Auto companies to pay max Rs 1 crore penalty for mandated recall of ‘faulty’ vehicles – Times of India


NEW DELHI: Come April and auto manufacturers and importers may have to pay a penalty of Rs 10 lakh to Rs 1 crore for selling “defective vehicles” if the government orders mandatory recall.
The rule for testing of vehicles and mandatory recall under the Central Motor Vehicle Act, notified by the transport ministry, provides for the penalty in case manufacturers or importers fail to undertake a voluntary recall.
While many are critical of the low penalty level, the ministry sought to defend its action with officials arguing that currently there is no penalty. The penalty will be in addition to the cost of fixing the fault.
In 2012, auto industry lobby SIAM had refrained from levying any penalty and sought a code for voluntary recall, something that was not palatable to the government, which wanted a penalty provision as a strong deterrent.
The new rules will apply to vehicles that are less than seven years old with the ministry defining defects as a fault in a vehicle or component or software that poses or may pose undue risk to road safety or environment.
Mandatory recall of over six lakh two-wheelers or over one-lakh four wheelers will attract the maximum penalty of Rs 1 crore. In the case of vehicles carrying over nine passengers and all heavy goods vehicles, the maximum penalty of Rs 1 crore will be imposed, if more than 50,000 vehicles are recalled on the basis of a government diktat.
The government has also finalised the threshold for triggering the recall, which will be notified soon. For example, in the case of a car or SUV, if the annual sale is up to 500 units, 100 complaints (20% of the sold units) will be enough to initiate the recall process.
In the case of cars and SUVs, which register annual sale is between 501 and 10,000 units, the number of complaints have to be at least 1,050 and in the case of cars sold beyond 10,000 units in a year, the number of complaints need to be at least 1,250 for initiating the mandatory recall process.
Similar formula has been worked out for two-wheelers, three wheelers and quadricycles.
There will be a uniform formula for other categories of vehicles including large passenger vehicles, buses and trucks. In these cases, the complaints of defects equivalent to 3% of the annual sales will trigger the government to start the process of recall.
The government intends to set up a portal for vehicle owners to register and lodge their complaints. Based on complaints notices will be sent out with auto companies given 30 days to respond. Based on the responses, the designated agency probe if the vehicle is a “defective motor vehicle” before ordering a mandatory recall.

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