Automakers to pay a maximum of Rs. 1 crore fine for ‘mandated’ recall

Automobile manufacturers might have to pay a penalty if they sell a “defective vehicle” and it is recalled due to government orders. The fine has been set from Rs. 10 lakhs to Rs 1 Crore. When it is a government order to recall the vehicles, the recall is known as “Mandated recall”. The new rule will be applicable to vehicles that are less than seven years old and the defect could be in the vehicle, software or a component that might pose a risk to the environment or road safety. Under the Central Motor Vehicle Act, it is already mentioned by the transport ministry that there will be a penalty in case the manufacturer or the importers fail to make a voluntary recall. As the name suggests, a voluntary recall is when the manufacturer themselves recall their vehicles to fix the issue.

The penalty that will be charged to the manufacturers or the importers will be in addition to the cost that will be incurred to fix the fault of the recalled vehicles. In 2012, the Society of Indian Automobile Manufacturers or SIAM as it is known refrained from charging any penalty on the voluntary recalls done by the manufacturers. However, this was not acceptable to the government because they wanted a proper penalty provision as a strong action.

The maximum penalty has been set to Rs. 1 Crore. If there is a mandatory recall of over one-lakh four-wheelers or over six lakh two-wheelers will have a penalty of Rs. 1 Crore. Also, for heavy goods vehicles and vehicles carrying over 9 people, the recall count has been set 50,000 vehicles but the fine stays the same at Rs. 1 Crore.

The government is also currently finalizing the threshold to trigger the recall. This new information should be notified soon by the government. For instance, in the case of a car, if the sales are up to 500 units annually then 100 complaints from the sold units will be enough to initiate the recall process. If the annual sales are between 501 to 10,000 units, then the number of complaints should be at least 1,050 to initiate the recall. If the manufacturer is selling more than 10,000 cars annually, then the complaint number is set to at least 1,250.

A similar type of formula is under works for the three-wheelers, two-wheelers and even quadricycles. Soon there will be a uniform formula for other categories also which will include buses, trucks and other large passenger carrying vehicles. For such vehicles, the complaint number will be set to 3 percent of the annual sales of the vehicles to trigger the recalls. The government is also working on opening a portal where the vehicle owners would be able to register and lodge their complaints. Based on these complaints, the notices will be sent to the respective automobile manufacturers. The manufacturer will have 30 days to respond to the complaints. Based on this response, the designated agency will classify if the vehicle is classified as a “defective motor vehicle” before issuing a mandatory recall.