This country-specific Q&A provides an overview to product liability laws and regulations that may occur in India

1. Please summarise the main legal bases for product liability.

The term ‘product liability’ has not been defined under any Indian statute. However, in accordance with the evolving jurisprudence around product liability claims in India, the term has generally been understood to mean the liability of any or all parties that form a part of the manufacturing and supply chain of a product, arising from any defect in the product and consequent loss or injury caused by the defective product.

In India, there is no one specific statute or law providing the entire legal framework for product liability claims. There exist multiple general and sector-specific laws that form part of the legal framework governing product liability in India, which, in certain instances may overlap depending on the sector and facts of the case.

Briefly, the substantive civil laws that relate to product liability in India are:

a. the Sale of Goods Act, 1930 (SGA);
b. the Consumer Protection Act, 1986 (CPA); and
c. the Indian Contract Act, 1872 (the Contract Act).

Further, as India is a common law country, courts are influenced by principles of justice, equity and good conscience, and principles of tort law such as the duty of care, negligence and strict liability (including absolute liability in exceptional circumstances) in claims dealing with product liability. The provisions of the Indian Penal Code, 1860 (IPC), such as those relating to criminal negligence, fraud and cheating, may apply in cases of defective products supplied if criminal intent is ascribed to the acts of the manufacturers or suppliers.

Additionally, there are pan industry laws such as the Bureau of Indian Standards Act 2016 (BIS Act), and sector specific statutes such as the Food Safety and Standards Act, 2006 (FSSA), Drugs and Cosmetics Act, 1940 (the Drugs Act), and Motor Vehicles Act, 1988 (MVA) that govern product liability in India.

BIS Act sets out mandatory and voluntary standards and specifications applicable to products across different sectors and industries. If any goods or articles do not conform to a mandatory standard, the regulatory authority under the BIS Act has the power to issue directions to stop the supply and sale, and may recall the non-conforming goods or articles. BIS Act also provides for penal consequences, including fines and imprisonment for non-conformance, including non-conformance to prescribed standards. Other sector specific laws also place recall obligations in cases of defective products, and have penalty provisions for non-compliance.

2. What are the main elements which a claimant must prove to succeed in a strict liability type claim for damage caused by a defective product?

Indian courts have significantly developed the concept of strict liability and the more stringent rule of absolute liability to deal with problems of a highly industrialised economy. However, the concept of strict liability has predominantly been applied in the context of environmental pollution and protection related matters. The jurisprudence on strict liability under tort law has not evolved significantly in India with respect to product liability claims. Having said that, the CPA, in a sense, codifies the principles of liability with respect to sale or supply of defective products to consumers. The redressal under the CPA is only available to aggrieved parties who fall under the statutory definition of a ‘consumer’. A ‘consumer’ has been defined under the CPA to include persons who have purchased or hired goods or services for consideration and does not extend to purchase for resale or commercial purposes. Aggrieved parties not being a ‘consumer’ under the CPA would be required to seek alternate methods of grievance redressal through civil suit or under contractual liability.

To establish causation in product liability cases under Indian law, every fact establishing the elements of a cause of action must be proved by the aggrieved party. Therefore, in cases relating to defects in products, based on the trend of judicial precedents in this regard and depending on the factual circumstances, the burden of proof will be on the aggrieved party to prove (a) presence of a defect in the products, (b) breach of warranty or condition (implied or expressed), or (c) breach of duty of care and resulting damage (in instances involving negligence). In some instances, however, Indian courts have gone as far as holding that the existence of the defect in the product implies negligence.

3. With whom does liability sit? If there is more than one entity liable, is liability joint and several?

Generally in cases under the CPA, there is joint liability of the manufacturer (on account of the warranty provided) and the seller (being the wholesaler or retailer), although the warranty with respect to the product is typically provided by the manufacturer alone. In product liability cases that are also contractual breaches, apportionment of liability is ordinarily contractually driven and may be joint or several (or both) depending on the provisions of the contract and the facts and circumstances of the case.

Under Indian law, a decree passed in respect of payment of compensation or damages in a suit for breach of contract or tortious claims may be passed by a civil court only against persons named as defendants in a suit. In case of sale of defective products, consumers generally tend to proceed against both, the manufacturer and the seller, for joint and several liability.

4. Are any defences available? If so, please summarise them.

The general defences available in strict liability cases under tort law provide that: (a) the injury was due to an act of God; (b) the injury was caused because of the fault of the aggrieved party; (c) the injury was because of an act of a third party (unless it was foreseeable); or (d) the risk of injury was inherent to the activity and the activity was done with the aggrieved party’s knowledge and consent.

5. What is the limitation period for bringing a claim?

Limitation on filing of suits in India is governed by the Limitation Act, 1963. The period of limitation for a tort claim is three years from the date on which the right to sue occurs. However, the CPA provides for a limitation period of two years from the date of the cause of action. Having said that, the CPA gives the consumer court the discretion to entertain complaints filed beyond the limitation period if it is satisfied with the reasons for the delay.

6. To what extent can liability be excluded (if at all)?

Manufacturers of consumer products usually limit their liability for damages (in quantum) and exclude liability for indirect losses in their warranty documents. However, in cases under the CPA, the consumer forum usually awards compensation for loss suffered and in appropriate instances also exercises its powers to award punitive damages, irrespective of the warranty terms. There are however general defences available in strict liability claims under tort law, as detailed above.

Further, as discussed earlier, the CPA permits only consumers to institute claims and therefore, the liability of manufacturers and sellers to persons who do not fall within the statutory definition of ‘consumer’, such as persons who obtain goods for resale or for commercial purposes, are excluded from the purview of the CPA.

7. What are the main elements which a claimant must prove to succeed in a non-contractual (eg tort) claim for damage caused by a defective product?

In India, there is no specific statute codifying law of torts. India is a common law country and general principles of Indian tort law follow principles of English tort law. The courts in India are guided by the principles of justice, equity and good conscience, and principles of tort law such as duty of care, negligence and strict liability, based on common law precedents.

The Supreme Court has held in Common Cause, a registered society v Union of India [(1999) 6 SCC 667] that tort signifies an act which gives rise to a right of action being a wrongful act or injury consisting in the infringement of a right created otherwise than by a contract. Torts are divisible into three classes, being in the infringement of a jus in rem, or in the breach of a duty imposed by law on a person towards another person, or in the breach of a duty imposed by law on a person towards the public.

The three essential elements required to be proved in a claim for negligence under the law of torts are (a) the existence of a duty of care, (b) a breach of such duty of care, and (c) injury or damage resulting from such breach. In most product liability claims, there is always an element of a contractual relationship between the parties. Hence, in order for an aggrieved party to institute a claim under tort law, the aggrieved party is required to establish that the breaching party had a duty of care which was independent of the contract.

8. What types of damage/loss can be compensated and what is the measure of damages? Are punitive damages available?

The damages which can be awarded in an action based on tort may be contemptuous, nominal, ordinary or exemplary. The primary object of award of damages is to compensate the aggrieved party for the harm suffered, while the secondary object is to punish the breaching party for its conduct in inflicting such harm. The secondary object is achieved in certain cases by awarding, in addition to compensatory damages, damages which are termed as exemplary, punitive, vindictive or retributory damages. In awarding punitive or exemplary damages, the emphasis is not on the injury caused, but on the breaching party and its conduct.

However, in product liability claims under the principles of tort law, practically there is limited jurisprudence available as aggrieved parties usually seek redressal under the CPA or under the Contract Act. This is also due to reluctance of Indian courts to award considerably significant amounts of exemplary or punitive damages in claims under tort law. The CPA permits awards of punitive damages in circumstances deemed fit by the consumer courts. Damages have been awarded by Indian courts under the CPA in exceptional cases by way of compensation where it has been established that the aggrieved party suffered harassment and extreme pain and suffering as a result of the conduct of the manufacturer, supplier or distributor, pursuant to being notified about the defective product. However, the quantum of damages awarded under the CPA or by a civil court is much lower than and not comparable with punitive damages that are awarded in other developed countries.

9. How are multiple tortfeasors dealt with? Is liability joint and several? Can contribution proceedings be brought?

In cases under tort law, Indian courts recognise the principle of joint and several liability. Under this principle, multiple parties may be held jointly liable in respect of any tortious claim by an affected person in the event that (a) the parties have, acting in concert, committed a wrongful act resulting in loss or damage to the affected person or, (b) when not acting in concert, have, by their individual wrongful acts, caused loss or damage to the affected person. In exceptional cases, courts have apportioned the liability between multiple tortfeasors on the basis of material evidence available on record, indicating the degree of liability of each tortfeasor.

In cases of composite negligence, an aggrieved party is entitled to recover damages from any or all of the negligent tortfeasors. That said, Indian courts have held that a tortfeasor proceeded against has the remedy to sue the other tortfeasors to recover contribution amounts to the extent of their liability. However, such proceedings are not evidenced as much in product liability claims.

10. Are any defences available? If so, please summarise them.

In case of negligence under tort law, the test is whether certain damage suffered by the aggrieved party was a foreseeable consequence of an act or omission on the part of the breaching party. The breaching party can contend that the essential components of negligence, being ‘duty’, ‘breach’ and ‘resulting damage’ are not established, and that all necessary steps a reasonable, prudent man would have taken in the given circumstances have been undertaken.

Indian courts have also recognised the principle of contributory negligence, i.e. the person who has suffered damage is also guilty of some negligence and has contributed towards damage, in adjudication of liability under tort law.

11. What is the limitation period for bringing a claim?

The period of limitation for a tort claim is three years from the date on which the right to sue occurs. The CPA provides for a limitation period of two years from the date of the cause of action; however, the CPA gives the consumer court the discretion to entertain complaints filed beyond the limitation period if it is satisfied with the reasons for the delay.

12. To what extent can liability be excluded (if at all)?

Under tort law, the breaching party’s liability can be excluded for consequences which are remote in nature, and foreseeability is the test for determining remoteness of damage. This is in addition to the defences available to the breaching party as discussed above.

Separately, the Contract Act position is that a party can monetarily limit its liability arising from defective products by including it in its contractual terms.

13. Does the law imply any terms into B2B or B2C contracts which could impose liability in a situation where a product has caused damage? If so, please summarise.

The SGA governs the relationship of a seller and buyer of movable goods in India, for both B2B and B2C contracts. The SGA specifically provides for implied conditions or warranties undertaken by the seller with respect to fitness and merchantable quality of the product sold; and there is an implied warranty for the goods sold to be free from defects. A breach of such an implied warranty entitles the purchaser the right to sue for damages.

14. What types of damage/loss can be compensated and what is the measure of damages?

The function of damages under the Contract Act is primarily to compensate the aggrieved party for losses sustained by it owing to breach of contract. In India, law has categorised damages as ‘direct damage’ or ‘indirect damage’; ‘consequential damage’ or ‘remote damage’ (the test is whether certain damage suffered by the aggrieved party was a foreseeable consequence of an act or omission on the part of the breaching party); and ‘punitive or exemplary damage’. However, the Contract Act does not permit grant of ‘indirect damages’ or ‘remote damages’.

Damages are further categorised as liquidated or unliquidated damages. Liquidated damages are such as have been agreed upon and fixed by the parties in anticipation of the breach whereas unliquidated damages are such that are required to be assessed. Applying the reasonableness test, the court can award any sum it considers reasonable provided that it does not exceed the sum previously agreed between the parties.

With regard to assessment of damages in contractual claims, Indian law imposes on the aggrieved party the duty of taking all reasonable steps to mitigate the loss consequent to the breach, and as discussed above, a court may deny an aggrieved party’s claim to the extent that it finds that the aggrieved party has failed to take such steps.

15. To what extent can liability be excluded (if at all)?

By virtue of contractual arrangements, parties are permitted to exclude liability for indirect losses even if they were aware of such losses when they made the contract. The Contract Act provides for the payment of damages/compensation by the defaulting party to the aggrieved party for any loss or damage which arose as a natural consequence of such breach; or which the parties knew, at the time of entering into the contract, to be likely to result from such a breach. The Contract Act does not allow damages for remote, indirect or incidental loss. In addition the Contract Act permits parties to agree on the quantum of liquidated damages payable by the breaching party in case of breach, thereby limiting the quantum of liability of the breaching party.

16. Are there any recent key court judgements which have had a significant impact on the approach to product liability?

Typically, jurisprudence for product liability claims under the CPA is in relation to one-off defects in consumer goods and therefore has not resulted in path-breaking judgements. That said, landmark product liability cases are also increasingly seen in the Indian scenario, however, more under industry specific statutes such as the FSSA and the Drugs Act, as opposed to under the CPA. Further, owing to limitations of legislative development, and the delay in disposition of pending cases due to systemic problems, the Government of India has also intervened in several instances to ensure breaching parties are held accountable and necessary steps are taken in this regard. Significant developments in this field have occurred in the last year through governmental intervention.

In relation to the global emission scandal involving Volkswagen, a public interest litigation case was filed against Volkswagen in India before the National Green Tribunal (NGT, which is the forum set up in India for expeditious disposal of cases relating to environmental and conservation-related issues) towards the end of 2015 seeking a ban on sale of its cars in India. In this respect, Volkswagen had submitted a road map to the NGT for the recall of its defective vehicles in India. The NGT constituted a committee to estimate the quantum of loss caused by Volkswagen, and the committee recommended a fine of one billion, seven hundred million rupees. Further to the committee’s recommendation, the NGT has directed Volkswagen to pay an interim deposit of one billion rupees, pending their decision in the case. Based on recent press releases, it appears that the NGT has now imposed an enhanced fine of five billion rupees on Volkswagen to create deterrence, on account of the environmental damage caused.

Six years after the cancellation of Johnson & Johnson’s (J&J) import license for hip replacement devices that were faulty, J&J has been ordered by the Indian Ministry of Health and Family Welfare (Ministry of Health) to pay compensation (ranging between 3 million to 12.3 million rupees) to patients who had received the faulty hip implant. A committee was formed by the Ministry of Health that calculated the compensation payable based on a formula using a person’s age and the extent of disability. J&J challenged the committee’s decision on grounds of lack of transparency and opportunity to be heard, which remains pending. However, the Supreme Court in a separate petition filed on behalf of a patient affected by the faulty implant chose not to interfere with the committee’s proposal on the quantum of compensation, including the manner of computation of the compensation. As an aftermath of the J&J case, an expert subcommittee has been constituted to review and appropriately recommend provisions for compensation in case of faulty devices under the Medical Devices Rules, 2017.

17. What are the initial litigation related steps you should take if you are facing a product liability claim or threatened claim?

As first steps upon the threat or initiation of a product liability claim, the nature of the alleged defect and the injury caused must be evaluated, including identifying factors such as the presence of a stand-alone defective product, or defects across products supplied. It is also imperative to identify if the defective products fall under a regulated sector where industry specific regulations, like the FSSA and the Drugs Act, may be applicable. Sector specific statutes may also prescribe remedial procedures, involving mandatory or voluntary recalls of the defective products, and require disclosures to a regulatory body.

Responsible parties must also devise a strategy to mitigate the damage caused, implement preliminary remedial measures, such as repairs, replacement or compensation, and manage consumer expectations. Potentially affected consumers should be notified of the remedial measures, which could comprise of a recall exercise and consequent replacements of their defective products.

Product liability claims in one jurisdiction could also trigger global recall requirements across other jurisdictions. We see global entities make a recall in select jurisdictions without being aware that news of such recall could have ramifications in other jurisdictions as well. Voluntary strategic actions with a view to limit potential liability due to defective products must be undertaken across jurisdictions. Responsible parties must therefore act swiftly to prevent escalation of loss and product liability claims.

18. Are the courts adept at handling complex product liability claims? Are cases heard by a judge or jury?

In incidents such as that involving Volkswagen (discussed above), the court relied on a report by an expert committee to better understand the damage / loss caused and corresponding quantum of compensation payable. In the J&J faulty hip implant incident, the Government pro-actively established committees to examine and evaluate the extent of damage caused and the compensation payable to patients who had received faulty hip implants manufactured by J&J. When the quantum of compensation was sought to be challenged before the Supreme Court through public interest litigation, the Supreme Court refrained from interfering with the action taken by the committee formed by the Government. Therefore, recent judgements as detailed above and related jurisprudential developments indicate the ability of Indian courts to handle increasingly complex and multifaceted product liability claims.

Cases are adjudicated by judges as the jury system was abolished in India in 1974.

19. Is it possible to bring a product liability related group action? If so, please summarise the types of procedure(s) available

Under the Civil Procedure Code (CPC), which sets out the relevant provisions relating to the jurisdiction of courts in civil cases, two or more aggrieved parties have the right to aggregate their claims in a suit against a breaching party. This can be done even if each of their cause of action is separate and distinct. This is based on the fact that in the event that the right to obtain relief arises out of the same act, transaction, or series of acts or transactions, and the causes of action are of such a nature that if separate suits were filed by the aggrieved parties, common questions of law or fact would arise. Additionally, the CPC also allows one or more persons to file a suit against the breaching party on behalf of, or for the benefit of, numerous persons having the same interest in the suit, with the prior permission of the court in which the suit is required to be instituted. In this regard, interest is said to be similar or common when the aggrieved parties have a common grievance against the breaching party and the relief sought is in its nature beneficial to all persons interested in the suit. Hence, it is possible to institute product liability related claims as a group action under contract law and tort law in India.

The CPA also recognises the right of one or more consumers or a voluntary consumer association to file a complaint against a single manufacturer, dealer, distributor, etc. on behalf of, or for the benefit of, numerous consumers having the same interest. The complainants are required to obtain prior permission from the relevant forum for adjudication of disputes under the CPA before instituting such proceedings. Additionally, the CPA provides the district, state and national fora the power to grant relief to several consumers who are unidentifiable. This power is typically exercised in the event of loss or injury being suffered by a large number of consumers as a result of defective goods or services.

20. How are cases typically funded? Can lawyers charge success fees? Is third party funding permissible?

Parties generally fund their own legal cases in India. The Bar Council of India, which is the regulatory body for the legal profession, does not permit lawyers to charge a success fee or contingent fee.

The Supreme Court of India recently held in Bar Council of India v AK Balaji and ors [AIR 2018 SC 1382] that third party funding / legal financing agreements are not prohibited in India. However, professional rules prevent lawyers from funding litigation on behalf of their clients.

Further, the Consumer Welfare Fund also provides financial assistance for expenses on advocacy and class action suits by consumers, and applications may be made to it for reimbursement of legal expenses incurred by a complainant or a class of complainants upon adjudication of a consumer dispute.

21. How common are product liability claims and what factors influence their frequency?

As India is a developing nation, the majority population has smaller disposable income, and therefore seeks value maximisation from their purchases. The CPA has established consumer dispute redressal forums at the state, district and national levels to deal with product liability claims. Due to ease of approachability of redressal forums, consumers mostly institute cases seeking replacement of defective products and / or compensation for harm caused. Factors such as (a) nominal fees for instituting a complaint before a consumer dispute redressal forum compared to that for instituting a civil suit in India, which would be calculated on an ad valorem basis, i.e., a percentage of the amount in dispute; (b) summary proceedings for ruling on cases; (c) pro-consumer approach of the forum; (d) the wide powers of the redressal forums to grant relief to consumers; and (e) tendency of the forum to award damages or compensation to an aggrieved consumer, has made consumer grievance redressal under the CPA accessible to Indian consumers. However, there remain certain systemic problems of delay owing to the severe back-log of cases pending before the forums. That said, in recent times, product liability claims are fairly common in India and claims and these claims range from mobile phones to luxury cars.

22. What are the likely future developments in product liability law and practice? To what extent is the suitability of the law being challenged by advances in technology?

On January 2018, the Ministry of Consumer Affairs, Food and Public Distribution introduced the Consumer Protection Bill, 2018 (CPB 2018) in the Lok Sabha (the lower house of the Indian Parliament). The CPB 2018 was passed in the Lok Sabha on December 2018 but is yet to be passed in the Rajya Sabha (the upper house of the Indian Parliament) and notified as law. The CPB 2018 defines product liability to mean a product manufacturer’s or seller’s responsibility towards compensating a consumer harmed by a defective product or deficiency in service. The salient features of the CPB 2018 include introducing provisions relating to product liability, enhanced penalties and establishment of the Central Consumer Protection Authority (CCPA) (a regulatory agency with wide powers to address consumers’ concerns) to promote, protect, and enforce rights of consumers as a class. The CCPA’s powers will include (a) enquiring and conducting investigations into violations of consumers’ rights, (b) order of recall of products found to be unsafe or withdrawal of services found to be unsafe or hazardous, (c) imposing penalties, and (d) issuing safety notices and alerting consumers to unsafe goods or services. The CPB 2018 also includes provisions that make the manufacturer liable for product liability actions in certain cases, and lists out instances where a product manufacturer or seller will not be held accountable for product liability.

To keep up with changing times and the advancement of technology, legislators and the judiciary are continuously attempting to keep Indian laws updated; however, it remains challenged by the rapid pace at which technology is progressing. In situations where processes are increasingly being automated, such as 3D printing and driverless cars, the existing principles of product liability in India are not sufficiently evolved to identify and apportion liability in cases involving human and machine error. The issue of liability is even less clear in situations where the involvement of a human element reduces and important decisions are taken by artificial intelligence systems.

Authors:
Vivek Bajaj, partner
Sonakshi Sharma, Associate
Kaavya Raghavan, Associate