Supreme Court Holds Automaker Liable for Defective Airbags in Consumer Case: Hyundai Motor India Ltd. vs. Shailendra Bhatnagar (20 April 2022)

Date of the Judgment: 20 April 2022
Citation: Civil Appeal No. 3001 of 2022 (Arising out of Petition for Special Leave to Appeal (Civil) No. 4881 of 2021)
Judges: Justice Vineet Saran and Justice Aniruddha Bose
Can a car manufacturer be held liable when a vehicle’s airbags fail to deploy during a significant accident, despite the manufacturer claiming the impact wasn’t severe enough? The Supreme Court of India addressed this critical question in a recent consumer case, emphasizing the importance of safety features and consumer rights. The core issue revolved around whether a car manufacturer could be held responsible for a defect in the airbag system when the airbags failed to deploy during a car accident, resulting in injuries to the car’s occupants. The judgment was delivered by a two-judge bench comprising Justice Vineet Saran and Justice Aniruddha Bose, with Justice Aniruddha Bose authoring the opinion.

Case Background

The case involves a complaint by Shailendra Bhatnagar (the respondent) against Hyundai Motor India Limited (the appellant), concerning a defect in his Hyundai Creta 1.6 VTVT SX+ car. The vehicle, purchased on August 21, 2015, was equipped with two front airbags. On November 16, 2017, the vehicle was involved in an accident on the Delhi-Panipat highway. The accident caused substantial damage to the right-hand (RH) front pillar, RH front roof, side body panels, front RH door panels, and left-hand (LH) front wheel suspension. At the time of the accident, the respondent, along with his mother and daughter, were in the car. The airbags did not deploy upon collision, and the respondent sustained head, chest, and dental injuries, which he attributed to the non-deployment of the airbags.

Following the accident, the appellant conducted an investigation, the results of which were documented in an SRS (Supplemental Restraint System) report. This report noted major damage to the RH front pillar, RH side body panels, and LH front wheel suspension. It also concluded that the impact was an under-ride and angular impact on the RH front pillar and roof. The report stated that no crash information was recorded in the SRSCM (Supplemental Restraint System Control Module), and therefore, the airbags did not deploy. The report concluded that the impact was not sufficient to trigger the front impact sensors.

Timeline

Course of Proceedings

The respondent filed a complaint before the Delhi State Consumer Redressal Commission, arguing that the primary reason for purchasing the vehicle was its safety features, including airbags, and that his injuries were a direct result of the airbags not deploying. The State Commission ruled in favor of the respondent, directing the appellant to compensate him ₹2,00,000 for medical expenses and loss of income, ₹50,000 for mental agony, and ₹50,000 as the cost of litigation. Additionally, the State Commission ordered the replacement of the vehicle, with a 7% per annum interest on the value of the vehicle if not replaced within the stipulated time.

The appellant then appealed to the National Consumer Dispute Redressal Commission, which dismissed the appeal and upheld the compensation awarded by the State Commission. The National Commission emphasized that the manufacturer had not disclosed the threshold limits for airbag deployment, which it considered an unfair trade practice. The Commission also noted that the photographs of the damaged vehicle showed a major impact, negating the need for expert evidence. The appellant then appealed to the Supreme Court of India against the order of the National Commission.

Legal Framework

The Supreme Court referred to Section 2(7) of the Sale of Goods Act, 1930, which defines vehicles as goods and states that they carry implied conditions as to their fitness. The Court also highlighted Section 16 of the Sale of Goods Act, 1930, which deals with implied conditions as to quality or fitness. Specifically, Section 16 states:

“16. Implied conditions as to quality or fitness.— Subject to the provisions of this Act and of any other law for the time being in force, there is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale, except as follows:—
(1) Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are required, so as to show that the buyer relies on the seller’s skill or judgment, and the goods are of a description which it is in the course of the seller’s business to supply (whether he is the manufacturer or producer or not), there is an implied condition that the goods shall be reasonably fit for such purpose:
Provided that, in the case of a contract for the sale of a specified article under its patent or other trade name, there is no implied condition as to its fitness for any particular purpose.
(2) Where goods are bought by description from a seller who deals in goods of that description (whether he is the manufacturer or producer or not), there is an implied condition that the goods shall be of merchantable quality:
Provided that, if the buyer has examined the goods, there shall be no implied condition as regards defects which such examination ought to have revealed.
(3) An implied warranty or condition as to quality or fitness for a particular purpose may be annexed by the usage of trade.
(4) An express warranty or condition does not negative a warranty or condition implied by this Act unless inconsistent therewith.”

The Court noted that the implied condition of fitness under Section 16 of the Sale of Goods Act, 1930, applies to goods, including vehicles, and that the limitation period for a defect begins from the date the defect surfaces, not the date of purchase. In this case, the defect was considered to have surfaced on the date of the accident.

Arguments

Appellant’s Arguments (Hyundai Motor India Limited):

• The appellant argued that the airbags deploy only when there is a severe impact and may not deploy if the vehicle collides with objects like poles or trees, where the full force of the impact is not delivered to the sensors.
• The appellant relied on the SRS investigation report, which stated that the impact of the accident was not sufficient to deliver the minimum threshold force required for airbag deployment to the front sensors.
• They contended that the airbag deployment depends on several factors, including vehicle speed, angle of impact, and the density of the objects hit, and that the front airbags are designed to deploy only when the impact is sufficiently severe and the impact angle is less than 30 degrees from the forward longitudinal axis of the vehicle.
• The appellant also argued that the impact was from the side, not a frontal hit, and that the airbags are not intended to deploy in side or rear impacts.
• The appellant argued that the limitation period should run from the date of purchase of the vehicle and not the date of the accident.
• The appellant also raised the issue of privity of contract, arguing that there was no direct contract between the manufacturer and the respondent, as the vehicle was purchased through a dealer.

Respondent’s Arguments (Shailendra Bhatnagar):

• The respondent contended that he purchased the car for its safety features, including airbags, and that the airbags did not function when required, resulting in serious injuries.
• He argued that the manufacturer did not disclose the minimum threshold force required to trigger the airbags.
• The respondent submitted photographs of the damaged car, showing substantial damage to the RH front pillar, RH front roof, side body panels, front RH door panels, and LH front wheel suspension, indicating a major impact.
• The respondent argued that the limitation period should run from the date the defect surfaces, which in this case is the date of the accident.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in a separate section, but the following issues were addressed:

1. Whether the non-deployment of airbags in the vehicle constituted a defect attributable to the manufacturer?
2. Whether the limitation period should be calculated from the date of purchase or the date of the accident?
3. Whether the principle of privity of contract applies in this case, given that the vehicle was purchased through a dealer?
4. Whether the order for replacement of the vehicle was justified?

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The Court considered the following authorities and legal provisions:

Legal Provisions:

• Section 2(7) of The Sale of Goods Act, 1930: Defines vehicles as goods, implying they carry conditions of fitness.
• Section 16 of The Sale of Goods Act, 1930: Deals with implied conditions as to quality or fitness of goods, stating that goods must be reasonably fit for the purpose for which they are purchased.
• Section 14 of the Consumer Protection Act, 1986: Outlines the reliefs that may be granted in consumer complaints, including replacement of defective goods and punitive damages.

Cases:

• Nagappa v. Gurudayal Singh & Others [(2003) 2 SCC 274] – This case was cited to support the proposition that a tribunal or court can award compensation exceeding the claimed amount.
• Sangita Arya and Others v. Oriental Insurance Company Limited and Others [(2020) 5 SCC 327] – This case was cited to support the principle of just and reasonable compensation.
• Jitendra Khimshankar Trivedi and Others v. Kasam Daud Kumbhar and Others [(2015) 4 SCC 237]– This case was cited to support the principle of just and reasonable compensation.
• M.C. Mehta and Another v. Union of India and Others [(1987) 1 SCC 395] – This case was cited to support the principle that the measure of compensation should be correlated to the magnitude and capacity of the enterprise, especially for hazardous activities, to have a deterrent effect.

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• The Court relied on Section 2(7) of the Sale of Goods Act, 1930* to establish that vehicles are goods with implied conditions of fitness.
• The Court used Section 16 of the Sale of Goods Act, 1930* to affirm that goods must be reasonably fit for their intended purpose, and the vehicle failed to meet this standard.
• The Court referred to Section 14 of the Consumer Protection Act, 1986* to justify the reliefs granted, including replacement of the vehicle and punitive damages.
• The Court cited Nagappa v. Gurudayal Singh & Others [(2003) 2 SCC 274]* to support the principle that compensation can exceed the claimed amount.
• The Court mentioned Sangita Arya and Others v. Oriental Insurance Company Limited and Others [(2020) 5 SCC 327]* and Jitendra Khimshankar Trivedi and Others v. Kasam Daud Kumbhar and Others [(2015) 4 SCC 237]* to support the principle of just and reasonable compensation, though it noted that the ratio of these authorities does not directly apply to the facts of this case.
• The Court applied the principle from M.C. Mehta and Another v. Union of India and Others [(1987) 1 SCC 395]* to justify the award of punitive damages, emphasizing that the compensation should have a deterrent effect and be correlated to the magnitude of the enterprise.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following factors:

• Implied Fitness and Safety: The Court emphasized that vehicles, especially those marketed with safety features like airbags, must meet the implied standards of fitness. The non-deployment of airbags during a significant accident indicated a failure in this implied fitness.
• Consumer Expectation: The Court noted that a consumer purchasing a vehicle with airbags reasonably expects them to deploy in the event of a frontal collision. The manufacturer’s failure to meet this expectation was a significant factor in the Court’s decision.
• Principle of Res Ipsa Loquitur: The Court upheld the lower fora’s reliance on the principle of Res Ipsa Loquitur, stating that the photographs of the damaged vehicle spoke for themselves, indicating a major impact that should have triggered the airbags.
• Deterrent Effect of Punitive Damages: The Court stressed that punitive damages are necessary to deter manufacturers from compromising on safety features. The damages should be correlated to the magnitude and capacity of the enterprise to ensure a deterrent effect.
• Unfair Trade Practice: The Court agreed with the National Commission that highlighting safety features without disclosing the threshold limits for their operation constitutes an unfair trade practice.

Logical Reasoning:

The Court also considered the argument that the manufacturer’s investigation report suggested that the impact was not sufficient to trigger the airbags. However, the Court rejected this argument, emphasizing that the vehicle’s safety features should have worked as reasonably expected by the consumer. The Court also noted that the manufacturer’s failure to disclose the threshold limits for airbag deployment was an unfair trade practice. The Court concluded that the manufacturer was liable for the defect in the airbag system and upheld the orders of the lower consumer fora.

The Court’s reasoning was based on the principle that consumers should not be expected to be experts in physics or engineering. They should be able to rely on the safety features of a vehicle as represented by the manufacturer. The Court also emphasized that punitive damages are necessary to deter manufacturers from compromising on safety features. The Court’s decision was also influenced by the principle of Res Ipsa Loquitur, which means “the thing speaks for itself.” This principle is used when the facts of a case are so clear that they speak for themselves.

The Court quoted from the judgment:
“The State Commission rightly observed “that expert evidence need not be relied upon where the facts speak for themselves. This is a case of Res Ipsa Loquitur where the photographs of the damaged vehicle placed on record clearly show the impact of the accident on the vehicle.””

The Court also quoted:
“A consumer is not meant to be an expert in physics calculating the impact of a collision on the theories based on velocity and force.”

The Court further quoted:
“The failure to provide an airbag system which would meet the safety standards as perceived by a car-buyer of reasonable prudence, in our view, should be subject to punitive damages which can have deterrent effect.”

Key Takeaways

• Manufacturer Liability: Car manufacturers can be held liable for defects in safety features, even if the exact cause of the defect is not definitively proven.
• Implied Fitness: Vehicles must meet the implied standards of fitness and safety, particularly regarding safety features like airbags.
• Consumer Expectation: Consumers have a reasonable expectation that safety features will function as advertised and intended.
• Punitive Damages: Manufacturers may be subject to punitive damages for defects in safety features, especially when such defects have the potential to cause serious injury.
• Unfair Trade Practice: Highlighting safety features without disclosing the threshold limits for their operation is considered an unfair trade practice.

Directions

The Supreme Court upheld the directions given by the State Commission and the National Commission, which included:

• Compensation of ₹2,00,000 for medical expenses and loss of income.
• Compensation of ₹50,000 for mental agony.
• Payment of ₹50,000 as the cost of litigation.
• Replacement of the defective vehicle.

Specific Amendments Analysis

There were no specific amendments discussed in this judgment.

Development of Law

The ratio decidendi of this case is that manufacturers are liable for defects in safety features of vehicles, and that consumers have a reasonable expectation that these features will function as intended. The Court’s decision reinforces the principle of implied fitness of goods, particularly in the context of safety features. The judgment also establishes that the limitation period for a defect begins from the date the defect surfaces, not the date of purchase. This case also highlights the importance of transparency in product information and that not disclosing the threshold limits for the operation of safety features is an unfair trade practice.

Conclusion

In summary, the Supreme Court dismissed the appeal by Hyundai Motor India Limited, upholding the decisions of the lower consumer fora. The Court held that the non-deployment of airbags during a significant accident constituted a defect, and that the manufacturer was liable for the resulting injuries and damages. The Court emphasized the importance of implied fitness of goods, consumer expectations regarding safety features, and the need for punitive damages to deter manufacturers from compromising on safety. The judgment reinforces consumer rights and underscores the responsibility of manufacturers to ensure the safety and reliability of their products.