Union Carbide Corporation vs Union of India Etc on 4 May, 1989

Facts of the Case:

The Bhopal disaster of December 2-3, 1984, at the Union Carbide pesticide factory remains one of the world’s most devastating industrial accidents. The tragedy unfolded as a result of a catastrophic gas leak of methyl isocyanate (MIC), which claimed thousands of lives and caused widespread suffering. The incident occurred at the Union Carbide plant in Bhopal, India, where MIC was stored in three tanks. Despite warning signs of rising pressure in one of the tanks, the situation was not adequately addressed by the plant’s management. Workers noticed the leak around 11:30 pm but were initially unaware of its severity. By the time the safety measures were attempted, it was too late. The safety systems, including the vent gas scrubber and flare tower, failed to contain the gas release due to maintenance issues and design flaws. The exact cause of the violent reaction leading to the gas leak remains debated. Union Carbide’s explanation cited a combination of factors including water contamination, presence of chloroform, and iron catalysts, leading to a runaway reaction. However, this explanation has been contested by Indian experts who believe the reaction was already underway due to negligence and improper maintenance. The city was plunged into chaos and despair. Hospitals overflowed with victims suffering from respiratory problems and other ailments caused by exposure to the toxic gas. The death toll rose rapidly, with official and unofficial estimates varying widely. The tragedy exposed systemic failures in industrial safety protocols, corporate responsibility, and government response. [1]

Legal issues:

The court was dealing with several critical issues in the case. Firstly, it was tasked with determining the appropriate settlement amount for the overall resolution of the dispute. This involved assessing the extent of damages suffered by the victims, the economic impact of the incident, and the financial capacity of the liable party. The court also needed to ensure that the settlement amount was just, equitable, and reasonable, taking into account the principles of fairness and accountability. Additionally, the court was faced with important legal questions regarding the liability of multinational corporations operating in developing countries with inherently dangerous technologies. These questions touched upon issues of corporate responsibility, environmental protection, and the rights of affected communities. While the court did not pronounce on these issues directly, they were undoubtedly part of the broader context within which the case was situated. Furthermore, the court had to consider the termination of criminal proceedings as part of the settlement. This raised questions about the intersection of civil and criminal law, the adequacy of penalties for corporate wrongdoing, and the need for accountability in cases involving serious harm to individuals and the environment. [2]

Arguments:

1. Appellants- The appellants in this case presented several key arguments regarding the settlement proposals and the legal framework surrounding the Bhopal Gas Leak Disaster. Firstly, they highlighted the lack of public-supported relief efforts for the victims of the tragedy, emphasizing that the response mainly consisted of anger towards the industrial enterprise without substantial efforts to provide immediate relief. They pointed out that previous attempts, both in the United States and in Bhopal, had been made to address the situation. The appellants also underscored the Court’s role in facilitating settlement discussions between the parties. They mentioned that the Court had repeatedly encouraged both sides to reach a fair settlement, despite initial skepticism from counsel due to past criticisms of such negotiations. However, they acknowledged positive responses from counsel and provided details of previous offers and counteroffers made during negotiations, which formed part of the record. During the settlement discussions, the appellants stated that their client was willing to stand by an earlier offer of Three Hundred and Fifty Million US dollars, with an additional offer to include appropriate interest, bringing the total to 426 million US dollars. However, they expressed that this figure was the maximum their client could offer. Conversely, the learned Attorney General argued that any settlement below 500 million US dollars would not be reasonable, presenting a different perspective on the appropriate compensation amount. Crucially, the settlement proposals were considered under the premise that the government had exclusive statutory authority to represent and act on behalf of the victims, with no reservations from either counsel regarding this arrangement. Additionally, the validity of the Bhopal Gas Leak Disaster (Registration and Processing of Claims) Act, 1985 was assumed. However, it was noted that if the Act were to be declared void in pending proceedings challenging its validity, the order dated February 14, 1989, would need to be reevaluated in light of that decision. In summary, the appellants’ arguments focused on the lack of public-supported relief efforts, the Court’s role in facilitating settlement discussions, the details of previous offers and counteroffers, and the considerations surrounding the compensation amount. They also addressed the legal framework underpinning the settlement proposals, particularly regarding the government’s authority and the validity of the relevant legislation. [3]
2. Respondents– The respondents argued that the appellant, The Carbide, was responsible for paying interim compensation to the gas victims under the substantive law of torts. They contended that the terms “other authority” in Article 372(1) of the Indian Constitution included a competent Civil Court, such as the District Court of Bhopal, operating under Section 9 of the Civil Procedure Code. Consequently, regardless of whether it was UCC or UCIL engaged in the high-risk activity, they were liable to pay damages under the doctrine of absolute liability. Furthermore, the respondents emphasized that the principle of absolute liability, established in the M.C. Mehta case, could be applied retroactively to the Bhopal gas tragedy. They asserted that even if the decision in the M.C. Mehta case came after the tragedy, there was no reason to believe that the principle of absolute liability should not be invoked in this instance. Regarding the issue of corporate liability, the respondents argued that lifting the corporate veil was necessary because UCIL did not possess adequate assets to compensate the victims. Since UCC held the majority of shares in UCIL, it was justifiable to hold UCC accountable for the damages incurred. This argument aimed to ensure that the victims received proper compensation despite the financial limitations of UCIL. The respondents also raised concerns about the practicality of delaying interim payments until all the necessary data and evidence were collected and verified. They questioned whether the gas-injured parties could survive until such time, especially given the extensive process required for scrutinizing, categorizing, and validating the multitude of claims. This argument underscored the urgency of providing immediate relief to the victims, highlighting the responsibility of the Government of India in facilitating the process of relief and rehabilitation. In summary, the respondents’ arguments centered on establishing the legal basis for the appellant’s liability under tort law, advocating for the application of the principle of absolute liability, justifying the lifting of the corporate veil to ensure adequate compensation, and emphasizing the need for timely relief for the gas victims. Their arguments aimed to support the court’s decision to hold the appellant accountable for compensating the victims of the Bhopal gas tragedy. [4]

Judgement:

In the case of Union Carbide Corporation v. Union of India, the Supreme Court issued a reasoned order on May 4, 1989, directing Union Carbide Corporation (UCC) to pay US $470 million as compensation for the damages caused by the leak of methyl isocyanate (MIC) gas in Bhopal. Justice Pathak, delivering the opinion, emphasized the court’s duty to provide immediate relief to the victims of the disaster. The decision was rooted in the principle of polluter pays, with the court considering counter offers ranging from US $426 million to US $500 million. The settled amount of US $470 million was deemed to be a reasonable mean of these counter offers. However, this compensation amount was met with criticism from various quarters, as it appeared inadequate in proportion to the magnitude of the tragedy. Critics argued that the sum translated to a relatively small payout for each victim, amounting to less than INR 50,000 per person. Consequently, the legal validity of the settlement was challenged, leading to the case being brought before the Supreme Court. In the subsequent judgment, the court addressed various issues raised by the petitioners. It was contended that dropping criminal proceedings against UCC was unlawful and that the compensation amount was inadequate given the extent of the injuries caused by the disaster. The majority opinion, delivered by Justice Venkatachaliah on behalf of himself, K.N. Singh, and N.D. Ojha JJ., rejected these contentions. The majority held that dropping the criminal proceedings against UCC was not justified, ordering that they be reinstated promptly. However, regarding the adequacy of the compensation, the majority bench deemed the amount of US $470 million to be sufficient, reasonable, and fair. Any deficiencies in the rehabilitation funds were to be supplemented by the Union and State governments In contrast, Justice Ahmadi dissented with the majority opinion on several points. He argued that the Union of India should not be held liable for damages unrelated to the MIC leak and that any rehabilitation deficits should be covered by UCC. Ultimately, the Supreme Court upheld the settlement amount of US $470 million while ordering the reinstatement of criminal proceedings against UCC.[5]

Reasoning:

In reaching its judgment in the case concerning the Bhopal Gas Tragedy, the Supreme Court meticulously calculated the compensation value by considering various factors. It relied on the number of persons treated at hospitals, a critical indicator, and the High Court’s order based on the allegations and claims in the Union of India’s amended pleadings. The court estimated the total fatal cases to be around 3000 and determined the average remuneration between Rs 1 lakh to Rs 3 lakh, amounting to approximately 70 crores. Furthermore, the Supreme Court emphasized the necessity to formulate a national policy safeguarding national interests against hazardous pursuits solely driven by economic gains. It called upon experts from diverse fields such as jurists, economists, environmentalists, sociologists, and futurologists to identify common concerns and establish criteria deserving judicial recognition and legal sanction. Subsequently, the Apex Court ordered Union Carbide Corporation (UCC) to pay damages amounting to 750 crores, representing a full settlement of all claims, rights, and liabilities arising from the Bhopal Gas Tragedy disaster. The judgment quashed all criminal proceedings and disposed of civil proceedings. However, several petitions later sought to revive criminal charges. [6]

Conclusion:

The judgment in the Union Carbide Corporation v. Union of India case concerning the Bhopal Gas Tragedy reflects a meticulous effort by the Supreme Court to address the aftermath of one of the world’s most devastating industrial disasters. By calculating compensation based on various factors and emphasizing the need for a national policy to prevent similar tragedies, the court demonstrated its commitment to justice and accountability. However, the decision to initially quash criminal proceedings against Union Carbide Corporation faced significant criticism, raising questions about accountability and the value of Indian lives. Despite these concerns, the judgment led to positive developments, including the enactment of laws aimed at promoting sustainable development and corporate responsibility. Overall, while the judgment may not have been perfect, it marked a significant step towards addressing the systemic failures exposed by the Bhopal Gas Tragedy and promoting a safer and more responsible industrial environment.

Reference(s):

[1] Tortter, Day and Love., “Bhopal, India and Union Carbide: The Second Tragedy on JSTOR” 86 Journal of Business Ethics <http://www.jstor.org/stable/25071921>

[2] ‘Union Carbide Corporation vs Union of India Etc on 4 May, 1989’ (Indiankanoon.org2024) <https://indiankanoon.org/doc/1344892/#:~:text=250%20crores.-,Both%20the%20Union%20of%20India%20and%20the%20Union%20Carbide%20Corporation,all%20civil%20and%20criminal%20proceedings.> accessed 2 March 2024>

[3] Kothari A, ‘Union Carbide Corporation v. Union of India, AIR 1988 SC 1531 : Case Study – IPleaders’ (iPleaders26 January 2022) <https://blog.ipleaders.in/union-carbide-corporation-v-union-of-india-air-1988-sc-1531-case-study/> accessed 2 March 2024

[4] Kothari A, ‘Union Carbide Corporation v. Union of India, AIR 1988 SC 1531 : Case Study – IPleaders’ (iPleaders26 January 2022) <https://blog.ipleaders.in/union-carbide-corporation-v-union-of-india-air-1988-sc-1531-case-study/> accessed 2 March 2024

[5] ‘Union Carbide Corporation (Appellant) v. Union of India and Others (Respondents) | InforMEA’ (Informea.org2024) <https://www.informea.org/en/court-decision/union-carbide-corporation-appellant-v-union-india-and-others-respondents> accessed 2 March 2024

[6] LEXPEEPS, ‘Union Carbide Corporation| Lexpeeps’ (Lexpeeps20 September 2020) <https://lexpeeps.in/union-carbide-corporation-v-union-of-india/> accessed 2 March 2024

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