An insight into product liability in India. Prepared in association with Nishith Desai & Associates, a leading law firm in India, this is an extract from The Pharma Legal Handbook: India, available to purchase here for GBP 75.
1. What types of liability are recognized in your jurisdiction?
Manufacturers, distributors and retailers can be held liable either under D&C Act or under India’s penal laws. Generally, manufacture, import, sale of drugs and devices that are spurious or of poor quality or contravene any of the requirements of law is punishable under Indian law. The D&C Act allows manufacture and sale of certain controlled substances which is otherwise prohibited under India’s anti-drug laws. Manufacture of those drugs illegally can lead to criminal prosecution under the Narcotic Drugs and Psychotropic Substances Act 1985 (“NDPS”) in addition to penalty under the D&C Act. The Indian Penal Code (“IPC”) specifically identifies adulteration of drugs and sale of adulterated drugs as an offence.
In addition to the criminal liabilities prescribed above, the Consumer Protection Act, 2019 (“CPA”) also applies as a means of obtaining compensation. Manufacturers and retailers can be held liable under the CPA under two primary grounds viz. sale of defective goods and unfair trade practice. Deficiency is any shortcoming, fault or imperfection in the quality or nature of the good as compared to the standard prescribed for that good. Unfair trade practice means an unfair or deceptive practice used for promoting the good. Manufacture or sale of spurious drugs will be construed as an unfair trade practice.
2. How do these types of liabilities apply to the manufacturers of medicines and devices?
Currently, for deficiencies in the quality of drug, the manufacturer can be held responsible under the D&C Act, IPC as well as the CPA. However, the D&C Rules have been amended such that liability for quality of drugs is imposed not only on the manufacturer but also on the marketer the drug. This was necessitated because a DCGI investigation revealed that many big pharmaceutical companies market unapproved drugs or drugs not of standard quality. However, those drugs are manufactured by third party contractors and therefore the company marketing the drug escapes liability.
Manufacture of a drug in Schedule X of the D&C Rules without a valid license is an offence under the NDPS Act.
The CPA states that the manufacturer can be held liable in a product liability claim in the following cases:
- the product contains a manufacturing defect;
- the product is defective in design;
- there is a deviation from manufacturing specifications;
- the product does not conform to an express warranty regardless of whether the manufacturer was negligent in making such express warranty; or
- the product fails to contain adequate instructions of correct usage to prevent any harm or any warning regarding improper or incorrect usage.
3. Does potential liability extend to the manufacturer only or could claims extend to corporate executives, employees, and representatives?
The D&C Act and the NDPS Act specify that when an offence has been committed by a company the persons in charge of the affairs of the company (key personnel) can be held liable for those acts. Key personnel includes directors, secretaries and managers of the company and any other officer who was responsible for the conduct of the company’s affairs.
The IPC applies to offences committed by persons and companies. Therefore, all persons involved in either the adulteration of drugs or sale of adulterated drugs will be held guilty.
4. How can a liability claim be brought?
In case of an offence committed under the IPC, a criminal complaint can be filed with the relevant police station to seek redressal. For offences under the D&C Act, a complaint may be made to the licensing authority.
The CPA establishes district, state and national commissions to exercise jurisdiction over consumer disputes and provide redressal. A complaint before the above mentioned forums can be filed even without the help of a lawyer. The appropriate forum to file a complaint depends on the total value of the goods and compensation claimed. If the value is below INR 10,000,000, the complaint must be filed in the District Forum. If the value is between INR 1,00,00,000 to 10,00,00,000, the complaint must be filed in the State Consumer Forum. If the value exceeds INR 10,00,00,000 the complaint must be filed at the National Forum.
5. What defenses are available?
The key personnel will not be held liable if they can prove that the offence was committed without their consent. However, it must be also be shown that they exercised all due diligence to prevent the commission of the offence. Therefore, if the offence was committed owing to the negligence of the director or manager the defense mentioned above will not be available to them.
Under the CPA, the manufacturer may take the following defenses.
- The complainant is not a ‘consumer’ under the CPA as the complainant has either obtained the goods or avails services for any commercial purpose or has availed the service free of charge.
- Even if the product was defective, no ‘harm’ caused to a consumer by the use of the defective product.
- In case of a claim against a product manufacturer for not having provided adequate warning or instructions, the product manufacturer shall not be liable if:
- The product was purchased by an employer for use at the workplace and the product manufacturer had provided warnings or instructions to such employer.
- 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.
- 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.
- While using the product, the complainant was under the influence of alcohol or any prescription drug which had not been prescribed by a medical practitioner.
iv. The product manufacturer would 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.