Published On: February 5th 2026
Authored By: Urvashi Shrivastava
SVKM's NMIMS School of Law, Navi Mumbai
- Title: Union Carbide Corporation v. Union of India
- Citation: AIR 1990 SC 273
- Court: Supreme Court of India
- Bench: R.S. Pathak (CJI), E.S. Venkataramiah, M.N. Venkatachalliah, Rangnath Misra, N.D. Ojha, JJ.
- Date of Judgement: May 4, 1989
- Relevant Provisions/Statutes: The Bhopal Gas Leak Disaster Act, 1985; Article 21, 136, 137, 142 of the Constitution of India
Brief Facts:
At midnight on December 2, 1984, deadly chemical fumes of methyl isocyanate escaped from a pesticide factory of Union Carbide India Limited in Bhopal. The gas leak resulted in an immediate toll of 2,660 lives and left tens of thousands of citizens physically impaired. The amended plaint from the Union of India later estimated excruciating deaths of 2,660 and serious injuries to 30,000 – 40,000 people. The disaster was characterised as a “ghastly monument” to the dehumanising influence of dangerous technologies where a lethal toxic poison was used without adequate medical procedures or neutralisation protocols. Legal proceedings for compensation begin in the United States court before being moved to the District Court at Bhopal. The District Judge initially ordered interim compensation. On April 4, 1988, the Madhya Pradesh High Court modified this order granting interim compensation of ₹250 crores. Both the Union of India and Union Carbide Corporation appealed the High Court order on February 14, 1989. The Supreme Court directed an overall settlement of 470 million US dollars and the termination of all civil and criminal proceedings.
Issues Involved:
- Why was this settlement amount considered just, equitable and reasonable?
- Is dropping of criminal proceedings against the Union Carbide justified?
Arguments:
Union of India’s Arguments
The Union of India argued that the primary concern was the urgent humanitarian crisis faced by thousands of victims who continued to suffer without adequate medical care, food or livelihood. It was contended that prolonged litigation would result in unconscionable delay, defeating the very purpose of compensation. The victims, many of whom belonged to economically weaker sections could not afford to wait for years for final adjudication. A settlement amount below 500 million U.S. dollars would not reflect the scale of death, injuries and long-term consequences. Under the 1985 act, the government had exclusive statutory authority to represent victims and the settlement was negotiated in that capacity. The Attorney General emphasise that Justice delayed would amount to justice denied, especially in a mass disaster of this magnitude.
Union Carbide Corporation’s Arguments
Union Carbide Corporation submitted that it had earlier offered 350 million U.S. dollars, which was later enhanced with interest to 426 million U.S. dollars. Further litigation would be uncertain, complex and prolonged due to jurisdictional issues and difficulties in enforcing Indian decrees in foreign courts. Settlement would bring finality and closure, allowing immediate disbursement of funds. UCC accepted the Court’s suggestion to leave the determination of a fair amount to judicial discretion. UCC maintained that the settlement was a pragmatic solution rather than an admission of liability.
Judgement:
The Court placed overwhelming emphasis on the humanitarian crisis. It observed that thousands of victims were living in extreme distress even four years after the disaster. The Court held that the rigid adherence to legal formalism would be morally indefensible. In such circumstances it described inaction as a heartless abstention when immediate relief was possible. The court acknowledge the reality of judicial delays and stated that even ordinary cases take years to conclude. A mass tort of this magnitude would inevitably take much longer . The Court clarified that the settlement was not an abandonment of judicial duty, but an exercise of judicial discretion in exceptional circumstances. It emphasised that the settlement process had already been initiated by lower courts and even by a U.S. judge and the Supreme Court merely continued those efforts. The court consciously refrained from deciding complex legal questions relating to multinational liability holding that the immediate survival of victims outweighed the need for doctrinal development. The Court determined that the settlement of 470 million U.S. dollars when paid immediately and held with interest during the distribution process would aggregate to nearly 500 million U.S. dollars meeting the minimum threshold suggested by the Attorney General. The settlement was premised on the validity of the Bhopal Gas Leak Disaster Act, 1985, which conferred exclusive authority on the Union of India to act on behalf of victims. The Court noted that if the act was subsequently struck down, the settlement could be revisited. The Court made it clear that the settlement was not immune from review. If material facts were later discovered showing that the settlement was based on an incorrect assumption or suppression of relevant information, the Court would not hesitate to exercise its review jurisdiction under Article 137 of the Constitution of India.
Ratio Decidendi:
The legal principle underlying this judgement is the “Prioritisation of immediate substantial relief over the perfection of legal doctrine in the face of a mass disaster.” The Court defined its duty as both judicial and humane to secure relief when thousands of lives were at stake. The court rightly discarded the ordinary standards of compensation like the multiplier method used in Motor Vehicle accidents which would have resulted in a total of less than 20 crore rupees. It adopted the principle of M.C. Mehta v. Union of India, stating that the damages must be correlated to the magnitude and capacity of the enterprise to have a deterrent effect. Justice and truth in this context were defined by the relief provided to the victims rather than the resolution of abstract legal questions.
Obiter Dicta:
The judgement contains significant observations that reflect the Court’s philosophy on technology and corporate responsibility. The court suggested a need to shift from hard, resource intensive and anti-ecological technology to soft, flexible and eco-conformable technology. The Court noted that certain things are impermissible even with compensation in a civilised society. It called for jurists, technologists and experts to help evolve a national policy to protect national interest from ultra-hazardous economic pursuits. The Court acknowledged its own fallibility stating that what appears just to the court may not appear so to others, but the ultimate test is whether it relieves undeserved suffering.
Final Decision:
The Supreme Court affirmed the settlement of 470 million U.S. dollars. All civil proceedings were concluded pursuant to the settlement. The Court acknowledged concerns regarding termination of criminal proceedings and left scope for review. The judgement emphasised judicial humility, admitting fallibility and openness to correction through lawful processes.
Impact:
The judgement of the case had a profound and lasting impact on Indian legal system. One of the most significant impact of the case is its recognition that traditional adjudicatory mechanisms are often inadequate for mass disaster litigation. The Supreme Court prioritised speedy humanitarian relief over prolonged litigation, thereby legitimising judicially facilitated settlements in exceptional circumstances. This approach influenced later cases involving large scale harm where courts became more open to negotiated settlements as a pragmatic solution. However, this also set a controversial precedent where settlement replaced full adjudication, raising concerns that justice may be compromised in favour of expediency. The case expanded the perceived role of Supreme Court from a strict adjudicatory body to a problem solving institution, exercising, equitable and humanitarian discretion by actively determining the settlement amount terminating proceedings. The judgement is often criticised for being a missed opportunity to develop robust principles on the liability of multinational corporations engaged in hazardous industries. From a humanitarian perspective, the case ensured immediate financial relief to thousands of victims who had been waiting for years.
