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.
Judgement
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.