The Consumer Protection Act, 2019 (‘New Act’) received the assent of the President of India and was published in the official gazette on 9th August 2019. This New Act will replace the old Consumer Protection Act, 1986 (‘Old Act’). The New Act will come into force on such date as the Central Government may so notify.

Now, recently, in exercise of the powers conferred by sub-section (3) of section 1 of the New Act, MINISTRY OF CONSUMER AFFAIRS, FOOD AND PUBLIC DISTRIBUTION (Department of Consumer Affairs) has issued a Notification No. S.O. 2351(E) dated 15th July 2020 (‘the Said Notification’) whereby the Central Government has appointed the 20th day of July, 2020 as the date on which the certain provisions of the said Act shall come into force including Chapter VI [Section 82 to 87]- to deal with ‘product liability’.

Product Liability & Penal Consequences.

A significant addition to the New Act is the introduction of “product liability” and it recognises product liability as a core area of focus for consumer protection. It refers to the liability of a manufacturer, service provider or seller to compensate a consumer for harm or injury caused by any defect in goods or deficiency in services.

The New Act incorporates a special chapter-Chapter VI [Section 82 to 87]– to deal with ‘product liability’.

The Section 82 of the New Act clearly mentioned that this Chapter (i.e. Chapter VI) 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’.

As per Section 83 of the New Act- 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.

As per Section 2(35) of the New Act “product liability action” means a complaint filed by a person before a District Commission or State Commission or National Commission, as the case may be, for claiming compensation for the harm caused to him”

As per Section 2(34) of the New Act “product liability” means the responsibility of a product manufacturer or product seller, of any product or service, to compensate for any harm caused to a consumer by such defective product manufactured or sold or by deficiency in services relating thereto;

According to Section 2(22) of the New Act, “harm”, in relation to a product liability, includes—

(i) damage to any property, other than the product itself;

(ii) personal injury, illness or death;

(iii) mental agony or emotional distress attendant to personal injury or illness or damage to property; or

(iv) any loss of consortium or services or other loss resulting from a harm referred to in sub-clause (i) or sub-clause (ii) or sub-clause (iii).

But it will not include any harm caused on account of breach of warranty conditions or any commercial or economic loss, including any direct, incidental or consequential loss relating thereto;”

Liability of Product Manufacturer.

As per Section 2(36) of the New Act “product manufacturer ” means a person who—

(i) makes any product or parts thereof; or

(ii) assembles parts thereof made by others; or

(iii) puts or causes to be put his own mark on any products made by any other person; or

(iv) 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

(v) designs, produces, fabricates, constructs or re-manufactures any product before its sale; or

(vi) being a product seller of a product, is also a manufacturer of such product;

As per Section 84 of the New Act, 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.

Further, 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.

There are increased liability risks for ‘product manufacturers’ as compared to ‘product service providers’ and ‘product sellers’, considering that under the New Act, ‘product manufacturers’ will be liable in product liability action’ even where he proves that he was not negligent or fraudulent in making the express warranty of a product.

Liability of Product Service Provider.

As per Section 2(38) of the New Act “product service provider” in relation to a product, means a person who provides any service in respect of such product.”

As per Section 85 of the New Act, 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.

Liability of Product Sellers.

As per Section 2(37) of the New Act “product seller” in relation to a product, means a 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,

but does not include

(a) a seller of immovable property, unless such person is engaged in the sale of constructed house or in the construction of homes or flats;

(b) a provider of professional services in any transaction in which, the sale or use of a product is only incidental thereto, but furnishing of opinion, skill or services being the essence of such transaction;

(c) a person who—

(I) acts only in a financial capacity with respect to the sale of the product;

(II) is not a manufacturer, wholesaler, distributor, retailer, direct seller or an electronic service provider;

(III) leases a product, without having a reasonable opportunity to inspect and discover defects in the product, under a lease arrangement in which the selection, possession, maintenance, and operation of the product are controlled by a person other than the lessor;

The term ‘product seller’ is defined to include a person who is involved in placing the product for a commercial purpose and as such would include e-commerce platforms as well. The defence that e-commerce platforms merely act as ‘platforms’ or ‘aggregators’ will not be accepted.

As per Section 86 of the New Act, 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

(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.

A ‘product liability action’ can be brought against even the ‘product seller’ in certain circumstances like seller exercising substantial control over designing, packing, testing, manufacturing etc, or seller altering or modifying the product.

The ‘product seller’ will also be liable if 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.

Exceptions to Product Liability Action.

Certain exceptions have been provided under the New Act from liability claims.

Exception for Product Sellers- as per Section 87(1) of the New Act, a ‘product liability action’ cannot be brought against the ‘product seller’ if, at the time of harm, the product was misused, altered, or modified.

Exception for Product Manufacturer- as per Section 87(2) of the New Act, 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

Further, 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.

Disclaimer: Nothing contained in this document is to be construed as a legal opinion or view of either of the authors whatsoever and the content is to be used strictly for educative purposes only.

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May 2021