NAME OF THE STUDENT : POOJA GN

REGISTRATION NUMBER : 19DBLAW028

PROGRAMME : BBA.LLB[HONS]

SEMESTER : IV

COURSE : LAW OF TORTS

COURSE CODE : 5BBL405

COMPONENT : CASE COMMENT

DATE OF SUBMISSION : 4TH JUNE,2021

SUBMITTED TO : PROF. PARUL RAGHUVANSHI

 UNION CARBIDE CORPORATION VS UNION OF INDIA

Equivalent citations: 1990 AIR 273, 1989 SCC (2) 540

Date of Judgement: 04 APRIL,1989
Bench: Pathak, R.S. (Cj), Venkataramiah, E.S. (J), Misra Rangnath,
Venkatachalliah, M.N. (J), Ojha, N.D. (J)

➢ INTRODUCTION:
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 number 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[1] 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:
In the year 1970 in densely populated region of Bhopal, Madhya Pradesh, a new pesticide
plant was incorporated. Despite repetitive complaints regarding the safety measures of the
pesticide plant by the agronomic engineer of the plant, no attention was given to it. Thus as
a result, on the night of 2nd December 1984 there was a gas leak from the plant of Methyl
Iso – cynate unlashing havoc upon the people of Bhopal. The gas leak was so devastating
that it killed almost 2600 people immediately and thousands of them left injured and
displaced. Final count showed that almost 20,000 people had died because of gas leak and
more than 60,000 were left affected. It was also found out that not only the flora and fauna,
even the life in the womb of mother was affected. Union of India immediately to provide
speedy justice to the victims enacted Bhopal Gas Leak Disaster (Processing of Claims) Act,
1985 (the Bhopal Act) making the Union of India representative. However, the validity of
this act was challenged in Supreme Court in Union Carbide Corporation v. Union of India
on the ground that since the Union of India was also owner of minority shareholders, they
are also responsible for the disaster. However, the court by applying Charan lal Sahu v.
Union of India[2] ruled in favour of the union of India and held that the state is obligated to
protect the interests of its citizens across the globe. However, the Union of India, decided to
litigate the case in foreign courts instead of the Indian Courts. Therefore, all appeals against
the Union Carbide were clubbed into a single file and were presented before the Judge
Keenan. But, the American court dismissed the case on the view that it comes under the
jurisdiction of the Indian Courts. Thus, in September 1986 Union of India started
proceedings against the Union Carbide in the Bhopal District Court. As a result, the District
Court asked the Union Carbide to give a sum of 350 million as interim compensation for the
damages which had been caused by the gas leak. The Union Carbide reached High Court
and the compensation sum was reduced to 250 million.
[1] AIR 1987 SC 965
[2] 1990 AIR 1480, 1989 SCR SUPL. (2) 597
 Then they finally put an appeal in the Supreme Court. The Supreme Court ordered the
Company to pay 470 million to the government. But the people were not satisfied as they
received less amount of money as they were promised. Thus a petition was filed in the
Supreme Court in which it was stated that, the settlement amount was too low and it would
be unfair to drop the criminal proceedings against the Union Carbide.

➢ ISSUES:
The validity of settlement ordered by the High Court of Madhya Pradesh :
• Whether the settlement amount was justifiable or not?
• Is dropping of criminal proceedings against the Union Carbide justified?

➢ ARGUMENTS:
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[3], 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[4], 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.

[3] AIR 1987 SC 965

[4] UKHL 1,(1868) LR 3 HL 330
 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 cannot 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.

➢ JUDGEMENT:
The court in order to not to waste any more time in writing detailed judgment ordered Union
Carbide on February 14, 1989 to pay a hefty compensation of US $470 Million before March
31, 1989. However, few months later on May 4, 1989 passed a reasoned order regarding the
same. The Supreme Court ordered Union Carbide to pay US $470 million against all the
destruction that the leak of MIC gas from the industrial premise. In the reasoned order
Justice Pathak said that it was the duty of the court to secure immediate relief to the victims
of the MIC leak and while doing that the court did not entered into any virgin territory.
Pathak j. applying the polluters pay principle decided the quantum of compensation to be
US $470 Million. The court considered that the counter offers ranged between US $ 426
Million and US $ 500Million. Therefore, US $ 470 Million was calculated as the mean of
the counter ranges. However, this settlement of US $ 470 Million was way less to the
promised amount by the government and also various jurists considered it to be an
inappropriate compensation. After analysing the ratio, it seems that an amount less than
INR 50,000 was delivered to each victim. Therefore, the legal validity of this settlement was
challenged in Union Carbide Corporation v. Union of India. The petitioners in this case
argued that the drop of criminal proceeding against Union Carbide was illegal and the
amount of Compensation was inappropriate to the injury the disaster caused. In this case
the majority opinion was given by Justice Venkatchaliah 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 that when Union of India is not even
remotely connected to the MIC leak in UCIL then how it could be made liable to pay the
damages. In his opinion any deficiency that may arise in rehabilitation of victims must be
tendered by Union Carbide as applying the formula of Rylands v. Fletcher[5]
[5] UKHL 1,(1868) LR 3 HL 330
➢ ANALYSIS:
The MIC leak disaster brought out the incompetence in Indian laws as well as the
institutions that claim themselves to be the protector of rights vested in the citizens of the
nation. From Parliament’s decision to fight the case in U.S. to the ambiguous and
inappropriate decision of SC, it was reflected that all the rights and freedom that a citizen is
guaranteed is only on papers. The government’s lack of confidence in the judiciary was a
critical criticism on the judicial system of the nation. The Parliament claimed that Indian
courts are not well equipped to entertain such huge matters. This shows how less Parliament
thinks of Indian Judiciary. Our legislature is asking a foreign state for justice when it should
have faith in the Indian Judiciary. Due to huge backlog in pending cases and no scope of
Law of Tort in India made Parliament to consider the option to approach US courts. Further,
the Indian courts in order to liberalize its standards did not order a compensation that
would suffice the loss of disaster. The judiciary should had considered the fact that Union
Carbide despite severe warnings did not adopted proper measures to check harmful
substances to escape its premises. The judiciary wasted two chances to revise the quantum
of compensation. Further, in 1991 it held that any deficiency in the amount of compensation
would be tendered by the Union & State government. The court should have thought that
why would public money be wasted for faults of private party. Therefore, this a lesson from
which all the constitutional functionaries should learn a strict lesson. The Parliament must
formulate such stringent laws by the virtue of which India becomes self – sufficient in
resolving such matters and not brag about its incompetence in international arena. The
executive should feel responsible to check such harmful plants that whether they are
complying with all the safety measures prescribed by the appropriate laws. The judiciary
should also understand when to deal with matters liberally and when not. If the judiciary
has in the first place awarded equitable compensation the public exchequer of India shall
not have suffered.