability of any or all parties along the chain of manufacture/supply/service of any product or services for any damage caused by that product. This liability includes the manufacturer of component parts, an assembling manufacturer, the wholesaler, and the retail store owner or even the person installing the goods. Products containing inherent defects that cause harm to a consumer/user of the product would be the subject of products liability suits. While products are generally thought of as tangible personal property, products liability has stretched that definition to include intangibles like services. The lability is primarily derived from law of torts.

Before enactment of Consumer Protection Act, 2019; product liability in India was governed by various statutes like the Consumer Protection Act or the Sales of Goods Act, 1930 or the law of Torts. Certain liabilities were also imposed under special statues pertaining to specific goods like drugs or cosmetics or food or motor vehicle. The Prevention of Food Adulteration Act prohibited import, manufacture or sale of adulterated or misbranded food. The provisions of the Standards of Weights and Measures Act are attracted in case of any false packaging, weight or measure which does not conform to the standards established by or under the said Act and breaches the mandatory declaratory requirements on a package.

The Motor Vehicle Act also provides for provisions of recall of motor vehicles upon the direction of the Central Government if any defects are found in the vehicle or a component of the vehicle, which are harmful to the environment, driver or occupant or road users or defects. In those cases, the manufacturer will also have to reimburse the buyers for the full cost of the motor vehicle or replace the defective motor vehicle and pay the applicable fines. However, the manufacturer will not be liable to pay any fines if he notices the defect on his own and initiates voluntary recall proceedings.

Duty of Care:

Product liability emanates from a basic fundamental "duty of care". India is a common law country, and "duty of care" has always been an integral part of Indian jurisprudence. Lord Atkin laid down the principle of "duty of care" in Donoghue v. Stevenson [1932 UKHL 100], sometimes also referred to as narrow rule. The wider rule is the duty of care in general, such as one must take reasonable care to avoid acts or omissions which one can reasonably foresee would be likely to injure one's "neighbour". The impact of Donoghue on tort law cannot be understated as it was a watershed moment effectively establishing tort, as separate from contract law. It conclusively established that "duty of care" is not confined only in contractual relationship; it extends to all "neighbours" in a moral and just society.

The next major development in the "neighbour principle" came from Hedley Byrne v Heller [1964 AC 465], which concerned economic loss. However, the locus classicus of the "neighbour test" is found in another case called Caparo Industries v Dickman [1990 UKHL 2]. The decision arose in the context of a negligent preparation of accounts for a company. It stated that when a person makes a statement, he voluntarily assumes responsibility to the person he makes statement to or those who were in his contemplation. If the statement was made negligently, then he will be liable for any loss which results from its negligence. Caparo set out a three-fold test; in order for a duty of care to arise in negligence- (i) harm must be reasonably foreseeable as a result of the defendant's conduct (ii) the parties must be in a relationship of proximity, and (iii) it must be fair, just and reasonable to impose liability. What emerges is that, in addition to the foreseeability of damage, necessary ingredients in any situation giving rise to a duty of care are that there should exist between the party owing the duty and the party to whom it is owed a relationship characterised by the law as one of "proximity" or "neighbourhood".

In Andrews v. Hobkinson [(1951) 1 QB 229], the principle of Donoghue has been extended from manufacturers to include repairers, fitters [Brown v. Cotterill, (1934) 51 T.L.R. 21], assemblers [Howard v. Furness—Houlder Argentine Lines Ltd., (1936) 2 All ER 296] and re-conditioners [Herschtal v. Stewart and Ardern (1940) 1 K.B. 155]. Similarly, a mere distributor maybe under a duty to make inquiries or carry out an inspection of the product and if it is dangerous for some reasons of which he should have known, his failure to warn of it will then amount to negligence [Chaudhury v. Prabhakar, (1989) 1 W.L.R. 29].

In respect to a manufacturer, an American Court had held, in MacPherson v. Buick Motor Co., [(1916) 111 N.E. 1050.]

"A manufacturer of products which he sells in such a form as to show that he intends them to reach the ultimate consumer in the form in which they left him with no reasonable possibility of intermediate examination and with the knowledge that the absence of reasonable care in the preparation or putting up of the products will result in an injury to the consumer's life or property, owes a duty to the consumer to take that reasonable care."

Consumer Protection:

Protection and the interest of consumers is important in a welfare state. In this context the development of consumer rights was protected by enacting special laws like Consumer Protection Act, supposed not to supplant but to supplement the existing judicial system. The Supreme Court also explained the object and philosophy of the Consumer Protection Act, 1986 in the landmark case of Lucknow Development Authority v. M.K. Gupta [(1993) 1 CTJ 929 (SC)]. The apex court has made the following important observations,

"In fact, the law meets the long-felt necessity of protecting the common man from such wrongs for which the remedy under ordinary law for various reasons has become illusory … The importance of the Act lies in promoting welfare of the society by enabling the consumer to participate directly in the market economy. It attempts to remove the helplessness of a consumer which he faces against powerful business, described as, 'a network of rackets' or a society in which, producers have secured power to 'rob the rest' and the might of public bodies which are degenerating into store house of inaction where papers do not move from one desk to another as a matter of duty and responsibility and for extraneous considerations leaving the common man helpless, bewildered and shocked."

Product Liability under CPA, 2019:

To strengthen the safeguards guaranteed to a consumer, the President gave his assent to the Consumer Protection Act, 2019 [CPA, 2019] on 9th August 2019. The New Act, introduces the concept of product liability, seeks to revamp the process and settlement of consumer disputes establishes a Central Consumer Protection Authority as a central authority and Consumer Protection Councils at the district, state and national level, introduces penalties, covers unfair trade practices, unfair contracts, broadens the definition of a "consumer", among other changes.

The New Act defines product liability under Section 2(34) of the CPA, 2019 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." The impact is that it is not only the manufacturer who will be liable to compensate a consumer but also the seller if it fulfils the conditions mentioned in the New Act.

The Act defines "product manufacturer" in widest possible terms, in Section 2(36) of the Act as a person who makes any product or parts thereof or assembles parts thereof made by others or puts or causes to be put his own mark on any products made by any other person; or makes a product and sells, distributes, leases, installs, prepares, packages, labels, markets, repairs, maintains such product or is otherwise involved in placing such product for commercial purpose; or designs, produces, fabricates, constructs or re-manufactures any product before its sale; or being a product seller of a product, is also a manufacturer of such product. Thus, assembler or even trade mark owner is also covered under product liability clause. Further, even the person maintaining the product is also liable, even when he may not have done anything active in the manufacturing of the product.

Chapter VI of the CPA, 2019 makes special provision for product liability and provides for compensation under a product liability action by a complainant for any harm caused by a defective product manufactured by a product manufacturer or serviced by a product service provider or sold by a product seller. A product liability action may be brought by a complainant against a product manufacturer or a product service provider or a product seller, as the case may be, for any harm caused to him on account of a defective product. The New Act sets out different scenarios in which a product manufacturer or product service provider or product seller shall be liable.

It may be noted that product liability action can be initiated by a "complainant", which primarily includes a consumer. Though the term "consumer" has been widely defined in comparison to the earlier law, and it includes any user of goods or services for consideration; it still does not include "neighbour". However, it may be noted that the provision of CPA is in addition to the existing provisions, and not in derogation to existing provisions [Section 100 of the CPA, 2019]. Thus, CPA supplements common law of torts and not derogate it. Therefore, any action not provided in the CPA can be initiated under normal tort laws.

Implications:

Though under common law principles, as applicable in Indian jurisprudence, product liability provisions were already there; the rights were illusory owing to the difficulty in enforcing those rights. The new Consumer Protection Act recognize the rights statutorily and provides for easy redressal mechanism. It shall result in increased awareness about consumer rights and a heavy penalty on negligent product manufacturers or service providers. Industry/service providers must gear up to fulfill this statutory aspiration of better recognition of consumer rights.

Rajesh Kumar is Managing Partner of "Rajesh Kumar and Associates". Rupali Singh is Associate Advocate with the firm. The authors can be contacted on office@rklegal.org .

[The opinions expressed in this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of LiveLaw and LiveLaw does not assume any responsibility or liability for the same]

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