India's Lemon Law Moment: Evolving Product Liability And Recall Regime In The Automotive Sector

Introduction

Few frustrations compare to owning an unreliable vehicle. A car that repeatedly breaks down despite multiple repairs may be considered a "lemon", a term popularized in the U.S¹. In such cases, consumers may be entitled to a refund, replacement, or compensation under "lemon laws"—a critical protection that has become standard in several countries. Lemon laws generally mandate that automobile manufacturers must either replace a faulty vehicle or reimburse the purchase price if a defect persists after a set number of repair attempts².

Historically, India lacked dedicated lemon laws, leaving consumers with limited recourse under general legal provisions such as the Sale of Goods Act, 1930, the Law of Torts, and common law principles. However, 2019 marked a pivotal shift with the enactment of the Consumer Protection Act, 2019 and the Motor Vehicles (Amendment) Act, 2019. These "Twin Amendments" significantly strengthened product liability and recall mechanisms, impacting not only Original Equipment Manufacturers (OEMs) but the entire automotive supply chain. Given India's status as one of the world's largest automobile markets, this article evaluates whether the new legal framework balances consumer rights with operational challenges faced by manufacturers.

Prior to the Twin Amendments of 2019

Before 2019, India had no statutory framework governing vehicle recalls, relying instead on the voluntary SIAM Code³ introduced by the Society of Indian Automobile Manufacturers in 2012. This code permitted manufacturers to notify owners or the government of vehicle defects, but without binding timelines, making recalls discretionary.

Indian courts did not impose strict liability for product defects. Relief was typically granted within the confines of warranty clauses. For instance, in Maruti Udyog Ltd. v. Susheel Kumar Gabgotra⁴, the Supreme Court held that manufacturers were only required to repair or replace defective parts under warranty and not the entire vehicle—even after multiple repair attempts. Courts often ordered limited compensation⁵ for serious defects involving brakes, engines, or body integrity. The burden remained on consumers to prove an "inherent manufacturing defect⁶," without which manufacturers faced minimal liability⁷.

As a result, minor and even serious defects were often inadequately addressed. With robust lemon laws emerging globally, India's outdated system necessitated reform, leading to the introduction of the Twin Amendments.

Post Twin Amendments of 2019

India's first formal product liability regime was introduced through the Consumer Protection Act, 2019 ("CP Act")⁸, followed by sweeping changes to the Motor Vehicles Act, 1988 via the Motor Vehicles (Amendment) Act, 2019 ("MV Amendment Act")⁹. These laws together established a comprehensive framework for vehicle recall and product liability, extending accountability to OEMs, component suppliers, distributors, and service providers.

A. Motor Vehicles (Amendment) Act, 2019

The MV Amendment Act empowered the Ministry of Road Transport and Highways (MoRTH) to mandate recalls of vehicle models deemed defective and hazardous to safety or the environment. MoRTH may also act upon defect reports from consumers or other stakeholders. If a component is found defective, recalls may extend to all vehicles using it. Manufacturers must then compensate consumers, repair or replace the part, or face prescribed penalties.

Voluntary recalls are incentivized, with no additional penalties imposed. The Act authorizes the Central Government to appoint investigating officers to enhance recall oversight. Section 110A(6) led to the insertion of Rule 127C into the Central Motor Vehicle Rules, 1989, detailing procedures for recall notices. The SIAM recall data post-implementation is as follows:

B. Consumer Protection Act, 2019

The CP Act ushered in a paradigm shift from "buyer beware" to "seller beware." Section 2(34) defines "product liability" as the duty of a manufacturer or seller to compensate for harm caused by a defective product. "Harm" includes physical injury, mental anguish, death, and damage to property, though not harm to the product itself or purely commercial losses.

Chapter VI imposes liability not only on manufacturers but also on sellers and service providers. The term "product" includes fully assembled goods and individual components. Indian courts have held manufacturers solely liable in some cases, such as Hindustan Motors Ltd. v. N. Siva Kumar¹⁰, while also upholding joint liability, as in C.N. Anantharam v. Fiat India Ltd¹¹. However, in Tata Motors Ltd. v. Antonio Paulo Vaz¹², the Court limited liability to cases where the manufacturer was aware of the defect.

The CP Act also extends compliance obligations to endorsers, marketers, and importers, ensuring a more robust accountability framework across the supply chain.

Impact Analysis: Balancing Stakeholder Interests

The Twin Amendments significantly enhanced consumer protections, empowering buyers to claim compensation for personal and financial harm caused by defective vehicles. Voluntary recall provisions incentivize manufacturers to act preemptively, promoting consumer trust.

For manufacturers, the regime offers reputational safeguards if issues are addressed swiftly but introduces a complex compliance burden. Hybrid recalls—where multiple suppliers are involved—can lead to disputes over liability, especially within global supply chains.

The codification of recall and liability standards builds public confidence in India's auto sector. Still, small manufacturers face disproportionate risks. For them, compliance costs can be burdensome. Penalties for mandatory recalls, while fair, may cripple smaller players. Meanwhile, reputational damage from voluntary recalls remains a risk in the digital age.

A more refined approach is needed—especially in hybrid recall scenarios—to define fault allocation clearly. Introducing proportional liability and clearer guidelines for joint responsibility would better serve all stakeholders.

Conclusion

The Consumer Protection Act, 2019 and the Motor Vehicles (Amendment) Act, 2019 represent a landmark evolution in India's product liability framework, bringing the nation closer to global standards of consumer protection. By mandating recalls and imposing strict liability, these laws significantly improve safety and accountability. Yet, as India's automobile sector grows more complex, legal frameworks must evolve further. Policymakers should focus on protecting vulnerable supply chain participants and ensuring balanced liability allocation. With these refinements, India's lemon laws can truly achieve their intended objective: safeguarding consumers while ensuring a just and competitive industry.

Footnotes

1. Suneeti Rao, 'Lemon Law' of Indian Auto Users, 37 Economic & Political Weekly 819-821 (2002).

2. Louis J. Sirico Jr., Automobile Lemon Laws: An Annotated Bibliography, 8 Loy. Consumer L. Rev. 39 (1995).

3. Motorindia, SIAM Code on vehicle recall comes into force, Motorindia (Aug. 17, 2024, 3:15 PM).

4. Maruti Udyog Ltd. v. Susheel Kumar Gabgotra, (2006) 4 SCC 644, paras. 10, 11.

5. M/s Jaycee Automobiles v. Raj Kumar Agnihotri, 2016 SCC OnLine NCDRC 1963, para. 19.

6. Sushila Automobiles Pvt. Ltd. v. Dr. Birendra Narain Prasad, 2010 SCC OnLine NCDRC 144.

7. C.N. Anantharam v. M/s Fiat India Ltd., (2011) 1 SCC 460, para. 20.

8. The Consumer Protection Act, 2019, §§ 2(34), 82-87 (hereinafter 'CP Act').

9. The Motor Vehicles (Amendment) Act, 2019, No. 32, Acts of Parliament, 2019 (India) (hereinafter 'MV Amendment Act').

10. Hindustan Motors Ltd. v. N. Siva Kumar, (2000) 10 SCC 654.

11. C.N. Anantharam v. M/s Fiat India Ltd., (2011) 1 SCC 460, para. 20

12. Tata Motors Ltd. v. Antonio Paulo Vaz, AIR 2021 SC 1149.

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