Product liability & safety 2020

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Articles / Alerts Reports Research Papers

June 24, 2020

1 Product Safety

1.1 Product Safety Legal Framework

Consumer Protection Act, 2019 (CPA)

The primary legislation on product liability and safety in India is the Consumer Protection Act, 2019.

Chapter VI of the CPA contains specific provisions, which set out different situations/circumstances under which a product manufacturer, a service provider or a seller can be held liable for a product liability action.

The CPA has been enacted for the protection and advancement of consumer interests. The application of the CPA is restricted to “consumers”, who are purchasers or users of any goods or services. However, the definition of a “consumer” does not include a person who obtains those goods or services for resale or for any commercial purpose. The CPA allows consumers to file a product liability action for any harm caused to them by a defective product manufactured or sold or caused by a deficiency in a service. These product liability actions can be filed before the consumer commissions established under the CPA. In addition, the CPA also allows consumers to file complaints for deficiency of service, unfair trade practices and hazardous services.

1.2 Regulatory Authorities for Product Safety

The CPA sets out three tiers of consumer protection councils, consisting of:

the District Consumer Protection Council;
the State Consumer Protection Council; and
the Central Protection Consumer Council.

The object of the consumer councils is to render advice on the promotion and protection of consumers’ rights under the CPA.

The CPA further establishes a Central Consumer Protection Authority (CCPA), which has been entrusted with powers to regulate matters relating to violations of rights of consumers, unfair trade practices, and false or misleading advertisements, which are prejudicial to consumers’ interests. In order to discharge its functions under the CPA, the CCPA has also been empowered to engage experts and professionals having special knowledge and experience in various sector-specific areas including product safety. One of fundamental functions of the CCPA is to issue notices to alert consumers against dangerous, hazardous or unsafe goods or services.

In addition, there are various other general and sector-specific regulators established under specific pieces of legislation.

The BIS, established under the BIS Act, is responsible for assessing and maintaining the Indian Standards for quality assurance of goods, articles, processes, and systems. The BIS also appoints certification officers who conduct search and seizure of goods not complying with the Indian Standards.

The FSSAI regulates the manufacture, processing, distribution, sale and import of food. It issues regulations on a number of subjects specifying standards and guidelines in relation to food, food-labelling standards, quality control for import of food, etc. Along with the state level Food Authorities, the FSSAI is required, among other things, to monitor and verify that all relevant requirements are fulfilled by food business operators at all stages of the food business.

The DCA provides for a number of regulatory functions to be exercised by the central government. The Central Drugs Standard Control Organisation (CDSCO) is the central drug authority established for discharging functions assigned to the central government under the DCA. The CDSCO is responsible for regulatory control over the import of drugs, approval of new drugs and clinical trials, and for approval of licences for drugs.

1.3 Obligations to Commence Corrective Action

There are obligations to commence corrective actions in certain cases under general as well as sector-specific legislation in India.

Corrective Actions Under General Legislations Such as the CPA and BIS

Under the CPA, consumer commissions are empowered to issue a corrective advertisement to neutralise the effect of a misleading advertisement, the cost of which is to be borne by the party responsible for issuing the misleading advertisement. Consumer commissions may also direct the opposite party/the party at fault to withdraw hazardous goods from being offered for sale.

In addition, the CCPA is also empowered to issue directions to the concerned trader, manufacturer, endorser, advertiser or publisher, as the case may be, to discontinue any misleading advertisements or to appropriately modify the contents of the advertisement. The CCPA may also issue directions regarding recall of goods or withdrawal of services, which are dangerous, hazardous or unsafe. It can further order reimbursement of the prices of such goods and services so recalled to the purchasers.

There are different rules/regulations/manuals under the BIS, under which a licensee is obliged to undertake corrective actions for non-conformities/non-compliance with the standards prescribed under the BIS Act or with the directions/recommendations of the competent authority. Also, if a product bears a Standard Mark, but does not actually conform to the Indian Standards, the BIS has the power to stop the sale of non-conforming products and to recall them.

Corrective Actions Under Sector-specific Legislations such as the FSSA and DCA

In the case of misbranding of food products, the adjudicating officer under the FSSA may issue directions to the person found guilty to take corrective actions, so as to rectify the misbranding, or require that the article of food be destroyed. In the case of food products, if a food business operator believes that a food, which is processed, manufactured or distributed by him or her is not in compliance with the FSSA or its rules or regulations, then he or she is required to initiate recall and withdrawal of the food from the market. He or she is also required to inform the relevant authority as well as the consumers of the food. The Food Safety and Standards (Food Recall Procedure) Regulations, 2017 (Food Recall Regulations) require all food business operators engaged in the manufacture, importation or wholesale supply of food to also maintain a detailed food recall plan. The Food Recall Regulations also clarify that a recall may be initiated because of complaints by consumers or by an order of the relevant authorities, such as the Food Safety Commissioner.

Similarly, under the DCA Rules, 1945, a manufacturer of drugs and cosmetics is required to take corrective actions to eliminate the causes of non-conformities in drugs and to ensure prevention of a reoccurrence. As part of a manufacturer’s self-inspection and quality audit mechanism, that manufacturer is also obliged to adopt and document/record the corrective measures as suggested by its self-inspection team. A manufacturer/licensee is required to devise/establish a product recall system of defective products and make the information available to all concerned stockists, wholesalers, suppliers and retailers.

Under the Medical Devices Rules, 2017 (MDR), framed under the aegis of the DCA, if a manufacturer or importer of medical devices believes that a medical device – which is imported, manufactured or distributed by him or her – is likely to pose a risk to the health of a user or patient, then he or she is required to initiate the recall and withdrawal of the medical device from the market, indicating the reasons for that withdrawal. He or she is also required to inform the relevant authority as well as the affected patients.

1.4 Obligations to Notify Regulatory Authorities

There is no general trigger for notification to authorities in respect of product safety issues in India. However, the FSSA and the Medical Devices Rules, 2017 provide that authorities are to be notified in certain cases.

The FSSA and the Food Recall Regulations impose an obligation on a food business operator to inform the relevant authority as well as the consumers, if that food business operator has reason to believe that a food product is not in compliance with the FSSA or is unsafe for consumption. The food business operator has to provide information, under Schedule I to the Food Recall Regulations, to the authority immediately, but not exceeding 24 hours from the time that the non-compliance came to the food business operator’s notice. Food business operators also have to send status reports regarding the recall process as per Schedule II to the Food Recall Regulations. Once a recall is complete, the food business operator is required to send a notice terminating the recall under Schedule III to the Food Recall Regulations.

The MDR imposes an obligation on a manufacturer or importer of medical devices to inform the relevant authority as well as the affected patients, if he or she has reason to believe that a medical device – which is imported, manufactured or distributed by him or her – is likely to pose a risk to the health of a user or patient. Additionally, he or she is required to initiate recall and withdrawal of the medical device from the market indicating the reasons for withdrawal.

The MVA includes a provision under which if a manufacturer notices a defect in a motor vehicle manufactured by him or her, he or she is obliged to inform the central government of that defect and initiate recall proceedings.

1.5 Penalties for Breach of Product Safety Obligations

The CPA stipulates imprisonment for a maximum term of three years along with a fine of up to INR1 million (approximately USD1,300), for a person who fails to comply with the orders/direction of the consumer commissions. For non-compliance with directions of the CCPA regarding product recall or misleading advertisements, the CPA prescribes an imprisonment for a term, which may extend to six months or with fine, which may extend to INR2 million (approximately USD26,700).

For non-compliance with the standards as prescribed by the BIS, and for manufacturing/selling products without the ISI Mark, the BIS prescribes imprisonment of up to two years along with a fine which may extend to up to ten times the value of the goods or articles produced or sold.

The FSSA provides for a penalty of up to INR200,000 (approximately USD2,600) for failure to comply with the directions of a Food Safety Officer or for any other contravention in respect of which no specific penalty has been provided under the FSSA. If a food business operator fails to comply with its obligation to recall food products or notify authorities, a penalty of up to INR200,000 (approximately USD2,600) may be imposed.

There are no penalties for breaching the obligation to recall defective or dangerous medical devices or for failure to inform the regulator under the DCA. However, breaching the obligation under the MDR and the DCA Rules, 1945 could lead to cancellation of the licence granted to a manufacturer or importer of medical devices.

2 Product Liability

2.1 Product Liability Causes of Action and Sources of Law

Product liability claims in India can be filed:

before the consumer commissions under the CPA;
before a civil court in case of a contractual claim under the ICA and relevant provisions of the SGA; or
before a civil court in cases of tortious liability.

Causes of Action Under the CPA

Under the CPA, a complainant may initiate a product liability action against a product manufacturer, service provider or seller by filing a complaint before a consumer commission, for any harm caused by a defective product. Chapter VI of the CPA contains provisions, which set out situations/circumstances under which a manufacturer, a service provider, or a seller may be held liable for a defective product.

A product manufacturer may be held liable for a manufacturing defect, defect in design, deviation from manufacturing specifications, non-conformation of express warranty, failure to give adequate instructions of correct usage to prevent any harm. A product manufacturer may be held liable even if he or she proves that he or she was not negligent or fraudulent in making the express warranty of a product.

A product service provider may be held liable for deficient or inadequate quality of service, act of negligence or consciously withholding information, failure to issue adequate instructions or warning, non-conformation to express warranty.

A product seller may be held liable for packaging or labelling of a product that caused harm if he or she had exercised substantial control over the design of the product. He or she may also be held liable for any alternation or modification of the product, failure to conform to the express warranty, selling a product when the identity of the product manufacturer is not known and failure to give necessary warning or instructions of the product that may cause harm.

Causes of Action Before the Civil Courts

If there is a contract between the buyer and seller of the product, a civil suit before the relevant civil court can be filed for breach of contract and damages on the basis of the terms and conditions of the contract.

Apart from the express terms of the contract, a cause of action may also arise from breach of implied conditions on buyers under the SGA ,such as:

the buyer’s right to have and enjoy quiet possession of the goods;
the goods being fit for the purpose for which they are sold;
the goods being of merchantable quality.

If these implied conditions as set out in the SGA are breached, the buyer of the goods has a right to sue the seller in a civil court.

Causes of action before the civil courts for tortious liability

An aggrieved person can also bring a tortious claim before a civil court. The principles of tort law are recognised under Indian law. A manufacturer/seller may be held liable if the good/product poses a threat to the health or safety of the consumer. Under tort law, the remedy may be sought against the manufacturer as he or she owes a duty of care to the consumer. However, this is not a remedy ordinarily pursued in India in independent civil actions. Tort law principles are often considered by consumer commissions while deciding cases such as medical negligence.

2.2 Standing to Bring Product Liability Claims

Standing Under the CPA

Under the CPA, a “complainant” has the standing to initiate a product liability action. A “complainant” is defined to include a consumer, any registered voluntary consumer association, the central or any state government, the CCPA, a group of consumers having the same interest, legal heirs or representatives (in the case of the death of a consumer), and parents or legal guardians (if the consumer is a minor).

The CPA also defines the term “consumer” to include a person who buys any goods, or hires or avails themselves of any services, but does not include a person who obtains those goods or services for resale or for commercial purposes.

Standing Before Civil Courts

In the case of contractual claims, the buyer of the products/goods has a right to sue a seller, or any other person with whom there is a contractual relationship. A third party who is a stranger to the contract does not ordinarily have a right to sue. In tortious claims, all persons who may be affected by the tort have the capacity to sue under tort.

2.3 Time Limits for Product Liability Claims

The time limit for bringing a product liability claim would depend upon the law under which the remedy is being pursued.

The time limit prescribed under the CPA is two years from the date on which the cause of action arises.

Under the general law on limitations which is governed by the Limitations Act, 1963 (LA), the time limit prescribed for instituting suits for compensation for breach of contract is three years from the date on which the cause of action arises.

In cases of tortious liability, the limitation period varies from one to three years depending upon the tort.

However, courts as well as consumer commissions are empowered to extend the time or condone the delay beyond the stipulated time period for instituting suits or filing consumer claims, if the applicant is able to demonstrate that a sufficient cause existed for not instituting the suit/or filing the complaint within the stipulated time period.

Under the FSSA, a court cannot take cognisance of an offence under the FSSA after the expiry of the period of one year from the date of commission of an offence. However, the Commissioner of Food Safety may, for reasons to be recorded in writing, approve prosecution within an extended period of up to three years.

2.4 Jurisdictional Requirements for Product Liability Claims

In order to institute a product liability claim, an aggrieved person has two options: either to file a civil suit, or to file a complaint for a product liability action before the appropriate consumer commission under the CPA.

Jurisdiction Under the CPA

Under the CPA, a three-tier consumer dispute redressal mechanism (the consumer commissions) has been established consisting of District Commission, State Commissions, and a National Consumer Disputes Redressal Commission (National Commission). The jurisdiction of all three of these consumer commissions is based on territorial factors (whether the case is situated within the geographical limits of the court) as well as pecuniary ones (it depends upon the amount claimed by the complainant).

The District Commission has the power to hear claims of not more than INR10 million (approximately USD133,000) within its territorial jurisdiction. The State Commission deals with claims between INR10 million (approximately USD133,000) and INR100 million (approximately USD1.33 million) within its territorial jurisdiction. The National Commission has jurisdiction over claims which are more than INR100 million (approximately USD1.33 million).

A claim would be within the territorial jurisdiction of the District Commission or State Commission if:

the opposite party (ie, the seller) resides, carries on business or has a branch office within the commission’s territorial jurisdiction; and/or
the cause of action, wholly or in part, arises within that jurisdiction.

The National Commission and the State Commission also have the power to hear appeals from the commissions subordinate to them.

In addition, an aggrieved person also has the option to file a complaint relating to violation of consumer rights or unfair trade practices or false or misleading advertisements to any of the authorities under the CPA namely, the District Collector or the Commissioner of the Regional Office or the CCPA.

Jurisdiction Under Civil Suits

A civil suit for product liability is required to be filed either:

at the place/residence of the defendant (ie, the seller);
at the defendant’s or seller’s principal place of business or; or
where the cause of action arose.

The jurisdiction of courts in relation to civil suits also depends upon the relevant pecuniary limit, which varies across the country.

2.5 Pre-action Procedures and Requirements for Product Liability Claims

There are no mandatory pre-action procedures and requirements prescribed under specific legislation for product liability claims.

The CPA does not mandatorily prescribe sending a notice as a pre-requisite for filing a complaint before the consumer court. However, it may be advantageous to send a legal notice to the opposite party before triggering legal proceedings. If there are numerous consumers having the same interest in a complaint under the CPA, a complainant must mandatorily send a notice of the institution of the complaint to all the affected/interested consumers either by personal service, or, where such service is not reasonably practicable by reason of the number of persons or any other cause, by public advertisement.

2.6 Rules for Preservation of Evidence in Product Liability Claims

There are no specific rules for preservation of documents and other evidence in product liability cases. However, under the CPA, if the consumer commission has any ground to believe that any commodity or document that may be required to be produced before the consumer commission, is being or may be destroyed or altered, it has the power to authorise any officer to exercise the power of entry and search/seize documents or commodities as required under the CPA. An appropriate application may be made by the petitioner in relation to any such information.

In case the defect in the goods cannot be determined without proper analysis or tests, the Consumer Commission may obtain a sample of the defective goods from the complainant and refer the sample to an appropriate laboratory. The laboratory may conduct the requisite tests and analysis with a view to finding out whether the goods suffer from any defect or shortcoming and submit its report to the Consumer Commission.

Under the BIS, the FSSA and the DCA, authorised officers have the power of search and seizure of documents as well as products; however, there are no rules requiring the preservation of documents and products.

The IPC provides that the destruction or alteration of any document or electronic record that a person may be lawfully compelled to produce as evidence before a court, is punishable with imprisonment of up to two years and a fine. Therefore, if documents, which are likely to be used in evidence for a product liability claim in a civil court, are destroyed, there may be criminal liability.

2.7 Rules for Disclosure of Documents in Product Liability Cases

The rules for production and disclosure of documents/other evidence are provided under the Code of Civil Procedure, 1908 (CPC); they are applicable to civil suits as well as to consumer complaints filed in product liability cases. The civil court or the appropriate consumer commission is permitted to order production of any document that is relevant for determining any matter in question in such suit or complaint. However, discovery is not to be ordered when the court or commission is of the opinion that it is not necessary for disposing of the complaint fairly or for saving costs.

2.8 Rules for Expert Evidence in Product Liability Cases

Under the CPA, if the National Commission or the State Commission is of the opinion that the complaint involves the larger interest of consumers, it may direct any individual, organisation, or an expert to assist the National Commission or the State Commission, as the case may be.

In addition, the CPA empowers the CCPA to engage experts and professionals who have special knowledge and experience in the areas of consumer rights and welfare including product safety to assist the CCAP in discharging its functions.

Civil courts and consumer commissions are permitted to appoint scientific or technical experts to form an opinion on defects or other technical matters, which cannot be determined without proper analysis or tests. If deemed necessary, courts are also permitted to issue a commission to an expert for carrying out scientific investigation that may not be conveniently performed before the court. However, courts are not bound by the opinion of experts and are required to form their own judgment based on the information and reasons provided by the expert for arriving at a particular conclusion. Parties can also tender expert evidence in support of their case.

2.9 Burden of Proof in Product Liability Cases

The burden of proof lies with the person who wants a court or tribunal to believe in the existence of a particular fact. Therefore, the burden of proof will be on the complainant or plaintiff who approaches the court or the tribunal alleging that a product is defective or unsafe.

In order to institute a product liability action before a consumer commission, the complainant would be required to prove that the product was defective, that there was fault or a shortcoming in the quality/quantity of the product which the manufacturer/seller is required to maintain under law, contract or trade. In a civil suit, the standard of proving liability of the defaulting party will be construed on the basis of the terms and conditions provided under the contract. A claim for a defective or unsafe product is also maintainable for breach of implied warranty or condition under the provisions of the SGA.

2.10 Courts in which Product Liability Claims Are Brought

Under the CPA, an aggrieved person can file a complaint for a product liability action before the appropriate consumer commission for claiming compensation for the harm caused to him or her by the defective product. If, after the first hearing of the complaint, it appears to the consumer commission that there exist elements of a settlement, which may be acceptable to the parties, it may direct the parties to give their written consent in writing, within five days, to have their dispute settled by mediation.

Separately, manufacturing companies may seek to challenge orders of the FSSAI, or any other regulator/government bodies, by writ proceedings before appropriate high courts. The jury system has been abolished in India and, therefore, all cases are decided by judges.

A civil suit may be filed before a district court or a high court (exercising original civil jurisdiction) depending on the applicable territorial limits provided under the CPC. There is no upper limit specified for the damages that may be claimed in product liability cases. Although this is subject to the pecuniary jurisdiction of the concerned court. However, there is an increasing trend of high damages being awarded depending on the gravity of the situation and its peculiar facts and circumstances.

There are no specific procedural requirements that apply only to product liability cases.

2.11 Appeal Mechanisms for Product Liability Claims

Under the CPA, the National Commission and the State Commissions have the power to hear appeals from commissions subordinate to them. An appeal can be filed before the State Commission against the order passed by a District Commission within a period of 45 days. However, if the District Commission passes an order which is based on a settlement through mediation, such an order cannot be appealed before a State Commission.

Similarly, an appeal can be filed before the National Commission against the order passed by a State Commission within a period of 30 days. An appeal against the orders of the National Commission can be filed before the Supreme Court of India within a period of 30 days from the date of the order.

A person aggrieved by any order passed by the CCPA in relation to recall of goods or directions and penalties imposed for false or misleading advertisements may file an appeal to the National Commission within a period of 30 days from the date of receipt of such order.

The State Commissions and the National Commission are required to make an endeavor to finally decide the appeal within a period of 90 days from the date of its admission. However, this is not usually followed in practice and appeals may take a much longer time to be decided.

In civil suits, an aggrieved party has the option of filing an appeal before the high court against an unfavourable decree passed by a subordinate court. In appeal cases to a high court against a decree passed by a lower court in civil suit, the time prescribed is 90 days from the date of the original decree or order. For appeal to any other court, the prescribed time limit is 30 days from the date of decree or order.

2.12 Defences to Product Liability Claims

Defences Under the CPA

Under the CPA, there are certain defences available to a product seller and manufacturer in a product liability action.

A product liability action cannot be brought against a product seller if, at the time of harm, the complainant misused, altered or modified the product.

Similarly, in a product liability action based on the failure to provide adequate warning or instructions, the CPA prescribes the following defences, which the product manufacturer can rely upon:

the product was purchased by an employer for use at the workplace and the product manufacturer had provided sufficient warnings and instructions to that employer;

the product was sold as a component or material to be used in, or along with, another product and necessary warnings or instructions were given by the product manufacturer to the purchaser of that component or material, but the harm was caused to the complainant by use of the end product in which the component or material was used;

the product was one that was legally meant to be used or dispensed only by or under the supervision of an expert or a class of experts and the product manufacturer had employed reasonable means to give warnings or instructions around the use of the product to that expert or class of experts;

the complainant, while using the product, was under the influence of alcohol or any prescription drug, which had not been prescribed by a medical practitioner; and/or

a product manufacturer cannot be held liable for failure to instruct or warn about a danger which is obvious or commonly known to the user or consumer of that product, or which that user or consumer ought to have known, taking into account the characteristics of the product.

Procedural Defences

In addition, parties may also object to such claims on account of procedural irregularities, such as:

no locus standi of complainant;
time-barred complaint; and/or
no pecuniary or territorial jurisdiction of the commission/court.

In the case of contractual claims in a civil court, a seller can also rely on the provisions of the SGA that provide for some implied conditions as to quality or fitness of the good/product. A seller can defend a claim on the ground that the defects in the product were apparent and could have been revealed by mere inspection or examination. Sometimes, parties agree to inspection procedures in the contract itself; in such cases, the results of the inspection may serve as a good defence.

2.13 The Impact of Regulatory Compliance on Product Liability Claims

If a complaint is filed on the ground that a product is not compliant with a requirement to be maintained under law, adherence to regulatory requirements would be a relevant consideration in any case filed against the manufacturer, seller or service provider. However, even if the product adheres to regulatory requirements, this will not preclude a complaint from being filed.

Additionally, a claim may be filed in civil court if the product does not meet the terms of the contract, regardless of the product’s adherence to regulatory requirements.

2.14 Rules for Payment of Costs in Product Liability Claims

With respect to payment of costs in a product liability action, if claims for compensation are proved, then the consumer commission may inter alia, order the opposite party to:

return the complainant the price, or, as the case may be, the charges paid by the complainant, along with such interest on such price or charges as may be decided;
pay such amount as may be awarded by it as compensation in a product liability action; and
to provide adequate costs to the parties
It should be noted that the courts in India generally consider awarding reasonable costs rather than actual costs.

2.15 Available Funding in Product Liability Claims

Third-Party Funding

The legal position on third-party funding in India is not clear and is at a nascent stage. Recently, in Bar Council of India v A.K. Balaji and Others, AIR 2018 SC 1382, while discussing and deliberating upon an unrelated issue, the Supreme Court of India made a stray observation that there appears to be no restriction on third parties (non-lawyers) funding litigation and being repaid after the outcome of the litigation. However, third-party funding is not a commonly used mechanism and there is no codified law or regulation regarding third-party funding.

Contingency Fees

Under the Bar Council of India Rules (BCI Rules), there is a clear prohibition on lawyers entering into contingency fee arrangements, claiming an interest in actionable claims, or fomenting litigation. Relying on the BCI Rules, the Supreme Court of India has observed that funding of litigation by advocates is not permissible under Indian law.

2.16 Existence of Class Actions, Representative Proceedings or Co-ordinated Proceedings in Product Liability Claims

Class actions and representative proceedings are available under Indian law.

Under the CPA, class actions by consumers having the same interest in the dispute may be initiated for pursuing product liability actions. This means that the consumers must be aggrieved by the same defect or deficiency and the complaint must be made against the same seller or service provider. Representative proceedings by legal heirs or representatives are also permissible before consumer commissions, in the case of a death of a consumer. Class action mechanisms are fairly common before the consumer commissions such as the National Commission.

In the case of civil suits, where there are several parties having a common interest or grievance, one or more of those parties may, with the permission of the court, pursue a class action or a representative suit on behalf of all the interested parties. The decree passed by the court, in such class actions or representative suits, will be applicable to all the interested parties.

2.17 Summary of Significant Recent Product Liability Claims

Johnson & Johnson Hip Implants

Following the Johnson & Johnson faulty hip implants recall in 2010 (in Johnson & Johnson Private Limited v Union of India, [W.P. (C) 13395/2018]), the Delhi High Court passed an interim order on 30 May 2019 affirming the terms of the voluntary offer made by Johnson and Johnson India Limited (J&J) to pay a sum of INR2.5 million (approximately USD33,000) to all persons who had undergone the revision surgery for the faulty hip implants supplied by the petitioner. This voluntary offer was made by the company after it was ordered by the CDSCO to pay compensation ranging up to INR10 million to the victims of its faulty hip implant. The voluntary offer of payment was made with the condition that if any individual claimant succeeds in his or her personal suit and gets awarded a higher amount, the difference will also have to be paid by the company. Furthermore, the court ruled that if J&J succeeds in repelling the claims made by the person affected by the faulty hip implants, the amount will not be refunded. The matter is still pending final adjudication before the Delhi High Court and J&J has not admitted its liability at this stage.

Maggi Noodles

After a nationwide ban imposed on the largest selling noodle brand in India (Maggi), in Nestle India Ltd. v The Food Safety and Standard Authority of India, AIR 2016 (NOC 225) 98, Nestle moved a writ petition before the Bombay High Court to challenge the ban on the ground that the procedure adopted by the FSSAI to conclude that the products were unsafe for consumption was not substantiated by proper evidence as required under CPA. After analysing rival contentions, the court ruled in favour of Nestle and lifted the ban. However, the order passed by the Bombay High Court has been appealed and is currently pending adjudication before the Supreme Court of India.

Separately, the government of India on behalf of the aggrieved customers has also filed a complaint before the National Commission seeking compensation of approximately INR6 billion (approximately USD80 million) on different grounds. This matter is also pending adjudication before the National Commission.

Volkswagen Emissions Scandal

In Saloni Ailawadi v Volkswagen Indian Pvt. Ltd. & Others. (OA No. 509 and 527 of 2015), in light of the deceptive devices installed in the engines by the car manufacturer to bypass the mandatory emission limits, the National Green Tribunal (NGT) imposed a penalty of INR5 billion (approximately USD66 million) on the car manufacturer. The NGT based its decision on instances of product recall by the manufacturer and the penalty imposed by adjudicatory forums in different jurisdictions. However, this order has been stayed by the Supreme Court of India and is currently pending adjudication.

Ashok Leyland

In Ashok Leyland Ltd. v Gopal Sharma, [2014 (2) C.P.C. 215] the complainant had purchased a truck, from the opposite party, which had some defects in its engine. After having sent multiple notices to the opposite party to rectify this defect, the complainant brought an action before the consumer commission. The State Commission directed the opposite party to replace the defective engine and pay money equivalent to the price of the engine along with interest of 9%. Furthermore, the State Commission awarded INR100,000 (approximately USD1,300) and INR10,000 (approximately USD130) towards damages and litigation costs, respectively. The National Commission upheld the decision rendered by the State Commission and held that the doctrine of res ipsa loqitur was applicable as the defective engine was not working from the very first day. The National Commission even imposed costs on the opposite party for filing the revision petition as being completely frivolous and vexatious.

Paramount Digital Colour Lab

In Paramount Digital Colour Lab & Others v Agfa India Pvt. Ltd. & Others, (2018) 14 SCC 81 the complainant had purchased a printer from the opposite party (Company 1) which was later found to be defective. It was the managing director and the general manager of the opposite party who had ensured the quality/special features of the printer and had also initiated the sale on part of the opposite party. Subsequently, Company 1 was taken over by Company 2, which continued to refrain from making any efforts to either replace the machine or rectify the defects. The Supreme Court held that the dissolution of Company 1 would not preclude the managing director and the general manager of Company 1 from facing liability for selling defective goods to the consumer. It was further held that Company 2 was also liable as it failed to redress/resolve the complainant’s grievance.

3 Recent Policy Changes and Outlook

3.1 Trends in Product Liability and Product Safety Policy

Consumer Protection Act, 2019

The CPA contains a separate chapter on product liability, which sets out different situations/circumstances under which a product manufacturer, a service provider or a seller can be held liable for a product liability action. It contains a separate chapter on product liability, which sets out different situations/circumstances under which a product manufacturer, a service provider or a seller can be held liable for a product liability action.

It also provides for the establishment of the CCPA. An aggrieved consumer may now even make a complaint before the CCPA in relation to any violation of consumer rights/unfair trade practices/false or misleading advertisements, which are prejudicial to the interests of consumers as a class. The powers vested with the CCPA, include, inter alia:

inquiry or investigation into matters involving violations of consumer rights or unfair trade practices;
recall of goods or withdrawal of services that are dangerous, hazardous or unsafe;
issuing safety notices and alerting consumers to unsafe goods or services;
in the case of a misleading advertisement, issuing directions to the manufacturer/ trader/ endorser/ advertiser/ publisher, as the case may be, to discontinue the advertisement or, as a corrective measure, to modify the same; and
imposition of penalties, which may be by way of criminal prosecution of the manufacturers and service providers who release false and misleading advertisements prejudicial to consumer interests.

Motor Vehicles Amendment Act, 2019

The Motor Vehicles Amendment Act, 2019, which amended the Motor Vehicles Act, 1988, introduced a separate provision authorising the central government to order the recall of defective motor vehicles from the market. The Amendment Act included provisions that oblige a manufacturer who notices a defect in a motor vehicle manufactured by him or her, to inform the central government of the defect and initiate recall proceedings. In cases of recall of motor vehicles, the manufacturer is liable to reimburse the buyers for the full cost of the motor vehicle, replace the defective motor vehicle and pay fines.

Drugs and Cosmetics (Eleventh Amendment) Rules 2018

On 24 December 2018, the government of India passed the Drugs and Cosmetics (Eleventh Amendment) Rules 2018 as a step to control the recent increase in the number of misleading advertisements relating to Ayurveda, Siddha and Unani (ASU) drugs. The amendment adds Rule 170(1) to the DCA Rules, which prohibits manufacturers or their respective agents from advertising the use of ASU drugs for the purpose of diagnosis, cure, mitigation, treatment or prevention of any disease, disorder, syndrome or condition. Further, under Rule 170(3), the amendment lays down the requirement to obtain a Unique Identification Number (UIN) for advertising any ASU drug for purposes other than those prohibited under Rule 170(1). This step of the government to regulate the advertisement of ASU Drugs comes as a protective step after the Ministry of Ayush (Ayurveda, Yoga & Naturopathy, Unani, Siddha and Homoeopathy) in India was informed of 804 cases of misleading advertisements.

Food Safety and Standards (Packaging) Regulations, 2018

On 24 December 2018, the FSSAI released and notified the Food Safety and Standards (Packaging) Regulations, 2018. The regulations impose an obligation on food business operators to ensure that the packaging material used for packing food products are in conformity with the standards prescribed under the regulations. The regulation also lays down specific requirements/criteria for packing different food products.

Food Safety and Standards (Advertising and Claims) Regulations, 2018

The FSSAI gave notification of the Food Safety and Standards (Advertising and Claims) Regulations, 2018 on 19 November 2018. These regulations aim at supervising how food products are advertised by food firms. To regulate this, they prescribe definitive definitions for words like “natural”, “fresh” and “traditional” and provide for a detailed guideline on how claims are to be made. These regulations are a step towards curbing misleading claims made by companies against the usage of various terms. They further mandate that claims made by the manufacturer should be in consonance with the information on the label and, at the same time, should not have words implying that the food is recommended, prescribed or approved by medical practitioners. These regulations aim at making the companies more accountable for their health and nutritional claims. A penalty up to INR1 million (approximately USD 13,000) for any act of misleading advertisement has also been included in the regulations.

The Food Safety and Standards (Alcoholic Beverages) Regulations, 2018

The FSSAI gave notification of the Food Safety and Standards (Alcoholic Beverages) Regulations, 2018 on 19 March 2018. These regulations aim at establishing a comprehensive standard for alcoholic beverages in India. They categorise various alcoholic beverages by their characteristics to provide an easy guide to define and implement standards for each specific product and provide specific labelling requirements. Furthermore, the regulations mandate that liquor bottles should have a statutory warning stating that “alcohol consumption is dangerous to health”. This has been the first time that the regulator has framed such well-defined guidelines for various alcoholic beverages in India.

3.2 Future Policy in Product Liability and Product Safety

Medical Devices (Safety, Effectiveness and Innovation) Bill, 2019

As of now, there is no specific legislation in India, which allows a patient facing health issues to seek compensation for faulty/defective medical devices from the manufacturer. The Medical Devices (Safety, Effectiveness and Innovation) Bill, 2019 seeks to remedy this by introducing provision regarding the imposition of a penalty of up to INR10 million (approximately USD132,000 USD) on the manufacturers or importers of faulty/defective medical devices. The draft bill also suggests a term of imprisonment extending up to three years or a fine of up to INR5 million (approximately USD66,000) or both for placing a medical device on the market without (i) a valid certificate of conformity, (ii) obtaining a registration and (iii) complying with conditions as may be specified under the proposed Act.

3.3. Impact of COVID-19

Pursuant to the lockdown and the restrictions on movement due to COVID-19, courts in India are not functioning at full scale and are only hearing urgent matters through videoconference. The National Commission has also ceased operations and is only hearing urgent matters through mentioning at the residence of the President of the National Commission. All matters at the National Commission that were to be heard during the lockdown period have now been adjourned to be heard from 1 June 2020 onwards.

In light of the difficulties faced by litigants in instituting complaints/petitions during the lockdown period, the Supreme Court on its own motion, by its order dated 23 March 2020, has relaxed the limitations period for filing claims/petitions before various judicial/quasi-judicial forums across the country.

The Supreme Court has ordered that the period of limitations, irrespective of the limitations prescribed under General or Special Laws, whether condonable or nots shall stand extended, effectively applicable from 15 March 2020 until further order(s). This decision of the Supreme Court is binding on all high courts, subordinate courts and tribunals including the consumer commissions.

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Contributed by: Pallavi Shroff, Managing Partner; Binsy Susan, Partner; Akshay Sharma, Senior Associate; Amogh Srivastava, Associate

Disclaimer

This is intended for general information purposes only. The views and opinions expressed in this article are those of the author/authors and does not necessarily reflect the views of the firm.

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