I INTRODUCTION TO THE PRODUCT LIABILITY FRAMEWORK
The term 'product liability' has not been defined under any Indian statute. In accordance with the evolving jurisprudence around product liability claims in India, however, the term has generally been understood to mean the liability of any or all the 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 providing the entire framework for product liability claims and multiple general and sector-specific laws exist that form part of the legal framework governing product liability in India. In certain instances, the laws and regulations may overlap depending on the sector and facts of the case.
Briefly, the substantive civil laws that relate to product liability in India are:
- the Sale of Goods Act 1930 (SGA);
- the Consumer Protection Act 1986 (CPA); and
- the Indian Contract Act 1872 (the Contract Act).
Further, given that 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. Furthermore, depending on the facts of the case, criminal liability may also arise under industry-specific statutes (discussed below).
There are also regulations, such as the Bureau of Indian Standards Act 2016 (the BIS Act),2 which set out mandatory and voluntary standards and specifications applicable to products across different sectors and industries.
In addition to the foregoing, specific areas such as the food,3 pharmaceuticals,4 automotive5 and electronics6 industries have specific laws that govern and regulate product standards, product safety and liability in these sectors.
II REGULATORY OVERSIGHT
The regulatory authorities in India overseeing product safety fall into two categories: pan-industry regulators and industry-specific regulators. Among the pan-industry regulators, the most significant agency for product safety and development of product standards is the Bureau of Indian Standards (BIS), which was established under the BIS Act. The BIS Act allows the central government to notify certain goods, articles, processes, systems or services that will need to compulsorily comply with prescribed standards and carry a standard mark. Such goods, articles, processes, systems or services will be notified by the government if it considers them necessary for:
- public interest;
- the protection of human, animal or plant health;
- safety of the environment;
- prevention of unfair trade practices; or
- national security.
BIS develops and sets out quality standards and certification requirements for different goods in India, some of which are mandatory, while the others remain voluntary. In cases of goods where the standards are mandatory, such as cement, identified electronic goods, pneumatic tyres and certain valves and cylinders, manufacturers, importers, distributors, retailers, sellers, lessors and any person who applies his or her trademark on such goods or service are required to ensure compliance with these standards before the goods or services are manufactured, imported, distributed, sold, leased, stored or exhibited in India. If the BIS is convinced that goods or articles bearing standard marks do not conform to the requirements of the relevant standard, the BIS has the power to direct the certified body or licence holder or its representative to stop the supply and sale, and may recall the non-conforming goods or articles. The BIS Act also provides for penal consequences, including fines and imprisonment for non-conformance with prescribed standards and other acts of non-compliance.
In addition to the foregoing, the drug, automotive and food industries are some of the notable sectors governed by industry-specific regulators, which are discussed below.
i Drugs and medical devices
The Central Drugs Standard Control Organisation (CDSCO) is the central authority for discharging functions assigned to the central government under the Drugs Act. Some of the major functions of the CDSCO include regulatory control (including quality control) over imported and locally manufactured drugs and setting out standards applicable to drugs and cosmetics. The CDSCO also has the power to regulate, restrict or prohibit the manufacture, sale or distribution of drugs or cosmetics that are likely to involve any risk to human beings or animals.
The implementation of these standards and related requirements under the Drugs Act and the rules framed thereunder are carried out by central and state authorities, including central and regional drug laboratories, drugs controllers, licensing authorities and inspectors.
The Union Ministry of Health and Family Welfare (Ministry of Health) notified the Medical Devices Rules 2017, which came into force on 1 January 2018. These rules apply to substances used for in vitro diagnosis and surgical materials, blood and blood component collection bags, mechanical contraceptives, disinfectants and insecticides as notified under the Drugs Act; and devices notified from time to time under the Drugs Act. Pursuant to these rules, medical device manufacturers are required to follow the essential principles of safety and performance of medical devices and conform to standards that may be specified by the Ministry of Health or the BIS, from time to time. Where no standards are notified by the Indian regulators, medical devices are required to conform to the standards laid down by the International Organisation for Standardization or the International Electrotechnical Commission, or any other pharmacopoeial standards. In the absence of these international standards, medical devices should conform to the validated manufacturer's standards.
Manufacturers or distributors that obtain licences for manufacture and distribution of medical devices are required to adhere to a number of conditions, including recall of devices. The relevant licensing authority also has the power to order recall of devices that do not conform to the prescribed standards. In addition, the rules also impose a general obligation on manufactures or authorised agents to recall medical devices (manufactured or imported) that are likely to pose a risk to users' health, indicating reasons for the recall; and inform the competent authority of the relevant details. Contravention of the provisions could result in penal consequences, including fines, imprisonment, cancellation, suspension or debarment of the licence holder.
Under the MVA, the Ministry of Road Transport and Highways is the primary authority for regulation of the automotive industry in India. It has overarching powers under the MVA, including laying down of standards on automotive safety, construction and equipment of motor vehicles, which have to be complied with by automobile manufacturers. Pursuant to these powers, the Ministry of Road Transport and Highways, in consultation with the Automotive Industry Standards Committee and other committees, has set out automotive technical standards and specifications to be complied with by motor vehicles manufactured or sold in India.
The Food Safety and Standards Authority of India (the Food Authority) was established under the FSSA to regulate the manufacture, storage, distribution, sale and import of food to ensure availability of safe and wholesome food for human consumption. The Food Authority has broad powers under the FSSA, including specifying and enforcing standards and guidelines in relation to food, food labelling and recalls. The Food Safety and Standards (Food Recall Procedure) Regulations 2017 (the Food Recall Regulations), framed under the FSSA, contain detailed provisions and procedures for the removal of food that is unsafe, including by way of recalls, and require all food business operators (FBOs) engaged in the manufacture, import or wholesale supply of food to have an up-to-date recall plan. The Food Authority is required to monitor the progress of a recall and assess the effectiveness of the action taken by the FBOs. Under the provisions of the Food Recall Regulations, the Food Authority can
- ensure removal of food under recall from all stages of the food chain;
- disseminate information to the consumers concerned and customers; and
- retrieve, destroy or reprocess food under recall.
Prior to the notification of the Food Recall Regulations, the Food Authority has used its inherent powers under the FSSA to recall defective or unsafe food.
Pursuant to the Food Recall Regulations, the Food Authority has issued guidelines to help FBOs develop a food recall plan, and also requires FBOs to maintain a recall management team. Further, based on information available in the public domain, it appears that the Food Authority directed 200 FBOs, including companies such as Coca-Cola India Private Ltd, Hindustan Unilever Ltd and Nestle India Ltd to submit details of their recall management teams and food recall plans.
III CAUSES OF ACTION
The term 'cause of action' is not defined under Indian statutes but has acquired a settled meaning based on judicial interpretation. It is largely a civil law concept and, generally speaking, it refers to all circumstances or sets of facts that give rise to a right to sue or, if proved or admitted, would entitle the plaintiff (the complainant) to the relief claimed by it.
Given the broad import of the term, various causes of action may arise in contractual disputes. For example, in a suit for damages for breach of contract, the cause of action may consist of the making of the contract, performance of the contract and of its breach. Similarly, in cases of consumer complaints under the CPA, the presence of a defect in the goods purchased or of a deficiency in services availed will constitute a cause of action to file a complaint before the relevant consumer court.
Indian courts have cautioned against extrapolation of civil law concepts such as 'cause of action' onto criminal law. The criminal procedural law in India unambiguously states that every offence shall ordinarily be inquired into and tried by a court within whose local jurisdiction it was committed. Therefore, this principle will need to be borne in mind in the event that provisions of the IPC are attracted to product liability cases.
Depending on the facts, the goods or services involved and the category of the aggrieved party (the consumer or buyer for commercial use), there are multiple fora that an aggrieved party can approach in cases relating to loss, damage or injury resulting from defects in goods or services. These include:
- jurisdictional consumer court or forum (depending on the claim amount) under the CPA;
- jurisdictional civil court in a case of a contractual breach or a tortious action;
- an arbitration tribunal in accordance with an arbitration agreement executed between the relevant parties in a case of contractual breach; or
- jurisdictional magistrate's court in the event of a criminal offence.
In addition to the foregoing, in certain circumstances, aggrieved parties can also approach a jurisdictional high court in the event that the distribution of defective products has resulted from a breach of duty or inaction by a statutory authority.
Further, in 2015, the Indian Parliament enacted the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act 2015 (the Commercial Courts Act), which seeks to streamline and fast-track commercial disputes (including disputes arising out of agreements related to the sale of goods or provision of services). The Commercial Courts Act was recently amended.7 It provides for the constitution of:
- commercial courts at a district level, though in areas where the high court exercises ordinary original civil jurisdiction the state government may specify the limits of the commercial courts' pecuniary jurisdiction; and
- commercial divisions and commercial appellate divisions in all high courts having ordinary civil jurisdiction.
These have been constituted for the adjudication and speedy disposal of commercial disputes:
- of a specified value of not less than 300,000 rupees or such other value as notified; and
- within the limits of the relevant territorial jurisdiction.
Although the Commercial Courts Act has come into force, commercial courts are still in the process of commencing proceedings across various Indian states.
In India, dispute resolution through adjudication by courts and arbitration are completely distinct and independent processes that rarely overlap. In cases where disputes are adjudicated before a civil court or a specially constituted tribunal, the matter is presided over by judges or presiding officers, as the case may be. India does not follow a jury system of trial. In a case of arbitration proceedings, the claims are adjudicated by the arbitral tribunal appointed by the parties in accordance with their arbitration agreement or in the manner set out in the rules of arbitration elected by the parties. Having said that, it is very common for parties to an arbitration agreement to appoint retired judges as arbitrators. Mediation, as a method of alternate dispute resolution is also gaining popularity in India. The recent amendment to the Commercial Courts Act makes pre-institution mediation mandatory in all cases where the parties do not require immediate intervention by courts.
ii Burden of proof
The Indian Evidence Act 1872 sets out the law relating to burden of proof for civil and criminal cases. As a general rule, any party seeking the court's intervention as to enforcement of its legal rights must prove the facts that establish and substantiate its claim.
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 plaintiff or the aggrieved party. Therefore, in claims relating to defects in products, depending on the factual circumstances, the burden of proof will be on the aggrieved party to prove:
- the presence of a defect in the goods;
- breach of warranty or condition (implied or expressed); or
- breach of duty of care and resulting damage (in instances involving negligence).
In some cases, however, the Indian courts have held that the existence of the defect per se is proof of negligence.
In a criminal case involving product liability or product defect, the burden of proof generally lies on the prosecution, unless specific statutes expressly provide otherwise. Furthermore, statutes such as the Drugs Act (as applicable in some Indian states) and the FSSA, in certain circumstances, create a presumption of an offence or violation and therefore, in such cases, the burden of proof is on the accused to prove that the offence was not committed.
The defence typically available to manufacturers, distributors or sellers in product liability claims include the following:
- the product being compliant with requisite statutory standards prescribed;
- the product not being 'defective' as defined under the CPA;
- the purchaser of the product is not a 'consumer' as defined under the CPA;
- loss or injury is owing to negligence or misuse by the consumer or buyer, including contributory negligence;
- the consumer or buyer had examined the goods prior to purchase and accepted it, being satisfied of its quality or specification; or
- contractually agreed disclaimers or limitations on warranties in terms of scope, period, recourse and amount.
In addition to the foregoing, defendants (such as manufacturers, distributors or sellers) could also contend that a civil action or complaint is barred by limitation. Limitation on filing of suits in India is governed by the Limitation Act 1963. The period of limitation for a civil proceeding for monetary compensation on account of a contractual breach is three years from the date on which the breach 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.
Further, under the general law on limitation, some specific statutes regulating certain products expressly set out applicable periods of limitation. For example, the FSSA provides for a limitation period of one year from the date of commission of an offence, extendable up to three years at the discretion of the relevant authorities.
iv Personal jurisdiction
Usually, a civil court will have jurisdiction to adjudicate a claim if the cause of action, wholly or in part, arises within its jurisdiction. Further, the Civil Procedure Code (CPC), which sets out the relevant provisions relating to the jurisdiction of courts in civil cases, gives the plaintiff discretion to file a suit for compensation for damage done to persons or movables, in (1) the jurisdictional court of the local limits where the damage took place, or (2) the court within the local limits where the defendant resides, or carries on business, or personally works for gain.
In cases involving foreign parties, Indian courts favour the common law principle of comity. Therefore, if the facts and circumstances indicate that a foreign court has jurisdiction (for example, if the parties have agreed to subject themselves to the exclusive jurisdiction of a foreign court), subject to certain exceptions, Indian courts are reluctant to interfere and tend to direct the aggrieved party to seek redress before the relevant foreign court. Having said that, Indian courts can ignore the choice of jurisdiction of the contracting parties if, among others, it is in the interests of justice to do so or if, by contract, the parties have vested jurisdiction in a court that originally lacks jurisdiction. Further, if it can be demonstrated by the aggrieved party that the situs of the contract or the cause of action (wholly or in part) arises in India, the Indian courts may assume jurisdiction, if considered appropriate to do so.
Indian law recognises the doctrine of privity of contract and, consequently, third parties are not ordinarily entitled to benefit from or sue for the breach of a contract to which they are not a party. Applying this principle to a case relating to product defects, where cause of action (wholly or in part) arises in India, a manufacturer or seller would not be liable for damages under breach of contract unless the claimant can establish existence of a valid contractual relationship with the manufacturer or seller.
However, in a considerable deviation from the position relating to contractual claims, in certain cases where aggrieved parties have alleged the tort of negligence, Indian courts have applied the principle in Donoghue v. Stevenson,8 where a duty of care is imposed on a party with regard to any person who would be affected by the first party's actions or who the first party should have considered while directing its acts or omissions (irrespective of whether any contractual relationship exists), and have assumed jurisdiction over the first party upon the request of the aggrieved party. Therefore, exercising such jurisdiction, Indian courts have attached tortious liability to sellers and distributors in addition to manufacturers in cases of defective products.
v Expert witnesses
Under Indian civil law, experts may be appointed by the court when it is necessary to form an opinion based on a technical or scientific issue. Expert opinions may be relied on by the parties to a suit or proceeding. The Evidence Act sets out the circumstances in which a court can rely on experts and these include instances when the court has to form an opinion on foreign law, science, art and handwriting. Indian criminal courts are also vested with the power to summon, examine and receive evidence from experts, including receiving reports from certain governmental scientific experts under the provisions of the Criminal Procedure Code 1973 (CrPC). Further, under the CPA, the consumer courts have the power to appoint experts to examine defective products manufactured, sold or distributed in the event that the defect cannot be determined without proper analysis or testing of the goods.
The courts are not bound by the evidence or opinions of the experts and have discretion to admit this evidence or derive their own conclusions based on these opinions.
The procedure governing the discovery of documents or information under Indian law is principally governed by the CPC for civil matters and CrPC for criminal cases. Indian courts (including consumer courts) have inherent powers to call for the production of documents or information that are in the power or possession of a party to the proceeding or a third party at any time during the pendency of proceedings. Indian law does not, however, permit discovery of evidence or information prior to initiation of legal proceedings.
Discovery of information is permitted through an order for discovery of documents or through interrogatories in civil cases, or through summons in criminal cases. The granting of an order permitting discovery of information (including production of documents) is completely at the discretion of the court and, ordinarily, discovery will not be permitted unless the court is satisfied that it is necessary either for disposing of the matter fairly or to save costs. In the event that the information or documents are not produced before the court and no legitimate reason is provided for this failure, the courts may draw an adverse inference against the party that has failed to comply.
In criminal cases, the court has the power to issue summons or a written order requiring a person to produce any document or thing believed to be in its possession or power for the purpose of any investigation, inquiry, trial or other proceeding.
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 the suit.
In cases of defective products 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. In cases of tort, the 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 (1) the parties have, acting in concert, committed a wrongful act resulting in loss or damage to the affected person or, (2) 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. Further, in consumer complaints under the CPA, the relevant forum has upheld the principle of joint and several liability and held the manufacturer and dealer to be jointly and severally liable for sale of defective products.
viii Mass tort actions
Under the CPC, two or more plaintiffs have the right to aggregate their claims in a suit against one defendant, even if their causes of actions are separate and distinct, 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 plaintiffs, common questions of law or fact would arise. Additionally, the CPC also allows one or more persons to file a suit against the opposing 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 plaintiffs have a common grievance against the defendant and the relief sought is in its nature beneficial to all persons interested in the suit.
The CPA 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, and where the consumers cannot easily be identified.
The general law of economic damages in the Indian context is covered under the SGA, Contract Act, CPA and tort law. The Contract Act provides for the payment of damages or compensation by the defaulting party to the aggrieved party for any loss or damage that arose as a natural consequence of a breach; or that the parties were aware, at the time of entering into the contract, would possibly result from a breach. In this context, the Contract Act does not allow damages for remote, indirect or incidental loss.
Further, damages under contract may be either liquidated or unliquidated. Liquidated damages are such as have been agreed upon and fixed by the parties in anticipation of a breach whereas unliquidated damages must be assessed and quantified. In either case, the courts have broad discretion in the assessment of damages. Applying the reasonableness test, the court usually awards the actual amount of loss proved to have been suffered by the aggrieved party as a direct result of the breach of the contract by the defaulting party; however, if the parties have stipulated liquidated damages in the contract, the courts, subject to the stipulated amount being a genuine pre-estimate of the loss, will not grant damages in excess of the stipulated amount.
Unlike in the case of a contract where the function of damages is primarily to compensate the aggrieved party for losses sustained by it owing to breach of contract, the function of damages in tort is to put the injured in the position in which it would have been had the tort not been committed. Further, the Indian courts have held that remedy by way of damages in tort extends to a negligent manufacturer causing monetary loss by the supply of a sub-standard product and is not restricted merely to loss of life or property of the user.
In contractual disputes, Indian courts do not normally award punitive or exemplary damages. However, applying principles of tort law, such as strict and absolute liability, exemplary damages have been awarded by the courts in cases where harm has been caused by ultra-hazardous or dangerous actions. The CPA permits awards of punitive damages in circumstances deemed fit by the consumer courts. Further under the CPA, the courts have in the past awarded damages by way of compensation in exceptional cases where it has been established that the complainant suffered harassment and extreme pain and suffering as a result of the conduct of the manufacturer, supplier or distributor, pursuant to its claim. However, the amount 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.
With regard to the assessment of damages, Indian law imposes on the plaintiff the duty of taking all reasonable steps to mitigate the loss consequent to the breach and debars the plaintiff from claiming any part of the damage that is owing to its failure to take these steps. Therefore, a court may deny a plaintiff's claim to the extent that it finds that the plaintiff has failed to mitigate the loss.
The Indian courts have broad powers to pass interim orders prior to a full trial and at any time during the legal proceedings when considered necessary and proper in light of the facts and circumstances of the case. Further, Indian courts are empowered to pass interim orders to prevent damage, alienation, removal or disposition of property or otherwise causing injury to the plaintiff in relation to any property in dispute in the suit. The courts are also able to pass an interim order attaching the assets of a defendant or requiring it to furnish security in certain circumstances.
V YEAR IN REVIEW
The BIS Act, which came into force on 12 October 2017, has replaced the BIS Act 1986. However, the Ministry of Consumer Affairs, Food and Public Distribution has clarified that until such time as the new regulations are issued under the BIS Act, the regulations and orders made under the provisions of the BIS Act 1986 shall have continued effect.
On 5 January 2018, the Ministry of Consumer Affairs, Food and Public Distribution introduced the Consumer Protection Bill 2018 (the CPB 2018) in the Lok Sabha (the lower house of the Indian Parliament). The CPB 2018 was passed in the Lok Sabha on 20 December 2018, however, on account of it not being passed in the Rajya Sabha (the upper house of the Indian Parliament), has not yet become 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. Under the CPB 2018, a product manufacturer shall be liable in a product liability action even if he or she proves they were not negligent or fraudulent in making the express warranty of the product. 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 that has wide powers to address consumers' concerns) to promote, protect and enforce rights of consumers as a class. The CCPA's powers include:
- enquiring and conducting investigations into violations of consumers' rights;
- recall of products found to be unsafe or withdrawal of services found to be unsafe or hazardous;
- imposing penalties; and
- issuing safety notices and alerting consumers to unsafe goods or services.
Failure to comply with the CCPA's recall order is punishable with a penalty of imprisonment up to six months or a penalty of two million rupees or both. The CPB 2018 also includes provisions that make the manufacturer liable for product liability actions where the product contains a manufacturing defect, design defect, deviates from manufacturing specifications, does not conform to the express warranty or does not contain adequate instructions for correct usage to prevent any harm, or any warning regarding improper or incorrect usage. The CPB 2018 lists out instances where a product manufacturer or seller will not be held accountable for product liability.
Six years after the cancellation of Johnson & Johnson's (J&J) import licence for hip replacement devices that were faulty, J&J has been ordered by the 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 the disability. J&J challenged the committee's decision on grounds of lack of transparency and opportunity to be heard, which remains pending. However, on 19 January 2019, 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 compensation, including the compensation formula. Press reports indicate that the aggrieved patients are not satisfied with the compensation formula and are making representations to the government in this regard.
As an aftermath of the J&J case, an expert subcommittee has been constituted to review and appropriately recommend provisions for compensation in the case of faulty devices under the Medical Devices Rules 2017.
The Ministry of Health also plans to launch an independent registry to track certain medical devices. Doctors and surgeons will be required to report adverse events to this registry, which is aimed at helping the CDSCO to monitor and evaluate the performance of medical devices.
Based on a global report in December 2018 that some batches of J&J's baby powder in the United States of America contained traces of asbestos, a known carcinogenic, the CDSCO also collected samples of J&J baby powder in India for testing. Press reports indicate that J&J has been ordered to stop using raw materials from two factories in India to manufacture the baby powder, until test results prove that it is free of asbestos.
Even in the absence of a statutory framework for automobile recalls in India, industry giants such as Mercedes Benz, Toyota and Volkswagen initiated voluntary recalls of their automobiles in 2018, owing to various defects discovered in the automobiles' components, including safety issues in certain circumstances. Toyota recalled over 9,000 cars of various models manufactured between 2008 and 2018 for issues owing to possible failure of an airbag sensor chip and issues with the fuel hose connection. Volkswagen issued a recall for over 18,000 cars of various models, including on the count of failure of the airbags and auxiliary heater element in the air conditioner. Mercedes Benz recalled over 22,000 cars of various models manufactured between 2012 and 2018 over various issues, including problems with the power steering system and airbag deployment.
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. As part of its ongoing global recall, Volkswagen continues to carry out a voluntary recall of its cars affected in India. The NGT constituted a committee to estimate the quantum of environmental loss caused by Volkswagen, and the committee recommended a fine of 1 billion 700 million rupees. Based on the committee's recommendation, the NGT has directed Volkswagen to pay an interim deposit of 1 billion rupees.
The unprecedented rise in the number of voluntary automobile recalls in India and concerns around road safety have led to the introduction of the Motor Vehicles (Amendment) Bill 2016 (the MV Amendment Bill) to amend the Motor Vehicles Act 1988. The MV Amendment Bill was passed by the Lok Sabha on 10 April 2017, but on account of it not being passed in the Rajya Sabha (the upper house of the Indian Parliament) this has not become law. The MV Amendment Bill allows the central government to order the recall of motor vehicles with defects that may cause damage to the environment, driver or occupants or other road users, if such defects are reported to the central government. The MV Amendment Bill also provides that the manufacturer whose vehicles are recalled will have to:
- either reimburse the buyers for the full cost of the vehicle or replace the defective vehicle with another vehicle with similar or better specifications; and
- pay such fines and other dues as may be prescribed.
Where the manufacturer notices defects in the motor vehicles it manufactures, the MV Amendment Bill also provides for voluntary recalls after informing the central government. In such cases, the manufacturer shall not be liable to pay the prescribed fines.
Voluntary product recalls, therefore, remain a key mechanism adopted by manufacturers and dealers to avoid or limit liability. Despite the lack of statutory or regulatory guidance, voluntary product recalls have continued being carried out across several industries. In particular, pursuant to obligations such as the duty of care under tort and consumer protection laws, manufacturers, dealers and distributors across various sectors undertake these actions as strategic initiatives to limit and curb potential liability arising because of defects in products.
1 Vivek Bajaj is a partner, and Sonakshi Sharma is an associate at AZB & Partners. The authors would like to acknowledge the invaluable assistance of Ms Kaavya Raghavan, an associate at AZB & Partners.
2 The recently notified BIS Act has replaced the Bureau of Indian Standards Act, 1986 (the BIS Act 1986).
3 Food Safety and Standards Act 2006 (FSSA).
4 Drugs and Cosmetics Act 1940 (the Drugs Act).
5 Motor Vehicles Act 1988 (MVA).
6 Electronics and Information Technology Goods (Requirements for Compulsory Registration) Order 2012.
7 The amendment to the Commercial Courts Act is dated 20 August 2018 and came into effect in May 2018.
8  AC 562.