This article has been written by Pooja Lakshmi, pursuing law at Bennett University.

Case no.

Civil Appeal No. 3187-88 Of 1988 With SLP (Civil) No. 13080 Of 1988

Equivalent citations

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

Decided On

April 5th 1989

Relevant Act

  • Constitution of India, 1950: Article 136, 137, 139-A, 142, 145
  • Civil Procedure Code, 1908: Order  XXIII, Rule 3B; Sections 112 and 114
  • Bhopal Gas Disaster (Processing of Claims) Act 1985: Sections  3, 4, 9
  • Administrative Law: Principles  of  Natural Justice

Abstract

The Union Carbide Corporation applied to the Supreme Court concerning S. 155 of the CPC, in a claim for damages made by the Union of India against the order of the Bhopal District Court, on behalf of all the claimants under the Bhopal Gas Leak Disaster Act, 1985. The Union Carbide Corporation, and the Union of India, both filed discrete appeals in the Supreme Court against the judgment of the Madhya Pradesh High Court, both of which were heard simultaneously.

Damages were sought on behalf of sufferers of the Bhopal gas leak disaster. The Court examined the prima facie material to quantify the damages, and also the question of domestication of the decree in the United States for execution.

It scrutinized the question regarding the amount of damages that would be “just, equitable and reasonable” for an over-all settlement. The Court referred to the M.C. Mehta v Union of India case, in which it was held that the measure of damages payable had to be correlated to the magnitude and the capacity of the enterprises because such reimbursement had to have a damper effect.

Facts of the Case

In 1934, Union Carbide India Ltd (UCIL) was consolidated in India. It manufactured chemicals, batteries, and pesticides. In 1970, in Bhopal, Madhya Pradesh,  UCIL established a pesticide plant. On the night of 2-3rd December 1984,very toxic methyl isocyanate (MIC) leaked from the plant. Although no official death count was undertaken, it is estimated that while the casualities were about 20000, the number of people who suffered unrecoverable physical damage was about 60000.

Procedural History

On 2nd December 1984, an invisible gaseous ghost engulfed Bhopal leaving at least 3800 people dead and a massive flora and fauna affected. The street of the city were crowded with human corpses and carcasses of cattle, dogs, and birds. With the faint gasps out of swollen lungs and irritation in eyes, all eyes were on the pesticide plant, named Union Carbide India Limited (UCIL), which was a subsidiary of Union Carbide Corporation (UCC). UCC was 51% stakeholder, while the Union of India was 49%. The specific site on which the plant was constructed was zoned for light industrial and commercial utility, not for dangerous industry. The plant was initially approved only to formulate pesticides from component chemicals, such as methyl isocyanate (MIC) imported from the parent company, in relatively small quantities. However, pressure from competition in the chemical industry led UCIL to implement “backward integration” – manufacturing raw materials and intermediate products to formulate the final product within one facility. This was naturally a more sophisticated and high-risk process. Due to the economic impacts of a large employer like UCIL, the government was unwilling to implement strict safety, and pollution control burdens or charges on the struggling industry as the demand for pesticides declined due to extensively spread famines and crop failures in the 1980s. Around 11 P.M, on 2nd December 1984, an operator observed a small scale leak of MIC gas which was kept at 75% of the storage capacity (where only 50% was permitted) and increasing pressure on the storage tank E610 and outstretched to the vent-gas scrubber that was designed to neutralize poison discharge from the MIC system.

Meanwhile, a faulty valve for cleaning internal pipes allowed one ton of water to mix with forty tonnes of MIC. A vigorous exothermic reaction took place due to the traces of iron ion from the rust, a vigorous exothermic reaction took place. The 30-ton refrigeration unit that provided a coolant for the MIC system was drained to use in the other area of the plant. The gas flare safety system was out of action for three months, entirely ignored. Pressure and heat from the reaction resulted in a loud rumbling that reverberated around the plant and made way for the MIC gas dissipated in the atmosphere. Within hours, local hospitals were crushed with the injured, a crisis further compounded by a lack of knowledge of exactly what gas was involved and its nature. Bhopal became similar to an industrial catastrophe.

Union of India enacted the Bhopal Gas Leak Disaster (Processing of Claims) Act, 1985, which allowed the union government to be the sole representative of the injured party by virtue of parents’ patriae. The validity of the act was challenged in the Supreme Court in Union Carbide Corporation v. Union of India on the ground that the Union of India was a minority shareholder. They are also responsible for the catastrophe. But, the Court related Charan Lal Sahu v. Union of India, and held that the state is obliged to protect its citizens’ interests across the globe.

Union of India decided to litigate the case in foreign courts on the ground that the Indian legal system is not appropriate to entertain such a significant and heavy matter due to considerable solid backlogs of the cases, and as the Indian Law and lawyers are not well familiar with Law of Torts, there are possibilities that justice might not be delivered due to the gap in the Law. However, Keenan’s Court demobilized all the petitions on the grounds of forum non-conveniens. The American Court opined that all evidence is within India’s jurisdiction, and thus, the cases were brought back into Indian courts.

In September 1986, the Bhopal District Court ordered UCC to pay an interim indemnity of $350 million. The UCC appealed in High Court, where the Court ordered UCC to pay $250 million. Subsequently, the UCC and Union of India went on to appeal by special-leaves in the Supreme Court against the High Court order.

Issue before the Court

The validity of the agreement ordered by the Madhya Pradesh High Court.

Arguments Raised

Appellants

  • The appellants challenged that whether in the suits for damages, tort courts in India have the jurisdiction to grant interim compensation or damages, and is it permissible to selectively incorporate and adapt in Indian parts of English Statutory Laws relating to the grant of interim compensation while ignoring safeguards specifically indicated in that Law?
  • The appellants questioned the observations of the judgment in M.C. Mehta v. Union of India, which are per incuriam, and thus, not binding under Article 141 of the Constitution of India. They argued that the M.C. Mehta case had confined the doctrine of strict liability established in Rylands v. Fletcher, and the newly introduced doctrine of absolute liability should not have retrospective effects.
  • The appellants argued the responsibility determination of a shareholder of a company (whatever his percentage of shareholding) for the so-called torts of a company limited by shares, this is contrary to the Scheme and specific provisions of the Companies Act 1956 (particularly S. 34 and S. 426). Did they maintain the same, given the doctrine of piercing the corporate veil was holding UCC liable impermissible in Law?
  • The appellants contended that having held that interim compensation could not be awarded under S.151 of the Civil Procedure Code (as found by the District Judge). Was it permissible for the learned High Court Judge to summarize the entire issue of liability and hold that interim compensation was payable under the “substantive law of torts.”

UCC pointed out the absence of statutory procedure required to be followed under the Scheme, which was not observed even after two years had elapsed since the Scheme promulgation. It claimed that no credible information was there before the Court about the nature, category, and genuineness of the claims nor even any simple approximation about the injury and damage caused to the alleged claimants. In these circumstances submitted (in the written submission dated August 17, 1987), the formulation of proposals for further immediate relief that may be required was considerably hampered. It also pointed out that there was no material on record about any of the claimants’ present health status.

Respondents

  • 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 Indian, in the context of the said Law, included a competent Civil Court (which in this case is District Court of Bhopal) exercising jurisdiction under S. 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, it was responsible to pay the damages as per the rules of absolute liability
  • Moreover, they withstood that even if the decision in M.C Mehta’s case was taken after the Bhopal gas tragedy, there was no reason to think that the principle of absolute liability laid in the case can not be used here.
  • The respondents reiterated that since the UCIL did not have sufficient assets to meet the claims of the magnitude of disaster injured parties and UCC held majority shares, thus, the Court was justified in raising the corporate veil of the Corporate entity of Indian Company, UCIL.
  • Concerning the interim payment, the respondents questioned that while the Indian Council of Medical Research is involved in epidemiological studies, can the gas injured parties survive till the time all the real data with correct preciseness is collected and proved and adjudged in refined forensic style in working out final amount of reimbursement with the precision of quantity  and quality?
  • In response to the nature, category, and genuineness of the claims, the respondents responded that due to the enormous magnitude of filing of claims, the process of scrutinizing, categorizing, and ascertaining of their claims is bound to take time, and it was the responsibility of Government of India to provide relief and rehabilitation of the injured parties.

Ratio of the Case

  • The Supreme Court considered a compelling duty, both judicial and humane, to secure immediate relief to the injured parties. It ordered UCC to pay $470 million, which upon instant payment and interest over a decent period, would lump very nearly to $500 million or its rupee corresponding of approximate rupees 750 crores. A sum of approximately Rs.500 crores was allocated to the untreatable cases and 42,000 cases of such personal severe injuries like total or partial incapacitation, either of a permanent or temporary character. It allocated Rs.25 crores for treatment of cases that required expert medical attention, rehabilitation, and aftercare. A general allocation of Rs.225 crores was done for cases of less serious nature, loss of personal belongings, and loss of live-stock.
  • The Supreme Court clarified how it managed to reach a sum of $470 million. The Court 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 did not heed by the standards of compensation under the Motor Vehicles Act. The Court took into the prima facie discovery of the High Court and estimated the number of fatal cases at 3,000 where remuneration could range from Rs.1 lakh to Rs.3 lakhs. This accounted for nearly Rs.70 crores, three times higher than what would otherwise be awarded in comparable motor vehicle accident claims.
  • The Court acknowledged arguments of the respondents over the compelling need for crucial  need for relief. It identified thousands of persons who were rendered destitute by the ghastly tragedy . The Supreme Court instructed that all the civil proceedings associated to and arising out of the Bhopal Gas tragedy should be transferred to the apex court and shall stand concluded in terms of the settlement. All criminal proceedings related to and emerging out of disaster shall stand cancelled wherever these may be pending.
  • 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 which may receive judicial recognition and legal sanction.

Decision of the Court

  1. The Union Carbide Corporation should indemnify a sum of U.S. Dollars 470 million to the Union of India in full settlement of all rights, claims, and liabilities related to and appearing out of the Bhopal gas disaster.
  2. The Union Carbide Corporation shall pay the sum described to the Union of India on or before March 31, 1989.
  3. To enable the effectuation of the agreement, all civil proceedings related to and emerging out of the Bhopal gas tragedy shall thereby shall stand concluded in terms of the settlement  and stand transferred to the Supreme Court. All criminal proceedings related to and arising out of the disaster shall stand cancelled, in wherever courts these may be pending.

Judgment

The Supreme Court ordered UCC to pay damages of 750 crores “in full settlement of all claims, rights, and liabilities arising out  and relating to of Bhopal Gas Tragedy disaster.” All all criminal proceedings quashed and civil proceedings were disposed of,. Later, several petitions were filed to resuscitate criminal charges.

The judgment has been criticized on several grounds, especially for quashing criminal proceedings in the first place. The pertinent delay and lack of responsibility have often raised the question “If lives in India are less valuable than the rest of the world?” because the people’s outrage and grievances would have been addressed if a dreadful act had taken place elsewhere,. The state would not have been permitted to escape the liability. However, if we ignore the downside, we will notice that several enactments like the Environmental Protection Act 1986 and Public Liability Insurance Act 1991 have been enacted to introduce sustainable and responsible development.

Comments

The night of December 2, 1984, is considered as the most tragic and worst chemical disaster ever. Though plenty of blame goes around among UCC, UCIL, Governments of Madhya Pradesh, and India, the clouds over the legal responsibility remain unclear. While the blame ball keeps bouncing over the stones of negligence, poor management, and sabotage, there were still be many injured parties for whom justice was pronounced, but not served. The MIC leak revealed the inability in Indian laws and the institutions that claim to protect the rights and safeguard its citizens. The legislature’s lack of confidence in the judiciary was met with severe criticism in governance and jurisprudence.

The order passed by the judiciary lost the opportunity of setting an example. It failed to regulate a precedent over the fate of companies that would risk public health in their hunt to earn profits. The Court lost two opportunities to revise the quantum of reimbursement. Moreover,  in 1991, it held that any deficiency in the amount of compensation would be tackled by state and central government. Its ignorance towards the thought that why tax-payer of the country should pay for a private entity’s mistakes was a question over which many minds dwelled.

However, the Court’s order worked as an encouragement for forming the Ministry of Forest, Environment and Climate Change, which assesses and protects public health from heavy multinational industries. Post-Bhopal tragedy, the British chemical company, Imperial Chemical Industry, was the initiator to increase attention on safety, health,  and environmental issues.

Though there were positive impacts, justice was served according to state functionaries. The Bhopal Gas disaster acts as a constant reminder for the need stringent laws under which any disaster of this magnitude can be curbed. To ensure economic growth, public health, and safety simultaneously, the legislature should formulate laws that are responsibly enforced by the executive and liberally examined by the judiciary because catastrophe like the Bhopal incident exposes our potential to exist along the ways of sustainable development.

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