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 USD 99.

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 1986 (“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, an amendment has been proposed to the Act through which the Government seeks to impose liability for quality of drugs not only on the manufacturer but also on the party marketing 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 trader can be held liable under the CPA. A trader can include any entity along the supply chain including the manufacturer, seller and distributer. In cases of packaged goods, it also includes the packer of the goods.

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 20,00,000, the complaint must be filed in the District Forum. If the value is between INR 20,00,000 to INR 1,00,00,000 the complaint must be filed in the State Consumer Forum. If the value exceeds INR 1,00,00,000 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 defence mentioned above will not be available to them.

Under the CPA, if the deficiency did not exist at the time it was supplied to the entity down the supply chain, such supplying entity will not be liable. For instance, if there was no defect in the good when the manufacturer supplied it to the wholesaler the manufacturer will not be liable.