M.C. Mehta v. Union of India (Oleum Gas Leak Case)

Oleum gas escaped from a Shriram unit while a writ petition against its units was pending. A five-judge Bench was asked how liable a hazardous enterprise is. The Court held that such an enterprise is absolutely liable (liable with no exceptions), without the exceptions of the rule in Rylands v. Fletcher.

Quick Revision

Parties

M.C. Mehta — petitioner (appeared in person); filed the writ petition under Article 32 for closure of various units of Shriram.

Union of India and others — respondents; the writ petition names them with Shriram.

Shriram Foods and Fertiliser Industries ("Shriram") — a respondent; an industrial concern owned by Delhi Cloth Mills Limited, a public company limited by shares.

Delhi Legal Aid and Advice Board — applicant; filed an application for compensation for the oleum gas victims.

Delhi Bar Association — applicant; filed an application for compensation for the oleum gas victims.

Delhi Administration — directed to provide funds to the Board for the compensation actions.

Intervener and Citizens Action Committee — appeared through counsel. The judgment records no separate argument from them.

Procedural History

1. M.C. Mehta filed Writ Petition (Civil) No. 12739 of 1985 under Article 32. He wanted a direction to close the various units of Shriram because they were hazardous to the community.
2. On 4 and 6 December 1985, oleum gas escaped from one of the Shriram units while the petition was pending.
3. The Delhi Legal Aid and Advice Board and the Delhi Bar Association applied for compensation for those who suffered harm.
4. On 17 February 1986, a Bench of three Judges gave judgment. It let Shriram restart its power plant and plants making caustic chlorine, soap, glycerine and technical hard oil, subject to conditions.
5. The three Judges formulated the issues. They asked the petitioner, his supporters and Shriram to file written submissions.
6. The case was referred to a Bench of five Judges. The issues involved substantial questions of law on Articles 21 and 32.
7. The hearing before the five Judges ended on 15 December 1986. The Court says it was called on to deliver judgment within four days, on 19 December 1986. The judgment is dated 20 December 1986.
8. The relocation of the units and the other issues were left for hearing on 3 February 1987.

Facts

1. Shriram made chemicals and fertilisers, including caustic soda and chlorine. It belonged to Delhi Cloth Mills Limited.
2. Its various units stood in a single complex. Thickly populated colonies surrounded the complex.
3. Chlorine gas is admittedly dangerous to life and health. If it escaped from a storage tank, a filled cylinder or any other point, people nearby could be seriously affected.
4. Shriram was required to obtain licences under the Factories Act and the Delhi Municipal Act, 1957. It was regulated under the Water (Prevention and Control of Pollution) Act, 1974 and the Air (Prevention and Control of Pollution) Act, 1981.
5. Shriram was registered under the Industries (Development and Regulation) Act, 1951. It received loans and overdrafts running into several crores of rupees from the Government through various agencies.
6. M.C. Mehta filed the writ petition to obtain closure of the units.
7. On 4 and 6 December 1985, oleum gas escaped from one of the units while the petition was pending.
8. The Delhi Legal Aid and Advice Board and the Delhi Bar Association then applied for compensation for those harmed.
9. The Court records that the facts and later events are set out in the three-Judge judgment of 17 February 1986. It does not repeat them.

Issues Raised

1. Should the Court decide these constitutional issues when the writ petition made no claim for compensation (the preliminary objection)?
2. What is the scope and ambit of the jurisdiction of the Supreme Court under Article 32, since the compensation applications are sought to be maintained under that Article?
3. Is Article 21 available against Shriram, owned by Delhi Cloth Mills Limited, a public company engaged in an industry vital to public interest with potential to affect life and health?
4. What is the measure of liability of an enterprise engaged in a hazardous or inherently dangerous industry, if persons die or are injured in an accident in that industry?
5. Does the rule in Rylands v. Fletcher apply, or is there another principle on which the liability can be determined?

Arguments Contended

For the applicants and the petitioner:

• Article 21 was available against Shriram. Counsel relied on the American doctrine of State action (State-backed private activity treated as State action) and on the functional and control test of earlier Indian decisions.
• Government policy intended this industry ultimately to be run by the State. Shriram was allowed to run it under active Government control and regulation.
• Since the Government meant to run the industry itself, its control was linked to regulating the part of the industry that could vitally affect public interest.
• Counsel stressed the Industries (Development and Regulation) Act, 1951, which covers industries that vitally affect public interest.
• Counsel also pointed to the Bombay Municipal Corporation Act, the Air and Water Pollution Control Acts and the recent Environment Act, 1986.
• Counsel pointed to the sizeable aid in loans, land and other facilities that the Government gave Shriram.
• Private activity that the State supports, controls or regulates may become so entwined with governmental activity that it is State action. It would then face the same constitutional limits as the State.

For Shriram (Mr. Diwan and counsel for Shriram):

• Preliminary objection: the Court should not decide these constitutional issues. The writ petition made no claim for compensation, so the issues did not arise on it.
• The escape of oleum gas happened after the petition was filed. The petitioner could have applied to amend the petition to claim compensation but did not.
• Control of a private corporation's functions under general law, such as the 1951 Act, is only an exercise of the State's police power of regulation. It does not turn the activity into that of the State.
• Control that makes a corporation an agency of the State must reach its management policies. Examples are sizeable representation on the board or prior Government approval of new policy.
• The State action doctrine does not suit India. Here the control and function tests decide whether a body is 'other authority' under Article 12. Once a body is 'other authority', it is State for all its activities. The American split between State action and private action cannot operate here.
• The Constitution makers made some rights available against private parties by specific provisions, namely Articles 17, 23 and 24. Widening Article 12 to cover private corporations would be against the scheme of the Chapter on fundamental rights.
• Including such private corporations within Article 12 would deal a death blow to the policy of encouraging private entrepreneurial activity. The Court records this apprehension at the end of its discussion of Article 12.
• The judgment records no separate argument by either side on the Rylands v. Fletcher question, though it says the question was seriously debated.

Court's Reasoning

The judgment is a single judgment of the Court, delivered by Bhagwati, C.J. The judgment has no numbered paragraphs, so no paragraph numbers are cited.

Opinion of Bhagwati, C.J. (for the Court)

1. Noted: The writ petition came before the five Judges on a reference. The reference was made because questions of seminal importance and high constitutional significance arose when the petition was first heard.
2. Noted: The three-Judge Bench had let Shriram restart its power plant and its chlorine plants and by-products plants, subject to conditions. That would ordinarily have ended the main controversy.
3. Noted: Only the question of relocating the units would have survived. The compensation applications then raised issues of great constitutional importance.
4. Held: The preliminary objection is not sustainable. The petitioner could have applied to amend the petition, but his not doing so does not let the Court throw out the compensation applications.
5. Why: The applications are for enforcing the fundamental right to life under Article 21. The Court cannot take a hypertechnical approach that would defeat the ends of justice. It must look at the substance and not the form.
6. Noted: Where the poor or disadvantaged cannot approach a court, a public-spirited individual or social action group can sue for them. This can be done by a regular writ petition or by a letter to the Court.
7. Held: Since the Court accepts a letter complaining of a violation of an individual's or class's fundamental right, these compensation applications should also be entertained.
8. Noted: The first question is the scope and ambit of Article 32. The Court endorsed what Bhagwati, J. said on Article 32 in Bandhua Mukti Morcha v. Union of India.
9. Held: Article 32 does not merely confer power to issue a direction, order or writ. It also lays a constitutional obligation on the Court to protect fundamental rights.
10. Held: For that purpose the Court has all incidental and ancillary powers, including the power to forge new remedies and fashion new strategies to enforce fundamental rights.
11. Noted: The Court has innovated new methods and strategies in the past. This is especially so for the poor and disadvantaged, who are denied basic human rights and to whom freedom and liberty have no meaning.
12. Noted: In S.P. Gupta v. Union of India the Court held that any member of the public or social action group may seek relief for a person or determinate class unable to approach the court. The reason must be poverty, disability or a socially or economically disadvantaged position. The remedy is a writ in the High Court under Article 226 or, for breach of a fundamental right, in this Court under Article 32.
13. Noted: S.P. Gupta, People's Union for Democratic Rights v. Union of India and Bandhua Mukti Morcha also held that procedure is merely the handmaid of justice. A letter from a person acting pro bono publico (a Latin phrase used for public-spirited action) can start the Court's jurisdiction. The Court wholly endorsed this and the broadening of locus standi (the right to approach the court), which has come to be called epistolary jurisdiction (jurisdiction started by a letter).
14. Noted: In Bandhua Mukti Morcha some Judges had feared frivolous cases. They had observed that letters should go to the Court or the Chief Justice and his companion Judges, not to individual Judges.
15. Held: A letter addressed to an individual Judge should be entertained. The letter must be by or for a person in custody, a woman, a child, or a class of deprived or disadvantaged persons.
16. Why: Poor and disadvantaged persons or social action groups may not know the proper form of address. They may know only a Judge from their State. Insisting on the proper form would deny access to justice.
17. Noted: The Court now has a Public Interest Litigation Cell. All letters addressed to the Court or to individual Judges go there. The staff scrutinise them, and only then are they placed before the Chief Justice and listed under his direction.
18. Held: Letters to individual Judges should not be rejected merely because they do not follow the preferred form of address. The Court should not insist that letters be supported by an affidavit.
19. Why: An affidavit requirement would frustrate the object of epistolary jurisdiction. Poor persons could not easily reach the Court, and social action groups would find it hard to approach it.
20. Noted: The Court has so far entertained letters without an affidavit. Only in a few rare cases were the allegations found false. That can also happen when jurisdiction is invoked in the regular way.
21. Noted: The Court endorsed Bhagwati, J.'s view in Bandhua Mukti Morcha on its power under Article 32 to gather relevant material in social action litigation and to appoint Commissions. It did not repeat it.
22. Held: Under Article 32(1) the Court is free to devise any procedure appropriate to enforcing a fundamental right. Under Article 32(2) it has the implicit power to issue whatever direction, order or writ is needed, with all incidental and ancillary power.
23. Held: The power is not only injunctive, that is, preventing infringement. It is also remedial in scope and gives relief against a breach already committed.
24. Why: If the Court were powerless once a right was violated, Article 32 would lose its efficacy. A violator who acted quickly would escape the net of Article 32.
25. Held: Article 32 is not powerless to assist a person whose fundamental right has been violated. The remedial power may include the power to award compensation in appropriate cases.
26. Held: Compensation is not awarded in every case of breach. The infringement must be gross and patent, that is, incontrovertible and ex facie glaring.
27. Held: Also, either the infringement must be on a large scale affecting many persons, or it must appear unjust or unduly harsh because of their poverty, disability or disadvantaged position. Making them go to the civil courts would be too harsh.
28. Held: Ordinarily, an Article 32 petition should not substitute for claiming compensation in the civil court. Compensation may be awarded only in exceptional cases of the kind described.
29. Noted: This is the principle on which the Court awarded compensation in Rudul Shah v. State of Bihar. It also awarded compensation to Bhim Singh, whose personal liberty the State of Jammu and Kashmir grossly violated.
30. Noted: In all such cases the infringement was patent and incontrovertible and the violation was gross. Its magnitude shocked the conscience of the Court. It would have been gravely unjust to send the victim to the civil court.
31. Noted: The next question is whether Article 21 is available against Shriram. Counsel for the applicants and for Shriram argued this at great length. The Court records their arguments, set out under Arguments.
32. Noted: To deal with the rival contentions, the Court traced how the criteria for treating a corporation as 'other authority' under Article 12 developed.
33. Noted: In Rajasthan Electricity Board v. Mohan Lal, Bhargava, J. for the majority said 'other authorities' includes all constitutional and statutory authorities on whom the law confers powers. He added that a body with power to issue directions, disobedience of which is punishable as an offence, indicates 'State'.
34. Noted: In the same case Shah, J. agreed in the result. He held that an authority falls within 'other authorities' only if it has sovereign power to make rules and regulations with the force of law.
35. Noted: The Court states the ratio of that case. A constitutional or statutory authority is within 'other authorities' if it has statutory power to give binding directions to third parties, disobedience of which brings penal consequences. It is also within the term if it has sovereign power to make rules with the force of law.
36. Noted: Ray, C.J. followed this test in Sukhdev v. Bhagat Ram. Mathew, J. in the same case gave a broader test. The State is to be seen mainly as a service corporation, and a public corporation that is an instrumentality or agency of the State has the same constitutional limits.
37. Noted: Mathew, J. gave two pre-conditions. The corporation must be the creation of the State, and it must have power to invade the individual's constitutional rights.
38. Noted: Ramanna Shetty v. International Airport Authority adopted Mathew, J.'s rationale of instrumentality or agency of the State. The concern behind it is to curb arbitrary and unregulated power wherever and howsoever reposed. The Court says that concern matters equally today, since Article 12 is an inclusive and not an exhaustive definition.
39. Noted: Ramanna Shetty said no all-inclusive or exhaustive test is possible. There is no cut-and-dried formula to sort corporations into instrumentalities of Government and others.
40. Noted: It drew analogical aid from the American State action concept. Extensive and unusual financial assistance, with a public purpose that matches the use of the assistance, may support an inference that the corporation is an instrumentality or agency of the Government.
41. Noted: The general common-law and statutory structure under which people carry on private affairs is not such assistance.
42. Noted: On control, Ramanna Shetty said some State control is not decisive, because the State has wide control under its police power over all business organisations. State financial support plus an unusual degree of control over management and policies might make the operation State action.
43. Noted: On the governmental-function criterion, Ramanna Shetty said a function should be classed as governmental by what the State today sees as an indispensable part of its activities. It repeated Mathew, J.'s view in Sukhdev v. Bhagatram that institutions in matters of high public interest or public functions are government agencies.
44. Noted: Ramanna Shetty listed five relevant factors:
    • financial assistance given by the State and its magnitude;
    • any other form of assistance, usual or extraordinary;
    • State control over management and policies, and the nature and extent of that control;
    • State-conferred or State-protected monopoly status;
    • functions that are public functions closely related to governmental functions.
    It said the list is not exhaustive and that the cumulative effect of all relevant factors controls.

46. Noted: Ajay Hasia v. Khalid Mujib applied those criteria. The Court there said that where constitutional fundamentals vital to human rights are at stake, functional realism, not facial cosmetics, must guide the inquiry. The corporate veil cannot hide that the Government is acting through the corporation, which is subject to the same limits.
47. Noted: Ajay Hasia also said constitutional guarantees should not be narrowed by a constricted judicial interpretation. Courts should widen fundamental rights by bringing in every authority that is an instrumentality or agency of the Government.
48. Noted: Ajay Hasia also held it immaterial whether a corporation is created by a statute or under a statute. The inquiry is not how the juristic person is born but why it was brought into existence. It may be a statutory corporation, a Government company, a Companies Act company or a registered society.
49. Noted: The Court has not allowed the corporate device to be a barrier to constitutional control of fundamental rights. It cited Som Prakash v. Union of India: it is dangerous to excuse corporations from constitutional conscience, and a government agency must not flourish as an imperium in imperio (a State within a State).
50. Noted: Taking that exposition as its guide, the Court turned to whether a private corporation like Shriram comes within Article 12 and so Article 21. It examined the industrial policy to see the public importance the State attached to the activity.
51. Noted: The Industrial Policy Resolution, 1956 sorted industries into three categories by the State's part in each.
    • The first category was the exclusive responsibility of the State.
    • The second category was to be progressively State-owned. The State would take the initiative in new undertakings, but private enterprise would supplement its effort, alone or with State participation.
    • The third category covered all other industries, left generally to the initiative and enterprise of the private sector.
    Schedule B to the Resolution listed the industries.
52. Noted: Appendix I to the Industrial Policy Resolution, 1948 said the State must play a progressively active role in industry. Under the conditions then, State machinery and resources might not let it enter industry as widely as desirable. For some time the State could add to national wealth more quickly by expanding its present activities and concentrating on new units of production in other fields.
53. Noted: On these considerations the Government made arms and ammunition, atomic energy and railway transport the exclusive monopoly of the Central Government.
54. Noted: New undertakings in coal, iron and steel, aircraft, shipbuilding, telephone, telegraph and wireless apparatus and mineral oil were the State's exclusive responsibility. The exception was where the State, in national interest, itself sought the co-operation of private enterprise under Central Government control.
55. Noted: The policy resolution also named basic industries whose planning and regulation by the Central Government was needed in national interest. Eighteen industries needed such Central control, and heavy chemicals and fertilisers were among them.
56. Noted: The Industries (Development and Regulation) Act, 1951 was enacted to carry out the Resolution. Its objects brought under central control important industries whose development must follow economic factors of all-India import.
57. Noted: Section 2 of the Act declares it expedient in the public interest that the Union take under its control the industries in the First Schedule. Chemicals and Fertilisers are Items 19 and 18 of the First Schedule.
58. Noted: The State deems producing chemicals and fertilisers an industry of vital public interest. Its public import requires that the State itself should ultimately carry it out. In the interim, private corporations may supplement the State's effort with State support and under State control.
59. Noted: The applicants argued from this that even private corporations making chemicals and fertilisers do activities so fundamental to society that they are government functions. They relied on Sukhdev v. Bhagat Ram, Ramanna Shetty and Ajay Hasia.
60. Noted: Shriram is registered under the 1951 Act, so its activities face extensive and detailed Government control and supervision. A licence is needed to set up a new undertaking, expand capacity or make a new article in a scheduled industry.
61. Noted: By refusing a licence the Government can prevent over-concentration in a region or over-investment in an industry. By specifying capacity in the licence it can prevent over-development of an industry that has reached target capacity.
62. Noted: Section 18 G (printed as 18G) empowers the Government to control supply, distribution and price of the articles of a scheduled industry. Under section 18A it can take over management and control of an undertaking after investigation, if the affairs are managed against public interest.
63. Noted: Under Section 18AA, in certain emergent cases, a take-over is allowed even without investigation. Shriram is subject to the registration and licensing system and to Government directions, and to the powers under Sections 18A and 18G.
64. Noted: Shriram needs a licence under the Factories Act and is subject to the orders of the authorities under it. It needs a licence for its manufacturing from the municipal authorities under the Delhi Municipal Act, 1957.
65. Noted: It is subject to wide environmental regulation under the Water (Prevention and Control of Pollution) Act, 1974. Its factory lies in an air pollution control area, so the Air (Prevention and Control of Pollution) Act, 1981 also applies.
66. Noted: The Government does not control Shriram's internal management policies. But it controls all the activities of Shriram that can jeopardise public interest.
67. Noted: This functional control matters particularly. The fertiliser industry can harm the health and safety of the community and is imbued with public interest. That perhaps explains the Government's policy decision to run it ultimately and exclusively, and its functional control.
68. Noted: Shriram also receives sizeable assistance in loans and overdrafts running into several crores of rupees from the Government through various agencies.
69. Noted: Shriram makes caustic soda, chlorine and similar products. Its units are in a single complex surrounded by thickly populated colonies. Chlorine gas is admittedly dangerous to life and health.
70. Noted: If gas escapes from a storage tank, a filled cylinder or any other point during production, the health and wellbeing of people nearby can be seriously affected. Shriram thus engages in an activity with potential to invade the right to life of large sections of people.
71. Noted: The question is whether these factors together are sufficient to bring Shriram within Article 12. Prima facie (on first view) it is arguable that a private corporation under State functional control should face the same limits.
72. Why: The State's power as economic agent, entrepreneur and allocator of benefits is itself subject to fundamental rights. The activity is hazardous to the health and safety of the community. It is imbued with public interest, and the State proposes ultimately to run it exclusively under its industrial policy.
73. Noted: The Court cited Eurasian Equipment and Chemicals Ltd. v. State of West Bengal, Rashbehari Panda v. State, Ramanna Shetty and Kasturilal Reddy v. State of Jammu and Kashmir for the point that the State's power as an economic actor is subject to fundamental rights.
74. Noted: The Court does not propose to decide the question or make a definite pronouncement on it, for reasons it gives later in the judgment.
75. Noted: Counsel traced the American State action doctrine at length. In America the Fourteenth Amendment applies only against the State.
76. Noted: American courts devised the theory to stop racial discrimination by private parties. Private activity aided, facilitated or supported by the State in a significant measure took the colour of State action. It then faced the limits of the Fourteenth Amendment.
77. Held: The historical context in which the doctrine arose in the United States is irrelevant for India, especially given Article 15(2) of the Constitution.
78. Held: Only the principle behind it is of interest. That principle is that State aid, control and regulation may so impregnate a private activity as to give it the colour of State action. It can be used only to the limited extent that it can be Indianised and blended with Indian constitutional jurisprudence.
79. Noted: The Court does not consider itself bound by the American exposition of constitutional law. In Ramanna Shetty it preferred the minority opinion of Douglas, J. in Jackson v. Metropolitan Edison Company over the majority opinion of Rehnquist, J.
80. Noted: In Air India v. Nargesh Mirza it preferred the minority view in General Electric Company v. Gilbert. It said the American Constitution cannot always be applied to Indian conditions. American principles may guide, but close adherence is not to be favoured because social conditions in India differ.
81. Held: The Court does not accept Shriram's argument that once a body is an 'authority' it is State for all its functions. It is not correct that the label 'authority' sticks to a corporation irrespective of the functional context.
82. Noted: Shriram's counsel argued that the American split between State action and private action cannot be applied in India. The Court disagreed with this argument.
83. Noted: Before leaving the topic, the Court said it has expanded the horizon of Article 12 mainly to inject respect for human rights and social conscience into the corporate structure. The aim was not to destroy the raison d'etre of creating corporations but to advance human rights jurisprudence.
84. Held: Prima facie the Court is not inclined to accept as well-founded Shriram's apprehension that subjecting such private corporations to Article 21 would be a death blow to private enterprise.
85. Why: Every new advance in human rights draws apprehension from status quoists that it will upset the smooth functioning and stability of the system. The same apprehension arose when Ramanna Shetty brought public sector corporations under Article 12 and fundamental rights.
86. Held: Apprehension from those affected by a new expansion of human rights need not deter the Court. It may widen the scope of human rights if it can do so without doing violence to the language of the constitutional provision.
87. Noted: Human rights jurisprudence has developed in India to a remarkable extent through creative interpretation and bold innovation. This forward march cannot be halted by unfounded apprehensions of status quoists.
88. Held: The Court does not decide at this stage whether a private corporation like Shriram falls within Article 12. It leaves the question for proper and detailed consideration at a later stage, if it becomes necessary.
89. Why: The Court had not had sufficient time to reflect on the question in depth. The hearing ended only on 15 December 1986, and judgment had to be delivered within four days, on 19 December 1986.
90. Noted: The Court then took up the measure of liability of an enterprise in a hazardous or inherently dangerous industry. The question was whether the rule in Rylands v. Fletcher applies or another principle governs.
91. Noted: The rule in Rylands v. Fletcher, evolved in 1866 as the Court dates it, says that a person who brings on his land for his own purposes and keeps there anything likely to do mischief if it escapes must keep it at his peril. If he fails, he is prima facie liable for the damage that naturally follows the escape.
92. Noted: Liability under the rule is strict. It is no defence that the thing escaped without the person's wilful act, default or neglect, or that he did not know of its existence.
93. Noted: The rule applies only to non-natural user of land. It does not apply to things naturally on the land, or to an escape due to an act of God (an uncontrollable natural event), an act of a stranger or the default of the injured person. It also does not apply where the thing is there with the injured person's consent, or in certain cases of statutory authority. The Court cited Halsbury's Laws of England, Vol. 45, at 1305.
94. Held: The Court need not consider the English decisions on natural and non-natural use or on when the rule is displaced.
95. Why: In a modern industrial society with highly developed science and technology, hazardous or inherently dangerous industries are necessary parts of the development programme. The rule evolved in the nineteenth century, before those developments, and cannot guide a standard consistent with constitutional norms and today's economy and social structure.
96. Held: The Court need not feel inhibited by a rule evolved for a totally different kind of economy. Law has to grow to satisfy the needs of a fast-changing society and cannot remain static.
97. Held: The Court cannot let its judicial thinking be constricted by the law as it prevails in England or any other foreign country. In its words, "We no longer need the crutches of a foreign legal order."
98. Held: The Court is prepared to receive light from whatever source it comes, but it has to build up its own jurisprudence. It will not accept that new law is barred merely because the rule in England recognises limitations and responsibilities.
99. Held: If it is necessary to build a new principle of liability for an unusual situation caused by hazardous or inherently dangerous industries, the Court should not hesitate to do so. It need not wait because England has not done so.
100. Held: An enterprise engaged in a hazardous or inherently dangerous industry poses a potential threat to the health and safety of persons working in the factory and living nearby. It owes "an absolute and nondelegable duty to the community" to ensure that no harm results.
101. Held: The enterprise must conduct the activity with the highest standards of safety. If harm results, it must be absolutely liable. It is no answer that it took all reasonable care and that the harm occurred without any negligence (failure to take due care) on its part.
102. Why: Persons harmed cannot isolate the process of operation or the hazardous preparation or substance that caused the harm. The enterprise must be held strictly liable as part of the social cost of carrying on the activity.
103. Why: If the enterprise is permitted to run a hazardous activity for its profit, the law must presume the permission is conditional. The enterprise must absorb the cost of any accident as an item of its overheads.
104. Why: Such an activity for private profit can be tolerated only if the enterprise indemnifies all who suffer, regardless of whether it is carried on carefully or not.
105. Why: The enterprise alone has the resource to discover and guard against hazards or dangers and to warn of potential hazards.
106. Held: Where an enterprise engaged in a hazardous or inherently dangerous activity causes harm to anyone through an accident, for example the escape of toxic gas, it is strictly and absolutely liable to compensate all those affected by the accident. That liability is not subject to any of the exceptions of the rule in Rylands v. Fletcher.
107. Held: The measure of compensation must be correlated to the magnitude and capacity of the enterprise, because the compensation must have a deterrent effect. "The larger and more prosperous the enterprise, the greater must be the amount of compensation payable by it".
108. Noted: Since the Court was not deciding whether Shriram is an authority within Article 12 or subject to Article 21, it did not think it right to set up a special machinery to investigate compensation claims.
109. Held: Instead the Delhi Legal Aid and Advice Board must take up the cases of all who claim to have suffered from the oleum gas and file actions for them in the appropriate court for compensation against Shriram.

Provisions discussed

• Article 12: defines 'the State' to include 'other authorities'. The Court discussed it at length but left open whether Shriram is within it.
• Article 21: the fundamental right to life. The compensation applications were for enforcing it.
• Article 32: the right to move the Supreme Court to enforce fundamental rights. Article 32(1) lets the Court devise any procedure appropriate to enforcing a fundamental right. Article 32(2) gives the implicit power to issue whatever direction, order or writ is needed.
• Article 226: lets the High Court issue writs. S.P. Gupta described its use by a public-spirited person for a disadvantaged class.
• Article 15(2): mentioned as the reason the American State action history is irrelevant for India.
• Articles 17, 23 and 24: provisions that, Shriram's counsel said, make rights available against private parties.
• Industries (Development and Regulation) Act, 1951: Section 2, Section 18A, Section 18AA, Section 18 G and the First Schedule (Items 18 and 19) as described above.
• Factories Act, Delhi Municipal Act, 1957, Water (Prevention and Control of Pollution) Act, 1974, Air (Prevention and Control of Pollution) Act, 1981, and the Environment Act, 1986: regulatory statutes mentioned in the discussion of State control.
• Industrial Policy Resolution, 1956 and Appendix I to the Industrial Policy Resolution, 1948: policy documents on State and private roles in industry.
• Fourteenth Amendment (United States Constitution): applies only against the State. It was the base of the American State action doctrine.

Authorities

• Rylands v. Fletcher, 1866 (as the judgment dates it): the Court described the rule and its exceptions. It declined to follow it for hazardous industries in India and laid down absolute liability instead.
• Bandhua Mukti Morcha v. Union of India, [1984] 2 SCR 67: endorsed on the scope of Article 32, epistolary jurisdiction and the power to appoint Commissions.
• S.P. Gupta v. Union of India, [1981] Supp. SCC 87: relied on for locus standi of a public-spirited person or social action group.
• People's Union for Democratic Rights v. Union of India, [1983] 1 SCR 456: cited for procedure being the handmaid of justice and for letters as petitions.
• Rudul Shah v. State of Bihar, AIR 1983 SC 1086: cited as a case where compensation was awarded under Article 32.
• Bhim Singh v. State of Jammu and Kashmir: mentioned as a case where compensation was awarded for a gross violation of personal liberty. No citation is given in the judgment.
• Rajasthan Electricity Board v. Mohan Lal, [1967] 3 SCR 377: the early test for 'other authorities' in Article 12.
• Sukhdev v. Bhagat Ram (also printed Sukhdev v. Bhagatram), [1975] 1 SCC 421: Ray, C.J. followed the Mohan Lal test. Mathew, J. gave the broader instrumentality test.
• Ramanna Shetty v. International Airport Authority, [1979] 3 SCR 1014: adopted the instrumentality test and gave the five factors. It also preferred the minority view in Jackson v. Metropolitan Edison Co.
• Ajay Hasia v. Khalid Mujib, [1981] 2 SCR 79: applied the Ramanna Shetty criteria. It held the mode of creation of a corporation immaterial.
• Som Prakash v. Union of India, [1981] 1 SCC 449: cited against letting a corporation be an imperium in imperio.
• Eurasian Equipment and Chemicals Ltd. v. State of West Bengal, (1975) 2 SCR 674: cited for the State's economic power being subject to fundamental rights.
• Rashbehari Panda v. State: cited with the same point. The judgment prints it as [1983] 3 SCR 374, and the headnote as [1969] 3 SCR 374.
• Kasturilal Reddy v. State of Jammu and Kashmir, [1980] 3 SCR 1338: cited with the same point.
• Air India v. Nargesh Mirza, [1982] 1 SCR 438: American constitutional law cannot always be applied to Indian conditions.
• Jackson v. Metropolitan Edison Co., 42 L.ed. (2d) 477: American case; the minority opinion of Douglas, J. was preferred in Ramanna Shetty.
• General Electric Co. Maratha v. Gilbert, 50 L.ed. (2d) 343: American case; the minority view was preferred in Air India v. Nargesh Mirza. The judgment prints the first party with the word Maratha.
• Halsbury's Laws of England, Vol. 45, at 1305: a textbook, cited for the scope and exceptions of the Rylands v. Fletcher rule.

Judgement

1. The preliminary objection is rejected, and the Court decides the issues.
2. Whether a private corporation like Shriram is within Article 12 and so subject to Article 21 is left for proper and detailed consideration at a later stage, if necessary.
3. The Court sets up no special machinery to investigate the compensation claims.
4. The Delhi Legal Aid and Advice Board must take up the cases of all who claim to have suffered from the oleum gas. It must file actions for them in the appropriate court for compensation against Shriram.
5. These actions may be filed by the Board within two months from the date of the judgment.
6. The Delhi Administration must provide the necessary funds to the Board for filing and prosecuting the actions.
7. The High Court will nominate one or more Judges as necessary to try these actions, so that they are disposed of expeditiously.
8. The issue of relocation and the other issues in the writ petition will come up for hearing on 3 February 1987.
9. The judgment ends with the note: Petition disposed of.
10. The judgment records no order as to costs.

Legal Principle / Ratio

An enterprise engaged in a hazardous or inherently dangerous activity owes an absolute and non-delegable duty (a duty that cannot be passed to others) to the community. If harm results from an accident, it is absolutely liable to compensate those affected, even if it took all reasonable care. It cannot rely on the exceptions of the rule in Rylands v. Fletcher.

The measure of compensation must match the magnitude and capacity of the enterprise, because compensation must deter.

Key holding: the enterprise "is strictly and absolutely liable to compensate all those who are affected by the accident".

Other points decided: Article 32 gives remedial power, including compensation in appropriate cases; letters to individual Judges are to be entertained; and the Article 12 question about Shriram is left open.

Subsequent Treatment

Based on the supplementary judgments in judgments/. The later judgments have no numbered paragraphs, so no paragraph numbers are cited.

Indian Council Enviro-Legal Action v. Union of India

Full title in the report: Indian Council for Enviro-Legal Action v. Union of India. Supreme Court of India, 13 February 1996, Jeevan Reddy and Kirpal, JJ.; AIR 1996 SC 1446; (1996) 3 SCC 212.

• Counsel for the petitioner relied strongly on this Constitution Bench decision, which the later Court calls the Oleum Gas Leak Case.
• Counsel for one respondent argued that absolute liability is not accepted in England or other Commonwealth countries. He said the Rylands v. Fletcher rule is correct. He relied on Ranganath Misra, C.J.'s opinion in Union Carbide Corporation v. Union of India, which called the statement of law essentially obiter (not needed for the decision).
• The Court held that argument untenable because of this binding decision. It said this decision expressly refers to Rylands v. Fletcher and refuses to apply it as unsuited to India.
• The Court found it difficult to say that the law declared here is obiter. It was not unnecessary for the case. Having declared the law, the Constitution Bench directed the parties and others to bring actions on it.
• It compared the English rule and the Australian High Court's approach. It preferred this rule as simple, practical and suited to India.
• It restated the rule. Once an activity is hazardous or inherently dangerous, the person carrying it on is liable for loss to others. Reasonable care is irrelevant.
• It applied the rule to hold the respondent industries absolutely liable for harm to villagers, the soil and the underground water. It linked this with the Polluter Pays principle, which it said this decision states in absolute terms.
• It added that this case was not one where the industry was run contrary to law or where orders of authorities were defied. The later case had such violations.

LIC of India v. Consumer Education Research Centre

Full title in the report: L.I.C. of India and another v. Consumer Education and Research Centre and others. Supreme Court of India, 10 May 1995, K. Ramaswamy and B.L. Hansaria, JJ.; 1995 AIR 1811; 1995 SCC (5) 482.

• The Court cited this case as a Constitution Bench decision on the reach of Article 12.
• It noted this Court's holding that it is dangerous to exonerate corporations from the need to have constitutional conscience.
• It also noted this Court's holding that law must grow to meet new situations and cannot remain static. This Court must evolve new principles for a highly industrialised economy.

Other later cases (not summarized)

• Union Carbide Corporation v. Union of India, 1991 (4) S.C.C. 584: named in the 1996 judgment. Ranganath Misra, C.J. explained this decision there.
• Indian Council for Enviro-Legal Action v. Union of India, 1995 (5) SCALE 578: an earlier order in the 1996 proceedings, named there. It was not fetched.

Comparative Analysis

Based on the 1996 Indian Council for Enviro-Legal Action judgment.

• Rylands v. Fletcher rule in England: the 1996 Court noted the House of Lords approved it in Cambridge Water Company v. Eastern Counties Leather. It saw foreseeability of harm as a pre-requisite under that rule. Under absolute liability the enterprise is liable whether or not it took reasonable care.
• Australian High Court: the 1996 Court described the Burnie Port Authority decision. There the rule in Rylands was absorbed into ordinary negligence, and a non-delegable duty of reasonable care was imposed. Absolute liability here does not turn on reasonable care.
• The 1996 Court preferred the rule laid down in this case as simple, practical and suited to Indian conditions. It also said it was binding.

Critical Analysis

Analysis based on the judgment text.

• The Court declines to decide whether Shriram is within Article 12. Yet it lays down a liability rule that applies to any enterprise engaged in a hazardous or inherently dangerous activity.
• The Court gives lack of time as its reason for leaving the Article 12 question open. The hearing ended on 15 December 1986 and judgment was due within four days.
• No compensation was fixed. The Court directed the Board to file actions in the appropriate court. The judgment gives no formula for the amount beyond saying that size and capacity must be correlated.
• The judgment does not say how to measure the size and capacity of an enterprise.
• The judgment records the dates of the gas escape as 4 and 6 December 1985 but says nothing on the number of victims or the injuries suffered.
• The later 1996 judgment records the view of a Judge that the statement was essentially obiter. The 1996 Court disagreed.

Significance

• The case is the source of the rule of absolute liability for hazardous or inherently dangerous activity. It departs from the rule in Rylands v. Fletcher.
• It shows the Court building its own jurisprudence rather than following English law. In its words, the Court does not need the crutches of a foreign legal order.
• It widens locus standi and epistolary jurisdiction, and keeps procedure from blocking access to justice for the poor.
• It holds that Article 32 is remedial as well as injunctive. Compensation can follow in appropriate cases of gross and patent violation.
• It links compensation to the size and capacity of the enterprise, to create a deterrent effect.
• It left the reach of Article 12 over private corporations for later.

Exam-Important Points

• Rule: a hazardous or inherently dangerous enterprise is absolutely liable for harm from an accident. Trap: taking reasonable care is no defence, and the Rylands v. Fletcher exceptions do not apply.
• Rule: the enterprise owes an absolute and non-delegable duty to the community.
• Rule: compensation is correlated to the magnitude and capacity of the enterprise, to deter.
• Rule: Article 32 is injunctive and remedial. Compensation is awarded only in appropriate cases where the infringement is gross and patent.
• Trap: the Court did not decide whether Shriram is 'State' under Article 12.
• Trap: no compensation was awarded in this judgment. The Delhi Legal Aid and Advice Board was told to file actions within two months.
• Rule: letters to individual Judges are entertained, and an affidavit is not required.
• The oleum gas escape took place on 4 and 6 December 1985.
• Present position: the 1996 judgment in Indian Council for Enviro-Legal Action held the rule binding and not obiter.

Prepared from the full text of the judgment. The judgment text has no numbered paragraphs, so no paragraph numbers are cited.