Article submitted by Niranjanaa Joy, Samisti Legal Associate
- Introduction:
Product liability has implicitly existed in India even before formal codification, with its principles originating from the Sale of Goods Act, 1930 (“SGA”), and tort law. The Consumer Protection Act, 1986 (“CPA, 1986”) solidified ‘Product Liability Action’, enabling the rights of consumers to file complaints before appropriate consumer forums for defective tangible goods provided by product manufacturers, sellers, and service providers. Courts, at times, concurrently applied provisions of the CPA, 1986, and the SGA, to adjudicate matters involving defective goods. In Hyundai Motor India Limited v. Shailendra Bhatnagar[1], the car manufacturer was held under strict and absolute liability for a defective safety feature, non-deployment of airbags, in a vehicle which was purchased upon the representations of the manufacturer. The Court relied upon the general doctrine of res ipsa loquitur, prescribed implied conditions as to the quality of the goods under Section 16 of the SGA, and Section 14 of the CPA, 1986 for awarding punitive damages for such circumstances depending on the nature of the defect and magnitude of its effect. With the introduction of the Consumer Protection Act, 2019, along with Bureau of Indian Standards Act, 2016, the Acts represented a fundamental shift from the ‘buyer beware’ doctrine to ‘seller beware’, placing a significant burden upon entities and essentially, departing from the principles of the CPA, 1986, where manufacturers could claim exemption by proving that they were not negligent in their actions and further, product sellers could claim exemption by proving that the defect lies within the manufacturing of the product.
Who is a Product Seller?
The Consumer Protection Act, 2019 (“CPA, 2019”) provides a comprehensive definition of ‘product seller’ and explicitly defines ‘product liability’ and ‘defect’ and introduces specific grounds available to consumers to invoke liability actions against product sellers, manufacturers and service providers (“Vendors”) under Section 84, 85, 86 of the Act while Section 87 provides defences available to product sellers and yet, strangely narrows the scope of defence through its provisions. A product seller encompasses: (i) manufacturers who sell products; (ii) service providers related to the product/service; and (iii) virtually any entity in the product distribution chain. The law does specifically exclude certain entities from being considered as a Vendor, including: (i) sellers of immovable property (unless engaged in construction); (ii) providers of professional services where the service is the essence, and the product is merely incidental; (iii) those acting solely in a financial capacity regarding the sale; (iv) parties who lease products without reasonable opportunity to inspect and discover defects. The CPA, 2019, creates a structured approach to product liability action, establishing specific criteria for different participants in the supply chain.
Product sellers face liability risks in several scenarios:
(a) When selling products with manufacturing defects, even if they were not involved in the manufacturing process
(b) For products with design defects that make them unreasonably dangerous
(c) When products fail to conform to express warranties or representations made about them
(d) For failing to provide adequate instructions or warnings regarding proper product usage
(e) When a seller modifies, alters, or repackages the original product in a way that causes harm
Strict Liability: No Escape for Product Sellers
These liability triggers under the CPA, 2019 comprise a broader framework compared to previous legislations, imposing strict liability on product sellers for any shortcomings regardless of negligence or fault. The codification of product liability actions under Sections 83 to 87 reinforces the principle that manufacturers, sellers, and service providers are legally accountable for defective products and deficient services, even in the absence of direct culpability. However, the framework of liability extends beyond these provisions and is further substantiated by construing the key definitional clauses under Section 2, including Section 2(35) (Product Liability), Section 2(11) (Deficiency), Section 2(9) (Consumer Rights), Section 2(10) (Defect), and Section 2(28) (Misleading Advertisements), establishing a benchmark in determining whether a product sold in an unfair, unsafe or hazardous manner, invokes product liability action, without any specificities. Section 18 of the CPA, 2019 empowers the Central Consumer Protection Authority (“CCPA”) to proactively safeguard consumer rights, prevent unfair trade practices, and misleading advertisements and is vested with the authority to initiate investigations into violations, either suo moto or upon directives from the Central Government, ensuring stringent regulatory oversight. Further, Section 20 of the CPA, 2019 grants the CCPA the power to recall defective goods, order the removal of defects, mandate product replacements, issue full refunds, and compensate affected consumers for any resulting losses or damages and pass any such order as necessary which extends to imposing punitive damages or other penalties at its discretion, as under Section 21 of the Act, or in alignment with the findings of the Central, State, and District Consumer Commissions.
A case which illustrated the powers and functions of the CCPA, the statutory interpretation of key consumer definitions, the harmonious construction between BIS, 2016 and CPA, 2019 can be seen in Cloudtail India Private Limited v. Central Consumer Protection Authority[2] whereinthe CCPA initiated suo-moto proceedings by way of notice to the product seller, the appellant, and recalled the sale of 1033 domestic pressure cookers from a product, along with the imposition of a penalty. The product seller sold pressure cookers on the e-commerce platform, Amazon, which were manufactured by a Chinese company and conformed to the European Commission Standard and the goods were imported to India. The CCPA found the goods to be defective, violative of consumer rights and amounting to unfair trade practice, within the meaning of CPA, 2019 and in violation of the Quality Control Order dated 01.02.2021 which mandates domestic pressure cookers to certify and conform to the Indian Standards IS 2347:2017 under the Bureau of Indian Standards Act. The NCDRC held that the after the enforcement of such Order, it was mandatory for domestic pressure cookers to bear the BIS mark since it denotes the quality of the good and if not maintained, such goods can be defined to be ‘defective’ under the CPA, 2019. The NCDRC highlighted that the public interest would be jeopardized if the safety standards were not complied with and that the CCPA has not committed any errors in passing any orders that it deemed necessary to protect the rights of consumers. This procedural view and understanding have imposed more of an expectation to bear preventative methods upon product sellers who (i) put their own mark on products manufactured by others; (ii) make representations about product quality and performance; (iii) modify products in anyway before sale; and (iv) are considered part of the distribution chain for defective products. This shift means that merely being in the chain of distribution can create substantial liability exposure, regardless of a product seller’s actual control over product quality or design. In practical terms, product sellers can potentially face the entire financial burden of a claim, even if the primary fault lies with the manufacturer.
Defences Available
Section 86 of the CPA, 2019 (Liability of product sellers) clarifies that a seller who is not a manufacturer is not liable unless they modified the product, knowingly sold a defective product, or misrepresented its performance. A product seller under the Consumer Protection Act, 2019 can defend against such liability claims using several legal provisions. For example, ‘defect’ being defined as an imperfection or fault that reduces a product’s safety or usability, allows the seller to argue that the product is not defective under the term of its definition. Section 87 provides exceptions that may serve as a valid defence to product liability action, stating that a seller who is not the manufacturer will not be liable (i) if the product was misused, altered, or modified after sale by the consumer, or if the consumer failed to follow proper instructions for use or maintenance, (ii) if the seller can claim lack of knowledge about a defect if they had no reasonable means to detect it, (iii) prove compliance with industry and regulatory safety standards and/or (iv) if the alleged harm is not directly caused by the defect. Finally, Section 2(47) provides a defence against claims of unfair trade practices if the seller did not engage in false advertising, misleading representations, or deceptive conduct and implicitly holds the seller liable only to the extent of the expiry of its warranty period without having any further service commitments on behalf of the product sellers but the mere expiration of the warranty period does not absolve the product seller from liability if the product suffered from an inherent manufacturing defect. These provisions collectively offer robust legal defences for product sellers against consumer complaints. However, product sellers cannot claim the defence by shifting liability upon e-commerce platforms such as Amazon, Flipkart and Snapdeal which are merely third-party intermediaries between buyers and sellers who have a pre-existing duty to manage the heavy volume and logistics of warehousing, transportation, packaging, dispatch, customer services to the consumers and Courts have held strict liability for product sellers for the unauthorized sale of tampered products without the consent of the direct selling entities on e-commerce platforms[3].
Conclusion
The evolution of product liability action in India, culminating in the CPA, 2019 and the powers of the CCPA, has reshaped the risk of liability factor for product sellers. Product sellers must recognize that product liability risk management is no longer optional but essential for business operations. To mitigate this risk, product sellers must adopt comprehensive protective strategies. Contractual protections should include indemnification clauses in agreements with manufacturers to clearly allocate liability. Insurance coverage is essential, ensuring product liability policies adequately cover potential claims. Quality control protocols such as sampling and inspections help identify defects before distribution. A robust documentation system maintaining records of product sourcing, quality checks, and consumer communications can serve as key evidence in liability disputes. Establishing principal-to-principal arrangements with manufacturers may limit vendor liability, provided these agreements are substantive. Finally, product sellers must enforce warning and instruction protocols to ensure proper conveyance of manufacturer-issued warnings and usage guidelines to consumers. These measures collectively strengthen product sellers’ defences against product liability claims under CPA, 2019. As consumer awareness and regulatory scrutiny grow, product sellers who proactively address product liability risks will be better positioned to navigate the legalities of product liability action through careful supplier selection, robust contractual protections, comprehensive insurance coverage, and diligent quality control.
[1] Hyundai Motor India Limited v. Shailendra Bhatnagar [2022] 2022 INSC 454
[2] Cloudtail India Private Limited v. Central Consumer Protection Authority [2023] MANU/CF/0649/2023
[3] Amway India Enterprises Pvt. Ltd. and Ors v. 1MG Technologies Pvt. Ltd. and Ors [2019]MANU/DE/2146/2019ower MSMEs, and foster a more secure and equitable financial framework for businesses nationwide.
