PRODUCT LIABILITY

PROVISIONS DISCUSSED IN BARE ACT

82. Application of Chapter.— This Chapter shall apply to every claim 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.

83. Product liability action.— 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.

84. Liability of product manufacturer.— ( 1 ) A product manufacturer shall be liable in a product

liability action, if—

( a ) the product contains a manufacturing defect; or

( b ) the product is defective in design; or

( c ) there is a deviation from manufacturing specifications; or

( d ) the product does not conform to the express warranty; or
( e ) the product fails to contain adequate instructions of correct usage to prevent any harm or
any warning regarding improper or incorrect usage.

( 2 ) A product manufacturer shall be liable in a product liability action even if he proves that he was
not negligent or fraudulent in making the express warranty of a product.

85. Liability of product service provider.— A product service provider shall be liable in a product
liability action, if—

( a ) the service provided by him was faulty or imperfect or deficient or inadequate in

quality, nature or manner of performance which is required to be provided by or under any law
for the time being in force, or pursuant to any contract or otherwise; or

( b ) there was an act of omission or commission or negligence or conscious withholding any

information which caused harm; or

( c ) the service provider did not issue adequate instructions or warnings to prevent any
harm; or ( d ) the service did not conform to express warranty or the terms and conditions of
the contract.

86. Liability of product sellers.— A product seller who is not a product manufacturer shall be liable
in a product liability action, if—

( a ) he has exercised substantial control over the designing, testing, manufacturing,

packaging or labelling of a product that caused harm; or

( b ) he has altered or modified the product and such alteration or modification was the
substantial factor in causing the harm; or
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( c ) he has made an express warranty of a product independent of any express warranty

made by a manufacturer and such product failed to conform to the express warranty made
by the product seller which caused the harm; or

( d ) the product has been sold by him and the identity of product manufacturer of such
product is not known, or if known, the service of notice or process or warrant cannot be
effected on him or he is not subject to the law which is in force in India or the order, if
any, passed or to be passed cannot be enforced against him; or

( e ) he failed to exercise reasonable care in assembling, inspecting or maintaining such

product or he did not pass on the warnings or instructions of the product manufacturer
regarding the dangers involved or proper usage of the product while selling such product and
such failure was the proximate cause of the harm.

87. Exceptions to product liability action.— ( 1 ) A product liability action cannot be brought
against the product seller if, at the time of harm, the product was misused, altered, or modified.

( 2 ) In any product liability action based on the failure to provide adequate warnings or instructions,
the product manufacturer shall not be liable, if—

( a ) the product was purchased by an employer for use at the workplace and the
product manufacturer had provided warnings or instructions to such employer;

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

( c ) the product was one which 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 the warnings or instructions for usage of such product to
such expert or class of experts; or
( d ) the complainant, while using such product, was under the influence of alcohol or
any prescription drug which had not been prescribed by a medical practitioner.

( 3 ) A product manufacturer shall not be liable for failure to instruct or warn about a
danger which is obvious or commonly known to the user or consumer of such product or which,
such user or consumer, ought to have known, taking into account the characteristics of such product.

PRODUCT LIABILITY UNDER THE CONSUMER

PROTETCTION ACT, 2019

The 2019 Act introduced the legal regime on product liability and dedicated
an entire chapter (Chapter VI) to enumerate the situations where a claim for
compensation under a product liability action would be available for ‘harm’
caused by a ‘defective’ product manufactured by a product manufacturer or
serviced by a product service provider or sold by a product seller.
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‘Harm’, in relation to a product liability inter alia includes — (I) damage to

any property other than the product itself; (ii) personal injury, illness or
death; (iii) mental agony or emotional distress, etc. It may be noted that
this does not include any harm caused to a product itself or any damage to
the property on account of breach of warranty conditions or any commercial
or economic loss including any direct, incidental or consequential loss
relating thereto. Further, the Act defines ‘defect’ to mean any fault,
imperfection or shortcoming in the quality, quantity, potency, purity or
standard, which is required to be maintained by or under any law or
contract, express or implied or as is claimed by the trader in any manner
whatsoever in relation to any goods or product.

As is evident from the above, to bring about a product liability action, it is

important for a consumer to establish that ‘harm’ was caused due to a
‘defective’ product.

The 2019 Act distinguishes between the roles of a product manufacturer,

product seller and service provider and accordingly envisages individual
criteria for attracting product liability actions against each of them. The same
has been discussed below:

I. Liability of a Product Manufacturer

The 2019 Act, under Section 2(36), contains a wide definition of ‘product
manufacturer’, to include every party connected with the sale process within
the scope of the definition. Under the 2019 Act, a ‘product manufacturer’ has
been defined to mean a person who: (a) makes any product or parts
thereof; or (b) assembles parts thereof made by others; or (c) puts or
causes to be put his own mark on any product made by any other person; or
(d) 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 (e) designs,
produces, fabricates, constructs or re-manufactures any product before its
sale; or (f) being a product seller of a product, is also a manufacturer of
such product.

Section 84 of the Act enumerates the situations where a product

manufacturer shall be liable in a claim for compensation under a product
liability action for a harm caused by a defective product manufactured by the
product manufacturer. The situations are as under:
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(a) The product contains a manufacturing defect;

(b) The product is defective in design;

(c) The product does not conform to the manufacturing specifications;

(d) A claim for compensation against a product manufacturer would also lie
when the product does not conform to an express warranty. It is
pertinent to note that under the 2019 Act, if the product does not
conform to an express warranty, a product liability action would lie
against the product manufacturer regardless of the product manufacturer
not being negligent or fraudulent in making the express warranty of the
product;

(e) Similarly, a product liability action will lie against the manufacturer if the
manufactured product fails to contain adequate instructions on correct
usage to prevent any harm or any warning regarding improper or
incorrect usage.

II. Liability of a Product Service Provider

A product service provider under the 2019 Act is defined to mean a person
who provides a service in respect of any product. The definition of a
product service provider has been specifically added to the 2019 Act so as to
cover services such as maintenance or repair where the service and the
product are inherently related, and the service has a direct bearing upon the
performance of the product.

Section 85 of the Act enumerates the instances under which a product

service provider shall be liable in a product liability action for a harm caused
by a defective product serviced by the product service provider. The
instances are as under:

(a) If the service provided by it was faulty, imperfect, deficient or

inadequate in quality, nature or manner of performance. The same must be
judged based on the requirement by or under any law for the time being in
force, or pursuant to any contract.
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(b) A product service provider shall also be liable if there was an act of
omission or commission or negligence or conscious withholding of any
information, which caused the harm.

(c) Liability will also be fastened on the product service provider if it does
not issue adequate instructions or warnings to prevent any harm.

(d) Similarly, a product service provider shall be liable in a product liability

action if the service did not conform to express warranty or the terms and
conditions of the contract.

III. Liability of a Product Seller

A product seller under the 2019 Act is defined to mean any person who, in
the course of business, imports, sells, distributes, leases, installs, prepares,
packages, labels, markets, repairs, maintains, or otherwise is involved in
placing such product for commercial purpose and includes (a) a
manufacturer who is also a product seller; or (b) a service provider. The
section specifically excludes certain people from the definition of a product
seller who are as under.

● A seller of an immovable property shall not be a product seller

unless such a person is engaged in the sale of constructed house
or in the construction of homes of flats.
● Similarly, a provider of professional services, where the skill or
service is the essence of the transaction and the sale or use of
the product is only incidental to it, shall not be included in the
definition of a product seller.

● Lastly, a person will not fall within the definition of a product

seller is he/ she (a) acts only in a financial capacity with respect
to the sale of the product or (b) is not a manufacturer,
wholesaler, distributor, retailer, direct seller or an electronic
service provider or (c) leases a product without having a
reasonable opportunity to inspect and discover defects in the
product, under a lease agreement in which the selection,
possession, maintenance, and operation of the product are
controlled by a person other than the lessor.
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Section 86 of the Act lists the instances under which a product seller (who is
not a product manufacturer) shall be liable in a product liability action for a

harm caused by a defective product sold by the product seller. They are:

(a) if the product seller had exercised substantial control over the
designing, testing, manufacturing, packaging or labelling of a product that
caused harm.

(b) if product seller alters or modifies the product and such alteration or
modification becomes the substantial factor in causing the harm.

(c) if product seller has made an express warranty of a product,

independent of any express warranty made by a manufacturer and such
product failed to conform to the express warranty made by the product
seller which caused the harm.

(d) if a product has been sold by the product seller and the identity of the
product manufacturer of such product is not known, or if known, the service
of notice or process or warrant cannot be affected on the product
manufacturer or the product manufacturer is not subject to the law, which is
in force in India or the order, if any, passed or to be passed cannot be
enforced against the product manufacturer.

(e) if the product seller fails to exercise reasonable care in assembling,

inspecting or maintaining such product or if it does not pass on the warnings
or instructions of the product manufacturer regarding the dangers involved
or proper usage of the product while selling such product and such failure
was the proximate cause of the harm.

IV. Penalties that may be imposed

If the consumer forum arrives at the finding that the product is defective or
any of the allegations of the complainant with respect to service, unfair trade
practice or claim for product liability is proved, the consumer forum may
inter alia direct one or more of the following: removal of defect,
replacement of the product, return of the price paid by consumer along with
interest, compensation to consumer, including punitive damages for
negligence, discontinuation of unfair trade practices, withdrawal of
hazardous or unsafe goods, direction to cease to manufacture hazardous
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goods or cease to offer for sale hazardous services, compensation for

product liability action, cease and desist from issuing misleading
advertisement or direction to issue corrective advertisement. Since The
2019 Act aims to provide enhanced protection to consumers, it accordingly
provides for more stringent punishments compared to the Erstwhile Act.

The 2019 Act has also defined ‘unfair contracts’ , which means a contract
between a manufacturer or trader or service provider on one hand, and a
consumer on the other, having such terms which cause significant changes in
the rights of such consumer; including (a) requiring excess security deposits
from consumers; (b) imposing disproportionate penalty upon the consumer
for breach of contract; (c) refusing to accept early repayment of debt; (d)
entitling unilateral termination; (e) permitting assignment of contract to the
detriment of customer without his/ her consent; (f) imposing on the
consumer any unreasonable charge, obligation or condition, which puts such
consumer at a disadvantage. Both State Commission and National
Commission have the power to declare such contracts null and void.

The 2019 Act has also established a Central Consumer Protection Authority
(“CCPA”). The CCPA is a regulatory authority under the Act with powers of
investigation, inquiry and injunctive actions. The primary objective of the
CCPA is to regulate matters pertaining to violation of rights of consumers,
unfair trade practices and false or misleading advertisements that are
prejudicial to the interests of public and consumers.

CCPA has the power to direct recall of goods or withdrawal of services that
are dangerous, hazardous or unsafe. The CCPA can also direct
reimbursement of the prices of goods or services so recalled to the
purchasers. Additionally, the CCPA has also been empowered to direct
discontinuation of practices that are unfair and prejudicial to consumers’
interest.

Further, the 2019 Act also heavily addresses the issue of misleading
advertisements. Both the Consumer fora and CCPA have the power to issue
directions and penalties against false or misleading advertisements. Any
manufacturer or service provider who causes a false or misleading
advertisement to be made, which is prejudicial to the consumers inter sets is
punishable with imprisonment extending up to two years and with a fine
extending up to ten lakh rupees and in case of subsequent offence with
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imprisonment extending up to five years and with fine extending up to fifty

lakh rupees.

The CCPA has also been empowered to direct the concerned party — be it a
trader, manufacturer, endorser, advertiser or publisher — to discontinue a
misleading advertisement or modify the same. Additionally, the CCPA has
been empowered to impose a penalty on the manufacturer, or the endorser
to the tune of ten lakh rupees, which may extend to fifty lakh rupees in
cases of subsequent contravention. Similarly, a publisher or a person who is
party to such publication may also be penalized for an amount up to rupees
ten lakhs. In addition to the above penalties, the 2019 Act also empowers
the CCPA to prohibit the endorser of a false or misleading advertisement
from making endorsement of any product or service for a period which may
extend to one year and in case of subsequent contravention to three years.
However, the Act also provides safe harbor for endorsers and publishers in
certain cases. An endorser is exempted from penalty under Section 21 of
the 2019 Act if he/ she exercised due diligence to verify the veracity of the
claims made in the advertisement regarding the product or service being
endorsed. Similarly, a person will not be liable if he/ she published or
arranged for the publication of the false or misleading advertisement in the
ordinary course of business. However, this defense would not be available if
the person had previous knowledge of an order passed by CCPA, regarding
withdrawal or modification of the advertisement.

In order to ensure compliance with the order of the CCPA, Section 88 of the
2019 Act criminalizes failure to comply with the directions of CCPA and
makes it punishable with imprisonment for a period up to 6 months or with
fine which may extend to twenty lakh rupees or with both. Furthermore, the
2019 Act also provides for punishment, including imprisonment or fine or
both, for manufacturing for sale or storing, selling or distributing or
importing products containing adulterant or spurious goods.

V. Possible Defenses to a Product Liability Action

A perusal of the definition of ‘product liability’ reveals that in order to

establish a claim of product liability, the complainant must establish ‘harm’
caused by a ‘defective’ product. Therefore, the product not being ‘defective’
and the absence of any ‘harm’ caused to the consumer by use of the product
are certainly valid defenses to a product liability action. In addition to the
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above, Section 87 of the Act envisages the below mentioned defences to a

product liability action:

(a) In case of a claim against a product seller, it would be a valid defence

that at the time of the alleged harm, the product was misused, altered, or
modified.

(b) In case of a claim against a product manufacturer for failure to provide

adequate warnings or instructions, the following would be valid defences:

(i) the product was purchased by an employer for use at the workplace
and the product manufacturer had provided warnings or instructions to such
employer;

(ii) the product was sold as a component or material to be used in another

product and necessary warnings or instructions were given by the product
manufacturer to the purchaser of such component or material, but the harm
was caused to the complainant by use of the end product in which such
component or material was used;

(iii) the product was one which 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 the warnings
or instructions for usage of such product to such expert or class of experts;
or

(iv) the complainant, while using such product, was under the influence of
alcohol or any prescription drug which had not been prescribed by a medical
practitioner.

(c) Also, a product manufacturer shall not be liable for failure to instruct or
warn about a danger, which is obvious or commonly known to the user or
consumer of such product or which, such user or consumer, ought to have
known, taking into account the characteristics of such product.

Any product liability claim requires swift action, starting with internal
investigation, expert analysis, followed by appropriate preventive steps,
requiring adequate disclosures and recalls if needed.
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CONCLUSION

The 2019 Act addresses the issue of ‘Product Liability’ comprehensively and
has certainly enhanced the nature of compliance, not only for product
manufacturers, sellers and service providers, but also on the parties
connected with the sale process, including endorsers, importers, marketers
and repairers.

The changes in the Consumer Protection Act enhancing the liability for
defective products is not standalone. Recently, there has been an
amendment in the Motor Vehicles Act, 1988 (“ MV Act ”), which has
introduced statutory framework for recall of defective motor vehicles. The
MV Act also provides for punishment of the manufacturer, importer or dealer
of motor vehicles for vehicles, which are in contravention of the norms
provided for construction, maintenance, sale and alteration of motor
vehicles, which may include imprisonment or fine or both.

With the continued establishment of product liability regime under various

statutes, it becomes all the more necessary for product manufacturers,
service providers, etc., to be extra cautious about the regulatory
compliances under sector-specific rules and regulations under the general
statutes such as the Consumer Protection Act, 2019, and provide for
adequate disclosures and warnings and swiftly take preventive and
precautionary steps as and when needed. There is also a need for product
manufacturers, traders, service providers to revisit the contracts in order to
ensure that they are not covered under the definition of ‘unfair contracts’.