Union Carbide

UNION CARBIDE CORPORATION ETC. ETC.
A
v.
UNION OF INDIA ETC. ETC.
OCTOBER 3, 1991
[RANGANATH MISRA, CJ, K.N. SINGH, M.N. 'B

VENKATACHALIAH, A.M. AHMADI AND N.D. OJHA, JJ.}
Bhopal Gas Disaster (Processing of Claims) Act, 1985: '

~ Sections 3, 4, 9: Settlement of claims before lite Apex Cou11-Not afford-
ing 'Faimess Heari11g'-Non-incorporation of re-opener clause-Whether C
vitiates the settlement- Review of settlement-If set aside by Court~1ether
Court has inhere11t jurisdiction to order restitutio11 of the fend to tlte com-
panJ-:;-Review proceedings - Court would not refuse to afford opportunity to
parties on rigid technical grounds-In case funds found inadequate in fu-
ture-Wlzether Union of India as ·Welfare State to make good the deficien-
cy--Whether settlement could be set aside on mere possibility that medical D
documentation and categorisation were faulty and figures of various ki11ds
of injuries and disableinent were undependable-Liability of tort-
feasor--Award of compensation--To be proportionate to economic supe-
riority of the offender.
Constitution of India, 1950: E
Article 136, 137, 139-A, 142, 145: Inherent jurisdiction under Articles
136 and 142 to withdraw or transfer and finally dispose of the main suits
and pending Criminal proceedings in the course of hearing of appeals arising
out of interlocutory orders in suits-Whether taken away by Article 139-
A--Words 'Cause"Or matter' appearing in Article 142---Meaning and scope
of--Apex Court's power to quash criminal proceedings--Court's order F
recording settlement between parties-:-Such agreement if opposed to public
polic_y- Whether void and order of settlement liagle to be set aside--Special
Nave jurisdiction-Nature and scope of-Main object-To meet ends of jus-
tic~ven specific provision for appeal under the Constitlllion of other laws
not to limit the j11risdictio11-'Stifli11g of prosecution d9.ctrine' -Whether at- G
tracted where the motive is to drop Criminai ai also Civil proceed:
ings-Doctrine of resti1111ion~1ether applicable to appeals under Article
136-Confennent of immunity from crimihal proceedings~1etlzer legisla-
tive ft111ctio11~1ether amounts to preferential treatment-Settlement of
claims recorded-Review. of~iether settlement could be set aside on
251
H
252 SUPREME COURT REPORTS (1991} SUPP. 1 ·s. C.R.
A ground of insufficiency of settlement fund-In the event offunds being found ¥.

insufficient to meet the compensation detennined-Wlzether Union of India
as Welfare State to make good the deficiency.
Civil Procedure Code, 1908:
Order XX/II, Rule 3B; Sections 112 and 114: Settlement recorded by
B Court-Principles of natural justice-Persons whose interests affected not
made co-nomine parties--Order recording settlement not preceded by notice
to such persons-Whether renders the proceedings void-Doctrine of restitu- '
tion---Applicability of. ,.Ar-_
Law of Torts:
C Mass tort actio~ourt assisted settlement-Non-affording of pre-
settlement 'Fairness Hearing' and non-incorporation of 'reopener' clause in
tlze settlement-Whether vitiate the settlement-Assessment of once and for
· all damages in personal injury actions--Unforeseen but likely future manifes-
tation of the injmy--.4.11 important factor to be kept in mind.
D Administrative Law:
. Principles of Natural Justice~Audi alteram partem rule-Non-com-
pliance with the rule--:-Effect of-To be viewed in circumstamial flexibility.
Practice & Procedure:
Plea of invaliditj based on public policy-Not ban'ed by rule of estop-
E pel.
Procedural teclm~calities-·-To yield to paramount considerations of
justice and fairness where matter involves moral and humanitorian con-
siderations.
The ~nion Carbide (India) Ltd•. (UCIL), a sister concern of Union
F Carbide Corporation (UCC) owned and operated in Bhopal, a chemical
plant manufacturing pesticides, one ·of the ingredients in the composition
being Methyl Isocyanat~ (MIC), considered to be the most toxie chemical
in industrial use.
G On the 2nd December, 1984 night there was escape of MIC from the
tanks in which it was stored. And the fumes blew into the hutments
abutting the plant premises affecting the residents as also the flora and
fauna. About 4000 people lost their lives and the health of tens of
thousands of people was affected in various degrees of seriousness.
H The Bhopal Gas Leak Disaster (Processing of Claims) Act, 1985 was
,.
UNION CARBIDE v. U.O.I. 253
passed on 29.3.1985 authorising the Government of India, as parent patriae A

exclusively to represent the victims so that the interests of victims of the
disaster could be fully protected and that the claims for compensation
were pursued speedily, effectively and to the best advantage of the
claimants. In exercise of the power conferred under the Act, the Union of
India instituted an action on behalf of the victims against Union Carbide B
Corporation before the U.S. District Court, Southern District of New York
for award of compensation for the damage caused by the disaster. A large
number of fatal accidents and personal injury actions filed by and on
behalf·of about 1,86,000 victims were already pending in courts in U.S.A.
All these claims came to be consolidated by the Judicial Panel on Multi
District Litigation and assigned to U.S. District Court, Southern District C
of New York, presided over by Judge Keenan. The claim brought by the.
Union of India was also consolidated with them.
However, the UCC resisted the choice of the American Forum on the
plea of/otum-non-conveniens. Judge Keenan allowed the plea of UCC and D
the Union of India was constrained to ~lter its choice of forum and to
pursue the remedy in the District Court at Bhopal by ,filing a suit seeking a
compensation of 3.3 Billion Dollars against the UCC and UCIL. Efforts
for a settlement were not fruitful. The District Court made an order
directing payment of Rs. 350 cores as interim compensation. UCC
challenged this award before the High Court and the quantum of interim E
compensation came to be reduced to Rs. 250 cores. Both Union of India
and UCC preferred appeals by special leave against the High Court's
order.
On 14th February, 1989 this Court recorded an overall settlement of

the claims in the suit for 470 million U.S. Dollars and the consequential F
·termination of Civil and Criminal proceedings. On 15th February, 1989
the terms of the settlement signed by the Attorney General for the Union of
India and the Counsel for. UCC was filed and on the basis of the
settlement, this Court passed an order recording the terms of settlement
and issuing directions as to the mode of payment of the sum of 470 million G
U.S. Dollars pursuant to and in terms of the settlemenL
The said settlement was assailed in the present Petitions on various

grounds.
H
254 SUPREME COURT REPORTS (1991) SUPP. 1 S. C.R.
A The petitioners contended that this Court had no jurisdiction to

wit~draw and dispose of the main suits and the Criminal proceedings in ~...
the course of hearing of appeals arising out of an interlocutory order in
the suits. It was further contended that the settlement recorded by this
Court was void under Order XXIll Rule 38 of the Code of Civil Procedure
as the order was not preceded by notice to the persons whose interests
B would be affected and who were not Co·nomine parties to the proceedings.
It was also contended that the orders quashing the criminal proceedings
which were serious non-compoundable offences would not amount to
withdrawal of the prosecution even under the inherent powers of this
Court either under Section 482 Cr. P.C. or under Article 142 of the
C Constitution of India.
Conferment of criminal immunity, by this Court, it was contended,
was without jurisdiction, since it was essentially a legislative function and
grant of immunity to a particular person or persons may amount to a
D preferential treatment violative of the equality clause. The settlement was
also assailed on the ground that the stipulation for abstention from future
· criminal proceedings amounted to stifling of the prosecution and,
therefore, it was unlawful and opposed to public policy. The settlement was
also assailed on the ground that 'Fairness Hearing' procedure was not·
followed that the quantum was inadequate and that there was no
E 're-opener' clause which was very essential in view of the fact that the
latency period for the manifestation of the effects of the toxic injuries was
unpredictable.·
It was contended that even if the settlement was to be set aside, the
funds should not be allowed to be repatriated as that would embroil the
F victims in endless litigations to realise the fruits of the decree that might
be made in the suit and to realise the order for interim payment. It was
also contended that since notices to and opportunities for hearing of the
victims represented by the Union of India, were imperative before the
settlement was recorded and the denial of the same amounted to violation
G of the rules of natural justice.
It was further contended that a large number of genuine claims
stood excluded on the ground that despite notices the claimants did not
appear for· medical documentation and so the medical documentation
H
, done was not reliable.
UNION CARBIDE v. U.0.1. 255
'i'bough the Union of India did not assail the settlement, it sought to A
support the petitioners' challenge to the validity of the settlement. It was
contended on behalf of the Union of India that though it did not dispute
the settlement, it was not precluded from pointing out the circumstances
ln the case which, if accepted, would detract from the legal validity of the
settlement. ·
Disposing of the petitions, this Court, B
HELD: (By The Court) •
----- 1. Under Article 142(1) of the Constitution, this Court, did have the
jurisdiction to withdraw to itself the original suits pending in the District
Court at Bhopal and dispose of the same in terms of the settlement. So C
also this Court has the jurisdiction to withdraw the criminal proceed~ngs.
However, in the particular facts and ·circumstances, the quashing of the
criminal proceedings was not justified. (372 B-C & FJ
2. The settlement ordered by this Court is not void for non- D

compliance with the requirements of Order XXIll Rule 3B of the Code of
Civil Procedure. (372-E]
3. The orders recording the settlement in so far as they seek to

prohibit future criminal proceedings do not amount to conferment of
criminal immunity; but merely consequential to the qt1ashing of the E
criminal proceedings. (372-G]
4. The orders recording the settlement are not void, as they are not
opposed to public policy and do not amount to stifling of criminal
proceedings. [373-A]
F
5. Having regard to the scheme of the Bhopal Gas Leak Disaster
(Processing of Claims) Act, 1985, 'Fairness Hearing' procedure is not
strictly attracted to the Court's sanctioning of a settlement. Likewise, the
absence of a 'Re-opener' clause does aot, ipso- facto, vitiate the settlement.
[373-B-C] .
G
6. If the settlement is set aside, UCC shall be entitled to the
restitution of the amount brought in by it pursuant to the orders of this
Court, subject to its complying with the terms of the order dated 30th Nov.,
1986 made by the Bhopal District Court. [373 C-D]
H
256 SUPREME COURT REPORTS (1991} SUPP. 1 S. C.R.
A 7. The settlement is not vitiated for not affording the victims and
victim-groups an opportunity oftJeing heard. [373-E]
8. If the settlement fund is found to be insumcient, the deficiency is

to be made good by the Union of India. (373 E]
B 9. For expeditious dispos.al or the claims, a time-bound

consideration and determination of the claims are necessary. [373-F]
. Per Majority: (Venkatachaliah, J. for himself, K.N. Singh and N.D.

Ojha, JJ. ): I
C 1. Article 139-A of the Constitution in terms does not apply to the

facts of the case. The appeals were by special leave under Article 136 of the
Constitution against an lnterlCM:utory order. Article 136 vests In the
Supreme Court a plenary juriscJictio~ in the matter of entertaining and
hearing of appeals by granting special leave against any kind of judgment
D or order made by a Court or Tribunal in any cause or matter and the
'powers can be exercised inspite of the limitations under the specific
provisfons for appeal contained in the Constitution or other laws. The
powers given by ~ticle 136 are, however, in the nature of special or
residuary powers which are exertisable outside the purview of the ordinary
laws in cases where the needs of justice demand interference by the
E Supreme Court. (303-A-C]
Durga Sliankar Melita v• .Thakur Raghuraj Singh & Others, (1955)

SCR267, relied on.
2. Any limited interpretation of the expression 'cause or matter'

F having regard to the wide and sweeping powers under Article 136 which
Article 142(2) seeks to effectuate, limiting it only to the short compass of
the actual dispute before the Court
I
and not to what might necessarily and
reasonably be connected with Of related to such matter in such a way that
°' their withdrawal to the Apex Court :would enable the court to do 'complete
justice', would stultify tht very Wide constitutional powers. Situations may
present themselves before the court where the court with the aid of the .
powers under Article 142(1) c~uld bring about a finality to the matters, y'
and it is common experience that day-in-and-day-out such matters are
taken up and decided in this Court. It is true that mere practice, however
long, will not legitimise issues of jurisdiction. But the argument, pushed
H
to its logical conclusions, would mean that when an interlocutory appeal A

comes up before this Court by special leave, even with the consent of the
parties, the main matter cannot be finally disposed of by this Court as
such a step would imply an impermissible transfer of the main matter.
Such technicalities do not belong to the content and interpretation of
constitutional powers. (304 B·G]
B
Halsbury's Laws of England, Fourth Edition, Vol. 37, para 22,
•-..... referred to.
3. To the extent power of withdrawal and transfer of cases to the

Apex Court is, in the opinion of the Court, necessary for the purpose of
effectuating the high purpose of Articles 136 and 142(1), the power under C
Article 139A does not to exhaust the power of withdrawal and transfer.
Article 139A, was Introduced as part of the scheme of the· 42nd
Constitutional Amendment. That amendment proposed to invest the
Supreme Court exclusive juris~iction to determine the constitutional
validity of central laws by Inserting Articles 131A, 139A and 144A. But D
Articles 131A and 144A were omitted by the 43rd Amendment Ac:t 1977,
leaving Article 139A in tact. That Article enables the litigants to approach
the Apex Court for transfer of proceedings if the con~itlons envisaged In
that Article are satisfied. Article 139A was not intended, nor does it
E
_,
operate, to whittle down the existing wide powers under Articles 136 and
142 of the Constitution. The purposed constitutional plenitude of the
powers of the Apex Court to ensure due and proper administration of
justice is Intended to be co-extensive in each case with the needs of justice
of a given case and to meeting any exigency. (304-H; 305 A-CJ
Harbatls Singh v. U.P. State, (1982] 3 SCR 235, relied on. F

4. In relation to the proceedings and decisions of superior Courts of
unlimited jurisdiction, imputation of nullity is not quite appropriate. They
decide all questions of their own jurisdiction. [309-F)
Isaacs v. Robertson, 1984(3) AER 140, relied on. G

5. Under Order 32 of Supreme Court Rules, Order XXIII Rule 3B
CPC is not one of the rules expressly invoked and made applicatile. Even
if the principle of natural justice underlying Order XXIll Rule 3B
CPC is made to apply, the consequences of non-compliance should not be
H
258 SUPREME COURT REPORTS (1991] SUPP. 1 S. C.R.
A different from the consequent\es of the breach of rules of natural justice ·~

implicit in Section 4 of the Bhopal Gas Leak Disaster (Processing of
Claims) Act, 1985. Having regard to the circumstances of the case, this •
Court, in Saliu's case declined to push the effect of non-compliance to its
logical conclusion and declare the settlement void. In that case, this Court
B
I
considered it appropriate to suggest the remedy and curative of an

opportunity of being heard in the proceedings for review. Even assuming
1
that the right of the affected Rt!rsons of being heard is also available at a ~
stage where a settlement.is plated before the Court for its acceptance, such
a right is not referable to, and ~loes not stem from, Rule 38 of Order XXIII
CPC. The pronouncement in Saliu's case as to what the consequences of
C non-compliance are conclusive. [309 A-DJ
i
Charan Lal Sahu v. Union of India, [1990) 1 SCC 613, relied on.
6. The proposition that ~ provision in any ordinary law irrespective

of the importance of the public policy on which it is founded, operates to
D limit the powers oi' the Apex Court under Article' 142(1) Is unsound and ,...-
erroneous. The power of the court under Article 142 in so far as quashing .......-
of criminal proceedings are coricerned is not exhausted by Sections 320 or
321 or 482 Cr.P.C. or all of them put together. The power under Article 142
is at an entirely different level and of a different quality. Prohibitions or
E limitations on provisions con~ined in ordinary laws cannot, ipso-/acto, act
as prohibitions or limitations. on the constitutional powers under Article
142. Such prohibitions or limitations in the statutes might embody and ·~ ,_
reflect the scheme of a particular law, taking Into account the nature and '
status of the authority or the court on which conferment of powers--
limited in some appropriate way-is contemplated. The limitations may
F not necessarily reflect or be based on any fundamental considerations of
public policy. It wiil be wholly, incorrect to say that powers under Article
142 are subject to express statutory prohibitions. That would convey the
idea that statutory provisions override a constitutional. In exercising
powers under Article 142 and ~n assessing the needs of 'complete justice'
G of a cause or matter, the Apex Court will take note of the express y
prohibitions in any substantive statutory provisions based on some
fundamental principles of public I
policy and regulate the exercise of its •
power and discretion accordingly. The proposition does not relate to the
powers of the Court under Article 142, but only to what is or is not
H 'complete justice' of a cause or matter and in the ultimate analysis of the
propriety of lb~ exercise of the power. No question of lack of jurisdiction or A

of nullity can arise. (313 H, 314 B·C, E·GJ
Prem Chand Garg v. Excise Commissioner, U.P., Allahabad, [1963)

Suppl. 1 SCR 885; A.R. Antulay v. R.S. Nayak and Anr., [1988) 2 SCC 602,
referred to.
B
7.1 The proposition that State is the Dominus Litis in criminal cases,
is· not an absolute one. The Society for its orderly and peaceful
development is interested in the punishment of the offender. The power
is
under Article 142 exercised with the aid of the principles or Section 321
CPC which enables withdrawal of prosecutions. But whether on the merits
there were justifiable grounds to quash the criminal proceedings is a c
different matter. There must be grounds to permit withdrawal of the
prosecution. It is really not so much a question of the existence of the
power as one of justification for its exercise. A prosecution .is not quashed
for no other reason than that the Court has the power to do so~ The
withdrawal must be justified on grounds and principles recognised as D
proper and relevant. There is no indication as to the grounds and criteria
justifying the withdrawal of the prosecution. The considerations that guide
the exercise of power of withdrawal by Government could be and are many
and varied. Government must indicate what those considerations are. (315
E, H, 316 B·C]
E
7.2 In the .instant case, the offences relate to and arise out of a
terrible and ghastly tragedy. Nearly 4,000 lives were lost and tens of
thousands of citizens have suffered injuries in various degrees of severity.
At one point of time UCC itself reeognised the possibility of the accident
having been-the result ofacts ofsabotage. It is a matter of importance that F
offences alleged in the context of a 'disaster of such gravity and magnitude
should not remain uninvestigated. The shifting stand of the Union of India
on the point should not by itself lead to any miscarriage· of justice. Since
there is no speciflc ground for withdrawal of the prosecutions set out at
that stage, the quashing of the pi:'osecutions requires to be set aside. [317
-B-i>J G
State of Punjab v. Union of India, (1986] 4 SCC 335; M.N.

Sankarayaraya11a11 Nair· v. P. V. Balakrislma11 & Ors., (1972) 2 SCR 599,
rt\\tdon.
H
A Sankar Rangayya v. Sankar Ramayya, AIR 1916 Mad. 463; Bis-

wabahan v. Gopen Chandra, (1967] 1 SCR 447; Majibar Rahman v. Mu/c-
lashed Hossein, ILR 40 Cal. 113; A.R. Antulay v. R.S. Nayak & Anr., (1984)
2 SCC 500; Sheonandan Paswan v. State of Bihar& Ors., (1987) 1SCC289,
referred to.
B 8. Grant of blanket immunity .is a legislative function. There is no

power or jurisdiction vested in courts to confer immunity for criminal
prosecution and punishment. Grant of such immunity to a particular
person or persons would amount to a preferential treatment. However, the
direction that future criminal proceedings shall not be Instituted or
proceeded with must be understood as a concomitant and a logical
C consequence of the decision to withdraw the pending prosecutions. In that
context, the stipulation that no future prosecution shall be entertained
may not amount to conferment of any immunity but only to a reiteration of
the consequences of such termination of pending prosecutions. Thus
understood any appeal to the principal as to the power to confer criminal
D Immunity becomes lnapposlte In this case, However, in view ofthls Court's
finding that the quashing of criminal proceedings was not Justified and
that the orders dated 14th and 15th of February~ 1989 in that behalf
require to be reviewed and set aside, as a logical corollary and
consequence thereof It ls directed that all portions In the orders of tbls
E Court which relate to the Incompetence of any future prosecutions be
deleted. However, in so far as the dropping of the proceedings in contempt
envisaged by clause (b) of para 4 of the order dated 15th February, 1989 ls
concerned, the same is left undisturbed. (321 B-F]
Apodaca v. Viramonies, 13 ALR 1427; Doyle v. Hafstader, 257 NY

p 244; Richard Nixon v. Ernest Fitzgerald, 451US731, referred to.
Jurisprudence by Wortley, p. 297; Commentaries i11 the Constitution of
United States by Justice Storey, p. 363, referred to.
9.1. The validity and durability of a consent order are wholly

G dependent on the legal validity of the agreement on which it rests. Such an
order is amenable to be set aside on any ground which would justify the ·
setting aside of the agreement itself. Though the Union of India was a
consenting party to the settlement recorded by this Court, it cannot be
precluded from urging a plea as to invalidity or nullity of the settlement on
the ground of public policy. [323 D-E].
H
UNION CARBIDE v. U.O.I. 261
9.2. A contract whose object is opposed to public policy is invalid and A

it is not any the less ~o by reason alone of the fact that unlawful terms are .
embodied in a consensual decree. [324-E].
State of Kera/a & Anr., v. The Gwalior Rayon Silk Manufacturing

(Wvg.) Co. Ltd. etc., [1974) 1 SCR 671; State of Punjab v. Amar Singh,
[1974) 2.SCC 70, relied on. B
A Bankruptcy Notice, 1924(2) Ch.D. 76; Maritime Electric Co. Ltd. v.
General Dairies Ltd., AIR 1937 PC 114; Huddersfield Banking Company
Ltd. v. Henry Lister & Son Ltd., 1895(2) Ch. 273; Great North-West Central
Railway Co.~ Ors. v. Charlebois and Ors., 1899AC114, referred to.
Corpus Juris Secondum, Vol. 1, p.473, referred to.

c
10. The essence of the doctrine of stifling prosecution is that no
private person should be allowed to take the administration or criminal
justice out of the hands of the Judges and place it in his own hands. A
private party is not taking administration of law in its own hands in this D
:y case. It is the Union or India, as the Dominus Litis, that consented to the
quashing of the proceedings. What was purported to be done was not a
compounding of the offence. The arrangement which purported .to
terminate the criminal cases was one of a purported withdrawal not
forbidden by any law but one which was clearly enabled. Whether valid E
grounds to permit such withdrawal existed or not is another matter.
(328-A; 329 A,D]
V. Narasimha Raju v. V. Gurumurthy Raju & Ors., [1963] 3 SCR 687;

Rameshwar v. Upendranath, AIR 1926 Calcutta 451; Ouseph Poulo & Ors.
v. Catholic U11ion Bank Ltd. & Ors., [1964) 7 SCR 745, relied on. F
Fry LJ. in Windhill Local Board of Health v. Vist, [1890] 45 Ch.J).
351; Keir v•. Leeman, 6 Queen's Bench 308; Majibar Rahma11 v. Muktashed
Hossein, ILR 40 Calcutta page 113, referred to.
11.1 The distinction between the 'motive' for entering into agreement G
and the 'consideration' for the agreement must be kept clearly
distinguished. Where dropping of the criminal proceedings is a motive for
entering into the agreement-and not its consideration the doctrine of
stifling of prosecution is not attracted. Where there is also a pre-existing
civil liability, the dropping of criminal proceedings need not necessarily be
H
']Jj2 SUPREME COURT REPORTS [19'J1} SUPP. 1 S. C.R.
A a consideration for the agreement to satisfy that liability. (329 G-H; 330-A]
Y.'
11.2 The doctrine of stifling of prosecution is not attracted in the
· present case. It is inconceivable that Union of India would, under the
threat of a prosecution, coerce UCC to pay 470 million US dollars or any
part thereof as consideration for stifling of the prosecution. [331-D]
B
Adhikanda Sahu & Ors. v. Jogi. Sahu & Ors., AIR 1922 Patna 502; Deb
Kumar Ray Choudhury v.Anath Bandhu Sen and Ors., AIR 1931Cal.421;
Babu Hamarain Kapur v. Babu Ram SwaTUp Nigam & Anr., AIR 1941.
Oudh 593; Ouseph Pou/o & Ors., v. Catholic Union Bank Ltd. & Ors.,
[1964) 7 SCR 745; relied on.
C.
12.1 On the basis of the medical research literature placed on
record, it can· reasonably be posited that the exposure in such
concentrations of MIC might involve delayed manifestations of toxic
morbidity, though the exposed population may not have manifested any
D immediate symptomatic medical status. But the long latency period of
toxic injuries renders the medical surveillance costs a permissible claim
even though ultimately the exposed persons may not actually develop the
apprehended complications. [334 B-C]
12.2. It is not the reasonable probability that the persons put at risk
E will actually suffer toxic injury in future that determines whether the
medical surveillance is necessary. But what _determines it is whether, on
tne basis of medical opinion, a person who has been exposed to a toxic
substance kno~ to cause long time serious injury should undergo
periodical medical tests in order to look for timely warning signs of the
F. on-set of the feared consequences. These costs constitute a relevant and
admissible head of compensation and may have to be borne in mind in
forming an opinion whether a proposed settlement-even as a
settlement-is just, fair and adequate. (336 B·D]
Ayers v.Jackson, TP, 525 A 2d 'li,7 (NJ.1987), referred to.

G "Law of Toxic Torts" by Michael Dore; "Health Problems of Bhopal
Gas Victims", ICMR Report· April, 1986, referred to.
13. In personal injury actions the possibilty of the future

aggravatjon of the condition are of consequent aggravation of damages are
H taken into account in the assessment of damages. The estimate of damages
in that sense is a very delicate exercise requiring evaluation of many A

criteria some of which may border on the imponderable. Generally
speaking actions for damages are limited by the general doctrine of
remoteness. and mitigation of damages. But the hazards of assessment of
once and for all damages in personal injury actions lie in many yet
inchoate factors requiring to be assessed. The likelihood of future
complkation&-thougb they may mean mere assessment or evaluation or B
mere cbances--are also put into the scales in quantifying damages. This
principle may, take care of the victims who have manifest symptoms. But
there mu.st be provision in the settlement for medical sunreillance costs
and compensation for those who are presently wholly asymptomatic and
have no material to support a present claim, but may become symptomatic C
after a drawn-out of latency period. Even if the award is an "Once and for
all" determination, these aspects must be taken into account. [337 F-H; 338
A-8)
14. The right of the victims read into Section 4 of the Act to express
their views on a proposed settlement does not contribute to a position D
analogous to that in United States in which fairness hearings are
imperative. Section 4 of the 'Act' to which the right is traceable merely
enjoins Government ~f India to have 'due-regard' to the views expressed by
victims. The power of the Union of India under the Act to enter into a
compromise is not necessarily confined to a situa.tion where suit has come E
to be instituted by it on behalf of the victims. Statute enables the Union of
India to enter into a compromise even without such a suit. Right of being
heard read into Section 4-and subject to which its constitutionality has
been upheld in .Sahu's case-subjects the Union of India to a
corresponding obligation. But that obligation does not envisage or compel F
a procedure like it 'Fairness Hearing' as a condition precedent to a
9
compromise that Union of India may reach, as the situation in which it
may do so are not necessarily confined to a suit. (340 G-H; 341 A·B).
Charan Lal Sahu v. Union of India, [1990) 1 SCC 613, referred to.
Agent Orange Litigation, 597 Federal Supplement 740(1984); Florida

G
Trailer and Equipment Co. v•. Deal, 284 F.2d 567 (1960), referred to.
15. The settlement is not vitiated by reason alone of want of a

'Fairness Hearing' procedure preceding it. Ukewise, the settlement is not
vitiated by reason oftbeabsenceofa 're-opener' clause built into it. [341 Cl H
SUPREME COURT REPORTS -(1991) SUPP. 1 S. C.R.
A 16.1 Strictly speaking no restitution in the sense that any funds

obtained and appropriate by the Union of India requiring to be paid back,
arises. The funds brought in by the UCC are deposited in the Rese"e
Bank of India and remain under this Court's control and jurisdiction.
Restitution ·is an equitable principle and is subject to the discretion of the
B Court.!Section 144, Code of Civil Procedure, embodying the doctrine of
restitution does not confer any new substantive right tO the party not
already obtaining under the general law. The section merely regulates the
power of the court in t~at behalf. But, in the present case, Section 144 CPC
does not in terms apply. There is always an inherent jurisdiction to order
restitution a /ortiorari where a party bas acted on the faith of an order of
C the court. A litigant should not go back with the impression that the
judicial-process so operated as to weaken bis position and whatever it did
on the faith of the court's order operated to its disadvantage. It is the duty
of the court to ensure that no litigant goes back with a feeling that he was
prejudiced by an act which be did on-the faith of the court order. Both on
D principle and authority it becomes the duty of the court to-es much
moral as it is legal-to order refund and restitution or the amount to the
UCC--if the settlement is set aside. [342 ff; 343 A-D]
16.2 In the instant case, the UCC transported the funds to India and
deposited the foreign currency in the Reserve Bank of India on the faith of
E the Court's order. If the settlement is set aside they shall be entitled to
have their funds remitted to them back in the United States together with
such interest as bas accrued thereon. A direction to the UCC to prove and
establish compliance with the District Court's order dated 30th November,
1986, should be sufficient safeguard and should meet the ends of justice.
F Accordingly, in the event of the settlement being set aside the UCC shall be
entitled to have 420 million US Dollars brought in by it. It will be remitted.,
to UCC by the Union of India at the United States along with such interest'
as has accrued on it in the account. But this right to have the restitution
shall be strictly subject to the condition that the UCC shall restore its
undertaking dated 27.11.1986 which was recorded. on 30.11.1986 by the
G District Court at Bhopal and on the strength of which the court vacated
the order of injunction earlier granted against the UCC. Pursuant to the
orders recording the settlement, the said order dated 30.11.1986 of the
District Court was set aside by this Court. If the settlement goes, the order
dated 30.11.1986 of the District Court will automatically stand restored '\
H and the UCC would .be required to comply with that order to keep and_
UNION CARBIDE v. U.O.L 265
maintain unencumbered assets of the value of 3 billion US dollars during A

the pendency of the suit. The right of the UCC to· obt&ln the refund of and
to repatriate the funds shail be subject to the performance and .
etTectuatlon of its obligations under the said order of 30.11.1986 of the
District Court at Bhopal. nu then the funds shall relnain withi~ the
jurisdiction or· this Court and shall not be amena.ble to any other legal
process. (344 G-H; 345 A-OJ B
Binayak v. Ramesh, [1966) 3 SCR24;Jai Berham and Ors. v•. Kedar
Nath Marwari and Ors. [1922) P.C. 269; L. Guran Ditta v. T.R. Ditta, [1935)
PC 12; Jagendra Nath Singh v. ilira Sahu and Ors., AIR 1948 All. 252 F.B;
referred to.
c
17.1 Omission to comply with the requirement of the rule of audi
alteram partem, as a general rule, vitiates a decision. Where there is
· violation of natural justice no resultant or independent prejudice need be
shown, as the denial of natural justice is, in itself, sufficient prejudice and
it is no answer to say that even with observance of natural justice the D
same conclusion would have been reached. But the effects and
x consequences of non-compliance may alter with situational variations and
particularities. [349 C-D].
17.2 In Sahu case this Court held that there was no compliance with
the principles of natural justice but also held that the result of the E
non-compliance should not be a mechanical invalidation. The Court
suggested curatives. The Court was not only sitting in judicial review of
legislation, but was a court of construction also, for, it is upon proper
construction of the provisions, questions of constitutionality come to be
decided. The Court was considering the scope and content of the F
obligations to afford a hearing implicit in Section 4 of the Act. It cannot be
said to have gone beyond the pale of the enquiry when it considered the
further question as to the different ways in which that obligation could be
complied with or satisfied. It cannot be said that the observations in this·
regard were made by the way and had no binding force. [349 F-H]
__ , Charan Lal Sahu v. Union of India, [1990) 1 SCC 613, relied on.
G
National TeXtile Workers Union v. P.R. Ramakrishnan [1983) 1 SCC

228; Institute of Chartered Accountants v. L.K Rama, [1986) 4 SCC 537;
Kl. Shephard v~ llnion of India, [1987] 4 SCC 431; R.B. Shreeram Durga
H
A Prasad v. Settlement Commission, (1989) 1 SCC 628; H.L. Trehan' v. Union

of India, (1989) 1 SCC 764, referred to.
Wiseman v. Borneman, 1971 AC 297; Leary v. National Union of

Vehicle Builders, 1971 Ch.34; Calvin v. Cart, 1980 AC 576; Llyod v.
Memahan, 1987 AC 625, referred to.
B 'Administrative Law' by Prof. Wade, referred to.
18. The question in the instant case is not so much as to the

consequences of the omission on the part of the Union oflndia to have 'due
regard' to the views of the victims on the settlement or the omission on the
C parf of the Court to afford an opportunity to the victim of being heard
before recording a settlement as it is one of the effects and implications of
the pr.~mouncement in Sahu case. In that case the Court expressly held that
the non-compliance with the obligation to issue notices did not, by such
reason alone, in the circumstances of the case; vitiate the settlement, and
that the affected persons may avail themselves of an opportunity of being
D heard in the course of the review petitions. It is not proper to isolate and
render apart the two implications and hold the suggested curative as a
mere obiter. Also, the petitioners who were litigating the matter did not
represent all the victims and victim-groups. (351 C-E,F]
Charan Lal Sahu v. Union of India, [1990) 1 SCC 613, relied on.
E
19. What was transacted with the court's assistance between the
Union of India on one side and the UCC on the other is now sought to be
made binding oaa the tens of thousands of innocent victims who, as the law
bas now declared, had a right to be heard before the settlement could be
F reached or approved. The implications of the settlement and its effect on
the lakhs of citiuns of this country are, indeed, crucial in their grim
struggle to reshape and give meaning to their torn lives. Any paternalistic
candescension that what has been done is after all for their own good is out
__of place. Either they should have been heard before a settlement was
G approved in accordance with the law declared by this Court or at least it
must become demonstrable in a process in which they have a reasonable
sense of participation that the settlement has been to their evident
advantage or, at least, the adverse consequences are effectively
neutralised. It is of utmost importance that in an endeavour of such great
magnitude where the court is trusted With the moral responsibility nf
H
UNION CARBIDE v. U.0.1. 11)7
ensuring justice to these tens of thousand innocent victims, the issues of A

human suffering do not become obscure in procedural thickets. In a
situation of this nature and magnitude, the Review-proceeding should not
be strict, orthodox and conventional but one whose scope would
accommodate the great netids of justice. That apart, quite obviously, the
individual petitioners and the petitioner-organisations which have sought B
review cannot, be held to represent and exhaust the interest of all the ·
victims. (352 F·H; 353 A·C)
26. The scope of the review in the present case is to ensure that no
miscarriage of justice occurs in a matter of such great moment. This is,
perhaps, the last opportunity to verify our doubts and to undo injustice, if
any, which may have occurred. ·The fate and fortunes of tens of thousands C
of persons depend on the effectiveness and fairness of these proceedinp.
The legal and procedural technicalities should yield to the paramount
considerations of justice and fairness. The considerations go beyond
legalism and are largely humanitarian. It is of utmost importance that
great issues of human suffering are not subordinated to legal tech·
nicalities. [354 F-G] D
Shivdeo Singh & Ors. v. State of Punjab & Ors., AIR 1963.SC 1909,
relied on.
21. The whole controversy about the adequacy of the settlement·

fund arises on account of the possibility that the totality of the awards
made on all the claims may exceed the settlement-fund in which event the E
settlement-fund will be insufficient to satisfy all the awards. This is the
main concern of the victims and victim-groups. There is, as it now stands,
a fund of one thousand two hundred crores of rupees for the benefit of the
victims. The charge that medical documentation was faulty and was
calculated to play down the ill-effects of the exposure to MIC is not F
substantiated. [360 G-H; 361 A·BJ
22. In bestowing a second thought whether the settlement is just, fair

and adequate, one should not proceed on the premise that the liability of
UCC has been firmly established. It is yet to be decided if the matter goes
to trial. It is true that even to the extent a settlement goes, the idea of its G
fairness and adequacy must necessarily be related to the magnitude of the
problem and the question of its reasonableness must be assessed putting
many considerations into the scales. It may be hazardous to belittle the
advantages of the se;ttlenrent in a matter of such complexity. Every effort
should be made to p}okt:t the victims from the prospects of a protractt.d, H
.
268 SUPREMB COURT REPORTS (1991) SUPP. 1 S. C.R.
A exhausting and uncertain litigation. (361 C-DI

Sterling v. Versicol Chemical Corp., 855 F 2d 1188 (1988); Florance
B. Bigelow v. RKO Radio Pictures Inc., 327 US 251, (1946); Story PDTChment
Company v. Paterson PDTChment Popper Co., 282 US 555; Frederick Thomas
Ki.n&rley v. The Secretary of State for India, AIR 1923 Calcutta 49• referred
B
~ .
'Scientific and Legal Standards of Statistical Evidence is Toxic and
Tort and Discrimination Suits' by Carl Cranor and Kurt Nutting in Law
and Philosophy, Vol. 9, No..2 May,1990, referred- to.
23. Indeed, in many tort actions the world-over speedy acijudlc:atlons

C and expeditious reliefs are not easily accomplished and many of them have
ended in settlements. In the context of the problems presented by the
issues of liability in cases of cer"..ain corporate torts beyond the corporate
veil there is an impressive body of academic opinion amongst the
schoolmen that the very theories of limited corporate liability .which
D initially served as incentives for commercial risk-taking needs
re-thinking in certain areas of tortious ·liability of Corporations. Some
scholars have advocated abolition of limited liability for 'knowable t.art
risi(s'. This, of course, has the limitation of one more shade or an
acad~mician's point ofview for radical changes in law. (364 G-H; 36581 .
E An Economic Analysis of Limited Liability in Corporation Law, 30 U.

Toronto L.J. 117 (1980); The Place of Enterprise Liability in the Control of
Corporate Conduct, 90 Yale Law Journal; Should Shareholders be personal-
ly liable for the tl'rts of their Corporations, 76 Yale Law Journal 1190 (1967),
, referred to.
F 24. While it may not be wise or proper to deprive the victims of the
benefit of the settlement, it is, however, necessary to ensure that In the-
perhaps unlikely-event of the settlement-fund being round ,, inadequate
to meet the compensation determin_ed in respect or all the present
claimants, those persons who may have their claims determined after the
O fund is exhausted are not left to fend themselves. But, such a contingency
may not arise having regard to the size or the settlement-fund. If it should
, arise, the reasonable way to protect the interests of the victims is to hold
that the Union of India, as a Welfare State and in the circumstances in
which the settlement was made, should not be found wanting in_ making
H good the deficiency, if any. (365 G·H; 366-A]
25. The settlement was arrived at and is left undisturbed on an A

over-all view. The settlement cannot be assailed as violative of Mehta
principle which might have arisen for consideration in a strict
adjudication. In the matter of determination of compensation also under
the Bhopal Gas Leak Disaster (Processing of Claims) Act, 1985, and the
Scheme framed thereunder, there is no scope for applying the said
principle inasmuch as the tort-feasor, in terms of the settlement-for all B
practical purposes-- stands notionally substituted by the settlement-fund
which now represents and exhausts the liability of the,alleged hazardous
entrepreneurs viz., UCC and UCIL. The Mehta principle can have no
application against Union of India inasmuch as requiring it to make good
the deficiency, if any, this Court does not impute to it the position of a joint C
tort-feasor but only of a welfare State. (366-H; 367 A-CJ
M.C. Mehta v. Union of India, (1987) 1SCC395, referred to.

26. At least for a period of eight years from now the population of
Bhopal exposed to the hazards of MIC toxkity should have provision for · D
medical surveillance by periodic medical check-up for gas related
amlctions. This shall have to be ensured by setting up long-term medical
facilities in the form of a permanent specialised medical and research
establishment with the best of expertise. An appropriate action plan
should be drawn up. It will be proper that expert med.ical facility In the E
form of the establishment of a full-fledged hospital of at least 500 bed
strength with the best of equipment for treatment of MIC related amictlon
should be provided for medical surveillance and for expert medical
treatment. The State of Madhya Pradesh shall provide suitable land free
of cost. The allocation of the land shall be made within two months and the
hospital shall be constructed, equipped and made functional within 18 F
months. It shall be' equipped as a Specialist Hospital for treatment and
research of MIC related amictions and for medical surveillance of the exposed
population. [367D-F]
27. The Capital outlays ·on the hospital and its operation expenses
for providing free treatment and services to the victims should, both on G
, hum.nitarian considerations and in fulfilment of the offer made before
the Bhopal Court, be borne by the UCC and· UCIL. It is not part of the
function of this Court to reshape the settlement or restructure its terms.
This aspect of the further liability is also not a matter on which the UCC
and the UCIL had an opportunity to express their views. However., from
the tenor of the written submissions made before the District Court at H
270 SUPREME COURT REPORTS (1991) SUPP. 1 S. C. R.
A Bhopal, both the UCC and UCIL had offered to fund and provide a hospi·
tal for the gas victims. The UCC had ·reiterated that in January, 1986, it
had offered to fund the construction of hospital for the treatment of gas
victims the amount being contributed by the UCC and the UCIL in equal
proportions. It is, no doubt, true that the offer was made in a different
context and before an overall settlement. But that should not detract the
B UCC and the UCIL from fulfilling these obligations, as, indeed, the moral
sensibilities to the immense need for relief in all forms and ways should
make both the UCC and UCIL forthcoming in this behalf. Such a hospital
should be a fully equipped· hospital with provision for maintenance for a
period of eight years which may involve the financial outlay of a~ound Rs.
SO crores. Contingencies such as payment of compensation to the persons
C who were exposed to the Bhopal gas disaster, who though presently
asymptomatic and filed no claim for compensation but might become
symptomatic in future and the yet unborn children of mothers exposed to
MIC toxicity, who may develop congenital defects, shall be taken care of
by obtaining an appropriate medical group insurance cover from the
General Insurance Corporation of India or the Life Insurance Corpora·
D tion of India. There shall be no individual upper monetary limit for the
insurance liabilty. The period of insurance cover should be a period of
eight years in the future. The number of persons to be covered. by this
Group Insurance Scheme should be about and not less than one lakh. of
persons. Having regard to the population of the seriously affected wards
of Bhopal city at the time of the disaster and having regard to the addition
to the population by the subsequent births extrapolated on the basis of
E national average of birth rates over the past years and the future ~riod of
survelllance, th'-, figure broadly accords with the percentage of population
of the affected wards bears to the number of persons found to be affected
by medical categorisation. This insurance cover will virtually serve to
render the settlement an open ended one so far as the contingent class of
future victims both existing and after-born ate ~oncerned. The possible
F claimants fall into two categories; those who were in existence at the time
of exposure; and those who were not yet unborn and whose congenital
defects are traceable to MIC toxicity inherited or 4erived congenitally.
The premia for the insurance shall be paid by the Union of India out of
the settlement fund. The eligible claimants shall be entitled to be paid by
the insurer compensation on such principles and upon establishment ~f
G the nature of the gas related toxic morbidity by such medical standards as
are applicable to the other claimants under the Bhopal Gas Leak Disaster
(Processing of Claims) Act, 1985 and the scheme framed thereunder. The ,
individual claimants shall be entitled to have their claims adjudlcated:
under the statutory scheme. (367 G-H; 368 ~-H; 369A-B; 370 B-<;:J
U.K. Law Commission Report on "l11juries to Unborn Childre11". ·
H
referred to. A
29. There is need for expeditious adjudication and disposal of the
claims. Even the available funds would not admit of utilisation unless the
claims. are adjudicated upon and the quantum of compensation deter·
mined. Both the Union of India and the State Government shall take
expeditious steps and set-up adequate machinery for adjudication of
claims and determination of the compensation. The appointment of the B.
Claim Commissioners shall be completed expeditiously and the adjudica·
tive process must commence within four months. In the first instance,
there shall at least be 40 Claim Commissioners with necessary secretarial
assistance to start the adjudication of the claims under the Scheme. (370
C·E]
30. In the matter of disbursement of the amounts so adjudicated
c
and determined it will be proper for the authorities administering the
funds to ensure that the compensation-amounts, wherever the
beneficiaries are illiterate and are susceptible to exploitation, are properly
invested for the benefit of the beneficiaries so that while they receive the
income therefrom they do not owing to their illiteracy and ignorance, D
deprive themselves of what may tum out to be the sole source of their
living and sustenance for the future. This Court approves and endorses
the guidelines formulated by the Gujarat High Court in Muljibhai
Ajarambhai Harijan!s case and the same could be usefully adopted with
appropriate modifications. Government might also consider such invest·
ments being handled by promulgating an appropriate scheme under the E
Unit Trust of India Act so as to afford to the beneficiaries not only ade·
quate returns but also appropriate capital appreciation to neutralise the
effect of denudation by inftation. (370 E-G; 371-H, 372-A]
Muljibhai Ajarambhai Harijan & Anr. v. United India Insurance Co.
Ltd. & O?·• 1982(1) Gujar~t Law Reporter 756, referred to.
Per Ranganath Misra, J. (concurring): 1. It is interesting to note that F
there has ~n no final adjudication in a mass tort action anywhere. The
several Instances which were placed before this Court were cases where
compensation had been paid by conJerit or where settlement was reached
either directly or through a circuitous process. Such an alternate proce-
, dure has been adopted over the years on account of the fact that trial In a
case of this type would be protracted and may not yield any social benefit. G
Assessment of compensation in cases of this t)'pe has generally been by a
rough and ready process. In fact, every assessment of compensation to
some extent is by such process and the concept of just compensation is an
attempt to approximate compensation to the loss suffered. (279 F·ff, 280·A)
2. This Court did take into account while accepting the settlement H
272 SUPREME COURT REPORTS [1991) SUPP. 1 S. C. ~.
A the fact that though a substantial period of time had elapsed the victims
were without relief. For quite some time the number of claims in courts or
before the authorities under the Act were not very appreciable. Perhaps an
inference was drawn from the figures that the subsequent additions were
to be viewed differently. It is not to indicate that the claims filed later are
frivolous particularly on account of the fact that there are some prima
B facie materials to show that the ill-effects of exposure to MIC could
manifest late. The nature of injuries suffered or the effect of exposure are
not the same or similar. Therefore, from the mere number no final
opinion could be reached about the sufficiency of the quantum. The Act
provides for a Fund into which the decretal sum has to be credited. The
statute contemplates of a procedure for quantification of individual entit-
C lement of compensation and as and when compensation becomes payable
. it is to be met out of the Fund. The fact that the Union of India has taken
over the right to sue on behalf of all the victims indicates that If there ls a
shortfall In the Fund perhaps it would be the liability of Unio.n of India to
meet the same. The genuine claimants thus have no legitimate grievance
to make as long as compensation statutorily quantiOed Is available to
D them because the source from which the compensation comes Into the
Fund Is. not of signlflcant relevance to the claimant. [280 B·E] ~
Charan Lal Salm v. Union of India, (1990] 1 SCC 613, relied on.
3. If the litigation was to go on merits in the Bhopal Court It would
have perhaps taken at least 8 to 10 years; an appeal to the High Court and
· a further appeal to this Court would have taken In all around another
E spell of 10 years with steps for expedition taken. It could be fairly assumed
that litigation In India would have taken around 20 years to reach finality,
and then steps would have to be taken for its execution in the United
States. On the basis that it was a foreign judgment, the law applicable to
the New York Court should have been applicable and the 'due process'
clause would have become relevant. That litigation in the minimum w:ould I
F have taken some 8-10 years to be finalised. Thus, relief would have been ~
available to the victims at the earliest around 2010. In the event of U.S.
Courts taking the view that strict liability was foreign to the American
jurisprudence and contrary to U.S. public policy, the decree would not
have been executed in the United States. and apart from the Indian assets
of UCIL, there would have been no scope for satisfaction of the decree.
G [284C-F]
Municipal Council, Rat/am v. Vardichand & Ors~. [1981) 1 SCR 97,
relied on. ·
4'. When dealing with this case this Court has always taken a prag·
matic approach. Under the constitutional discipline determination of dis-
putes has beeQ left to the hierarchical system of Courts and this Court at
H
I
its apex has the highest concern to ensure that Rule of Law works effec- A
dvely and the cause of justice in no way suffers. To have a decree after
~ struggling for a quarter of a century with the apprehension that the decree
may be ultimately found not to be executable would certainly not have
been a situation which this Court c.ould countenance. [285 A-CJ
5. In the order of May 4, 1989, this Court clearly indi.cated that it is

the obligation of this Court to uphold the rights of the citizens and to B
bring to them a judicial fitment as available in accordance with the la~.
There have been several Instances where this Court has gone out of its way
to evolve principles and make directions which would meet the demands
of justice in a given situation. This, however, Is not an occasion when such
an experiment could have been undertaken to formulate principle of strict
llabWty at the eventual risk of ultimately losing the legal battle. (285 C-D) c
M.C. Mehta v•. Union of India, [1987]1SCC395; Ry/ends v. Fle(cher
L.R., 1868(3) House of Lords 330, referred to.
6. This Court ls entitled under the constitutional scheme to certain
freedom of operation. It would be wrong to assume that there is an ele·
ment of judicial arrogance in the act of the Court when it proceeds to act D
in a pragmatic way to protect the victims. It must be conceded that the
citizens are equally entitled to speak in support of their rights. Public
activists should also be permitted to espouse the cause of the poor citizens
but there must be a limit set to such activity and nothing perhaps should
be done which would affect the dignity of the Court and bring down the
serviceability of the instiutiton to the people at large. [285 F-H] E
Shaw v. Director of Public Prosecutions, [1961) 2 All E.R. 447,
referred to.
.....,- PerAhmadi, J. (partly Dissenting):
1.1 It is agreed that the settlement is not vitiated for not affording F
the victims or victim-groups an opportunity of being heard. But it is
difficult to accept the view that if the settlement fund is found to be
insufficient the shortfall must be made good by the Union of India. The
Union of India cannot be directed to suffer the burden of the shortfall, if
any, without finding it liable in damages on any count. [375 B-C]
G
~ 1.2 In view of the observations in Sahu 's case, the scope of the inquiry
in the present petitions can be said to be a narrow one. Supposing a
pre-decisional hearing was afforded to the victims, the Court's option
obviously would have been either to approve the terms of the compromise,
H
. I
A or to refuse to superadd Its seal to the settlement and leave the parties to
go to trial. The Court could not have altered, varied or modified the terms
of the settlement without the express consent of the contracting parties. If
it were to find the compensation amount payable undet the settlement
inadequate, the only option left to it would have been to ~fuse to approve
B the settlement and tum It Rnto a decree of the Court. It' could not have
Unilaterally imposed any additional liability on any of the ~tracfing parties~
(378 C·E]
i
1.3 According to the interpretation given in Sahu's case on the scope
of sectiOns 3 and 4 of the Act, a pre-decisional hearing ought to have been
c given but failure to do so cannot vitiate the settlement as according to the
majority the lapse could be cured by a post-decisional hearing. The scope
or the review petitions cannot be any different at the post.:decisional stage
also. (378 E·F] I •
I
1.4On a mere possibllty of there being a shortfall, a possibility not

D supported by any ·realistic appraisal of the material on record but on a
mere apprehension, quia timet, it would not be proper to Saddle the Union
of India with the liabillty to make good the shortfall by imposing an
additional term In the settlement without its consent in exercise or power
under Article 142 of the Constitution or any statute or on the premises of
E Its duty as a Welfare State. Therefore, it Is Impermissible ~n I11w to Impose
the burden of making good the shortfall on the Union of India and thereby
saddle the Indian tax-payer with the tort·feasor's liability. If the
Settlement Fund was found inadequate, the only logical thlng was to review
the settlement leaving the parties to work outa fresh set~lement or go to
trial in the pending suit. In Sahu's case the victims had not been able to
F show any material which would vitiate the settlement. tlbe voluminous
documentary evidence placed on the record of the present proceedings
also does not make out a case of inadequacy of the amount, necessitating a
review of the settlement. In the circumstances the Union of India cannot be
saddled with the liability to make good the deficit, if any, particularly when
G it is not found to be a tort·feasor. Its liability as a tortrfeasor, if at all,
would have to be gone into in a separate proceeding and dot in the present
petitions. (379 C·F]
Charan Lal Salm v. Union of India, (1990] 1 SCC 6~3, referred to.
H CIVIL APPELLATE JURISDICTION: Civil Miscellaneous Petition
UNION CARBIDE v. U.0.1. [ RANGANATI-1 MISRA, CJ.] 275
Nos .29'377-N88, 7942-43/89, 16093/89, 17965/89, Review Petition Nos. 229 A

~- and 623-24 of 1989.
IN
. Civil Appeal Nos. 3187-88 of 1988.
From the Judgment and Order dated 4.4.1988 of the Madhya B
Pradesh High Court in Civil Revision No. 26 of 1988.
4, (With W.P. Nos. 257, 297, 354, 379, 293, 399, 420/89, 231, 300, 378,
382/89 (In CA.Nos. 3187-88/88 & I.A. NO. 1/90 (In W.P. Nos. 281/89) and
W.P. Nos. 741/90, 3461/89).
Soll J. Sorabjee, Attorney Genera~ Shanti Bhushan, Ms. Indira Jais-

c
ing, R.K. Garg, Danial Latif, B.R.L. Iyengar, P.P. Rao, Ashwani Kumar,
D.N.M. Ghatate, F.S. Nariman, Anil B. Dewan, Rajinder Singh, Prashant
. Bhushan, Ms. Kamirii Jaiswal, C.L. Sahu, Anil Nauriya, Vibhuti Jha, Mrs.
A. Mathur, Mrs. A. Mariarputham, R.P. Saxena, R. Venkataraman~ P.K.
Manohar, Madan Lokur, A.l. Trehan, Ms. C.S. Lalitha, Barish Uppa1 in D
),; person, Mrs. K. Hingorani, R.B. Mehrotra, Ms. Lalitha Kaushik, D.K.
Garg, Raju Ramachandran, Mukul Mudgal, S.R. Bhat, M.S. Ganesh, V.B.
Mishra, A.N. Khanwilkar, Ms. Madhu Khatri, P. Parmeswaran, Sakesh
Kumar, Satish K.Agnihotri, K. Kachwaha, Mrs. A.K. Verma, Ashok Sagar,
Dadachanji, Vijay Gupta, Ms. A. Subhashini, C.S. Vaidyanathan and E
Ashok Singh for the appearing Parties.
The Judgment of the Court was delivered by

y
RANGANATH MISRA, CJ. I entirely agree with my noble and
learned Brother Venkatachaliah and hope and trust that the judgment he F
has produced is the epitaph on the litigation. I usually avoid multiple judg-
ments- but this seems to be a matter where something more than what is
said in the main judgment perhaps shou~d be said.
Early in the morning of December 3, 1984, one of the greatest in-
dustrial tragedies that history has recorded got clamped down on the G
~Ill(
otherwise quiet township of Bhopal, the capital of Madhya Pradesh. The
incident was large in magnitude - 2,600 people died instantaneously and
quite a good number of the inhabitants of the town suffered from several
ailments. In some cases the reaction manifested contemporaneously and in
others the effect was to manifest itself much later.
H
I
A Union Carbide Corporation ('UCC' for short), a ~ulti-national one,

has diverse and exteP.sive international operations in countries like India, Y
Canada, West Asia, the Far East, African countries, Latin America and
Europe. It has a sister concern known as Union Car~ide India Limited
('UCIL' for short). In the early hours of the 3rd of December, 1984, there
was a massive escape of lethal gas from the MIC Storage Tanlc of the plant
B into the .atmosphere which led to the calamity.
Several suits were filed in the United States of Arherica for damages
by the local representatives of the deceased and by many of. the affected ~
persons. The Union of India under the Bhopal Oas Leak Disaster
(Processing of Claims) Act of 1985 took upon itself tbe right to sue for
C compensation on behalf of the affected parties and filed a suit for realisa-
tion of compensation. The suits were consolidated and Judge Keenan by
his order dated 12th May, 1988, dismissed them on tlie ground of forum
non conveniens subject, inter alia, to the following conditions:
1. Union Carbide shall consent to submit to the jtirisdiction of
D the Courts of India and shall continue to waive defences based
on the statute of limitations, and
2. Union Carbide shall agree to satisfy any judgment rendered

against it in an Indian Court, and if appealable, upheld by any
appellate court in that country, whether Sl!ch judgment and
E affirmance comport with the minimal requirements of due
process. 1
The United States Court of Appeals for the Strcond Circuit by its
decision of January 14, 1987, upheld the first conditiQn and in respect of
the second one stated: I
"In requiring that UCC consent to enforceability of an Indian

F judgment against it, the district court proceeded at least in part
on the erroneous assumption that, absent ~uch a requirement,
the plaintiffs, if they should succeed in obtaining an Indian
judgment against UCC, might not be able to enforce it against
UCC in the United States. The law, however, is to the contrary.
Under New York law, which governs actibns brought in New
G York to enforce foreign judgments ...... f<;>reign-country judg-
ment that is final, conclusive and enforceable where rendered
·must be recognised and will be enforced as "conclusive be-
tween the parties to the extent that it grants or denies recovery
of a sum of money" except that it is not, deemed to be con-
clusive if:
UNION CARBIDE v. U.O.L (RANGANATH MISRA, CJ.} 277
"1. The judgment was rendered under a system which A

does not provide impartial tribunals or procedures,
compatible with the requirements of due process of law;
2. The foreign court did not have personal jurisdiction

over the defendant". B
Art. 53. Recognition of Foreign. Country M/ney Judgments.
Although 5304 further provides that under certain specified
conditions a foreign country judgment need not be recognized,
none of these conditions would apply to the present cases ex-
cept for the possibility of failure to provide UCC with suffi-
cient notice of procedings or the existence Gf fraud in C
obtairiing the judgment, which do not presently exist but con-
ceivably cou~d 'occur in the future."
The Court rejected the plea advanced by UCC of breach of due
process by non-observance of proper standards and ultimately stated: -
"Any denial by the Indian Courts of due process can be rai~ed D

by UCC as a defence to the plaintiffs' later attempt to enforce
a resulting judgment against UCC in this country."
After Judge Keenan made the order of 12th of May, 1986, in Sep-
tember of that year Union of India in exercise of its power under the Act
filed a suit in the District Court at Bhopal. In the plaint it was stated that E
death toll upto then was 2,660 and serious injuries had been suffered by
several thousand persons and in all more than 5 Iakh persons had sought
damages upto then. But the extent and nature of the injuries or the after-
•
effect thereof suffered by victims of the disaster had not yet been fully
ascertained though survey and scientific and medical studies had already
been undertaken. The suit asked for a decree for damages for such amount F
as may be appropriate under the facts and the law and as may be deter-
mined by the Court so as to fully, fairly and finally compensate all persons
and authorities who had suffered as a result of the disaster and were having
claims against the UCC. It also asked for a decree for effective damages ·
in an amount sufficient to deter the defendant and other multi-national
corporations involved in business activities from committing wilful and G
malicious and wanton disregard of the rights and safety of the citizens of
India. While the litigations were pending in the US Courts an offer of 350
million dollars had been made for settlement of the claim. When the dis-
pute arising out of interim compensation ordered by the District Court of
Bhopal came before the High Court, efforts for settlement were continued.
When the High Court reduced the quantum of interim compensation from fl
278 SUPREME COURT REPORTS (1991) SUPP. 1 S. C. R.
A Rs. 350 crores to a sum of Rs. 250 crores, both UCC and Union of India
challenged the decision of the High Court by filing special leave petitions. It ~
is in these cases that the matter was settled by two orders dated 14th and
15th of February, 1989. On May 4, 1989, the Constitution Bench which had
recorded the settlement proceeded to set out brief reasons on three aspects: ·
"(a) How did .this Court arrive at the sum of 470 million US
B dollars for an over-all settlement?
(b) Why did the Court consider this sum of 470 million US
dollars as 'just, equitable and re_asonable?
(c) Why did the Court not pronounce on certain important

c legal questions of far-reaching importance said to arise in the
appeals as to the principles of liability of monolithies, economi-
cally entrenched multi-national companies operating. With in-
herently dangerous technologies in the developing countries of
the third world - questions said to be of great contemporary
D . the democracies
relevance to . . of the third-world?"
The Court indicated that considerations of excellence and niceties of legal
principles were greatly overshadowed by the pressing problems of very survival
of a large number of victims. The Court also took into account the law's prover-
bial delays. In paragraph 31 of its order the Constitution Bench said:
"As to the remaining question, it has been said that many vital
E
juristic principles of great contemporary relevance to the Third
World generally, and to India in·particular, touching problems
emerging from the pursuit of such dangerous technologies for
economic gains by multi-nationals arose in this case. It is said
that this is an instance of lost opportunity to this apex Court to
give the law the new direction of new vital issues emerging
F from the increasing dimensions of the economic exploitation of
developing countries by economic forces of the rich ones. This
case also, it is said, concerns the legal limits to be envisaged in
the vital interests of the protection of the constitutional rights
of the citizenry, and of the· environment, on the permissibility ·
of such ultra-hazardous technologies and to prescribe absolute
G and deterrent standards of liability if harm is causea by such
enterprises~ The prospects of exploitation. of cheap l~bour and
of captive-markets, it is said, induces multi-nationals to enter
into the developing countries for such economic"exploitation
and that this was eminently an appropriate case for a eareful
assessment of the legal and Constitutional safeguards stem-
H
UNION CARBIDE v. U.O.I. [RANOANATII MISRA, CJ.) 279
ming from these vital issues of great contemporary relevance." A

The Bhopal g~ leak matter has been heard in this Court by four
different Constitution Benches. The first Bench consisted of Pathak, CJ,
Venkataramiah, Misra, Venkatachaliah and Ojha, JJ. The hearing con-
tinued for 24 days. The challenge to the validity of the Act was beard by
a different Bench consisting of Mukharji, CJ, Singh, Ranganathan, Ahmadi
and Saikia, JJ. where the hearing continued for 27 days. The review B
. proceedings wherein challenge was to the settlement were then taken up
for .hearing by a Constitution Bench presided over by Mukharj~ CJ with
Misra, Singh, Venkatachaliah and Ojha, JJ. as the other members. This
continued for 18 days. It is unfortunate that Mukharji, CJ. passed aw,ay
soon after the judgment had been reserved and that necessitated a re-
hearing. The matters were re-heard at the earliest opportunity and this C
further hearing took 19 days. Perhaps this litigation is unique from several
angles and this feature is an added one to be particularly noted.· The
validity of the Act has been upheld and three separate but concurring
judgments have been delivered. At the final hearing of these matters long
arguments founded upon certain varying observations of the learned Judges
constituting the vires Bench in their respective decisions were advanced and D
some of them have been noticed in the judgment of my learned brother.,
. . .
. ln the main judgment now being delivered special attention has been
devoted to the· conduct of Union of India in sponsoring the settlement in
February, 1989, and then asking for a review of the decision based upon
certain developments. Union of India as rightly indicated is a legal entity E
and has been given by the Constitution the right to sue and the liability
of being sued. Undet our jurisprudence a litigating party is not entitled
to Withdraw from a settlement by choice. Union of India has not filed a
petition for review but has supported the stand of .others who have asked
for review. The technkal limitations of review have not been invoked in
this· cas!'! · by the Court and all aspects have been permitted to be placed F
before lhe Court for its consideration.
It is interesting to note that there has been no final adjudication in

a mass tort action anywhere. The several instances which counsel for the
parties placed before us were cases where compensation had been paid
by consent or where settlement was reached either directly or through a G
circuitous process. Such an alternate procedure has been adopted over
the years on account of the fact that trial in a case of this type would· be
protracted and may not yield ·any sodal benefit. Assessment of compen-
sation in cases of this tyPe has generally been by a rough and ready
proeess. In fact, every assessment of compensation to some extent is by
such process and the concept of just compensation is an_ attempt lo ap-
H
280 SUPREME COURT REPORTS [1991) SUPP. 1 ~·C.R.
A proximate compensation to the loss suffered. We have pointed out in our

order of May 4, 1989, that 'the estimate in the very nature of~ cannot
share the accuracy of an adjudication'. I would humbly add that even an
adjudication would only be an attempt at approximation.
This Court did take into account while accepting the settlement the
B fact that though a substantial period of time had elapsed the victims were
without relief. For quite some time the number of claims in courts or
before the authorities under the Act was not very appreciable. Perhaps an
inference was drawn from the figures that the subsequent additions were
to be viewed differently. I do not intend to indicate that the claims filed
later are frivolous particularly on account of the fact that there are con-
tentions and some prim a f acie materials to show that the ill-effects of ex-
C. posure to MIC could manifest late. The nature of injuries suffered or the
effect of exposure are ·not the same or similar; therefore, from the mere
number no final opinion could be reached about the sufficiency of the
quantum. The Act provides for a Fund into which the decretal sum has
to be credited. The statute· contemplates of a procedure for quantification
D of individual entitlement of compensation and as and when compensation
be(;Omes payable it is to be ttlet out of the Fund. The fact that the Union
of India has taken over the right to sue on behalf of all the victims indicates
that if there is a shortfall in the Fund perhaps it would be the liability of
Union of India to meet the same. Some of the observatidns of the vire~
Brach support this view. The genuine claimants thus have no legitimate ·
g 1evance to make as long as compensation statutorily quantified is avail-
E able to them because the source from which the compensation comes into
the Fund is not of significant relevance to the claimant.
When the settlement was reached a group of social activists, the

Press and even others claiming to be trustees of society came forward to
question it. For some time what appeared to be a tirade was carried on
F by the media against the Court. Some people claiming· to speak on behalf
of the social Think Tank in meetings disparaged the Court. Some of the
innocent victims were -even brought into the Court premises to shout
slogans at the apex institution. Some responsible citizens oblivious of their
own role in the matter carried on mud-slinging.
G The main foundation of the challenge was two-fold:
(i) The criminal cases could not have been compounded or

quashed and immunity against criminal action could. not be
granted; and
H (ii) the quantum of compensation settled was grossly low.
\.,
UNION CARBIDE v. U.O.L [RANOANA'Ill MISRA, CJ.] 281
So far as the first aspect is concerned. the main judgment squarely deals A
with it and nothing more need be said As far as the second aspect goes, the
argument has been that the principle enunciated by this Court in M.C Mehta
v. Union of India, [1987) 1 SCC 395 should have been adopted. The rule in
Rylands v. Fletcher [1868} 3 House of Lords 330 has been the universally
accepted authority in the matter of determining compensation in tort cases
of this type. American jurisprudence writers have approved the ratio of that B
decision and American Courts too have followed the· decision as a precedent.
This Court in paragraph 31 of the Mehta judgment said:
"The Rule of Rylands v. Fletcher was evolved in the year 1866
and it provides that a person who for his own purposes brings
on to his land and collects and keeps there anything likely to
do mischief if it escapes must keep it at his peril and, if he fails C
to do so, is prima f acie liable for the damage which is the
natural consequence of its escape. The liability under this rule
is strict and it is no defence that the thing escaped without that
person's wilful act, default or neglect or even that he had no
knowledge of its existence. This rule laid down a principle of
liability that if a person who brings on to his land and collects D
and keep there anything likely to do harm and such thing es-
capes and does damage to another, he is liable to compensate
for the qamage caused. Of course, this rule applies only to
non- natural user of the land and it does not apply to things
naturally on the land or where the escape is due to an act of
God and an act of a stranger or the default of the person E
injured or where the thing which escapes is present by the
consent of the person injured or in certain cases where there is
·~·
statutory authority. Vide Halsbury's Laws of England, vol. 45,
para 1305. Considerable case law has developed in England as
to what is natural and what is non-natural use of land and what
are precisely the circumstances in which this rule may be dis- F
placed. But it is not necessary for us to consider these
decisions laying down the parameters of this rule because in a
modern industrial society with highly developed scientific
knowledge and technology where hazardous or inherently
dangerous industries are necessary to carry as part of the
de~•elopmental programme, this rule evolved in the 19th cen- G
tury at a time when all these developments of science and tech-
nology had not taken place cannot afford any guidance in
evolving any standard of liability consistent with the coruititu-
tional norms and the needs of the present day economy and
&Ocial structure. We need not feel inhibited by this ruJe which
was evo.lved in the context of a totally different kind of rule H
282 SUPREME COURT REPORTS . (1991) SUPP. 1 S. C.R.
A which was evolved in .the context of a totally different kind of

economy. Law has to grow in order to Satisfy the needs of the
fast changing society and keep abreast with the economic
developments taking place in the country'. As new sit~tions
arise the law has to be evolved in order to meet the challenge
of such new situations. Law cannot afford to remain static. We
have to evolve new principles and lay down new norms which
B
would adequately deal with the new problems which ariSe in a
highly industrialiSed economy. We cannot allow our judicial
thinking to be constricted by reference to the law as it prevails
·in England or for the matter of that in any other foreign
country. We no longer need.the crutches of a foreign legal order.
We are certainly prepared to receive light from whatever
c · source it comes but we· have to build our own jurisprudence
and we cannot countenance an argument that merely because
the law in England does not recognise the rule of strict and
·absolute liability in cases of hazardous or inherently dangerous
activities or the rule laid down in Rylands v. Fletcher as
developed in England recognises certain limitations and excep-
·n tfons, we in India must hold back our hands and not venture to
evolve a new principle of liability since English courts have not
. done so. We have to develop our own law and if we fmd that it
is necessary to construct a new principle of liability to deal with
an unusuat situation which has arisen and which is likely to
arise in future on account of hazardous or inherently
E dangerous industries which are concommitant to an industrial
economy, there is no reason why we should hesitate to evolve
such principle of liability .merely because it has not been so
done in England. We are of the view that an enterprise which
is engaged in a hazardous or inherently dangerous .industry
which pooes·a potential threat. to the health and safety of the
F · . ·persons working in the factory and residing in the surrounding
areas owes an absolute and non-delegable duty to the com-
. munity to ensure that no harm results to anyone on account of
hazardous or inherently dangerous nature of the activity which
it has undertaken. The enterprise must be held to be under an
obligation to provide that the hazardous. or inherently
G. dangerous .activity, the enterprise must be absolutely liable to
compensate for such harm and it should be no answer to the .
enterprise to say that it had taken all reasonable care and that
the harm occurred. without any n'egligence on its part. Since the .
. persons harmed on account of the hazardous or inherently
·dangerous activity carried on by the enterprise would not be in
H
UNION CARBIDE v. U.0.1. [RANGANATII MISRA, CJ.] 283
a position to isolate the process of operation from the hazard- A

ous preparation of substance or any other related element that
caused the harm the enterprise held strictly liable for causing
such harm as a part of the social cost of carrying on the haz-
ardous or inherently dangerous activity. If the enterprise is
permitted to carry on a hazardous or inherently dangerous ac-
tivity for its profit the law must presume that such permission is B
conditional on the enterp"rise absorbing the cost of any acci-
denl arising on account of such hazardous or inherently
dangerous activity as an appropriate item of its overheads.
Such hazardous or inherently dangerous activity for private
profit can be tolerated only on condition that the enterprise
engaged in such hazardous or inherently dangerous activity in- C
demnifies all those who suffer on account of the carrying on of
such hazardous or inherently dangerous activity regardless of
whether it is carried on carefully or not. This principle is also
sustainable on the ground that the enterprise alone has the
resource to discover and guard against hazards or dangers and ·
to provide warning against potential hazards. We would there- D
fore hold that where an enterprise is engaged in a hazardous or
inherently dangerous activity and harm results to anyone on
account of an accident in the operation of such hazardous or
inherently dangerous activity resulting, for example, in escape
of toxic gas the enterprise is strictly and absolutely liable to
compensate all those who are affocted by the accident and ·
such liability is not subject to any of the exceptions which E
operate vis-a-vis the tortious principle of strict liability under
the rule of Rylands v. Fletcher."
In M.C. Melita's case no compensation was awarded as this Court
could not reach the conclusion that Shriram (the delinquent company)
came within the meaning of "State" in Article 12 so as to be liable to the F
discipline of Article 21 and to be subjected to a proceeding under Article
32 of the Constitution. Thus what was said essentially obiter.
The extracted part of the conservation from M.C. Mehta's case per-
haps is a good guideline for working out compensation in the cases to
which the ratio is intended to apply. The statement of the law ex1acie
makes a departure from the accepted legal position in Rylands v. Fletcher. G
We have not been shown any binding precedent from the American
Supreme Court where the ratio of M.C. Mehta's decision has in terms been
applied. In fact Bhagwati, CJ clearly indicates in the judgment that his
view is a departure from the law applicable to the western countries.
H
284 SUPREME COURT REPORTS [1991} SUPP. 1 S. C.R.
A We are not concerned in the p~esent case as to whether the ratio of

M.C. Mehta should be applied to cases of the type referred to in it in India.
We have to remain cognizant of the fact that the Indian assets of UCC
through UCIL are around Rs.100 crores or so. For any decree in excess of
that amount, execution h~ to be taken in the United States and one has to
remember the observation of the U.S. Court of Appeals that the defence o(
B due process -.yould be available to be raised in the execution proceedings.
The decree to be obtained in the Bhopal suit would have been a money decree
and it would have been subject to the law referred to in the judgment of the
U.S. Court of Appeals. If the compensation .is determined on the basis of strict
liability- a foundation different from the accepted basis in the United
States- the decree would be open to attack and may not be eY.ecutable.
c If the litigation was to go on on merits in the Bhopal Court it would
have perhaps taken at least 8 to 10 years; an appeal to the High Court
and a further appeal to this Court would have taken in all around another
spell of 10 years with steps for expedition taken. We can, therefore, fairly
assume that litigation in India would have taken around 20 years to·teach
D finality. From 1986, the year when the suit was instituted, that would have
taken us to the beginning of the next century and then steps would have
been made for its execution in the United States. On the basis that it was
a foreign judgment, the law applicable to the New York Court should have
been applicable and the 'due process' clause would have become relevant.
That litigation in the minimum would have taken some 8-10 years to be
E finalised. Thus, relief would have been available to the victims at the ear-
liest around 2010. In the event the U.S. Courts would have been of the
view that strict liability was foreign to the -American jurisprudence and
contrary to U.S. public policy, the decree would not have been executed
in the United States and apart from the Indian assets of UCIL, there
would have been no scope for satisfaction of the decree. What was said
by this Court in Municipal Council, Rat/am v. Vardichand & Ors., (1981]
F 1 SCR 97 may be usefully recalled:
"Admirable though it may be, it is at once slow and costly. It is
a finished product of great beauty, but entails an immense
sacrifice of time, money and talent
This "beautiful" system is frequently a luxury; it tends to give a

G, high quality of justice only when, for one reason or another,
parties can surmount the substantial barriers which it erects to
most people and to many types of claims."
We had then thought that the Bhopal dispute came within the last
category and now we endorse it.
H
UNION CARBIDE v. U.0.1. [RANGANA1H MISRA, CJ.] 285
When dealing with this case this Court has always taken a pragmatic A
approach. The oft··quoted saying of the great American Judge that 'life is
not logic but experience' has been remembered. Judges of this Court are
men and their hearts also bleed when calamities like the Bhopal gas leak
incident occur. Under the constitutional discipline determination of dis-
putes has been left to the hierarchical system of Courts and this Court at its
apex has the highest concern to ensure that R~le of Law works effectively B
and the cause of justice in no way suffers. To have a decree after struggling
for a quarter of a century with the apprehension that the decree may be
ultimately found not to be executable would certainly not have been a
situation which this Court could countenance.
In the order of May 4, 1989, this Court had clearly indicated that it is C
our obligation to uphold the rights of the citizens and to bring to them a
judicial fitment as available in accordance with the laws. There have been
several instances where this Court has gone out of its way to evolve prin-
ciples and make directions which would meet the deman<Js of justice in a
given situation. This, however, is not an occasion when such an experiment
could have been undertaken to formulate the Mehta principle of strict D
liability at the eventual risk of ultimately losing the legal battle.
Those who have clamoured for a judgment on merit were perhaps
not alive to this aspect of the matter. If they were and yet so clamoured,
they are not true representatives of the cause of the victims, and if they are
not, they were certainly misleading the poor victims. It may be right that E
some people challenging the settlement who have come before the Court
are the real victims. I assume that they are innocent and unaware of the
rigmarole of the legal process. They have been led into a situation without
-i appreciating their own interest. This would not be the first instance where
people with nothing as stake have traded in the misery of others.
F
This Court is entitled under the constitutional scheme to certain
freedom of operation. It would be wrong to assume that there is an element
of judicial arrogance in the act of the Court when it proceeds to act in a
pragmatic way to protect the victims. It must be conceded that the citizens
are equally entitled to speak in support of their rights. I am prepared to
assume, nay, concede, that public activists should also be permitted to G
espouse the cause of the poor citizens but there must be a limit set to such
activity and nothing perhaps should be done which would affect the dignity
of the Court and bring down the serviceability of the institution to the
people at large. Those who are acquainted with jurisprudence and enjoy
social privilege as men educated in law owe an obligation to the community
of educating it properly and allowing the judicial process to continue un- H
286 SUPREME COURT REPORTS [1991) SUPP. 1 S. C.R.
A soiled. Lord Simonds in Shaw v. Director of Public Prosecutions,· (1981) 2

All E.R. 447 said:
"I entertain no doubt that there remains in the courts of law a
residual power to enforce the supreme and fundamental pur·
pose of the law, to conserve not only the safety and order but
B also the moral welfare of the State."
Let us remember what had once been said in a different context:
"It depends upon the present age whether this great national
institution shall descend to our children in its masculine majes·
ty to protect the people and fulfil their great expectations."
c
Let us also remember what Prof. Harry Jones in the Efficacy of Law
has said:
"There are many mansions in the house of Jurisprudence, and I .

would not be little any one's perspective on· law in society,
D provided only. that he does not insist that his is the only
perspective that gives a true and meaningful view of ultimate
legal reality."
In the facts and circumstances indicated and for.the reasons adopted·

by my noble brother in the judgment. I am of the view that the decree ·
E obtained on consent terms for compensation does not call for review.
I agree with the majority view.

---+-
VENKATACHALIAH, J. ·These Review Petitions under Article 137 \
and Writ Petitions under Article 32 of the Constitution of India raise cer-
F tain fundamental issues as to the constitutionality, legal-validity, propriety
and fairness and conscionability of the settlement of the claims of the
victims in a mass-tort-action relating to what is known as the "Bhopal Gas
Leak Disaster"-considered world's industrial disaster, unprecedented as
to its nature and magnitude. The tragedy, in human terms, was a terrible
one. It has taken a toll of 4000 innocent human lives and. has left tens of
G thousands of citizens of Bhopal physically affected in various degrees. The
action was brought up by the Union of India as parens·patriae before the
District Court Bhopal in Original Suit No. 1113 of 1986 pursuant to the
statutory enablement in that behalf under the Bhopal Gas Leak Disaster
(Processing of Claims) Act 1985 ('Act for short') claiming 3.3 Billion- Dol-
lars as compensation. When an inter-locutory matter pertaining to the in-
H
UNION CARBIDE v. U.0.1. [ VENKATACHALIAH,.J.} 287
terim-comperisation came up for hearing there was a Court assisted settle- A
;"'¥ ment of the main suit claim itself at 470 Million U.S. Dollars recorded by
the orders of this Court dated 14th and 15th of February 1989. The peti-
tions also raise questions as to the jurisdiction and powers of ihe Court to
sanction and record such settlement when appeals brought up against an .
inter-locutory order, were alone before this court.
B
The Union Carbide (India) Limited (for short the UCIL) owned and
operated, in the northern sector of Bhopal, a· chemical plant manufacturing
pesticides commercially marketed under the trade-names "Sevin" and
~ "Temik". Methyl Isocyanate (MIC) is an ingredient in the composition of
these pesticides. The leak -and escape of the poisonous fumes from the
tanks in which they were stored occurred late in the night on the 2nd of
December 1984 as a result of what has been stated to be a 'run-away'
c
reaction owing to water entering into the storage tanks. Owing to the. then
prevailing wind conditions the fumes blew into the hutments abutting the
premises of the plant and the residents of that area had to" bear the burnt of
the fury of the vitriolic fumes. Besides large areas of the city were also
exposed to the gas. D
i'( 2. Referring to this industrial accident this Court in the course o1 its
order dated 4th May, 1989 had occasion to say:
"The Bhopal Gas Leak· tragedy that occurred at midnight on
2nd December, 1984, by the escape of deadly chemical fumes E.
form the appellant's pesticide-factory was a horrendous in-
I dustrial mass disaster, unparalleled in its magnitude and devas-
tation and remaining a ghastly monument to the de-humanising
influence of inherently dangerous technologies. The tragedy
-f--
took an immediate toll of 2,660 innocent human lives and left
tens of thousands of innocent citizens of Bhopal physically im- F
paired or affected in various degrees. What added grim poig-
nance to ·the tragedy was that the industrial-enterprise was
using Methyl !so-cyanate, a lethal toxic poison, whose poten-
tiality for destruction of life and biotic-communities was, ap-
parently, matched only by the lack of a prepackage of relief
procedures for management of any accident based on ade- G
~~
quate scientific knowledge as to the ameliorative medical pro-
cedures for immediate neutralisation of its effects."
The toll of life has since gone up, to around four thousand and the
health of tens of thousands of citizens of Bhopal City has come to be
H
A affected and impaired in various degrees of seriousness. The effect of the

exposure of the victims to Methyl Isocyanate (MIC) which was stored in ,y-•
considerably large quantities in tanks in the chemical plant of the UCIL
which escaped on the night of the 2nd of December 1984 both in terms of
acute and chronic episodes has been much discussed. There has been
growing body of medical literature evaluating the magnitude and, intensity
B of the health hu.ards wltich the exposed population of Bhopal suffered as·
immediate effects and to which it was potentially put at risk. ' '
It is stated that the MIC is the most toxic chemical in industrial use.
The petitioners relied upon certain studies on the subject carried out by )..:.
the Toxicology Laboratory, D~partm.'ent of Industrial Environmental
C Health Sciences, Graduate School of Public Health, University of Pit-
tsburg, [reported in Environmental Health Perspective Volume 72, pages
159 to 167]. Though it was initially assumed that MIC caused merely simple
and short-term injuries by scalding the surface tissues owing to its highly
exothermic reaction with water it has now been found by medical research
that injury caused by MIC is not to the mere surface tissues of the eyes and
D the lungs but is to th'e entire system including nephrological lymph, im-
mune, circulatory system, etc. It is even urged that exposure to MIC has
mutagenic effects and that the injury caused by exposure to MIC is Yf.
progressive. The hazards of exposure. to this lethal poison are yet an un-
known quanta.
E Certain studies undertaken by the Central Water and Air Pollution

Control Board, speak of the high toxicity of the chemical.
The estimates of the concentration of MIC at Bhopal that fateful

night by the Board inculcate a concentration of 26-70 parts per million as
against the 'OSHA' standard for work environment of 0.02 P.P.M. which
F is said to represent the threshold of tolerance. This has led to what can
only be described as a grim and grisly tragedy. Indeed the effects of ex-
posure of the human system to this toxic ch.~mical h'aye not been· fully
grasped. Research studies seem to suggest that exposure to this chemical
fumes renders the human physiology susceptible to long term pathology
and the toxin is suspected to lodge itself in the tissues and cause long term
G damage to the vital systems, apart from damaging the exposed parts such
as the eyes, lung membrane etc. It is also alleged that the 'latency-period'
. ';-('.-
for the symptomatic manifestation of the effects of the exposure is such
that a vast section of the exposed population is put at risk and the potential
risk of long term effects is presently unpredictable. It is said that even in
cases of victims presently manifesting symptoms, the prospects of aggrava-
t
H tion of the condition and manifestation of other effects of exposure are
UNION CARBIDE v. U.0.1. (VENKATACHALIAH,J.] 289
statable possibilities. A
. -·-~
. Immediately symptomatic cases showed ocular inflamation affecting
visual acuity and· respiratory distress owing to pulmonary edema and a
marked tending towards general morbidity. It: is argued that analysis of
the case histories of persons. manifesting general morbidity trends at ·
various intervals from_· 3rd December, 1989 upto Apri~ 1990 indicate that
in all the severely affected, moderately affected .and mildly affected areas B
the morbidity _trend initially showed a decline compared with the acute
phase. But the analysis for the later periods, it is. alleged, showed a sig-
nificant trend towards increase of respiratory, opthalmic and general mor-
bidity in .all the three areas. It is also sought to be_ pointed out that the
fatal miscarriages in the exposed group was dist~bingly higher than in the C
control group as indicated by the studies carried out by medical re·
searchers. One of _the points urged is that the likely long term effects of
exposure have riot been taken into account in approving the settlement
and that the_ only way _the victims' interests could have been protected
against future aggravation of their g~s teiated health hazards was by the
incorporation. of an appropriate "re~opener" clause.
D
3. On 29th of March, 1985 the Bhopal Gas Leak Disaster (Processing
of Claims) Act, i985 (Act) was passed authorising the Government of
India, as parens patriae exclusively to represent the victims so that interests
of the victims of the disaster ate fully protected, and that claims for com-
pensation were pursued speedily, effectively, equitably and to the best ad-
vantage of the claimants. On 8th of April, 1985 Union of India, in exercise E
of the powers conferred on it under the Act, instituted before the U .S.Dis-
trict Court, Southern _District of ·New York, an action on behalf of· the
victims agamstthe Union Carbide C~rp9rati~n (UCC) for award of com-
pensittiOn foi: the damage caused by the disaster. · ·
-. A l~ge n~ber of fatal~accldents and personal-injury actions had F

earlier also coine to be filed in Courts in the United States of America· by
and on behalf ,of about 1,86,000 victims. All these-earlier claims instituted
in the various Courts in United States of America had come to be con~
solidated by the "Judici~l Panel on Multi District Litigation" by its direction
dated 6th February 1985. and assigned to· United States District Court,
Southern Dis_trict of t_he New York, presided over by a Judge Keenan. The G
claim brought by the Union of India was also consolidated with them.
The UCC held 50.9% of the shares in the UCIL~ The latter was its
subsidiary: UCCsliabilitywas asserted on the averments that UCC, apart
from being the holding co'mpany, had retained and exercised powers of
H
A effective control over its Indian subsidiary in terms of its Corporate Policy
and the establishment of the Bhopal Chemical Plant-with defective and
inadequate safety standardi. which, compared with designs of UCC's
American plants, manifeste<: an indifference and disregard for human-
safety-was the result of a conscious and deliberate action of the UCC.
It was averred that UCC had, on considerations of economic advantages,
B consciously settled and opted for standards of safety for its plant in a
developing country much lower· than what it did for its own American
counter-parts.The claim was partly based on 'Design liability' on the part
of UCC. The liability was also said to arise out of the use of ultra-hazard-
ous chemical poisons said to engender not merely strict liability on Rylands
v. Fletcher principal but an absolute liability on the principals of M.C.
C Melita's case.
The defences of the UCC, inter-alia, were that UCC was a legal
entity distinct in· 1aw from the UCIL; that factually it never exercised any
direct and effective control over UCIL and that its corporate policy itself
recognised, and was subject to, the over-riding effect of the municipal laws
D . of the country and therefore subject to the statutes in India which prohibit
any such control by a foreign company over its Indian subsidiar}', except
the exercise of rights as share-holder permitted by-law.
The UCC also resisted the choice of the American Forum on the
plea of Forum-Non-Conveniens. Union of India sought to demonstrate that
.the suggested alternative forum before the judiciary in India was not an
E 'adequate' forum pointing out the essential distinetion between the
American and Indian systems of Tort Law botJi substantive and procedural
available under and a comparison of the rights, remedies and procedure
the competing alternative forums. The nature and scope of a defendant's
plea of Forum Non-Conveniens and the scope of an enquiry on such plea
have received judicial considerations before the,Supreme Court of United
F States of America in Gulf Oil Corp. v. Gilbert [330 U.S. 501], Koster v.
Lumbennens Mutual Casualty Co. [330 U.S. 518] and Piper Aircraft Co. v.
Reyno [454 U.S. 235].
The comparison of rights, -remedies and procedures available in the
two proposed forums though not a "major-factor", nevertheless, were
G relevant tests to examine the adequacy of the suggested alternative forum.
System of American Tort Law has many features which make it a distinc-
tive system. Judge Keenan adopting the suggested approach in Piper's
decision that doctrine off01um no11 conveniens was desinged in part to
help courts in avoiding. complex exercises in comparative laws and that
the decision should not hinge on an unfavourable change in law which was
H
UNION CARBIDE v. U.0.1. ( VF.NKATACHALIAH,J.] 291
not a major factor in the analysis was persuaded to the view that differen- A
ces in the system did not establish inadequacy of the alternative forum in
India. Accordingly on 12th of May, 1986, Judge Keenan allowed UCC's
plea and held that the Indian judiciary must have the "opportunity to stand
tall before the world and to pass judgment Qtl behalf of its own people",
4. Thereafter the Union of India was constrained to alter its choice of

the forum and to pursue the remedy against the UCC in the District COurt at B
Bhopal. That is how Original Suit No. 1113 of 1986 seeking a compensation of
3.3 Billion Dollars against the UCC and UCIL came to be filed at Bhopal.
Efforts were made by the District Court at .Bhopal to explore the

possibilities of a settlement. But they were not fruitful. Zahreeli Gas Kand C
Sangharsh Morcha one of the victim-organisations appears to have moved
the Court for award of interim-compensation. On 13th December ~987,
the District Court made an order directing payment of Rupees 350 crores
as interim compensation. UCC challenged this award before the High
Court of Madhya Pradesh. The High Court by its order dated 4th of April,
1988 reduced the quantum of interim compensation to Rs. 250 crores. D
Both Union of India and UCC brought up appeals by Special Leave before
this Court against the order of the High Court - Government of India
assailing the reduction made by the High Court in the quantum of interim
compensation from Rs. 350 crores to Rs. 250 crores and the UCC assailing
the ye!Y_jurisdiction and permissibility to grant interim compensation in a
tort-action where the very basis of liability itself had been disputed. The
contention of the UCC was that in a suit for damages where the basis of E
·the liability was disputed the Court had no power to make an award of
interim-compensation. It was urged that in common law- and that the law
in India too- in a suit for damages no court could award interim-com-
pensation.
Prior to 1980 when the Rules of Supreme Court in England were F

amended (Amendment No. 2/1980) Courts in United Kingdom refused
interim-payments in actions for damages. In Moore v. Assignment Courier
{1977 (2) All ER 842 (CA)], it was recogn1sed that there was no such
power in common law. It was thereafter that the rules of the Supreme
Court were amended by inserting Rules 10 and 11 of Order 29 Rules of
Supreme Court specifically empowering the High Court to grant interim G
relief in tort injury actions. The amended provision stipulated certain pre-
conditions for the invokability of its enabling provision. But in England
Lord Denning in the Court of Appeal thought that even under the common
law the court could make an interim award for damages [(See Lim Poli
Choo v. Camden Islington Area Health Authority (1979 1 AER 332). But his
H
292 SUPREME COURT REPORTS (1991) SUPP. 1 S. C. ll.
A view was disapproved by the Hnuse of Lords (See 1979 (2)AER 910 at
pages 913, 914). Lord Scarman said:
"Lord Denning MR in the Court of AppeaJs declared that a

radicaJ reappraisal of the law is needed. I agree. But I part
company with him on ways and means. Lord Denning MR
B believes it can be done by the Judges, whereas I would suggest
to your Lordships that such a reappraisal caJls for social, finan-
cial, economic and administrative decisions which only the
· legi$lature can take. The perplexities of the present case, fol-
·JowiDg on the publication of the report of Royal Commission ·
of Civil Liability and Compensation for Personal Injury (the
c Pearson report), emphasise the need for reform of the law.
Lord Denning MR appeared, however, to think, or at least to

hope, that there exists machinery in the rules of the Supreme
Court which rn.ay be.adopted to enable an award of damages in
a case such as this to be 'regarded as an interim award'.
D
It. is·. an attractive, ingenious suggestion, but, in my judgment,
unsound. For so radical a reform can be made neither by
judges nor by modification of rules of court. It raises issues· of
social economic and financial policy not amenable. to judicial
.reform, which will almost certainly prove to be controversial.
E and can be resolved by.the legiSiature only after full considera•
tion of factors which cannot be brought into clear focus; or be·
weighed arid assessed, in the course of the forensic process.
The Judge, however, wise,· creative, and imaginative he may be,·
is cabined, cribbed, confined, bound in not as was Macbeth, to
.his 'saucy doubts and fears' but the evidence and arguments of
F the litigants. It is this limitation, inherent in the forensic
process; which sets .bounds to the scope of judicial law reform."
But in cases. governed by common law and not affected by the

statutory changes in.the Rules of Supreme Court in U.K., the Privy Council
said:. ·. .:
G
· "Their Lordships cannot leave this case without commenting 'x'.'.' ....
on two unsatisfactory features. First, there is the inordinate
length of time which has elapsed between service of the writ in
February 1977 and final disposal of the case iii the early
months of 1984. The second is that, as their LOrdships, under-
UNION CARBIDE v. U.0.1. [ VENKATACHALIAH,J.] 293
stand the position,. no power exists in a case where liabmty is A

admitted for an interim payment to be ordered pending a final
decision on quantum of damages. These are matters to which
consideration should be given. They are; of course, linked;
though the remedy for delay may be a matter of judicial ad-
miniStration, it would be seen legislation may be needed to
enable an interim award to be made." B.
[See: Jamil Bin Harun v. Young Kamsiah: 1984 (1)AC 529, S38]
. . The District Court sought to sustai~ the i~terim a~ard on the in-
herent 'powers of. the court preserved in Section ·151 CPC. But the High
C,ou~t of Madhya Pradesh thought that appeal to and reliance Section on C
151 was not appropriate. It invoked Section 9 CPC read with the principle
underlying the English Amendment, without its strict pre-conditions. The
correctness of this view was assail.ed. by the UCC before this Court in the
appeal. . . · · · · . ·-
Oii 14th Febniary, 1989' this Court recorded an over-all settlement of D

the claims iii the su,i~ for 470 million U.S. Dollars and,the consequential
termination of'au··civil and cfiminal proceedings. The relevant portions of
the order of ~his Court dated 14th February, 1989 provide:
(1) The ,Union Carbide Corporation shall pay a sum of

U.S. Doll;u~ 410 mi_llion~ (Four hundre.d '.ind seventy E
Millions) t() the Uni~~ ~flndia ~~ full settlement of all
•, 'claim~; rights and liabilities related. to and arising out of
·· the Bhopal•Gas disaster. "
(2) The aforesaid sum shall be paid by the Union Car- F

' .: .b'~deCorporaiio~.tothe Union0findiaonorbefofo31st
, . ,March, 1989.
. (3)To ~~~hie th~ effectuation of the settleln:ent, all civil

proceedings related to and C'lrising out ~f the Bhopal
Gas disaster shall hereby stand transferred to this Court G
· and shall stand concluded in terms of the settlement,
·and all criminal proceedings related to and arising out
of the disaster shall stand quashed wherever these may
.b~ pen~ing. '
H
A A memorandum of settlement shall be filed before us tomor-

row setting forth all the details of the settlement to enable ~ -
consequential directions, if any, to issue."
On 15th February, 1989 the terms of settlement signed by learned

Attorney General for the Union of India and the Counsel for the UCC was
B filed. That memorandum provides:
1. "The parties acknowledge that the order dated February 14,
1989 as supplemented by the order dated February 15, 1989
~-
disposes of in its entirety all proceedings in Suit No. 1113 of
1986. This settlement shall finally dispose of all past, present
c and future claims, causes of action arid civil and criminal
proceedings (of any nature whatsoever wherever pending) by
all Indian citizens and all public and private entitles with
respect to all past, present and future deaths, personal injuries,
health effects compensation, losses, damages and civil and
criminal complaints of any ·nature whatsoever against UCC,
D Union Carbide India Limited, Union Carbide Eastern, and all
of their subsidiaries and affiliates as well as each of their
present and former directors, officers, employees, agents rep-
resentatives, attorneys, advocates and solicitors arising out of,
relating to or concerned with the Bhopal gas leak disaster,
"'
including past, present and future claims, causes of action and
E proceedings against each other. All such claims and causes of
action whether within or outside India of Indian citizens,
public or private entitles are hereby extingui$hed, including
without limitation each of the claims filed or to be filed under
the Bhopal Gas Leak Disaster (Registration and Processing -f
Claims) Scheme 1985, and all such civil proceedings Indiam
F are hereby transferred to this ·court and are dismissed with
prejudice, and all such criminal proceedings including con-
tempt proceedings stand quashed and accused deemed to be
acquitted.
2. Upon full payment in accordance with the Court's directions

G the undertaking given by UCC pursuant to the order dated Y-_-4......
November 30, 1986 in the District Court, Bhopal stands dis-
· charged, and all orders passed in Suit. No. 1113 of 1986 and ·or
in any Revision therefrom, also stand discharged."
.
A further order was made• by this Court on· 15th February, 1989
H
UNION CARBIDE v. U.O.L [ VENKATAOIALIAH,J.] 295
which, apart from issuing directions in paragraphs 1 and 2 thereof as to the A

mode of payment of the said sum of 470 million U.S. Dollars pursuant to
and in terms of the settlement, also provided the following:
"3. Upon full payment of the sum referred to in paragraph 2
above:
(a) The Union of India and the State of Madhya Pradesh shall B
take all steps which may in future become necessary in order to
implement and give effect to this order including but not
limited to ensuring that any suits, claims or civil or criminal
complaints which may be filed in future against any Corpora-
tion, Company or person referred to in this settlement are
defended by them and disposed of in terms of this order. C
(b) Any such suits, claims or civil or criminal proceedings filed
or to be filed before any court or authority are hereby enjoined
and shall not be proceeded with before such court or authority
except for dismissal of quashing in terms of this order.
4. Upon full payment in accordance with the Court's direc- D
tions:
(a) The undertaking given by Union Carbide Corporation pur-

'liuant to the order dated 30 November, 1986 in the District
Court Bhopal shall stand discharged, and all orders passed in
Suit No. 1113 of 1986 and/or in revision therefrom shall also E
stand discharged.
(b) Any action for contempt initiated against counsel or parties

relating to this case and arising out· of proceedings in the
courts below shall be treated as dropped."
F
5. The settlement is assailed in these Review Petitions and Writ Peti-
tions on various grounds. The arguments of the petitioners in the case have
covered ·a wide range and have invoked every persuasion......:.jurisdictional,
legal, humanitarian and those based on considerations of public-policy. It
is urged that the Union of India had surrendered the interests of the vic-
tims before the might of multinational cartels· and that what are in issue in G
.>- ~~ the case are matters of great moment to developing countries in general.
Some of these exhortations were noticed by this Court in the course of its
9rder of 4th May, 1989 ~ th~ following ~ords:
"31. As to the remaining question, it has been said that many

vital juristic principles of great contemporary relevance to the H
' . . .
296 SUPREME COURT REPORTS [1991] ·SUPP. 1 S.C.R
A Third World generally, and to India in particular, touching

problems emerging from the pursuit of such dangerous tech-
nologies for· economic gains by multi-nationals arose in this
case. It is said that this is an instance of lost opportunity to this
·. apex Court to give the law the new dire.ction on vital issues
. emerging from the increasing dimensions of ·the economic ex-
B . ploitation of· developj.ng ·countries .by economic forces of the
'rich ones: This case also, it is said, concerns the legal limits to
be envisaged in the vital interests of the protection of the con-
stitutional rights of the citizenry, and of the environment, on
the permissibility of such ultra~hazardous technologies and to
c prescribe· absolute and deterrent standards of liability if harm
is caused by such erite'rprises. The prospect of exploitation of
cheap labour and ~f captive-markets, it is said, induces multi-
nation'als' to .enter irito the developing countries for such
economic-exploitation arid that this was eminently an ap-
·propriaty case for. a careful assessment of the legal and Con-
D stitutional safeguards stemming from these vital issues of great
contemporary relevance.
On..ihe µnportance ~d relevance of these. ronsiderations; this Court

said:
E . 32: Thes(! issues 'and certain eognate areas of e~en wider sig-
. ·. 'ni[t,canee ·~iid "the limits of the adjudicative disposition of some
' ' of .theiraspec~s are indeed questions of seminal importance.
. ~T~.e. culi~t;e. of modern i~dusttiaI technologies; which .is sus-
taine<;i o~ .p~~ce.sses of such pernicious potentialities, in the
F '< ' ' ultimate analysis, has: thrown open Vital and fundametital issues
· . .:· of technology optio1's· ASsociat~d .Problems of th~ adequacy of
. ; legal' protection against such. exJ>loitative and haZardous in-
:. ~chistrial adventurism, and whether the citizen~ of the ~untry
. . ar~. as.sured the protection of a legal system which could be
said to.be adequate in a'comprehensive sense in such contexts
G .. ari~e.. These,. . irideed. ~re · issues of vital .importance and this
. trageqy, an9 the'.Gonditioris' that enabled' it happen, are of par-
. ticular concern:: ~ . .· ' . .' ' '
- . : • ' ' l > : · •• ' ~ - •. ' • '~ ....
33. The· che~cal pe~tici4e .mdtistry is con.eomitant; and in- a

.. ,. deed, ,an Pitewal part, of tJi~'tech,no!ogy of ChemiCal ·Farming.
H
UNION CARBIDE v. U.0.1. [ VENKATACHALIAH,J.) 297
Some experts think, that it is time to return from the high-risk, A

resource-intensive, high input, anti-ecological, monopolistic
'hard' technology which feeds, and is fe(f on, jts self-assertive
.attribute, to a more human and humane flexible, eoo-c0nform-
able, "soft" technology with . its systetllic-v.?sdoin and oppor-
tunities for human creativity. and. initiative·."Wisdom demands"
says Schumacher "a new orientation of science and technology B
towards the orgitnic, the gentle the µon-violent, the.elegant and
beautiful". The other view str.essing .the spect;icular success of
agricultural production in the .new era of chemical farming
with high-yielding strains, p9ints to th~ break-through achieved
by Jhe Green Revolution .with .its effective response to, and
successful management of the great challenges of feeding, the. C
millions; This technology in agriculture has given a big impetus
to· enterprises of chemical fertilizers and pesticides. This, say
its critics, has brought in its trail its own serious problems. The
technology-options before ·scientists and .planners have been
difficult."
D
6. Before we examine the grounds of challenge t() the sett•ement we
might, perhaps, refer to three events. The first is that th.e Central Bureau of
Investigation, Government of India, brought criminal charges under Sec-
tions 304, 324, 326, 429 read with Section 35 of the fndian .Penal Code
against Mr.Warren Anderson, the then Chairm·an of the UCC and several
other persons including some of the officers in-charge of the affairs of the E
UCIL. On 7th December, 1984 Mr.Warren Anderson came to India to see
for himself the situation at Bhopal. He was arrested and later released on
bail. One of the points seriously urged in these petitions is the validity of
the effect of the ·order of this. Court which terminated those criminal
proceedings.
F
The· sec0nd event is that on 17th of November, 1986 the District
Court at Bhopal, on the motion of the plaintiff :-Union of India, made an
order restraining the UCC by an interlocutory injunction, from selling its
assets, paying dividends; buying back debts; etc. during the pendency of the
suit. On 30th of November, 1986 the District Court vacated that injunction
on the written assurance and undertaking dated 27th November 1986 filed G
by the UCC to maintain unencumbered assets of three billion U.S. Dollars.
One of the points argued in the course of the hearing of these petitions is
whether, in the event the· order recording the settlement is reviewed and
the settlement set aside, the UCC and UCIL would become entitled to the
restitution of the funds that they deposited in Court pursuant to and in H
298 SUPREME COURT REPORTS (1991) SUPP. 1 S. C.R ..
A performance of their obligations under the settlement. The UCC deposited

420 million U.S. Dollars and the UCIL the rupee equivalent of 45 million ~·-·
U.S. Dollars. 5 million U.S. Dollars directed by Judge Keenan to be paid to

the International Red Cross was giveri credit to. The petitioners urge that
even after setting aside of the settlement, there is no compulsion or obliga-
tion to restore to the UCC the amounts brought into Court by it as such a
B step would prejud_icially affect the interests of the victims. The other cog-
nate question is whether, if UCC is held entitled to such restitution, should
it not, as a pre-condition, be held to be under a corresponding obligation to
· restore and effectuate its prior undertaking dated 27th November 1987 to
maintain unencumbered assets of three billion U.S.Dollars, accepting
which the order dated 30th November, 1987 of the District Court Bh~pal
C came to be made.
The third event is that· subsequent to the recording of the settlement

a Constitution Bench of this Court dealt with and disposed of writ-petitions
challenging the constitutionality of the 'Act' on various grounds in what is
known as Charania/ Salru's case and connected matters. The Constitution
D Bench upheld its constitutionality ar.d in the course of the Court's opinion
Chief Justice Mukharji made certain observations as to the validity of the 7'-
settlement and the effect of the denial of a right of being heard to the
victims before the settlementi a right held to be implicit in Section 4 of the
Act. Both sides have heavily relied on certain .observations in that pronoun-
E cement in support of the rival submissions.
7. We have heard learned Attorney General for the Union of India;
Sri Shanti Bhushan, Sri R.K. Garg, Smt.Indira Jaising, Sri Danial Latif, Sri
Trehan learned senior oounsel and Shri Prashant Bhushan, learned ~unset
for petitioners and Sri F.S. Nariman, learned senior counsel for the UCC,
--t·
Sri Rajinder Singh, learned senior counsel for the UCIL and Dr~N.M.
F Ghatate and Sri AshWini Kumar, learned senior counsel for the State-of
Madhya Pradesh and its authorities.
At the outset, it requires to be noticed that Union of India which was

a party to· the settlement has not bestirred itself to assail the settlement on
any motion of its own. However, Union of India while not assailing the
G factum of settlement has sought to support the petitioners' challenge to the
validity of the settlement. Learned Attorney General submitted that the
factum of compromise or settlement l'.ecorded in the orders dated 14th &
15th of February, 1989 is. not disputed by the Union of India. Learned
Attorney-General also made it clear that the Union of India does not
·. H dispute the authority of the then Attorney General and the Advocate on
UNION CARBIDE v. U.O.L(VENKATAOIALIAH,.J.] 299
record for the Union of India in the case to enter into a settlement. But, he A
submitted that this should not preclude the Union of India from pointing
out circumstances in the case which, if accepted, would detract from the
legal validity of the settlement.
8. The contentions. urged at the hearing in support of_ these petitions

admit of the following formulations: B
Contention (A):
The proceedings before this Court were merely in the nature

of appeals against an interlocutory order pertaining to the in-
terim-compensation. Consistent with the limited scope and C
subject-matter of the appeals, the main suits themselves could
not be finally disposed of by the settlement. The Jurisdiction of
this Court to withdraw or transfer a suit. or proceeding to itself
is exhausted by Article 139 A of the Constitution. Such transfer
implicit in the final disposal of the suits having been impermis-
sible suits were not befofo the Court so as to be amenable to D
final disposal by recording a settlement. The settlement is,
therefore, without jurisdiction.
Contention (B ):
Likewise the pending criminal prosecution was a separate and E

distinct proceeding unconnected with the suit from the inter-
locutory order in which the appecils before this Court arose.
The criminal proceeding!; were not under or relatable to the
+- 'Act'. The Court had no power to withdraw to itself those
criminal proceedings and quash them. The orders of the Court
dated 14th and 15th of February 1989, in so far as they pertain F
to the quashing of criminal proceedings are without jurisdic-
tion.
Contention (C):
The 'Court-assisted-settlement' was as between, and confined G

to, the Union oflndia on the one hand and UCC & UCIL on
the other. The Original Suit No. 1113of1986 was really and in
susbtance a representative suit for purposes and .within the
meaning of Order XXIII Rule 3B C.P .C. inasmuch as any
order ma.de· therein would affect persons not eo-nomine par-
ties to the suit. Any settlement reached without notice to the H
300 SUPREME COURT REPORTS (1991) SUPP. 1 S. C.R..
A ·persons so affected· without complying with the procedural

drill of Order XXIII Rule 3B is a: nullity.
That the present suit is such a representative suit; that the

order under review did affect the interests of third parties and
that the legal effects and consequences of non-compliance with
B Rule 3B are attracted to case are concluded by the pronounce-
ment ·of the Constitution Bench in Charan/al Sahu's case.'
Contention (D):
The termination of the pe~ding cilmin~I proeeedingS brought

about by the orders dated 14th and 15th of February~ 1989 is
c bad in law and would ·require to be reviewed and set aside on
grounds ·.that (i) if the orders ·are construed a5 -perniitting a
compounding of offences, they run. in the teeth of the statutory
prohibition contained in Section 37.0 (9) of the Code of
Criminal Procedure; (ii) if the orders are construed as pemiit-
0-· ting a withdrawal of the pros~cutfon under Sectfon,321 Cr.P.C.
they would, again, be bad as violative of settled principles guid-
ing withdrawal .of . prosecutions; arid (iii). if the orders
amounted to a quashh1g of the proceedings under Section 482
of the Code of Criininal Procedure;·· grounds for such quashing
did not obtain in rhe case., ' . .
E ·' ' ~ ,; )
Contention· (E):
· The effect -0f the orders u.nder review interdicting and

prohibiting future criminal proce,edings against any ~erson or
persons whatsoever in rehtti~ri. to or arising out of the Bhopal
F Gas LeakDisaster,:in effectand substarice,;amounts to oonfer-
ment of an iIDm~fy from crf1llinal proceedings. Grant of im-
. munity is ,essentially a legisiative function and cannof be made
byajudic~al.acL :< .. ,.,, ..... · ·· · · ,
At. all events, grant of such< immunity is oppos~d. to public

G poliey and· pievents· the ·investigation :of serious .·offe11ces m
. relation to this·horrendous industrial dis.aster where_UCC had
inter-alia alleged .sabotage Jls cau,se,of the disaster. Criminal
mvestigation was·n~ssaryjn publi~i,nterestnot.only to punish
the ·guilty but to.pre~ent a~y,t;ecurrtmee .. o( such calainitious
.J.:
events in future.; . :r ; . 1 "_,,. .. • • • . . • ..
H·,·
UNION CARBIDE v. U.0.1. [ VBNKATACHALIAH).) 301
Contention (F): A
The memorandum of settlement and the orders of the Court ·
thereon, properly construed, make the inference inescapable
·.• .\ ·.' · .that a part of the consideration for the payment of 470 million
U.S. Dollars was the stifling of the criminal prosecutions which
' 1·. . is opposed to public-policy. This vitiates the agreement on B
,which the settlement is based for unlawfulness of the con-
sideration. The consent order has no higher sanctity than the
legality and validity of the agreement on which it rests. •
Contention (G):
The process of settlement of a Qlllss tort action has its own C

complexities and that a "Fairness~Hearing" must precedo the
approval.of any settlement by the court as fair, reasonable and
adequate. In concluding that the settlement was· just and
. reasonabfo the Court omitted to take into aecount and provide
for certain important heads of compensation such as the need D
for and the costs of me;dical surveillance of a large section of
population, which though asymptomatic for the present was
. likely. to become symptomatic iater having regard to the char-
' . , ". . .acter and the potentiality ofthe risks of exposure and the
.' likely fi.iture damages resulting from' long-term.effects and to
· build-in a 're~opener' clause. ·· ' E
··The settlement is bad for not affor'1ing a {airness~he~ing.and
for not incorporating a "re-opener" clause. The settlement is
bad for not indicating appropriate break-down of the amo1mt
· amongst the variou~ classes of victim-groups. There were no
· · criteria to go by at all to decide the fa~~es.s and adequa~y of F
.the settlement. ··.
. Contention (H):
Even if the settlement is reviewed and set aside there is no

· c:Ompulsion or obligation to re(und and restore to the UCC the G
. . . funds brought in by it, as such restitution is discretionary and
· · in exercisirig this discretion the interests of the victiins be kept
·.· in mind arid restitutioii'denied.
At'all events, if restitution is to be allowed, ~heth~r l)Cc

would dot be required to act upon and effectuate its undertak- · H
302 . SUPREME COURT REPORTS (1991) SUPP. I S. C.R.
A ing dated 27th November, 1986 on the basis of which order

dated 30th November, 1986 of the Bhopal District Court
Vacating the injunction against it was made.
Contention (I):
Notice to the affected-person implicit in section 4 of the Act

B was imperative before reaching a settlement and that as admit- .
tedly no such opportunity was given to the affected-person
• either by the Union of India before entering into the settlement
or by the Court before approving it, the settlement is void as
violative of natural justice. Sufficiency of natural justice at any
c later· stage cannot cure the effects of earlier insufficiency and
does not bring life back to a purported settlement which was in
its inception void.
The observations of the constitution Bench m Charania/ Sahu 's

case suggesting that a hearing was available at the review stage
D and should be sufficient compliance with natural justice,..are ·
mere obiter-dicta and do not alter the true legal position.
Point (j):
.
D0es the settlement require to tJe set aside and the Original
Suit No. 1113 of 1986 directed to be proceeded with on the
E merits? If not, what other reliefs ·require to be granted and
what other directions require to be issued?.
Re: Contentions (A) and (B)
9. The contention articulated with strong emphasis is that the court

F had no jurisdiction to withdraw and dispose of the main suits and the
criminal proceedings 'in the course of hearing of appeals arising out of an
·interlocutory order in the suits. The disposal of the suits would require and
imply their transfer and withdrawal to this court for which, it is contended,
the Court had no power under law. It is urged that there is no power to
G withdraw the suits or proceedings dehors. Article 139-A and the conditions
enabling the application of Article 139-A do. not, admittedly, exist. It is,
therefore, oontended that the withdrawal of the suits, implicit in the order
of their final disposal pursuant to the settlement, ,is a nullity. It is urged that
·Article 139A is exhaustive of the powers of the Court to withdraw suits or
other proceedings to itself.
H
UNION CARBIDE v. U.0.1. [ VENKATAOIALIAH,J.] 303
It is not disputed that Article 139A in terms does not apply in the A
,..f,-~ facts of the case. The appeals were by special leave under Article 136 of
the Constitution against an interlocutory order. If Article 139A exhausts
the power of transfer or withdrawal of proceedings, then the contention
has substance. But is that so?
This Court had occasion to point out ~hat Article 136 is worded in B
the widest terms possible. It vests in the Supretne Court a plenary jurisdic-
tion in the matter of entertaining and hearing of appeals by granting special
~- leave against any kind of judgment or order made by a Court or Tribunal in
any cause of matter and the powers can be exercised in spite of the limita-
tions under the specific provisions for appeal contained in the Constitution
or other laws. The powers given by Article 136 are, however, in the nature· C
of special or resi.duary powers which are exercisable outside the purview of
the ordinary laws in cases where the needs of justice demand interference
by the Supreme Court. (See Durga Shankar Mehta v. Thakur Raglmraj
Singh & Others [1955] S.C.R. 267].
Article 142 (1) of the Constitution provides: D
"142 (1) The Supreme Court in exercise of its jurisdi~tion may

pass such decree or make such order as is necessary for doing
complete justice in any cause or matter pending before it, and any ,
decree so passed or order so made shall be enforceable E
throughout the territory of India in such manner as may be
prescribed by or under any law made by Parliament and, until
provision in that behalf is so made, in such manner as the
-+- President may by order prescribe."
[Emphasis "added] F
The expression "cause or matter" in Article 142 (1) is very wide

covering almost every kind of proceedings in Court. In Halsbury's Laws of
England-Fourth Edition [vol. 37) para 22 referring to the plenitude of
'~-~
'
that expression it is stated:
"Cause or matter-The words "cause and "matter" are often used

in juxtaposition, but they have different meanings. "Cause"
G
means any action or any criminal proceedings and "matter"

means any proceedings in court not in a cause. When used
together, the words "cause or matter" cover almost every kind of H
A proceeding in court, whether civil or criminal; whether inter-

locutory or final, an<l whether before or after judgmenC
. . f • • .
•..-
[emphasis added]
Any limited interpretation of the. expression ft cause or matter" having

·a regard to the wide and sweeping powers under Article 136 which Article
i42 (1) seeks to effectuate, limiting it only to the short compass of the
actual dispute before the Court and not· to what might necessarily and
reasonably be connected with or related to such matter in such a way that
their withdrawal to the Apex Court would enable the court to do "complete .
justice", would stultify the very wide constitutional powers. Take, for in-
C stance, a case where an interlocutory order in a matrimonial cause pending
in the trial court comes up before the apex court. The parties agree to have '
the main matter itself either decided on the merits. or disposed of by a
compromise. If the argument is correct this court would be powerless to
withdraw the main matter and dispose it of finally even if it be on consent
of both sides. Take also a similar situation where some criminal proceed-
D ings are also pending between the "litigating spouses. If all disputes are
settled, can the cOW't not call up to itSelf the oon:nected criminal litigation
for a· final disposal? If matters are disposed of by consent of the parties,
can any one of them later turn around and say that the apex court's order
was a nullity as one without jurisdiction and that the consent does not
confer jurisdiction? This is not the way in which-jurisdiction with such wide
E constitutimial. powers is to be construed. While it is neither possible nor
advisable to enumerate exhaustively the niultltudmous ways in 'which such
sltuatfons may. present themselves. before ,the court where· the court. with
the aid of t~e' powers ooder Article 142 (1) couid bring aootit .a finality to
the matters, it is ~mnion experience that day-in-and-day•out such matters.
---t·
are 'taken up anCI decided in. this. colirt It. is true that mere practice, how-.
F ever lo.ng, will n'ot legitirtilZe issues of jurisdiction. Buf the argument,
pushed to its 'logical conclusions, wowd mean that when an.interlocutory
appeal' comes up before this Court by special leave, even with the consent
of th~ parti~s; the main matter cannot be fmally disposed of by this court as
such a step would imply an impeintlssihle transfer of the main matter.
Such techilicalities do not belong to the content and interpretation of con-
G stitution~ powers. . , , ..
_ T<) ·the extent power of withdrawal and transfer of cases to the apex •
eo'urtis,"in the opinion of the 'court, necessary for the purpose of effectual"
ing the high purpose ofArticles 136 and 142 (1), the power under Article
i39A, must be held not to'. eXha:ust the power of Withdrawal. and transfer.
H
Article 139A it is relevant to mention here, was introduced as part of the

I
A
scheme of the 42nd Constitutional Amendment. That amendment
proposed to invest the Supreme Court with exclusive jurisdiction to deter-
mine the constitutional validity of central laws by inserting Articles 131 A,
139A and 144A. But Articles 131A, and 144A were omit.led by the 43rd
Amendment Act 1977, leaving Article 139A in tact. That article enables the
litigants to approach the Apex Court for transfer of. proceedings if the B
conditions envisaged in that Article are satisfied. Article 139A was not
intended, nor does it operate, to whittle down the existing wide powers
under Article 136 and 142 of the Constitution.
The purposed constitutional plenitude of the powers of the Apex

Court to ensure due and proper administration of justice is intended to be C
co-extensive in each case with the needs of justice of a given case and to
meeting any exigency. Indeed, in Harbans Singh v. U.P. State (1982) 3 SCR
235 the Court said:
"Very wide powers have been conferred on this Court for due and D
proper administration of justice. Apart from the jurisdiction and powers
conferred on this Court under Arts. 32 and 136 of the Constitution I am of
the opinion that this Court retains and must retain, an inherent power and
jurisdiction for dealing with any extra-ordinary situation in the larger inter-
ests of administration of justice and for preventing manifest injustice being
done. This power must necessarily be sparingly used only in exceptional E
circumstances for furthering the ends of justice. Having regard to the facts
and circumstances of this case, I am of the opinion that this is a fit case
where this Court should entertain the present petition of Harbans Singh
and this Court should interfere."
We find absolutely no merit in this hypertechnical submission of the

F
petitioners' learned counsel. We reject the argument as unsound.
A similar ground is urged in support of contention [BJ in relation to

such withdrawal implicit in the quashing of the .criminal proceedings. On
the merits of the contention.whether such quashing of the proceedings was, . G
in the circumstances of the case, justified or not we have rea.ched a
decision on Contentions [DJ and [E]. But on the power of the court to
withdraw the proceedings, the contention must fail.
We, accordingly, reject both Contentions (A] and [BJ.

H
A Re: Contention (C)

10. Shri Shanti Bhushan contendS that the settlement recorded on
the 14th and 15th of February, 1989, is void under Order XXIH Rule 3B,
Code of Civil Procedure, as the orders affect the interests of persons not
eo-nomine parties to the proceedings, and, therefore,. the proceedings be-
B come representative-procee~gs for the purpose and within the meaning
of Order XX:Ill Rule 3-B C.P.C. The order recording the settlement, not
having been preceded by notice to such persons who may appear to the
Court to be interested in the suit, would, it ,is contended, be vo:d.
' XX:lll Rule 3-B CPC provides: .
Order
c
"Order XXIH Rule 3B.
No agreement or compromise to be entered in a representative

suit without leave of Court.
D (1) No agreement or compromise in a representative suit shall

be entered into without the leave of the Court expressly l"·
recorded in the proceedings; and any such agreement or com-
promise entered into without the leave of the Court so
recorded shall be void.
E
(2) Before granting such leave, the Court shall give notice in
such manner as it may think fit to such persons as may appear
to it to be interested in the suit.
~
EXJ>lanation-In this rule, "representative suit" means,-
F
(a) a suit under Section 91 or Section 92.
(b) a suit under rule 8 of Order 1,
(c) a suit in which the manager of an undivided Hindu family

G sues or is sued as representing the .other members of the
family,
'*-- .
( d) any other suit in which the decree passed may; by virtue of
the provisions of this Code or of any other law for time being in
H
.UNION CARBIDE v. U.0.1. [ VENKATAOIALIAHJ.] 307
force bind any person who is not named as party to t~e suit." A
·~
Shri Shanti Bhushan says that the present proceedings by virtue of

clause ( d) of the Explanation should be deemed to be a representative suit
and that the pronouncement of the Constitution Bench in Sahu case which
has held that Order XXIiI Rule 3-B CPC is. attracted to the present
proceedings should conclude the controversy. The observations in Sahu's B
case relied in this behalf are these:
-J._
"However, Order XXIII Rule 3B of the Code is an important and
significant pointer and the principles behind the said provision
would apply to this case. The said rule 3B provides that no c
agreement or compromise in a representative suit shall be
entered into without the leave of the Court expressly recorded
in the proceedings; and sub-rule (2) of rule 3B enjoins that
before granting such leave the Court shall give notice in such
manner as it may think fit in a representative action. Repre- D
sentative suit, again, has been defined under Explanation to
the said rule vide clause ( d) as any other suit in which the'
decree passed may, by virtue of the provisions of this Code or
of any other law for the time being in force, bind any person
who is not named as party to the suit. !11 this case, indubitably
E
the 'Victims would be bound by the settlement though 11ot named
in the suit. 17iis is a position conceded by all. If that is so, it
would be a representative suit in temis of and for the purpose of
Rule 3B of Order XX/I/ of the Code. If the principles of this rule
are the principles of natural justice then we are of the opinion
that the principles behind it would be applicable, and also that
F
section be applicable, and also that section 4 should be so con-
strued in spite of the difficulties of the process of notice and
other difficulties of making "informed decision making
process cumbersome", as canvassed by the learned Attorney
~
).. General". G
"The Learned Attorney General, however, sought to canvas the
view that the victims had notice and some of them had par-
ticipated in the proceedings. We are, however, unable to ac-
cept the position that the victims had notice of the nature
H
A contemplated under the Act upon the underlying principle , r

• of Order XXIII Rule 3B of the Code. It is not enough to say ...,,...-- '
that the victims must keep vigil and watch the proceeding
.....................In the aforesaid view of the matter, in our opinion,
notice was necessary. The victims at targe did not have the
notice.
B
[Emphasis added]
11. We have given our careful consideration to this submission. The k

question is whether Rule 3-B of Order X.X.III,proprio-vigore, is attracted to
the proceedings in the suit or whether the general principles ~f natural
C ·justice underlying the provision apply. If it is the latter, as ind~ed, the Sahu
case has held, the contention in substance is not different from the one
based on non-compliance with the right of being heard which has been
read into Section 4. The Sahu case did not lay down that provisions of
Order XXIII Rule 3-B CPC, proprio-vigore, apply. It held that thr prin·
D ciples of natural justice underlying the said provisions were not excluded. It
is implicit in that reasoning that Order xx.III Rule 3B in terms did not )'--
apply. The Court thereafter considered the further sequential question
whether the obligation to hear had been complied with or not and what
were the consequences of failure to comply. The Court in the Sahu case
E after noticing that the principle underlying Rule 3-B had not been satisfied,
yet, did not say that the settlement was, for that reason, void. If as Shri
Shanti Bhushan says the Sahu case had concluded the matter, it would
have as a logical consequence declared the settlement void. On the con·
trary, the discussion of the effect of failure of compliance would indicate "t
that the court declined to recognise any such fatal consequences. The
F Court said:
"Though entering into a settlement without the required notice
is wrong. In the facts and circumstances of this case, therefore,
we are of the opinion, to direct that notice should be given
now, would not result in doing justice in the situation. In the
G
premises, no further consequential order is necessary by the ~ ~
Court. Had it been necessary for this Bench to have passed
such a consequential order, we would not have passed any such
consequential order in respect of the same."
H
UNION CARBIDE v. U.O.L[VF.NKATAOIALIAH,J.J 309
12. 1.ie finding on this contention cannot be different from the one A
, ~-~- urged under Contention (I) infra. If the principle of natural justice underly-
ing Order XXill Rule 3-B CPC is held to apply, the consequences of
non-compliance should not be different from the consequences of the
breach of rules of natural justice implicit in Section 4. Dealing with that,
the Sahu case, having regard to the circumstances of the case, declined to
push the effect of non-compliane to its logi.Cal oonclusion and declare the · B
settlement void. On the contrary, the Court in Sahu's case considered it
appropriate to suggest the remedy and curative of an opportunity of being
--J-- _heard in the proceedings for review. In sahu decision the obligation under
Section 4 to give notice is primarily on the Union of India. Incidentally
there are certain observations implying an opportunity of being heard also
before the Court. Even assuming that the right of the affected persons of C
being heard is also available at a stage where a settlement is placed before
the Court for its acceptance, such a right is not referable to, and does not
stem from, Rule 3-B of Order XXIII CPC. The pronouncement in Sahu
case as to what the consequences of non-compliance are in conclusive as
the law of the case. It is not open to us to say whether such a conclusion is D
-'"'( right or wrong. These findings cannot be put aside as mere obiter. ·
Section 112 CPC, illler-a/ia, says that nothing contained in that Code
shall be deemed to affect the powers of the Supreme Court under Article
136 or any other provision of the Constitution or to interfere with any rules
made by the Supreme Court. The Supreme Court Rules are framed and E
promulgated under Article 145 of the ConstitutiOn. Under Order 32 of the
Supreme Court Rules, Order XXIII Rule 3-B CPC is not one of the rules
expressly invoked and made applicable.
In relation to the proceedings and decisions of superior Courts of

unlimited jurisdiction, imputation of nullity is not quite appropriate. They F
decid~ all questions of their own jurisdiction. In Isaacs v. Robertson,1984
(3) AER 140 at 143 the Privy Council said:
"The ....... '. legal concepts of voidness and voidability form part
df the English law of contract. They are inapplicable to orders
made by a court of unlimited jurisdiction in the course of con- G
tentious litigation. Such an order is either irregular or regular.
If it is irregular it can be set aside by the court that made it on
application to that court; if it is regular it can only be set aside
by an appellate court on appeal if there is one to which appeal
lies."
H
A With reference to the "void" cases the Privy Council observed:
".... The cases that are referred to in these dicta do not support
the proposition that there is any category or orders of a court
of unlimited jurisdiction of this kind; what they do support is
the quite different proposition that there is a category of or-
B ders of such a court which a person affected by the order is
entitled to apply to have set aside ex debito justitiae in the
exercise of the inherent jurisdiction of the court without his
needing to have recoilrse to. the rules that deal expressly with
proceedings to set aside orders for irregularity and give to the
judge a discretion·as to the order he will make.· The judges in
c the cases that have drawn the distinction between the two types
of orders have cautiously refrained from seeking to lay down a
comprehensive definition of defects that bring an order into
the category that·attracts ex debito justitiae the right to have it
set aside, save that specifically it includes orders that have
been obtained in breach of rules of natural justice."
D
This should conclude the present Contention under C also against )- .
the petitioners.
Re: Contention (D)
E 13. · This concerns the validity of that part of the orders of the 14th
and 15th of February, 1989 quashing and terminating the criminal proceed-
ings. In the order dated 14th February 1989 Clause (3) of the order
provides:
"..... and all criminal proceedings related to and arisi:ig
out of the disaster shall stand quashed wherever these may be
F pending."
Para 3 of the order dated 15th February, 1989 reads:
"Upon full payment of the sum referred to in paragraph 2
above:
(a) The Union of India and the State of Madhya Pradesh shall
G take all steps which may in future become necessary in order to
implemrnt and give effect to this order including but not
limited to ensuring that any suits, claims or civil or criminal
complaints which may be filed in future against any Corpora-
tion, Company or person referred to in this settlement are
defended by them and disposed of in terms of this order.
H
UNION CARBIDE v. U.0.1.(VENKATACHALIAH,J.] 311
(b) Any such suits, claims or civil or criminal proceedings filed A

or to be filed before any court or authority are hereby enjoined
_ and shall 111ot be proceeded with before such court or authority
except for dismissal or quashing in terms of this order."
The signed memorandum filed by the Union of India and the UCC
includes the following statements: B
"This settlement shall finally dispose of all pa5t, present and
· future claims, causes of action and· civil and criminal proceed-
ings (of any nature whatsoever wherever pending) by all Indian
citizens and all public and private entitles with respect to all
past, present and future deaths, personal injuries, health ef- · C
fects, compensation, losses, damages and civil and criminal
complaints of any nature whatsoever against UCC, Union Car-
bide India Limited, Union Carbide Eastern, and all of their
subsidiaries and affiliates as well as each of their present and
former directors, officers, employees, agents representatives,
attorneys, advocates and solicitors arising out of, relating or D
concerned with the Bhopal gas leak disaster, including past,
present and future claims, causes of action and proceedings
against each 0th.er.
..... and all such criminal proceedings including contempt

. proceedings stand quashed ·and accused deemed to be ac- E
quitted."
The order of 15th February, 1989 refers to the written memorandum

...,... filed by the learned counsel on both sides..
14. The two contentions of the petitioners, first, in regard to the F

legality and validity of· the termination of the criminal proceedings and
secondly, the validity of the protection or immunity from future proceed-
ings; are distinct. They are dealt with also separately. The first - which
is considered here - is in relation to the termination of pending criminal
proceedings.
G
15. Petitioners' learned counsel strenuously contend that the orders
of 14th and 15th of February, 1989, quashing the pending criminal
proceedings which were serious non-compoundable offences under Sec-
tions 304, 324, 326 etc. of the Indian Penal Code are not supportable either
as amounting to withdrawal of the prosecution under Section 321 Code of
Criminal Procedure, the legal tests of permissibility of which are well set- H
I
A tied or as amounting to a compounding of the offences under section 320

Criminal Procedure Code as, indeed, sub-section (9) of section 320 Cr.P.C.
imposes a prohibition on such compounding. It is also urged that the
inherent powers of the Court preserved under Section 482 Cr. P.C. could
not be pressed into service as the principles guiding the administration of
the inherent power could, by no stretch of imagination, be said ·to accom-
B modate the present case. So far as Article 142 (1) of the .Constitution is
concerned, it is urged, that the power to do "complete justice" does not
enable any order "mconsistent with the express statutory provisions of sub-
stantive law, much less, inconsistent with any constitutional provisions" as
observed by this Court in Prem Chand Garg v. Excise Commissioner, U.P.,
Allahabad,[1963).Suppl. 1SCR885 at 899-900).
c 16. Shri Nariman, however, sought to point out that in Prem Chand
Garg's case the words of limitation of the power under Article 142 (1)
with reference to the "express statutory provisions of substantive law" were
a mere obiter and were not necessary for the decision of that case. Shri
Nariman contended that neither in Garg's case nor in the subsequent
D decision in A.R. Antulay v. R:S. Nayak and Anr. ,(1988) 2 S.C.C. 602
where the above observations in Garg's ·case were approved, any question
of inconsistency with the express statutory provisions of substantive law·
arose and in both the cases the challenge had been on the ground of
violation of fundamental rights. Shri Nariman said that the powers under
Articles 136 and 142 (1) are overriding constitutional powers and that
E while it is quite understandable that the exercise of these powers, however
wide, should not violate any other constitutional provision, it would, how-
ever, be 'denying the wide sweep of these constitutional powers if their
legitimate plentitude is whittled down by statutory provisions. Shri
Nariman said that the very constitutional purpose of Article 142 is to em-
power the Apex Court to do complete justice and that if in that process
F the compelling needs of justice in a particular case and provisions of some
law are not on speaking terms, it was the constitutional intendment that
the needs of justice should prevail over a provision of law. Shri Nariman
submitted that if the statement in Garg's case to the contrary passes into
law it would wrongly alter the constitutional scheme. Shri Nariman
referred to a number of decisions of this Court to indicate that in all of
them the operative result would not strictly square with the provisions of
G some law or the other. Shri Nariman referred to the decisions of this
court where even non-compoundable offences were permitted to be com-
pounded .in the interests of complete justice; where even after conviction
under Section 302 sentence was reduced to one which was less than that
statutorily prescribed; where even after declaring certain taxation laws un-
H constitutional for lack of legislative competence this court directed that
UNION CARBIDE v. U.0.1.[VENKATAClIALIAH,J.] 313
the tax already collected under the _void law need not be refunded etc. A
Shri Nariman also r.eferred to the Sanchaita case where this Court, having
regard to the large issues of public interest involved in the matter, con-
ferred the power of adjudication of claims exclusively on one forum ir-
respective of jurisdictional prescriptions.
17. Learned Attorney General submitted that the matter had been B
placed beyond doubt in Antulay's case where the court had invoked and
applied the dictum in GOTg's case to a situation where the invalidity of a
judicial-direction which, "was contrary to the statutory provision, namely
section 7(2) of the Criminal Law (Amendment) Act, 1952 arid as such
violative of Article 21 of the Constitution" was raised and the court beld
that such a direction was invalid. Learned Attorney General said that the C
power under Article 142 (1) could not be exercised if it was against an
express substantive statutory provision containing a prohibition against
such exercise. This, he said, is as it should be because justice dispensed by
the Apex Court also should be according to law.
The order terminating the pending criminal proceedings is not sup- D

portable on the strict terms of Sections 320 or 321 or 482 Cr. P.C. Con-
scious· of this, Shri Nariman submitted that if the Union of India as the
Dominus dtis through its Attorney-General invited the court to quash the
criminal proceedings and the court accepting the request quashed them,
the power to do so was clearly referable to Article 142(1) read with the
principle of Section 321 Cr.P.C. which enables the Government through E
its public-prosecutor to withdraw a prosecution. Shri Nariman suggested
that what this Court did on the invitation of the Un~on of India as Dominus
Litis was a mere procedural departure adopting the expedient of "quashing"
.• as an alternative to or substitute for "withdrawal". There were only pro-
cedural and terminological departures and the Union of India as a party
inviting the order could not, according to Shri Nariman, challenge the
jurisdiction to make it. Shri Nariman submitted that the State as the F
Dominus Litis may seek leave to withdraw as long as such a course was
not an attempt to interfere with the normal course of justice for illegal
reasons.
18. It is necessary to set at rest certain misconceptions in the argu-

ments touching the scope of the powers of this Court under Article 142(1) G
of the Constitution. These issues are matters of serious public importance.
The proposition that a provision in any ordinary law irrespective of the
importance of the public policy on which it is founded, operates to limit
the powers of the Apex Court under Article 142(1) is unsound and er-
roneous. In both Garg's as well as Antzilay's case the point was one of
H
314 SUPREME COURT REPORTS (1991) SUPP.. 1 S. C.R.
A violation of constitutional provisions and constitutional rights. The obser-

vations as to the effect of inconsistency with statutory provisions were real-
ly unnecessary in those cases as tJ{e decisions in the. ultimate analysis
turned on the breach of constitutional rights. We agree with Shri Nariman
that the power of the Court under Article 142 in so far as quashing of
criminal proceedings are concerned is not exhausted by Sections 320 or
B 321 or 482 Cr.P.C. or all of them put together. The power under Article
142 is at an entirely "different level and of a different quality. Prohibitions
or limitations or provisions contained in ordinary laws cannot, ipso-facto,
act as prohibitions or limitations on the constitutional powers under Ar-
ticle 142. Such prohibitions or limitations in the statutes might embody
and reflect the scheme of a particular law, taking into account the nature
C and status of the authority or the coJJrt on which conferment of powers
- limited in some appropriate way - is contemplated. The limitations
may not necessarily reflect or be based on any fundamental considerations
of public policy. Sri Sorabjee, learned Attorney-General, refering to
Garg's case, said that limitation on the powers under Article 142 arising
from "inconsistency with express statutory provisions of substantive law"
D must really mean and be understood as some "xpress prohibition contained
in any substantive statutory law. He suggested that if the expression
'prohibition' is read in place of 'provision' that would perhaps convey the·
appropriate idea. But we think that such prohibition should also be shown
to be based on some underlying fundamental and general issues of public-
policy and not merely ineidental to a particular statutory sclteme or pat- .
E tern. It will again be wholly incorrect to say that powers under Article
142 are·subject to such express statutory prohibitions. That would convey
the idea that statutory provisions override a constitutional provision. Per-
haps, the proper way of expressing the idea is that in exercising powers
under Article 142 and in assessing the needs of "complete justice" of a
cause or-matter, the apex court will take note of the express prohibitions
in any substantive statutory provision based on some fundamental prin-
F ciples of public-policy and regulate the exercise of its power and discretion
accordingly. The proposition does not relate to the powers of the court
under Article 142, but oniy to what is or is not 'complete justice' of a
cause or matter and in the ultimate analysis of the propriety of the exercise
of the power. No question of lack of jurisdiction or of nullity can arise.
G Learned Attorney General said that Section 320 Criminal Procedure

Code is "exhaustive of the circumstances and conditions under which com-
position can be effected." [See Sankar Rangayya v. S01ikar Ramayya (AIR
1916 Mad. 463 at 485] and that "the courts cannot go beyond a test laid
down by the Legislature for determining the class of offences that are
H compoundable and substitute one of their own." Learned Attorney
UNION CARBIDE v. U.0.1. [ VENKATACHALIAH,.J.] 315
General also referred to the following passage in Biswabahan v. Gopen A

• ~ Chandra (1967) SCR 447 at 451:
"If a person is cliar-ged with an offence, then unless there is

some provision for composition of it the law must take its
course and the charge enquired into resulting either in convic-
tion or acquittal." B
He said that "if a criminal· case is declared to be non-compoun-
dable, then it is against public policy to compound it, and any agreement to
that end is wholly void in law." (See ILR 40 Cal.113 at 117-118); and
submitted that court "cannot make that legal which the law condemns".
Learned· Atto:-ney-General stressed .that the criminal case was an inde- C
pendent matter and of great public concern and could not be the subject
matter of any compromise or settlement. There is some justification say to
that statutory prohibition against compounding of certain class of serious
offences, in which larger social interests and social security are involved, is
based on broader and fundamental considerations of public policy. But all
statutory prohibitions need not necessarily partake of this quality. The D
attack on the power of the apex court to quash the crucial proceedings
under Article 142(1) is ill-conceived. But the justification for its exercise is
another matter.
19. The proposition that State is the dominus Litis in criminal cases,
is not an absolute one. The society for its orderly and peaceful develop- E
ment is interested in the punishment of the offender. [See A.R. Antulay v.
R.S. Nayak & A11r. [1984] 2 SCC 500 at 508, 509 and "If the offence for
which a· prosecution is being launched is ·an offence against the society
and not merely an individual wrong, any 111ember of the society must have
locus to initiate a prosecution as also to resist withdrawal of such prosecu-
tion, if initiated." [See Sheonan(lan Paswan v. State of Bilzar & Ors. (1987] F
1 sec 289 at 316).
But Shri Nariman put it effectively when he said that if the position
in relation to the criminal cases was that the court was invited by the
Union of India to permit the termination of the prosecution and the court
consented to it and quashed the criminal cases, it could not be said that G
there was some prohibition in some law for such powers being exercised
under Article 142. The mere fact that the word 'quashing' was used did
not matter. Essentially, it was a matter of mere form and procedure and
not of substance. The power under Article 142 is exercised with the aid
of the principles of Section 321 Cr.P.C. which enables withdrawal of
prosecutions. We cannot accept the position urged by the learned AUor- H
A ney-General and learned counsel for the petitioners that court had no
power or jurisdiction to make that Qrder. We do not appreciate Union of ~ -
India which filed the memorandum of 15th February, 1989 raising the plea
of want of jurisdiction.
But whether on the merits there were justifiable grounds to quash

B is a different matter. There must be grounds to permit a withdrawal of
the Prosecution. It is really not so much a question of the existence of the
power as one of justification for its exercise. A prosecution is not quashed
for no other reason than that the Court has the power to do so. The
withdrawal must be justified on grounds and principles recognised as
proper and relevent. There is no indication as to the grounds and-criteria
C justifying the withdrawal of the prosecution. The considerations that guide
the exercise of power of withdrawal by Uovernment could be and are many
and varied. Government must indicate what those considerations are. This
Court in State of Punjab v: Union of India, [1986] 4 SCC 335 said that in
the matter of power to withdraw prosecution the "broad ends of public
justice may well include appropriate sodal, economic a!ld political pur-
pOSt<S". In the present case, no such. endeavour was made. Indeed, the
D stand of the UCC in these review petitions is not specific as to the court
to permit a withdrawal. Even the stand of the Union of India has not been
consistent. On the question whether Union of India itself invited the order
quashing the criminal cases, its subsequents stand ·in the course of the
arguments in Sahu case as noticed by the court appears to have been this:
E " ... The Government as such had nothing to do with the quash-
ing of the criminal proceedings and it was not representing the
victims in respect of the criminal liability of the UCC or UCIL
to the victims. He further submitted that quashing of criminal
proceedings was done by the Court in exercise. of plenary
powers under Articles 136 and 142 of the Constitution ...."
F The guiding principle in according permission for withdrawal of a
prosecution were stated by this Court in M.N. Sankarayanan Nair v. P. V.
Balakrish11an & Ors. [1972) 2 SCC 599: .
" ...Nevertheless it is the duty of the Court also to see in

furtherance of justice that the permission is not sought on
G grounds extraneous to the interest of justice or that offences
which are offences against the State go unpunished merely be-
cause the Government as a matter of general policy or ex-
pediency unconnected with its duty to prosecute offenders
under the law, directs the public prosecutor to withdraw from
H the prosecution and the Public Prosecutor merely does so at
... ~
the behest."
Learned counsel for the petitioners submitted that the case involved
A
the allegation of commission of serious offence:s in the investigation of

which the society was vitally interested and that considerations of public
interest, instead of supporting a withdrawal, indicate the very opposite.
The offences refote to and arise out of a terrible and ghastly tragedy. B
Nearly 4,000 lives were lost and tens of thousarids of citizens have suffered
injuries in various degrees of severity. Indeed at. one point of time UCC
-~ itself recoginsed the possibility of the accident having been the result of
acts of sabotage. It is a matter of importance that offences alleged in the
oontext of a disaster of such gravity and magnitude should not remain
uninvestigated. The shifting stand of the Union of India on the point should c
not by itself lead to any miscarriage of justice.
We hold that no "• ~cific ground or grounds for withdrawal of the

prosec.utions having been set out at that stage the quashing of the prosecu-
tions requires to be set aside.
D
20. There is, however, one aspect on which we should pronounce.
Learned Attorney-General showed us some correspondence pertaining to
a letter Rogatory in the criminal investigation for discovery and inspection
of the UCC's plant in the United States for purposes of comparison of
the safety standards. The inspection was to be conducted during the mid-
die of February, 1°89. The settlement, which took place on the 14th of E
February, 1989, it is alleged, was intended to circumvent that inspection
we have gone through the correspondence on the point. The docum.ents
relied upon do not support such an allegation. That apart, we must confess
~- our inability to appreciate this suggestion coming as it does from the
Government of India which was a party to the settlement.
F
21. However, on Contention (D) we hold that the quashing and ter-
mination of the criminal proceedings brought about by the orders dated
14th and 15th February, 1989 require to be, and are, hereby reviewed a.nd
set aside.
Re: Co11te11tio11 (E)

G
..> x 22. The written me~morandum setting out the terms of the settlement
filed by the Union of India and the U.C.C. contains certain terms which are
susceptible of being construed as conferring a general future immunity
from prosecution. The order dated 15th February, 1989 provides in clause
3la) and 3[b] : H
318 SUPRE¥E COURT REPORTS (1991) SUPP. I S. C.R.
A " ....that any suits , claims or civil or criminal complaints which

may be filed in future aganist any Corporation, Company or
person referred to in this settlement.are defended by them and
disposed of in terms of this order".
" Any such suits, claims or civil or criminal proceedings filed

B or to be filed before any court or authority or hereby enjoined
and shall not be proceeded with before such court or Authority
except for dismissed or quashing in terms of this order.''.
These provisions, learned Attorney General contends, amount to

conferment of immunity from the operation of the criminal law in the
C future respecting matters not already the subject matter of pending cases
and therefore, partake of the character of a blanket criminal immunity
which is essentially a legislative function. There is no power or jurisdiction
in the courts, says learned Attorney-General, to confer immunity for
criminal prosecution and punishment. Learned Attorney General also con-
tends that grant of immunity to a particular person or persons may amount
D to a preferential treatment violative of the equality clause.
This position seems to be correct. In Apodaca v. Viramontes 13 ALR

1427, it was observed:
"............The grant ofan immunity is in very truth the assump-
tion of a legislative power ....". (P.1433)
E
" ..........The decisive question, then, is whether the district attor-
ney and the district court in New Mexico, absent constitutional
provision or enabling statute conferring the power, are
authorized to grant immunity from prosecution for an offense
to which incriminating answers provoked by questions asked
will expose the witness.
F
We are compelled to give a negative answer to this inquiry.
Indeed, sound reason and logic, as well as the great weight of
authority, to be found both in text books and in the decided
, cases, affirm that no such power exists in the district attorney
and the· district court, either or both, except as placed there by
G constitutional or statutory language. It is unnecesary to do
more in this opinion in proof of the statement. made than to
give a few.rc::ferences to texts and to cite some of the leading
. ·cases.... "
[p. 1431)
H
After the above observation, the court referred to the words of Chief A
~~ Justice Cardozo (as he then was in the New York Court of Appeals] in
Doyle v. Hafstader [257 NY 244]:
"........ The grant of an immunity is in very truth the assumption

of a legislative power, and that is why the Legislature, acting
alone; is incompetent to declare it. It is the assumption o~ a B
power to annul as to individuals or classes the statutory law of
crimes, to stem the course of justice, to absolve the grand
jurors ofthe county from the performance of their duties, and
the prosecuting officer from his. All these changes may be
wrought through the enactment of a statute. They may be
wrought in no other way while the legislative structure of our c
government continues what it is".
In the same case the opinion of Associate Judge Pound who dis-
sented in part on another point, but who erttirely shared the view expressed
by Chief Justice Cardozo may also be cited:
D
"The grant of i••1munity is a legislative function; The Governor
may pardon after conviction [NY Const. Art. 4 & 5], but he
may not grant immunity from criminal prosecution or may the
courts. Amnesty is the determination of the legislative power
that the public welfare requires the witness to speak." [P. 1433]
E
Learned Attorney General referred us to the following passage in
"Jurisprudence" by Wortley:
.. ..,.. "Again, if we say that X has an immunity from arrest when a
sitting member of the House of Commons, then during its sub-
sistence he has an immunity that is denied to the generality of F
citizens; there is an inequality of rights and duties of citizens
when the immunity is made out ......".[p. 297] ·
This inequality must be justified by intelligible differentia for clas-

sification which are both reasonable and have a rational nexus with the
object. G
# ¥
Article 361(2) of the Constitution confers on the President and the
Governors immunity even in respect of their personal acts and enjoins that
no crim~nal proceedings shall be instituted against them during their term
of office. As to the theoretical basis for the need for such immunity, the
Supreme Court of the United States in a case concerning immunity from H
A civil liability [Richard Nixon · v. Ernest Fitzgerald, 451 US 731: 73 L Ed 2d 1----- •

349 said:·
".... This court necessarily also has weighed concerns of public

policy, especially as illuminated by our history and the struc-
ture of our government ... ." (p. 362)
B
".... In the case of the President tlie inquiries into history and
policy, though mandated independently by our case, tend to
converge. Because the Presidency did not exist through mos~
of the development of common law, any historical analysis
must draw its evidence primarily from our constitutional
c heritage and structure. Historical inquiry thus merges almost
at its inception with the kind of "public policy" analysis ap-
propriately undertaken by a federal court. This inquiry invol-
ves policies and principles that may be considered implicS in
the nature of the President's office in a system structured to
achieve effective government under a constitutionally man-·
D dated separation of powers."
(p. 362 and 363] ·

"...... In view of the special nature of the President's constitu-
tional office and functions, we think it a{J°propriate to recognise
absolute Presidential immunity from damages liability for acts
E within the "outer perimeter" of his official responsibility.
Under the Constitution and laws of the United States the
President has discretionary responsibilities in a broad variety
of areas, many of them highly sensitive. In many cases it would
be difficult to determ.ine which of the President's innumerable
F "functions" encompassed a particular action .... "
(p. 367]
Following observations of Justice Storey in his "Commentaries in the

Constitution of United States" were referred to:
G " There are ...... incidental powers, belonging to the executive
department, which are necessarily implied from the nature of
the functions, which are confided to it. Among these, must
necessarily be included the power to perform them.... The
president cannot, therefore, be liable to arrest, imprisonment,
H or detention, while he is in the discharge of the duties of his
UNION CARBIDE v. U.O.I. [ VENKATACHALIAH,J.] 321
office; and for this purpose his person must be deemed, in civil A
cases at least, to possess an official inviolability".
[p. 363)
23. Indeed, the submissions of learned Attorney General on the
theorel:ical foundations as to the source of immunity as being essentially
legislative may be sound. But the question does not strictly arise in that B
sense in the present case. The direction that future criminal proceedings
shall not be instituted or proceeded with must be understood as a con-
comitant and a logical consequence ·of the decision to withdraw the pend-
ing prosecutions. In that context, the stipulation that no future
prosecutions shall be entertained may not amount to conferment of any
immunity but only to a reiteration of the consequences of such termination c
of pending prosecutions. Thus understood any appeal to the principle as
to the power to confer criminal immunity becomes inapposite in this case.
24. However, in view of our finding on contention (D) that the

· quashing of criminal proceedings was not justified and that the orders
dated 14th and 15th of February, 1989 in that behalf require to be reviewed D
and set-aside, the present co.ntention does not survive because as a logical
corollary and consequence of such further directions as to future prosecu-
tions earlier require to be deleted. We, therefore, direct that all portions in
the orders of this Court which relate to the incompetence of any future
prosecutions be deleted.
E
25. The effect of our order on Contentions [DJ and [E] is that all
portions of orders dated 14th and 15th February, 1989, touching the quash-
ing of the pending prosecution as well as impermissibility of future criminal
liability are set-aside. However, in so far as the dropping of the lJroceed-
ings in contempt envisaged by clause (b) of para 4 of the order dated 15th
February, 1989 is concerned, the same is left undisturbed .. F·
Contention (e) is answered !lccordingly.
Re: Contention (F)
26. As we have seen earlier the memorandum of settlement as well
as the orders of the Court contemplate that with a view to effectuating the G
settlement there be a termination of pending criminal prosecution with a
further stipulation for abstention from future criminal proceedings.
Petitioners have raised the plea - and learned Attorney General supports
them - that the language of the memorandum of settlen:ie_nt ~s well as the
ordtrs of the court leave no manner of doubt that a part of the considera-
tion for the payment of 470 million US dollars was the stifling of the H
322 SUPREME COURT REPORTS (1991} SUPP. 1 S. C.R.
A prosecution and, therefore, unlawful and opposed to public policy. Relying ~-·
upon Sections 23 and 24 of the Indian Contract Act it was urged that ii
any part of a single consideration for one or more objects or any one or ')
any part of any one of several considerations for a single object is unlawful,
the agreement becomes "void".
27. At the outset, learned Attorney General sought to clear any pos-
B sible objections based on estoppel to the Union of India, which was a
consenting party to the settlement raising this plea. Learned . Attorney-
General urged that where the plea is one of invalidity the conduct of par- +--
ties becomes irrelevant and that the plea of illegality is a good answer to
the objection of consent. The invalidity urged is one based on public-
c policy. We think that having regard to the nature of plea -·- one of nullity
· --- no preclusive effect of the earlier consent should come in the way of the
Union of India from raising the 'plea. Illegalities, it is said, are incurable.
This position is ·fairly well established. In re A Bankruptcy Notice (1924
2 Ch.D. 76 at 97) Atkin LJ. said:
"It is well established that it is impossible in law-for a person to allege
D any kind of principle which precludes him from alleging the invalidity of -~
that which the statute has, on grounds of general public policy, enacted
shall be invalid."
In Maritime Electric Co.Ltd. v. General Dairies Ltd. AIR 1937 PC 114

at 116-117 a similar view fmds expression:
E "..........an estoppel is only a rule of evidence which under certain
special circumstances can be invoked by a party to .an action; it cannot
therefore avail in such a case to release the plaintiff from an obligation to
obey such a statute, nor can it enable the defendant to escape from '"'{ ..
statutory obligation of such a kind on his part. It is immaterial whether the
obligation is onerous or otherwise to the party suing. The duty of each
F party is to obey the law.
........The court should first of all determine the nature of the obliga·
tion imposed by the statute, and then consider whether the admission of an
estqppel would nullify the statutory provision. ·
case
..... there is not a single in which an estoppel has been allowed in >'
G such a case to defeat a statutory obligation of an unconditional character." x
The case of this Court in point is of the State of Kera/a & Anr. v. The
Gwalior Rayon Silk Manufacturing (Wvg.) Co. Ltd. etc. (1974) 1 SCR 671.
at 688 where this court repelled the contention that ari agreement on .
the part of the Government riot to acquire, for a period of (j() years the
H lands of the 90mpany did not prevent the State from enacting or ·giving
UNION CARBIDE v. U.O.L(VENKATACHALIAH,J.J 323
. ·~
effect to a legislation for acquisition and that the surrender by the Govern- A
ment of its legiSia:tive powers which are intended to be used for public good
cannot avail the c0mpany or operate against the Government as equitable
estoppel. It is unnecessary to expand the discussion and enlarge
authorities.
We do not think that the Union of India should be precluded from
urgii1.g the contention as to invalidity in. the present case. B
28. The mairi argumerats ('n invalidity proceed on the premise that
the terms of the settlement· and the orders' o'f 'the ci>urt passed pursuant
thereto contemplate, amount to and permit a compounding of non-com·
poundable offences which is opposed to publilf.policy and, therefore, un-
lawful. The orders of the court based on aQ.1agreement whose or part of C
whose consideration is unlawful have, it is drg~d, no higher sanctity than
the agreement on which it is based. The orders of the court base«;t on
consent of parties do not, so goes the ar~ent, reflect an adjudicative
imposition of the court, but merely set the seal of the court on what is
essentially an agreement between the parties. It is urged that the validity
and durability of a consent order are wholly dependent on the legal validity D
of the agreement, on which it rests. Such an order is amenable to be
set-aside on any ground which would justify a setting aside of the agree-
ment itself.
These principles are unexceptionable. 1.ndeed, in Huddersfield
Banking Compa11y Ltd. v. Henry Lister & So11 Ltd, (1895] 2 Ch. 273 at 276 E
Vaughan Williams J. said:
"..... it seems to me that the clear result of the authorities is
that, notwitltsta11di11g tlte c011sent order has bee11 draw11 up and
completed, and acted upon to the extent that the property has
been sold and the money has been paid into the hands of the
receiver, I may, 11ow set aside tlie order and ammgemem upon F
a11y ground which would justify me i11 setti11g aside a11 agreement
e11tered imo between tire ponies.
· nre real tnttlr of tire matter is tllat tire order is a mere creature
·of tire agreemellt, a11d to say that tlle. Coult ca11 set aside tire
agi-eement - a11d it was 11ot disputed that tllis could be do11e if G
a co111mo11 mistake were proved - but that it cannot set aside
an order which was the creature of that agreement, seems to
me to ~e giving the branch an existence which is independent
of tbe tree. ·
/
/
[emphasis added]
H
324 SUPREME COURT REPOlt1'5 (1991) SUPP. 1 S. C.R.
·A This was affirmed in appeal by Lindley L,,f. mthe following words:
"the appellants, contend that the~e is no jurisdiction to set

aside the consent order upon such i:naterials as we have to deal
with ; and they go so far as to say t~at a consent order can only
be set aside on the ground of f~aud. I dissent from that
B proposition entirely. A consent order, I agree, is an order; and
so long as it stands I think it is as good an estoppel as any other
order. I have not the slightest doUbt on that; nor have I the
slightest doubt that a consent order can be impeached, not only
on the ground of fraud, but upon ~y grounds .which invalidate
c
the agreement it expresses in a moreJ.fo~al way than usual".
In Great North-West Central Railway QJ. t& Ors. v. Charlebois and

(p. 280)
I
\
i
--
Ors, (1899 AC 114 at 124, the Privy Council stated the proportion thus: I
"It is quite clear that a company qannot do what is beyond its \
legal powers by simply going intq co.urt and consenting to a
D
decree which orders that the thing shall be done ... Such a judg-
ment cannot be of more validity titan the invalid. contract on
which it was fou11ded". ·
\ i
[emphasis added] \. ~
E It is, indeed, trite proposition that a cpntract whose object is op-

posed to public policy is invalid and it is not any the less so by reason alone
of the fact that the unlawful terms are embodied in a consensual decree. In
State of Punjab v.Amar Singh·, (1974) 2 SCC 70 at 90, this Court said:
After all, ·by consent or agreement, parties cannot achieve what
is contrary to law and a decree merely based on such agree-
F ment cannot furnish a judicial amulet against statutory viola-
tion .... The true rule is that the contract of the parties is not the
less a contract, and subject to the incidents of a contract, be-
cause there is superadded the command of the Judge".
29. We do not think that the plea of "Accord and Satisfaction"
G raised by the UCC is also of any avail to it. UCC contends that the funds x .......
constituting the subject-matter of the settlement had been accepted and
appropriated by Union of India and that, therefore, there was full accord
and satisfaction. We find factually that thert is no appropriation of the
funds by the Union of India. The funds remain to the credit of the
Registrar- General of this Court in the Reserve Bank of India. That apart
H as observed in Corpus Juris Seczmdum, Vol.I:
"an illegal contract or agreement, such as one involving ii- A

legality of the subject matter, one involving the unlawful sale or
exchange of intoxicating liquors, or a subletting, subleasing, or
hiring out of convicts, held under iease from the state, in viola-
tion of statute, or stifling a prosecution for a public policy,
cannot constitute or effect an accord and satisfaction". ·
B
(p. 473]
(emphasis added]
30. The main thrust of petitioner's argument of unla\\fulness of cone

sideration is that the dropping of criminal charges and undertaking to C
abstain from bringing criminal charges in future were part of the con-
sideration for the offer of 470 million US dollars by the UCC and as the
offences involved in the charges were of public nature and non-compoun-
dable, the consideration for the agreement was stifling of prosecution and,
therefore, unlawful. It is a settled proposition and of general application
that where the criminal charges are matters of public concern there can be D
no diversion of the course of public justice and cannot be the subject
matters of private bargain and compromise.
31. Shri Nariman urged that there were certain fundamental mis-
conceptions about the scope of this doctrine of stifling of prosecution in
the arguments of the petitioners. He submitted that the true principle was E
that while non-compoundable offences which are matter of public concern
cannot be subject-matter of private bargains and that administration of
criminal justice should not be allowed to pass from the hands of Judges to
private individuals, the doctrine is not attracted where side by side with
criminal - liability there was a pre-existing civil liability that was also settled
and satisfied. The doccrine, he said, contemplates invalidity based on the F
possibility of the ~lement of coercion by private individuals for private
gains taking advantages of the threat of criminal prosecution. The whole
idea o; applicability of this doct~ine in this case becomes irrelevant having
regard to the fact that the Union of India as dominus litis moved in the
matter and that administration of criminal justice was not sought to be
exploited by any private individual for private gains. Shri Nariman sub- G
mitted that distinction between "motive" and "consideration" has been well
recognised in distinguishing whether the doctrine is or is not attracted.
32. The questions that arise in the present case are, first, whether
putting an end to the criminal proceedings was a part of the consideration
H
A and bargain for the payment of 470 million US :dollars or whether it was
merely one of the motives for entering into the settlement and, secondly,
whether the memorandum of settlement and Qrders of this court, properly
construed, amount to a compounding of the dffences. If, on the contrary,
what was done was that Union of India invited the court to exercise its
powers under Article 142 to permit a withdr~wal of the prosecution and
B the expedient of quashii;ig was a mere proce<lJure of recognising the effect
of withdrawal, could the settlement be declarcirvoid ?
We think that the main settlement does *Cl,t suffer from this vice. The
pain of nullity does not attach to it flowing from any alleged unlawfulnesi;
of consideration. We shall set out our reasons !Presently. . .
c Stating the law on the matter, Fry L.J. i.n WimJ/JiliLocal Board of
Heoitli v. Vint. (1890) 45 Ch.D. 351at366 said j · .
. ' .
"We have therefore a case in whic~ a eontract is entered iiito

for the purpose of diverting .:...... l ~ay say perverting -.-. the
course. ofjustiee ; and, although I agree that in this case it was
D
. entered into with perfect good faith'. and with all the security
which could possibly be given 'to such an agreement, I never-
theless think that the general principle applies, and that we
cannot give effect to the agreement, the consideration of which
is the diverting t~e course of public justice."
E
In Keir v. Leeman, [6 Queen's Bench 308 at 316, 322); Lord Denman,
C.J. said: ·· · ·
"The principle of law is laid down by Wilmot C.J. in Collins v.

Blantem (a) that a contract to withdraw a prosecution for per-
jury, and consent to give no evidence againstthe accused, is
F
founded on an unlawful consideration and void.
On the soundness of this decision no doubt can be entertained,

whether the party accused were innocent or guilty of the crime
charged. If innocent, the law was abused for the purpose of
extortion; if guilty the law was eluded by a corrupt .com-
G
promise, screening the criminal for a bribe. · · .
......Eut, if the offence is of a public nature, no agreenientcan

be valid that is founded ·on the consideration of stifling a
-
prosecution for it.
H
.·
UNION CARBIDE v. U.O.L [VFNKATAOIALIAH).) 327
In the present· instan~, the offence 'is not confined to personal A

injury, but is accompanied with riot and obstruction of a public
officer in the execution of his duty. These are matters of public
concern, and therefore not legally the subject of a com-
promise~
The approbation of the Judge (whether necessary or not) may B

properly be asked on all occasions where an indictment is com-
promised on the trial ; plainly it cannot make that legal which
the law eondemns."
This was affirmed in appeal b}' Tindal CJ. who said (p.393) :
"It seems clear, from the various authorities brought before us C
on the argument, that some misdemeanours are of such a na-
ture that a contract to withdraw a prosecution in respect of
them, and to consent to give no evidence against the parties
accused, is founded on an illegal consideration. Such was the
case of Co//i11s v. B/011tem, 2 Wils. 341, 347, which was the case
of a prosecution for perjury. It is strange that such a doubt D
should ever have been raiSed. A contrary decision would have
placed it in the power of a private individual to make a profit
to himself by doing a great public injury."
V. Norosimlio Raju v. V. Gurnmurthy Raju & Ors. [1963) 3 S.C.R. 687
of this court is a case in point. The first respondent who had filed a
criminal complaint in the Magistrate's Court against the appellant and his E
other partners alleging of commission of offences under Sections 420, 465,
468 and 477 read with Sections 107, 120B of the Indian Penal Code entered
into an agreement with the accused persons under which the dispute be-
tween the appellant and the first respondent and others was to be referred
to arbitration on the first respondent agreeing to withdraw his criminal F
complaint. Pursuant to· that agreement the complaint was got dismissed,
on the first-respondent abstaining from adducing evidence. The arbitra-
tion proceedings, the consideration for which was the withdrawal of the
complaint, culminated in an award and the first respondent ;applied to have
the award made a rule of the eourt. The appellant turned around and
challenged the award on the ground that the consideration for the arbitra- G
tion-agreement was itself. unlawful as it was one not to prosecute a non-
compoundable offence. This court held that the arbitration agreement was
void under Section 23 of the Indian Contract Act as its consideration was
opposed to public policy. The award was held void.
~. even ill~S\lming thilt the Union of India agreed to compound H

328 SUPREME COURT REPORTS [1991] SUPP. 1 S. C.R.
A non-compoundable offences, would this constitute a stifling of prosecution

in the sense in which the doctrine is understood. The essence of the
doctrine of stifling of prosecution is that no private person should be al- ~ •
lowed to take the administration of criminal justice out of the hands of the
Judges and place it in his own hands .. In Rameshwar v. Upendranath, AIR
1926 Calcutta 451, 456 the High Court said :
B "Now in order to show that the object of the Agreement was to
stifle criminal prosecution, it is necessary to prove that there
was an agreement between the parties express or implied, the
consideration for which was to take the administration of law
out of the hands of the Judges and put it into the hands of a ..:r-·
private individual to detemzi11e what is to be done ill particular
c case and that the contracting parties should enter i11to a bargain
to that effect".
[emphasis added]
V. Narasimha Raju (supra) this Court said :

D [p. 693]
"The principle underlying this provision is obvious. Once the

machinery of the Criminal Law is set into motion on the allega-
tion that a non-compoundable offence has been committed, it
is for the criminal courts and criminal courts alone to deal with
E that allegation and to decide whether the offence alleged has in
fact been committed or not. 17ze decision of this question ca11-
11ot either directly or i11directly be take11 out of the ha11ds of
criminal courts and dealt with by private individuals."
F [Emphasis added]
This was what was reiterated in Ouseph Poulo & Ors. v. Catholic
Union Bank Ltd. & Ors. [1964] 7 SCR 745:
"With regard to non-compoundable offence, however, the posi-

tion is clear that no C£!Urt to law can allow a private party to take
G the admi11iftratio11 of law in its own hands and settle tlie questio11
as to whether a particular offence has been committed or not for
itself"
x ....
[ Emphasis added ]
H
UNION CARBIDE v. U.O.I. [ VENl<ATACHALIAH,J.] 329
In this sense, a private party is not taking administration of law in its A

own hands in this case. It is the Union of India, as the dominus litis, that
• ...-J consented to the quashing of the proceedings.. We have said earlier that
what was purported to be done was not a compounding of the offences.
Though, upon review, we have set aside that part of the order, the conse-
quences of the alleged unlawfulness of consideration must be decided as at
the time of the transacti9n. It is here that we see the significance of the B
concurring observations of Cha pan J. in Majibar Rahman v. Muktaslied
Hossein, ILR 40 Calcutta page 113 at page 118, who said .
"I agree, but desire to carefully confine my reason for holding
that the bond was void to the ground that the consideration for
the bond was found by the lower Court to be a promise to C
withdraw from the prosecution in a case the compromise of
which is expressly forbidden by the Code of Criminal Proce-
dure."
As stated earlier, the arrangement which purported to terminate the

criminal cases was one of a purported withdrawal not forbidden by any law D
but one which was clearly enabled. Whether valid grounds to permit si.tch
withdrawal existed or not is another matter.
35. Besides as pointed out by this court in Narasimha Raju's case

(supra) the consequence of doctrine of stifling of prosecution is attracted,
and its consequences follow where a "person sets the machinery of criminal E
law into action on the allegation that the opponent has committed a non-
compoundable offence and by the use of this coercive criminal process he
compels the opponent to enter into an agreement, that agreement would
be treated as invalid for the reason that its consideration is opposed to
public policy". (See page 692 of the report ). In that case this court further
held that the doctrine applies "when as a consideration for not proceeding F
With a criminal complaint, an agreement is made, in substance it really
means that the complainant has taken upon himself to deal with his com-
plaint,a11d on the bargaining counter he has used his 11011-prosecution of the
complaint as a consideration for the agreement which his opponent has been
induced or coerced to enter into". (emphasis added). These are not the
features of the present case. G
36. More importantly, the distinction between the "motive" for
entering into agreement and the "consideration" for the agreement must be
kept clearly distinguished. Where dropping of the criminal proceedings is
a motive for entering into the agreement - and not its consideration - the
doctrine of stifling of prosecution is not attracted. Where there is also a H
330 SUPREME C'.OURT REPORTS (19'Jl) SUPP. 1 S. C.R.
A pre-existing· civil liability, the dropping of criminal proceedings need not

necessarily be a consideration for the agreement to satisfy that liability. In
Adhikmula Sahu & Ors. v. Jogi Sahu & Ors. AIR 1922 Patna 502, this
distinction is poitlted out: ·
"The distinction between the motive for coming to an agree-
ment and the actual consideration for the agreement must be
B kept carefully in view and this care must be particularly exer-
cised in a case· where there is a civil liability already existing,
which is discharged or remitted by the Agreement".
(p. 503)
C In Deb.Kumar Ray Choudhury v. Anath Bandhu Sen and Ors. AIR
1931 Cat 421. it was mentioned :
· "A contract for payment of money in respect of which a criminal
prOS(!CUtiOll WOS pennissib/e under the law, Was not by itself op- .
. posed to public policy.
D ...... the withdrawal of the. prosecution iri the case before us
might have been the motive but not certainly the object or the
oonsideration of the contract as .evidenced by the bond in suit
. so as to render the agreement illegal.
Th.ese decisions are based upon the facts of the cases :;bowing
E clearly that the agreements or the contracts sought to be en-
·.· forced were the foundation for the withdrawal of non-com-
.poundable criminal cases and were declared to be unlawful on
t~.e gr<;>und of public policy wholly void in law and, therefore,
unenforceable. This class ofca$es has no application, where, as
in.the present .case, there was a pre-existing civil liability based
F upon adjustment of accounts between the parties concerned."
[emphasis added)
Ag~in. in Babu Hamaraih Kapur v. Babu 'Ram Swqrnp Nigam & Anr.
G [AIR 1941 Oudh 593) this distinction has been pointed out:
."Thouift the ~otive of the· execution of.the document. may be
the withdrawal of a non-compoundable criminal case; the con-
sideration is quite legal, provided there is. an enforC(!able pre-
existing liability. In the Patna case it was observed that the ·
distinction between the motive for coming to an agreement and
H the actual consideration. fo~ the agreement must be kept care-
UNION.CARBIDE v. U.O.L[VENKATAOIALIAH,J.) 331
fully in view and this care must be particularly exercised in a A

case where there is a civil liability already existing which is
discharged or remitted by the agreement." [P.592) .
Finatly, this Court in Ouseph Poulo (supra) at page 749 held that:
"In dealing with such agreements, it is, however, necessary to
bear in mind the distinction between the motive which may B
operate in the mind of the complainant and the accused and
which may indirectly be responsible for the agreemetit and the
consideration for such an agreement. It is otlly where the agree-
. ment is supported by the prohibited consideration that it falls
within· the mischief of the principle, that agreemen.ts which in-
tend to stifle criminal prosecutions are invalid."
c
·.·[Emphasis added)
37. On a consideration of the matter, we hold that the doctrine of·

stifling of prosecution is not attracted in the present case, In reaching this
co~lusion we do not put out of eonsideration that it is inconceivable that
. Uajon of India would, under the threat of a prO!!fiCUtion, coerce ucc to D
pay. 470 million US dollars or any part thereof as considerationfor stifling
of the prosecution. In the ·context of the Union. of India the· plea lacks as
much in reality as in a sense of proportion.. ·
38. AC:cordingly on Contention (F) we hold that the settlement is
not hit by Section 23 or 24 of the Indian Contract Act and that no part of .
the consideration for pa}'ment of 470 mil~ion us dollars was unlawful~ E
Re: Conteniion (G)
39. This concerns the ground that a "Fairnfss-Hearing", as under-
stood in the American procedure is mandatory before· a mass- tort action is
settled and the settlement in the.present case is bad as no such procedure
had preceded it It is al.So urged that the quantum settled for is hopelessly F
inadequate as .the settlement ha.s not enVisaged and provided for many
heads of compensation such as the future medical surveillance costs of a
large section· of the. exposed population which is put at risk; and that the
_Jo~c fort actions where, the latency-period for the manifestation of the
effects Qf the exposure is unpredictable it is necessary to have a "re-opener"
G
-
clause as in the very .nature of toxic injuries the fatency period for the
manifestation of effects .is unpredictable and any structured. settlement
.... should .contemplate and provide for the possible. baneful contingencies'. of
the future. It is pointed out for the petitioners that the order recor,ding the
settlement·. and the· order dated 4th May, .1989 indiCate that 110 · provision
was made: for such imminent contingencies for the future \Vhich. even in- H
332 SUPREME COURT ·REPORTS (1991) SUPP. 1 S. C.R.
\
A elude the effect of the toxic gas on pregnant mothers resulting in congenital
.abnormalities of the children. These aspects, it is urged, would have been
appropriately discussed before the Court, had the victims and victim-
groups had a "Fairness-Hearing". It is urged that there has been no ap-
)
plication of the Court's mind to matters particularly relevant to toxic
injuries. The contention is two fold. First is that the settlement did not
B envisage th~ possibilities of delayed manifestation or aggravation of toxic
morbidity, in the exposed population. This aspect, it is urged, is required
to be taken care of in two ways: One by making adequate financial
provision for medical surveillance costs for the exposed but still latent
victims and secondly, by providing in the case of symptomatic victims a
"re-opener clause" for meeting contingencies of aggravation of damages· in
C the case of the presently symptomatic victims. The second contention is as
to the infirmity of the settlement by an omission to follow the 'Fairness-
Hearing' procedures.
40. On the first aspect, Sri Nariman, however, contends that the
possibility that the exposed population might develop hitherto unsuspected
p complications in the future was known to and was in the mind of the Union
of India and it must be presumed to hav~ taken all the possibilities into
account in arriving at the settlement. Sri Nariman said we now have the
benefit of hindsight of six years which is a sufficiently long period ewer
which the worst possibilities would have blow-over. Indeed, in the plain< in
the Bhopal Court, Shri Nariman points out, Union of India has specifically.
· E averred that there were possibilities of such future damage. Sri Nariman
referred to the preface to the Report of April, 1986 of the Indian Council
of Medical Research (ICMR) on "Health Effects of the Bhopal Gas
Tragedy" where these contingencies are posited to point out that these
aspects were .in the mind of Union of India and that there was nothing
unforeseen which could be said to have missed its attention. in the said
F preface ICMR said:
"...... How long will they (i.e. the respiratory, ocular and other
morbidities) last ?. What permanent diabilities can be caused?
What is the outlook for these vict!ms ? What of their off-spring?"
G Shri Nariman referred to the following passage in the introduction to

the Working Manual I on "Health Problems of Bhopal Gas Victims" April,
1986,ICMR;
x -
"Based on clinical experience gained so far, it is believed that
many of them (i.e. victims) would require specialised medicare
H for several years since MIC is an extremely reactive substanc~,
UNION CARBIDE v. U.0.1. [ VENKATACHALIAH,J. J 333
the possibility of the exposed population developing hitherto A

unsuspected complications in the future cannot be over-
looked."
What i~, however, implicit in this stand of the UCC is the admission
that exposure to MIC has such grim implications for the future; but UCC
urges that the Union of India must be deemed to have put all these into the B
scales at the time it settled the claim for 470 million US ~ollars. UCC als9 ·
suggests that with the passage of time all such problems of the future must
have already unfolded themselves and that going by the statistics of medi-
cal evaluation of the affected persons done by the Directorate of Claims,
even the amount of 470 million US dollars is very likely to be an over-pay-
ment. UCC ventures to suggest that on the estimates of compensation C.
based on the medical categorisation of the affected population, a sum of
Rs. 440 crores could be estimated to be an over-payment and that for all
the latent-problems not manifested yet, this surplus of Rs. 440 crores
should be a protect;·:e and adequate financial cushion.
41. We may at this stage have a brief look at the work of the D
medical evaluation and categorisation of the Health Status of the affected
persons carried out by the Directorate of Claims. It would appear that as
on 31st October, 1990, 6,39,793 claims had been filed. It was stated that a
considerably large number of the claimants who w~re asked to appear for
medical evaluation did not turn up and only 3,61,166 of them responded to
the notices. Their medical folders were prepared. The total number of E
deaths had risen to 3,828... The results of medical evaluation and
categorisation of the affected persons on the basis of the data entered in
their Medical Folders as on 31st October, 1990 are as follows:
No. of medical folders prepared 3,61,966

No. of folders evaluated 3,58,712 F
No. of folders categorised 3,58,712
No injury 1,55,203
Temporary injuries 1,73,382
Permanent injuries 18,922
- Temporary disablement
caused by a
Temporary injury 7,172
G
Temporary disablement
caused by a
permanent injury 1,313
Permanent Partial disablement 2,680
H
A Permanent total disablement 40

Deaths 3,828
42. On the medical research literature placed before us it can
reasonably be posited that the exposure to such concentrations of MIC
might involve delayed manifestations of toxic morbidity. The exposed
B population may not have manifested any immediate symptomatic medical
status.
But the long latency-period of toxic injuries renders the medical sur-
.veillance costs a permissible claim even ·ultimately the exposed persons
may not actually develop the apprehended complications. In Ayers v. Jack-
C son TP, 525 A 2d.287 NJ.1987, referring to the admissibility of claims of
medical surveillance expenses, it was stated:
"The claim for medical surveillance expenses stands on a dif.
ferent footing from the claim based on enhanced risk. It seeks
to recover the cost of periodic medical examinations intended
D to monitor plaintiffs' health and facilitate early diagnosis and
treatment· of disease caused by plaintiffs' exposure to toxic
chemicals.....". ·
"....The future expense of medical monitoring, could be a
·recoverable consequential damage provided that plaintiffs can
E establish with a reasonable degree of medical certainty that
such expen_ditures are "reasonably anticipated" to be incurred
by reason of their exposure. There is .no doubt that such a
remedy would permit the early detection and treatment of
maladies and that as a matter of public policy the tort-feasor
should bear its.cost.
F Compensation for reasonable and necessary medical expenses
is consistent with well-accepted legal principles. It is also con·
· sistent with ·the important public health interest in fostering
access to medical testing for individuals whose exposure to
.toxic chemicals creates an enhanced risk of disease. The value
G of early diagnosis and treatment for cancer patients is .well- .
documented." ·
"Although some individuals exposed to hazardous chemicals
may seek regular medical surveillance whether or not the cost
is reimbursed, the lack of reimbursement will undoubtedly
H deter others from .doing so. An application of tort law that
UNION CARBIDE v. U.0.1. [ VENKATACHALlAH,J.) 335
allows post-injury, pre-symptom recovery in toxic tort litigation A

for reasonable medical surveillance c0sts is manifestly consis-
tent with the public interest in early detection and treatment of
disease.
Recognition of pre-symptom claims for medical surveillance
serves other important public interests. The difficulty of prov- B
ing causation, where the disease is· manifested years after ex-
posure, has caused many commentafors to suggest that tort law
has no capacity to deter pollutors, because the costs of proper
disposal are often viewed by pollutors as exceeding the risk of
tort liability......"
"Other considerations compel recognition of a pre-symptom
c
medical surveillance claim. It is inequitable for an individual,.
·wrongfully exposed to dangerous toxic chemicals but unable to
prove that disease is likely to have to pay his own expenses
when medical intervention is clearly reasonable and neces-
' sary..........................." D
"Accordingly, we hold that the cost of medical surveiilance is a
compensable item of damages where the proves demonstrate,
through reliable expert testimony predicated upon the sig-
nificance and extent of exposure to chemicals, the toxicity of
the chemicals, the seriousness of the diseases for which in- E
dividuals are at risk, the relative increase in the chance of onset
of disease in those exposed, and the value of early diagnosis,
that such surveillance to monitor the effect of exposure to toxic
chemicals is reasonable and necessary......" .
In the "Law of Toxic Torts" by Michael Dore, the same idea is ex- F
pressed:
"In Myers v. Johns-Manville Corporation, the court permitted

·plaintiff prove emotional harm where they were suffering from
"serious fear or emotional distress or a clinically diagnosed
phobia of cancer." The court distinguished, however, between G
a claim for. fear of cancer and a elaim for cancerphobia. The
former could be based on plaintifPs fear, preoccupation and
distress resulting from the enhanced risk of cancer but the
latter would require expert opinion testimony...................,..."
"The reasonable value of future medical services required by a H
A defendant's conduct is recoverable element of damage in tradi-

tion and toxic tort litigation. Such damages have been awarded
even in circumstances where no present injury exists but medi-
cal testimony establishes that such furture medical surveillance
is reasonably required on the basis of the conduct of a par-
ti~ular defendant. .........................n
B
It is not the reasonable probability that the persons put at risk will
actually suffer toxic injury in future that determitles whether the medical r-·
surveillance is necessary. But what determines it is whether, on the basis of
medical opinion, a· person who has been exposed to a toxic substance
known to cause iong time serious injury should undergo periodical medical
C tests in order to look for timely warning signs of the on-set of the feared
consequences. These costs constitute a relevant and admissible head of
compensation and may have to be borne in mind in forming an opinion
whether a proposed settlement - even as a settlement - is just, fair and
adequate.
D 43. Sri Nariman, however, urged that the only form of compensa-
tion known to the common law is a lumpsum award - a once and for all
determination of compensation for all plaintiffs' losses, past, present and
future - and that split-trials for quantification of compensation taking into
account future aggravation of injuries, except statutorily enabled, are un-
known to common law.
E
Indeed, that this is the position in common law cannot be disputed.
In an action for negligence, damages must be and are assessed once and
for all at the trial of such an issue. Even if it is found later that the damage
s_uffered was much greater than was originally supposed, no further action
could be brought. It is well .settled rule of law that damages resulting from
F one and the same cause of action must be assessed and recovered once and
for all. Two actions, therefore, will not lie against the same defendant for
personal injury sustained in the same accident. (See Charlsworth and Percy
on Negligence [1990) 8th Edn. Para 43.
G
Indeed, even under the Gommon Law, as administered in U .K. prior
to the introduction of sec.32A of the Supreme Court Act 1981, Lord Den-
ning thought that such special awards were not impermissible. But as
pointed out earlier the House of Lords in Lim Poli Choo v. Camden
-
Islington, did not approve that view.
Later sec.32A of the Supreme Court Act, 1981 expressly enabled

H award of provisional damages and Order 31 Rules 7 to 10 (Part II) Rules _of
UNION CARBIDE v. U0.1.[VENKATACHAUAH).] 337
Supreme Court provided for the assessment of such further damages. The A
contention of the UCC is that the common law rule of once and for all
damages is unuttered in India unlike in England where split awards are
now statutorily enabled and that, therefore, references to future medical
surveillance costs and "re-opener" Clauses are inapposite to a once for all
payment. The concept of re-opener clause in settlement, it is contended, is
the result of special legal r~quirements in certain American jurisdictions B
and a settlement is not vitiated for not incorporating a "re-opener" clause
or for 'not providing for future medical surveillance costs inasmuch as all
these must be presumed to have engaged the minds of the settling parties
at the time of a once for all settler.aent. Shri Nariman pointed out that the
American case of Acushnet River v. New Bedford Harbour, 712 F 2d Supp.
1019 referred to by the learned Attorney-General was a case where the C
"re-opener" clause was a statutory incident under the Comprehensive En-
vironmental Response, Compensation and Liability Act, 1980.
But petitioners say that in the process of evolving what is a fair,

reasonable and adequate settlement some of the elements essential and
relevant to fairness and adequacy such as provision for future medical D
surveillance and the likely future, but yet unforeseen, manifestation of toxic
injury, having regard to the nature of the hazard, have not been kept in
mind and, therefore, the approval accorded to the settlement is on an
incomplete criteria. But UCC would say that Union of India was aware of
the possibility of such future manifestations of the effects of the exposure
and must be deemed to have kept all those in mind at the time of settle- E
ment.
44. But the point to emphasise is that those who were not parties to
the process of settlement are ·assailing the settlement on these grounds. In
personal injury actions the possibility of the future aggravation of the con-
dition and of consequent aggravation of damages are taken into account in F
the assessment of damages. The estimate of damages in that sense is a very
delicate exercise requiring evaluation of many criteria some of which may
border on the imponderable. Generally speaking actions for damages are
limited by the general doctrine of remoteness and mitigatibn of damages.
But the hazards of assessment of once and for all damages in personal
injury actions lie in many yet inchoate factors requiring to be assessed. It is G
in this context we must look at the 'very proper refusal of. the courts to
sacrifice physically injured plaintiffs on the alter of the certainty principle'.
The likelihood of future complications--though they may mean mere as-
sessment or evaluation of mere chances--are also put into the scales in
qua\ifying damages. This principle may, as rightly pointed out 9Y Sri
H
A Nariman, take care of the victims who have manifest symptoms. But what
about those who are presently wholly a symptomatic and have no materfal to Jo.-
support a present claim ? Who will provide them medical surveillance costs
and if at some day in the future they develop any of the dreaded symptoms,
who will provide them with compensation ? Even if the award is an "once
and for all" determination, these aspects must be taken into account.
B
45. The second· aspect is ·the imperative of the exercise of a
"Fairness-Hearing" as a condition for the validity of the settlemenr. Smt.
Indira Jaising strongly urged that in the absence of a "Fairness-Hearing"
no settlement could at all be meaningful. But the question· is whether such
a procedure is relevant to and apposite in the context of the scheme under
C the Act. The "Fairness-Hearing" in a certified class of action is a concept
in the United States for which a provision is available ·under rule 23 of
US Federal Rules of Procedure. Smt. Indira Jaising referred to certain
passages in the report of Chief Judge Weinstein in what is known as the
Agent Orange Litigation (597 Federal Supplement 740 (1984), to indicate
what according to her, are the criteria a Court has to keep in mind in
D approving a settlement. The learned judge observed (at page 7(:1.) para 9):
"In deciding whether to approve the settlement the Court :nust
have a sufficient grasp of the facts and the law involved in the
case in order to make a sensible evaluation of the ligation's
prospects. (See Malchman v. Davis, 706 F.2d, 426, 433 (2d
Cir.1983). An appreciation of the probabilities of plaintiffs'
E recovery after a trial and the possible range of damages is essen-
tial. The cases caution, however, that the court"should not
.... turn the settlement hearing 'into a trial or rehearsal of the
trial.'"Flbt v. FMC Corp.,528 F.2d, 1169, 1172(4th Cir. 1975),
Cert. denied, 424 U.S. 967, 96 S.Ct. 1462, 47 L.Ed.2d
734(734(1976), quoting Teachers Ins. & annuity Ass'n of
F America v. Beame, 67 F.R;D. 30, 33(S.D.N.Y.1975) .. See also
Malchman v. Davis, 706 F.2d 426, 433· (2D Cir. 1983)."
"A democratic vote by informed members of the class would be

virtually impossible in any large class suit. The costs of ensur-
ing that each member of the class in this case fully understood
the issue bearing on settlement and then voted on it would be
G prohibitive and the enterprise quixotic. Even though hundreds
of members of the class were heard from, there was an over-
whelmingly large silent majority. In the final <malysis there was
and can be no "con.sent" in any meaningful sense."
[Emphasis added]
H
Learned Judge also referred to the nine relevant factors: (1) The A
complexity expense and likely duration of the litigation, (2) The reaction of
the class of the settlement, (3) The stage of the proceedings and the
amount of dis~very completed, (4) The risks of establishing liability, (5)
The risks of establishing damages (6) The risks of maintaining the class
action through the trial, (7) The ability of the defendants to withstand a
greater jQdgement, (8) The range of reasonableness of the settlement fu~d. B
in the light of the best possible recovery and, (9) the range of reasonable-
ness of the settlement fund to a possible recovery in the light of all the
attendant risks of litigation. But the limits were also indicated by learned
Judge:
''Thus the trial court has a limited scope of review for deter- C
mining fairness. The very purpose of settlement is to avoid
trial of sharply disputed issue and the costs of protracted litiga-
tion."
"The Court may limit its fairness proceeding to whatever is

necessary to aid it in reaching a just and informed decision. D
'Flin v. FMC Corp. 528 F.2d at 1173. An evidentiary hearing is
not required."
The settlement must, of course, be an informed one. But it will be an

error to require its quantum to be co-extensive with the suit claim or what,
if the plaintiffs fully succeeded; they would be entitled to expect. E
The Bhopal Gas Disaster (Processing of Claims) Act, 1985, has its
own distinctive features. It is a legislation to meet a one time situation.
It provides for exclusivity of the right of representation of all claimants by
Union of India and for divesting the individual claimants of any right to
pursue any remedy for any cause of action against UCC and UCIL. The F
constitutionality of this scheme has been upheld in the Sahu's case. Sri
Nariman contended that the analogy of "Fairness-Hearing" envisaged in
certified class action in the United States is inapposite in the context of
the present statutory right of the Union of India. Shri Nariman referred
to the following statement of the Court in Sahu case:.
"...Our attention was drawn to the provisions of Order 1 Rule G
8(4) of the Code. Strictly speaking, Order 1, Rule 8 will not apply
to a suit or a proceeding under the Act. It is not a case of one
havi11g common i11terest with others. Here the plaintiff, the
Central Govemment has replaced a11d divested the victims."
[Emphasis added]
H
A Consistent with the limitations of the scope of the review, says Shri
Nariman, the Court cannot go behind the settlement so as to take it back to
a stage of proposal and order a "Fairness Hearing". He urged that a settle-
ment was after all a settlement and an approval of a settlement did not
depend on the legal certainty as to the claim or counter claim being worth-
B less or valuable. Learned counsel commended the following passage
from the judgment in the Court of Appeal for the Fifth Circuit stated in
Florida Trailer and Equipment Co. v. DealJllA F.2d 567 (1960):
- .
"...................... The probable outcome in the event of litigation, the
relative advantages and disadvantages are, of course, relevant
c factors for evaluation. But the very uncertainties of outcome in
litigation, as well as the avoidance of wasteful litigation and ex-
pense, lay behind the Congressional infusion of a power to com-
promise. This is a recognition of the policy of the law generally to
encourage settlements. This could'hardly be achieved if the test
on hearing for approval meant establishing success or failure to a
D certainty. Parties would be hesitant to explore the likelihood
of settlement apprehensive as they would then be that the
application for approval would necessarily result in a judi-
cial determination that there was no escape from liability or
no hope of recovery and (thus) no basis for a ,com-
promise."
E
Sri Nariman also pointed out that In Agent Orange settlement only a
small fraction of one percent of the class came forward at the fairness
hearings; that there was no medical evidence nor a mini-trial about the
factual aspects of the case and that in the end: "the silent majority remains -i
inscrutable". It is pointed out that in United Kingdom a different variant
F or substitute of fairness hearing obtains. Order 15 Rule ·13, Rules of
Supreme Court makes provision for orders made in representative actions
binding on persons, class or members of a class who cannot be ascertained
or cannot be readily ascertaineq.
G 46. In our opinion, the right of the victims read into section 4 of
the Act to express their views on a proposed settlement does not con-
tribute to a position analogous to that in United States in which fairness ·~·
hearings are imperative. Section 4 of the Act to which the right is trace-
able merely enjoins Government of India to have 'due-regard' to the views
H expressed by victims. The power of the Union of India under the Act to
UNION CARBIDE v. U.0.1. [ VENKATACHALIAH,.J. J 341
enter into a compromise is not necessarily confined to a situation where A

suit has come to be instituted by it on behalf of the victims. Statute .enables
the Union of India to enter into a compromise even without such a suit.
Right of being heard read into. sec. 4--and subject to which its con- -
stitutionality has been upheld in Sahu 's case-subjects the Union· of India
to a corresponding obligation. But that obligation does not envisage or
B
compel a procedure like a "Fairness-Hearing" as a condition precedent to·a
compromise that Union of India may reach, as the situations in which it
may do so are not necessarily confined to a suit.
Accordingly, contention (G) is answered against petitioners. We

hold that the settlement is not vitiated by reason alone of want of a "Fair- C
ness-Hearing" procedure preceding it. Likewise, the settlement is not
vitiated by reason of the absence of a "re-opener" clause built into it. But
there is one aspect as to medical surveillance costs and as to a provision
for possible cases which are now a-symptomatic and which may become
symptomatic after a drawn-out of latency period. We will discuss that
aspect under Point (J) infra. D
Re: Contention (H)
47. The question is if the settlement is reviewed and set aside what
should happen to the funds brought in by the UCC pursuant to the order.
This question was raised by the petitioners and argued before us by the
parties inviting a decision. We propose to decide it though the stage for E
giving effect to it has not yet arrived.
The stand of the Union of India and other petitioners is that even
upon a setting aside of the settlement, the funds should not be allowed to
be repatriated to the United States as that would embroil the victims in
endless litigations to realise the fruits of the decree that may be made in F
the suit and to realise the order for interim-payment. The stand of the
Union of India as recorded in the proceedings dated 10.4.1990 is as fol-
lows:
. "l. It is submitted that the Union of India consistent with its

duty as parens patriae to the victims cannot consent to the G
taking away by Carbide of the moneys which are in India out-
side the jurisdiction of Indian Courts.
2. At this stage, the Union of India is not claiming unilaterally

to appropriate the moneys, nor to disburse or distribute the
same. The moneys can continue to be deposited in the Bank as H
A at present and earn interest subject to such orders that may be

passed in appropriate proceedings by courts.
3. It is submitted that in view of the facts and circumstances of

the case, the previous history of the litigation, the orders
passed by the district court Bhopal, Madhya Pradesh High
B C_ourt and this Hon'ble Court, and the undertakings given by
UCIL and Carbide to Courts in respect of their assets, this
Hon'ble Court may, in order to do complete justice under Ar-
ticle 142 of the constitution, require retention of the moneys
for such period as it may deem· fit, in order to satisfy any
decree that may be passed in the suit· including the enforceable
c order of the M.P. High Court dated 4th April 1988."
48. It is urged by the learned Attorney General that restitution being

in the nature of a proceedings inexecution, the party claiming that benefit
must be relegated to the court of first instance to work out its remedies. It
is also urged that the UCC did not bring in the funds on the faith of the
D court's order, but did so deliberately and on its own initiative and choice
and deposited the funds to serve its own interest even after it was aware of
the institution of the proceedings challenging the settlement in an attempt
to effectuate a fait-accompli. It is further said that the order of the High
Court directing payment of interim compensation of Rs. 250 crores is
operative and since the UCC has not sought or obtained any stay of opera-
E tion of that order, the sums to the extent of Rs. 250 crores should not, at all
events, be permitted to be repatriated.
Learned Attorney General also sought to point out that the UCC
. had, subsequent to the settlement, effected certain corporate and ad-
ministrative changes and without a full disclosure by the UCC of these
F changes and their effect on the interests of the claimants, the funds should
not be permitted to be taken out of the court's jurisdiction, though, how-
ever, Government of India should not also be free to appropriate or use the
funds.
49. We are not impressed by any of these contentions. It is not

G shown that the UCC brought-in the monies with any undue haste with a
view to confronting Union of India with a fait accompli. The records indi-
cate a different complexion of the matter. The payment appears to have
been expedited at instance by the Union of India itself.
50. Strictly speaking no restitution in the sense that any funds ob-
H tained and appropriated by the Union of India requiring to be paid back
UNION CARBIDE v. U.0.L [VENKATACHALIAH,J.] 343
arises. The funds brought in by the UCC are deposited in the Reserve A
-~ Bank oflndia and remain under this Court's control and jurisdiction. Res-
titution is an equitable principle and is subject to the discretion of the
Court. Section 144, Code of Civil Procedure, embodying the doctrine of
restitution does not confer any new substantive right to the party not ·al-
ready obtaining under the general law. The section merely regulates the
power of the court in that behalf. B
51. But, in the present case, Section 144 CPC does not in terms
apply. There is always an inherent jurisdiction to order restitution a for-
tiorari where a party has acted on the faith of an order of the court. A
litigant should not go back with the impression that the judicial-process so
operated as to weaken his position and whatever it did on the faith of the c
court's order operated to its disadvantage. It is the duty of the court to
ensure that no litigant goes back with a feeling that he was prejudiced by an
act which he did on the faith of the court's order. Both on principle and
authority it becomes the duty of the court to - as much moral as it is legal
- to order refund and restitution of the amount to the UCC - if the
settlement is set aside. D
In Binayak v. Ramesh, [1966] 3 SCR 24 this Court dealing with scope

of Section 144 CPC observed:
"..........The principle of the doctrine of restitution is that on the

reversal of a decree, the law imposes an obligation on the party E
to the suit who received the benefit of the erroneous decree to
make restitution to the other party for what he has lost. This
obligation arises automatically on the reversal or modification
of the decree and necessarily carries with it the right to restitu-
tion of all that has been done under the erroneous decree; and
the court in making restitution is bound to restore the parties, F
so far as they can be restored, to the same position they were in
at the time when the Court by its erroneous action had dis-
placed them from ..........."
[p.27]
G
-" In Jai Berham and others v. Kedar Nath Marwari and Others [1922)
P.C. 269 at 271 the Judicial Committee noticed that:
"The auction-purchasers have parted with their purchase-

rnoney which they paid into ~ourt on the faith of the order of
H
A confirmation and certificate of sale already referred to .......".
and said:
"............ and it would be inequitable and contrary to justice that

the judgment-debtor should be restored to this property
without making good to the auction-purchaser the moneys
B
which have been applied for his benefit."
In L. Guran Ditta v; T.R. Ditta, [1935] PC 12 Lord Atkin said:

"...........The duty of the Court when awarding ·restitution under
sec. 144 of the Code is imperative. It shall place the applicant
c in the position in which he would have been if the order had
not made: and for th.is purpose the Court is armed with powers
[the 'may' is empowering, not discretionary] as to mesne
profits, interest and so forth. As long ago as 1871 the Judicial
Committee in 3 P.C. 465 (1) made it clear that interest was part
of the normal relief given in restitution: and this decision seems
D right to have grounded the practice in India in such cases....... ."
(p.13]
In Jagendra Nath Singh v. Hira Salm and others. AIR 1948 All. 252
F.B. Motham J. observed:
E -"Every Court has a paramount duty to ensure that it does no

injury to any litigant and the provisions of Sec. 144 lay down a
procedure where effect can be given to that general provision
of the law. The Court should be slow so to construe this sec-
tion as to impose a restriction upon its obligation to act right
and fairly according to the circumstances towards all parties
F involved."
[p.253]
52. We are satisfied in this case that the UCC transported the funds
to Jndia and deposited the foreign currency in the Reserve Bank of India
G on the faith of the Court's order. If the settlement is set aside they shall be
entitled to have their funds remitted to them back in the United States
together with such interest as has accrued thereon. So far as the point
raised by the learned Attorney-General as to the corporate changes of the
UCC is concerned, we think, a direction to the UCC to prove and establish
compliance with the District Court's order dated 30the November, 1986,
H
UNION CARBIDE v. U.0.1. [ VFNKATACHALIAH,J. J 345
should be sufficient safeguard and should meet the ends of justice. A

__...J'
53 Accordingly, in the event of the settlement being set aside the
UCC shaU be entitled to have 420 million US Dollars brought in by it
remitted to it by the Union of India at the United States along with such
interest as !las accrued on it in the account.
B
But this right to have the restitution shall be strictly subjeet to the
condition that the UCC shall restore its undertaking dated 27.11.1986
which was recorded on 30.11.1986 by District Court at Bhopal and on the
strength of which the court vacated the order of injunction earlier granted
against the UCC. Pursuant to the order recording the Settlement, the said
order dated 30.11.1986 of the District Court was set-aside by this Court. If c
the settlement goes, the order dated 30.11.1986 of the District Court will
automatically stand restored and the UCC would be required to comply
with that order to keep and maintain unencumbered assets of the value of
US 3 billion dollars during the pendency of the suit. The right of the UCC
to obtain the refund of and repatriate the funds shall be subject to the
performance and effectuation of its obligations under the said order of D
30.11.1986 of the District Court at Bhopal. Till then the funds shall remain
--'.,
within the jurisdiction of this Court and shall not be amenable to any other
legal process. The Contention (H) is disposed of accordingly.
Re: Contention(/)
54. The contention is that notices to and opportunities for hearing of
E
the victims, whom the Union of India claims to represent, were imperative
before the proposed settlement was recorded and this, admittedly, not
having been done the orders dated 14th and 15th February, 1989 are nul-
lities as these were made in violation of the rules of nafural justice. Shri
Shanti Bhushan urged that the invalidity of the settlement is squarely F
covered and concluded, as a logical corollary, by the pronouncement of the
Constitution Bench in Sahu case. He referred to and relied upon the
following observatior.s of Chief Justice Sabyasachi Mukharji in Sa/m's case:
----+ "It has been canvassed on behalf of the victims that the Code of
Civil Procedure is an instant example of what is a just, fair and
G
reasonable procedure, at least the principles embodied therein
~
and the Act would be unreasonable if there is exclusion of the
victims to vindicate properly their views and rights. This ex-
clusion may amount to denial of justice. In any case, it has been
sugsested and in our opinion there is a good deal offorce in this
co11tentio11, that ifa part of the claim, for good reasons or bad, is H
"t
346 SUPREME COURT REPORTS
.
(1991] SUPP. 1 S. C.R .
A sought to be compromised or adjusted without at least consider-

ing the views of the victims that would be unreasonable depriva-
tion of the rights of the victims.......... "
".............Right to a hearing or representation before entering

into a compromise seems to be embodied in the due process of
B law understood in the sense the term has been used in the
con~titutional jargon of this country though perhaps not
originally intended .............."
"In view of the principles settled by this court and accepted all
over the world, we are of the opi11ion that i11 a case of this
c magnitude a11d nature, wizen the victims have been given some
say by sectio11 4 of the Act, in order to make that opportunity
contemplated by sec. 4 of the Act meaningful and effective, it
should be so read that the victims have to be give11 a11 opportllnity
of the making their representation before the collrt comes to any
conclusion in respect of any settlement."
D
xx xxx xx
"In our opinion, the constitutional requirements, the language
of the section, the purpose of the Act and the principles of
natural justice lead us to this interpretation of section 4 of the
Act that in case of a proposed or contemplated settlement,
E notice should be given to the victims who a;e affected or whose
rights are to be affected to ascertain their views. Section 4 is
significant. It enjoins the Central Government only to have
"due regard" to any matters which such person may require to
be urged. So the obligation is 011 the Central Govt. in the situa-
tion contemplated by Sec. 4 to /lave dlle regard to the views of the
F victims and that obligation cannot be discharged by the Central
Govemment unless the victims are _told that a settlement is
proposed, intended or contemplated. It is not necessary that such
views would reqllire consent of all the victims. The Central
Govt. as the Representative of the victims must have the views
of the victims and place such views before the court in such
G manner it considers necessary before a settlement is entered
into. If the victims want to advert to certain aspects of the
matter during the proceedings under the Act and settlement
indeed is an important stage in the proceedings, opportunities
must be given to the victims. Individual notices may not be
necessary. The court can, and in our opinion should, in such
H situation fo_rmulate modalities of giving notice and public ;
notice can also be given inviting views of the victims by the A

help of mass media."
"........... The Act would be bad if it is not constrned in the light that
notice before any settlement under sec.4 of the Act was required to be
given .......... "
(Emphasis Supplied] B
'Shri Shanti Bhushan urged that with these findings and conclusions
the only logical resultant is that the settlement must be declared a nullity
as one reached in violation of the rules of natural justice. For Shri Shanti
Bhushan, the .matter is as simple as that.
But after making the observation excerpted above, the Constitution

c
Bench, having regard to the nature of this litigation, proceeded to spell
out its views and conclusions on the effect of non-compliance of natural
justice and whether there were other remedial and curative exercise. Chief
Justice Mukharji noticed the problem arising out of non-compliance thus:
" ........ .It further appears that that type of notice which is re- D
quired to be given had not been given. The question there/ore, is
what is to be done a11d what is the co11seque11ce ? The Act
would be bad if it is not construed in the light that notice
before any settlement under sec. 4 of the Act was required to
be given. Then arises the question of consequences of not giving
the notice........ " E
[Emphasis supplied]
Learned Chief Justice proceeded to say:
".......... Jn this adjudication, we are not strictly concerned with

the validity or otherwise of the settlement, as we have indicated F
hereinbefore. But constitutional adjudication cannot be.
divorced from the reality of a situation, or the impact of an
adjudication. Constitutional deductions are never made in the
vacuum. These deal with life's problems in the reality of a
given situation. And no constitutional adjudication is also pos-
sible unless one is aware of the consequences of such an ad- G
judication. One hesitates in matters of this type where large
consequences follow one way or the other to put as under what
others have put together. It is well to remember, as old Justice
Holmes, that time has upset many fighting faiths and one mu'S>t
always wager one's salvation upon some prophecy based upon
H
A imperfect knowledge. Our knowledge changes; our perception i... ("
of truth also changes ........ "
"............ No man or no man's right should be affected without

an opportunity to ventilate his views. We are also conscious
that justice is a psychological yearning, in which men seek ac-
B ceptance of their_ view point by having an opportunity of vin-
dication of their view point before the forum or the authority
enjoined or obliged to take a decision affecting their right. Yet, ~-
i11 the particular situatio11s, one has to bear in mind how an
i11fraction of that should be sought to be removed in accordance
with justice. !11 the facts a11d the circumsta11ces of this case where
c sufficie11t opportunity is available when review application is
heard 011 notiae, as directed by Court, no further opportunity is
necessary a11d it can11ot be said that injustice has been done. "To
do a great right" after all, it is permissible sometimes "t.o do a
little wrong". In the facts and circumstances of the case, this is
one of those rate occasions .........."
D
[Emphasis supplied] >-·
Chief Justice Mukharji also observed;
"........... But having regard to the urgency o1 the situation and
having regard to the need for the victims for relief and help
E and having regard to the.fact that.so much effort has' gone in
finding a basis for the settlement, we, at 011e poi11t of time,
thought that a post-decisio11al hearing in the facts and cir-
cumstances of this case might be considered to be sufficient com-
plia11ce with the requireme11ts of principles of 11atural justice as
embodied u11der Sec. 4 of the Act......... "
F
(p._63)
".......... .In the facts and the circumstances of this, therefore, we

are of the opi11io11, to.· direct that notice should be given 11ow,
would not result in doing justice in the situation. In the premises,
G 110 further conseque11tial order is 11ecessary by this Court......... "
'r"
(p. 65)
While Shri Nariman understandably strongly relies on these observa-
tions as the ll!_W of the case, Shri Shanti Bhushan seeks to deny them any
binding force on the ground that they were mere passing observations
H
UNION CARBIDE v. U.O.L [VENKATACHALIAH).) 349
inasmuch as the question of validity of the settlement was not before the A
court in Sahu case Shri Shanti Bhushan relied upon several prQnounce-
ments of this Court : viz. National Textile Worker.r Union v. P.R. Ramakrish-
nan, (1983) 1 SCC 228 Institute of Chartered Accountants v. L.K Ratna,
(1986) 4 SCC 537, Kl. Shephard v. Union of India, (1987) 4 SCC 431, R.B.
Shreeram Durga Prasad v. Settlement Commission, (1989) 1 SCC 628 and
H.L. Treltan v. Union of India, [1989} 1 SCC 764 to emphasise the imperatives B
of observance of natural justice and the inevitability of the consequences the
flow from a non-compliance of the requirements of a pre-decisional hearing.
~ These are all accepted principles. Their wisdom, verity and univer-
sality in the discipline of law are well established. Omission to comply with
the requirements of the rule of Audi Alteram Partem, as a general rule, C
vitiates a decision. Wh"'re there is violation of natural justice no resultant
or independent prejudice need be shown, as the denial of natural justice is,
in itself, sufficient prejudice and it is no answer to say that even with
observance of natural justice the same conclusion would have been
reached. The citizen "is entitled to be under the Rule of law and not the Rule
of Discretion" and "to remit the maintenance of constitutional right to judicial D
discretion is to shift the foundation of freedom from the rock to the sand". ·
But the effects and consequences of non-compliance may alter with

situational variations and particularities, illustrating a "flexible use of dis-
cretionary remedies to meet novel legal situations". "One motive" says Prof.
Wade "for holding administrative acts to be voidable where according to E
principle they are void may be a desire to extend the discretionary powers
of the Court". As observed by Lord Reid in Wiseman v. Bomeman (1971
AC 297) natural justice should not degenerate into a set of hard and fast
rules. There should be a circumstantial tlexibility.
In Sahu case this Court held that there was no compliance with the F
principles of natural justice but also held that the result of the non-com-
pliance should not be a mechanical invalidation. The Court suggested
curatives. The Court was not only sitting in judicial review of legislation;
but was a court of construction also, for, it is upon proper constructiori of
the provisions, questions of constitutionality come to be decided. The
Court was considering the scope and content of the obligations to afford a G
hearing implicit in Section 4 of the Act. It cannot be said to have gone
~ beyond the pale of the enquiry when it considered the further question as
to the different ways in which that obligation could be complied with or
satisfied. This is, in substance, what the Court has done and that is the law
of the case. ·It cannot be said that these observations were made by the way
and had no binding force. H
A Sri Garg submitted that when the Union of India did not, even prima-
facie, probabilise that the quantification reflected in the settlement was
arrived on the basis of rational criteria relevant to the matter, the deter-
mination fails as the statutory authority had acted ultra-vires its powers and
trusts under the statutory scheme. Sri Garg said that it would be a perver-
sion of the process to call upon the victims to demonstrate how the settle-
B ment is inadequate. There was, accordi11g to Sri Garg, no material to shift
the risk of non-persuasion. Sri Garg urged that unless the elements of
reasonableness and adequacy - even to the extent a settlement goes -
are not established and the quantification shown to. be justified on some
tenable basis the settlement would incur the criticism of being the result of
an arbitrary action of Government.
c
Shri Shanti Bhushan, however, strongly commended the following
observations of Megarry J in Leary v: National Union of Vehicle Builders
[1971) Ch.34 which were referred to with approval by the court in Institute
of Chartered Accountants v. L.K. Ratna [1986) 4 SCC 537 as to the effect of
non-observance of natural justice:
D "If one accepts the contention that a defect of natural justice in
the trial body can be cured by the presence of natural justice in
the appellate body, this has the result of depriving the member
of his right of appeal from the expelling body. If the rules and
the law combine to give the member the right to a fair trial and
the right of appeal, why should he be told that he ought to be
E satisfied with al! unjust trial and a fair appeal? Even if the
appeal is treated as a hearing de novo, the member is being
stripped of his right to appeal to another body from the effec-
tive decision to expel _him . I cannot think that natural justice is
satisfied by a process whereby an unfair trial, though not
resulting in a valid expulsion, will never-the-less have the effect
F of depriving the member ·of his right of appeal when a valid
decision to expel him is subsequently made. Such a depriva-
tion would be a powerful result to be achieved by what in law is
a mere nullity; and it is no mere triviality that might be justified
on the ground that natural justice does not mean perfect jus-
tice. As a general rule, at all events, I hold that a failure of
G natural justice in the trial body cannot ~ cured by a sufficiency
of natural justice in an appellate body."
Prof. Wade in his treatise on Administrative Law observes:
"If natural justice is violated at the first stage, the right of ap-
peal is not so much a true right of appeal as a corrected initial
H
UNION CARBIDE v. U.0.1. [ VENKATAGIALIAH,J.] 351
hearing: instead of fair trial followed by appeal, the procedure A

is reduced to unfair trial followed by fair trial."
We might recall here that the Privy Council in Calvin v. Carr [1980]
AC 576 had expressed its reservations about Megarry J's 'General Rule' in
Leary's case. However, the reservations were in the area of domestic juris-
diction, where contractual or conventional Rules operate. The case did B
not involve a public law situation. But the House of Lords in Llyod v.
Memahan [1987] AC 625 applied the principle to a clearly public law situa-
tion. The principle in Leary's might, perhaps, be too broad a generalisa-
tion.
But the question here is not so much as to the consequences of the c

omission on the part of the Union oflndia to have "due regard" to the views
of the victims on the se~tlement or the omission on the part of the Court to
afford an opportunity to the victims of being heard before recording a
settlement as it is one of the effects and implications of the pronouncement
in Sahu case which is the law of the case. In Salm case the Court expressly
held that the non-compliance with the obligation to issue notices did not, D
by such reason alone, in the circumstances of the case, vitiate the settle-
ment, and that the affected persons may avail themselves of an opportunity
of being heard in the course of the review petitions. It is not proper to
isolate and render apart the two implications and hold the suggested cura-
tive as a mere obiter.
E
55. While reaching this conclusion, we are not unmindful of the
force of the petitioner's case. The Sa/m's case laid down that Section 4 of
the Act contemplated and conferred a right on the victims of being heard.
It also held that they were not so heard before the Government agreed to
the terms of the settlement. According to the Sahu's case, the victims
F
should have an opportunity of being heard in the Review Proceedings. The
petitioners who were litigating the matter did not represent all the victims
and victim-groups.
56. In the ultimate analysis, the crucial question is whethe~ the op-
portunity to the affected persons predicated in the Sahu case can G
reasonably be said to have been afforded. Indeed, at the very commence-
ment of the hearing of the review petitions, Smt. Indira Jaising made a
pertinent submission that the court should determine and clarify the nature
and scope of the review hearing: whether they partake of the nature of a
"Fairness Hearing" or of the nature of a "post-decisional hearing" or
whether the court would device some way in which the victims at large H
A would have an effective sense of participation as envisaged in the Sahu

decision. Smt. Indira Jaising submitted that opportunity of being heard in
the review suggested and indicated by the Sahu decision cannot be under-
stood to confer the opportunity only to those who were eo-nomine parties
to the review petitions.
B SJ. In the present hearings Shri Nariman placed before us a number

of press-clippings to show that, from time to time, largely circulated
newspapers in the country carried detailed news reports of the settlement
and of the subsequent legal proceedings questioning them. Shri Nariman's
contention is that in view of this wide publicity the majority of the affected
persons must be presumed to have had notice, though not .in a formal way
C and to have accepted the settlement as they had not bestirred themselves to
move the Court.
58. Shri Nariman also raised what he urged were basic objection as
to the scope of the review jurisdiction and to the enlargement of the scope
of the review hearings to anything resembling a "Fairness Hearing" by treat-
D ing the concluded settlement as a mere proposal to settle. Shri Nariqian
said that the Court could either review the orders dated 14th and 15th
February, 1989 if legal grounds for such review under law were strictly
made out or dismiss the review petitions if petitioners fail to make out a
case in accordance with the accepted principles regulating the review juris-
E diction; but the court could not adopt an intermediate course by treating
the settlement as a proposed or provisional settlement and seek now to do
what the Union of India was expected to .do before the settlement was
reached.
59. The whole issue, shorn of legal subtleties, is a moral and

F humanitarian one. What was transacted with the court's assistance be-
tween the Union of India on one side and the UCC on the other is now
sought to be made binding on the tens of thousands of innocent victims
who, as the law has now declared, had a right to be heard before the
settlement could be reached or approved. The implications of the settle-
ment and its effect on the lakhs, of citizens of this country are, indeed,
G crucial in their grim struggle to reshape and give meaning to their torn
lives. Any paternalistic condescension that what has been,done is after all
for their own good is out of place. Either they should have been heard
before a settlement was approved in accordance with the law declared by
this Court or it, at least, must become demonstrable in a process in which
they have a reasonable sense of participation that the settlement has been .
H to their evident advantage or, at .least, the adverse consequences are effec-
UNION CARBIDE v. U.0.1. ( VENKATACHALIAH,J.] 353
tively neutralised. The ultimate directions on Point J that we propose to A

issue will, we think, serve to achieve the last mentioned expectation. Legal
and procedural technicalities should yield to the paramount considerations
of justice and humanity. It is of utmost importance that in an endeavour of
such great magnitude where the court is trusted with the moral respon-
sibility of ensuring justice to these tens of thousand innocent victims, the
issues of human suffering do not become obscure in procedural thickets. B
We find it difficult to accept Shri Nariman's stand on the scope of the
review. We think that in a situation of-this nature and magnitude, the
Review-proceeding should not be strict, orthodox and conventional but
one whose scope would accommodate the great needs of justice. That
·apart, quite obviously, the individual petitioners and the petitioner-or- C
ganisations which have sought review cannot, be held to represent and
exhaust the interest of all the victims.
Those represented by the petitioner-organisations-even if their

claims of membership are accepted on face value-- constitute only a small
percentage of the total number of persons medically evaluated. The rest of D
the victims ~onstitute the great silent majority.
When an order affects a person not a party to the proceedings, the

remedy of an affected person and the powers of the Court to grant it are
well-settled. For instance, in Sliivdeo Singh & Ors. v. State of Punjab & Ors.
AIR 1963 SC 1909 on a writ petition filed under Article 226 of the Con-
stitution l?Y A for cancellation of the order of allotment passed by the E
Director of Rehabilitation in favour of B, the High Court made an order
cancelling the allotment though 'B' was not a party. Later, B filed a writ
petition under Article 226 for impleading him as a party and for re-hearing
the whole matter. The High Court granted it. Before this Court, the objec-
tion was this: ·
F
"Learned counsel contends that Art. 226 of the Constitution
does not confer any power on the High Court to review its own
order and, therefore, the second order of Khosla, J ., was
without jurisdiction."
This Court rejected the contention observing that: G

"It is sufficient to say that there is nothing in Art. 226 of the
Constitution to preclude a High Court from exercising the
power of review which inheres in every court of plenary juris-
diction to prevent miscarriage of justice or to correct grave and
H
A palpable errors committed by it. Here the previous order of

Khosla, J ., affected the interests of persons who are not made
parties to the proceedings before him. It was at their instance
and for giving them a hearing that Khosla, J., entertained the
second petition. In doing so, he merely did what the principles
of natural justice required him to do. It is said that the respon-
B dents before us had no right to apply for review because they
were not parties to the previous proceedings. As we have al-
ready pointed out, it is precisely because they were not made
parties to the previous proceedings, though their interests were
sought to be affected by the decision of the High Court, that
the second application was entertained by Khosla, J."
c
60. The nature of the present reView ·proceedings is indeed sui-
ge11eris. Its scope is pre-set by the terms of the order dated 4th May 1989 as
well as what are further n~cessarily implicit in Sahu decision. In the course
of the order dated 4th May 1989, it was observed.
"....... .If, owing to the pre-settlement procedures being limited
D to the main contestants in the appeal, the! benefit of some con-
trary or supplem~ntal information or material, having a crucial
bearing on the fundamental assumptions basic to the settle-
ment, have been denied to the Court and that as a result,
serious miscarriage of justice, violating the constitutional and
legal rights of the persons affected, has been occasioned, it will
E be the endeavour of this Court to undo any such injustice. But .
that, we reiterate, must be by procedures recognised by law.
Those who trust this Court ~II not have eause for despair."
The scope of the review in the present case is to ensure that no mis-
carriage of justice occurs in a matter of such great moment. This is, per- ~
F haps, the last opportunity to verify our doubts and to undo injustice, if any,
which may have occurred. The fate and fortunes of tens of thousands of
persons depend on the effectiveness and fairness of these proceedings.
The kgal and procedural technicalities should yield to the paramount con-
siderations of justice and fairness. The considerations go beyond legalism
and are largely humanitariam. It is of utmost importance that great issues
G of human suffering are not subordinated to legal technicalities.
But in view of our '::onclusion on point J that on the material on T
record, the settlement-fund should be sufficient to meet the needs of a just
compensation and the order we propose to pass with regard to point J, the
grievance of the petitioners on the present contention would not, in our
H opinion really survive. Contention (I) is answered accordingly.
UNION CARBIDE v. U.0.1. [VENKATACHALIAH,J.] 355
Re: Point (J) A

61. Before we go into the question whether the settlement should be
set aside on grounds of inadequacy of the settlement fund, certain sub-
sidiary contentions and arguments may be noticed. They deal with (i) that
there has been an exclusion of a large number of claims on the ground that
despite service c;f notices they did not respond and appear for medical
documentation and (ii) that the whole exercise of medical documentation B
is faulty and is designed and tends to exclude genuine victims. These con-
tentions are really not directly germane to the question of the validity of the
settlement. However, they were put forward to d,iscredit •the statistics
emerging from the medical documentation done by the Directorate of
Claims on which the UCC sought to rely. We may as well deal with these
two contentions. c
· 62. The first contention is that the claims of a large number of per-
sons who had filed their claims are not registered on the ground that they
did not respond to the notices calling upon them to undergo the requisite
medical tests for medical documentation. It was urged that nc effective
service of notice had taken place and that the claims of a large number of D
claimants-according to them almost over 30% of the total number-- have
virtually gone for default. While the victim-groups allege that there was a
systematic attempt to suppress the claims, the Directorate of Claims would
say that the lack of response indicated that the claims were speculative and
spurious and, therefore, the claimants did not offer themselves to medical
examination. E
In order to appreciate this grievance of the victim-groups it is, per-
. haps, necessary to advert to the provisions of the Act and the Scheme
attracted to this stage of processing of the claims. Section 9 of the Act
enjoins upon the Central Government to frame a Scheme providing for any
or all of the matters enumerated in clauses (a) to (i) of Sub-section (2) of F
Sec. 9. The Scheme, known as the ''Bhopal Gas Leak Disaster (Registra-
tion and Processing of Claims) Scheme, 1985," was promulgated by
notification dated 24th September, 1985, published in the Gazette of India.
Para 4 of the Scheme deals with the manner of filing of claims and specifies
the forms in which they should be filed. Pa~a. 5( 1) requires the Deputy
Commissioner of Claims to place the claims in the appropriate category G
amongst those enumerated in sub-para (2) of para 5. Sub-para (2) re-
quires the registration of the claim under various heads such as "death";
"total disablement resulting in permanent disability to earn livelihood";
"permanent partial disablement affecting the overall capacity of a person to
earn hi~ livelihood"; "temporary partial disablement resulting in reduced
H
A capacity to earn livelihood" and so on. Sub-paras (3), (4) and (5) of para 5
of the Scheme provide: ·
"(3) On the consideration of a claim made under paragraph 4
of the Scheme, if the Deputy Commissioner is of the opinion
that the claim falls in a category different from the category
mentioned by the claimant, he may dedde the appropriate
B category after giving an opportunity to the claimant to be
heard and also after taking into consideration any facts made
available to him in this behalf by the Government or the
authorities authorised by the Government in this behalf.
(4) Where the Deputy Commissioner is of the opinion that a
claim made under paragraph 4 does not fall in any of the
c categories specified in sub-paragraph (2) he may refuse to
register the claim:
Provided that before so refusing he shall give a reasonable

opportunity for a personal hearing to the claimant. ·
D (5) If the claimant is not satisfied with the order of the Deputy
Commissioner under sub-paragraph (3) or sub-paragraph (4)
he may prefer an appeal against such order to the Commis-
sioner, who shall decide the same."
E The stage at which medical examination was required related

presumably to the exercise under sub-paragraph (3) of Para 5 of the
Scheme. Failure of a elaimant to respond to the notice and offer himself
for medical examination would entail a refusal to register the claim. It is ·
manifest that such a refusal is apealable under the scheme. But this ~-
grievan.:e does not survive in view of the stand taken by the Government in
F these. proceedings. In the affidavit of Sri Ramesh Yashwant Durve, dated
5th December, 1989 in W.P. No. 843/88, it is stated:...:.. ·
''That all claimants who did not respond to the first notice were
given a second and then a third notice to appear at one of the
medical documentation centers for their medical examination.
Wide publicity was also done by way of beating of drums in
G
mohallas, radio announcements and newspaper advertise-
ments. In addition to all these, ward committee members were
also involved in motivating the claimants to get themselves
medically examined. All those claimants who approach the
Director of Claims even now are given a fresh date on which to
H appear for.medical examination and are informed accordingly.
Although the medical documentation exercise is completed, A

even then if a claimant fails to appear for medical examination
after service of all three notices and he makes an application
for medical examination, his medical examination is arranged
at one of the two medical documentation centers--TB Center
and JP Hospital--specially kept functioning for such
claimants. It is relevant to point out that this arrangement has B
been approved by Supreme Court vide order dated 29 Septem-
ber, 1989.........."
"For the reasons given above, a fresh public notice and fixing of
dates for .medical documentation is also not needed. It may be
pointed out here that these people will still have an oppor- C
tunity to file claims when the Commissioner for Welfare of the
gas victims issues a notification in terms of para 4{i) of Bhopal
Gas Leak Disaster (Registration & Processing of Claims)
Scheme, 1985 inviting claims."
This assurance coupled with the right of appeal should sufficiently D

safeguard the interests of genuine claimants.
63. It was urged by the petitioners that the very concept of injury' as
an element in the eligibility for medical documentation was erroneous as it
tended to exclude victims who did not have or retain some medical
documentation of their initial treatment immediately after the exposure. E
·The stand of the Director of Claims on the point is this: -
"That it is unlikely that a person who was injured and suffered

during the post-exposure, period is not in possession of any
form of medical record. \ The line of treatment was widely
publicised. Therefore, the patient must have received treat- F
ment from: on~ of the private practitioners, if not from one of
· the many temporary and permanent govt./semi-govt. institu-
tions or institutions run by voluntary organisations, and he
must be in possession of some form of record.
Every Claimant is advised to bring relevant medical record at G

the time of medical examination. Documents of post-expon-
sure medical record are accepted even after the medical
documentation of the claimant is over.
It is incorrect to say that the documents for post-exposure

H
A period are just not available. Had it been so, 55% of the
claimants who fall in category 'B' to 'CF would also have been
categorised as 'A'. In this connection it may be clarified that
even in post-exposure period prescriptions were issued. Be-
sides this, private practitioners were also issuing prescriptions
in printed form. It is therefore incorrect to say that there is
B dearth of documentation. However, bearing this point in mind,
a very liberal approach in admitting documents was adopted as
will be clear from the guidelines for evaluation. It will also be
relevant here to state that the claimants are being helped to get
the benefit of any medical records available in any hospital or
dispensary. Institutions like ICMR, COM (Gas Relief),
c Jawahar Lal Nehru Hospital, Bhopal Eye Hospital, Indian Red
Cross Society, BUEL Hospital and the Railway Hospital have
treated numerous gas victims during the post-exposure period.
The relevant medical records from them have been retrieved
and are being linked with the respective claim folders so that
the benefit of such post-exposure record is extended to these
D claimants.
It will be irrational and unscientific to admit all claims without

reference to any documentary evidence as suggested by the
petitioner ........"
E (See the affidavit dated 5th December, 1989 of Sri Ramesh
Yeshwant Durve filed i~ W.P. No. 843/88.)
63. As to the charge that after the purported settlement, Govern-

ment is playing down the seriousness of the effects of the disaster, and that ~
the medical documentation did not help proper evaluation it is, perhaps,
F necessary to read the affidavit dated 5th December, 1989 of the Additional
Director of Claims, in W.P. No. 843 of 1988. The Additional Director says:
"The Medical Documentation Exercise ha~ been an unique ef-

fort. It was possibly for the first time that such a comprehen-
sive medical examination (with documentation evaluation and
G categorisation) of such a large population was undertaken
anywhere in the world. There was no earlier experience or
expertise to fall back upon. The whole exercise had, therefore,
to be conceived, conceptualised and concretised locally. But
care was taken to ensure that .the guidelines were approved by
legal and medical experts not only at the State level but also at
H
UNION CARBIDE v. U.0.1. ( VENKATACHALIAH,.J.] 359
the National level. The guidelines were also approved by A

··~
GOl's Committee of Experts on Medical Documentation. In
other words, a systematic arrangement was organised to make
the most objective assessment of the medical health status of
the claimants in a scientific manner.
It has to be recognised in this context that the guidelines for B

categorisation can only be a broad indicator as it is not pos-
sible for anyone to envisage all types of situations and
prescribe for them. Likewise, the examples cited are only 'il-
lustrative examples' and not 'exhaustive instructions'.
Hundreds of graduate and post-graduate doctors assisted by C

qualified para-medical staff have examined the claimants with
the help of sophisticated equipments. It cannot be reasonably
contended that all of them have crilluded with the Government
to distort the whole exercise.
The exercise of categorisation is not just an arithmetical exer- D

cise directly flowing from the evaluation sheet. Had it been so,
the same Assistant Surgeon, who does the evaluation can him~
self do the categorisation also. Post graduate specialists have
• been engaged for this work because the total medical folder
has to be assessed keeping the evaluation sheet as a basic in-
dicator. In doing the categorisation, the postgraduate E
specialist takes into account symptoms reported, clinical find-
ings, specialist's opinions and investigation reports."
The Additional Director accordingly assests:
".. .it will be meaningless to suggest that the Guvt. is jeopard- F

ising the interests of the claimants by deliberately distorting the
Medical Documentation Exercise. Similarly, it will be absurd
to suggest that the Govt. is trying to help UCC in any way."
The Additional Director also refers to the attempts by unscrupulous

persons to exploit the situation in pursuit of unjust gains and how the G
authorities had to encounter attempts of impersonation and "attempts by
claimants to pass of other's urine as their own." It was said that there were
urine-donors. The affidavit also discloses certain malpractices involving
medical prescriptions and certificates by some members of the medical
profession and ante-dated urine-thiocynate estimations. The Additional
Di(ector says that despite all this Government endeavoured to give the H
360 SUPREME COURT REPORTS [1991} SUPP. 1 S. C.R.
A benefit to the claimants wherever possible. It is stated :

"The State Govt. had to preserve the scientific character and
ensure the credibility of the exercise of evaluation. Bearing
this limitation in mind, wherever possible, the government has
attempted to give the benefit to the claimants. The various
B guidelines relating to documentation of the immediate post-
disaster phase are proof of this intention. At the same time,
government have had to adhere to certain quality standards so
that the exercise could stand up to scrutiny in any Court of law
or in any scientific form."
C The stand of the Directorate cannot be brushed aside as arbitrary.

However, provisions of appeal ensure that in genuine cases there will be no
miscarriage of justice.
64. Shall we set aside the settlement on the mere possibility that
medical documentation and categorisation are faulty? And that the figures
D of the various kinds of injuries and disablement indicated are undepen-
dable? As of now, medical documentation discloses that "there is no con- f-'
elusive evidence to establish a casual link between cancer-incidence and
MIC exposure". It is true that this inference is tentative as it would appear
studies are continuing and conclusions of scientific value in this behalf can
only be drawn after the studies are over. While the medical literature
E relied upon by the petitioners suggests possibilities of the exposure being
carcinogenic, the ICMR studies show that as of now the annual incidt{nce
of cancer registration is more among the unexposed population as com-
pared to the exposed population." (See Sri Ramesh Yeshwant Durve's -'f.
affidavit dated 5th December, 1989, para 9). Similarly, "there is no definite
evidence that derangement in immune system of the gas exposes have
F taken place". But the literature relied ·upon by petitioners does indicate
that such prognosis cannot be ruled out. These matters are said to be
under close study of the ICMR and other research agencies using, as indi-
cated, the "multi-test CMI technique to screen the status of the immune
system".
G 65. But the whole controversy about the adequacy of the settle-
ment-fund arises on account of the possibility that the totality of the
awards made on all the claims may exceed the settlement-fund in which
event the settlement-fund will be insufficient to satisfy all the Awards. This
is the main concern of the victims and victim-groups. There is, as -it now
H stands, a fund of one thousand two hundred crores of rupees for the
UNION CARBIDE v. U.0.1. [ VENKATAOIALIAH,J.] 361
benefit of the victims. The main attack on its adequacy rests solely on the A
possibility that the medical documentation and categorisation based there-
on, of the victims' medical status done by the Directorate of Claims is
faulty. The charge that medical documentation was faulty and was calcu-
lated to play down the ill-effects of the exposure to MIC is, in our opinion,
not substantiated. This attack itself implies that if the categorisation of the
claimants on the basis of the sevetjty of the injuries is correct then the B
settlement-fund may not, as a settle~ent, be unreasonable.
66. At the same time, it is necessary to remind ourselves that in

bestowing a second thought whether the settlement is just, fair and ade-
quate. We should not proceed on the premise that the liability of the UCC
has been firmly established. It is yet to be decided if the matter goes to C
trial. Indeed, UCC has seriously contested the basis of its alleged liability.
But it is true that even to the extent a settlement goes, the idea of its
fairness and adequacy must necessa~!l.Y be related to the magnitude of the
problem and the question of its reasonableness must be assessed putting
many considerations into the scales. It may be hazardous to belittle the
advantages of the settlement in a matter of such complexity. Every effort D
should be made to protect the victims from the prospects of a protracted,
exhausting and uncertain litigation. While we do not intend to comment on
the merits of the claims and of the defences, factual and legal, arising in the
suit, it is fair to recognise that the suit involves complex questions as to the
basis of UCC's liability and assessment of the quantum of compensation in
a mass tort action. One of the areas of controversy is as to the admissibility E
of scientific and .statistical data in the quantification of damages without
resort to the .evidence as to injuries in individual cases.
67. Sri Nariman contended that scientific and statistical evidence

for estimates of damages in toxic tort actions is permissible only in fairness
headngs and such evidence would not be so admissible in the proceedings F
of adjudication, where personal injury must be proved by each individual
plaintiff. That would, indeed, be a struggle with infinity as it would involve
individual adjudication of tens of thousands of claims for purposes of
quantification of damages.
In an article on 'Scientific and Legal Standards of Statistical G

Evidence in Toxic Tort and Discrimination Suits' by Carl Cranor and Kurt
Nutting (See: Law and Philosophy Vol. 9 No. 2 May, 1990) there is an
interesting discussion as to what would be the appropriate standard of
evidence in presenting and evaluating scientific and statistical information
for use in legal proceedings. The· learned authors say:
H
~
A "These are two of the main sides in the controversy concerning
the kind and amount of scientific evidence necessary to sup-
port legally a verdict for the plaintiff. Black seems to urge that
courts should only accept evidence that is scientifically valid,
and adhere to the standards of evidence implicit in the dis-
cipline, while the Ferebee court urges that plaintiffs in present-
B ing scientific eVidence and expert scientific testimony should
be held to legal standards of evidence. Powerful forces are
arrayed on both sides of this issue. On the side of requiring
scientific testimony only to measure up to legal standards of
evidence, the social forces include plaintiffs or potential plain-
tiffs, plaintiffs' attorneys, public interest groups, consumer ad-
c vocacy groups, all individuals who are 'Concerned to make it
somewhat easier to recover damages under personal injury law
for alleged injuries suffered as a consequ~nce of activities of
others. On the other side of the same. issue are defendants,
poteni:ial defendants (typically corporations,· manufacturing
firms) and, interestingly, the scientific community." [Page 118)
D
In Sterling v. Ve/sicol Chemical Corp. (855 F 2d 1188 (1988)) the US '!<-·
Court of Appeals tended to the view that generalised proof of damages is
not sufficient to prove individual damages and that damages in mass tort
personal injury cases must be proved individually by each individual plain-
E .tiff. The Court held:
"We cannot emphasise this point strongly -enough because

generalised proof will not suffice to prove individual damages.
The main problem on review stems from a failure to differen-
tiate between the·general and the particular. This is an under-
standably easy trap to fall into in mass tort litigation. Although
F many common issues of fact and law will be capable of resolu-
tion on a group basis, individual particularised damages still
must be proved on an individual basis."
68. While Shri Nariman contends that admissibility of scientific

and statistical evidence is confined to Fairness Hearings alone and not in
G adjudication where personal injury by each individual plaintiff must be
proved, the learned Attorney-General; however, urges that such evidence
and estimates of damages are permissible in toxic-tort actions and Says t.hat
the fundamental principle is and should be that countless injured persons
must not suffer because of the difficulty of proving damages with certainty
H or because of the delay involved in pursuing each individual elaim_. · He
UNIQN CARBIDE v. U.0.1. [ VENKATACHALIAH,.J.) 363
referred to the following passage in Florance B. Bigelow v. RKO Radio A

Pictures Inc., (327 US 251, 264 (1946):
"the most elementary conceptions of justice and public policy

require that the wrong doer shall bear the risk of the uncer-
tainty which his own wrong has created."
B
Learned Attorney General also urged that in tort actions of this kind
the true rule is the one stated in Story Parchment Company v. Paterson
Parchment Paper Co. (282 US 555, 568):
"The rule which precludes the recovery of uncertain damages
applies to such as are not the certain result of the wrong, not to C
those damages which are definitely attributable to the wrong
and only uncertain in respect of their amount. Taylor v. Brad-
ley, 4 Abb. App. DEc. 363,366, 367, 100 Am. Dec. 415:
It is sometimes said that speculative damages cannot be

recovered, because the amount is uncertain; but such remarks D
will generally be found. applicable to such damages as it is
uncertain whether sustained at all from the breach. Sometimes
the claim is rejected as being too remote. This is another
mode of saying that it is uncertain whether such damages
resulted necessarily and immediately from the breach com-
plained of. E
The general rule is, that all damages resulting necessarily and
immediately and directly from the breach are recoverable, and
not those that are contingent and uncertain. The later descrip-
tion embraces, as I think, such only as are not the certain result
of the breach, and does not embrace such as are the certain F
result, but uncertain in amount.
Where the tort itself is of such a nature as to preclude the

ascertainment of the amount of damages with certainty, it
would be a perversion of fundamental principles of justice to
deny all relief to the injured person, and thereby relieve the G
wrongdoer from making any amend for his acts. In such case,
while the damages may not be determined by mere speculation
or guess, it will be enough if the evidence show the extent of
the damages as a matter of just and reasonable inference, al-
thousit the result be only approximate. The wrongdoer is not
entitled to complain that they cannot be measured with the H
364 SUPREME COURT REPORTS [1991) SUPP. 1 S. C.R..
A exactness and precision that would be possible if the case,

which he alone is responsible for making,were otherwise."
And in Frederick Thomas J(jngsley v. The Secretary of State for India,

(AIR 1923 Calcutta 49), it was observed:
. "Shall the injured party be allowed to recover no damages (or

B
merely nominal) because he cannot show the exact amount of
the certainty, though he is ready to show, to the satisfaction of
the Jury, that he has suffered large damages by the injury?
Certainty, it is true, would be thus attained, but it would be the
certainty of injustice. Juries are allowed to act upon probable
c and inferential, as well as direct and positive proof. And when,
from the nature of the case, the amount of damages cannot be
estimated with certainty, or onJy a part of them can be so es-
timated, we can see no objection to placing before the Jury all
the facts and circumstances of the case, having any tendency to
show damages, or their probable amount, so as to enable them
D to make the most intelligible and probable estimate which the
nature of the case will permit."
The risk of the uncertainty, says learned Attorney-General, should,

. in such cases, be thrown upon the wrongdoer instead of upon t~e injured
party. Learned Attorney General also urged that, on first principle, in
E : ·cases where ·thousands ·have been injured, it .is far .simpler .to prove the
amount of damages to the members of the class by establishing their total
damages than by c:Ollecting and aggregating individual claims as a sum to
·. be assessed against the defendants. He said statistical methods are com-
monly accepted and used .as admissible evidence in a variety of contexts ~ ·
including· quantification of damages in such mass tort actions. He said that
. F .· these principles are essential principles of justice and the Bhopal disaster is
· an ideal setting for an: innovative application of these salutary principies.
69. The foregoing serve~ to highlight the complexities.of the area.

I11deed, in many tort actions the world~over spe.edy adjudications and ex-
peditious reliefs are not easily accomplished and many of them have ended
G in settlements. In the context ·of the problems presented by. the issues of
liability in cases ofcertain corporate torts beyond the corporate veil there y
·is an impressive hody of academic opinion amongst the school men that the
very theories of limited corporate liability which initially served as 'iiieen-
tives for commercialrisk~taking needs re-thinking iri certain areas of tor-
. tious liability of Corporations. Some scholars have advocated abolition of
H; ..
UNION CARBIDE v. U.0.1. [VENKATACHALIAH,J.) 365
limited liability for "knowable tort risks". (See "An Economic Analysis of A
Limited Liability in Corporation Law" (30 U.Toronto LJ.117, (1980); "The
Place of Enterprise Liability in the Control of Corporate Conduct" ·
(90Yale Law Journal 1 (1980); "Should Shareholders be personally liable
for the torts of their Corporations?". (76 Yale Law Journal 1190 (1967).
This, of course, has the limitation of one more shade of an academician's
point of view for radical changes in law. B
70. With the passage of time there are more tangible details avail-
able by way of the proceedings of the Directorate of Claims which has
medically evaluated and categorised nearly 3,60,000 affected persons. We
have looked into the formats and folders prepared by the Directorate of
Claims for the medical evaluation of the conditions of the victims. Some C
sample medical riossiers pertaining to some individual claimants containing
an evaluation of the data pertaining to the medical status of the persons
have also been shown to us. It is on the basis of such medical dossiers that
evaluation and categorisation are stated to have been done. The guidelines
for carrying out these medical evaluations, it is stated, have been formu-
lated and issued by the Government of India. D
71. Petitioners seriously assail the correctness of the guidelines for
medical evaluation as also the result of the actual operational processes of
evaluation based thereon. Petitioners described the results indicated by
the medical categorisation done by the Directorate of Claims which
showed only 40 cases of total permanent disablement as shocking and E
wholly unrelated to the realities. Indeed, some learned counsel for the
petitioners, of course in a lighter vein, remarked that if these were the final
figures of injuries and incapacitations caused by the Bhopal Gas Leak
Disaster, then UCC should be entitled to a refund out of the sum settled
and wondered why, in the circumstances, UCC was taking shelter under
the settlement and fighting shy of a trial. F
It appears to us that particulars care has gone into the prescription
of the medical documentation tests and the formulation of the results for
purposes of evaluation and categorisation.
72. After a careful thought, it appears to us that while it may not G

be wise or proper to deprive the victims of the benefit of the settlement, it
is, however, necessary to ensure that in the-perhaps unlikely-event of
the settlement-fund being found inadequate to meet the compensation
determined in respect of all the present claimants, those persons who may
have their claims determined after the fund is exhausted are not left to fend
themselves. But, such a contingency may not arise having regard to the size H
A of the settlement-fund. If it should arise, the reasonable way to protect

the interests of the victims is to hold that the Union of India, as a welfare
State and in the circumstances in which the settlement was made, should
not be found wanting in making good the deficiency, if any. We hold and
declare accordingly.
B 73. It is relevant here that the Union of India while, quite fairly,
acknowledging that there was in fact such a settlement, however, sought to
assail its validity on certain legal issues. But the factum of the settlement
was not disputed. Indeed, Union of India did not initiate any substantive
proceedings of its own to assail the agreement or the consensual element
constituting the substratum of the order of the Court. The legal conten-
C tions as to the validity of the settlement were permitted to be raised in as
much as that ag order made on consent would be at no higher footing and
could be assailed on the grounds on which an agreement could be. But, as
stated earlier, the factum of the consensual nature of the transaction and
its existence as a fact was not disputed. Those legal conte~tions as to the
.
validity have now failed. The result is that the agreement subsists.
.
D
For all these· reasons we leave the settlement and the orders dated
14/lSth February, 1989-except to the extent set aside or modified pur-
suant to the other findings-undisturbed.
74. We may here refer to and set at rest one other contention which
E had loomed in the hearings. The petitioners had urged that the principles
of the liability and the standards of assessment of damages in a toxic mass
tort arising out of a hazardous enterprise should be not only on the basis of
absolute liability-not merely on Rylands v. Fletcher principle of strict
liability-not admitting of any exceptions ~ut also that the size of the award
be proportional to the economic superiority of the offender, containing a
F deterrent and punitive element. Sustenance was sought from M.C. Mehta
v. Union of India, AIR 1987 SC 1086. This argument in relation to a
proceeding assailing a settlement is to be understood as imputing an infir-
mity to the settlement process as not being informed by the correct prin-
ciple of assessment of damages. Respondents, however, raised several
contentions as to the soundness of the Mehta principle and its applicability.
G It was also urged that Mehta principle, even to the extent it goes, does not
solve the issues of liability of the UCC as distinct from that of UCIL as
Mehta case only spoke of the liability of the offending enterprise and did
not deal with principles guiding the determination of a holding-company
for the torts of its subsidiaries.
H It is not necessary to go into this controversy. The settlement was

UNION CARBIDE v. U.0.1. [ VENKATACHALIAH,J.} '367
arrived at and is left undisturbed on an over-all view. The settlement can- A

not be assailed as violative of Mehta principle which might have arisen for
consideration in a strict adjudication. In the matter of determination of
compensation also under the Bhopal Gas Leak Disaster (P.C) Act, 1985,
and the Scheme framed thereunder, there is no scope for applying the
Mehta principle inasmuch as the tort-feasor, in terms of the settlement-
for all practical purpose~tands notipnally substituted by the settlement- B
fund which now represents and exhausts the liability of the alleged hazard-
ous entrepreneurs viz., UCC and UCIL. We must also add that the Mehta
principle can have no application against Union of India inasmuch as re-
quiring it to make good the deficiency, if any, we do not impute to it the
position of a joint tort-feasor but only of a welfare State. There is, there-
fore, no substance in the point that Mehta principle should guide the quan- C
tifi.cation of compensation to the victim-claimants.
75. This necessarily takes us to the question of the medical surveil-

lance costs; and the operational expenses of the Hospital. We are of the
view that for at least a period of eight years from now the population of
Bhopal exposed to the hazards of MIC toxicity should have provision for D
medical surveillance by periodic medical check-up for gas related afflic-
tions. This shall have to be ensured by setting up long-term medical
facilities in the form of a perman-nt specialised medical and research es·
tablishment with the best of expertise. An appropriate action-plan should'
be drawn up. It will be proper that expert medical facility in the form of
the establishment of a full-fledged hospital of at least 500 bed strength with E
the best of equipment for treatment of MIC related affliction should be
provided for medical surveillance and for expert medical treatment. The
State of Madhya Pradesh shall provide suitable land free of cost. The
allocation of the land shall be made within two months and the hospital
shall be constructed, equipped and made functional within 18 months. It
shall be equipped as a Specialist Hospital for treatment and research of F
MIC related afflictions and for medical surveillance of the exposed popula-
tion.
76. We hold that the capital outlays on the hospital and its opera-
tion expenses for providing free treatment and services to the victims
should, both on humanitarian considerations and in fulfilment of the offer G
made before the Bhopal court, be borne by the UCC and UCIL. We are
conscious that it is not part of the function of this Court to re-shape the
settlement or restructure its terms. This aspect of the further liability is
also not a matter on which the UCC and the UCIL had an opportunity to
express their views. However, from the tenor of the written submissions
H
368 SUPREME COURT REPORTS (1991} SUPP. 1 S. C. It
A made before the District Court at Bhopal in response to the proposal of

the Court for "reconciliatory substantial interim relief' to the gas victims,
both the UCC and UCIL had offered to fund and provide a hospital for the·
gas victims. The UCC had re-called that in January, 1986, it had offered "to
fund the construction of hospital for the treatment of gas victims the
amount being contributed by the UCC and the UCIL in equal propor-
B tions". Shri N:ariman bad also referred to this offer during the submissions
in the context of the bona fides of the UCC in that behalf. It is, no doubt,
true that the offer was made in a different context and before an overall
settlement. But that should not detract the UCC and the UCIL from
fulfilling these obligations, as indeed, the moral sensibilities to the immense
need for relief in all forms and ways should make both the UCC and UCIL
C forthcoming in this behalf. Such a hospital should be a fully equipped
hospital with provision for maintenance for a period of eight years which in
our estimate might together involve the financial outlay of around Rs. 50
crores. We hope and trust that UCC and UCIL will not be found wanting
in this behalf. ·
D 77. ·Then comes the question which we posed at the end of para-
graph 44. This concerns the exposed members of the populace of Bhopal
who were put at risk and who though presently a symptomatic and filed no
claim for compensation might become symptomatic in future. How should
cases of yet unborn children of mothers exposed to MIC toxicity where the
children are found to have or develop congenital defects be taken care of?
E
The question is as to who would provide compensation for such
cases?
We are of the view that such contingencies shall be taken care of by

obtaining an appropriate medical group insurance cover from the General
F Insurance.Corporation of India or the Life Insurance Corporation of India
for compensation to this contingent class of possible prospective victims.
There shall be no individual upper monetary limit for the insurance
liability. The period of insurance cover should be a period of eight years in
the future. The number of persons to be covered by this Group Insurance
scheme should be about and not less than one lakh of persons. Having
G regard to the population of the seriously affected wards of Bhopal city at
the time of the disaster and having regard to the addition to the population
by the subsequent births extrapolated on the basis of national average of
birth rates over the past years and the future period of surveillance, this
figure broadly accords with the percentage of population of the affected
. wards bears to the number of persons found to be affected by medical
H categorisation. This insurance cover will virtually serve to render the set-
UNION CARBIDE v. U.O.l [ VENKATACHALIAH).] 369
tlement an open ended one so far as the contingent class of future victims A
both existing and after-born are concerned. The possible claimants fall
into two categories: those who were in existence at the time of exposure;
and those who were yet unborn and whose congenital defect.s are traceable
to MIC toxicity inherited or derived congenitally.
In so far as the second class of cases is concerned, some aspects have B

been dealt with in the report of the Law Commission in United Kingdon;i
on "Injuries to Unborn Children". The Commission, referring to the then-
existing Law, said:
"7. Claims for damages for pre-natal injuries have been made
in many other jurisdictions but there is no English or Scottish
authority as to whether a claim would lie and, if it did, what C
rules and limitations should govern it. In our working p~per
w~ did not attempt to forecast how such a claim would be
decided if it came before a court in this country, although we
did add, as an appendix to the paper, a brief account of some
of the decisions of courts in other jurisdictions..."
" 8. It is, however, important from our point of view to express D
our opinion (reinforced by our general consultation and sup-
ported by the report of the Scottish Law Commission) that it is
highly probable that the common law would, in appropriate
circumstances, provide a remedy for a plaintiff suffering from a
pre-natal injury caused by another's fault. It is important to E
make our opinion on this point clear because, on consultation,
it has become apparent that many people think that we were,
in our working paper, proposing the creation of new liabilities,
whereas it is probable that liability under the common law
already exists .....".
Thereafter in United Kingdom, the Congenital Disabilities (Civil

F
Liability) Act, 1976, was brought forth. Section 1 (1) of that Act says:
" 1 (1~ If a child is born disabled as the result of such an

occurrence before its birth as is mentioned in sub-section (2)
below, and a person (other than the child's own mother) is G
under this section answerable to the child in respect of the
occurrence, the child's disabilities are to be regarded as
damage resulting from the wrongful act of that person and ·
actionable accordingly at the suit of the child."
It is not necessary for the present purpose to go into other features of H

A that legislation and the state of corresponding law in India. Our present.
question is as to how and who would provide compensation to the two class
of cases referred to us earlier. We hold that these two classes of cases are
compensatable if the claimants are able to prove injury in the course of the
next eight years from now. ·
B The premia for the insuran~ shall be paid by the Union of India out
of the settlement fund. The eligible claimants shall be entitled to be paid r-
by the insurer compensation, on such principles and upon establishment of
the nature of the gas related toxic morbidity by such medical standards as
are applicable to the other claimants under the Bhopal Gas Leak Disaster
(Processing of Claims) Act, 1985, and the scheme framed thereunder. The
C individual claimants shall be entitled to have their claims adjudicated
under the statutory scheme. "
78. We must, however, observe that there is need for expeditious

adjudication and disposal of the claims. Even the available funds would
not admit of utilisation unless the claims are adjudicated upon and the -...,,__,. ·
D quantum of compensation determined. We direct both the Union of India
and the State Government to take expeditious steps and set-up adequate
machinery for adjudication of claims and determination of the compensa·
tion. The appointment of the Claim Commissioners shall be completed
expeditiously and the adjudicative process ·must commence within four
months from today. In the first instance, there shall at least be 40 Claim
E Commissioners with necessary secretarial assistance to start the adjudica·
tion of the claims under the Scheme.
79. In the matter of disbursement of the amounts so adjudicated and

determined it will be proper for the authorities administering the funds to
ensure· that the compensation-amounts, wherever the beneficiaries are il-
F literate and are susceptible to exploitation, are properly invested for the
benefit of the ·beneficiaries so that while they receive the income therefrom
they do not, owing to their illiteracy and ignorance, deprive themselves of
what may turn out to be the sole source of their living ~nd sustenance for
the future. We ma1 usefully refer to the guide-lines laid down in the case of
Muljibhai Ajarambhai Harijan & Anr. v. United India Insurance c;o.Ltd. &
G Ors., 1982 (1) Gujarat Law Reporter 756. We approve and endorse the
guidelines formulated by the Gujarat High Court. Those guidelines, With
appropriate modifications, could usefully be adopted. We may briefly
recapitulate those guidelines: ,.
(i) The Claims Commissioner should, in the case of minors,
''
}
H invariably order the amount of compensation awarded to the

UNION CARBIDE v. U.0.1. [ VENKATACHALIAH,J. J 371
minor to be invested in long term fixed deposits at least till the A

date of the minor attaining majority. The expenses incurred by
the guardian or next friend may, however, be allowed to be
withdrawn;
(ii) In the case of iUiterate claimants also the Claims commis-

sioner should follow the procedure set out in (i) above, but if B
lump sum payment is required for effecting purchases of any
movable or immovable property such as, agricultural imple-
ments, assets utilisable to earn a living, the Commissioner may
consider such a request after making sure that the amount is
actually spent for the purpose and the demand is not a ruse to
withdraw money; C
(iii) In the case of semi-literate persons the Commissioner
should ordinarily resort to the procedure set out in (ii) above
unless he is satisfied that the whole or part of the amount is
required for expanding any existing business or for purchasing
some property for earning a livelihood. D
(iv) In the case of widows the Claims Commissioner should
invariably follow the procedure set out in (i) above;
(v) In personal injury cases if further treatment is necessary
· withdrawal of such amount as may be necessary for incurring E
the expenses for such treatment may be permitted;
(vi) In· all cases in which investment in long term fixed

deposits is made it should be on condition that the Bank wiil
not permit any loan or advance on the fixed deposit and inter~
est on the amount invested is paid monthly directly to the p
claimant or his guardian, as the case may be.
It should be stipulated that the FDR shall carry a note on the

face of the document that no loan or advance will be allowed
on the security of the said document without express permis-
sion. G
(vii) In all cases liberty to apply for withdrawal in case of an
emergency should be available to the claimants.
Government might also consider such investments being handled by

promulgating an appropriate scheme under the Unit Trust of India Act so H
A as to afford to the beneficiaries not only adeqpate returns but also ap-
propriate capital appreciation to neutralise the effect of denudation by
inflation.
80. Point (J) is disposed pf in terms of the foregoing directions.
81. We might now sum up tlie conclusions reached, the fmdinp

B recorded and directions issued on the various contention5:
(i) The contention that the Apex Court had no jurisdiction to
withdraw to itself the original suits pending in the District
Court at Bhopal and dispose of the same in terms of the settle-
ment and the further contention that, similarly, the Court had·
c no jurisdiction to withdraw the criminal proceedings are
rejected.
It is held that under Article 142(1) of the Constitution, the

Court had the necessary jurisdiction and power to do so.
D Accordingly, contentions (A) and (B) are held and answered
against the petitioners.
(ii) The contention' that the settlenient is void for non-com-

pliance with the requirements of Order XXIII Rule 38, CPC is
rejected. Contention (C) is held and answered against the
E petitioners.
(iii) The contention that the Court had no jurisdiction to

quash the criminal proceedings in exercise of power under Ar-
ticle 142(1) is rejected. But, in the particular facts and cir-
cumstances, it is held that the quashing of the criminal
F proceedings was not justified.
The criminal proceedings are, accordingly, directed to be

proceeded with. Contention (D) is answered accordingly.
(iv) The orders dated 14th /15th of February, 1989 in so far as

G they seek to prohibit future criminal proceedings are held not
to amount to a conferment of criminal immunitY; but are held
to be merely consequential to the quashing of the criminal
proceedings.
Now that the quashing is reviewed; this pad of the order is

UNION CARBIDE v. U.O.I. [ VENKATACHALIAH).] 373
also set aside. Contention (E) is answered accordingly. A
(v) The contention (F) that the settlement, and the orders of
the Court thereon, are void as opposed to public policy and as
amounting fo a stifling of criminal proceedings is rejected.
(vi) Having regard to the scheme of the Bhopal Gas Leak B

Disaster (Processing of Claims) Act, 1985, the incidents and
imperatives of the American Procedure of 'Fairness Hearing'
is not strictly attracted to the Court's sanctioning of a settle-
ment. Likewise, the absence of a "Re-opener" clause does not,
ipso facto, vitiate the settlement. Contention (G) is rejected.
c
(vii) It is held, per invitim, that if the settlement is set aside
the UCC shall be entitled to the restitution of the US 420
million dollars brought in by it pursuant to the orders of this
Court.
But, such restitution shall be subject to the compliance with D
and proof of satisfaction of the terms of the order dated 30th
November 1986, made by the Bhopal District Court. · Conten-
tion (H) is rejected subject to the condition aforesaid.
(viii) The settlement is not vitiated for not affording .the victims
and victim-groups an opportunity of being heard. However, if
the settlement-fund is found to be insufficient, the deficiency is E
to be made good by the Union of India as indicated in para-
graph 72. Contention (I) is disposed of accordingly.
(ix) On point (J), the following findings are recorded and

directions issued:
F
. (a) For an expeditious disposal of the claims a time-bound
consideration and determination of the claims are necessary.
Directions are issued as indicated in paragraph 77.
(b) In the matter of administration and disbursement of the

compensation amounts determined, the guide-lines contained G
in the judgment of the Gujarat High Court in Muljibhai v.
United India Insurance Co, are required to be taken into ac-
count and, wherever apposite, applied. Union of India is also
directed to examine whether an appropriate scheme under the
Unit Trust of India Act could be evolved for the benefit of the
Bhopal victims. H
A (c) For a period of 8 years facilities for medical surveillance of

the population of the Bhopal exposed to MIC should be
provided by periodical medical check-up. For this purpose a
hospital with at least 500 beds strength, with the best of equip-
ment and facilities should be established. The facilities shall t·
be provided free of cost to the victims at least for a period of 8
B years from now. The state Government shall provide suitable
land free of cost. ·
(d) In respect of the population of the affected wards, [ex-

cluding those who have filed claims], Government of India
shall take out an appropriate medical group insurance cover
c from the Life Insurance Corporation of India or the General
Insurance Corporation of India for compensation to those
who, though presently asymtomatic and filed no claims for
compensation, might become symptomatic in future and to
those later-born children who might manifest congenital or
prenatal MIC related afflictions. There shall be no upper in-.
D dividual monetary limit for· the insurance liability. The period
of insurance shall be for a period of eight years in future. The
number of persons to be covered by this group shall be about
one lakh persons. The premia shall be paid out of the settle-
ment fund.
E
(e) On humanitarian consideration and in fulfilment of the
offer made earlier, the UCC and UCIL should agree to bear
the financial burden for the establishment and equipment of a
hospital, and its operational expenses for a period of eight
years.
F
82. In the result, the Review Petitions are allowed in part and all the
contentions raised in the Review-Petitions and the I.As in the civil appeals
are disposed of in terms of the findings recorded· against the respective
contentions. In the light of the disposal of the Review-petitions, the ques-
tion raised in the writ-petitions do not survive. The writ-Petitions are dis-
G missed accordingly without any order as to costs.
AHMADI, J. I have carefully gone through the elaborate judgment
prepared by my learned Brother Venkatachaliah,J. and I am by and large
in agreement with his conclusions except on a couple of aspects which l
will presently indicate.
H
UNION CARBIDE v. U.0.1. [AHMADI, J.] 375
The points which arise for determination on the pleadings, docu- A

ments and submissions made at the Bar in the course of the hearing of
these petitions have been formulated at points (A) to (J) in paragraph 8 of
my learned Brother's judgment and the conclusions reached by him have
been summarised and set out in the penultimate paragraph of his judgment
at (i) to (ix), with their sub-paragraphs. I am in agreement with the con-
clusions at (i) to (vii) which answer contentions (A) to (H). So far as B
conclusion (viii) pertaining contention (I) is concerned. I agree that the
settlement is not vitiated for not affording the victims or victim-groups an
opportunity of being heard but I find it difficult to persuade myself to the
view that if the settlement. Fund is found to be insufficient the shortfall
.... ---, must be made good by the Union of India. For reasons which I will
presently state I am unable to comprehend how the Union of India can be C
directed to suffer the burden of the shortfall, if any, without finding the
Union of India liable in damages on any count. As regards conclusion (ix)
referable to contention(J). I am in agreement with sub-paragraphs (a), (b)
arid (d) thereof but so far as sub-paragraphs (c) and (e) are concerned I
agree with the directions therein as I understand them to be only recom- D
mendatory in nature and not linked with the settlement.
In Charan Lal Saliu's case (1990}1SCC613 this Court upheld the

constitutional validity of the Bhopal Gas Leak Disaster {Processing of
Claims) Act,. 1985 (herein after called 'the Act'). In that case although the
·question referred to the Bench was in regard to the constitutional validity E
of the said enactment, submissions were made on the question whether the
impugned settlement was liable to be set aside on the ground that it was in
flagrant violation of the principles of natural justice, in that, the victims as
well as the victim-groups bad no opportunity to examine the terms of the
settlement and express their views thereon. Mukharji, CJ. who spoke for F
the :najority (Ranganathan, J. and myself expressing separately) observed
that on the materials available "the victims have not been able to show at all
any other point or material which would go to impeach the validity of the
settlement". It was felt that though the settlement without notice to the
victims was not quite proper, justice had in fact been done to the victims
but did not appear to have been done. Taking the view that in entering G
upon the settlement regard should have been had to the views of the vic-
tims and for that purpose notices should have been issued before arriving
at_ the settlement, the majority held that "post-decisional notice might be
sufficient but in the facts and circumstances of this case, no useful purpose
would be served by giving a post-decisional hearing having regard to the H
---
A circumstances mentioned in the order of this Court dated May 4, 1989, and
having regard to the fact that there are no further additional data and facts
availabl~ with the· victims which can· profitably and meaningfully be
presented to controvert the basis of the settlement and further having
regard to the fact that the victims had their say or on their behalf their
B views have been agitated in· the proceedings. and will have further oppor-
tunity in the pending review proceedings". It would, therefore, appear that
the majority had applied its mind fully to the terms of the settlement in the
light of the data as well as the facts and circumstances placed before it and
was satisfied that the settlement was a fair and reasonable. one and a post-
decisional hearing would not be of much avail. Referring to the order of
C May 4, 1989 carrying the Court's assurance that it will be only too glad to
consider any aspect which may have been overlooked in considering the
terms of the settlement, Mukharji, CJ., opined that the further hearing
which the victims will receive at the time of the h.earing of the review
petitions will satisfy the requirement of the principles of natural justice .
D K.N. Singh, J. while agreeing with the view expressed by Mukharj~ CJ. did
not express any opinion on the question of inadequacy of the settlement.
In the circumstances it was held that there was no failure of justice neces-
sitating the setting aside of the settlement as violative of. fundamental
rights. After stating this the learned Chief Justice observed that while
justice had in fact been done, a feeling persisted in the minds of the victims
E that they did not have a full opportunity to ventilate their grievances in
regard to the settlement. In his view this deficiency would be adequately
met in the hearing on the Review Petitions (the present petitions). After
taking notice of the aforesaid view expressed by the learned Chief Justice,
Ranganathan, J. (myself concurring) observed as under:
F
"Though we are prima facie inclined to agree with him that
there are good reasons why the settlement should not be set
aside on the ground that the principles of natural justice have
been violated quite apart from the practical complications that
may arise as a result of such an order, we would not express
G anY final opinion on the validity of the settlement but would
leave it open to be agitated to the extent permissible in law in
tht> review petition pending before this Court."
It is, therefore, manifest from the above that the Sahu Bench was
'prima facie' of the view that the settle~ent was not liable to be set aside on
·H
UNION CARBIDE v. U.0.1. [ AHMADI, J. ] 377
.the ground that the principles of natural justice had been violated. A
Mukharji, CJ. went on to say that no useful purpose would be served by
a post-decisional hearing and that the settlement was quite reasonable and
fair. Of course K.N. Singh, J. did not express any opinion on the inade-
quacy of the settlement amount but he was otherwise in agreement with the
view expressed by Mukharji, CJ. on all the other points. The view of Ran-
B
ganathan, J. and myself is evident from the passage extracted above.
This case has gone through several .twists and turns. One of the
world's Worst disaster occurred on the night between 2nd and 3rd Decem-
ber, 1984 choking several to death and injuring thousands of residents
living near.about the industrial plant of UCIL. Litigation was initiated on C
behalf ofse>me of the victims in the U.S. District Court, Southern District
of New-York presided over by Judge Keenan. After the enactment of the
Act on 29th March, 1985, the Union of India also approached Judge
Keenan with a complaint. Judge Keenan ultimately terminated the
proceedings before him on the ground of 'forum~non-convenience'. There-
after the Union of India representing the victims file a suit for damages in D
the Bhopal District Court aga_inst the UCIL as 'Yell as the UCC in which an
order for interim compensation was made against which an appeal was
filed in the High Court. The matter was brought to this Court against the
High Court order. It was during the hearing of the said matter that a court
assisted settlement was struck and orders were passed recording the same 'E
on 14th/15th February, 1989. On 4th May, 1989 this Court gave its reasons
for the settlement. Soon a hue and cry was raised against the settlement by
certain victims and victim groups. In the meantime petitions were filed in
this Court challenging the constitutional validity of the Act on diverse
grounds. In the course of the hearing of the cases raising the question of F
validity of the Act submissions were also made regarding the validity of the
settlement. Th<; hearing continued from 8th March, 1989 to 3rd May, 1989
and the same received wide publication in the media. The judgment in the
said case was pronounced on 22nd December, 1989 upholding the validity
of the Act. In the meantime petitions were filed under Article 137 of the
Constitution to review the settlement. Several Writ Petitions und~r Article G
32 also came to be filed. These came up for hearing before a Constitution
Bench presided over by Mukharji,CJ. The hearing continued for more
than two weeks and. the media carried reports of the day to day court
proceedings throughout the country. Unfortunately, before the judgment
could be pronounced a tragic event took place. Mukharji, CJ. passed away H
378 SUPREME COQRT REPORTS [1991} SUPP. 1 S. C.R.
A necessitating a rehearing by a Constitution Bench presided over by Misra,

CJ. This hearing lasted for about 18 to 19 days and received the same wide
coverage in the .press, etc. In fact considerable heat was generated
throughout the court hearings and the press also was none too kind on the
court. It is, therefore, difficult to imagine that all those who were inter-
B ested in the review of the settlement were unaware of the proceedings. Mr.
Nariman has placed on record a number of press-clippings to make good
his point that newspapers having large circulation throughout the country
carried news regarding the settlement and subsequent attempts to chal-
lenge the same. Can it then be said that the victims were unaware of the
proceeding5 before this Court ? To say so would be to ignore the obvious.
c
In view of the observations in Sahu's case, the scope of the inquiry in
the present petitions can be said to be. a narrow one. One way of ap-
proaching the problem is to ask what the Court could have done if a
pre-decisional hearing was afforded to the victims. The option obviously
D would have been either to approve the terms of the compromise, or to
refuse to super add the Court's seal to the settlement and leave the parties
to go to trial. The Court could not have altered, varied or modified the
terms of the settlement without the express consent of the contracting
parties. If it were to find the compensation amount payable under the
settlement inadequate; the only option left to it would have been to refuse
· E to approve the settlement and turn it into a decree of the Court. It could
not have unilaterally imposed any additional liability on any of the con-
tracting parties. If it found the settlement acceptable it could turn it into a
Court's decree. According to the interpretation put by the majority in
Salm 's case on the scope of sections 3 and 4 of the Act, a pre-decisional
F hearing ought to have been given but failure to do so cannot vitiate the
settlement as according to the majority the lapse could be cured by a
post-decisional hearing. The .scope of the review petitions cannot be any
different at the post··decisional stage also. Even at that stage the Court can
either approve of the· settlement or disapprove of it but it cannot, without
the consent of the concerned party, impose any new or additional financial
G obligations on it. At the post decisional stage it' must be satisfied that the
victims are informed of or alive to the process of hearing, individually or
through press reports, and if it is so satisfied it can apply its mind to the
fairness .and . reasonableness Of the settlement and either endorse it or
refuse to do so. 'In the present case the majority speakingthrough Brother
H Venkatachaliah, J. has not come to the conclusion that the settlement does
UNION CARBIDE v. U.0.1. [ AHMADI,.J.) 379
not deserve fo be approved nor has it held that the settlement-fund is A

inadequate. Merely on the apprehended possibility that the settlement-
fund may prov~ to be inadequate, the majority has sought to saddle the
Union of India with the liability to make good the deficit, if any. The
Union of India has not agreed to bear this liability. And why should it
burden the Indian tax-payer with this liability when it is neither held liable
in tort nor is it shown to have acted negligently in entering upon the settle- B
ment? The Court has to reach a definite .conclusion on the question
whether the compensation fixed under the agreement is adequate or other-
wise and based thereon decide whether or not to convert it into a decree.
But on a mere possibility of there being a shortfall, a possibility not sup-
ported by any realistic appraisal of the material on record but on a mere c
apprehension, quia timet, it would not be proper to saddle the Union of
India with the liability to make good the shortfall by imposing an additional
term in the settlement without its consent, in exercise of power under
Article 142 of_tlle Constitution or any statute or on the premises of its duty
as a welfare State. To my mind, therefore, it is impermissible in law to
D
impose the burden of making good the shortfall on the Union of India and
thereby saddle the Indian tax-payer with the tortfeasor's liability, if at all. If
I had com"e to the conclusion that the settlement-fund was inadequate, I
would have done the only logical thing .of reviewing the settlement and
would have left the parties to work out a fresh. settlement or go to trial in
the pending suit. In Sa/m's case as pointed out by Mukharji, CJ. the victims E
had not been able to show any material which would vitiate the settlement.
The voluminous documentary evidence-placed on the record of the present
proceedings also does not make out a case of inadequacy of.the amount,
necessitating a review of the settlement. In the circumstances I do not
think that the Union of India can be saddled with the liability to make good F
the deficit, if any, particularly when it is not found to be a tortfeasor. It's
liability as a tortfeasor, if at all, would have to be gone into in a separate
proceeding and not in the present petitions. These, in brief, are my
reasons for my inability to agree with the latter part of conclusion (viii)·
imposing a liability on the Union of India to make good the deficit, if any.
G
One word about the shifting stand of the Union of India. It
entered into a Court assisted settlement but when the review applications
came up for hearing it supported the review petitioners without seeking the
Court's leave to withdraw from the settlement on permissible grounds or
itself filing a review petition. To say the least this conduct is indeed H
A surprising.
I would have liked to reason out my view in greater detail but the.
constraint of time does not permit me to do so. The draft of the main
judgment was finalised only yesterday by noon time and since the matter
was already listed for judgment today, I had only a few hours to state my
B views. I had, therefore, no time to write a detailed judgment but just a little
time to indicate in brief the crux of some of the reasons for my inability to
agree with the view expressed in the judgment of Brother Venkatachaliah,
J. on the question of Union of India's liability to make good the defieiency,
if any.
r-·
G.N. Petitions disposed of.

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UNION CARBIDE CORPORATION ETC. ETC.

[RANGANATH MISRA, CJ, K.N. SINGH, M.N. 'B

Bhopal Gas Disaster (Processing of Claims) Act, 1985: '

A ground of insufficiency of settlement fund-In the event offunds being found ¥.

passed on 29.3.1985 authorising the Government of India, as parent patriae A

On 14th February, 1989 this Court recorded an overall settlement of

The said settlement was assailed in the present Petitions on various

A The petitioners contended that this Court had no jurisdiction to

2. The settlement ordered by this Court is not void for non- D

3. The orders recording the settlement in so far as they seek to

8. If the settlement fund is found to be insumcient, the deficiency is

B 9. For expeditious dispos.al or the claims, a time-bound

. Per Majority: (Venkatachaliah, J. for himself, K.N. Singh and N.D.

C 1. Article 139-A of the Constitution in terms does not apply to the

Durga Sliankar Melita v• .Thakur Raghuraj Singh & Others, (1955)

2. Any limited interpretation of the expression 'cause or matter'

to its logical conclusions, would mean that when an interlocutory appeal A

3. To the extent power of withdrawal and transfer of cases to the

Harbatls Singh v. U.P. State, (1982] 3 SCR 235, relied on. F

Isaacs v. Robertson, 1984(3) AER 140, relied on. G

A different from the consequent\es of the breach of rules of natural justice ·~

considered it appropriate to suggest the remedy and curative of an

6. The proposition that ~ provision in any ordinary law irrespective

propriety of lb~ exercise of the power. No question of lack of jurisdiction or A

Prem Chand Garg v. Excise Commissioner, U.P., Allahabad, [1963)

State of Punjab v. Union of India, (1986] 4 SCC 335; M.N.

A Sankar Rangayya v. Sankar Ramayya, AIR 1916 Mad. 463; Bis-

B 8. Grant of blanket immunity .is a legislative function. There is no

Apodaca v. Viramonies, 13 ALR 1427; Doyle v. Hafstader, 257 NY

9.1. The validity and durability of a consent order are wholly

9.2. A contract whose object is opposed to public policy is invalid and A

State of Kera/a & Anr., v. The Gwalior Rayon Silk Manufacturing

Corpus Juris Secondum, Vol. 1, p.473, referred to.

V. Narasimha Raju v. V. Gurumurthy Raju & Ors., [1963] 3 SCR 687;

Ayers v.Jackson, TP, 525 A 2d 'li,7 (NJ.1987), referred to.

13. In personal injury actions the possibilty of the future

in that sense is a very delicate exercise requiring evaluation of many A

Agent Orange Litigation, 597 Federal Supplement 740(1984); Florida

15. The settlement is not vitiated by reason alone of want of a

A 16.1 Strictly speaking no restitution in the sense that any funds

maintain unencumbered assets of the value of 3 billion US dollars during A

National TeXtile Workers Union v. P.R. Ramakrishnan [1983) 1 SCC

A Prasad v. Settlement Commission, (1989) 1 SCC 628; H.L. Trehan' v. Union

Wiseman v. Borneman, 1971 AC 297; Leary v. National Union of

18. The question in the instant case is not so much as to the

ensuring justice to these tens of thousand innocent victims, the issues of A

21. The whole controversy about the adequacy of the settlement·

22. In bestowing a second thought whether the settlement is just, fair

A exhausting and uncertain litigation. (361 C-DI

23. Indeed, in many tort actions the world-over speedy acijudlc:atlons

E An Economic Analysis of Limited Liability in Corporation Law, 30 U.

25. The settlement was arrived at and is left undisturbed on an A

M.C. Mehta v. Union of India, (1987) 1SCC395, referred to.

5. In the order of May 4, 1989, this Court clearly indi.cated that it is

.....,- PerAhmadi, J. (partly Dissenting):

1.4On a mere possibllty of there being a shortfall, a possibility not

Nos .29'377-N88, 7942-43/89, 16093/89, 17965/89, Review Petition Nos. 229 A

Soll J. Sorabjee, Attorney Genera~ Shanti Bhushan, Ms. Indira Jais-

The Judgment of the Court was delivered by

A Union Carbide Corporation ('UCC' for short), a ~ulti-national one,