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This article is authored by Anusha Kothari, a law student from the Maharaja Sayajirao University of Baroda. This article aims to analyse one of the landmark judgments which led to the enactment of the Environment Protection Act, 1986.

Introduction

Case name – Union Carbide Corporation v. Union of India

Citation -1992 AIR 248, 1991 SCR Supl. (1) 251

Court – The Supreme Court of India

Bench – Venkatachaliah, M.N. (J)

The courts in India in the case of Union Carbide Corporation v. UOI, also known as the infamous Bhopal gas leak case, reiterated the principles of strict liability and absolute liability. A highly toxic gas, methyl isocyanate, escaped the premises of Union Carbide Limited (UCIL) harming a massive population along with the flora and fauna. As an aftermath of this tragedy, the Environment Protection Act, 1986 and the Public Insurance Liability Act, 1991 were enacted to prevent such catastrophe. It even widened the scope of Article 21 of the Indian Constitution, which guarantees every person the Right to Life and Personal Liberty. This right includes the fundamental Right to  Live in a Pollution Free  Environment for their full enjoyment of life as was held in the case of Subhash Kumar v. State of Bihar(1991) The constitutional provisions incorporated under Article 39(b), 47, 48, 48A, 49, 51A(g) impose a duty on the citizens and the state to protect the environment.

Facts of the case

In the year 1934, American Industrial giant Union carbide incorporated with the Union of India to form Union Carbide India Limited (UCIL), in which Union Carbide was a majority shareholder holding a stake of 51%. The main objective of the company was to manufacture chemicals, batteries, pesticides and other industrial products. A new plant of UCIL was incorporated in a densely populated area of Bhopal, Madhya Pradesh in the year 1970. On the night of 2nd December 1984, the havoc of gas leak spread unleashed upon the people of Bhopal. Methyl iso-cynate escaped the parameters of the factory killing 2600 people instantly and leaving thousands of them injured. Later reports disclosed the count of people who died reached 20,000 and around 60,000 people suffered irrecoverable physical damage.

The zone wherein the plant was situated was for light industrial and commercial utility, not for dangerous industry. The plant was initially approved only to formulate pesticides in relatively small quantities. The government was apprehensive in implementing strict liability despite the principle being in existence since the Stockholm Conference came into existence.

The Union of India immediately enacted the Bhopal Gas Leak Disaster (Processing of Claims) Act, 1985 (the Bhopal Act) for speedy trial of this case and to prevent the accused from escaping liability. The Union of India tried to litigate the case before the foreign courts but the foreign courts dismissed their petition citing a jurisdictional conflict. 

The District Court awarded a sum of 350 million as interim compensation to the victims of the accident which was reduced by the High Court to 250 million. The dissatisfaction amongst the families of the victim led the Supreme Court to increase the amount of compensation to 470 million.

The applicants were still dissatisfied and filed a petition for increasing the compensation amount along with continuing the criminal charges levelled against Union Carbide.

Legal consequences

The Parliament passed the Bhopal Gas Leak Disaster (Processing of Claims) Act on 29th March 1985 which gave the government powers to file a suit on behalf of all the victims (surviving or deceased). This power of government was predicated by the doctrine of parens patriciae. This Act was challenged in the Supreme Court as being ultra vires and violated the fundamental right of the citizens to choose counsel of their own choice. It was also contended that the  Government of India was a stakeholder at the UCIL, which resulted in a conflict of interest. However, the plea was rejected and the Act was held constitutional.

The Government of India filed a suit against UCC in New York’s district court claiming 3.3 billion US Dollars. This suit was dismissed on jurisdictional issues. 

As a result, the suit was then filed in the District Court of Bhopal, claiming damages of Rs. 3.5 billion. This interim compensation was awarded by the district court. 

The UCC appealed in the High Court of Madhya Pradesh for reducing this interim compensation amount and they succeeded. On 4 April 1998, the High Court of Madhya Pradesh reduced this amount to Rs. 2.5 billion.

The appeal was then filed in the Apex Court which applied the doctrine of absolute liability and granted a compensation order of 470 million dollars which was not even 15% of the original claim.

Issues

The validity of the settlement order given by the High Court of Madhya Pradesh was challenged in the case at hand on the grounds-

  • Whether the settlement amount was justifiable or not?
  • Is dropping of criminal proceedings against the Union Carbide justified?

Contentions of the parties

Submissions by the appellants

  • Firstly, the appellants challenged the jurisdiction of the Court, the proceedings were appeals arising from the interlocutory injunction which awarded interim compensation to the victims. The jurisdiction of the Court to withdraw or transfer a suit or proceeding to itself is exhausted by Article 139A of the Constitution. Such transfer implicit in the final disposal of the suits have been impermissible suits were not before the Court to be amenable to final disposal by recording a settlement. The settlement is, therefore, without jurisdiction
  • The appellants argued that the M.C. Mehta case (1986) had confined the doctrine of strict liability established in Rylands v. Fletcher (1868), and the newly introduced doctrine of absolute liability should not have retrospective effects
  • It was argued that the criminal proceedings were not a part of the suit where the interlocutory injunction was granted. Therefore the Court had no power to withdraw to itself those criminal proceedings and quash them and such quashing is without jurisdiction.
  • The liability of the shareholders was in question. The appellant argues that the shareholder’s liability must be determined for a company limited by shares and whether the doctrine of piercing of corporate veil was holding UCC liable impermissible in Law

Submissions by the respondent

  • The respondents furnished that the appellant was responsible to pay the interim compensation to gas victims under ‘substantive law of torts’ because the terms “other authority” used in Article 372(1) of the Constitution of India, in the context of the said Law, included a competent Civil Court (which in this case is District Court of Bhopal) exercising jurisdiction under Section 9 of the Civil Procedure Code. As a result, it was beyond doubt in the Bhopal suit, whichever was the enterprise occupied in the high-risk activity, be it UCC or UCIL, was responsible to pay the damages as per the rules of absolute liability
  • Even if the decision in M.C Mehta’s case was taken after the Bhopal gas tragedy, the principle of absolute liability laid in the case can be used.
  • It was necessary to lift the corporate veil as the UCIL did not have sufficient means to compensate the victims and the UCC held majority shares, so it had to be lifted.

Judgment

The majority opinion was given by Justice Venkatachaliah on behalf of himself and K.N. Singh and N.D. Ojha JJ. while CJ Mishra concurred with him and Ahmadi J. wrote the minority opinion. 

  • The majority opinion directed that the quashing of criminal proceedings against Union Carbide was not justified and held that the criminal proceedings must be initiated. On the point that whether such compensation is adequate or not the majority bench held that the said compensation is adequate, reasonable and fair and in case any deficiency arises in money for rehabilitation, such money shall be tendered by the Union & State government. On this point, Ahmadi J. dissented with the majority. Therefore, the Supreme Court held that the dropping of criminal proceedings is not justified and thus it quashed the earlier order and directed that criminal proceedings shall be initiated as soon as possible.
  • The Supreme Court also held that the amount compensated is adequate, reasonable and fair; in case any deficiency arises in the rehabilitation of the victim, the government will take care of that.
  • The Union Carbide Corporation was ordered to indemnify 470 million dollars to the Union of India to settle all claims payable on or before March 31, 1989.

Ratio Decidendi

  • The Court explained how it calculated the value of compensation. It considered the elements of the no. of persons treated at the hospital, an essential indicator, and depended on the High Court’s order upon the allegations and claims in the amended pleadings of the Union of India. It estimated total fatal cases to 3000 and the average remuneration as Rs 1  lakh to Rs 3 lakh which would be approx 70 crores. 
  • The Apex Court observed the need to evolve a national policy to protect national interests from such ultra-hazardous pursuits of economic gains and expected help of jurists, economists, environmentalists, sociologists, and futurologists to identify areas of common concern and establish criteria that may receive judicial recognition and legal sanction.

Analysis

There are both positive and negative takeaways from the Bhopal gas tragedy case. On one hand, where the criminal proceedings against the state and the UCIL should not have been dropped by the Supreme Court, the legislature enacted and amended all the necessary laws to prevent further similar accidents. Although there were policies and international guidelines regarding environmental protection, no legislation was enacted by the Indian legislature despite being a signatory and part of the Stockholm conference. After the enactment of the laws in the aftermath of the Bhopal Gas tragedy, although it couldn’t prevent further tragedies like the oleum gas leak, it did fix liability on the perpetrators which was a necessary step forward.

The legislature’s step to approach the foreign courts for adjudication of the matter was highly criticised. It reflected the lack of confidence and incompetence of Indian courts. Along with this the compensation awarded to the victims was inadequate. This was later rectified by the courts by granting compensation through Union and state funds which were unjust and unreasonable because public funds cannot be appropriated for private wrongs. 

Conclusion

The Bhopal gas leak case is still considered the world’s worst industrial disaster. Its aftermath was a warning that the path to industrialization is fraught with human, environmental and economic perils. This is where the concept of sustainable development holds its importance. Even the judgment of the case was highly criticised because neither the sentence imposed on the company nor the contributions paid by the government have been completely sufficient, the reason being the people affected during the accident were not the only victims. The number of deaths, sick persons, babies born with cancer or deformities and completely handicapped has continued to rise every year.

References


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