Hyundai Motor India Limited vs Shailendra Bhatnagar

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 3001 OF 2022 (Arising out of Petition for Special Leave to Appeal (Civil) No. 4881 of 2021)

Hyundai Motor India Limited ……...Appellant(s)

Versus

Shailendra Bhatnagar ……Respondent(s)

JUDGMENT

ANIRUDDHA BOSE, J.

Leave granted.

2. The appellant are manufacturers of vehicles and the present

appeal arises out of a complaint made by the respondent Signature Not Verified Digitally signed by Rachna Date: 2022.04.21

concerning defect in a vehicle, particularly in relation to its safety 16:01:51 IST Reason:

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features originating from the appellant, of the model Creta 1.6

VTVT SX+. The vehicle came with two front airbags. Purchase of the

vehicle was made on 21st August 2015. It met with an accident on

the Delhi­Panipat highway on 16th November 2017 resulting in

substantial damage to its RH front pillar, RH front roof, side body

panels, front RH door panels and LH front wheel suspension. The

initials RH and LH appears to be used as short forms of Right Hand

and Left Hand sides of the vehicle. At that point of time, the

complainant (being the respondent herein), his mother and

daughter were in the vehicle. The airbags of the vehicle did not

deploy at the time of collision. The complainant suffered head,

chest as also dental injuries. He attributes such injuries to non­

deployment of airbags at the time of accident. The appellant

themselves obtained an investigation report which has been

referred to as SRS report. The remarks and conclusion of the said

SRS Investigation Report, as it appears from pages 53 and 54 of the

paperbook were:­

“Remarks:

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 Vehicle found with major damage on RH front pillar, RH Side body panels and LH front wheel suspension.

 Under ride & Angular impact found on the RH Front Pillar, Roof and Front RH Door panel.  Grazing damages found on the RH side panels

due to the scratch against truck while moving towards left.

Findings:

 No crash info recorded in SRSCM, hence no air bags deployed.

 No impact damage observed on both side chassis members, damages found away from impact sensors.  Vehicle found completely dismantled and mid­ repair condition during inspection.

Conclusion:

 The major impact to the vehicle from RH pillar resulted in under ride and angular condition.  Both front chassis member found unaffected by the frontal impact, hence no impact sensed by the front impact sensors and not triggered any signal to SRSCM (No crash info recorded in SRSCM for frontal impact).

 After thorough study, it is confirmed that the condition was not met for the air bag deployment, hence no air bags deployed. The air bag system was working proper at the time of accident.

Accident description:

 As per customer verbatim, while he was driving at 100 kmph speed on Gannaur highway. A front going truck applied sudden brake, his car hit to the truck from the right side to the left rear corner of the Truck. Further his car scratched against the truck while moving towards left side of the road and finally hit to some stones on the left front wheel and vehicle stopped.” (quoted verbatim)

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3. The Delhi State Consumer Redressal Commission, in a

complaint raised by the respondent, upheld his claim. The main

theme of his complaint was that the main reason for his purchase

decision of the model was because of its safety features including

the airbags and the injury was suffered by him because of non­

deployment of the airbags. The State Commission granted relief to

the following effect:­

“19. Keeping in view of the facts and circumstances of the present consumer complaint, we direct the opposite party to:

a. Compensate the complainant an amout of Rs.2,00,000/­ for medical expenses and loss of income.

b. Compensate the complainant an amount of Rs.50,000/­ for mental agony.

c. Pay to the complainant an amount of Rs.50,000/­ as cost of litigation.

20. The aforesaid payment shall be made by opposite party within two months from the date of this order by way of demand draft. Failure of opposite party in paying the said amount in stipulated period will attract an interest of 7% per annum from the date of default. Furthermore, failure in replacing the vehicle of the appellant will also attract an interest of 7% per annum of the value of the vehicle from the date of default.”

4. The appellant preferred appeal before the National Consumer

Dispute Redressal Commission (“National Commission”). The

4 National Commission dismissed the appeal sustaining the

compensation awarded by the State Commission. The Order of the

National Commission, which was passed on 5th January 2021, is

under appeal before us. Neither the State Commission nor the

National Commission accepted the justification sought to be made

by the appellant referring to the said investigation report, having

regard to the fact of non­deployment of the airbags. It has been,

inter­alia, held by the National Commission:­

“11.... Learned Counsel for the Appellant/Opposite Party submitted that the airbags deploy only when there is severe impact of force and airbags may not deploy if the vehicle collides with objects like poles and trees, when full force of the impact is not delivered to the sensors. Learned Counsel for the Appellant argued that the SRS Investigation report dated 01.12.2017 clearly stated that the impact of the accident was such that the minimum threshold force required for the deployment of the airbags was not delivered to the front sensors installed in the engine compartment and hence, the airbags did not deploy. No expert evidence was produced by the Respondent to substantiate any manufacturing defect. The Complainant contended that he purchased the car for its safety features highlighted by the Manufacturer, but the airbags did not function when required, due to which he sustained serious injuries as can be seen from the medical prescriptions and bills furnished by the Complainant. The impact/force required for triggering the front airbags was not made known to the Complainant. Nowhere has the minimum threshold force been

5 quantified and this defence can never be refuted.

Highlighting safety features including airbags while selling the car and not elaborating and disclosing the threshold limits for their opening is by itself an unfair trade practice. Complainant, however, had filed photographs of the accidental car. Major damage to RH front pillar, RH front roof, side body panels front RH door panels and LH front wheel suspension is seen in the photographs of the car. Without forceful impact, the car would not have been so badly damaged. The accident was a major accident in which the entire deriver side of the car, the side part and even the front mirror of the car got smashed and broken. The impact of the accident was so intense that the front bumper grill, dash board and the radiator got totally damaged. 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.”

5. One of the points argued on behalf of the appellant by Mr.

Huzefa Ahmadi, learned Senior advocate, is that the order for

replacement of the vehicle ought not to have been passed. The

respondent had not asked for replacement of the vehicle as part of

the reliefs claimed before the State Commission. He has otherwise

questioned legality of the decisions of the two fora citing certain

clauses from the owner’s manual. His argument on this count has

been that if force generated by the collision is lesser than a certain

degree, there would not be deployment of the airbags. Thus, there

6 was no defect in the security system according to him. He also

highlighted that impact of the accident was from the side and it was

not a frontal hit.

6. It is the case of the appellant that the airbag deployment

depends on a number of factors including vehicle speed, angle of

impact, density and stiffness of vehicles or objects which the

vehicle hits in the collision. The vehicle is designed to deploy the

front airbags only when an impact is sufficiently severe and when

the impact angle is less than 30 degrees from the forward

longitudinal axis of the vehicle. Mr. Ahmadi has submitted that the

front airbags are not intended to deploy if the impact is from the

side or in cases of rear impact or roll over crashes. He has referred

to a variety of circumstances in a collision which may not result in

deployment of the airbags. He has cited the investigation report to

which we have already referred to.

7. Before the Commission, point of limitation was also taken and

the appellant wanted the limitation to run from the date of

purchase of the vehicle and not the date of the accident. This

7 objection on maintainability has been rightly rejected by both the

State Commission and the National Commission. We do not find

any error in the view of the respective Commissions on this point.

Vehicles are goods within the meaning of Section 2(7) of The Sale of

Goods Act, 1930 and they carry implied conditions as to their

fitness. That is a statutory mandate and that mandate also

operates in respect of goods, whose defect is subject of proceeding

in a consumer complaint under the Consumer Protection Act,

1986. In the complaint, it has been pleaded that the respondent

had relied on the safety features of the vehicle projected by the

manufacturer. In such a situation, the limitation will run from the

day the defect surfaces in a case. There is no way by which the

nature of defect complained against could be identified in normal

circumstances at an earlier date, before the collision took place. In

this case, the safety feature of the vehicle fell short of the quality of

fitness as was represented by the manufacturer by implication. The

National Commission’s view is broadly based on the principle

incorporated in Section 16 of the 1930 Act. The defect in this case

8 ought to be treated to have had surfaced on the date of the accident

itself. We quote below the provisions of Section 16 of The Sale of

Goods Act, 1930:­

“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.

9 (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.”

8. The question on privity of contract was also raised before the

State as also the National Commission and from the decision under

appeal we find that this point was raised on the ground that the

dealer was not impleaded as a party and there was no contract

between the appellant and the respondent consumer. This issue

was rejected by both the consumer fora. No argument has been

advanced before us on this point and we do not find any error in

the reasoning of the National Commission on this point.

9. There are findings of the two fora about the defect in the

product sold, in this case being a vehicle. This was sold with front

airbags and there was frontal damage. The airbags did not deploy.

The accident caused injuries to the respondent. The appellant

referred to various portions from the owner’s manual to contend

that the impact of the collision was not sufficient to activate the

10 sensor which in turn would have resulted in deployment of the

airbags. We would not like to revisit the facts on which findings

have been returned by the two fora against the appellant. The State

Commission relied on the principle of Res Ipsa Loquitur to affix

the liability of the manufacturer as regards defect in the airbag

system, having regard to the nature of the collision. The National

Commission affirmed this finding referring to certain photographs

of the damaged vehicle, which showed substantial frontal damage.

In such circumstances, both the aforesaid fora took the view that

expert evidence was not necessary in the subject case. Such view

cannot be faulted as being unreasonable, in the given facts.

10. We do not find any reason to interfere with the finding of the

National Commission. We would like to add here that ordinarily a

consumer while purchasing a vehicle with airbags would assume

that the same would be deployed whenever there is a collision from

the front portion of the vehicle (in respect of front airbags). Both the

fora, in their decisions, have highlighted the fact that there was

significant damage to the front portion of the vehicle. Deployment of

11 the airbags ought to have prevented injuries being caused to those

travelling in the vehicle, particularly in the front seat. 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. In such

circumstances, we do not find that there is any error in the findings

of the two fora as regards there being defect in the vehicle.

11. We shall now turn to the reliefs granted by the State

Commission and upheld by the National Commission. The first

point argued in this regard is that there was no prayer in the

petition for replacement of the vehicle. This is a case where the

1986 Act was applicable and Section 14 of the said statute lays

down the reliefs which may be granted. The directions as per the

statute, could be for replacement of defective goods as also punitive

damages. The appellant have also taken a point that so far as

replacement of the vehicle is concerned, there was no substantive

direction and no discussion either. The operative part of the order

suffers from a shortcoming on this count, but that is not fatal. On a

composite reading of the directions, we find from paragraph 20 of the

12 Order of the State Commission that such a direction was made. The

confusion, if any, arises because of construction defect in the Order of

the State Commission. Considering the fact that the dispute is pending

for a reasonably long period of time, we have ourselves applied our

mind on this issue and our view is that a direction for replacement of

the vehicle is justified in the facts of this case. The direction for

replacement of the vehicle would not be treated as non­est having

regard to paragraph 20 of the State Commission’s Order. The fact that

the consumer has got the car repaired on insurance money would not

impact the quantum of damages, which is partly punitive in nature in

this case.

12. Three cases arising out of motor accident claims were cited

before us. In Nagappa v. Gurudayal Singh & Others. [(2003) 2 SCC

274], it was held that there is no restriction that the Tribunal or

Court cannot award compensation amount exceeding the claimed

amount. Two other authorities were cited before us, by Ms. Tamta,

learned counsel for the respondent, being the cases of Sangita Arya

and Others v. Oriental Insurance Company Limited and Others 13 [(2020) 5 SCC 327] and Jitendra Khimshankar Trivedi and Others

v. Kasam Daud Kumbhar and Others [(2015) 4 SCC 237]. These two

cases lay down the principle of just and reasonable compensation

that may be paid. The ratio of these authorities, however, do not

directly apply in the facts of this case.

13. The damages awarded against the appellant may have gone

beyond the actual loss suffered by the respondent and may not

represent the actual loss suffered by him in monetary terms. But

the provision of Section 14 of the 1986 Act permits awarding

punitive damages. Such damages, in our view, can be awarded in

the event the defect is found to have the potential to cause serious

injury or major loss to the consumer, particularly in respect of

safety features of a vehicle. For instance, defective safety feature in

a vehicle has to be distinguished from a dysfunctional “courtesy

light”. The manufacturer should be under strict and absolute

liability in respect of the latter. Compensation in the form of

punitive damages ought to have a deterrent effect. We also refer to

14 the principles detailing the factors guiding quantification of liability

laid down by a Constitution Bench of this Court in the case of M.C.

Mehta and Another v. Union of India and Others [(1987) 1 SCC

395]. In this case it has been opined:­

“32. We would also like to point out that the measure of compensation in the kind of cases referred to in the preceding paragraph must be corelated to the magnitude and capacity of the enterprise because such compensation must have a deterrent effect. The larger and more prosperous the enterprise, the greater must be the amount of compensation payable by it for the harm caused on account of an accident in the carrying on of the hazardous or inherently dangerous activity by the enterprise.”

14. The aforesaid decision arose out of a case involving the death

of an individual and injuries to several others in an industrial

accident. But in our opinion, in the subject dispute also the same

principle can be extended. We are dealing with a case where in a

collision, the airbags did not deploy. The complainant, driving the

vehicle, suffered substantial injuries as a result thereof. The impact

of the collision was such that it would have been reasonable for the

respondent to assume that there would have been deployment of

the airbags. The safety description of the goods fell short of its

15 expected quality. The content of the owners’ manual does not carry

any material from which the owner of a vehicle could be alerted

that in a collision of this nature, the airbags would not deploy.

Purchase decision of the respondent­complainant was largely made

on the basis of representation of the safety features of the vehicle.

The failure to provide an airbag system which would meet the

safety standards as perceived by a car­buyer of reasonable

prudence, in our view, should be subject to punitive damages

which can have deterrent effect. And in computing such punitive

damages, the capacity of the manufacturing enterprise should also

be a factor. There was no specific exclusion clause to insulate the

manufacturer from claim of damages of this nature. Even if there

were such a clause, legality thereof could be open to legal scrutiny.

But there is no reason for dilating on that aspect in this case. That

question doesn’t arise here.

15. If the reliefs granted in a consumer complaint fits any of the

statutory provision contained in sub clause (1) of Section 14 of the

Act, it would be well within the power and jurisdiction of the Forum

16 to pass directions irrespective of the fact as to whether specifically

certain reliefs have been claimed or not, provided that facts make

out foundations for granting such reliefs. In any event, it is within

the jurisdiction of the said forum to mould the reliefs claimed to do

effective justice, provided the relief comes within the stipulation of

Section 14(1) of the Act. We find that the relief granted to the

respondent comes within the statutory framework. We accordingly

do not want to interfere with the decision of the National

Commission. We do not find the reasoning of the Commission or

the operative part of the order awarding damages to be perverse.

We do not need the aid of the ratio of the three authorities cited

before us pertaining to motor accident claim to sustain the decision

under appeal. We are also of the view that the directions issued

against the appellant by the State Commission and upheld by the

National Commission cannot be said to have failed the test of

proportionality. We hold so as we find the subject­defect to be of

such nature that the provisions relating to punitive damages ought

to be attracted against the appellant.

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16. We accordingly dismiss the appeal. Interim order passed in

this matter shall stand dissolved.

17. Pending application(s), if any, shall stand disposed of.

18. There shall be no order as to costs.

………………………J. (VINEET SARAN)

……………………….J. (ANIRUDDHA BOSE)

NEW DELHI;

APRIL 20, 2022.

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