Analyzing Product Liability Under The Consumer Protection Act 2019

The Consumer Protection Act, 2019("2019 Act"), which recently received the Presidential assent on the 9th August 2019 and was published in the Official Gazette for general information,aspires to safeguard the interests of the consumers by introducing provisions which aim at addressing consumer concerns in a timely and effective manner. In the words of Ram Vilas Paswan, Union Minister of Consumer Affairs, Food and Public Distribution, the new legislation would ease the overall process of consumer grievance redressal.

Key takeaways from the 2019 Act can be summed up as: (i)the inclusion of an exclusive provision concerning product liability; (ii) establishment of Central Consumer Protection Authority (CCPA), with the powers of initiating class action and enforcing recall, refund and return of products;(iii) provision enabling consumers to file complaint from any place (even video conferencing) instead of the current practice of filing it from the place of purchase/seller's registered address; (iv) penalties for misleading advertisement; and (v) providing a comprehensive framework dealing with unfair contracts.

The 2019 Act also aims to deal with unfair contracts in a comprehensive manner. It provides that a contract between a manufacturer or a seller or a trader and a consumer will come under the purview of an unfair contract if it will, in any manner, undermine the rights of the consumer. It lists down grounds on the basis of which the fairness of a contract can be ascertained. This comes as a notable amendment as it endeavors to base a statutory recognition to the practice the judiciary of striking out unfair terms of a contract in the interest of consumers.

The Supreme Court in a case held that, "the courts will not enforce and will, when called upon to do so, strike down an unfair and unreasonable contract, or an unfair and unreasonable clause in a contract, entered into between parties who are not equal in bargaining power."

Another remarkable provision which the 2019 Act has brought out is the imposition of penalty for misleading advertisements. In doing so, the manufacturer or endorser or advertiser or publisher, as the case may be, would be asked to discontinue advertisements which are prejudicial to the interests of the consumer and additionally be asked to pay penalty for the same. Most importantly, the endorser may also be prohibited from making endorsement of any product or service for a period of one year which may extend to three years.

This is an innovative provision, as in the past, there have been instances where in celebrities were found endorsing faulty goods and services, be it cricketers in the recent Amrapali case or Bollywood celebrities in the Maggi case. These endorsements impact the consumers monumentally and hence it is important that the endorsers exercise due diligence before advertising the product. This is more so in a country like India, where celebrities, cricketers, etc. are often idolized as demi-Gods and significantly influence decision making of consumers in terms of buying or not buying a product.

Product Liability: Legal Framework before the advent of the 2019 Act

The term "product liability" was not defined in any statute before the 2019 Act came into picture. That being said, there was no specific statute dealing with the product liability claims. As a result of this, the jurisprudence pertaining to product liability evolved mainly with the aid of judicial decisions. The Courts resorted to the principles of justice, equity and good conscience, and often English common law, especially to the principle enshrined in the case of Donoghue v Stevenson .

By analyzing the principle enunciated in the case of Donoghue v Stevenson, product liability can be simply understood as the liability of all the persons involved in the chain of delivering a product to a consumer(manufacturing-servicing-selling),  if that product causes harm to him. It can be said that the concept of product liability originated with this landmark judgment of the House of Lords.

Though, a few statutes (the Consumer Protection Act, 1986, the Sale of Goods Act, 1930, The Indian Contract Act, 1872) have helped in resolving product liability claims in the past, none of them could lay down a comprehensive framework for its redressal. These statutes led to the implied curtailment of the consumer's right to approach the appropriate authority since these statutes could not ascertain a specific individual in the supply chain against whom the consumer could lodge a grievance.

The Hon'ble Karnataka High Court also held that,"the doctrine of product liability does not exist in India." Hence, there arose a need for a pro-consumer legislation.

Product Liability: Who is responsible?

Product liability under the 2019 Act has been defined to mean the responsibility of a product manufacturer or a product seller or a product service provider, of any product or service, to compensate for any harm caused to a consumer by such defective product manufactured or sold by deficiency in service relating thereto.

Simply put, a consumer is entitled to seek compensation from the manufacturer or seller or trader if any harm is caused to him owing to the faulty product. The consumer can do so by filing a complaint before the District Commission or State Commission or National Commission. This has been termed as "Product Liability Action" under the 2019 Act.

For the first time ever, an exclusive law dealing with product liability has been formulated. The 2019 Act has gone into deeper roots to give clarity on the product liability provision by detailing each term precisely. In fact, Chapter VI of the 2019 Act specifically deals with "Product Liability". As per Section 82 of the 2019 Act, the 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.

What should the Companies (involved in goods and services sector) do to ensure compliance with the 2019 Act?

Companies involved in goods and services sector should most importantly ensure that they meet with the under noted check-list:

1. Product Manufacturers :

a) the product should not contain a manufacturing defect.

b) the product should not be defective in design.

c) there should not be any deviation from the manufacturing specifications.

d) the product should conform to the express warranty.

e) the product should contain adequate instructions of correct usage to prevent any harm or any warnings regarding improper or incorrect usage.

Additionally, 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 the product.

2. Product Service Provider :

a) Services provided by him should be perfect and adequate in respects of quality, nature or manner of performance as mandated under any law or in pursuance of any contract.

b) He should not withhold any information which might cause harm to the consumer.

c) He should issue adequate instructions or warnings to prevent any harm.

d) The service should conform to express warranty or terms and conditions of the contract.

3. Product Seller :

a) He should alter or modify the product only to that extent, up till which no harm can be caused to the consumer.

b) Any express warranty made independent to that made by the manufacturer must be complied with.

c) He should ensure that the product or service is assembled and inspected properly.

d) He should provide adequate instructions to the consumer as passed on to him by the manufacturer.

Exceptions to Product Liability Action :

A Company (involved in goods and services sector) shall not be held responsible in the following circumstances:

1) Product Manufacturer:

He shall not be held liable for failure to instruct or warn about a danger:

a) 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.

b) if the product was purchased by an employer and it was his duty to pass on the instructions to the employees.

c) if the product was to be used under the supervision of an expert.

d) if 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.

2) Product Seller:

He shall not be liable if, at the time of harm, the product was misused, altered, or modified.

Conclusion:

A clear understanding of the 2019 Act is that the companies dealing with the goods and services sector have to be now extremely cautious whilst manufacturing or selling or trading a product as the legislation seems to be extensively focusing on the principle of caveat venditor(let the seller beware) rather than caveat emptor(let the buyer beware). The new legislation has put more responsibility on companies for misleading advertisements and faulty products. It also attempts to make endorsers responsible, given the influence they have on the consumer.

The advent of new technology has changed the business world remarkably, while at the same time the consumer needs protection from misleading advertisement and products. The consumer, now, has a plethora of options to choose from, which places him in a somewhat advantageous position. The 2019 Act is a major step forward in catering to the consumer concerns by providing a swift intervention to prevent consumer detriment. The 2019 Act in general and the provisions in relation to product liability, are a welcome change by the legislature to give statutory recognition to a concept which customarily found place under common law. The 2019 Act on the face of it, appears to be advantageous and consumer friendly but it will be interesting to see how these provisions will wield in future. The jurisprudence of these provisions will develop when the Commissions under the 2019 Act will interpret them, as the Act only provides a framework for consumer redressal.

Jeevan Ballav Panda 

Siddhi Kochar

(Jeevan Ballav Panda is an Advocate practicing in Delhi and Siddhi Kochar is a fourth-year law student, studying at Amity Law School, Delhi (affiliated to GGSIPU). They can be reached at jbpanda@gmail.com and siddhikochar12@gmail.com respectively.)