All questions


i Forum

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:

  1. jurisdictional consumer court or forum (depending on the claim amount) under the CPA;
  2. jurisdictional civil court in a case of a contractual breach or a tortious action;
  3. an arbitration tribunal in accordance with an arbitration agreement executed between the relevant parties in a case of contractual breach; or
  4. 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. It provides for the constitution of:

  1. 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
  2. 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:

  1. of a specified value of not less than 300,000 rupees or such other value as notified; and
  2. 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:

  1. the presence of a defect in the goods;
  2. breach of warranty or condition (implied or expressed); or
  3. 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.

iii Defences

The defence typically available to manufacturers, distributors or sellers in product liability claims include the following:

  1. the product being compliant with requisite statutory standards prescribed;
  2. the product not being 'defective' as defined under the CPA;
  3. the purchaser of the product is not a 'consumer' as defined under the CPA;
  4. loss or injury is owing to negligence or misuse by the consumer or buyer, including contributory negligence;
  5. the consumer or buyer had examined the goods prior to purchase and accepted it, being satisfied of its quality or specification; or
  6. 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, 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.

vi Discovery

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.

vii Apportionment

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.

ix Damages

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.