M.C. Mehta v. Union of India

M.C. Mehta had already moved the Supreme Court under article 32 seeking closure and relocation of the hazardous units. While that petition was pending, oleum gas escaped from the caustic chlorine plant on 4 December 1985 and again on 6 December 1985. One advocate practising in the Tis Hazari courts died, and others in the neighbourhood were affected. Applications for compensation were filed.

The Court thus had to decide, among other things, on what principle an enterprise of this kind is liable for harm caused by an escape of a dangerous substance, and how compensation should be measured.

The rule the Court was invited to apply

The rule in Rylands v. Fletcher, laid down in England in 1868, is that a person who for his own purposes brings on his land and collects and keeps there anything likely to do mischief if it escapes must keep it at his peril, and if he does not do so is prima facie answerable for all the damage which is the natural consequence of its escape.

That is strict liability, and it comes with exceptions: an act of God, the act of a stranger, the plaintiff's own default, consent, and statutory authority. It also requires a non-natural user of the land and an escape from the defendant's land to another's.

Applied to Shriram, those exceptions would have done real work. An enterprise could argue that the leak was caused by the act of a third party, or by an event beyond its control, and escape liability altogether.

What the Court held

Held. The Court, speaking through Bhagwati C.J., refused to be bound by a rule of 1868 and its exceptions.

It said that Indian law must develop its own jurisprudence; that it was not for want of a precedent that a new principle should be denied; that where an unusual situation has arisen, and is likely to arise, out of hazardous or inherently dangerous industries which are a concomitant of an industrial economy, there is no reason to hesitate to evolve a new principle of liability merely because the English courts have not done so.

It then laid down the rule.

An enterprise engaged in a hazardous or inherently dangerous industry which poses a potential threat to the health and safety of the persons working in the factory and residing in the surrounding areas owes an absolute and non delegable duty to the community to ensure that no harm results to anyone on account of the hazardous or inherently dangerous nature of the activity it has undertaken.

The enterprise must conduct that activity with the highest standards of safety, and if any harm results, the enterprise must be absolutely liable to compensate.

It is no answer for the enterprise to say that it took all reasonable care and that the harm occurred without any negligence on its part.

The liability is not subject to any of the exceptions which operate in relation to the tortious principle of strict liability under the older rule.

Two reasons were given for placing the loss on the enterprise. Those harmed cannot isolate the process of operation from the hazardous preparation of the substance or the other element that caused the harm, so they cannot prove what went wrong. And the enterprise alone has the resources to discover and guard against hazards and to provide warning of them.

The Court added that if an enterprise is permitted to carry on a hazardous activity for profit, the law must presume that the permission is conditional on the enterprise absorbing the cost of any accident as an item of its overheads.

On the measure of compensation, the Court held that it must be correlated to the magnitude and capacity of the enterprise, because compensation must have a deterrent effect: the larger and more prosperous the enterprise, the greater must be the amount payable for harm caused by an accident in carrying on the hazardous activity.

On the machinery, the Court declined at that stage to decide whether Shriram was an authority within article 12 so as to be subject to article 21, and therefore did not set up a special machinery for investigating the claims. It directed the Delhi Legal Aid and Advice Board to take up the cases of those claiming to have suffered from the oleum gas and to file actions on their behalf in the appropriate court within two months, and directed the Delhi Administration to provide the necessary funds.

Why it matters for this syllabus

Three reasons, and the third is the one that connects it to the rest of Module III.

It is judicial material as a source of law. Nothing in any Act said that an enterprise carrying on a hazardous activity is absolutely liable. A court said it, and it became the law.

It shows a court refusing a received rule and giving its reasons. That is exactly what cessante ratione legis, cessat ipsa lex describes, and the maxim is worked in [Legal Maxims: the Remaining Seven]: the conditions that produced the rule of 1868 no longer obtain, so the rule no longer governs.

It shows the limits of that technique. Note carefully what the Court did not do. It did not hold that Rylands v. Fletcher had been repealed, and it did not purport to legislate a scheme of compensation. It stated a principle of liability, left the quantification to the courts hearing the claims, and expressly directed the claimants to the appropriate court.

Absolute liability against strict liability

This comparison is asked directly and the table below is the answer. Learn the four differences.

A worked example

A chemical plant on the outskirts of Pune, owned by a company with a turnover of nine hundred crore rupees, stores a toxic gas. During a cyclone of unprecedented severity a storage tank ruptures and the gas escapes, injuring residents of the colony next door. The company proves that it maintained the tank to a standard above the statutory requirement, that the rupture was caused by wind speeds never before recorded in that district, and that no negligence on its part contributed to it.

Under the older rule. The company would plead the act of God. An operation of natural forces so unexpected that no human foresight could reasonably provide against it is a recognised exception to strict liability, and on the facts as proved the plea would succeed. The residents would recover nothing.

Under M.C. Mehta. The plea fails. The Court held in terms that the liability is not subject to any of the exceptions which operate in relation to strict liability, and that it is no answer that the enterprise took all reasonable care and that the harm occurred without negligence. The duty is absolute and non delegable, and the harm resulted from the hazardous activity.

On quantum. Compensation is correlated to the magnitude and capacity of the enterprise, so the turnover is relevant, not because it measures the residents' loss but because compensation must have a deterrent effect.

And the connection to [Legal Maxims: the First Eight]. The act of God defence, actus Dei nemini facit injuriam, is real and it has a boundary. This is where the boundary is.

Distinctions table

What this case does NOT decide

It does not decide that Shriram was the State. The Court expressly left open whether Shriram was an authority within article 12, and declined for that reason to set up a special machinery.

It does not abolish the older English rule. It declines to apply Rylands v. Fletcher to the class of enterprise described, and says so on the ground that Indian conditions require a different rule.

It does not fix a formula for compensation. It says the measure must be correlated to the magnitude and capacity of the enterprise and must have a deterrent effect, and leaves the figure to the court trying the claim.

It is not a decision under the environmental statutes. The rule is one of tort, developed in a petition under article 32, and it applies whether or not a pollution statute has been breached.

Limits and criticism

A rule with no exceptions is a blunt rule. Absolute liability makes no allowance for the truly unforeseeable, and the answer given is that between an innocent victim and an enterprise that chose to profit from a dangerous activity, the loss should lie on the enterprise.

"Correlated to the magnitude and capacity of the enterprise" is not a measure of damages, it is a direction to make the award hurt. That mixes compensation with deterrence, and the criticism is that deterrence is ordinarily the business of penalties rather than of damages between parties.

The claimants in this very case were sent to the ordinary courts. A principle of absolute liability announced in a judgment does not by itself deliver money to the people injured, and the gap between the rule and the remedy is the standing criticism of the decision.

Quick revision

Two judgments: 17 February 1986, AIR 1987 SC 965, restarting the caustic chlorine plant and the need for environment courts, which is the citation MU prints; 20 December 1986, AIR 1987 SC 1086, absolute liability, which is the case that is taught.

Facts: oleum gas escaped from Shriram's caustic chlorine plant at Kirti Nagar, Delhi, on 4 and 6 December 1985; a complex of about seventy six acres with roughly two hundred thousand people within three kilometres; one advocate died.

Held: an enterprise engaged in a hazardous or inherently dangerous industry owes an absolute and non delegable duty to the community; must conduct the activity with the highest standards of safety; is absolutely liable to compensate if harm results; cannot answer that it took all reasonable care; and is not entitled to the exceptions available under Rylands v. Fletcher. Compensation must be correlated to the magnitude and capacity of the enterprise, and the larger and more prosperous the enterprise the greater it must be.

Reasons: victims cannot isolate what went wrong; the enterprise alone has the resources to discover and guard against the hazard; and permission to carry on the activity for profit is presumed conditional on absorbing the cost of accidents.

Test yourself

1. What are the facts of M.C. Mehta v. Union of India?

Shriram Foods and Fertilizer Industries, run by Delhi Cloth Mills Limited, operated several chemical units in a complex of about seventy six acres at Kirti Nagar, Delhi, surrounded by thickly populated colonies with about two hundred thousand people within three kilometres. M.C. Mehta had moved the Supreme Court under article 32 for closure and relocation of the hazardous units. On 4 and 6 December 1985 oleum gas escaped from the caustic chlorine plant, an advocate died and others were affected, and the Court had to decide on what principle such an enterprise is liable.

2. State the rule of absolute liability.

An enterprise engaged in a hazardous or inherently dangerous industry which poses a potential threat to the health and safety of the persons working in the factory and residing in the surrounding areas owes an absolute and non delegable duty to the community to ensure that no harm results; it must conduct the activity with the highest standards of safety; and if harm results it is absolutely liable to compensate. It is no answer that it took all reasonable care and that the harm occurred without negligence, and the liability is not subject to any of the exceptions that operate under the rule in Rylands v. Fletcher.

3. How does absolute liability differ from strict liability?

Strict liability under Rylands v. Fletcher requires a non-natural user of land and an escape, and it admits five exceptions: an act of God, the act of a stranger, the plaintiff's own default, consent and statutory authority. Absolute liability attaches to the carrying on of the hazardous activity itself, requires no escape from land to land, and admits no exception at all, so a defendant who proves that the harm was caused by an unprecedented natural event or by a stranger is still liable. The measure of compensation also differs, being correlated under M.C. Mehta to the magnitude and capacity of the enterprise.

4. Why did the Court refuse to follow Rylands v. Fletcher?

Because the rule was laid down in 1868 in a different society, and because the Court took the view that Indian law must build its own jurisprudence rather than wait for the English courts. It said that where an unusual situation has arisen, and is likely to recur, on account of hazardous industries that are a concomitant of an industrial economy, there is no reason to hesitate to evolve a new principle of liability merely because it has not been done in England. That reasoning is the maxim cessante ratione legis, cessat ipsa lex applied to judge-made law.

5. On what basis is compensation to be measured?

Not solely by the loss suffered. The Court held that the measure of compensation must be correlated to the magnitude and capacity of the enterprise, because compensation in such cases must have a deterrent effect, so that the larger and more prosperous the enterprise the greater must be the amount payable for harm caused by an accident in the carrying on of the hazardous activity. The Court did not lay down a formula, and left the figure to the court trying the individual claims.

6. Why does MU's citation for this case need care?

Because AIR 1987 SC 965 is the judgment of 17 February 1986 in the same litigation, which dealt with whether the caustic chlorine plant should be permitted to restart and on what conditions, and which recorded the need for environment courts with technical members. The absolute liability holding is in the judgment of 20 December 1986, reported at AIR 1987 SC 1086. A candidate should answer on absolute liability and note in a line that the citation printed is that of the earlier decision, which shows the case has been read rather than a summary of it.