The Public Liability Insurance Act 1991

Section 5: the Collector verifies and publicises. Whenever it comes to his notice that an accident has occurred within his jurisdiction, the Collector must verify it and give publicity inviting applications.

Section 6: who may apply, and by when. An application may be made by the injured person, by the owner of the damaged property, by all or any of the legal representatives where death has resulted, or by an authorised agent; where all the legal representatives do not join, the application is made for the benefit of all and the rest are impleaded as respondents. Sub-section (1A), inserted in 2023, allows an application for the restoration of public or private property damaged by the handling of a hazardous substance. No application is entertained unless made within five years of the accident.

Section 7: award of relief. On receipt of an application the Collector holds an inquiry, gives the parties an opportunity of being heard, and makes an award determining the relief, which is paid by the owner or out of the Relief Fund.

Section 7A: the Environmental Relief Fund. The Central Government may establish the Fund; there are credited to it the amounts paid by owners with their premiums under section 4(2C), the penalties imposed under the Act, the income from its investments and any other prescribed amounts; the Fund is used to pay relief under awards made by the Collector; and the Central Government may make a scheme for its vesting and administration.

Section 8: relief is in addition to other rights. The right to claim relief under section 3 is in addition to any other right to claim compensation under any other law, and where the owner is liable both under this Act and under another law, the amount paid under this Act is reduced from what is payable under the other.

Sections 9 to 13: powers. Power to call for information, power of entry and inspection, power of search and seizure, power to give directions, and power to apply to a court to restrain an owner from handling a hazardous substance.

Sections 14, 15, 15A and 15B: penalties, as rewritten in 2024. Section 14 makes a contravention of the insurance obligations in section 4 punishable with a penalty equal to the annual premium, extending to twice that amount, with an additional penalty for each month a contravention continues. Section 15 makes non-compliance with a direction under section 12 punishable with a penalty of not less than ten thousand rupees extending to fifteen lakh rupees, with an additional penalty of not less than ten thousand rupees for each day of continued non-compliance, and applies the same range to a failure to comply with section 9 or an obstruction of the powers under sections 10 and 11. Section 15A provides for the appointment of an adjudicating officer to impose these penalties, and section 15B for an appeal against his order.

Section 16 is omitted. Sections 17, 17A and 17B deal with contravention by a Government department, the crediting of penalty amounts to the Environmental Relief Fund, and the offence of failing to pay a penalty or additional penalty.

Sections 18 to 23: machinery. Cognizance of offences, power to delegate, protection of action taken in good faith, the Advisory Committee, the effect of other laws, and the power to make rules.

A worked example

A tanker of chlorine overturns at a factory gate in Thane and injures thirty people, damages six shops, and kills one passer-by.

Immediate relief. The Collector verifies the accident under section 5 and invites applications. The injured, the shopkeepers and the legal representatives of the deceased apply under section 6 within five years, and the Collector awards relief under section 7 without anybody proving fault, because section 3(2) says so.

Who pays. The owner, and his insurer under the policy he was bound to take out under section 4, with the Environmental Relief Fund under section 7A behind it.

A workman injured in the same accident. He is outside section 3, which excludes a workman, and his remedy lies under the employees' compensation legislation.

Is that all they get? No. Section 8 preserves every other right, so the larger claim in tort under the rule of absolute liability in M.C. Mehta v. Union of India, AIR 1987 SC 1086, remains, and what was paid under this Act is deducted from it.

And if the owner never insured? He faces a penalty under section 14, imposed by the adjudicating officer under section 15A, equal to the annual premium and extending to twice that amount, with a monthly additional penalty while the default continues.

What it does NOT mean

It is not full compensation. It is immediate relief, and section 8 preserves the larger claim.

It does not cover a workman. Section 3 excludes him expressly.

It is not confined to the owner's own money. Compulsory insurance and the Environmental Relief Fund stand behind the liability.

Its penalties are no longer prison sentences. Since 1 April 2024 sections 14 and 15 impose monetary penalties, adjudicated under section 15A with an appeal under section 15B.

Quick revision

1. Purpose: immediate relief for an accident while handling a hazardous substance.
2. Section 3: no-fault liability of the owner; the claimant need not plead or establish wrongful act, neglect or default; a workman is excluded.
3. Section 4: compulsory insurance before handling begins, for not less than the paid-up capital and up to a prescribed amount not exceeding five hundred crore rupees, plus a contribution to the Relief Fund with the premium.
4. Section 5: the Collector verifies and publicises. Section 6: who may apply, and a five-year limit. Section 7: the Collector's award.
5. Section 7A: the Environmental Relief Fund, credited with owners' contributions, penalties and investment income.
6. Section 8: the relief is in addition to other rights, and is deducted from what is payable under another law.
7. Sections 9 to 13: information, entry, inspection, search, seizure, directions and restraining applications.
8. Sections 14, 15, 15A and 15B, as rewritten with effect from 1 April 2024: monetary penalties imposed by an adjudicating officer, with an appeal.
9. Section 16 is omitted; sections 17 to 23 deal with Government departments, the crediting of penalties, offences, cognizance, delegation, good faith, the Advisory Committee, other laws and rules.

Test yourself

1. What is the scheme of the Public Liability Insurance Act 1991? The Act gives immediate relief to persons affected by an accident occurring while handling a hazardous substance. Section 3 makes the owner liable on the principle of no fault for death, injury to a person other than a workman, or damage to property, and provides expressly that the claimant need not plead or establish any wrongful act, neglect or default. Section 4 obliges every owner to take out insurance before he begins handling the substance, for not less than the paid-up capital of the undertaking and up to a prescribed limit not exceeding five hundred crore rupees, and to pay a further amount with the premium for the Relief Fund. Section 5 requires the Collector to verify an accident and publicise it, section 6 allows the injured, the property owner or the legal representatives to apply within five years, and section 7 empowers the Collector to award relief. Section 7A establishes the Environmental Relief Fund. Section 8 makes the relief additional to other rights, deducting what is paid under the Act from what is payable elsewhere.

2. How does this Act differ from a claim in tort for absolute liability? In four ways. The Act gives relief without proof of fault by a summary procedure before the Collector, while the tort claim is decided by a court. The Act gives prescribed amounts of immediate relief, while absolute liability under M.C. Mehta v. Union of India, AIR 1987 SC 1086, gives compensation related to the magnitude and capacity of the enterprise. The Act is backed by compulsory insurance and by the Environmental Relief Fund, so the money exists, whereas a decree in tort is worth what the defendant is worth. And the Act excludes a workman, who is left to the employees' compensation legislation, while the tort claim has no such exclusion. Section 8 makes clear that the two coexist, the amount paid under the Act being deducted from what is payable under any other law.

3. What happened to the penalty provisions of this Act in 2024? They were rewritten by the Jan Vishwas (Amendment of Provisions) Act 2023, Act 18 of 2023, with effect from 1 April 2024. What were offences punishable with imprisonment became monetary penalties. Section 14 now makes a contravention of the insurance obligations punishable with a penalty equal to the annual premium and extending to twice that amount, with an additional penalty for each month the contravention continues. Section 15 makes non-compliance with a direction punishable with a penalty of not less than ten thousand rupees extending to fifteen lakh rupees, with a daily additional penalty. A new section 15A provides for an adjudicating officer to impose those penalties and a new section 15B for an appeal against his order, while section 17A directs that penalty amounts be credited to the Environmental Relief Fund and section 17B makes failure to pay a penalty an offence. Any textbook printed before 2024 states this part of the Act wrongly.