Photographer: Marc Tienda. Bloomberg News.

Buyer Beware! Why India Can But Doesn’t Award ‘Blockbuster’ Damages

In July this year a jury in Missouri, USA ordered Johnson & Johnson to pay $4.7 billion in compensatory and punitive damages to 22 women who alleged that the company’s talc products caused them to develop ovarian cancer.

Over the last two years juries in federal court in Dallas have ordered J&J to pay a total of more than $1.7 billion in damages over artificial hips. One verdict was for more than $1 billion though several awards were later cut by a U.S. District Judge.

Contrast that with the Rs 20 lakh compensation recommended by a government panel in India for faulty hip devices supplied by J&J.

Two points here. First, the compensation is a much lower amount than punitive damages awarded in the American mass tort cases cited above. Two, punitive damages are rarely awarded in India.

Since the Consumer Protection Act came into force in India, over 48 lakh consumer cases have been filed and around 91 percent of these cases have been resolved, according to the National Consumer Disputes Redressal Commission. Most of these are a result of settlement and none of them have really resulted in blockbuster damages, experts say.

The largest according to lawyers cited in this story was a Rs 1.10 crore compensatory and punitive damages award.

Existing Framework

In the legal context, ‘punitive damages’ unlike compensatory damages do not exist to simply reimburse or compensate for losses. Their objective is to punish the wrongdoer. To understand these damages, let’s look at the existing product liability framework in India.

The term ‘product liability’ refers to the responsibility of a manufacturer or a seller to compensate for any harm that is caused to a person or property due to supply of a defective product or deficient service.

As a recipient of defective goods (perhaps the same cancer-causing talcum powder) or deficient services (say if a doctor was negligent and left a syringe inside your body while performing a medical procedure) a consumer may take action under a variety of laws, including general tort law, contract law, consumer protection law and even the Indian Penal Code.

But, the Consumer Protection Act is the most effective remedy, experts say.

A suit adjudicated by a civil court is more time-consuming than a consumer matter, it is also lot more expensive.
Anay Shukla, Leader, Nishith Desai Associates

This is because in addition to the lawyer fees, the consumer has to bear court fees as well, which in a civil court may be a percentage of the amount the consumer is claiming. In contrast, the consumer court fee to file a suit for claim amount over Rs 1 crore is just Rs 5,000, Shukla explains.

Vineet Shingal, partner at law firm Khaitan & Co, tells BloombergQuint that the Consumer Protection Act is a more popular choice for product liability claims for two reasons.

One, the consumer protection law permits overriding legal principles like ‘caveat emptor’ (latin for ‘let the buyer beware’) under which the buyer is responsible for checking quality and suitability of goods before purchase.

Two, it permits the consumer to sue not just the direct seller, but the manufacturer, the importer or the distributor, even though there may be no direct contractual relationship between the consumer and such third parties, he explains.

Interestingly, while the Consumer Protection Act provides for a class action suit (suit filed by multiple persons having similar claims), there are no precedents for a successful class action suit.

Punitive and Compensatory Damages

Punitive damages may make headlines every other day in the U.S. But in most jurisdictions like India, U.K. and Ireland they are reserved for extreme cases which result in disproportionate harm. In some jurisdictions like France, Germany and Switzerland, they don’t really form a part of the official legal framework.

While not unheard of, in India awarding punitive damages is an exception rather than the rule and the awarded amount is rarely large in absolute terms.
Vineet Shingal, Partner, Khaitan & Co

One of the many reasons for this is that typically punitive damages are awarded only in cases where high-handed, malicious, arbitrary or highly reprehensible misconduct is evident, Shingal adds.

For example, in the case of Indu Sharma vs Apollo Hospital, compensatory damage of Rs 1 crore was awarded but punitive damages of only Rs 10 lakh were imposed for professional misconduct which included tampering with medical records and making false submissions.

While the Consumer Protection Act does not cap the amount of damages that can be awarded, the Supreme Court in the Charan Singh case clarified that the damages are primarily compensatory and that calculation of damages depends on the facts and circumstances of each case. No hard and fast rule can be laid down for universal application.

India – Revised Framework?

If a legal framework is not in tune with the realities of time, it is bound to fail. Most of these laws that aim to protect consumers are archaic, Shukla said. For example, the law enacted to regulate medicines and medical devices dates back to 1940. Even the regulator’s hands are tied to a large extent due to the age-old framework, he explains.

There is a need to introduce new laws and update legal standards from time to time in order to help consumers access only the latest and safer products, which would automatically reduce the incidence of injury, he adds.

To this end, in January this year the Consumer Protection Bill, 2018 was introduced. It seeks to replace the existing framework and codify product liability.

The revised framework will brings us one step closer to building a functional and practical regime, Shingal said. But the true impact of this can only be felt when consumers are made aware of their rights. The willingness of the courts to impose harsher liabilities to serve as true deterrent will also aid this cause, he concluded.