Absolute Liability, and Why India Abandoned the English Rule

Why it matters. It is the foundation of Indian environmental liability. It is also the source of the reasoning behind the polluter pays principle, of the liability provisions of the Public Liability Insurance Act 1991, and of section 17 of the National Green Tribunal Act 2010.

The four things the rule changed

No exceptions. Sabotage, act of God, statutory authority, the plaintiff's consent and the plaintiff's default are all unavailable. The rule says so expressly.

No escape required. The duty is owed to persons working in the factory as well as to those residing around it. Workers inside are covered.

No non-natural use required. The trigger is the character of the activity, not the character of the use of the land.

Damages are not merely compensatory. They are correlated to the size of the enterprise, so that the award deters. That is an unusual measure in the law of torts and it has attracted criticism.

The reasoning, which is examinable in its own right

The Court gave two reasons, and a good answer states both.

The enterprise alone can guard against the risk. An enterprise that carries on a hazardous activity has the resources to discover and to guard against hazards and dangers and to provide warning against potential hazards. Those living around it have none of that.

The cost of an accident is an overhead of the activity. 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 arising from that activity as an appropriate item of its overheads.

That second sentence is the polluter pays principle, stated more than nine years before the Supreme Court adopted it by that name in the Bichhri judgment of 1996, which Vellore Citizens Welfare Forum v. Union of India then described as a sound principle already accepted by the Court.

Worked example

A refrigerant plant in an industrial estate at Ambernath releases ammonia at four in the morning. Ninety people in the adjoining chawl are hospitalised. Two workers on the night shift die. The company's inquiry finds that a valve was opened by an unknown person.

Is the company liable? Yes, on the rule in the Oleum gas leak case. The manufacture and storage of ammonia in bulk is a hazardous activity, harm resulted from an accident in its operation, and the liability is absolute.

Does sabotage help it? No. The act of a stranger is an exception to Rylands v. Fletcher and the Court has expressly held that none of those exceptions applies.

Are the two workers covered? Yes. The duty is owed to persons working in the factory and residing in the surrounding areas alike, and there is no escape requirement.

How much? Correlated to the magnitude and the capacity of the enterprise, so a large multinational pays more than a small partnership for the same injury.

What else is available? Relief under the Public Liability Insurance Act 1991 without any proof of fault, immediately, from the insurer; an application to the National Green Tribunal under section 15 for relief and compensation and for restitution of the environment; and a prosecution for the offences under the Bharatiya Nyaya Sanhita 2023 relating to negligent conduct with a poisonous substance.

What it does NOT mean

It does not mean the rule applies to every industry. The activity must be hazardous or inherently dangerous. A garment factory is not within it; a chlorine plant is.

It does not mean the compensation was awarded in the case itself. The Court laid the rule down and referred the individual claims to be pursued in the appropriate forum. It is a common error to say that Shriram was ordered to pay.

It does not mean absolute liability is a criminal liability. It is a rule of civil liability. Criminal responsibility for an industrial accident is a separate question decided under the criminal law and the special statutes.

Limits and criticism

The rule has been criticised on four grounds, and a student who can state them will be answering the University's question about judicial trends at the same time.

It was obiter. The claims for compensation were not decided in the judgment, and it has been argued that the whole statement of the rule was unnecessary to the decision. The answer is that it has been followed and applied ever since, most importantly in the Bichhri case, and is now beyond argument.

The measure of damages is unprincipled. Damages in tort compensate the plaintiff for his loss. A measure that varies with the defendant's wealth is punitive, and it means two identical injuries are worth different sums.

It has been rarely applied to individual claims. The rule is invoked constantly in judgments and has produced very few awards to victims, most compensation in practice coming from statutory schemes or negotiated settlements.

It did not help at Bhopal. The Court laid the rule down in December 1986 for an accident in Delhi; the claims of the Bhopal victims were settled in February 1989 for a sum arrived at without any application of it.

Quick revision

• The rule: an enterprise in a hazardous or inherently dangerous activity is absolutely liable for harm from an accident in its operation.
• Laid down in the Oleum gas leak case, AIR 1987 SC 1086, by a Constitution Bench of five judges.
• No exceptions, no escape requirement, no non-natural use requirement.
• Damages correlated to the magnitude and capacity of the enterprise, for deterrence.
• Two reasons: only the enterprise can guard against the risk, and the cost of an accident is an overhead of the activity.
• It is the source of the polluter pays principle, of the Act of 1991 and of section 17 of the Act of 2010.

Test yourself

1. State the rule of absolute liability and the two reasons the Court gave for it. Where an enterprise is engaged in a hazardous or inherently dangerous activity and harm results to anyone from an accident in the operation of that activity, the enterprise is absolutely liable to compensate all those affected, whether or not it took reasonable care and whether or not it was negligent, and no exception to the rule in Rylands v. Fletcher applies. The reasons are that the enterprise alone has the resources to discover and guard against the hazard and to warn of it, and that if an enterprise is permitted to carry on a hazardous activity for profit the law must presume that permission to be conditional on its absorbing the cost of any accident as an item of its overheads.

2. How does absolute liability differ from strict liability under Rylands v. Fletcher? In five ways. It has no exceptions, whereas the older rule has five. It requires no escape, so persons inside the premises are protected. It requires no non-natural use of land. It is triggered by the character of the activity rather than by the bringing of a dangerous thing onto land. And its measure of damages is correlated to the magnitude and capacity of the enterprise rather than being purely compensatory.

3. What is the strongest criticism of the deterrent measure of damages? That it confuses compensation with punishment. The function of damages in tort is to put the plaintiff in the position he would have been in but for the wrong, and a measure that varies with the defendant's size means that two people with identical injuries recover different sums according to who injured them. The Court's answer is that in a hazardous industry the deterrent function is the point, and that the ordinary measure had failed to deter anything.