An Appraisal of Strict Product Liability in India: Making a Case for Protection to Bystanders

Introduction

With increasing consumerism in today's world and greater awareness of legal rights, product liability claims have risen rapidly and have become popular in many countries. Product liability finds its roots in various theories like tort-negligence, strict liability, and contract-warranty theory. There are conceptual confusions around the relationship of strict product liability with warranty theory since the former was intimately related with and derived its existence from the implied warranty of fitness of the product for the particular purpose and its merchantability.¹ The correct position is that the warranty approach is one of the theoretical justifications of strict product liability. A recent survey conducted in India revealed the extent of the problem, with one in two customers encountering high-value products with inherent defects and an equally flawed redressal mechanism.² The Consumer Protection Act, 2019 (CPA)³, that came into effect in July 2020, marked the first step towards the explicit introduction of product liability, including the strict one, into the Indian legal structure. This assumes special significance given the Karnataka High Court's observations in the 1994 case of Airbus Industrie v. Laura Howell Linton⁴. The Court had made reference to the absence of strict product liability in India.

Through this article, I would demonstrate that this judicial stance on strict product liability is not completely accurate and strict liability has existed in an implicit manner in India. For this, I shall attempt to unearth the traces of strict product liability in our statutory regime through a case law analysis of the Sale of Goods Act, 1930⁵ and the Consumer Protection Act, 1986⁶. However, the major argument of this article would entail an advocacy of the extension of strict product liability under CPA, 2019 to bystanders who are not the purchasers or users of the product. This analysis shall also unearth the trajectory of theoretical underpinnings that underlined strict product liability in India.

(Strict) product liability on sellers: In the fetters of warranty and privity

The Sale of Goods Act (SOGA) provides for the regulation of relationships between the sellers and buyers wherein the former undertakes a sale of goods to the latter for consideration. Section 15⁷ elaborates on the requirement of compliance of goods with the description under which they are sold. It creates an implied condition that the particular product sold has to be in line with what the description entailed. Section 16⁸ lays down the general rule of caveat emptor wherein no implied warranty as to the quality or fitness of a good shall be considered to exist. But it goes a step further and lays down a few exceptions to that rule. The first exception deals with the reliance of the buyer on the skill and judgment of the seller for the purchase of goods. It is necessary that the purpose of the purchase is made known to the seller, either impliedly or expressly. Section 13⁹ allows the buyer to pursue the case as one of a breach of warranty and claim damages. This action does not require negligence as a precondition and is, hence, a case of strict liability.

The courts while dealing with cases under SOGA have operated on the logic of privity of contract. In Eastern Mining Contractors (P) Ltd. v. Premier Automobiles Ltd.,¹⁰ the defective car has been purchased through reliance on the judgment and skill of the dealer, and hence action lay against him under Section 16(1) of the SOGA. Further, there was a breach of implied condition of merchantability that grounded another cause of action under Section 16(2). However, the manufacturer was not held to be strictly liable since the dealer was not found to be his agent. No privity of contract existed between the customer and the manufacturer, and he could not be implicated through the warranty approach. G. McKenzie & Co. (1919) Ltd. v. Nagendra Nath Mahalanabish¹¹ had also highlighted how two independent causes of action for a customer who has suffered damages: one in tort against the product manufacturer, and the other in contract against the seller. The reliance on contractual dealings is further evinced when one views Eternit Everest Ltd. v. C.G. Abraham.¹² Here, the manufacturers of defective asbestos sheet were held liable under Section 16 of the SOGA because the seller was held to be agent of manufacturers, thus establishing a clear contractual linkage between manufacturer and consumer.

It is clear that the SOGA does not provide for any direct extension of implied warranty and condition from the manufacturer to the buyer through circumvention of privity and the courts have only used the relevant provisions to hold sellers strictly liable. Liability of the manufacturer to the ultimate user only arose when the seller was an agent of the former. Therefore, the action became contingent on the construction of the contractual dealings between the manufacturer and seller. The takeaway from the foregoing discussion is that SOGA provided for strict product liability against sellers and, in rare cases, manufacturers on basis of contractual warranty approach.

Product liability under the consumer protection regime

Under the Consumer Protection Act, 1986 (CPA, 1986), there was no reference to product liability actions. However, the consumer could still move the court and base her claims on various provisions. CPA, 1986 can be considered to be an improvement over SOGA since the courts have impliedly recognised the existence of strict product liability against manufacturers on basis of an implied contract between manufacturer and the consumer as to the quality of the product sold. Jagrut Nagrik v. Baroda Automobiles Sales and Service¹³ revolved around the complainant who had purchased a Padmini car from the dealer but subsequently found several defects in various components of the vehicle. Despite many attempts, the defects were not rectified by the dealer and both the manufacturer, and the dealer denied any liability. The National Consumer Disputes Redressal Commission (NCDRC) held both of them to be liable to pay compensation to the aggrieved complainant.

In Tata Motors Jivan Tara Building v. Rajesh Tyagi,¹⁴ the NCDRC opined that there is the existence of an implied contract as to the manufacturer that the vehicle sold is not possessed of and will not suffer from any fault or imperfection in the quality and standard required to be upheld. This can be construed as freeing the warranties of fitness and merchantability from the shackles of privity. There is clear transition towards conversion of strict product liability into a full-fledged tort, while still employing the language of warranty.

Notwithstanding the above observation, there always existed an element of uncertainty owing to the absence of express provisions dealing with product liability in the legislation. To provide a systematic framework for the provision of compensation to consumers, a dedicated chapter on product liability was included in CPA, 2019. It entails detailed provisions on the liabilities of product manufacturers, sellers, and product service providers.¹⁵ From a reading of Section 84, it becomes clear that deviation from express warranty is one of the grounds of product liability claim.¹⁶ Section 83¹⁷ read with Section 84 lead to the inference that the liability on manufacturers has been instituted as strict liability and goes beyond the contractual theory of implied warranties of fitness and merchantability. However, Section 84(2) that makes manufacturers liable even in the absence of negligence or fraud may create a bit of confusion since it only refers to strict liability in making express warranty of product. Nevertheless, keeping in mind the overall trajectory of consumer protection regime, the legislative intent, and the conjoint reading of Sections 83 and 84, strict product liability extends to all sub-clauses given under Section 84.

It would seem that all issues are resolved. However, the next section shows that it is not the case.

Making a case for bystanders

Section 83 entitles the complainant to bring an action for product liability against the product manufacturer for harm caused to him. On a conjoint reading of the definitions of complainant and consumer given under Sections 2(5) and 2(7), it is clear that the ambit of consumer is restricted to persons who have bought the good and those who use them with the approval of the buyer. Therefore, the statute presents us with a glaring legal gap. The bystanders who may be harmed due to the defective nature of the products are out of the protection of CPA. Arguendo, take a simple hypothetical (that may very well happen or indeed happens in real life): I bought a gun developed by manufacturer X that has certain structural defects. While firing, it explodes in my hand and causes severe injuries. At the same time, it also harms my friend who was standing by my side. From a plainly logical perspective, I and my friend X ought to be entitled to same legal remedy against the manufacturer. The recognition of this simple truth is what led to the extension of strict product liability to bystanders in US.

As stated in the introduction, implied warranty by manufacturer is one the conceptual groundings of strict product liability and exemplified the first phase of development of strict product liability in US.¹⁸ However, it is recognised that warranty has its own limitations and loopholes, which include reliance on the implied and express assertion made by the seller.¹⁹ Since strict product liability in US was already being extended beyond the restrictive confines of contractual privity, the courts felt the need to dispense with the legalities of warranty altogether. Traynor, J. in Greenman v. Yuba Power Products Inc.²⁰ based the liability as a strict one in tort and divorced from any requirement to show the presence of implied warranty flowing from manufacturer to the user. This quantum leap in the conceptual underpinning accelerated the move towards liability claims by bystanders.

Public policy demands that it is justified to place liability on the party who is in charge of the making of the product. This will assist in reducing the hazards to life and health that emerge from those defective products by nudging the manufacturers to be careful (Escola v. Coca Cola Bottling Co.).²¹ It is well established that the liability for negligence extends to all persons who are expected to be endangered by that product, including bystanders. There is no reason why the same logic should not operate to work in case of strict product liability. The Connecticut Court in Mitchell v. Miller²² operated on this same rationale and found no reason to deny relief to an innocent golf player who had been killed by a defective Buick car rolling down the golf course.

It is important to remember that all the factual scenarios in which bystanders got claims in US can very much happen and continue to happen in India as well. Thus, to realise the true potential of strict product liability regime, bystanders ought to be included in the ambit within CPA, 2019. Fairness as a concept demands of the manufacturers to bear the burdens when they accrue benefits from a large market like India. Even though Y bystanders may not have purchased the product, they along with X consumers form the society from which the manufacturers and sellers benefit as whole. The responsibility is further accentuated when one acknowledges the angle of unreciprocated risk operating in case of innocent bystanders.²³ The bystanders have no opportunity to evaluate the quality of the product or consider the defects that may persist in it. The person herself never used the product while suffering the injuries at the same time.²⁴ Thus, she suffers the fallout of the defects without even receiving the product's benefits. In such a case, if the consumer is entitled to sue the manufacturer under Section 83 of the CPA, 2019, it is untenable to justify the denial of relief to bystanders.

It is suggested that the following be considered while formulating the standards to determine liability in case of bystanders and the subsequent judicial scrutiny. The first logical query is to determine the existence of defect in the product. The next step should entail an examination of the proximity between the defect and the ensuing damage to the third party. This would be a reasonable yardstick to ascertain the liability and ensure that cases involving far-fetched, remote claims are not brought to court. Finally, the presence of any situational agent or causation that might have contributed to the resulting damage should be discerned. The liability of the manufacturer can be adjusted to that extent.

Since the legislation is comparatively recent, there is a dearth of judicial rulings to discern the trend of the application of strict product liability claims against manufacturers. It remains to be seen if the courts carve out space for bystanders within the existing statutory framework or a legislative action would be imperative in the future.