UNION CARBIDE CORPORATION ETC. ETC. A

v.

UNION OF INDIA ETC. ETC.

OCTOBER 3, 1991

[RANGANATH MISRA, CJ, K.N. SINGH, M.N. 'B

VENKATACHALIAH, A.M. AHMADI AND N.D. OJHA, JJ.}

Bhopal Gas Disaster (Processing of Claims) Act, 1985: '

~ Sections 3, 4, 9: Settlement of claims before lite Apex Cou11-Not afford-

ing 'Faimess Heari11g'-Non-incorporation

of re-opener clause-Whether C

vitiates

the settlement-Review of settlement-If set aside by Court~1ether

Court has inhere11t jurisdiction to order restitutio11 of the fend to tlte com­

panJ-:;-Review proceedings -Court would not refuse to afford opportunity to

parties on

rigid technical

grounds-In case funds found inadequate in fu­

ture-Wlzether Union of India as ·Welfare State to make good the deficien­

cy--Whether settlement could be set aside on mere possibility that medical D

documentation and categorisation were faulty and figures of various ki11ds

of injuries and disableinent were undependable-Liability of tort­

feasor--Award

of compensation--To be proportionate to economic supe­

riority

of the off ender.

Constitution

of India,

1950:

Article 136, 137, 139-A, 142, 145: Inherent jurisdiction under Articles

136 and 142 to withdraw or transfer and finally dispose of the main suits

and pending Criminal proceedings

in the course of

hearing of appeals arising

out

of

interlocutory orders in suits-Whether taken away by Article 139-

A--Words 'Cause"Or matter' appearing in Article 142---Meaning and scope

of--Apex Court's power to quash criminal proceedings--Court's order

recording settlement between parties-:-Such agreement if opposed to public

polic_y-Whether void and order of settlement liagle to be set aside--Special

Nave jurisdiction-Nature and scope of-Main object-To meet ends of jus­

tic~ven specific provision for appeal under the Constitlllion of other laws

not to limit the j11risdictio11-'Stifli11g of prosecution d9.ctrine' -Whether at­

tracted where the motive is to drop Criminai ai also Civil proceed:

ings-Doctrine of resti1111ion~1ether applicable to appeals under Article

136-Confennent of immunity from crimihal proceedings~1etlzer legisla-

tive ft111ctio11~1ether amounts to preferential treatment-Settlement of

claims recorded-Review. of~iether settlement could be set aside on

251

E

F

G

H

252 SUPREME COURT REPORTS (1991} SUPP. 1 ·s. C.R.

A ground of insufficiency of settlement fund-In the event of funds being found ¥.

insufficient to meet the compensation detennined-Wlzether Union of India

as Welfare State to make good the deficiency.

Civil Procedure Code, 1908:

Order XX/II, Rule 3B; Sections 112 and 114: Settlement recorded by

B Court-Principles of natural justice-Persons whose interests affected not

made co-nomine parties--Order recording settlement not preceded by notice

to such persons-Whether renders the proceedings void-Doctrine of restitu-'

tion---Applicability of. ,.Ar-_

Law of Torts:

C Mass tort actio~ourt assisted settlement-Non-affording of pre-

settlement 'Fairness Hearing' and non-incorporation

of 'reopener'

clause in

tlze settlement-Whether vitiate the settlement-Assessment of once and for

· all damages in personal injury actions--Unf oreseen but likely future manif es­

tation

of

the injmy--.4.11 important factor to be kept in mind.

D Administrative Law:

E

. Principles of Natural Justice~Audi alteram partem rule-Non-com­

pliance with the rule--:-Effect of-To be viewed in circumstamial flexibility.

Practice

& Procedure:

Plea

of

invaliditj based on public policy-Not ban'ed by rule of estop-

pel.

Procedural teclm~calities-· -To yield to paramount considerations of

justice and fairness where matter involves moral and humanitorian con­

siderations.

The

~nion Carbide (India) Ltd •. (UCIL), a sister concern of Union

F Carbide Corporation (UCC) owned and operated in Bhopal, a chemical

plant manufacturing pesticides, one ·of the ingredients in the composition

being Methyl Isocyanat~ (MIC), considered to be the most toxie chemical

in industrial use.

G

On the 2nd December, 1984 night there was escape of MIC from the

tanks in which it was stored. And the fumes blew into the hutments

abutting the plant premises affecting the residents as also the flora and

fauna. About 4000 people lost their lives and the health of tens of

thousands of people was affected in various degrees of seriousness.

H The Bhopal Gas Leak Disaster (Processing of Claims) Act, 1985 was

,.

UNION CARBIDE v. U.O.I. 253

passed on 29.3.1985 authorising the Government of India, as parent patriae A

exclusively to represent the victims so that the interests of victims of the

disaster could

be fully protected and that the claims for compensation

were pursued speedily,

effectively and to the best advantage of the

claimants. In exercise of the power conferred under the Act, the Union of

India instituted an action on behalf of the victims against Union Carbide B

Corporation before the U.S. District Court, Southern District of New York

for award of compensation for the damage caused by the disaster. A large

number of fatal accidents and personal injury actions filed by and on

behalf·of about 1,86,000 victims were already pending in courts in U.S.A.

All these claims came to be consolidated by the Judicial Panel on Multi

District Litigation

and assigned to

U.S. District Court, Southern District C

of New York, presided over by Judge Keenan. The claim brought by the.

Union of India was also consolidated with them.

However, the UCC resisted the choice of the American Forum on the

plea of/otum-non-conveniens. Judge Keenan allowed the plea of UCC and D

the Union of India was constrained to ~lter its choice of forum and to

pursue the remedy in the District Court

at

Bhopal by ,filing a suit seeking a

compensation of

3.3 Billion Dollars against the

UCC and UCIL. Efforts

for a settlement were not fruitful. The District Court made an order

directing payment of Rs. 350 cores

as

interim compensation. UCC

challenged this award before the High Court and the quantum of interim E

compensation came to be reduced to Rs. 250 cores. Both Union of India

and UCC preferred appeals by special leave against the High Court's

order.

On 14th February, 1989 this Court recorded an overall settlement of

the claims in the suit for 470 million U.S. Dollars and the consequential F

·termination of Civil and Criminal proceedings. On 15th February, 1989

the terms of the settlement signed by the Attorney General for the Union of

India

and the Counsel for.

UCC was filed and on the basis of the

settlement, this Court passed an order recording the terms of settlement

and issuing directions as to the mode of payment of the sum of 470 million G

U.S. Dollars pursuant to and in terms of the settlemenL

The said settlement was assailed in the present Petitions on various

grounds.

H

254 SUPREME COURT REPORTS (1991) SUPP. 1 S. C.R.

A The petitioners contended that this Court had no jurisdiction to

wit~draw and dispose of the main suits and the Criminal proceedings in ~ ...

the course of hearing of appeals arising out of an interlocutory order in

the suits. It was further contended that the settlement recorded by this

Court was void under Order XXIll Rule 38 of the Code of Civil Procedure

as the order

was not

preceded by notice to the persons whose interests

B would be affected and who were not Co·nomine parties to the proceedings.

It was also contended that the orders quashing the criminal proceedings

which were serious non-compoundable offences would not amount to

withdrawal of the prosecution even under the inherent powers of this

Court either under Section

482 Cr. P.C. or under Article 142 of the

C Constitution of India.

Conferment of criminal immunity,

by this Court, it was contended,

was without jurisdiction, since it

was essentially a legislative function and

grant of immunity to a particular person

or persons may amount to a

D preferential treatment violative of the equality clause. The settlement was

also assailed on the ground that the stipulation for abstention from future

· criminal proceedings amounted to stifling of the prosecution and,

therefore, it

was unlawful and opposed to public policy. The settlement was

also assailed

on the ground that 'Fairness Hearing' procedure was not·

followed

that the quantum was inadequate and that there was no

E 're-opener' clause which was very essential in view of the fact that the

latency period for the manifestation of the

effects of the toxic injuries was

unpredictable.·

It was contended that even if the settlement was to be set aside, the

funds should not

be allowed to be repatriated as that would embroil the

F victims in endless litigations to realise the fruits of the decree that

might

be made in the suit and to realise the order for interim payment. It was

also contended that since notices to and opportunities for hearing of the

victims represented

by the

Union of India, were imperative before the

settlement was recorded and the denial of the same amounted to violation

G of the rules of natural justice.

It was further contended that a large number of genuine claims

stood excluded on the ground that despite notices the claimants did not

appear for· medical documentation and so the medical documentation

H done was not reliable.

,

UNION CARBIDE v. U.0.1. 255

'i'bough the Union of India did not assail the settlement, it sought to A

support the petitioners' challenge to the validity of the settlement. It was

contended on behalf

of the

Union of India that though it did not dispute

the settlement, it was not precluded from pointing out the circumstances

ln the case which,

if accepted, would detract from the legal validity of the

settlement.

·

Disposing of the petitions, this Court, B

HELD: (By The Court) •

-----1. Under Article 142(1) of the Constitution, this Court, did have the

jurisdiction to withdraw to itself the original suits pending in the District

Court at Bhopal and dispose of the same in terms of the settlement.

So C

also this Court has the jurisdiction to withdraw the criminal proceed~ngs.

However, in the particular facts and ·circumstances, the quashing of the

criminal proceedings was not justified.

(372 B-C & FJ

2. The settlement ordered by this Court is not void for non- D

compliance with the requirements of Order XXIll Rule 3B of the Code of

Civil Procedure. (372-E]

3. The orders recording the settlement in so

far as they seek to

prohibit future criminal proceedings do not amount to conferment

of

criminal immunity; but merely consequential to the qt1ashing of the E

criminal proceedings. (372-G]

4. The orders recording the settlement

are not void, as they are not

opposed to public policy

and do not amount to stifling of criminal

proceedings.

[373-A]

5. Having

regard to the scheme of the Bhopal Gas Leak Disaster

(Processing of Claims) Act,

1985, 'Fairness Hearing' procedure is not

strictly attracted to the Court's sanctioning of a settlement. Likewise, the

absence of a 'Re-opener' clause does

aot, ipso-facto, vitiate the settlement.

[373-B-C] .

6. If the settlement is set aside,

UCC shall be entitled to the

restitution of the amount brought in by it pursuant to the orders of this

Court, subject to its complying with the terms of the

order dated

30th Nov.,

1986 made

by the Bhopal District Court. [373 C-D]

F

G

H

256 SUPREME COURT REPORTS (1991} SUPP. 1 S. C.R.

A 7. The settlement is not vitiated for not affording the victims and

victim-groups an opportunity oftJeing heard. [373-E]

8. If the settlement fund is found to be insumcient, the deficiency is

to be made good by the Union of India. (373 E]

B 9. For expeditious dispos.al or the claims, a time-bound

consideration and determination of the claims are necessary. [373-F]

. Per Majority: (Venkatachaliah, J. for himself, K.N. Singh and N.D.

Ojha, JJ. ): I

C 1. Article 139-A of the Constitution in terms does not apply to the

facts of the case. The appeals were by special leave under Article 136 of the

Constitution against

an

lnterlCM:utory order. Article 136 vests In the

Supreme Court a plenary juriscJictio~ in the matter of entertaining and

hearing of appeals by granting special leave against any kind of judgment

D or order made by a Court or Tribunal in any cause or matter and the

'powers can

be exercised inspite of the

limitations under the specific

provisfons for appeal contained in the Constitution or other laws. The

powers given

by

~ticle 136 are, however, in the nature of special or

residuary powers which are exertisable outside the purview of the ordinary

laws in cases where the needs of justice demand interference

by the

E Supreme Court.

(303-A-C]

Durga Sliankar Melita v •. Thakur Raghuraj Singh & Others, (1955)

SCR267, relied on.

2.

Any limited interpretation of the expression 'cause or matter'

F having

regard to the wide and sweeping powers under Article 136 which

Article 142(2) seeks to effectuate, limiting it only to the short compass of

the actual dispute before the Court

and not to what might necessarily and

I

reasonably be connected with Of related to such matter in such a way that

their withdrawal to the Apex Court :would enable the court to do 'complete

°' justice', would stultify tht very Wide constitutional powers. Situations may

present themselves before the court where the court with the aid of

the .

powers under Article 142(1)

c~uld bring about a finality to the matters,

and it is common experience that day-in-and-day-out such matters are

taken

up and decided in this Court. It is true that mere practice, however

long,

will not legitimise issues of jurisdiction. But the argument, pushed

H

y'

UNION CARBIDE v. U.0.1. 257

to its logical conclusions, would mean that when an interlocutory appeal A

comes up before this Court by special leave, even with the consent of the

parties, the main matter cannot

be finally disposed of by this Court as

such a step would imply

an impermissible transfer of the main matter.

Such technicalities do not belong to the content and interpretation

of

constitutional powers.

(304 B·G]

B

Halsbury's Laws of England, Fourth Edition, Vol. 37, para 22,

•-..... referred to.

_,

3. To the extent power of withdrawal and transfer of cases to the

Apex Court is, in the opinion of the Court, necessary for the purpose of

effectuating the high purpose of Articles

136 and 142(1), the power under C

Article 139A does not to exhaust the power of withdrawal and transfer.

Article 139A, was

Introduced as part of the scheme of the· 42nd

Constitutional Amendment. That amendment proposed to invest the

Supreme Court exclusive juris~iction to determine the constitutional

validity of central laws by Inserting Articles 131A, 139A and 144A. But D

Articles 131A and 144A were omitted by the 43rd Amendment Ac:t 1977,

leaving Article 139A in tact. That Article enables the litigants to approach

the

Apex Court for transfer of proceedings if the

con~itlons envisaged In

that Article are satisfied. Article 139A was not intended, nor does it

operate, to whittle down the existing wide powers under Articles 136 and E

142 of the Constitution. The purposed constitutional plenitude of the

powers of the Apex Court to ensure due and proper administration of

justice is Intended to be co-extensive in each case with the needs of justice

of a given case

and to meeting any

exigency. (304-H; 305 A-CJ

Harbatls Singh v. U.P. State, (1982] 3 SCR 235, relied on.

4. In relation to the proceedings and decisions of superior Courts of

unlimited jurisdiction, imputation of nullity is not quite appropriate. They

decide all questions of their

own jurisdiction.

[309-F)

Isaacs v. Robertson, 1984(3) AER 140, relied on.

5. Under Order 32 of Supreme Court Rules, Order XXIII Rule 3B

CPC is not one of the rules expressly invoked and made applicatile. Even

if the principle of natural justice underlying Order XXIll Rule 3B

CPC is made to apply, the consequences of non-compliance should not be

F

G

H

258 SUPREME COURT REPORTS (1991] SUPP. 1 S. C.R.

A different from the consequent\es of the breach of rules of natural justice ·~

implicit in Section 4 of the Bhopal Gas Leak Disaster (Processing of

Claims)

Act, 1985. Having

regard to the circumstances of the case, this •

Court, in Saliu's case declined to push the effect of non-compliance to its

logical conclusion and declare the settlement void. In

that case, this Court

I

B considered it appropriate to suggest the remedy and curative of an

opportunity of being heard in

1

the proceedings for review. Even assuming

that the right of the affected Rt!rsons of being heard is also available at a ~

stage where a settlement.is plated before the Court for its acceptance, such

a right is not referable to,

and

~loes not stem from, Rule 38 of Order XXIII

CPC. The pronouncement in Saliu's case as to what the consequences of

C non-compliance are conclusive. [309 A-DJ

i

Charan Lal Sahu v. Union of India, [1990) 1 SCC 613, relied on.

6. The proposition that ~ provision in any ordinary law irrespective

of the importance of the public policy on which it

is founded, operates to

D limit the powers

oi' the Apex Court under Article' 142(1) Is unsound and ,...-

erroneous. The power of the court under Article 142 in so far as quashing .......-

of criminal proceedings are coricerned is not exhausted by Sections 320 or

321 or 482 Cr.P.C. or all of them put together. The power under Article 142

is at an entirely different level and of a different quality. Prohibitions or

E limitations on provisions con~ined in ordinary laws cannot, ipso-/ acto, act

as prohibitions or limitations. on the constitutional powers under Article

142. Such prohibitions or limitations in the statutes might embody and ·~ ,_

reflect the scheme of a particular law, taking Into account the nature and '

status of the authority or the court on which conferment of powers--

limited in some appropriate way-is contemplated. The limitations may

F not necessarily reflect or be based on any fundamental considerations of

public policy. It wiil be wholly, incorrect to say that powers under Article

142 are subject to express statutory prohibitions. That would convey the

idea

that statutory provisions override a

constitutional. In exercising

powers under Article

142 and

~n assessing the needs of 'complete justice'

G of a cause or matter, the Apex Court will take note of the express y

prohibitions in any substantive statutory provisions based on some

fundamental principles of public policy

and regulate the exercise of its

I •

power and discretion accordingly. The proposition does not relate to the

powers of the Court under Article 142, but only to what is or is not

H 'complete justice' of a cause or matter and in the ultimate analysis of the

UNION CARBIDE v. U.0.1. 259

propriety of lb~ exercise of the power. No question of lack of jurisdiction or A

of nullity can arise. (313 H, 314 B·C, E·GJ

Prem Chand Garg v. Excise Commissioner, U.P., Allahabad, [1963)

Suppl. 1 SCR 885; A.R. Antulay v. R.S. Nayak and Anr., [1988) 2 SCC 602,

referred to.

7.1 The proposition

that State is the Dominus Litis in criminal cases,

is· not an absolute one.

The Society for its orderly and peaceful

development is interested in the punishment of the offender. The power

under Article 142 is exercised with the aid of the principles or Section 321

CPC which enables withdrawal of prosecutions. But whether on the merits

there were justifiable grounds to quash the criminal proceedings is a

different matter.

There must be grounds to permit withdrawal of the

prosecution. It

is really not so much a question of the existence of the

power as one of justification for its exercise. A prosecution .is not quashed

for

no other reason than that the Court has the power to do

so~ The

withdrawal must be justified on grounds and principles recognised as

proper and relevant. There is no indication as to the grounds and criteria

justifying the withdrawal of the prosecution. The considerations that guide

the exercise of power of withdrawal by Government could be and are many

and varied. Government must indicate what those considerations are. (315

E, H, 316 B·C]

7.2 In the . instant case, the offences relate to and arise out of a

terrible

and ghastly tragedy. Nearly

4,000 lives were lost and tens of

thousands of citizens have suffered injuries in various degrees of severity.

At one point of time UCC itself reeognised the possibility of the accident

having been-the

result ofacts ofsabotage. It is a matter of importance that

offences alleged in the context of a 'disaster of such gravity and magnitude

should not

remain uninvestigated. The shifting stand of the Union of India

on the point should not by itself lead to any miscarriage· of justice. Since

there is no speciflc

ground for withdrawal of the prosecutions set out at

that stage, the quashing of the

pi:'osecutions requires to be set aside. [317

-B-i>J

State of Punjab v. Union of India, (1986] 4 SCC 335; M.N.

Sankarayaraya11a11 Nair· v. P. V. Balakrislma11 & Ors., (1972) 2 SCR 599,

rt don.

B

c

D

E

F

G

H

260 SUPREME COURT REPORTS (1991) SUPP. 1 S. C.R.

A Sankar Rangayya v. Sankar Ramayya, AIR 1916 Mad. 463; Bis-

wabahan v. Gopen Chandra, (1967] 1 SCR 447; Majibar Rahman v. Mu/c­

lashed Hossein, ILR 40 Cal. 113; A.R. Antulay v. R.S. Nayak & Anr., (1984)

2 SCC 500; Sheonandan Paswan v. State of Bihar& Ors., (1987) 1SCC289,

referred to.

B 8. Grant of blanket immunity .is a legislative function. There is no

power or jurisdiction vested in courts to confer immunity for criminal

prosecution

and punishment. Grant of such immunity to a particular

person or persons would amount to a preferential treatment. However, the

direction that future criminal proceedings shall not be

Instituted or

proceeded with must be understood as a concomitant and a logical

C consequence of the decision to withdraw the pending prosecutions. In that

context, the stipulation that no future prosecution shall be entertained

may not amount to conferment of any immunity but only to a reiteration of

the consequences of such termination of pending prosecutions. Thus

understood any appeal to the principal as to the power to confer criminal

D Immunity becomes lnapposlte In this case, However, in view ofthls Court's

finding that the quashing of criminal proceedings was not Justified and

that the orders dated 14th and 15th of February~ 1989 in that behalf

require to be reviewed and set aside, as a logical corollary and

consequence thereof It ls directed that all portions In the orders of tbls

E Court which relate to the Incompetence of any future prosecutions be

deleted. However, in so

far as the dropping of the proceedings in contempt

envisaged by clause (b)

of para 4 of the order dated 15th February, 1989 ls

concerned, the same is left undisturbed. (321 B-F]

Apodaca v. Viramonies, 13 ALR 1427; Doyle v. Hafstader, 257 NY

p 244; Richard Nixon v. Ernest Fitzgerald, 451US731, referred to.

Jurisprudence by Wortley, p. 297; Commentaries i11 the Constitution of

United States by Justice Storey, p. 363, referred to.

9.1. The validity and durability of a consent order are wholly

G dependent on the legal validity of the agreement on which it rests. Such an

order is amenable to be set aside on any ground which would justify the ·

setting aside of the agreement itself. Though the Union of India was a

consenting

party to the settlement recorded by this Court, it cannot be

precluded from urging a plea as to invalidity or nullity of the settlement on the ground of public policy. [323 D-E].

H

UNION CARBIDE v. U.O.I. 261

9.2. A contract whose object is opposed to public policy is invalid and A

it is not any the less ~o by reason alone of the fact that unlawful terms are .

embodied in a consensual decree. [324-E].

State of Kera/a & Anr., v. The Gwalior Rayon Silk Manufacturing

(Wvg.) Co. Ltd. etc., [1974) 1 SCR 671; State of Punjab v. Amar Singh,

[1974) 2.SCC 70, relied on. B

A Bankruptcy Notice, 1924(2) Ch.D. 76; Maritime Electric Co. Ltd. v.

General Dairies Ltd., AIR 1937 PC 114; Huddersfield Banking Company

Ltd. v. Henry Lister & Son Ltd., 1895(2) Ch. 273; Great North-West Central

Railway Co.~ Ors. v. Charlebois and Ors., 1899AC114, referred to.

Corpus Juris Secondum, Vol. 1, p.473, referred to.

c

10. The essence of the doctrine of stifling prosecution is that no

private person should be allowed to take the administration or criminal

justice out

of the hands of the Judges and place it in his own hands. A

private party is not taking administration

of law in its own hands in this D

:y case. It is the Union or India, as the Dominus Litis, that consented to the

quashing

of the

proceedings. What was purported to be done was not a

compounding of the offence. The arrangement which purported .to

terminate the criminal cases was one of a purported withdrawal not

forbidden by any law but one which was clearly enabled. Whether valid E

grounds to permit such withdrawal existed or not is another matter.

(328-A; 329 A,D]

V. Narasimha Raju v. V. Gurumurthy Raju & Ors., [1963] 3 SCR 687;

Rameshwar v. Upendranath, AIR 1926 Calcutta 451; Ouseph Poulo & Ors.

v. Catholic U11ion Bank Ltd. & Ors., [1964) 7 SCR 745, relied on. F

Fry LJ. in Windhill Local Board of Health v. Vist, [1890] 45 Ch.J).

351; Keir v •. Leeman, 6 Queen's Bench 308; Majibar Rahma11 v. Muktashed

Hossein,

ILR 40 Calcutta page 113, referred to.

11.1 The distinction between the 'motive' for entering into agreement G

and the 'consideration' for the agreement must be kept clearly distinguished. Where dropping of the criminal proceedings is a motive for

entering into the agreement-and not its consideration the doctrine of

stifling of prosecution is not attracted. Where there is also a pre-existing

civil

liability, the dropping of criminal proceedings need not

necessarily be

H

']Jj2 SUPREME COURT REPORTS [19'J1} SUPP. 1 S. C.R.

A a consideration for the agreement to satisfy that liability. (329 G-H; 330-A]

B

C.

11.2 The doctrine of stifling of prosecution is not attracted in the

· present case. It is inconceivable that Union of India would, under the

threat of a prosecution, coerce UCC to pay 470 million US dollars or any

part thereof as consideration for stifling of the prosecution. [331-D]

Adhikanda Sahu & Ors. v. Jogi. Sahu & Ors., AIR 1922 Patna 502; Deb

Kumar Ray Choudhury v.Anath Bandhu Sen and Ors., AIR 1931Cal.421;

Babu Hamarain Kapur v. Babu Ram SwaTUp Nigam & Anr., AIR 1941.

Oudh 593; Ouseph Pou/o & Ors., v. Catholic Union Bank Ltd. & Ors.,

[1964) 7 SCR 745; relied on.

12.1 On the basis of the medical research literature placed on

record, it can· reasonably be posited that the exposure in such

concentrations of MIC might involve delayed manifestations of toxic

morbidity, though the exposed population may not have manifested any

D immediate symptomatic medical status. But the long latency period of

toxic injuries renders the medical surveillance costs a permissible claim

even though ultimately the exposed persons may not actually develop the

apprehended complications.

[334 B-C]

12.2. It is not the reasonable probability that the persons put at risk

E will actually

suffer toxic injury in future that determines whether the

medical surveillance is necessary. But what _determines it is whether, on

tne basis of medical opinion, a person who has been exposed to a toxic

substance kno~ to cause long time serious injury should undergo

periodical medical tests in order to look for timely warning signs of the

F . on-set of the feared consequences. These costs constitute a relevant and

admissible head of compensation and may have to

be borne in mind in

forming an opinion whether a proposed settlement-even as a

settlement-is just, fair and adequate. (336

B·D]

G

Ayers v.Jackson, TP, 525 A 2d 'li,7 (NJ.1987), referred to.

"Law of Toxic Torts" by Michael Dore; "Health Problems of Bhopal

Gas Victims",

ICMR

Report· April, 1986, referred to.

13.

In personal injury actions the possibilty of the future

aggravatjon of the condition are of consequent aggravation of damages are

H taken into account in the assessment of damages. The estimate of damages

Y.'

UNION CARBIDE v. U.0.1. 263

in that sense is a very delicate exercise requiring evaluation of many A

criteria some of which may border on the imponderable. Generally

speaking actions for damages

are limited by the general doctrine of remoteness. and mitigation of damages. But the hazards of assessment of

once

and for all damages in personal injury actions lie in many yet

inchoate factors requiring

to be assessed. The likelihood of future

B

complkation&-thougb they may mean mere assessment or evaluation or

mere cbances--are also put into the scales in quantifying damages. This

principle may, take care of the victims who have manifest symptoms. But

there mu.st be provision in the settlement for medical sunreillance costs

and compensation for those who are presently wholly asymptomatic and

have no material to support a present claim, but may become symptomatic C

after a drawn-out of latency period. Even if the award is an "Once and for

all" determination, these aspects must be taken into account. [337 F -H; 338

A-8)

14. The right of the victims read into Section 4 of the Act to express

their views on a proposed settlement does not contribute to a position D

analogous to that in United States in which fairness hearings are

imperative. Section 4 of the 'Act' to which the right is traceable merely

enjoins Government ~f India to have 'due-regard' to the views expressed by

victims. The power of the Union of India under the Act to enter into a

compromise is not necessarily confined to a situa.tion where suit has come E

to be instituted by it on behalf of the victims. Statute enables the Union of

India to enter into a compromise even without such a suit. Right of being

heard read into Section

4-and subject to which its constitutionality has

been upheld in .Sahu's case-subjects the

Union of India to a

corresponding obligation. But that obligation does not envisage

or compel F

9

a procedure like it 'Fairness Hearing' as a condition precedent to a

compromise that Union of India may reach, as the situation in which it

may do

so are not necessarily confined to a suit. (340 G-H; 341

A·B).

Charan Lal Sahu v. Union of India, [1990) 1 SCC 613, referred to.

Agent Orange Litigation, 597 Federal Supplement 740(1984); Florida

Trailer and Equipment Co. v •. Deal, 284 F .2d 567 (1960), referred to.

G

15. The settlement is not vitiated by reason alone of want of a

'Fairness Hearing' procedure preceding it. Ukewise, the settlement is not

vitiated by reason oftbeabsenceofa 're-opener' clause built into it. [341 Cl H

SUPREME COURT REPORTS -(1991) SUPP. 1 S. C.R.

A 16.1 Strictly speaking no restitution in the sense that any funds

obtained and appropriate

by the

Union of India requiring to be paid back,

arises. The funds brought in by the UCC are deposited in the Rese"e

Bank of India and remain under this Court's control and jurisdiction.

Restitution ·is an equitable principle and is subject to the discretion of the

B Court.!Section 144, Code of Civil Procedure, embodying the doctrine of

restitution does not confer any new substantive right tO the party not

already obtaining under the general

law. The section merely regulates the power of the court in t~at behalf. But, in the present case, Section 144 CPC

does not in terms apply. There is always an inherent jurisdiction to order

restitution a

/ortiorari where a party bas acted on the faith of an order of

C the

court. A litigant should not go back with the impression that the

judicial-process so operated as to weaken bis position

and whatever it did

on the faith of the court's order operated to its disadvantage.

It is the duty

of the court to ensure that no

litigant goes back with a feeling that he was

prejudiced by an act which be did on-the faith of the court order. Both on

D principle and authority it becomes the duty of the court to-es much

moral

as it is

legal-to order refund and restitution or the amount to the

UCC--if the settlement is set aside. [342 ff; 343 A-D]

16.2 In the instant case, the UCC transported the funds to India and

deposited the foreign currency in the Reserve Bank of India on the faith of

E the Court's order. If the settlement is set aside they shall be entitled to

have their funds remitted to them back in the United States together with

such interest

as bas accrued thereon. A direction to the

UCC to prove and

establish compliance with the District Court's order dated 30th November,

1986, should be sufficient safeguard and should meet the ends of justice.

F Accordingly, in the event of the settlement being set aside the UCC shall be

entitled to have

420 million

US Dollars brought in by it. It will be remitted .,

to UCC by the Union of India at the United States along with such interest'

as has accrued on it in the account. But this right to have the restitution

shall be strictly subject to the condition that the UCC shall restore its

undertaking dated 27.11.1986

which was recorded. on 30.11.1986 by the

G District Court at Bhopal and on the strength of which the court vacated

the order of injunction earlier granted against the

UCC. Pursuant to the

orders recording the settlement, the said order dated

30.11.1986 of the

District Court

was set aside by this Court. If the settlement goes, the order

dated 30.11.1986 of the District Court

will automatically stand restored

H and the

UCC would .be required to comply with that order to keep and_

'

UNION CARBIDE v. U.O.L 265

maintain unencumbered assets of the value of 3 billion US dollars during A

the pendency of the suit. The right of the UCC to· obt&ln the refund of and

to repatriate the funds shail be subject to the performance and .

etTectuatlon of its obligations under the said order of 30.11.1986 of the

District Court

at Bhopal.

nu then the funds shall relnain withi~ the

jurisdiction

or· this Court and

shall not be amena.ble to any other legal

process. (344 G-H; 345 A-OJ B

Binayak v. Ramesh, [1966) 3 SCR24;Jai Berham and Ors. v •. Kedar

Nath Marwari and Ors. [1922) P.C. 269; L. Guran Ditta v. T.R. Ditta, [1935)

PC 12; Jagendra Nath Singh v. ilira Sahu and Ors., AIR 1948 All. 252 F.B;

referred to.

17.1 Omission to comply with the requirement of the rule of audi

alteram partem, as a general rule, vitiates a decision. Where there is

· violation of natural justice no resultant or independent prejudice need be

shown, as the denial of natural justice is, in itself, sufficient prejudice and

c

it is no answer to say that even with observance of natural justice the D

same conclusion would have been reached. But the effects and

x consequences of non-compliance may alter with situational variations and

particularities. [349 C-D].

__ ,

17.2 In Sahu case this Court held that there was no compliance with

the principles of natural justice but also held

that the result of the E

non-compliance should not be a mechanical invalidation. The Court

suggested curatives.

The Court was not only sitting in judicial review of

legislation, but was a court of construction also, for, it is upon proper

construction of the provisions, questions of constitutionality come to be

decided. The Court was considering the scope and content of the F

obligations to afford a hearing implicit in Section 4 of the Act. It cannot be

said to have gone beyond the pale of the enquiry when it considered the

further question as to the different ways in which that obligation could be

complied with or satisfied. It cannot be said that the observations in this·

regard

were made by the way and had no binding force. [349 F-H]

Charan Lal

Sahu v. Union of India, [1990) 1 SCC 613, relied on.

National TeXtile Workers Union v. P.R. Ramakrishnan [1983) 1 SCC

228; Institute of Chartered Accountants v. L.K Rama, [1986) 4 SCC 537;

Kl. Shephard v~ llnion of India, [1987] 4 SCC 431; R.B. Shreeram Durga

G

H

266 SUPREME COURT REPORTS (1991) SUPP. 1 S. C.R.

A Prasad v. Settlement Commission, (1989) 1 SCC 628; H.L. Trehan' v. Union

of India, (1989) 1 SCC 764, referred to.

B

Wiseman v. Borneman, 1971 AC 297; Leary v. National Union of

Vehicle Builders, 1971 Ch.34; Calvin v. Cart, 1980 AC 576; Llyod v.

Memahan, 1987

AC 625, referred to.

'Administrative Law' by Prof. Wade, referred to.

18.

The question in the instant case is not so much as to the

consequences of the omission on the part

of the Union oflndia to have 'due

regard' to the views of the victims on the settlement or the omission on the

C parf of the Court to afford an opportunity to the victim of being heard

before recording a settlement as it is one of the effects and implications of

the pr.~mouncement in Sahu case. In that case the Court expressly held that

the non-compliance with the obligation to issue notices did not, by such

reason alone, in the circumstances

of the case; vitiate the settlement, and

that the affected persons may avail themselves of an opportunity of being

D heard in the course of the review petitions. It is not proper to isolate and

render apart the two implications and

hold the suggested curative as a

mere obiter. Also, the petitioners who were litigating the

matter did not

represent all the victims

and victim-groups. (351 C-E,F]

E

Charan Lal Sahu v.

Union of India, [1990) 1 SCC 613, relied on.

19.

What

was transacted with the court's assistance between the

Union of India on one side and the UCC on the other is now sought to be

made binding oaa the tens of thousands of innocent victims who, as the law

bas now declared, had a right to be heard before the settlement could be

F reached or approved. The implications of the settlement and its effect on

the lakhs of citiuns of this country are, indeed, crucial in their grim

struggle to reshape and give meaning to their torn lives. Any paternalistic

candescension

that what has been done is after all for their own good is out __ of place. Either they should have been heard before a settlement was

G approved in accordance with the law declared by this Court or at least it

must become demonstrable in a process in which they have a reasonable

sense of participation that the settlement has been to their evident

advantage or, at least, the adverse consequences are effectively

neutralised. It is of utmost importance that in an endeavour of such great

magnitude where the court is trusted With the moral responsibility nf

H

UNION CARBIDE v. U.0.1. 11)7

ensuring justice to these tens of thousand innocent victims, the issues of A

human suffering do not become obscure in procedural thickets. In a

situation of this nature and magnitude, the Review-proceeding should not

be

strict, orthodox and conventional but one whose scope would

accommodate the

great netids of justice. That apart, quite obviously, the

individual petitioners and the petitioner-organisations which have sought

B

review cannot, be held to represent and exhaust the

interest of all the ·

victims. (352 F ·H; 353 A·C)

26. The scope of the review in the present case is to ensure that no

miscarriage of justice occurs in a matter of such great moment. This is,

perhaps, the last opportunity to verify our doubts and to undo injustice,

if

any, which may have occurred.

·The fate and fortunes of tens of thousands C

of persons depend on the effectiveness and fairness of these proceedinp.

The legal and procedural technicalities should yield to the paramount

considerations of justice

and fairness. The considerations go beyond

legalism

and are largely humanitarian. It is of utmost importance that

great issues of human

suffering are not subordinated to legal tech·

nicalities. [354 F-G] D

Shivdeo Singh & Ors. v. State of Punjab & Ors., AIR 1963.SC 1909,

relied on.

21. The whole controversy about the adequacy of the settlement·

fund arises on account of the possibility that the totality of the awards

made on all the claims

may exceed the settlement-fund in which event the E

settlement-fund will be insufficient to satisfy all the awards. This is the

main concern of the victims

and

victim-groups. There is, as it now stands,

a fund of one thousand

two hundred crores of

rupees for the benefit of the

victims. The charge that medical documentation

was faulty and was

calculated to play

down the ill-effects of the exposure to MIC is not F

substantiated.

[360 G-H; 361 A·BJ

22. In bestowing a second thought whether the settlement is just, fair

and adequate, one should not proceed on the premise that the liability of

UCC has been firmly established. It is yet to be decided if the matter goes

to trial.

It is true that even to the extent a settlement goes, the idea of its G

fairness and adequacy must necessarily be related to the magnitude of the

problem

and the question of its reasonableness must be assessed putting

many considerations into the scales.

It may be hazardous to belittle the

advantages of the

se;ttlenrent in a matter of such complexity. Every effort

should be made to p}okt:t the victims from the prospects of a protractt.d, H

.

268 SUPREMB COURT REPORTS (1991) SUPP. 1 S. C.R.

A exhausting and uncertain litigation. (361 C-DI

B

Sterling v. Versicol Chemical Corp., 855 F 2d 1188 (1988); Florance

B. Bigelow v. RKO Radio Pictures Inc., 327 US 251, (1946); Story PDTChment

Company v. Paterson PDTChment Popper Co., 282 US 555; Frederick Thomas

Ki.n&rley v. The Secretary of State for India, AIR 1923 Calcutta 49• referred

~ .

'Scientific and Legal Standards of Statistical Evidence is Toxic and

Tort and Discrimination Suits' by Carl Cranor and Kurt Nutting in Law

and Philosophy, Vol. 9, No..2 May,1990, referred-to.

23. Indeed, in many tort actions the world-over speedy acijudlc:atlons

C and expeditious reliefs are not easily accomplished and many of them have

ended in settlements. In the context of the problems presented by the

issues of liability in cases of cer"..ain corporate torts beyond the corporate

veil there is an impressive body of academic opinion amongst the

schoolmen

that the very theories of limited corporate

liability .which

D initially served as incentives for commercial risk-taking needs

re-thinking in certain areas

of tortious

·liability of Corporations. Some

scholars have advocated abolition of limited liability for 'knowable t.art

risi(s'. This, of course, has the limitation of one more shade or an

acad~mician's point ofview for radical changes in law. (364 G-H; 36581 .

E An Economic Analysis of Limited Liability in Corporation Law, 30 U.

F

Toronto L.J. 117 (1980); The Place of Enterprise Liability in the Control of

Corporate Conduct, 90 Yale Law Journal; Should Shareholders be personal­

ly liable for the tl'rts of their Corporations, 76 Yale Law Journal 1190 (1967),

, referred to.

24. While it may not be wise or proper to deprive the victims of the

benefit of the settlement, it is, however, necessary to ensure that In the­

perhaps unlikely-event of the settlement-fund being round inadequate ,,

to meet the compensation determin_ed in respect or all the present

claimants, those persons

who may have their

claims determined after the

O fund is exhausted are not left to fend themselves. But, such a contingency

may not arise having regard to the size or the settlement-fund. If it should

, arise, the reasonable way to protect the interests of the victims is to hold

that the Union of India, as a Welfare State and in the circumstances in

which the settlement was made, should not be found wanting in_ making

H good the deficiency, if any. (365 G·H; 366-A]

UNION CARBIDE v. U.0.1. 269

25. The settlement was arrived at and is left undisturbed on an A

over-all view. The settlement cannot be assailed as violative of Mehta

principle which might have arisen for consideration in a strict

adjudication. In the matter of determination of compensation also under

the Bhopal Gas Leak Disaster (Processing of Claims) Act, 1985, and the

Scheme framed thereunder, there is no scope for applying the said

principle inasmuch as the tort-feasor, in terms of the settlement-for all B

practical purposes--stands notionally substituted by the settlement-fund

which now represents

and exhausts the liability of

the,alleged hazardous

entrepreneurs

viz.,

UCC and UCIL. The Mehta principle can have no

application against Union of India inasmuch as requiring it to make good

the deficiency, if any, this Court

does not impute to it the position of a joint C

tort-feasor but only of a

welfare State. (366-H; 367 A-CJ

M.C. Mehta v. Union of India, (1987) 1SCC395, referred to.

26.

At least for a period of eight years from now the population of

Bhopal exposed to the hazards of

MIC toxkity should have provision for · D

medical surveillance by periodic medical check-up for gas related

amlctions. This shall have to be ensured by setting up long-term medical

facilities

in the form of a permanent specialised

medical and research

establishment with the best of expertise.

An appropriate action plan

should

be

drawn up. It will be proper that expert med.ical facility In the E

form of the establishment of a full-fledged hospital of at least 500 bed

strength with the best of equipment for treatment of MIC related amictlon

should be provided for medical surveillance

and for expert medical

treatment. The State of Madhya Pradesh shall provide suitable land free

of cost. The allocation of the land shall

be made within two months and the

hospital shall

be constructed, equipped and made functional within 18 F

months. It shall be' equipped as a Specialist Hospital for treatment and

research of MIC

related amictions and for medical surveillance of the exposed

population. [367D-F]

27. The Capital outlays ·on the hospital and its operation expenses

for providing free treatment and services to the victims should, both on

G , hum.nitarian considerations and in fulfilment of the offer made before

the Bhopal Court, be borne by the UCC and· UCIL. It is not part of the

function of this Court to reshape the settlement or restructure its terms.

This aspect of the further liability is also not a matter

on which the

UCC

and the UCIL had an opportunity to express their views. However., from

the tenor of the written submissions made before the District Court at H

270 SUPREME COURT REPORTS (1991) SUPP. 1 S. C. R.

A Bhopal, both the UCC and UCIL had offered to fund and provide a hospi·

tal for the gas victims. The UCC had ·reiterated that in January, 1986, it

had offered to fund the construction of hospital for the treatment of gas

victims the amount being contributed

by the

UCC and the UCIL in equal

proportions.

It is, no doubt, true that the

offer was made in a different

context and before an overall settlement. But that should not detract the

B UCC and the UCIL from fulfilling these obligations, as, indeed, the moral

sensibilities to the immense need for relief in all forms and ways should

make both the UCC and UCIL forthcoming in this behalf. Such a hospital

should be a fully equipped· hospital with provision for maintenance for a

period of eight years which may involve the financial outlay of a~ound Rs.

SO crores. Contingencies such as payment of compensation to the persons

C who were exposed to the Bhopal gas disaster, who though presently

asymptomatic

and filed no claim for

compensation but might become

symptomatic in future and the yet unborn children of mothers exposed to

MIC toxicity,

who may develop congenital defects, shall be taken care of

by obtaining an appropriate medical group insurance cover from the

General Insurance Corporation of India or the Life Insurance

Corpora·

D tion of India. There shall be no individual upper monetary limit for the

insurance liabilty. The period of insurance cover should be a period of

eight years in the future. The number of persons to be covered.

by this

Group Insurance

Scheme should be about and not less than one lakh. of

persons. Having regard to the population of the seriously affected wards

of Bhopal city

at the time of the disaster and having regard to the addition

to the population

by the subsequent births extrapolated on the basis of

E national average of birth rates over the past years and the future

~riod of

survelllance, th'-, figure broadly accords with the percentage of population

of

the affected wards bears to the number of persons found to be

affected

by medical categorisation. This insurance cover will virtually serve to

render the settlement an open ended one so far as the contingent class of

future victims both existing and after-born ate ~oncerned. The possible

F claimants fall into two categories; those who were in existence at the time

of exposure; and those who were not yet unborn and whose congenital

defects are traceable to MIC toxicity inherited

or

4erived congenitally.

The premia for the insurance shall

be paid by the

Union of India out of

the settlement fund. The eligible claimants shall

be entitled to be paid by

the insurer compensation on such principles and upon establishment

~f

G the nature of the gas related toxic morbidity by such medical standards as

are applicable to the other claimants under the Bhopal Gas Leak Disaster

(Processing of Claims) Act,

1985 and the scheme framed thereunder. The ,

individual claimants shall be entitled to have their claims adjudlcated:

under the statutory scheme.

(367 G-H; 368

~-H; 369A-B; 370 B-<;:J

H

U.K. Law Commission Report on "l11juries to Unborn Childre11". ·

UNION CARBIDE v. U.0.1. 271

referred to.

A

29. There is need for expeditious adjudication and disposal of the

claims.

Even the available funds would not admit of utilisation unless the

claims. are adjudicated upon and the quantum of compensation

deter·

mined. Both the Union of India and the State Government shall take

expeditious steps

and set-up adequate machinery for adjudication of

claims and determination of the compensation. The appointment of the

B.

Claim Commissioners shall be completed expeditiously and the

adjudica·

tive process must commence within four months. In the first instance,

there shall

at least be

40 Claim Commissioners with necessary secretarial

assistance to

start the adjudication of the claims under the

Scheme. (370

C·E]

30. In the matter of disbursement of the amounts so adjudicated

c

and determined it will be proper for the authorities administering the

funds to ensure that the compensation-amounts, wherever the

beneficiaries are illiterate and are susceptible to exploitation, are properly

invested for the benefit of the beneficiaries so that while they receive the

income therefrom they

do not owing to their illiteracy and ignorance, D

deprive themselves of what may tum out to be the sole source of their

living and sustenance for the future. This Court approves and endorses

the guidelines formulated

by the Gujarat High Court in Muljibhai

Ajarambhai Harijan!s case and the same could be usefully adopted

with

appropriate modifications. Government might also consider such invest·

ments being handled by promulgating an appropriate scheme under the E

Unit Trust of India Act so as to afford to the beneficiaries not only ade·

quate returns but also appropriate capital appreciation to neutralise the

effect of denudation by inftation. (370 E-G; 371-H, 372-A]

Muljibhai Ajarambhai Harijan & Anr. v. United India Insurance Co.

Ltd. & O?·• 1982(1) Gujar~t Law Reporter 756, referred to.

Per Ranganath Misra, J. (concurring): 1. It is interesting to note that F

there has ~n no final adjudication in a mass tort action anywhere. The

several Instances which were placed before this Court were cases where

compensation

had been paid by conJerit or where settlement was reached

either directly

or through a circuitous process.

Such an alternate proce-

, dure has been adopted over the years

on account of the fact that trial

In a

case of this type would be protracted and may not yield any social benefit. G

Assessment of compensation in cases of this t)'pe has generally been by a

rough and ready process. In fact,

every assessment of compensation to

some extent

is by such process and the concept of just compensation is an

attempt to approximate compensation

to the loss suffered. (279 F ·ff, 280·A)

2. This Court did take into account while accepting the settlement H

272 SUPREME COURT REPORTS [1991) SUPP. 1 S. C. ~.

A the fact that though a substantial period of time had elapsed the victims

were without relief.

For quite some time the number of claims in courts or

before the authorities under the Act were not very appreciable.

Perhaps an

inference was drawn from the figures that the subsequent additions were

to

be viewed differently. It is not to indicate that the claims filed later are

frivolous particularly on account

of the fact that there are some prima

B facie materials to show that the

ill-effects of exposure to MIC could

manifest late. The nature of injuries suffered or the effect of exposure are

not the same

or similar. Therefore, from the mere number no final

opinion could

be reached about the

sufficiency of the quantum. The Act

provides for a Fund into which the decretal sum has to be credited. The

statute contemplates of a procedure for quantification of individual entit-

C lement of compensation and as and when compensation becomes payable

. it is to be met out of the Fund. The fact that the Union of India has taken

over the right to sue on behalf

of

all the victims indicates that If there ls a

shortfall In the Fund perhaps it would be the liability of Unio.n of India to

meet the same. The genuine claimants thus have no legitimate grievance

to make as long as compensation statutorily quantiOed Is available to

D them because the source from which the compensation comes Into the

Fund Is. not of signlflcant relevance to the claimant. [280 B·E] ~

Charan Lal Salm v. Union of India, (1990] 1 SCC 613, relied on.

3. If the litigation was to go on merits in the Bhopal Court It would

have perhaps taken

at

least 8 to 10 years; an appeal to the High Court and

· a further appeal to this Court would have taken In all around another

E spell of 10 years with steps for expedition taken. It could be fairly assumed

that litigation In India would have taken around 20 years to reach finality,

and then steps would have to be taken for its execution in the United

States. On the basis that it was a foreign judgment, the law applicable to

the

New

York Court should have been applicable and the 'due process'

clause would have become relevant.

That litigation in the minimum

w:ould

F have taken some 8-10 years to be finalised. Thus, relief would have been

available to the victims at the earliest around 2010. In the event of U.S.

Courts taking the view that strict liability was foreign to the American

jurisprudence and contrary to U.S. public policy, the decree would not

have been executed in the United States. and apart from the Indian assets

of UCIL, there would have been no scope for satisfaction of the decree.

G [284C-F]

H

Municipal Council, Rat/am v. Vardichand & Ors~. [1981) 1 SCR 97,

relied on. ·

4'. When dealing with this case this Court has always taken a prag·

matic approach. Under the constitutional discipline determination of dis­

putes has beeQ left to the hierarchical system of Courts and this Court at

I

I

~

UNION CARBIDE v. U.0.1. 273

its apex has the highest concern to ensure that Rule of Law works effec-

A

~

dvely and the cause of justice in no way suffers. To have a decree after

struggling for a quarter of a century with the apprehension that the decree

may

be ultimately found not to be

executable would certainly not have

been a situation which this Court c.ould countenance. [285 A-CJ

5. In the order of May 4, 1989, this Court clearly indi.cated that it is

B

the obligation of this Court to uphold the rights of the citizens and to

bring to them a judicial fitment as available in accordance with the la~.

There have been several Instances where this Court has gone out of its way

to evolve principles and make directions which would meet the demands

of justice in a given situation. This, however, Is not an occasion when such

an experiment could have been undertaken to formulate principle of strict

c

llabWty at the eventual risk of ultimately losing the legal battle. (285 C-D)

M.C. Mehta v •. Union of India, [1987]1SCC395; Ry/ends v. Fle(cher

L.R., 1868(3) House of Lords 330, referred to.

6. This Court ls entitled under the constitutional scheme to certain

freedom of operation.

It would be wrong to assume that

there is an ele·

ment of judicial arrogance in the act of the Court when it proceeds to act D

in a pragmatic way to protect the victims. It must be conceded that the

citizens

are

equally entitled to speak in support of their rights. Public

activists should also be permitted to espouse the cause of the poor citizens

but there must

be a

limit set to such activity and nothing perhaps should

be done which would affect the dignity of the Court and bring down the

serviceability of the instiutiton to the people at large. [285 F-H] E

Shaw v. Director of Public Prosecutions, [1961) 2 All E.R. 447,

referred to.

.....,-

PerAhmadi, J. (partly Dissenting):

1.1 It is agreed that the settlement is not vitiated for not affording F

the victims or victim-groups an opportunity of being heard. But it is

difficult to accept the view that if the settlement fund is found to be

insufficient the shortfall must be made good by the Union of India. The

Union of India cannot be directed to suffer the burden of the shortfall, if

any, without finding it liable in damages on any count. [375 B-C]

G

~

1.2 In view of the observations in Sahu 's case, the scope of the inquiry

in the present petitions can

be said to be a narrow one.

Supposing a

pre-decisional hearing was afforded to the victims, the Court's option

obviously would have been either to approve the terms of the compromise,

H

274 SUPREME COURT REPORTS (1991) SUPP. 1 S. C.R .

. I

A or to refuse to superadd Its seal to the settlement and leave the parties to

go to trial. The Court could not have altered, varied or modified the terms

of the settlement without the express consent of the contracting parties. If

it were to find the compensation amount payable undet the settlement

inadequate, the only option left to it would have been to ~fuse to approve

B the settlement and tum It Rnto a decree of the Court. It' could not have

Unilaterally imposed any additional liability on

any of the

~tracfing parties~

(378 C·E]

i

1.3 According to the interpretation given in Sahu's case on the scope

of sectiOns 3 and 4 of the Act, a pre-decisional hearing ought to have been

c given but failure to do so cannot vitiate the settlement as according to the

majority the lapse could be cured by a post-decisional hearing. The scope

or the review petitions cannot be any different at the post.:decisional stage

also. (378 E·F] I •

I

1.4 On a mere possibllty of there being a shortfall, a possibility not

D supported by any ·realistic appraisal of the material on record but on a

mere apprehension,

quia timet, it would not be proper to Saddle

the Union

of India with the liabillty to make good the shortfall by imposing an

additional term In the settlement without its consent in exercise or power

under Article 142 of the Constitution or any statute or on the premises of

E Its duty as a Welfare State. Therefore, it Is Impermissible ~n I11w to Impose

the burden

of making good the

shortfall on the Union of India and thereby

saddle the Indian tax-payer with the tort·feasor's liability. If the

Settlement Fund was found inadequate, the only logical thlng was to review

the settlement leaving the parties to work outa fresh set~lement or go to

trial in the pending suit. In

Sahu's case the victims had not been able to

F show any

material which would vitiate the settlement. tlbe voluminous

documentary evidence placed on the record of the present proceedings

also does not make

out a case of inadequacy of the amount, necessitating a

review of the settlement. In the circumstances the Union of India cannot be

saddled with the liability to make good the deficit, if any, particularly when

G it is not found to be a tort·feasor. Its liability as a tortrfeasor, if at all,

would have to be gone into in a separate proceeding and dot in the present

petitions.

(379

C·F]

Charan Lal Salm v. Union of India, (1990] 1 SCC 6~3, referred to.

H CIVIL APPELLATE JURISDICTION: Civil Miscellaneous Petition

UNION CARBIDE v. U.0.1. [ RANGANATI-1 MISRA, CJ.] 275

Nos .29'377-N88, 7942-43/89, 16093/89, 17965/89, Review Petition Nos. 229

A

~- and 623-24 of 1989.

IN

. Civil Appeal Nos. 3187-88 of 1988.

From the Judgment and Order dated 4.4.1988 of the Madhya B

Pradesh High Court in Civil Revision No. 26 of 1988.

4,

(With W.P. Nos. 257, 297, 354, 379, 293, 399, 420/89, 231, 300, 378,

382/89 (In CA.Nos. 3187-88/88 & I.A. NO. 1/90 (In W.P. Nos. 281/89) and

W.P. Nos. 741/90, 3461/89).

Soll J. Sorabjee, Attorney Genera~ Shanti Bhushan, Ms. Indira Jais-

c

ing, R.K. Garg, Danial Latif, B.R.L. Iyengar, P.P. Rao, Ashwani Kumar,

D.N.M. Ghatate, F.S. Nariman, Anil B. Dewan, Rajinder Singh, Prashant

. Bhushan, Ms. Kamirii Jaiswal, C.L. Sahu, Anil Nauriya, Vibhuti Jha, Mrs.

A. Mathur, Mrs. A. Mariarputham, R.P. Saxena, R. Venkataraman~ P.K.

D Manohar, Madan Lokur, A.l. Trehan, Ms. C.S. Lalitha, Barish Uppa1 in

),;

person, Mrs. K. Hingorani, R.B. Mehrotra, Ms. Lalitha Kaushik, D.K.

Garg, Raju Ramachandran, Mukul Mudgal, S.R. Bhat, M.S. Ganesh, V.B.

Mishra, A.N. Khanwilkar, Ms. Madhu Khatri, P. Parmeswaran, Sakesh

Kumar, Satish K.Agnihotri, K. Kachwaha, Mrs. A.K. Verma, Ashok Sagar,

Dadachanji, Vijay Gupta, Ms. A. Subhashini, C.S. Vaidyanathan and

E

Ashok Singh for the appearing Parties.

The Judgment of the Court was delivered by

y

RANGANATH MISRA, CJ. I entirely agree with my noble and

learned Brother

Venkatachaliah and hope and trust that the judgment he F

has produced is the epitaph on the litigation. I usually avoid multiple judg-

ments-but this seems to be a matter where something more than what is

said in the main judgment perhaps

shou~d be said.

Early in the morning of December 3, 1984, one of the greatest in-

G dustrial tragedies that history has recorded got clamped down on the

~Ill(

otherwise quiet township of Bhopal, the capital of Madhya Pradesh. The

incident was large in magnitude -2,600 people died instantaneously and

quite a good number of the inhabitants of the town suffered from several

ailments. In some cases the reaction manifested contemporaneously and in

others the effect was to manifest itself much later.

H

276 SUPREME COURT REPORTS (1991) SUPP. 1 S. C.R.

I

A Union Carbide Corporation ('UCC' for short), a ~ulti-national one,

has diverse and exteP.sive international operations in countries like India, Y

Canada, West Asia, the Far East, African countries, Latin America and

Europe. It has a sister concern known as Union Car~ide India Limited

('UCIL' for short). In the early hours of the 3rd

of

December, 1984, there

was a massive escape

of lethal gas from the MIC

Storage Tanlc of the plant

B into the .atmosphere which led to the calamity.

Several suits were filed in the United States of Arherica for damages

by the local representatives

of the deceased and by many

of. the affected ~

persons. The Union of India under the Bhopal Oas Leak Disaster

(Processing

of Claims) Act of 1985 took upon itself tbe right to sue for

C compensation on behalf of the affected parties and filed a suit for realisa­

tion

of compensation. The suits were consolidated and Judge Keenan by

his order dated 12th

May, 1988, dismissed them on tlie ground of

forum

non conveniens subject, inter alia, to the following conditions:

D

E

F

G

1.

Union Carbide shall consent to submit to the jtirisdiction of

the Courts of India and shall continue to waive defences based

on the statute

of limitations, and

2. Union Carbide shall agree to satisfy

any judgment rendered

against it

in an Indian Court, and if appealable, upheld by any

appellate court in that country, whether

Sl!ch judgment and

affirmance comport with the minimal requirements

of due

process.

1

The United States Court of Appeals for the Strcond Circuit by its

decision

of January 14, 1987, upheld the first conditiQn and in respect of

the second one stated:

I

"In requiring that UCC consent to enforceability of an Indian

judgment against it, the district court proceeded at least in part

on the erroneous assumption that, absent ~uch a requirement,

the plaintiffs,

if they should succeed in obtaining an Indian

judgment against UCC, might not be able to enforce it against

UCC in the United

States. The law, however, is to the contrary.

Under New York

law, which governs actibns brought in New

York to enforce foreign judgments ......

f<;>reign-country judg-

ment that

is final, conclusive and enforceable where rendered ·must be recognised and will be enforced as "conclusive be­

tween the parties to the extent that it grants or denies recovery

of a sum of money" except that it is not, deemed to be con­

clusive

if:

UNION CARBIDE v. U.O.L (RANGANATH MISRA, CJ.} 277

"1. The judgment was rendered under a system which A

does not provide impartial tribunals or procedures,

compatible with the requirements of due process of

law;

2. The foreign court did not have personal jurisdiction

over the defendant".

B

Art. 53. Recognition

of Foreign. Country M/ney Judgments.

Although 5304 further provides that under certain specified

conditions a foreign country judgment need not

be recognized,

none of these conditions would apply to the present cases

ex-

cept for the possibility of failure to provide UCC with suffi­

cient notice of procedings or the existence Gf fraud in C

obtairiing the judgment, which do not presently exist but con­

ceivably cou~d 'occur in the future."

The Court rejected the plea advanced

by

UCC of breach of due

process by non-observance

of proper standards and ultimately stated:

-

"Any denial by the Indian Courts of due process can be rai~ed D

by UCC as a defence to the plaintiffs' later attempt to enforce

a resulting judgment against UCC in this country."

After Judge Keenan made the order of 12th

of May, 1986, in

Sep­

tember of that year Union of India in exercise of its power under the Act

filed a suit in the District Court at Bhopal. In the plaint it was stated that

death toll upto then was 2,660 and serious injuries had been suffered by

several thousand persons and in all more than 5 Iakh persons had sought

damages upto then. But the extent and nature of the injuries or the after­

effect thereof suffered by victims of the disaster had not yet been fully

ascertained though survey and scientific and medical studies had already

E

been undertaken. The suit asked for a decree for damages for such amount F

as may be appropriate under the facts and the law and as may be deter­

mined by the Court so as to fully, fairly and finally compensate all persons

and authorities who had suffered as a result of the disaster and were having

claims against the UCC. It also asked for a decree for effective damages ·

•

in an amount sufficient to deter the defendant and other multi-national

corporations involved in business activities from committing wilful and

G

malicious and wanton disregard of the rights and safety of

the citizens of

India. While the litigations were pending in the US Courts an offer of 350

million dollars had been made for settlement of the claim. When the dis-

pute arising out of interim compensation ordered by the District Court of

Bhopal came before the High Court, efforts for settlement were continued.

When the High Court reduced the quantum of interim compensation from fl

278 SUPREME COURT REPORTS (1991) SUPP. 1 S. C. R.

A Rs. 350 crores to a sum of Rs. 250 crores, both UCC and Union of India

challenged the decision of the High Court by filing special leave petitions. It ~

B

c

D

E

F

G

H

is in these cases that the matter was settled by

two orders dated 14th and

15th of February, 1989. On May 4, 1989, the Constitution Bench which had

recorded the settlement proceeded to set out brief reasons on three aspects: ·

"(a) How did .this Court arrive at the sum of 470 million US

dollars for an over-all settlement?

(b)

Why did the Court consider this sum of

470 million US

dollars as 'just, equitable and re_asonable?

(c) Why did the Court not pronounce on certain important

legal questions of far-reaching importance said to arise

in the

appeals

as to

the principles of liability of monolithies, economi­

cally entrenched multi-national companies operating. With in­

herently dangerous technologies in the developing countries of

the third world -questions said

to be of great contemporary

relevance to the democracies of the third-world?"

.

. .

The Court indicated that considerations of excellence and niceties of legal

principles were greatly overshadowed by the pressing problems of very survival

of a large number of victims. The Court also took into account the law's prover­

bial delays. In paragraph 31 of its order the Constitution Bench said:

"As to the remaining question, it has been said that many vital

juristic principles of great contemporary relevance to the Third

World generally, and

to India

in·particular, touching problems

emerging

from the pursuit of such dangerous technologies for

economic gains

by multi-nationals arose in this case. It is said

that this

is an instance of lost opportunity to this apex Court to

give the law the new direction of new vital issues emerging

from the increasing dimensions of the economic exploitation of

developing countries

by economic forces of the rich ones. This

case

also, it is said, concerns the legal limits to be envisaged in

the

vital interests of the protection of the constitutional rights

of the citizenry, and of

the· environment, on the permissibility ·

of such ultra-hazardous technologies and to prescribe absolute

and deterrent standards

of liability if harm is

causea by such

enterprises~ The prospects of exploitation. of cheap l~bour and

of captive-markets,

it is said, induces multi-nationals to enter

into the developing countries for such economic"exploitation

and that this

was eminently an appropriate case

for a eareful

assessment of the legal and Constitutional safeguards stem-

UNION CARBIDE v. U.O.I. [RANOANATII MISRA, CJ.) 279

ming from these vital issues of great contemporary relevance." A

The Bhopal g~ leak matter has been heard in this Court by four

different Constitution Benches. The first Bench consisted

of Pathak,

CJ,

Venkataramiah, Misra, Venkatachaliah and Ojha, JJ. The hearing con­

tinued for

24 days. The challenge to the validity of the Act was beard by

a different Bench consisting of Mukharji,

CJ, Singh, Ranganathan, Ahmadi

and Saikia,

JJ. where the hearing continued

for 27 days. The review B

. proceedings wherein challenge was to the settlement were then taken up

for .hearing by a Constitution Bench presided over

by

Mukharj~ CJ with

Misra, Singh, Venkatachaliah and Ojha, JJ. as the other members. This

continued for 18 days. It is unfortunate that Mukharji, CJ. passed aw,ay

soon after the judgment had been reserved and that necessitated a re­

hearing. The matters were re-heard at the earliest opportunity and this

C

further hearing took 19 days. Perhaps this litigation is unique from several

angles and this feature

is an added one to be particularly

noted.· The

validity of the Act has been upheld and three separate but concurring

judgments have been delivered. At the final hearing of these matters long

arguments founded upon certain

varying observations of the learned Judges

constituting the

vires

Bench in their respective decisions were advanced and D

some of them have been noticed in the judgment of my learned brother.,

. . .

. ln the main judgment now being delivered special attention has been

devoted to the· conduct of Union of India in sponsoring the settlement in

February,

1989, and then asking for a review of the decision based upon

certain developments.

Union of India as rightly indicated is a legal entity E

and has been given by the Constitution the right to sue and the liability

of being sued. Undet our jurisprudence a litigating party is not entitled

to Withdraw from a settlement by choice. Union of India has not filed a

petition for review but has supported the stand of .others who have asked

for review. The

technkal limitations of review have not been invoked in

this· cas!'! · by the Court and all aspects have been permitted to be placed F

before lhe Court for its consideration.

It

is interesting to note that there has been no final adjudication in

a mass tort action anywhere. The several instances which counsel

for the

parties placed before us were cases where compensation had been paid

by consent or where settlement

was reached either

directly or through a G

circuitous process. Such an alternate procedure has been adopted over

the years on account of the fact that trial in a case of this type would· be

protracted and

may not yield

·any sodal benefit. Assessment of compen­

sation in cases of this tyPe has generally been by a rough and ready

proeess. In fact, every assessment of compensation to some extent is by

such process and the concept of just compensation

is

an_ attempt lo ap-

H

280 SUPREME COURT REPORTS [1991) SUPP. 1 ~·C.R.

A proximate compensation to the loss suffered. We have pointed out in our

order

of May 4, 1989, that 'the estimate in the very

nature of~ cannot

share the accuracy

of an adjudication'. I would

humbly add that even an

adjudication would only be an attempt

at approximation.

This Court did take into account while accepting the settlement the

B fact that though a substantial period of time had elapsed the victims were

without relief. For quite some time the number of

claims in courts or

before the authorities under the Act was not very appreciable. Perhaps an

inference was drawn from the figures that the subsequent additions were

to be viewed differently. I do not intend to indicate that the claims filed

later are frivolous particularly on account of the fact that there are con­

tentions and some prim a f acie materials to show that the ill-effects of ex-

C. posure to MIC could manifest late. The nature of injuries suffered or the

effect

of exposure are ·not the

same or similar; therefore, from the mere

number no final opinion could be reached about the sufficiency of the

quantum.

The Act provides for a Fund into which the decretal sum has

to be credited.

The statute· contemplates of a procedure for quantification

D of individual entitlement of compensation and as and when compensation

be(;Omes payable it is to be ttlet out of the Fund. The fact that the Union

of India has taken over the right to sue on behalf of all the victims indicates

that if there is a shortfall

in the Fund perhaps it would be the liability of Union of India to meet the same. Some of the observatidns of the vire~

Brach support this view. The genuine claimants thus have no legitimate ·

g 1evance to make as long as compensation statutorily quantified is avail-

E able to them because the source from which the compensation comes into

the Fund is not of significant relevance to the claimant.

When the settlement

was reached a group of social activists, the

Press and even others claiming to be trustees of society came forward to

question it. For some time what appeared to be a tirade was carried on

F by the media against the Court. Some people claiming· to speak on behalf

of the social Think Tank in meetings disparaged the Court. Some of the

innocent victims were -even brought into the Court premises to shout

slogans at the apex institution. Some responsible citizens oblivious

of their own role in the matter carried on mud-slinging.

G

H

The main foundation of the challenge was two-fold:

(i) The criminal cases could not have been compounded or

quashed and immunity against criminal action could. not be

granted; and

(ii) the quantum of compensation settled was grossly low.

\.,

·~·

UNION CARBIDE v. U.O.L [RANOANA'Ill MISRA, CJ.] 281

So

far as the first aspect is concerned. the main judgment squarely deals A

with it and nothing more need be said As far as the second aspect goes, the

argument

has been that the principle enunciated by this Court in M.C Mehta

v.

Union of India, [1987) 1 SCC 395 should have been adopted. The rule in

Rylands v. Fletcher [1868} 3 House of Lords 330 has been the universally

accepted authority in the matter of determining compensation in tort cases

of

this type. American jurisprudence writers have approved the ratio of that B

decision and

American Courts too have followed the· decision as a precedent.

This Court in paragraph 31 of the Mehta judgment said:

"The Rule

of Rylands v. Fletcher was evolved in the year 1866

and it provides that a person who for his own purposes brings

on

to his land and collects and keeps there

anything likely to

do mischief if it escapes must keep it at his peril and, if he fails C

to do so, is prima f acie liable for the damage which is the

natural consequence

of its escape. The liability under this rule

is strict and

it is no defence that the thing escaped without that

person's wilful act, default or neglect or even that he had no

knowledge of its existence. This rule laid down a principle of

liability that if a person who brings on to his land and collects

D

and keep there anything likely to do harm and such thing es­

capes and does damage to another, he

is liable to compensate

for the

qamage caused. Of course, this rule applies only to

non-natural user of the land and it does not apply to things

naturally on the land or where the escape

is due to an act of

God and an act of a stranger

or the default of the person E

injured or where the thing which escapes is present by the

consent of the person injured or in certain cases where there is

statutory authority. Vide

Halsbury's Laws of England, vol. 45,

para

1305. Considerable case law has developed in England as

to what is natural and what

is non-natural use of land and what

are precisely the circumstances

in which this rule may be dis-F

placed. But it is not necessary for us to consider these

decisions laying down the parameters of this rule because in a

modern industrial society with highly developed scientific

knowledge and technology where hazardous or inherently

dangerous industries are necessary to carry as part

of the

de~•elopmental programme, this rule evolved in the 19th cen- G

tury at a time when all these developments of science and tech­

nology had not taken place cannot afford any guidance in

evolving any standard of liability consistent with the coruititu­

tional norms and the needs of the present day economy and

&Ocial structure. We need not feel inhibited by this ruJe which

was evo.lved in the context of a totally different kind of rule H

282

A

B

c

·n

E

F

G.

H

SUPREME COURT REPORTS . (1991) SUPP. 1 S. C.R.

which was evolved in .the context of a totally different kind of

economy. Law has to grow in order to Satisfy the needs of the

fast changing society

and keep abreast with the economic

developments

taking place in the country'. As new sit~tions

arise the law has to be evolved in order to meet the challenge

of such new situations. Law cannot afford to remain static. We

have to evolve new principles and lay down new norms which

would adequately deal with the new problems which ariSe in a

highly industrialiSed economy. We cannot allow our judicial

thinking to be constricted by reference to the law as it prevails

·in England or for the matter of that in any other foreign

country.

We no longer need.the

crutches of a foreign legal order.

We are certainly prepared to receive light from whatever

· source it comes but we· have to build our own jurisprudence

and we cannot countenance

an argument that merely because

the law in England does not recognise the rule of strict and ·absolute liability in cases of hazardous or inherently dangerous

activities

or the rule laid down in Rylands

v. Fletcher as

developed in England recognises certain limitations and excep­

tfons, we in India must hold back our hands and not venture to

evolve a new principle of liability since English courts have not

. done so. We have to develop our own law and if we fmd that it

is necessary to construct a new principle of liability to deal with

an unusuat situation which has arisen and which is likely to

arise in future on account of hazardous or inherently

dangerous industries which are concommitant to an industrial

economy, there is no reason why we should hesitate to evolve

such principle of liability . merely because it has not been so

done in England. We are

of the view

that an enterprise which

is engaged in a hazardous or inherently dangerous . industry

which pooes·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 com-

. munity to ensure that no harm results to anyone on account of

hazardous or inherently dangerous nature of the activity which

it has undertaken. The enterprise must be held to be under an

obligation to provide that the hazardous. or inherently

dangerous .activity, the enterprise must be absolutely liable to

compensate for such harm

and it should be no answer to the .

enterprise to say that it had taken all reasonable care and that

the harm occurred. without any n'egligence on its part. Since the .

. persons harmed on account of the hazardous or inherently

·dangerous activity carried on by the enterprise would not be in

UNION CARBIDE v. U.0.1. [RANGANATII MISRA, CJ.] 283

a position to isolate the process of operation from the hazard- A

ous preparation of substance or any other related element that

caused

the harm the enterprise held strictly liable for causing

such harm as a

part of the social cost of

carrying on the haz­

ardous or inherently dangerous activity. If the enterprise is

permitted to carry on a hazardous or inherently dangerous ac­

tivity for its profit the law must presume that such permission is B

conditional on the enterp"rise absorbing the cost of any acci­

denl arising on account of such hazardous or inherently

dangerous activity as an appropriate item

of its overheads. Such hazardous or inherently dangerous activity for private

profit can

be tolerated only on condition that the enterprise

engaged in such hazardous

or inherently dangerous activity in-C

demnifies all those who suffer on account of the carrying on of

such hazardous or inherently dangerous activity regardless of

whether it is carried on carefully or not. This principle is also

sustainable

on the ground that the enterprise alone has the

resource

to discover and guard against hazards or dangers and

·

to provide warning against potential hazards. We would there- D

fore hold that where an enterprise is engaged in a hazardous or

inherently dangerous activity and harm results to anyone on

account

of an accident in the operation of such hazardous or

inherently dangerous activity resulting, for example, in escape

of toxic gas the enterprise is strictly and absolutely liable to

compensate all those who are

affocted by the accident and ·

such liability is not subject to any of the exceptions which E

operate vis-a-vis the tortious principle of strict liability under

the rule of Rylands v. Fletcher."

In M.C. Melita's case no compensation was awarded as this Court

could not reach the conclusion that Shriram (the delinquent company)

came within the meaning

of "State" in Article 12 so as to be liable to the F

discipline of Article 21 and to be subjected

to a proceeding under Article

32 of

the Constitution. Thus what was said essentially obiter.

The extracted part of the conservation from

M.C. Mehta's case per-

haps

is a good guideline for working out compensation in the

cases to

which the ratio

is intended to apply. The statement of the law ex1acie

makes a departure from the accepted legal position in Rylands v. Fletcher. G

We have not

been shown any binding precedent from the American

Supreme Court where the ratio of M.C. Mehta's decision has in terms been

applied.

In fact Bhagwati, CJ clearly indicates in the judgment that his

view is a departure from the law applicable to the western countries.

H

284 SUPREME COURT REPORTS [1991} SUPP. 1 S. C.R.

A We are not concerned in the p~esent case as to whether the ratio of

M.C. Mehta should be applied to cases of the type referred to in it in India.

We have to remain cognizant

of the fact that the Indian assets of UCC

through UCIL are around Rs.100 crores or so. For any decree in excess of

that amount, execution

h~ to be taken in the United States and one has to

remember the observation of the U.S. Court of Appeals that the defence o(

B due process -.yould be available to be raised in the execution proceedings.

c

The decree to be obtained in the Bhopal suit would have been a money decree

and it would have been subject to the law referred to

in the judgment of the

U.S. Court of Appeals.

If the compensation .is determined on the basis of strict

liability-a foundation different from the accepted basis in the United

States-the decree would be open to attack and may not be eY.ecutable.

If the litigation was to go on on merits in the Bhopal Court it would

have perhaps taken

at least 8 to

10 years; an appeal to the High Court

and a further appeal to this Court would have taken in all around another

spell

of

10 years with steps for expedition taken. We can, therefore, fairly

assume that litigation in India would have taken around 20 years to·teach

D finality. From 1986, the year when the suit was instituted, that would have

taken us

to the beginning of the next century and then steps would have

been made for its execution in the

United States. On the basis that it was

a foreign judgment, the law applicable to the New York Court should have

been applicable and the

'due process' clause would have become relevant.

That litigation in the minimum would have taken some

8-10 years to be

E finalised. Thus, relief would have been available to the victims at the ear­

liest around 2010. In the event the U.S. Courts would have been of the

view that strict liability was foreign to

the

-American jurisprudence and

contrary to U.S. public policy, the decree would not have been executed

in

the United

States and apart from the Indian assets of UCIL, there

would have been no scope for satisfaction

of the decree. What was said

F

G,

H

by this Court in Municipal Council, Rat/am v. Vardichand & Ors., (1981]

1 SCR 97 may be usefully recalled:

"Admirable though it may be, it

is at once slow and costly. It is

a finished product of great beauty, but entails an immense

sacrifice

of time, money and talent

This

"beautiful" system is frequently a luxury; it tends to give a

high quality

of justice only when, for one reason or another,

parties can surmount the substantial barriers which it erects to

most people

and to many types of

claims."

We had then thought that the Bhopal dispute came within the last

category and now we endorse it.

UNION CARBIDE v. U.0.1. [RANGANA1H MISRA, CJ.] 285

When dealing with this case this Court has always taken a pragmatic A

approach. The oft··quoted saying of the great American Judge that 'life is

not logic but experience' has been remembered. Judges of this Court are

men and their hearts

also bleed when calamities like the Bhopal gas leak

incident occur.

Under the constitutional discipline determination of dis­

putes has been left to the hierarchical system of Courts and this Court at its

apex has the highest concern

to ensure that

R~le of Law works effectively B

and the cause of justice in no way suffers. To have a decree after struggling

for a quarter of a century

with the apprehension that the decree may be

ultimately

found not to be executable would certainly not have been a

situation

which this Court could countenance.

In the order of May 4, 1989, this Court had clearly indicated that it is C

our obligation to uphold the rights of the citizens and to bring to them a

judicial fitment

as available in accordance with the laws. There have been

several instances where

this Court has gone out of its way to evolve

prin­

ciples and make directions which would meet the deman<Js of justice in a

given situation. This, however, is not an occasion when such an experiment

could

have been undertaken to formulate the Mehta principle of strict D

liability at the eventual risk of ultimately losing the legal battle.

Those

who have clamoured for a judgment on merit were perhaps

not

alive to this aspect of the matter. If they were and yet so clamoured,

they are not true representatives of the cause of the victims, and if they are

not, they were certainly misleading the poor victims. It may be right that E

some people challenging the settlement who have come before the Court

are the real

victims. I assume that they are innocent and unaware of the

rigmarole of the

legal process. They have been led into a situation without

-i appreciating their own interest. This would not be the first instance where

people

with nothing as stake have traded in the misery of others.

This Court

is entitled under the constitutional scheme to certain

freedom of operation. It

would be wrong to assume that there is an element

of judicial arrogance

in the act of the Court

when it proceeds to act in a

pragmatic

way to protect the victims. It must be conceded that the citizens

F

are equally entitled to speak in support of their rights. I am prepared to

assume, nay, concede, that public activists should also be permitted to G

espouse the cause of the poor citizens but there must be a limit set to

such

activity and nothing perhaps should be done which would affect the dignity

of the Court

and bring down the serviceability of the institution to the

people at large. Those

who are acquainted with jurisprudence and enjoy

social privilege as men educated in law owe an obligation to the community

of educating

it properly and allowing the judicial process to continue un-H

286 SUPREME COURT REPORTS [1991) SUPP. 1 S. C.R.

A soiled. Lord Simonds in Shaw v. Director of Public Prosecutions,· (1981) 2

All E.R. 447 said:

B

c

D

"I entertain no doubt that there remains in the courts of law a

residual power to enforce the supreme and fundamental pur·

pose of the law, to conserve not only the safety and order but

also the moral welfare of the State."

Let

us remember what had once been said in a different context:

"It depends upon the present age whether this great national

institution shall descend to our children in its masculine

majes·

ty to protect the people and fulfil their great expectations."

Let us also remember what Prof. Harry Jones in the Efficacy of Law

has said:

"There are many mansions

in the house of Jurisprudence, and I .

would not be little any one's perspective on· law

in society,

provided only. that he does not insist that his is the only

perspective

that gives a true and meaningful view of ultimate

legal reality."

In the facts and circumstances indicated and for.the reasons adopted·

by my noble brother in the judgment. I am of the view that the decree ·

E obtained on consent terms for compensation does not call for review.

I agree with the majority

view.

VENKATACHALIAH, J.

·These Review Petitions under Article 137

and Writ Petitions under Article 32 of the Constitution of India raise cer-

F tain fundamental issues as to the constitutionality, legal-validity, propriety

and fairness and conscionability of the settlement of the claims of the

victims

in a mass-tort-action relating to what is known as the "Bhopal Gas

Leak Disaster"-considered world's industrial disaster, unprecedented as

to its nature and magnitude.

The tragedy, in human terms, was a terrible

one. It has taken a toll of 4000 innocent human lives and. has left tens of

G thousands of citizens of Bhopal physically affected in various degrees. The

action

was brought up by the

Union of India as parens·patriae before the

District Court Bhopal in Original Suit No. 1113 of 1986 pursuant to the

statutory enablement

in that behalf under the Bhopal Gas Leak Disaster

(Processing of Claims) Act

1985 ('Act for short') claiming 3.3

Billion-Dol­

lars as compensation. When an inter-locutory matter pertaining to the in-

H

---+-

UNION CARBIDE v. U.0.1. [ VENKA TACHALIAH,.J.} 287

terim-comperisation came up for hearing there was a Court assisted settle-

A

;"'¥ ment of the main suit claim itself at 470 Million U.S. Dollars recorded by

the orders of this Court dated 14th and 15th of February 1989. The peti-

tions

also raise questions as to the jurisdiction and powers of ihe Court to

sanction and record such settlement when appeals brought up against an

.

inter-locutory order, were alone before this court.

The Union Carbide (India) Limited (for short the UCIL) owned and

B

operated, in the northern sector of Bhopal, a· chemical plant manufacturing

pesticides commercially marketed under the trade-names "Sevin" and

~ "Temik". Methyl Isocyanate (MIC) is an ingredient in the composition of

these pesticides. The leak -and escape of the poisonous fumes from the

tanks in which they were stored occurred late in the night on the 2nd of

December 1984 as a result of what has been stated to be a 'run-away'

c

reaction owing to water entering into the storage tanks. Owing to the. then

prevailing wind conditions the fumes blew into the hutments abutting the

premises of the plant and the residents of that area had to" bear the burnt of

the fury of the vitriolic fumes. Besides large areas of the city were also

exposed to the gas. D

i'( 2. Referring to this industrial accident this Court in the course o1 its

order dated 4th May, 1989 had occasion to say:

"The Bhopal Gas Leak· tragedy that occurred at midnight on

2nd December, 1984, by the escape of deadly chemical fumes

E.

I

form the appellant's pesticide-factory was a horrendous in-

dustrial mass disaster, unparalleled in its magnitude and devas-

tation and remaining a ghastly monument to the de-humanising

-f--

influence of inherently dangerous technologies. The tragedy

took an immediate toll of 2,660 innocent human lives and left

tens of thousands of innocent citizens of Bhopal physically im-F

paired or affected in various degrees. What added grim poig-

nance to ·the tragedy was that the industrial-enterprise was

using Methyl !so-cyanate, a lethal toxic poison, whose poten-

tiality for destruction of life and biotic-communities was, ap-

parently, matched only by the lack of a prepackage of relief

procedures

for management of any accident based on ade-G

~~

quate scientific knowledge as to the ameliorative medical pro-

cedures

for immediate neutralisation of its

effects."

The toll of life has since gone up, to around four thousand and the

health of tens of thousands of citizens of Bhopal City has come to be

H

288 SUPREME COURT REPORTS (1991) SUPP. 1 S. C.R.

A affected and impaired in various degrees of seriousness. The effect of the

exposure of the victims to Methyl Isocyanate (MIC) which was stored

in

,y-•

considerably large quantities in tanks in the chemical plant of the UCIL

which escaped on the night of the 2nd of December

1984 both in terms of

acute and chronic episodes has been much discussed. There has

been

growing body of medical literature evaluating the magnitude and, intensity

B of the health hu.ards wltich the exposed population of Bhopal suffered as·

immediate effects and to which it was potentially put at risk. ' '

It is stated that the MIC is the most toxic chemical in industrial use.

The petitioners relied upon certain studies on the subject carried out

by

)..:.

the Toxicology Laboratory, D~partm.'ent of Industrial Environmental

C Health Sciences, Graduate School of Public Health, University of Pit­

tsburg, [reported in Environmental Health Perspective Volume 72, pages

159 to 167]. Though it was initially assumed that MIC caused merely simple

and short-term injuries by scalding the surface tissues owing to its highly

exothermic reaction with water it has now been found

by medical research

that injury caused

by MIC is not to the mere surface tissues of the eyes and

D the lungs but is to th'e entire system including nephrological lymph,

im­

mune, circulatory system, etc. It is even urged that exposure to MIC has

mutagenic effects and that the injury caused by exposure to MIC is Yf.

progressive. The hazards of exposure. to this lethal poison are yet an un­

known quanta.

E Certain studies undertaken by the Central Water and Air Pollution

Control Board, speak of the high toxicity of the chemical.

The estimates of the concentration of MIC at Bhopal that fateful

night

by the Board inculcate a concentration of 26-

70 parts per million as

against the 'OSHA' standard for work environment of 0.02 P.P.M. which

F is said to represent the threshold of tolerance. This has led to what can

only

be described as a grim and grisly tragedy. Indeed the effects of ex-

posure of the human system to this toxic

ch.~mical h'aye not been· fully

grasped. Research studies seem to suggest that exposure to this chemical

fumes renders the human physiology susceptible to long term pathology

and the toxin

is suspected to lodge itself in the tissues and cause long term

G damage to the vital systems, apart from damaging the exposed parts such

as the

eyes, lung membrane etc. It is also alleged that the 'latency-period'

for the symptomatic manifestation of the effects of the exposure is such

that a vast section of the exposed population

is put at risk and the potential

risk of long term effects

is presently unpredictable. It is said that even in

cases of victims presently manifesting symptoms, the prospects

of aggrava-

H tion of the condition and manifestation of other effects of exposure are

. ';-('.-

t

. -·-~

UNION CARBIDE v. U.0.1. (VENKATACHALIAH,J.] 289

statable possibilities.

A

. Immediately symptomatic cases showed ocular inflamation affecting

visual acuity and· respiratory distress owing to pulmonary edema and a

marked tending towards general morbidity.

It: is argued that analysis of

the case histories

of persons. manifesting general morbidity trends at ·

various intervals from_· 3rd December, 1989 upto Apri~ 1990 indicate that

in

all the

severely affected, moderately affected . and mildly affected areas B

the morbidity _trend initially showed a decline compared with the acute

phase. But the analysis for the later periods, it

is. alleged, showed a

sig­

nificant trend towards increase of respiratory, opthalmic and general mor­

bidity in .all the three areas. It is also sought to be_ pointed out that the

fatal miscarriages in the exposed group was dist~bingly higher than in the C

control group as indicated by the studies carried out by medical re·

searchers. One of _the points urged is that the likely long term effects of

exposure have riot been taken into account in approving the settlement

and that

the_

only way _the victims' interests could have been protected

against future aggravation of their g~s teiated health hazards was by the

incorporation. of an appropriate "re~opener" clause.

3. On 29th of March, 1985 the Bhopal Gas Leak Disaster (Processing

of Claims) Act, i985 (Act) was passed authorising the Government of

India, as parens patriae exclusively to represent the victims so that interests

of the victims of the disaster ate fully protected, and that claims for

com­

pensation were pursued speedily, effectively, equitably and to the best ad­

vantage of the claimants. On 8th of April, 1985 Union of India, in exercise

of the powers conferred on it under the Act, instituted before the U .S.Dis-

trict Court, Southern _District of ·New York, an action on behalf of· the

victims agamstthe Union Carbide C~rp9rati~n (UCC) for award of com-

pensittiOn foi: the damage caused by the disaster. · ·

D

E

-. A l~ge n~ber of fatal~accldents and personal-injury actions had F

earlier also coine to be filed in Courts in the United States of America· by

and on behalf ,of about 1,86,000 victims. All these-earlier claims instituted

in the various Courts in United States of America had come to be con~

solidated by the "Judici~l Panel on Multi District Litigation" by its direction

dated 6th February

1985.

and assigned to· United States District Court,

Southern

Dis_trict of

t_he New York, presided over by a Judge Keenan. The G

claim brought by the Union of India was also consolidated with them.

The UCC held 50.9% of the shares in the UCIL~ The latter was its

subsidiary: UCCsliabilitywas asserted on the averments that UCC, apart

from being the holding co'mpany, had retained and exercised powers of

H

290 SUPREME COURT REPORTS (1991) SUPP. 1 S. C.R.

A effective control over its Indian subsidiary in terms of its Corporate Policy

and the establishment of the Bhopal Chemical Plant-with defective and

inadequate safety standardi. which, compared with designs of UCC's

American plants, manifeste<: an indifference and disregard for human­

safety-was the result of a conscious and deliberate action of the UCC.

It was averred that UCC had, on considerations of economic advantages,

B consciously settled and opted for standards of safety for its plant in a

developing country much lower· than what it did for its own American

counter-parts.The claim

was partly based on 'Design liability' on the part

of

UCC. The liability was also said to arise out of the use of ultra-hazard­

ous chemical poisons said to engender not merely strict liability on

Rylands

v.

Fletcher principal but an absolute liability on the principals of M.C.

C Melita's case.

The defences of the UCC, inter-alia, were that UCC was a legal

entity distinct in· 1aw from the UCIL; that factually it never exercised any

direct and effective control over UCIL and that its corporate policy itself

recognised, and

was subject to, the over-riding effect of the municipal laws

D

. of the country and therefore subject to the statutes in India which prohibit

any such control

by a foreign company over its Indian

subsidiar}', except

the exercise of rights as share-holder permitted by-law.

The UCC also resisted the choice of the American Forum on the

plea of

Forum-Non-Conveniens.

Union of India sought to demonstrate that

. the suggested alternative forum before the judiciary in India was not an

E 'adequate' forum pointing out the essential distinetion between the

American and Indian systems of Tort Law botJi substantive and procedural

available under and a comparison

of the rights, remedies and procedure

the competing alternative forums. The nature and scope of a defendant's

plea of

Forum Non-Conveniens and the

scope of an enquiry on such plea

F

have received judicial considerations before the,Supreme Court of United

States of America in Gulf Oil Corp. v. Gilbert [330 U.S. 501], Koster v.

Lumbennens Mutual Casualty Co. [330 U.S. 518] and Piper Aircraft Co. v.

Reyno [454 U.S. 235].

The comparison of rights, -remedies and procedures available in the

two proposed forums though not a "major-factor", nevertheless, were

G relevant tests to examine the adequacy of the suggested alternative forum.

H

System of American Tort Law has many features which make it a distinc­

tive system. Judge Keenan adopting the suggested approach in Piper's

decision that doctrine off 01um no11 conveniens was desinged in part to

help courts in avoiding. complex exercises in comparative

laws and that

the decision should not hinge on an unfavourable change

in law which was

UNION CARBIDE v. U.0.1. ( VF.NKATACHALIAH,J.] 291

not a major factor in the analysis was persuaded to the view that differen- A

ces in the system did not establish inadequacy of the alternative forum in

India. Accordingly on 12th of May,

1986, Judge Keenan allowed

UCC's

plea and held that the Indian judiciary must have the "opportunity to stand

tall before the world and to pass judgment Qtl behalf of its own people",

4. Thereafter the Union of India was constrained to alter its choice of

the forum and to pursue the remedy against the UCC in the District COurt at B

Bhopal. That is how Original Suit No. 1113 of 1986 seeking a compensation of

3.3 Billion Dollars against the UCC and UCIL came to be filed at Bhopal.

Efforts were made by the District Court at . Bhopal to explore the

possibilities of a settlement. But they were not fruitful. Zahreeli Gas Kand C

Sangharsh Morcha one of the victim-organisations appears to have moved

the Court for award of interim-compensation. On 13th December ~987,

the District Court made an order directing payment of Rupees 350 crores

as interim compensation. UCC challenged this award before the High

Court of Madhya Pradesh. The High Court by its order dated 4th of April,

1988 reduced the quantum of interim compensation to Rs. 250 crores. D

Both Union of India and UCC brought up appeals by Special Leave before

this Court against the order of the High Court -Government of India

assailing the reduction made by the High Court in the quantum

of interim

compensation from Rs.

350 crores to Rs. 250 crores and the

UCC assailing

the ye!Y_jurisdiction and permissibility to grant interim compensation in a

tort-action where the very basis of liability itself had been disputed. The

contention

of the

UCC was that in a suit for damages where the basis of E

·the liability was disputed the Court had no power to make an award of

interim-compensation. It was urged that in common law-and that the law

in India

too-in a suit for damages no court could award

interim-com­

pensation.

Prior to 1980 when the Rules of Supreme Court in England were F

amended (Amendment No. 2/1980) Courts in United Kingdom refused

interim-payments in actions for damages. In

Moore v. Assignment Courier

{1977 (2) All ER 842 (CA)], it was

recogn1sed that there was no such

power

in common law. It was thereafter that the rules of the Supreme

Court were amended

by inserting Rules

10 and 11 of Order 29 Rules of

Supreme Court specifically empowering the High Court to grant interim

G

relief in tort injury actions. The amended provision stipulated certain

pre­

conditions for the invokability of its enabling provision. But in England

Lord Denning in the Court of Appeal thought that even under the common

law the court could make an interim award for damages [(See

Lim

Poli

Choo v. Camden Islington Area Health Authority (1979 1 AER 332). But his

H

292 SUPREME COURT REPORTS (1991) SUPP. 1 S. C. ll.

A view was disapproved by the Hnuse of Lords (See 1979 (2)AER 910 at

B

c

D

E

F

G

pages 913, 914). Lord Scarman said:

"Lord Denning

MR in the Court of AppeaJs

declared that a

radicaJ reappraisal

of the law is needed. I agree.

But I part

company with him

on ways and means. Lord Denning MR

believes it can be done by the Judges, whereas I would suggest

to your Lordships that such a reappraisal

caJls for social, finan-

cial, economic and administrative decisions which only the

· legi$lature can take. The perplexities of the present case, fol-

· JowiDg on the publication of the report of Royal Commission ·

of Civil Liability and Compensation for Personal Injury (the

Pearson report), emphasise the need for reform of the law.

Lord Denning

MR appeared, however, to think, or at least to

hope, that there exists machinery in the rules

of the Supreme

Court which rn.ay be.adopted to enable an award of damages in

a case such as this to be 'regarded as an interim award'.

It. is·. an attractive, ingenious suggestion, but, in my judgment,

unsound. For so radical a reform can be made neither by

judges nor by modification of rules of court. It raises issues· of

social economic and financial policy not amenable. to judicial

. reform, which

will almost

certainly prove to be controversial.

and can be resolved by.the legiSiature only after full considera•

tion

of

factors which cannot be brought into clear focus; or be·

weighed arid assessed, in the course of the forensic process.

The Judge, however, wise,· creative, and imaginative he may be,·

is cabined, cribbed, confined, bound in not as was Macbeth, to

. his 'saucy doubts and fears' but the evidence and arguments of

the litigants. It is this limitation, inherent in the forensic

process; which sets .bounds to the scope of judicial law reform."

But in cases. governed by common law and not affected by the

statutory changes in.the Rules

of Supreme Court in

U.K., the Privy Council

said:. ·. .:

· "Their Lordships cannot leave this case without commenting

on two unsatisfactory features. First, there

is the inordinate

length of time which has elapsed between service

of the writ in

February 1977 and final disposal

of the case iii

the early

months of 1984. The second is that, as their LOrdships, under-

'x'.'.' ....

UNION CARBIDE v. U.0.1. [ VENKATACHALIAH,J.] 293

stand the position,. no power exists in a case where liabmty is A

admitted for an interim payment to be ordered pending a final

decision

on quantum of damages. These are matters to which

consideration should

be given. They

are; of course, linked;

though the remedy for delay may

be a matter of judicial

ad­

miniStration, it would be seen legislation may be needed to

enable an interim award to be made." B.

[See: Jamil Bin Harun v. Young Kamsiah: 1984 (1)AC 529, S38]

. . The District Court sought to sustai~ the i~terim a~ard on the in­

herent 'powers of. the court preserved in Section · 151 CPC. But the High

C,ou~t of Madhya Pradesh thought that appeal to and reliance on Section C

151 was not appropriate. It invoked Section 9 CPC read with the principle

underlying the English Amendment, without its strict pre-conditions. The

correctness

of this view

was assail.ed. by the UCC before this Court in the

appeal. .. . · · · · . · -

Oii 14th Febniary, 1989' this Court recorded an over-all settlement of D

the claims iii the su,i~ for 470 million U.S. Dollars and,the consequential

termination of'au··civil and cfiminal proceedings. The relevant portions of

the order of ~his Court dated 14th February, 1989 provide:

(1) The ,Union Carbide Corporation shall pay a sum of

U.S. Doll;u~ 410 mi_llion~ (Four hundre.d '.ind seventy E

Millions) t() the Uni~~ ~flndia ~~ full settlement of all

•, 'claim~; rights and liabilities related. to and arising out of

·· the Bhopal•Gas disaster. "

(2) The aforesaid sum shall be paid by the Union Car-F

' .: .b'~deCorporaiio~.tothe Union0findiaonorbefofo31st

, . ,March, 1989 .

. (3)To ~~~hie th~ effectuation of the settleln:ent, all civil

proceedings related to and C'lrising out ~f the Bhopal

Gas disaster shall hereby stand transferred to this Court

G · and shall stand concluded in terms of the settlement,

·and all criminal proceedings related to and arising out

of the disaster shall stand quashed wherever these may

. b~ pen~ing. '

H

294 SUPREME COURT REPORTS (1991] SUPP. 1 S. C.R.

A

A memorandum of settlement shall be filed before us tomor-

row setting forth all the details of the settlement to enable ~ -

consequential directions, if any, to issue."

On 15th February, 1989 the terms of settlement signed by learned

Attorney General for the Union of India and the Counsel for the UCC was

B

filed. That memorandum provides:

1. "The parties acknowledge that the order dated February 14,

1989 as supplemented by the order dated February 15, 1989

~-

disposes of in its entirety all proceedings in Suit No. 1113 of

1986. This settlement shall finally dispose of all past, present

c

and future claims, causes of action arid civil and criminal

proceedings (of any nature whatsoever wherever pending)

by

all Indian citizens and all public and private entitles with

respect to all past, present and future deaths, personal injuries,

health effects compensation, losses, damages and

civil and

criminal complaints of any

·nature whatsoever against UCC,

D Union Carbide India Limited, Union Carbide Eastern, and all

of their subsidiaries and affiliates as

well as each of their

"'

present and former directors, officers, employees, agents rep-

resentatives, attorneys, advocates and solicitors arising out of,

relating to or concerned with the Bhopal gas leak disaster,

including past, present and future claims, causes of action and

E proceedings against each other. All such claims and causes of

action whether within or outside India of Indian citizens,

public or private entitles are hereby extingui$hed, including

without limitation each of the claims filed or

to be filed under

-f

the Bhopal Gas Leak Disaster (Registration and Processing

F

Claims) Scheme 1985, and all such civil proceedings m India

are hereby transferred to this ·court and are dismissed with

prejudice, and all such criminal proceedings including con-

tempt proceedings stand quashed and accused deemed to be

acquitted.

G

2.

Upon full payment in accordance with the Court's directions

the undertaking given by UCC pursuant to the order dated

November 30, 1986 in the District Court, Bhopal stands dis-

Y-_-4......

· charged, and all orders passed in Suit. No. 1113 of 1986 and ·or

in any Revision therefrom, also stand discharged."

..

H

A further order was made• by this Court on· 15th February, 1989

UNION CARBIDE v. U.O.L [ VENKATAOIALIAH,J.] 295

which, apart from issuing directions in paragraphs 1 and 2 thereof as to the A

mode of payment of the said sum of 470 million U.S. Dollars pursuant to

and in terms of the settlement, also provided the following:

"3. Upon full payment of the sum referred to in paragraph 2

above:

(a) The Union of India and the State of Madhya Pradesh shall B

take all steps which may in future become necessary in order to

implement and give effect to this order including but not

limited to ensuring that any suits, claims or civil or criminal

complaints which may

be filed in future against any

Corpora­

tion, Company or person referred to in this settlement are

defended by them and disposed of in terms of this order. C

(b) Any such suits, claims or civil or criminal proceedings filed

or to be filed before any court or authority are hereby enjoined

and shall not

be proceeded with before such court or authority except for dismissal of quashing in terms of this order.

4. Upon full payment in accordance with the Court's direc- D

tions:

(a) The undertaking given by Union Carbide Corporation pur­

'liuant to the order dated 30 November, 1986 in the District

Court Bhopal shall stand discharged, and all orders passed in

Suit No.

1113 of 1986 and/or in revision therefrom shall also E

stand discharged.

(b) Any action for contempt initiated against counsel

or parties

relating to this case and arising out· of proceedings in the

courts below shall

be treated as dropped."

5. The settlement is assailed in these Review Petitions and Writ Peti-

tions on various grounds. The arguments of the petitioners in the case have

covered

·a wide range and have invoked every persuasion......:.jurisdictional,

legal, humanitarian and those based on considerations of public-policy. It

is urged that the Union of India had surrendered the interests of the vic-

F

tims before the might of multinational cartels· and that what are in issue in G

.>-~~ the case are matters of great moment to developing countries in general.

Some

of these

exhortations were noticed by this Court in the course of its

9rder of 4th May, 1989 ~ th~ following ~ords:

"31. As to the remaining question, it has been said that many

vital juristic principles of great contemporary relevance to the

H

296

A

B

c

D

said:

E

F

G

H

' . . .

SUPREME COURT REPORTS [1991] ·SUPP. 1 S.C.R

Third World generally, and to India in particular, touching

problems emerging from the pursuit of such dangerous tech­

nologies for· economic gains by multi-nationals arose in this

case. It is said that this is an instance of lost opportunity to this

·. apex Court to give the law the new dire.ction on vital issues

. emerging from the increasing dimensions of ·the economic ex­

. ploitation of· developj.ng ·countries . by economic forces of the

'rich ones: This case also, it is said, concerns the legal limits to

be envisaged in the vital interests of the protection of the con­

stitutional rights of the citizenry, and of the environment, on

the permissibility of such ultra~hazardous technologies and to

prescribe· absolute and deterrent standards of liability if harm

is caused by such erite'rprises. The prospect of exploitation of

cheap labour and ~f captive-markets, it is said, induces multi­

nation'als' to . enter irito the developing countries for such

economic-exploitation arid that this was eminently an ap­

·propriaty case for. a careful assessment of the legal and Con­

stitutional safeguards stemming from these vital issues of great

contemporary relevance.

On . .ihe µnportance ~d relevance of these. ronsiderations; this Court

. 32: Thes(! issues 'and certain eognate areas of e~en wider sig­

. ·. 'ni[t,canee ·~iid "the limits of the adjudicative disposition of some

' ' of .theiraspec~s are indeed questions of seminal importance .

. ~T~.e. culi~t;e. of modern i~dusttiaI technologies; which .is sus­

taine<;i o~ .p~~ce.sses of such pernicious potentialities, in the

'< ' ' ultimate analysis, has: thrown open Vital and fundametital issues

· . .:· of technology optio1's· ASsociat~d .Problems of th~ adequacy of

. ; legal' protection against such. exJ>loitative and haZardous in­

:. ~chistrial adventurism, and whether the citizen~ of the ~untry

. . ar~. as.sured the protection of a legal system which could be

said to.be adequate in a'comprehensive sense in such contexts

.. ari~e .. These,. . irideed. ~re · issues of vital . importance and this

. trageqy, an9 the'.Gonditioris' that enabled' it happen, are of par-

. ticular concern:: ~ . .· ' . . ' ' '

- . : • ' ' l > :· •• ' ~ -•. ' • '~ ....

33. The· che~cal pe~tici4e .mdtistry is a con.eomitant; and in­

.. , . deed, ,an Pitewal part, of tJi~'tech,no!ogy of ChemiCal ·Farming.

UNION CARBIDE v. U.0.1. [ VENKA TACHALIAH,J.) 297

Some experts think, that it is time to return from the high-risk,

resource-intensive, high input, anti-ecological, monopolistic

'hard' technology which feeds, and is fe(f on, jts self-assertive

. attribute, to a more human and humane flexible, eoo-c0nform­

able, "soft" technology with .. its systetllic-v.?sdoin and oppor­

tunities for human creativity. and. initiative·. "Wisdom demands"

A

says Schumacher "a new orientation of science and technology B

towards the orgitnic, the gentle the µon-violent, the.elegant and

beautiful". The other

view

str.essing .the spect;icular success of

agricultural production in the . new era of chemical farming

with high-yielding strains, p9ints to th~ break-through achieved

by

Jhe Green Revolution

. with . its effective response to, and

successful management of the great challenges of feeding, the.

C

millions; This technology in agriculture has given a big impetus to· enterprises of chemical fertilizers and pesticides. This, say

its critics, has brought in its trail its own serious problems. The

technology-options before ·scientists and . planners have been

difficult."

D

6. Before we examine the grounds of challenge t() the

sett•ement we

might, perhaps, refer to three events. The first is that th.e Central Bureau of

Investigation, Government

of India, brought criminal charges under

Sec­

tions 304, 324, 326, 429 read with Section 35 of the fndian .Penal Code

against Mr.Warren Anderson, the then Chairm·an of the UCC and several

other persons including some of the officers in-charge of the affairs of the

E UCIL. On 7th December, 1984 Mr.Warren Anderson came to India to see

for himself the situation at Bhopal.

He was arrested and later released on

bail.

One of the points seriously urged in these petitions is the validity of

the effect of the ·order of this. Court which terminated those criminal

proceedings.

The· sec0nd event is that on 17th of November, 1986 the District

Court at Bhopal, on the motion of the plaintiff :-Union of India, made an

order restraining the UCC by an interlocutory injunction, from selling its

assets, paying dividends; buying back debts; etc. during the pendency of the

suit. On 30th of November, 1986 the District Court vacated that injunction

on the written assurance and undertaking dated 27th November 1986 filed

by the

UCC to maintain unencumbered assets of three billion U.S. Dollars.

One of the points argued in the course of the hearing of these petitions is

whether, in the event the· order recording the settlement is reviewed and

the settlement set aside, the UCC and UCIL would become entitled to the

restitution of the funds that they deposited in Court pursuant to and in

F

G

H

298 SUPREME COURT REPORTS (1991) SUPP. 1 S. C.R ..

A performance of their obligations under the settlement. The UCC deposited

420 million U.S. Dollars and the UCIL the rupee equivalent of 45 million

U.S. Dollars. 5 million U.S. Dollars directed by Judge Keenan to be paid to

the International Red Cross was

giveri credit to. The petitioners urge that even after setting aside of the settlement, there is no compulsion or obliga­

tion to restore to the UCC the amounts brought into Court by it as such a

B step would prejud_icially affect the interests of the victims. The other cog­

nate question is whether, if UCC is held entitled to such restitution, should

it not, as a pre-condition, be held to be under a corresponding obligation to · restore and effectuate its prior undertaking dated 27th November 1987 to

maintain unencumbered assets of three billion U.S.Dollars, accepting

C

which the order dated 30th November, 1987 of the District Court Bh~pal

came to be made.

The third event is that· subsequent to the recording of the settlement

a Constitution Bench

of this Court dealt with and disposed of writ-petitions

challenging the constitutionality of the 'Act' on various grounds

in what is

known as Charania/

Salru's case and connected matters. The Constitution

D Bench upheld its constitutionality ar.d in the course of the Court's opinion

Chief Justice Mukharji made certain observations

as to the validity of the

settlement and the effect of the denial

of a right of being heard to the

victims before the

settlementi a right held to be implicit in Section 4 of the

Act. Both sides have heavily relied on certain .observations in that pronoun-

E cement in support of the rival submissions.

7. We have heard learned Attorney General for the Union of India; Sri Shanti Bhushan, Sri R.K. Garg, Smt.Indira Jaising, Sri Danial Latif, Sri

Trehan learned senior oounsel and Shri Prashant Bhushan, learned ~unset

for petitioners and Sri F.S. Nariman, learned senior counsel for the UCC,

Sri Rajinder Singh, learned senior counsel for the UCIL and Dr~N.M.

F Ghatate and Sri AshWini Kumar, learned senior counsel for the State-of

Madhya Pradesh and its authorities.

At the outset, it requires to be noticed that Union of India which was

a party to· the settlement has not bestirred itself to assail the settlement on

any motion

of its own. However, Union of India while not assailing the

G factum of settlement has sought to support the petitioners' challenge to the

validity

of

the settlement. Learned Attorney General submitted that the

factum

of compromise or settlement

l'.ecorded in the orders dated 14th &

15th of February, 1989 is. not disputed by the Union of India. Learned

Attorney-General also made it clear that the Union

of India does not · . H dispute the authority of the then Attorney General and the Advocate on

~·-·

7'-

--t·

+-

UNION CARBIDE v. U.O.L(VENKATAOIALIAH,.J.] 299

record for the Union of India in the case to enter into a settlement. But, he A

submitted that this should not preclude the Union of India from pointing

out circumstances in the case which,

if accepted,

would detract from the

legal validity of the settlement.

8. The contentions. urged at the hearing in support of_ these petitions

admit

of the following formulations: B

Contention (A):

The proceedings before this Court were merely in the nature

of appeals against an interlocutory order pertaining to the in­

terim-compensation. Consistent with the limited scope and

C

subject-matter of the appeals, the main suits themselves could

not be finally disposed

of by the settlement. The Jurisdiction of

this Court to withdraw

or transfer a suit. or proceeding to itself

is exhausted by Article 139 A of the Constitution. Such transfer

implicit in the final disposal of the suits having been impermis­

sible suits were not

befofo the Court so as to be amenable to D

final disposal by recording a settlement. The settlement is,

therefore, without jurisdiction.

Contention (B ):

Likewise the pending criminal prosecution was a separate and E

distinct proceeding unconnected with the suit from the inter­

locutory order in which the appecils before this Court arose.

The criminal proceeding!; were not under or relatable to the

'Act'. The Court had no power to withdraw to itself those

criminal proceedings and quash them. The orders

of the Court

dated 14th and 15th of February

1989, in so far as they pertain F

to the quashing of criminal proceedings are without jurisdic­

tion.

Contention (C):

The 'Court-assisted-settlement' was as between, and confined G

to, the

Union oflndia on the one hand and UCC & UCIL on

the other. The Original Suit

No. 1113of1986 was really and in

susbtance a representative suit for purposes and

. within the

meaning

of

Order XXIII Rule 3B C.P .C. inasmuch as any

order ma.de· therein would affect persons not eo-nomine par-

ties to the suit. Any settlement reached without notice to the

H

A

B

c

0-·

E

F

G

300 SUPREME COURT REPORTS (1991) SUPP. 1 S. C.R..

·persons so affected· without complying with the procedural

drill of Order XXIII Rule 3B is a: nullity.

That the present suit is such a representative suit; that the

order under review did affect the interests of third parties and

that the legal effects and consequences

of non-compliance with

Rule 3B are attracted to

case are concluded by the pronounce­

ment ·of the Constitution Bench in Charan/al Sahu's case.'

Contention (D):

The termination of the pe~ding cilmin~I proeeedingS brought

about by the orders dated 14th and 15th of February~ 1989 is

bad in law and would ·require to be reviewed and set aside on

grounds ·.that (i)

if the orders ·are construed

a5 -perniitting a

compounding of offences, they run. in the teeth of the statutory

prohibition contained in Section 37.0 (9) of the Code of

Criminal Procedure; (ii) if the orders are construed as pemiit­

ting a withdrawal of the pros~cutfon under Sectfon,321 Cr.P.C.

they would, again, be bad as violative of settled principles guid­

ing withdrawal . of . prosecutions; arid (iii). if the orders

amounted to a quashh1g of the proceedings under Section 482

of the Code of Criininal Procedure;·· grounds for such quashing

did not obtain in rhe case., ' . .

Contention· ( E):

·'

' ~ ,; )

· The effect -0f the orders u.nder review interdicting and

prohibiting future criminal proce,edings against any ~erson or

persons whatsoever in rehtti~ri. to or arising out of the Bhopal

Gas LeakDisaster,:in effectand substarice,;amounts to oonfer­

ment of an iIDm~fy from crf1llinal proceedings. Grant of im-

. munity is ,essentially a legisiative function and cannof be made

byajudic~al.acL :< .. ,.,, ..... · ·· · · ,

At. all events, grant of such< immunity is oppos~d. to public

poliey and· pi events· the ·investigation : of serious .·off e11ces m

. relation to this·horrendous industrial dis.aster where_UCC had

inter-alia alleged .sabotage Jls cau,se,of the disaster. Criminal

mvestigation was·n~ssaryjn publi~i,nterestnot.only to punish

the ·guilty but to.pre~ent a~y,t;ecurrtmee .. o( such calainitious

H·,·

events in future.; . :r ; . .J.:

1

"_,,. .. • • • . . • ..

UNION CARBIDE v. U.0.1. [ VBNKATACHALIAH).) 301

Contention (F):

A

' 1·.

The memorandum of settlement and the orders of the Court ·

thereon, properly construed, make the inference inescapable

·.• . ·.' · . that a part of the consideration for the payment of 470 million

U.S. Dollars was the stifling of the criminal prosecutions which

. is opposed to public-policy. This vitiates the agreement on B

,which the settlement is based for unlawfulness of the con­

sideration. The consent order has no higher sanctity than the

legality and validity of the agreement on which it rests. •

Contention (G):

The process of settlement of a Qlllss tort action has its own C

complexities and that a "Fairness~Hearing" must precedo the

approval.of any settlement

by the court as fair, reasonable and

adequate.

In concluding that the settlement was· just and

. reasonabfo the Court omitted to take into aecount and provide

for certain important heads of compensation such as the need

D

for and the costs of

me;dical surveillance of a large section of

population, which though asymptomatic for the present was

.

likely. to become symptomatic

iater having regard to the char-

' . , ". . .acter and the potentiality ofthe risks of exposure and the

. ' likely fi.iture damages resulting from' long-term.effects and to

·· build-in a 're~opener' clause. · · '

··The settlement is bad for not affor'1ing a {airness~he~ing.and

for not incorporating a "re-opener" clause. The settlement is

bad for not indicating appropriate break-down of the amo1mt

· amongst the variou~ classes of victim-groups. There were no

E

· · criteria to go by at all to decide the fa~~es.s and adequa~y of F

. the settlement. · · .

. Contention (H):

Even if the settlement is reviewed and set aside there is no

· c:Ompulsion or obligation to re(und and restore to the UCC the G

. . . funds brought in by it, as such restitution is discretionary and

· · in exercisirig this discretion the interests of the victiins be kept

· .· in mind arid restitutioii'denied.

At'all events, if restitution is to be allowed, ~heth~r l)Cc

would dot be required to act upon and effectuate its undertak-· H

A

B

c

D

E

302 . SUPREME COURT REPORTS (1991) SUPP. I S. C.R.

ing dated 27th November, 1986 on the basis of which order

dated 30th November, 1986 of the Bhopal District Court

Vacating the injunction against it was made.

Contention (I):

•

Point (j):

Notice to the affected-person implicit in section 4 of the Act

was imperative before reaching a settlement

and that as admit-

.

tedly no such opportunity was given to the affected-person

either by the Union of India before entering into the settlement

or by the Court before approving it, the settlement is void as

violative

of

natural justice. Sufficiency of natural justice at any

later· stage cannot cure the effects

of earlier insufficiency and

does not bring life back to a purported settlement which was in

its inception void.

The observations of the constitution Bench

m Charania/ Sahu 's

case suggesting that a hearing was available at the review stage

and should

be sufficient compliance with

natural justice, .. are ·

mere obiter-dicta and do not alter the true legal position.

D0es the settlement require to tJe set aside and the Original

Suit No. 1113

of 1986 directed to be proceeded with on the

merits?

If not, what other reliefs ·require to be granted and

what other directions require to be issued?.

Re: Contentions (A) and (B)

9. The contention articulated with strong emphasis is that the court

F had no jurisdiction to withdraw and dispose of the main suits and the

criminal proceedings 'in the course of hearing of appeals arising out of an

·interlocutory order in the suits. The disposal of the suits would require and

imply their transfer and withdrawal to this court for which, it is contended,

the Court had no power

under law. It is urged that there is no power to

G withdraw the suits or proceedings dehors. Article 139-A and the conditions

enabling the application

of Article 139-A do. not, admittedly, exist. It is,

therefore,

oontended that the withdrawal of the suits, implicit in the order

of their final disposal pursuant to the settlement, ,is a nullity. It is urged that

·Article 139A is exhaustive of the powers of the Court to withdraw suits or

other proceedings to itself.

H

..

UNION CARBIDE v. U.0.1. [ VENKATAOIALIAH,J.] 303

It is not disputed that Article 139A in terms does not apply in the A

,..f,-~ facts of the case. The appeals were by special leave under Article 136 of

the Constitution against an interlocutory order. If Article 139A exhausts

the power

of transfer or withdrawal of proceedings, then the contention

has substance. But

is that so?

'

'

This Court had occasion to point out ~hat Article 136 is worded in B

the widest terms possible. It vests in the Supretne Court a plenary jurisdic-

tion in the matter

of entertaining and hearing of appeals by granting special ~- leave against any kind of judgment or order made by a Court or Tribunal in

any cause

of matter and the powers can be exercised in spite of the

limita­

tions under the specific provisions for appeal contained in the Constitution

or other laws. The powers given by Article 136 are, however, in the nature· C

of special or resi.duary powers which are exercisable outside the purview of

-+-

the ordinary laws in cases where the needs of justice demand interference

by the Supreme Court. (See Durga Shankar Mehta v. Thakur Raglmraj

Singh & Others [1955] S.C.R. 267].

Article

142 (1) of the Constitution provides: D

"142 (1) The Supreme Court in exercise of its jurisdi~tion may

pass such decree or make such order as is necessary for doing

complete justice in any cause or matter pending before it, and any ,

decree so passed or order so made shall be enforceable E

throughout the territory of India in such manner as may be

prescribed by or under any law made by Parliament and, until

provision in that behalf

is so made, in such manner as the President may by order prescribe."

[Emphasis "added]

The expression "cause

or matter" in Article 142 (1) is very wide

covering almost every kind of proceedings in Court.

In Halsbury's Laws of

England-Fourth Edition [vol. 37) para 22 referring to the plenitude of

F

~-~

that expression it is stated: G

"Cause or matter-The words "cause and "matter" are often used

in juxtaposition, but they have different meanings. "Cause"

means any action or any criminal proceedings and "matter"

means any proceedings in court not in a cause. When used

together, the words "cause

or matter" cover almost every kind of H

A

·a

304 SUPREME COURT REPORTS (1991) SUPP. 1 S. C.R.

proceeding in court, whether civil or criminal; whether inter­

locutory or final, an<l whether before or after judgmenC

. . f • • .

[emphasis added]

Any limited interpretation

of the. expression

ft cause or matter" having

regard to the wide and sweeping powers under Article

136 which Article

i42 (1) seeks to effectuate, limiting it only

to the short compass of the

actual dispute before the Court

and

not· to what might necessarily and

reasonably

be

connected with or related to such matter in such a way that

their withdrawal to the Apex Court would enable the court to do "complete .

justice", would stultify the very wide constitutional powers. Take, for in-

C stance, a case where an interlocutory order in a matrimonial cause pending

in the trial court

comes up before the apex court. The parties agree to have '

the main matter itself either decided on the merits. or disposed of by a

compromise.

If the argument is correct this court would be powerless to

withdraw the

main matter and dispose it of finally even if it be on consent

of both sides. Take also a similar situation where some criminal proceed-

D ings are also pending between the " litigating spouses. If all disputes are

settled, can the cOW't not call up to itSelf the oon:nected criminal litigation

for a· final disposal? If matters are disposed of by consent of the parties,

can any one

of them later turn around and say that the apex court's order

was a nullity as one without jurisdiction

and that the consent does not

confer jurisdiction? This

is not the

way in which-jurisdiction with such wide

E constitutimial. powers is to be construed. While it is neither possible nor

advisable to enumerate exhaustively the niultltudmous ways in 'which such

sltuatfons may. present themselves. before ,the court where· the court. with

the aid of t~e' powers ooder Article 142 (1) couid bring aootit .a finality to

the matters, it is ~mnion experience that day-in-and-day•out such matters.

are 'taken up anCI decided in. this. colirt It. is true that mere practice, how-.

F ever lo.ng, will n'ot legitirtilZe issues of jurisdiction. Buf the argument,

pushed to its 'logical conclusions, wowd mean that when an .interlocutory

appeal' comes up before this Court by special leave, even with the consent

of th~ parti~s; the main matter cannot be fmally disposed of by this court as

such a step would imply an impeintlssihle transfer of the main matter.

Such techilicalities do not belong to the content and interpretation of con-

G stitution~ powers. . , , ..

H

_ T<) ·the extent power of withdrawal and transfer of cases to the apex

eo'urtis,"in the opinion of the 'court, necessary for the purpose of effectual"

ing the high purpose ofArticles 136 and 142 (1), the power under Article

i39A, must be held not to'. eXha:ust the power of Withdrawal. and transfer.

---t·

•

•

..-

UNION CARBIDE v. U.0.1. [ VENKATACHALIAH,J.) 305

Article 139A it is relevant to mention here, was introduced as part of the

scheme of the 42nd Constitutional Amendment. That amendment

proposed to invest the Supreme Court with exclusive jurisdiction to deter­

mine the constitutional validity of central laws by inserting Articles

131 A,

139A and 144A. But Articles

131A, and 144A were omit.led by the 43rd

Amendment Act

1977, leaving Article 139A in tact. That article enables the

litigants to approach the Apex Court for transfer of. proceedings

if the

conditions envisaged in that Article are satisfied. Article 139A was not

intended, nor does

it operate, to whittle down the existing wide powers

under Article

136 and 142 of the Constitution.

I

A

B

The purposed constitutional plenitude of the powers of the Apex

Court to ensure due and proper administration of justice

is intended to be

C

co-extensive in each case with the needs of justice of a given case and to

meeting any exigency. Indeed, in

Harbans

Singh v. U.P. State (1982) 3 SCR

235 the Court said:

"Very wide powers have been conferred on this Court for due and D

proper administration of justice. Apart from the jurisdiction and powers

conferred on this Court under Arts.

32 and 136 of the Constitution I am of

the opinion that this Court retains and must retain, an inherent power and

jurisdiction for dealing with any extra-ordinary situation in the larger inter-

ests

of administration of justice and for preventing manifest injustice being

done. This power must necessarily be sparingly used only in exceptional E

circumstances for furthering the ends of justice. Having regard to the facts

and circumstances of this case, I am of the opinion that this

is a fit case

where this Court should entertain the present petition of Harbans

Singh

and this Court should interfere."

We find absolutely no merit in this hypertechnical submission of the

petitioners' learned counsel. We reject the argument

as unsound.

A similar ground

is urged in support of contention [BJ in relation to

such withdrawal implicit in the quashing of the .criminal proceedings.

On

F

the merits of the contention.whether such quashing of the proceedings was, . G

in the circumstances of the case, justified or not we have rea.ched a

decision on Contentions

[DJ and [E]. But on the power of the court to

withdraw the proceedings, the contention must fail.

We, accordingly, reject both Contentions

(A] and [BJ.

H

306 SUPREME COURT REPORTS [1991) SUPP. 1 S. C.R.

A Re: Contention (C)

10. Shri Shanti Bhushan contendS that the settlement recorded on

the 14th and 15th of February, 1989, is void under Order XXIH Rule 3B,

Code

of Civil

Procedure, as the orders affect the interests of persons not

eo-nomine parties to the proceedings, and, therefore,. the proceedings be-

B come representative-procee~gs for the purpose and within the meaning

of Order XX:Ill Rule 3-B C.P.C. The order recording the settlement, not

having been preceded by notice to such persons who

may appear to the

Court to be interested in the suit, would, it

,is contended, be vo:d.

c

D

E

F

G

H

'

Order XX:lll Rule 3-B CPC provides: .

"Order XXIH Rule 3B.

No agreement or compromise to be entered in a representative

suit without leave of Court.

(1) No agreement or compromise in a representative suit shall

be entered into without the leave of the Court expressly

recorded in the proceedings; and any such agreement or com-

promise entered into without the leave of the Court so

recorded shall

be void.

(2) Before granting such leave, the Court shall give notice in

such manner as it

may think fit to such persons as may appear

to

it to be interested in the suit.

EXJ>lanation-In this rule, "representative suit" means,-

(a) a suit under Section

91 or Section 92.

(b) a suit under rule 8 of Order 1,

(c) a suit in which the manager of an undivided Hindu family

sues or is sued as representing the

. other members of the

family,

( d) any other suit in which the decree passed

may; by virtue

of

the provisions of this Code or of any other law for time being in

l"·

~

'*--.

. UNION CARBIDE v. U.0.1. [ VENKATAOIALIAHJ.] 307

force bind any person who is not named as party to t~e suit." A

·~

Shri Shanti Bhushan says that the present proceedings by virtue of

clause ( d) of the Explanation should be deemed to be a representative suit

and that the pronouncement

of the Constitution Bench in

Sahu case which

has held that Order XXIiI Rule 3-B CPC is. attracted to the present

B

proceedings should conclude the controversy. The observations in Sahu's

case relied in this behalf are these:

-J._

"However, Order XXIII Rule 3B of the Code is an important and

significant pointer and the principles behind the said provision

would apply to this case. The said rule 3B provides that no c

agreement or compromise in a representative suit shall be

entered into without the leave of the Court expressly recorded

in the proceedings; and sub-rule (2) of rule 3B enjoins that

before granting such leave the Court shall give notice

in such

manner as it may think fit in a representative action. Repre-

D

sentative suit, again, has been defined under Explanation to

the said rule vide clause ( d) as any other suit in which the'

decree passed may, by virtue of the provisions of this Code or

of any other law for the time being in force, bind any person

who is not

named as party to the suit.

!11 this case, indubitably

E

the 'Victims would be bound by the settlement though 11ot named

in the suit. 17iis is a position conceded by all. If that is so, it

would be a representative suit in temis of and for the purpose of

Rule 3B of Order XX/I/ of the Code. If the principles of this rule

are the principles of natural justice then we are of the opinion

F

that the principles behind it would be applicable, and also that

section be applicable, and also that section 4 should be so con-

strued in spite of the difficulties of the process of notice and

other difficulties of making "informed decision making

process cumbersome", as canvassed by the learned Attorney

G

~

).. General".

"The

Learned Attorney General, however, sought to canvas the

view that the victims had notice and some of them had par-

ticipated

in the proceedings. We are, however, unable to ac-

cept the position that the victims had notice of

the nature

H

308

A

B

SUPREME COURT REPORTS (1991) SUPP. 1 S. C.R.

contemplated under the Act upon the underlying principle

• of Order XXIII Rule 3B of the Code. It is not enough to say

that the victims must keep vigil and watch the proceeding

.................... .In the aforesaid view of the matter, in our opinion,

notice

was necessary. The victims at

targe did not have the

notice.

[Emphasis added]

, r

...,,...--'

11. We have given our careful consideration to this submission. The k

question is whether Rule 3-B of Order X.X.III,proprio-vigore, is attracted to

the proceedings

in the suit or whether the general principles

~f natural

C ·justice underlying the provision apply. If it is the latter, as ind~ed, the Sahu

case has held, the contention in substance is not different from the one

based on non-compliance with the right of being heard which has been

read into Section

4. The

Sahu case did not lay down that provisions of

Order XXIII Rule 3-B CPC, proprio-vigore, apply. It held that thr prin·

D ciples of natural justice underlying the said provisions were not excluded. It

is implicit

in that reasoning that

Order xx.III Rule 3B in terms did not )'-­

apply. The Court thereafter considered the further sequential question

whether the obligation to hear had been complied with or not and what

were the consequences of failure to comply. The Court in the Sahu case

E after noticing that the principle underlying Rule 3-B had not been satisfied,

yet, did not say that the settlement

was, for that reason, void. If as

Shri

Shanti Bhushan says the Sahu case had concluded the matter, it would

have

as a logical consequence declared the settlement void.

On the con·

trary, the discussion of the effect of failure of compliance would indicate "t

that the court declined to recognise any such fatal consequences. The

F Court said:

G

H

"Though entering into a settlement without the required notice

is wrong. In the facts and circumstances of this case, therefore,

we are of the opinion, to direct that notice should be given

now, would not result in doing justice in the situation. In the

premises, no further consequential order

is necessary by the

~ ~

Court. Had it been necessary for this Bench to have passed

such a consequential order,

we

would not have passed any such

consequential order in respect of the same."

UNION CARBIDE v. U.O.L[VF.NKATAOIALIAH,J.J 309

12. 1.ie finding on this contention cannot be different from the one A

, ~-~- urged under Contention (I) infra. If the principle of natural justice underly-

ing

Order XXill Rule 3-B CPC is held to apply, the consequences of

non-compliance should not be different from the consequences of the

breach of rules of natural justice implicit in Section 4. Dealing with that,

the Sahu case, having regard to the circumstances of the case, declined to

push the effect of non-compliane to its

logi.Cal oonclusion and declare the · B

settlement void. On the contrary, the Court in Sahu's case considered it

appropriate to suggest the remedy and curative of an opportunity of being

--J--_ heard in the proceedings for review. In sahu decision the obligation under

Section 4 to give notice is primarily on the Union of India. Incidentally

there

are certain observations implying an

opportunity of being heard also

before

the Court. Even assuming that the right of the affected persons of C

being heard is also available at a stage where a settlement is placed before

the

Court for its acceptance, such a right is not referable to, and does not

stem from, Rule 3-B of Order

XXIII CPC. The pronouncement in Sahu

case as to what the consequences of non-compliance are in conclusive as

the law

of the case. It is not open to us to say whether such a conclusion is D -'"'( right or wrong. These findings cannot be put aside as mere obiter. ·

Section 112 CPC, illler-a/ia, says that nothing contained in that Code

shall be deemed to affect the powers of the Supreme Court under Article

136 or any other provision of the Constitution or to interfere with any rules

made by the Supreme Court. The Supreme Court Rules are framed and E

promulgated under Article 145 of the ConstitutiOn. Under Order 32 of the

Supreme Court Rules, Order XXIII Rule 3-B CPC is not one of the rules

expressly invoked

and made applicable.

In relation to the proceedings and decisions of superior Courts of

unlimited

jurisdiction, imputation of nullity is not quite appropriate. They F

decid~ all questions of their own jurisdiction. In Isaacs v. Robertson,1984

(3) AER 140 at 143 the Privy Council said:

"The ....... '. legal concepts of voidness and voidability form part

df the English law of contract. They are inapplicable to orders

made by a court of unlimited jurisdiction in the course of con-G

tentious litigation. Such an order is either irregular or regular.

If it is irregular it can be set aside by the court that made it on

application to that court; if it is regular it can only be set aside

by

an appellate court on appeal if there is one to which appeal

lies."

H

310 SUPREME COURT REPORTS [1991) SUPP. 1 S. C.R.

A With reference to the "void" cases the Privy Council observed:

B

c

D

" .... The cases that are referred to in these dicta do not support

the proposition that there

is any category or orders of a court

of unlimited jurisdiction of this kind; what they do support is

the quite different proposition that there is a category of or­

ders of such a court which a person affected by the order

is

entitled to apply to have set aside

ex debito justitiae in the

exercise of the inherent jurisdiction of the court without his

needing to have recoilrse to. the rules that deal expressly with

proceedings to set aside orders for irregularity and give to the

judge a discretion·as to the order he

will make.· The judges in

the cases that have drawn the distinction between the two types

of orders have cautiously refrained from seeking to

lay down a

comprehensive definition

of defects that bring an order into

the category that·attracts ex debito justitiae the right to have it

set aside, save that specifically

it includes orders that have

been obtained in breach of rules of natural justice."

This should conclude the present Contention

under C also against )-.

the petitioners.

Re: Contention (D)

E 13.

· This concerns the validity of that part of the orders of the 14th

F

G

H

and 15th of February, 1989 quashing and terminating the criminal proceed­

ings. In the order dated 14th February

1989 Clause (3) of the order

provides:

" ..... and all criminal proceedings related to and arisi:ig

out of the disaster shall stand quashed wherever these may be

pending."

Para 3 of the order dated 15th February, 1989 reads:

"Upon full payment of the sum referred to in paragraph 2

above:

(a) The Union of India and the State of Madhya Pradesh shall

take all steps which may in future become necessary

in order to implemrnt and give effect to this order including but not

limited to ensuring that any suits, claims or

civil or criminal

complaints which may

be filed in future against any Corpora­

tion, Company or person referred to in this settlement are

defended by them and disposed of in terms of this order.

UNION CARBIDE v. U.0.1.(VENKATACHALIAH,J.] 311

(b) Any such suits, claims or civil or criminal proceedings filed A

or to be filed before any court or authority are hereby enjoined

_ and shall 111ot be proceeded with before such court or authority

except for dismissal or quashing in terms of this order."

The signed memorandum filed by the

Union of India and the UCC

includes the following statements: B

"This settlement shall finally dispose of all pa5t, present and

· future claims, causes of action and· civil and criminal proceed-

ings (of any nature whatsoever wherever pending) by all Indian

citizens and all public and private entitles with respect to all

past, present and future deaths, personal injuries, health ef-· C

fects, compensation, losses, damages and civil and criminal

complaints of any nature whatsoever against UCC, Union Car-

bide India Limited, Union Carbide Eastern, and all of their

subsidiaries and affiliates

as well as each of their present and

former directors, officers, employees, agents representatives,

attorneys, advocates and solicitors arising out

of, relating or D

concerned with the Bhopal gas leak disaster, including past,

present and future claims, causes of action and proceedings

against each

0th.er .

..... and all such criminal proceedings including contempt

. proceedings stand quashed ·and accused deemed to be ac- E

quitted."

The order of 15th February, 1989 refers to the written memorandum

...,... filed by the learned counsel on both sides ..

14. The two contentions of the petitioners, first, in regard to the F

legality and validity of· the termination of the criminal proceedings and

secondly, the validity of the protection or immunity from future proceed­

ings; are distinct. They are dealt with also separately. The first -which

is considered here - is in relation to the

termination of pending criminal

proceedings.

15.

Petitioners' learned counsel strenuously contend that the orders

of 14th and 15th of February, 1989, quashing the pending criminal

proceedings which were serious non-compoundable offences under Sec­

tions 304, 324, 326 etc. of the Indian Penal Code are not supportable either

G

as amounting to withdrawal of the prosecution under Section 321 Code of

Criminal Procedure, the legal tests of permissibility of which are well set- H

I

312 SUPREME COURT REPORTS [1991) SUPP. 1 S. C.R.

A tied or as amounting to a compounding of the offences under section 320

Criminal Procedure Code as, indeed, sub-section (9) of section 320 Cr.P.C.

imposes a prohibition on such compounding. It is also urged that the

inherent powers of the Court preserved under Section 482 Cr. P.C. could

not

be pressed into service as the principles guiding the administration of

the inherent power could, by no stretch of imagination, be said

·to accom-

B modate the present case. So far as Article 142 (1) of the .Constitution is

concerned, it is urged, that the power to do "complete justice" does not

enable any

order "mconsistent with the express statutory provisions of sub­

stantive law, much less, inconsistent with any constitutional provisions" as

observed by this

Court in Prem

Chand Garg v. Excise Commissioner, U.P.,

Allahabad,[1963).Suppl. 1SCR885 at 899-900).

c

16. Shri Nariman, however, sought to point out that in Prem Chand

Garg's case the words of limitation of the power under Article 142 (1)

with reference

to the "express statutory provisions of substantive law" were

a mere obiter and were

not necessary for the decision of that case. Shri

Nariman contended that neither in Garg's case nor in the subsequent

D decision in A.R. Antulay v. R:S. Nayak and Anr. ,(1988) 2 S.C.C. 602

where the above observations in Garg's ·case were approved, any question

of inconsistency with the express statutory provisions of substantive law·

arose and in both the cases the challenge had been on the ground of

violation of fundamental rights. Shri Nariman said that the powers under

Articles 136 and 142 (1) are overriding constitutional powers and that

E while it is quite understandable that the exercise of these powers, however

wide, should

not violate any other constitutional provision, it would, how­

ever,

be 'denying the wide sweep of these constitutional powers if their

legitimate plentitude is whittled down by statutory provisions.

Shri

Nariman said that the very constitutional purpose of Article 142 is to em­

power

the Apex Court to do complete justice and that if in that process

F the compelling needs of justice in a particular case and provisions of some

law

are not on speaking terms, it was the constitutional intendment that

the needs

of justice should prevail over a provision of law.

Shri Nariman

submitted that if

the statement in Garg's case to the contrary passes into

law it would wrongly

alter the constitutional scheme.

Shri Nariman

referred to a number of decisions of this Court to indicate that in all of

G

them the operative result would not strictly square with the provisions of

some law or the other. Shri Nariman referred to the decisions of this

court where even non-compoundable offences were permitted to

be com­

pounded

. in the interests of complete justice; where even after conviction

under Section 302 sentence was reduced to one which was less than that

statutorily prescribed; where even after declaring certain taxation laws un-

H constitutional for lack of legislative competence this court directed that

.•

UNION CARBIDE v. U.0.1.[VENKATAClIALIAH,J.] 313

the tax already collected under the _void law need not be refunded etc. A

Shri Nariman also r.eferred to the Sanchaita case where this Court, having

regard to the large issues of public interest involved in the matter, con­

ferred the power

of adjudication of claims exclusively on one forum ir­

respective of jurisdictional prescriptions.

17. Learned Attorney General submitted that the matter had been B

placed beyond doubt in Antulay's case

where the court had invoked and

applied the dictum

in

GOTg's case to a situation where the invalidity of a

judicial-direction which,

"was contrary to the statutory provision, namely

section 7(2)

of the Criminal Law (Amendment) Act, 1952

arid as such

violative of Article

21 of

the Constitution" was raised and the court beld

that such a direction

was invalid. Learned Attorney General said that the C

power under Article 142 (1) could not be exercised if it

was against an

express substantive statutory provision containing a prohibition against

such exercise. This, he said,

is as it should be because justice dispensed by

the Apex Court also should be according to law.

The order terminating the pending criminal

proceedings is not sup- D

portable on the strict terms of Sections 320 or 321 or 482 Cr. P.C. Con­

scious· of this, Shri Nariman submitted that if the Union of India as the

Dominus dtis through its Attorney-General invited the court to quash the

criminal proceedings and the court accepting the request quashed them,

the power to do

so was clearly referable to Article 142(1) read with the

principle of Section

321

Cr.P.C. which enables the Government through E

its public-prosecutor to withdraw a prosecution. Shri Nariman suggested

that what this Court did on the invitation of the Un~on of India as Dominus

Litis was a mere procedural departure adopting the expedient of "quashing"

as

an alternative to or substitute for "withdrawal". There were only pro­

cedural and terminological departures and the

Union of India as a party

inviting the order could not, according to Shri Nariman, challenge the

jurisdiction to make it. Shri Nariman submitted that the State as the

F

Dominus Litis may seek leave to withdraw as long as such a course was

not an attempt to interfere with the normal course of justice for illegal

reasons.

18. It is necessary to set at rest certain misconceptions in the argu­

ments touching the scope of the powers of this Court under Article 142(1)

G

of the Constitution. These issues are matters of serious public importance.

The proposition that a provision

in any ordinary law irrespective of the

importance of the public policy on which

it is founded, operates to limit

the powers of the Apex Court under Article 142(1)

is unsound and

er­

roneous. In both Garg's as well as Antzilay's case the point was one of

H

314 SUPREME COURT REPORTS (1991) SUPP .. 1 S. C.R.

A violation of constitutional provisions and constitutional rights. The obser­

vations as to the effect

of inconsistency with statutory provisions were real­

ly unnecessary in those cases as

tJ{e decisions in the. ultimate analysis

turned on the breach of constitutional rights. We agree with Shri Nariman

that the power

of the Court under Article 142 in so far as quashing of

criminal proceedings are concerned

is not exhausted by

Sections 320 or

B 321 or 482 Cr.P.C. or all of them put together. The power under Article

142 is at an entirely "different level and of a different quality. Prohibitions

or limitations or provisions contained in ordinary laws cannot,

ipso-facto,

act as prohibitions or limitations on the constitutional powers under Ar­

ticle 142.

Such prohibitions or limitations in the statutes might embody

and reflect the scheme of a particular

law, taking into account the nature

C and status of the authority or the coJJrt on which conferment of powers

-limited in some appropriate

way -is contemplated. The limitations

may not necessarily reflect or be based on any

fundamental considerations

of public policy. Sri Sorabjee, learned Attorney-General, refering to

Garg's case, said that limitation on the powers under Article 142 arising

from "inconsistency with express statutory provisions of substantive law"

D must really mean and be understood as some "xpress prohibition contained

in any substantive statutory law. He suggested that if the expression

'prohibition'

is read in place of 'provision' that would perhaps convey

the·

appropriate idea. But we think that such prohibition should also be shown

to be based on some underlying fundamental and general issues of public­

policy and not merely ineidental to a particular statutory sclteme or pat-.

E tern. It will again be wholly incorrect to say that powers under Article

142 are·subject to such express statutory prohibitions. That would convey

the idea that statutory provisions override a constitutional provision. Per­

haps, the proper way of expressing the idea is that in exercising powers

under Article

142 and in assessing the needs of

"complete justice" of a

cause or-matter, the apex court will take note of the express prohibitions

in any substantive statutory provision based on some fundamental prin-

F ciples of public-policy and regulate the exercise of its power and discretion

accordingly. The proposition does not relate to the powers

of the court

under Article

142, but oniy to what is or is not 'complete justice' of a

cause or matter and in the ultimate analysis of the propriety of the exercise

of the power.

No question of lack of jurisdiction or of nullity can arise.

G Learned Attorney General said that

Section 320 Criminal Procedure

Code

is

"exhaustive of the circumstances and conditions under which com­

position can be effected." [See Sankar Rangayya v. S01ikar Ramayya (AIR

1916 Mad. 463 at 485] and that "the courts cannot go beyond a test laid

down

by the Legislature for determining the class of offences that are

H compoundable and substitute one of their own." Learned Attorney

UNION CARBIDE v. U.0.1. [ VENKATACHALIAH,.J.] 315

General also referred to the following passage in Biswabahan v. Gopen A

• ~ Chandra (1967) SCR 447 at 451:

"If a person is cliar-ged with an offence, then unless there is

some provision for composition of it the law must take its

course and the charge enquired into resulting either in convic-

tion or acquittal."

B

He said that

"if a criminal· case is declared to be non-compoun­

dable, then it

is against public policy to compound it, and any agreement to

that

end is wholly void in law."

(See ILR 40 Cal.113 at 117-118); and

submitted that court "cannot make that legal which the law condemns".

Learned· Atto:-ney-General stressed . that the criminal case was an inde- C

pendent matter and of great public concern and could not be the subject

matter of any compromise or settlement. There

is some justification

to say

that statutory prohibition against compounding of certain class of serious

offences,

in which larger social interests and social security are involved, is

based on broader and fundamental considerations of public policy. But all

statutory prohibitions need not necessarily partake of this quality. The D

attack on the power of the apex court to quash the crucial proceedings

under Article 142(1)

is ill-conceived. But the justification for its exercise is

another matter.

19. The proposition that

State is the dominus Litis in criminal cases,

is not an absolute one. The society for its orderly and peaceful develop- E

ment is interested in the punishment of the offender. [See A.R. Antulay v.

R.S. Nayak & A11r. [1984] 2 SCC 500 at 508, 509 and "If the offence for

which a· prosecution is being launched is ·an offence against the society

and not merely

an individual wrong, any

111ember of the society must have

locus to initiate a prosecution as also to resist withdrawal of such prosecu­

tion, if initiated." [See Sheonan(lan Paswan v. State of Bilzar & Ors. (1987] F

1 sec 289 at 316).

But Shri Nariman put it effectively when he said that if the position

in relation to the criminal cases was that the court was invited by the

Union of India to permit the termination of the prosecution and the court

consented to

it and quashed the criminal cases, it could not be said that G

there was some prohibition in some law for such powers being exercised

under Article 142. The mere fact that the word 'quashing' was used did

not matter. Essentially, it

was

a matter of mere form and procedure and

not of substance. The power under Article 142 is exercised with the aid

of the principles of Section 321 Cr.P.C. which enables withdrawal of

prosecutions. We cannot accept the position urged by the learned AUor-H

316 SUPREME COURT REPORTS (1991) SUPP. 1 S. C.R.

A ney-General and learned counsel for the petitioners that court had no

power

or jurisdiction to make that Qrder. We do not appreciate

Union of ~ -

India which filed the memorandum of 15th February, 1989 raising the plea

of want

of jurisdiction.

But whether on the merits there were justifiable grounds to quash

B is a different matter. There must be grounds to permit a withdrawal of

the Prosecution.

It is really not so much a question of the existence of the

power as one of justification for its exercise. A prosecution is not quashed

for

no other reason than that the Court has the power to do so. The

withdrawal must be justified on grounds and principles recognised

as

proper and relevent. There is no indication

as to the grounds and-criteria

C justifying the withdrawal of the prosecution. The considerations that guide

the exercise of power of withdrawal

by

Uovernment could be and are many

and varied. Government must indicate what those considerations are. This

Court

in State of

Punjab v: Union of India, [1986] 4 SCC 335 said that in

the matter of power to withdraw prosecution the "broad ends of public

justice may well include appropriate sodal, economic a!ld political pur­

pOSt<S". In the present case, no such. endeavour was made. Indeed, the

D stand of the UCC in these review petitions is not specific as to the court

to permit a withdrawal. Even the stand of the Union of India has not been

consistent. On the question whether Union of India itself invited the order

quashing the criminal cases, its subsequents stand ·in the course of the

arguments in

Sahu case as noticed by the court appears to have been this:

E

" ... The Government as such had nothing to do with the quash­

ing of the criminal proceedings and it was not representing the

victims

in

respect of the criminal liability of the UCC or UCIL

to the victims. He further submitted that quashing of criminal

proceedings

was done by the Court in exercise. of plenary

powers under Articles

136 and 142 of the Constitution .... "

F The guiding principle in according permission for withdrawal of a

G

H

prosecution were stated by this Court in M.N. Sankarayanan Nair v.

P. V.

Balakrish11an & Ors. [1972) 2 SCC 599: .

" ... Nevertheless it is the duty of the Court also to see in

furtherance of justice that the permission

is not sought on

grounds extraneous to the interest of justice or that offences

which are offences against the

State go unpunished merely be­

cause the Government as a matter of general policy or ex­

pediency unconnected with its duty to prosecute offenders

under the

law, directs the public prosecutor to withdraw from

the prosecution and the Public Prosecutor merely does

so at

UNION CARBIDE v. U.0.1. [ VENKATACHALIAH,J.) 317

the behest."

A . ..

~ Learned counsel for the petitioners submitted that the case involved

the allegation of commission of serious off ence:s in the investigation of

which the society

was vitally interested and that considerations of public

interest, instead

of supporting a withdrawal, indicate the very opposite.

The offences

refote to and arise out of a terrible and ghastly tragedy. B

Nearly 4,000 lives were lost and tens of thousarids of citizens have suffered

injuries

in various degrees of severity. Indeed at. one point of time

UCC

-~ itself recoginsed the possibility of the accident having been the result of

acts of sabotage.

It is a matter of importance that offences alleged in the oontext of a disaster of such gravity and magnitude should not remain

c

uninvestigated. The shifting stand of the Union of India on the point should

not

by itself lead to any miscarriage of justice.

We hold that no

"• ~cific ground or grounds for withdrawal of the

prosec.utions having been set out at that stage the quashing of the prosecu-

tions requires to be set aside.

D

20. There is, however, one aspect on which we should pronounce.

Learned Attorney-General showed us some correspondence pertaining to

a letter Rogatory in the criminal investigation for discovery and inspection

of the UCC's plant in the United States for purposes of comparison of

the safety standards. The inspection

was to be conducted during the mid-

die of February,

1°89. The settlement, which took place on the 14th of E

February, 1989, it is alleged, was intended to circumvent that inspection

we have gone through the correspondence on the point. The docum.ents

relied upon

do not support such an allegation. That apart, we must confess ~- our inability to appreciate this suggestion coming as it does from the

Government of India which was a party to the settlement.

21. However, on Contention (D) we hold that the quashing and ter-

F

mination of the criminal proceedings brought about by the orders dated

14th and 15th February,

1989 require to

be, and are, hereby reviewed a.nd

set aside.

Re: Co11te11tio11 (E)

G

..> x

22. The written me~morandum setting out the terms of the settlement

filed

by the

Union of India and the U.C.C. contains certain terms which are

susceptible of being construed

as conferring a general future immunity

from prosecution. The order dated 15th February,

1989 provides in clause

3la) and 3[b] :

H

A

B

318 SUPRE¥E COURT REPORTS (1991) SUPP. I S. C.R.

" .... that any suits , claims or civil or criminal complaints which

may be filed in future aganist any Corporation, Company or

person referred to in this settlement.are defended by them and

disposed of in terms of this order".

" Any such suits, claims or civil or criminal proceedings filed

or to be filed before any court or authority or hereby enjoined

and shall not be proceeded with before such court or Authority

except for dismissed

or quashing in terms of this

order.''.

These provisions, learned Attorney General contends, amount to

conferment of immunity from the operation of the criminal law in the

C future respecting matters not already the subject matter of pending cases

and therefore, partake of the character of a blanket criminal immunity

which

is essentially a legislative function. There is no power or jurisdiction

in

the courts, says learned Attorney-General, to confer immunity for

criminal prosecution

and punishment. Learned Attorney General also

con­

tends that grant of immunity to a particular person or persons may amount

D to a preferential treatment violative of the equality clause.

E

F

G

H

This position seems to be correct. In Apodaca v. Viramontes 13 ALR

1427, it was observed:

" ............ The grant ofan immunity is in very truth the assump-

tion

of a legislative power .... ". (P.1433)

" .......... The decisive question, then, is whether the district attor-

ney and the district court in New Mexico, absent constitutional

provision or enabling statute conferring the power, are

authorized to grant immunity from prosecution for an offense

to which incriminating answers provoked by questions asked

will expose the witness.

We are compelled

to give a negative answer to this inquiry.

Indeed, sound reason

and logic, as well

as the great weight of

authority, to be found both in text books and in the decided

, cases, affirm that

no such power exists in the district attorney

and the· district court, either or both, except as placed there by

constitutional

or statutory language. It is unnecesary to do

more in this opinion in proof of the statement.

made than to

give a few.rc::ferences to texts and to cite some of the leading

. ·cases .... "

[p.

1431)

UNION CARBIDE v. U.0.1. [ VENKATACHALIAH,J.) 319

After the above observation, the court referred to the words of Chief A

~~

Justice Cardozo (as he then was in the New York Court of Appeals] in

Doyle v. Hafstader [257 NY 244]:

" ........ The grant of an immunity is in very truth the assumption

of a legislative power, and that

is why the Legislature, acting

alone; is incompetent to declare it. It

is the assumption

o~ a B

power to annul as to individuals or classes the statutory law of

crimes, to stem the course

of justice, to absolve the grand

jurors

ofthe county from the performance of their duties, and

the prosecuting officer from his. All

these changes may be

wrought through the enactment of a statute. They may be

wrought

in no other way while the legislative structure of our c

government continues what it

is".

In the same case the opinion of Associate Judge Pound who dis-

sented in part on another point, but who erttirely shared the view expressed

by Chief Justice Cardozo may also be cited:

D

"The grant of i •• 1munity is a legislative function; The Governor

may pardon after conviction [NY Const. Art. 4 & 5], but he

may not grant immunity from criminal prosecution or may the

courts. Amnesty is the determination of the legislative power

that the public welfare requires the witness to speak." [P. 1433]

E

Learned Attorney General referred us to the following passage in

"Jurisprudence" by Wortley:

..

"Again, if we say that X has an immunity from arrest when a ..,..

sitting member of the House of Commons, then during its sub-

sistence he has an immunity that

is denied to the generality of

F

citizens; there is an inequality of rights and duties of citizens

when the immunity

is made out ...... ".[p. 297]

·

This inequality must be justified by intelligible differentia for clas-

sification which are both reasonable and have a rational nexus with the

object.

G

# ¥

Article 361(2) of the Constitution confers on the President and the

Governors immunity even

in respect of their personal acts and enjoins that

no

crim~nal proceedings shall be instituted against them during their term

of office. As to the theoretical basis for the need for such immunity, the

Supreme Court of the United States in a case concerning immunity from

H

320 SUPREME COURT REPORTS (1991] SUPP. 1 S. C.R.

A civil liability [Richard Nixon · v. Ernest Fitzgerald, 451 US 731: 73 L Ed 2d 1-----•

349 said:·

B

c

D

E

F

G

H

" .... This court necessarily also has weighed concerns of public

policy, especially as illuminated by our history and the struc-

ture

of our government ... ." (p. 362) " .... In the case of the President tlie inquiries into history and

policy, though mandated independently by our case, tend to

converge. Because the Presidency did not exist through mos~

of the development of common law, any historical analysis

must

draw its evidence primarily from our constitutional

heritage and structure. Historical inquiry thus merges almost

at its inception with the kind

of "public policy" analysis ap­

propriately undertaken by

a federal court. This inquiry invol­

ves policies and principles that may be considered implicS in

the nature

of the President's office in a system structured to

achieve effective government under a constitutionally

man-·

dated separation of powers."

(p. 362 and 363] ·

" ...... In view of the special nature of the President's constitu­

tional office and functions, we think it a{J°propriate to recognise

absolute Presidential immunity from damages liability for acts

within the "outer perimeter"

of his official responsibility.

Under the Constitution and laws of the United States the

President has discretionary responsibilities in a broad variety

of areas, many

of them highly sensitive. In many cases it would

be difficult to determ.ine which

of the President's innumerable

"functions" encompassed a particular action ....

"

(p. 367]

Following observations

of Justice

Storey in his "Commentaries in the

Constitution of United States" were referred to:

" There are ...... incidental powers, belonging to the executive

department, which are necessarily implied from the nature

of

the functions, which are confided to it. Among these, must

necessarily

be included the

power to perform them.... The

president cannot, therefore, be liable to arrest, imprisonment,

or detention, while he is in the discharge of the duties of his

UNION CARBIDE v. U.O.I. [ VENKATACHALIAH,J.] 321

office; and for this purpose his person must be deemed, in civil

A

cases at least, to possess an official inviolability".

[p.

363)

23.

Indeed, the submissions of learned Attorney General on the

theorel:ical foundations as to the source of immunity as being essentially

legislative may be sound. But the question does not strictly arise in that

sense in the present case. The direction that future criminal proceedings

shall not be instituted or proceeded with must be understood as a con­

comitant and a logical consequence ·of the decision to withdraw the pend­

ing prosecutions. In that context, the stipulation that no future

prosecutions shall be entertained may not amount to conferment of any

immunity but only to a reiteration of the consequences of such termination

of pending prosecutions. Thus understood any appeal to the principle as

to the power to confer criminal immunity becomes inapposite in this case.

24. However, in view of our finding on contention (D) that the

· quashing of criminal proceedings was not justified and that the orders

dated 14th and 15th of February,

1989 in that behalf require to be reviewed

and set-aside, the present co.ntention does not survive because as a logical

corollary and consequence of such further directions as to future

prosecu­

tions earlier require to be deleted. We, therefore, direct that all portions in

the orders of this Court which relate to the incompetence of any future

prosecutions be deleted.

25. The effect of our order on Contentions [DJ and [E] is that all

portions of orders dated 14th and 15th

February, 1989, touching the quash­

ing of the pending prosecution as well as impermissibility of future criminal

liability are set-aside. However, in so far as the dropping of the lJroceed­

ings in contempt envisaged by clause (b) of para 4 of the order dated 15th

February,

1989 is concerned, the same is left undisturbed ..

Contention ( e)

is

answered !lccordingly.

Re: Contention (F)

26. As we have seen earlier the memorandum of settlement as well

as the orders

of the Court contemplate that with a view to effectuating the

settlement there be a termination of pending criminal prosecution with a

further stipulation for abstention from future criminal proceedings.

Petitioners have raised the plea -and learned Attorney General supports

them -that the language of the memorandum of

settlen:ie_nt ~s well as the

ordtrs of the court leave no manner of doubt that a part of the considera­

tion for the payment of 470 million US dollars was the stifling of the

B

c

D

E

F·

G

H

322 SUPREME COURT REPORTS (1991} SUPP. 1 S. C.R.

A

prosecution and, therefore, unlawful and opposed to public policy. Relying

upon Sections 23 and

24 of the Indian Contract Act it was urged that

ii

~-·

any part of a single consideration for one or more objects or any one or

')

any part of any one of several considerations for a single object is unlawful,

the agreement becomes

"void".

B

27. At the outset, learned Attorney General sought to clear any pos-

sible objections based on estoppel to the Union of

India, which was a

consenting party to the settlement raising this plea. Learned . Attorney-

+--

General urged that where the plea is one of invalidity the conduct of par-

ties becomes irrelevant and that the plea of illegality

is a good answer to

the objection

of consent. The

invalidity urged is one based on public-

c

policy. We think that having regard to the nature of plea -·-one of nullity

· ---no preclusive effect of the earlier consent should come in the way of the

Union

of India from raising the 'plea. Illegalities, it is

said, are incurable.

This position is ·fairly well established. In re A Bankruptcy Notice (1924

2 Ch.D.

76 at 97) Atkin LJ. said:

D

"It is well established that it is impossible in

law-for a person to allege

any kind

of principle which precludes him from alleging the

invalidity of -~

that which the statute has, on grounds of general public policy, enacted

shall be invalid."

In

Maritime Electric Co.Ltd. v. General Dairies Ltd. AIR 1937

PC 114

E

at 116-117 a similar view fmds expression:

" .......... an estoppel is only a rule of evidence which under certain

special circumstances can be invoked by a party to .an action; it cannot

therefore avail in such a case to release the plaintiff from an obligation to

'"'{ ..

obey such a statute, nor can it enable the defendant to escape from

statutory obligation of such a kind on his part. It is immaterial whether the

F

obligation is onerous or otherwise to the party suing. The duty of each

party

is to obey the law .

........

The court should

first of all determine the nature of the obliga·

tion imposed by the statute, and then consider whether the admission of an

estqppel would nullify the statutory provision. ·

G

..... there is not a single case in which an estoppel has been allowed in

>'

such a case to defeat a statutory obligation of an unconditional character." x

The case of this Court in point is of the State of Kera/a & Anr. v. The

Gwalior Rayon Silk Manufacturing (Wvg.) Co. Ltd. etc. (1974) 1 SCR 671.

at 688 where this court repelled the contention that ari agreement on .

the

part of the Government riot to acquire, for a period of

(j() years the

H

lands of the 90mpany did not prevent the State from enacting or ·giving

. ·~

UNION CARBIDE v. U.O.L(VENKATACHALIAH,J.J 323

effect to a legislation for acquisition and that the surrender by the Govern- A

ment of its legiSia:tive powers which are intended to be used for public good

cannot avail the c0mpany or operate against the Government as equitable

estoppel. It is unnecessary to expand the discussion and enlarge

authorities.

We do not think that the Union of India should be precluded from

urgii1.g the contention as to invalidity in. the present case. B

28. The mairi argumerats ('n invalidity proceed on the premise that

the terms

of the settlement· and the orders'

o'f 'the ci>urt passed pursuant

thereto contemplate, amount to and permit a compounding of non-com·

poundable offences which is opposed to publilf.policy and, therefore, un­

lawful. The orders of the court based on aQ.1agreement whose or part of C

whose consideration is unlawful have, it is drg~d, no higher sanctity than

the agreement on which it

is based. The orders of the court

base«;t on

consent

of parties do not, so goes the

ar~ent, reflect an adjudicative

imposition of the court, but merely set the seal of the court on what

is

essentially an agreement between the parties. It

is urged that the validity

and durability of a consent order are wholly dependent on the legal validity D

of the agreement, on which it rests. Such an order is amenable to be

set-aside on any ground which would justify a setting aside of the agree­

ment itself.

These principles are unexceptionable.

1.ndeed, in Huddersfield

Banking

Compa11y Ltd. v. Henry Lister & So11 Ltd, (1895] 2 Ch. 273 at 276 E

Vaughan Williams J. said:

"

..... it seems to me that the clear result of the authorities is

that,

notwitltsta11di11g tlte c011sent order has bee11 draw11 up and

completed, and acted upon to the extent that the property has

been sold and the money has been paid into the hands of the

receiver,

I

may, 11ow set aside tlie order and ammgemem upon F

a11y ground which would justify me i11 setti11g aside a11 agreement

e11tered imo between tire ponies.

· nre real tnttlr of tire matter is tllat tire order is a mere creature

·of tire agreemellt, a11d to say that tlle. Coult ca11 set aside tire

agi-eement -a11d it was 11ot disputed that tllis could be do11e if G

a co111mo11 mistake were proved -but that it cannot set aside

an order which was the creature of that agreement, seems to

me to ~e giving the branch an existence which is independent

of tbe tree. ·

/

/

[emphasis added]

H

·A

B

c

D

E

F

324 SUPREME COURT REPOlt1'5 (1991) SUPP. 1 S. C.R.

This was affirmed in appeal by Lindley L,,f. m the following words:

"the appellants, contend

that

the~e is no jurisdiction to set

aside the consent order upon such i:naterials as we have to deal

with ; and they go so far as to say t~at a consent order can only

be set aside on the ground of f~aud. I dissent from that

proposition entirely. A consent order, I agree, is an order; and

so long as it stands I think it is as good an estoppel as any other

order. I have not the slightest doUbt on that; nor have I the

slightest doubt that a consent order can be impeached, not only

on the ground of fraud, but upon ~y grounds .which invalidate

the agreement it expresses

in a

moreJ.fo~al way than usual".

(p.

280)

In Great North-West Central Railway

QJ. t& Ors. v. Charlebois and

Ors, (1899 AC 114 at 124, the Privy Council stated the proportion thus:

"It is quite clear that a company qannot do what is beyond its

legal powers by simply going intq co.urt and consenting to a

decree which orders that

the

thing shall be done ... Such a judg­

ment cannot be of more validity titan the invalid. contract on

which it was fou11ded". ·

[emphasis added]

It is, indeed, trite proposition that a cpntract whose object is op­

posed to public policy is invalid and it is not any the less so by reason alone

of the fact that the unlawful terms are embodied in a consensual decree. In

State of Punjab v.Amar Singh·, (1974) 2 SCC 70 at 90, this Court said:

After all, ·by consent or agreement, parties cannot achieve what

is contrary

to law and a decree merely based

on such agree­

ment cannot furnish a judicial amulet against statutory viola­

tion .... The true rule is that the contract of the parties is not the

less a contract, and subject to the incidents of a contract, be­

cause there is superadded the command of the Judge".

29.

We do not think that the plea

of "Accord and Satisfaction"

G raised by the UCC is also of any avail to it. UCC contends that the funds

constituting the subject-matter of the settlement

had been accepted and

appropriated by

Union of India and that, therefore, there was full accord

and satisfaction. We find factually that thert is no appropriation of the

funds by the Union of India. The funds remain to the credit of the

Registrar-General of this Court in the Reserve Bank of India. That apart

H as observed in Corpus Juris Seczmdum, Vol.I:

--I

i

I

i

\. ~

x .......

UNION CARBIDE v. U.0.1. [ VENKATACHALIAH,J.] 325

"an illegal contract or agreement, such as one involving ii-A

legality of the subject matter, one involving the unlawful sale or

exchange of intoxicating liquors, or a subletting, subleasing, or

hiring out of convicts, held under iease from the state, in viola-

tion

of statute, or stifling a prosecution for a public policy,

cannot constitute or effect

an accord and satisfaction". ·

B

(p. 473]

(emphasis added]

30. The main thrust of petitioner's argument of unlaulness of cone

sideration is that the dropping of criminal charges and undertaking to C

abstain from bringing criminal charges in future were part of the con­

sideration for the offer of 470 million US dollars by the UCC and as the

offences involved in the charges were

of public nature and

non-compoun­

dable, the consideration for the agreement was stifling of prosecution and,

therefore, unlawful. It

is a settled proposition and of general application

that where the criminal charges

are matters of public concern there can be D

no diversion of the course of public justice and cannot be the subject

matters

of private bargain and compromise.

31.

Shri Nariman urged that there were certain fundamental mis­

conceptions about the scope of this doctrine of stifling of prosecution in

the arguments

of the petitioners. He submitted that the true principle was E

that while non-compoundable offences which are matter of public concern

cannot

be subject-matter of private bargains and that administration of

criminal justice should not be allowed to pass from the hands of Judges to

private individuals, the doctrine is not attracted where side by side with

criminal -liability there was a pre-existing

civil liability that was also settled

and satisfied.

The

doccrine, he said, contemplates invalidity based on the F

possibility of the ~lement of coercion by private individuals for private

gains taking advantages

of the threat of criminal prosecution. The whole

idea

o; applicability of this doct~ine in this case becomes irrelevant having

regard to the fact that the Union of India as dominus litis moved in the

matter and that administration

of criminal justice was not sought to be

exploited by any private individual for private gains.

Shri Nariman sub- G

mitted that distinction between "motive" and "consideration" has been well

recognised in distinguishing whether the doctrine

is or is not attracted.

32. The questions that arise in the present case are, first, whether

putting an end to the criminal proceedings

was a part of the consideration

H

326 SUPREME COURT REPORTS (1991] SUPP. 1 S. C.R.

A and bargain for the payment of 470 million US :dollars or whether it was

merely one of the motives for entering into the settlement and, secondly,

whether the memorandum

of settlement and Qrders of this court, properly

construed, amount

to a compounding of the dffences. If, on the contrary,

what was

done was that

Union of India invited the court to exercise its

powers under Article

142 to permit

a withdr~wal of the prosecution and

B the expedient of quashii;ig was a mere proce<lJure of recognising the effect

of withdrawal, could the settlement be declarcirvoid ?

c

D

E

F

G

H

We think that the main settlement does

*Cl,t suffer from this vice. The

pain of nullity does not attach to it flowing from any alleged unlawfulnesi;

of consideration. We shall set out our reasons !Presently. . .

Stating the law on the matter, Fry L.J. i.n WimJ/JiliLocal Board of

Heoitli v. Vint. (1890) 45 Ch.D. 351at366 said j · .

. ' .

"We have therefore a case in whic~ a eontract is entered iiito

for the purpose of diverting .:...... l ~ay say perverting -.-. the

course. ofjustiee ; and, although I agree that in this case it was

. entered into with perfect good faith'. and with all the security

which could possibly

be given 'to

such an agreement, I never­

theless think that the general principle applies, and that we

cannot give effect to the agreement, the consideration of which

is the diverting t~e course of public justice."

In Keir v. Leeman, [6 Queen's Bench 308 at 316, 322); Lord Denman,

C.J.

said:

·· · ·

"The principle of law is laid down by Wilmot C.J. in Collins v.

Blantem (a) that a contract to withdraw a prosecution for per­

jury, and consent

to give no evidence againstthe accused, is

founded on an unlawful consideration and void.

On the soundness of this decision no doubt can be entertained,

whether the party accused were innocent

or guilty of the

crime

charged. If innocent, the law was abused for the purpose of

extortion; if guilty the law was eluded by a corrupt . com-

promise, screening the criminal for a bribe. · · .

...... Eut, if the offence is of a public nature, no agreenientcan

be valid that is founded ·on the consideration of stifling a

prosecution for it.

.·

-

UNION CARBIDE v. U.O.L [VFNKATAOIALIAH).) 327

In the present· instan~, the offence 'is not confined to personal A

injury, but is accompanied with riot and obstruction of a public

officer in the execution of his duty. These are matters of public

concern, and therefore not legally the subject

of a com­promise~

The approbation of the Judge (whether necessary or not) may B

properly be asked on all occasions where an indictment is com­

promised on the trial ; plainly it cannot make that legal which

the law eondemns."

This was affirmed in appeal b}' Tindal CJ. who said (p.393) :

"It seems clear, from the various authorities brought before us C

on the argument, that some misdemeanours are of such a na-

ture that a contract to withdraw a prosecution in respect

of

them, and to consent to give no evidence against the parties

accused,

is founded on an illegal consideration. Such was the

case of

Co//i11s v. B/011tem, 2 Wils. 341, 347, which was the case

of a prosecution for perjury. It is strange that such a doubt

should ever have been raiSed. A contrary decision would have

placed it in the power of a private individual to make a profit

D

to himself by doing a great public injury."

V. Norosimlio Raju v. V. Gurnmurthy Raju & Ors. [1963) 3 S.C.R. 687

of this court is a case in point. The first respondent who had filed a

criminal complaint in the Magistrate's Court against the appellant and his

E

other partners alleging of commission of offences under Sections

420, 465,

468 and 477 read with Sections 107, 120B of the Indian Penal Code entered

into an agreement with the accused persons under which the dispute be­

tween the appellant and the first respondent and others was to be ref erred

to arbitration on the

first respondent agreeing to withdraw his criminal

complaint. Pursuant to· that agreement the complaint was got dismissed,

on the first-respondent abstaining from adducing evidence. The arbitra-

tion proceedings, the consideration for which was the withdrawal of the

complaint, culminated

in an award and the first respondent ;applied to have

the award made a rule

of the

eourt. The appellant turned around and

challenged the award on the ground that the consideration for the arbitra­

tion-agreement was itself. unlawful as it was one not to prosecute a non­

compoundable offence. This court held that the arbitration agreement was

void under Section 23 of the Indian Contract Act as its consideration was

opposed to public policy. The award was held void.

F

G

~. even ill~S\lming thilt the Union of India agreed to compound H

328 SUPREME COURT REPORTS [1991] SUPP. 1 S. C.R.

A non-compoundable offences, would this constitute a stifling of prosecution

in the sense

in which the doctrine is understood. The essence of the

B

c

D

E

F

G

H

doctrine of stifling of prosecution is that no private person should be al-

~ •

lowed to take the administration of criminal justice out of the hands of the

Judges and place it in his own hands .. In Rameshwar v. Upendranath, AIR

1926 Calcutta

451, 456 the High Court said :

"Now in order to show that the object of the Agreement was to

stifle criminal prosecution,

it is necessary to prove that there

was an agreement between the parties express or implied, the

consideration for which was

to take the administration of law

out of the hands of the Judges and put it into the hands of a ..:r-·

private individual to detemzi11e what is to be done ill particular

case and that the contracting parties should enter i11to a bargain

to that effect".

[emphasis added]

V. Narasimha Raju (supra) this Court said :

[p.

693] "The principle underlying this provision is obvious. Once the

machinery

of the Criminal Law is set into motion on the allega­

tion that a non-compoundable offence has been committed, it

is for the criminal courts and criminal courts alone to deal with

that allegation and to decide whether the offence alleged has in

fact been committed or not.

17ze decision of this question

ca11-

11ot either directly or i11directly be take11 out of the ha11ds of

criminal courts and dealt with by private individuals."

[Emphasis added]

This

was what was reiterated in

Ouseph Poulo & Ors. v. Catholic

Union Bank Ltd. & Ors. [1964] 7 SCR 745:

"With regard to non-compoundable offence, however, the posi­

tion

is clear that

no C£!Urt to law can allow a private party to take

the admi11iftratio11 of law in its own hands and settle tlie questio11

as to whether a particular offence has been committed or not for

itself"

[ Emphasis added ]

x ....

•. ..-J

UNION CARBIDE v. U.O.I. [ VENl<ATACHALIAH,J.] 329

In this sense, a private party is not taking administration of law in its A

own hands in this case. It is the Union of India, as the dominus litis, that

consented to the quashing of the proceedings

.. We have said earlier that

what was purported to be done was not a compounding of the offences.

Though, upon review, we have set aside that part

of the order, the

conse­

quences of the alleged unlawfulness of consideration must be decided as at

the time of the transacti9n.

It is here that we see the significance of the B

concurring observations of Cha pan J. in Majibar Rahman v. Muktaslied

Hossein,

ILR 40 Calcutta page 113 at page 118, who said .

"I agree, but desire to carefully confine my reason for holding

that the bond

was void to the ground that the consideration for

the bond was found

by the lower Court to be a promise to C

withdraw from the prosecution in a case the compromise of

which is expressly forbidden by the

Code of Criminal

Proce­

dure."

As stated earlier, the arrangement which purported to terminate the

criminal cases was one of a purported withdrawal not forbidden

by any law D

but one which was clearly enabled. Whether valid grounds to permit si.tch

withdrawal existed or not is another matter.

35. Besides as pointed out by this court in

Narasimha

Raju's case

(supra) the consequence of doctrine of stifling of prosecution is attracted,

and its consequences follow where a "person sets the machinery of criminal E

law into action on the allegation that the opponent has committed a non­

compoundable offence and by the use of this coercive criminal process he

compels the opponent to enter into an agreement, that agreement would

be treated as invalid for the reason that its consideration is opposed to

public policy". (See page 692 of the report ). In that case this court further

held that the doctrine applies "when as a consideration for not proceeding

F With a criminal complaint, an agreement is made, in substance it really

means that the complainant has taken upon himself to deal

with

his com­

plaint,a11d on the bargaining counter he has used his 11011-prosecution of the

complaint as a consideration for the agreement which his opponent has been

induced or coerced to enter into". (emphasis added). These are not the

features of the present case.

G

36. More importantly, the distinction between the

"motive" for

entering into agreement and the "consideration" for the agreement must

be

kept clearly distinguished. Where dropping of the criminal proceedings is

a motive for entering into the agreement -and not its consideration -the

doctrine of stifling of prosecution

is not attracted. Where there

is also a H

330 SUPREME C'.OURT REPORTS (19'Jl) SUPP. 1 S. C.R.

A pre-existing· civil liability, the dropping of criminal proceedings need not

necessarily be a consideration for the agreement to satisfy that liability. In

Adhikmula Sahu & Ors. v. Jogi Sahu & Ors. AIR 1922 Patna 502, this

B

distinction is poitlted out: ·

"The distinction between the motive for coming to an agree­

ment and the actual consideration for the agreement must be

kept carefully in view and this care must be particularly exer­

cised in a case· where there is a civil liability already existing,

which is discharged or remitted by the Agreement".

(p. 503)

C In Deb.Kumar Ray Choudhury v. Anath Bandhu Sen and Ors. AIR

1931 Cat 421. it was mentioned :

D

E

F

· "A contract for payment of money in respect of which a criminal

prOS(!CUtiOll WOS pennissib/e under the law, Was not by itself op-.

. posed to public

policy.

...... the withdrawal of

the. prosecution iri the case before us

might have been the motive but not certainly the object or the

oonsideration of the contract as .evidenced by the bond in suit

. so as to render the agreement illegal.

Th.ese decisions are based upon the facts of the cases :;bowing

clearly that the agreements or the contracts sought to be en-

·.· forced were the foundation for the withdrawal of non-com­

. poundable criminal cases and were declared to be unlawful on

t~.e gr<;>und of public policy wholly void in law and, therefore,

unenforceable. This class

of

ca$es has no application, where, as

in.the present .case, there was a pre-existing civil liability based

upon adjustment of accounts between the parties concerned."

[emphasis added)

Ag~in. in Babu Hamaraih Kapur v. Babu 'Ram Swqrnp Nigam & Anr.

G [AIR 1941 Oudh 593) this distinction has been pointed out:

. "Thouift the ~otive of the· execution of.the document. may be

the withdrawal of a non-compoundable criminal case; the con­

sideration is quite legal, provided there is. an enforC(!able pre­

existing liability. In the Patna case it was observed that the ·

H

distinction between the motive for coming to an agreement and

the actual consideration. fo~ the agreement must be kept care-

-....

UNION.CARBIDE v. U.O.L[VENKATAOIALIAH,J.) 331

fully in view

and this care must be particularly exercised in a A

case where there is a civil liability already existing which is

discharged or remitted by the agreement."

[P .592) .

Finatly, this Court in Ouseph Poulo (supra) at page 749 held that:

"In dealing with such agreements, it is, however, necessary to

bear in mind the distinction between the motive which may B

operate in the mind of the complainant and the accused and

which may indirectly be responsible for the agreemetit and the

consideration for such an agreement. It is otlly where the agree-

. ment is supported by the prohibited consideration that it falls

within·

the mischief of the principle, that

agreemen.ts which in­

tend to stifle criminal prosecutions are invalid."

·.·[Emphasis added)

37. On a consideration of the matter, we hold that the doctrine of·

stifling of prosecution is not attracted in the present case, In reaching this

co~lusion we do not put out of eonsideration that it is inconceivable that

c

. Uajon of India would, under the threat of a prO!!fiCUtion, coerce ucc to D

pay. 470 million US dollars or any part thereof as considerationfor stifling

of the prosecution. In the ·context of the Union. of India the· plea lacks as

much in reality as in a sense

of

proportion.. ·

38. AC:cordingly on Contention (F) we hold that the settlement is

not hit by Section 23 or 24 of the Indian Contract Act and that no part of .

the consideration for pa}'ment of 470 mil~ion us dollars was unlawful~ E

Re: Conteniion ( G)

39. This concerns the ground that a "Fairnfss-Hearing", as under-

stood in the American procedure is mandatory before· a mass-tort action is

settled and the settlement in the.present case is bad as no such procedure

had preceded it It is al.So urged that the quantum settled for is hopelessly F

inadequate as .the settlement ha.s not enVisaged and provided for many

heads

of compensation

such as the future medical surveillance costs of a

large section· of the. exposed population which is put at risk; and that the

_Jo~c fort actions where, the latency-period for the manifestation of the

effects Qf the exposure is unpredictable it is necessary to have a "re-opener"

clause as in the very .nature of toxic injuries the fatency period for the

manifestation of effects . is unpredictable and any structured. settlement

should . contemplate and provide for the possible. baneful contingencies'. of

the future. It is pointed out for the petitioners that the order recor,ding the

settlement·. and the· order dated 4th May, .1989 indiCate that 110 · provision

was made: for such imminent contingencies for the future \Vhich. even in-

G

H

332 SUPREME COURT ·REPORTS (1991) SUPP. 1 S. C.R.

A elude the effect of the toxic gas on pregnant mothers resulting in congenital

.abnormalities of the children. These aspects, it is urged, would have been

appropriately discussed before the Court, had the victims and victim­

groups had a "Fairness-Hearing". It

is urged that there has been no ap­

plication

of the Court's mind to matters particularly relevant to toxic

injuries. The contention

is two fold. First is that the settlement did not

B envisage

th~ possibilities of delayed manifestation or aggravation of toxic

morbidity, in the exposed population. This aspect, it

is urged, is required

to

be taken care of in two ways:

One by making adequate financial

provision for medical surveillance costs for the exposed but still latent

victims and secondly, by providing in the case of symptomatic victims a

"re-opener clause" for meeting contingencies of aggravation of damages· in

C the case of the presently symptomatic victims. The second contention is as

to the infirmity of the settlement by an omission to follow the 'Fairness­

Hearing' procedures.

40. On the first aspect, Sri Nariman, however, contends that the

possibility that the exposed population might develop hitherto unsuspected

p complications in the future was known to and was in the mind of the

Union

of India and it must be presumed to hav~ taken all the possibilities into

account in arriving at the settlement. Sri Nariman said

we now have the

benefit

of hindsight of six years which is a sufficiently long period

ewer

which the worst possibilities would have blow-over. Indeed, in the plain< in

the Bhopal Court, Shri Nariman points out, Union of India has specifically.

· E averred that there were possibilities of such future damage. Sri Nariman

referred to the preface to the Report of April,

1986 of the Indian Council

of Medical Research (ICMR) on "Health Effects of the Bhopal Gas Tragedy" where these contingencies are posited to point out that these

aspects were

.in the mind of

Union of India and that there was nothing

unforeseen which could be said to have missed its attention.

in the said

F preface ICMR said:

" ...... How long will they (i.e. the respiratory, ocular and other

morbidities) last

?. What permanent diabilities can be caused?

What

is the outlook for

these vict!ms ? What of their off-spring?"

G Shri Nariman referred to the following passage in the introduction to

H

the Working Manual I on "Health Problems of Bhopal Gas Victims" April,

1986,ICMR;

"Based on clinical experience gained so far, it

is believed that

many

of them

(i.e. victims) would require specialised medicare

for several years since MIC

is an extremely reactive

substanc~,

)

x -

-

UNION CARBIDE v. U.0.1. [ VENKATACHALIAH,J. J 333

the possibility

of the exposed population developing hitherto A

unsuspected complications in

the future cannot be over­

looked."

What

i~, however, implicit in this stand of the UCC is the admission

that exposure to MIC has such grim implications for the future; but UCC

urges that the Union of India must be deemed to have put all these into the B

scales at the time it settled the claim for 470 million US ~ollars. UCC als9 ·

suggests that with the passage of time all such problems of the future must

have already unfolded themselves and that going by the statistics of medi-

cal evaluation of the affected persons done

by the Directorate of Claims,

even the amount of

470 million US dollars is very likely to be an over-pay­

ment. UCC ventures to suggest that on the estimates of compensation C.

based on the medical categorisation of the affected population, a sum of

Rs. 440 crores could be estimated to be an over-payment and that for all

the latent-problems not manifested yet, this surplus of Rs. 440 crores

should be a protect;·:e and adequate financial cushion.

41. We may at this stage have a brief look at the work of the D

medical evaluation and categorisation of the Health Status of the affected

persons carried out by the Directorate of Claims. It would appear that as

on 31st October, 1990, 6,39,793 claims had been filed. It was stated that a

considerably large number of the claimants who w~re asked to appear for

medical evaluation did not turn up and only 3,61,166 of them responded to

the notices. Their medical folders were prepared. The total number of

E

deaths had risen to 3,828... The results of medical evaluation and

categorisation of the affected persons on the basis of the data entered in

their Medical Folders as on 31st October,

1990 are as follows:

No. of medical folders prepared

No. of folders evaluated

No. of folders categorised

No injury

Temporary injuries

Permanent injuries

Temporary disablement

caused

by a

Temporary injury

Temporary disablement

caused

by a

permanent injury

Permanent

Partial disablement

3,61,966

3,58,712

3,58,712

1,55,203

1,73,382

18,922

7,172

1,313

2,680

F

G

H

334

A

SUPREME COURT REPORTS [1991] SUPP. 1 S. C.R.

Permanent total disablement

Deaths

40

3,828

42. On the medical research literature placed before us it can

reasonably

be posited that the exposure to such concentrations of MIC

might involve delayed manifestations of toxic morbidity. The exposed

B population may not have manifested any immediate symptomatic medical

status.

But the long latency-period of toxic injuries renders the medical

sur­

.veillance costs a permissible claim even ·ultimately the exposed persons

may not actually develop the apprehended complications. In Ayers v. Jack­

C son TP, 525 A 2d.287 NJ.1987, referring to the admissibility of claims of

medical surveillance expenses, it was stated:

D

E

F

G

H

"The claim for medical surveillance expenses stands on a dif.

f erent footing from the claim based on enhanced risk. It seeks

to recover the cost of periodic medical examinations intended

to monitor plaintiffs' health and facilitate early diagnosis and

treatment· of disease caused by plaintiffs' exposure to toxic

chemicals ..... ". ·

" .... The future expense of medical monitoring, could be a

· recoverable consequential damage provided that plaintiffs can

establish with a reasonable degree of medical certainty that

such expen_ditures are "reasonably anticipated" to be incurred

by reason of their exposure. There is . no doubt that such a

remedy would permit the early detection and treatment of

maladies and that

as a matter of public policy the tort-feasor

should bear its.cost.

Compensation

for reasonable and necessary medical expenses

is consistent with well-accepted legal principles. It is also

con·

· sistent with ·the important public health interest in fostering

access to medical testing for individuals whose exposure to

. toxic chemicals creates an enhanced risk of disease. The value

of early diagnosis and treatment for cancer patients is .well-.

documented." ·

"Although some individuals exposed to hazardous chemicals

may seek regular medical surveillance whether or not the cost

is reimbursed, the lack of reimbursement will undoubtedly

deter others

from . doing so. An application

of tort law that

'

UNION CARBIDE v. U.0.1. [ VENKATACHALlAH,J.) 335

allows post-injury, pre-symptom recovery in toxic tort litigation A

for reasonable medical surveillance c0sts is manifestly consis-

tent with the public interest in early detection and treatment of

disease.

Recognition of pre-symptom claims for medical surveillance

serves other important public interests. The difficulty of prov-B

ing causation, where the disease is· manifested years after ex­

posure, has caused many commentafors to suggest that tort law

has no capacity to deter pollutors, because the costs of proper

disposal are often viewed by pollutors as exceeding the risk of

tort

liability ...... "

"Other considerations compel recognition of a pre-symptom

medical surveillance claim. It is inequitable for an individual,.

·wrongfully exposed to dangerous toxic chemicals but unable to

prove that disease is likely to have to pay his own expenses

when medical intervention is clearly reasonable and neces-

sary ........................... "

"Accordingly, we hold that the cost of medical surveiilance is a

compensable item of damages where the proves demonstrate,

through reliable expert

testimony predicated upon the

sig­

nificance and extent of exposure to chemicals, the toxicity of

c

D

the chemicals, the seriousness of the diseases for which in-E

dividuals are at risk, the relative increase in the chance of onset

of disease in those exposed, and the value of early diagnosis,

that such surveillance to monitor the effect of exposure to toxic

chemicals is reasonable and necessary ...... " .

In the "Law of Toxic Torts" by Michael Dore, the same idea is ex-F

pressed:

"In Myers v. Johns-Manville Corporation, the court permitted

·plaintiff prove emotional harm where they were suffering from

"serious fear or emotional distress or a clinically diagnosed

phobia of cancer." The court distinguished, however, between G

a claim for. fear of cancer and a elaim for cancerphobia. The

former could be based on plaintifPs fear, preoccupation and

distress resulting from the enhanced risk of cancer but the

latter would require expert opinion testimony ................... , ... "

"The reasonable value of future medical services required by a H

A

B

336 SUPREME COURT REPORTS (1991) SUPP. 1 S. C.R.

defendant's conduct is recoverable element of damage in tradi­

tion

and toxic tort litigation. Such

damages have been awarded

even in circumstances where no present injury exists but medi­

cal testimony establishes that such furture medical surveillance

is reasonably required on the basis

of the conduct of a par-

ti~ular defendant. ......................... n

It is not the reasonable probability that the persons put at risk will

actually suffer toxic injury in future that determitles whether the medical r-·

surveillance is necessary. But what determines it is whether, on the basis of

medical opinion, a· person who has been exposed to a toxic substance

known to cause iong time serious injury should undergo periodical medical

C tests in order to look for timely warning signs of the on-set of the feared

consequences. These costs constitute a relevant and admissible head

of

compensation and may have to be borne in mind in forming an opinion

whether a proposed settlement -even as a settlement -is just, fair and

adequate.

D 43. Sri Nariman, however, urged that the

only form of compensa-

E

tion known to the common law is a lumpsum award - a once and for all

determination of compensation for all plaintiffs' losses, past, present and

future -and that split-trials for quantification

of compensation taking into

account future aggravation

of injuries, except statutorily enabled, are un­

known to common law.

Indeed, that this

is the position in common law cannot be disputed.

In an action for negligence, damages must be and are assessed once and

for all at the trial of such an issue. Even if it is found later that the damage

s_uff ered was much greater than was originally supposed, no further action

could be brought. It is well .settled rule of law that damages resulting from

F one and the same cause of action must be assessed and recovered once and

for all. Two actions, therefore,

will not lie against the same defendant for

personal injury sustained in the same accident.

(See Charlsworth and Percy

on Negligence [1990) 8th Edn. Para 43.

Indeed, even under the Gommon Law, as administered in U .K. prior

G to the introduction of sec.32A of the Supreme Court Act 1981, Lord Den­

ning thought that such special awards were not impermissible. But as

pointed out earlier the House

of Lords in Lim

Poli Choo v. Camden

Islington,

did not approve that view.

Later sec.32A

of the

Supreme Court Act, 1981 expressly enabled

H award of provisional damages and Order 31 Rules 7 to 10 (Part II) Rules _of

-

UNION CARBIDE v. U0.1.[VENKATACHAUAH).] 337

Supreme Court provided for the assessment of such further damages. The A

contention of the UCC is that the common law rule of once and for all

damages

is unuttered in India unlike in England where split awards are

now statutorily enabled and that, therefore, references to future medical

surveillance costs and "re-opener" Clauses are inapposite to a once for all

payment. The concept of re-opener clause in settlement, it

is contended, is

the result

of special legal

r~quirements in certain American jurisdictions B

and a settlement is not vitiated for not incorporating a "re-opener" clause

or for 'not providing for future medical surveillance costs inasmuch as all

these must

be presumed to have engaged the minds of the settling parties

at the time

of a once for all

settler.aent. Shri Nariman pointed out that the

American case

of Acushnet

River v. New Bedford Harbour, 712 F 2d Supp.

1019 referred to by the learned Attorney-General was a case where the C

"re-opener" clause was a statutory incident under the Comprehensive En­

vironmental Response, Compensation and Liability Act, 1980.

But petitioners say that in the process of evolving what is a fair,

reasonable and adequate settlement some

of the elements essential and

relevant to fairness and adequacy such as provision for future medical

D

surveillance and the likely future, but yet unforeseen, manifestation of toxic

injury, having regard to the nature

of the hazard, have not been kept in

mind and, therefore, the approval accorded to the settlement is on an

incomplete criteria. But

UCC would say that Union of India was aware of

the possibility of such future manifestations of the effects of the exposure

and must be deemed to have kept all those in mind at the time of settle-

E

ment.

44. But the point to emphasise is that those who were not parties to

the process of settlement are

·assailing the settlement on these grounds. In

personal injury actions the possibility of the future aggravation of the con­

dition and of consequent aggravation of damages are taken into account in

the assessment of damages. The estimate of damages

in that sense is a very

delicate exercise requiring evaluation of many criteria some of which

may

border on the imponderable. Generally speaking actions for damages are

limited

by the general doctrine of remoteness and mitigatibn of damages.

But the hazards of assessment of once and for all damages in personal

injury actions lie in many yet inchoate factors requiring to be assessed. It

is

in this context we must look at the 'very proper refusal of. the courts to

sacrifice physically injured plaintiffs on the alter of the certainty principle'.

The likelihood of future complications--though they

may mean mere as­

sessment or evaluation of mere chances--are also put into the scales in

qua\ifying damages. This principle may, as rightly pointed out 9Y Sri

F

G

H

338 SUPREME COURT REPORTS [1991] SUPP. 1 S. C.R.

A Nariman, take care of the victims who have manifest symptoms. But what

about those who

are presently wholly a symptomatic and have no

materfal to Jo.-

B

support a present claim ? Who will provide them medical surveillance costs

and if at some day in the future they develop any of the dreaded symptoms,

who

will provide them with compensation ? Even if the award is an "once

and for all" determination, these aspects must be taken into account.

45.

The

second· aspect is ·the imperative of the exercise of a

"Fairness-Hearing" as a condition for

the validity of the settlemenr. Smt.

Indira Jaising strongly urged that in the absence of a "Fairness-Hearing"

no settlement could at all be meaningful. But the

question· is whether such

a

procedure is relevant to and apposite in the context of the scheme under

C the Act. The "Fairness-Hearing" in a certified class of action is a concept

in

the United States for which a provision is available

·under rule 23 of

US Federal Rules of Procedure. Smt. Indira Jaising referred to certain

passages in

the report of Chief Judge Weinstein in what is known as the

Agent

Orange Litigation (597 Federal Supplement 740 (1984), to indicate

what according

to her, are the criteria a Court has to keep in mind in

D approving a settlement. The learned judge observed (at page

7(:1.) para 9):

E

F

G

H

"In deciding whether to approve the settlement the Court

:nust

have a sufficient grasp of the facts and the law involved in the

case in

order to make a sensible evaluation of the ligation's

prospects. (See

Malchman v. Davis,

706 F.2d, 426, 433 (2d

Cir.1983). An appreciation of the probabilities of plaintiffs'

recovery after a trial and the possible range of damages is essen­

tial. The cases caution, however, that the court"should not

.... turn the settlement hearing 'into a trial or rehearsal

of

the

trial.'"Flbt v. FMC Corp.,528 F.2d, 1169, 1172(4th Cir. 1975),

Cert. denied, 424 U.S. 967, 96 S.Ct. 1462, 47 L.Ed.2d

734(734(1976), quoting Teachers Ins. & annuity Ass'n of

America v. Beame, 67 F.R;D. 30, 33(S.D.N.Y.1975) .. See also

Malchman v. Davis, 706 F.2d 426, 433· (2D Cir. 1983)."

"A democratic vote by informed members of the class would be

virtually impossible in any large class suit. The costs of ensur­

ing

that each member of the class in this case fully understood

the issue bearing on settlement and

then voted on it would be

prohibitive and the enterprise quixotic. Even though hundreds

of members of the class were heard from, there was an over­

whelmingly large silent majority. In the final <malysis there was

and can be no "con.sent" in any meaningful sense."

[Emphasis added]

UNION CARBIDE v. U.0.1. [ VENKATACHALIAH,J.) 339

Learned Judge also referred to the nine relevant factors: (1) The A

complexity expense and likely duration of the litigation, (2) The reaction of

the class of the settlement, (3) The stage of the proceedings and the

amount of dis~very completed, (4) The risks of establishing liability, (5)

The risks of establishing damages (6) The risks of maintaining the class

action through the trial, (7) The ability

of the defendants to withstand a

greater

jQdgement, (8) The range of reasonableness of the settlement fu~d. B

in the light of the best possible recovery and, (9) the range of reasonable-

ness

of the settlement fund to a possible recovery in the light of all the

attendant risks

of litigation. But the limits were also indicated by learned

Judge:

''Thus

the trial court has a limited scope of review for deter- C

mining fairness. The very purpose of settlement is to avoid

trial

of sharply disputed issue and the costs of protracted litiga­

tion."

"The

Court may limit its fairness proceeding to whatever is

necessary to aid it in reaching a just and informed decision.

D

'Flin v. FMC Corp. 528 F.2d at 1173. An evidentiary hearing is

not required."

The settlement must, of course, be an informed one. But it will be an

error to require its quantum to be co-extensive with the suit claim or what,

if the plaintiffs fully succeeded; they would

be entitled to expect. E

The Bhopal Gas Disaster (Processing of Claims) Act, 1985, has its

own distinctive features.

It is a legislation to meet a one time situation.

It provides for exclusivity of the right of representation of all claimants by

Union of India and for divesting the individual claimants of any right to

pursue any remedy for any cause of action against UCC and UCIL. The F

constitutionality of this scheme has been upheld in the Sahu's case. Sri

Nariman contended that the analogy of "Fairness-Hearing" envisaged in

certified class action in the United States is inapposite in the context of

the present statutory right of the Union of India. Shri Nariman referred

to the following statement of the Court in Sahu case:.

" ... Our attention was drawn to the provisions of Order 1 Rule G

8( 4) of the Code. Strictly speaking, Order 1, Rule 8 will not apply

to a suit or a proceeding under the Act. It is not a case of one

havi11g common i11terest with others. Here the plaintiff, the

Central Govemment has replaced a11d divested the victims."

[Emphasis added]

H

340 SUPREME COURT REPORTS (1991) SUPP. 1 S. C.R.

A Consistent with the limitations of the scope of the review, says Shri

Nariman, the Court cannot go behind the settlement so as to take it back to

a stage of proposal and order a "Fairness Hearing". He urged that a settle­

ment was after all a settlement and an approval of a settlement did not

depend on the legal certainty as

to the claim or counter claim being worth-

B less or valuable. Learned counsel commended the following passage from the judgment in the Court of Appeal for the Fifth Circuit stated in

Florida Trailer and Equipment Co. v. DealJllA F.2d 567 (1960):

c

D

E

- .

" ...................... The probable outcome in the event of litigation, the

relative advantages and disadvantages are, of course, relevant

factors for evaluation. But the very uncertainties of outcome in

litigation, as well as the avoidance of wasteful litigation and ex­

pense, lay behind the Congressional infusion of a power to com­

promise. This is a recognition of the policy of the law generally to

encourage settlements. This could' hardly be achieved if the test

on hearing for approval meant establishing success or failure to a

certainty. Parties would be hesitant to explore the likelihood

of settlement apprehensive

as they would then be that the

application for approval

would necessarily result in a

judi­

cial determination that there was no escape from liability or

no hope of recovery and (thus) no basis for a ,com­

promise."

Sri Nariman also pointed out that In Agent Orange settlement only a

small fraction of one percent of the class came forward at the fairness

hearings; that there

was no medical evidence nor a mini-trial about the

factual aspects of the case and that

in the end:

"the silent majority remains -i

inscrutable". It is pointed out that in United Kingdom a different variant

F or substitute of fairness hearing obtains. Order 15 Rule · 13, Rules of

Supreme Court makes provision for orders made in representative actions

binding on persons, class or members of a class

who cannot be ascertained

or cannot be readily

ascertaineq.

G 46. In our opinion, the right of the victims read into section 4 of

the Act to express their

views on a proposed settlement does

not con-

tribute to a position analogous to that

in

United States in which fairness ·~·

hearings are imperative. Section 4 of the Act to which the right is trace-

able merely enjoins Government of India to

have 'due-regard' to the views

H expressed by victims. The power of the

Union of India under the Act to

UNION CARBIDE v. U.0.1. [ VENKATACHALIAH,.J. J 341

enter into a compromise is not necessarily confined to a situation where

suit has come to be instituted

by it on behalf of the victims. Statute .enables

A

the

Union of India to enter into a compromise even without such a suit.

Right

of being heard read into. sec. 4--and subject to which its con--

stitutionality has been upheld in

Sahu 's case-subjects the Union· of India

to a corresponding obligation. But that obligation does not envisage

or

compel a procedure like a "Fairness-Hearing" as a condition precedent

to·a

compromise that Union of India may reach, as the situations in which it

may do so are not necessarily confined to a suit.

B

Accordingly, contention (G) is answered against petitioners. We

hold that the settlement

is not vitiated by reason alone of want of a

"Fair-C

ness-Hearing" procedure preceding it. Likewise, the settlement is not

vitiated by reason of the absence of a "re-opener" clause built into it. But

there

is one aspect as to medical surveillance costs and as to a provision

for possible cases

which are now a-symptomatic and which may become

symptomatic after a drawn-out

of latency period. We will discuss that

aspect under Point

(J) infra. D

Re: Contention (H)

47. The question is if the settlement is reviewed and set

aside what

should happen to the funds brought in

by the

UCC pursuant to the order.

This question

was raised by the petitioners and argued before us by the

parties inviting a decision. We propose to decide

it though the stage for

giving effect to it has not yet arrived.

The stand of the

Union of India and other petitioners is that even

upon a setting aside of the settlement, the funds should not be allowed to

E

be repatriated to the United States as that would embroil the victims in

endless litigations to realise the fruits of the decree that may be made in

F

the suit and to realise the order for interim-payment. The stand of the Union of India as recorded in the proceedings dated 10.4.1990 is as fol­

lows:

. "l. It is submitted that the Union of India consistent with its

duty

as parens patriae to the victims cannot consent to the G

taking away by Carbide of the moneys which are in India out-

side the jurisdiction

of Indian Courts.

2. At this stage, the

Union of India is not claiming unilaterally

to appropriate the moneys, nor to disburse or distribute the

same. The moneys can continue to be deposited

in the Bank as H

A

B

c

342

SUPREME COURT REPORTS (1991) SUPP. 1 S. C.R.

at present and earn interest subject to such orders that may be

passed in appropriate proceedings by courts.

3. It is submitted that in view of the facts and circumstances of

the case, the previous history of the litigation, the orders

passed

by the district court Bhopal, Madhya

Pradesh High

C_ourt and this Hon'ble Court, and the undertakings given by

UCIL and Carbide to Courts in respect of their assets, this

Hon'ble Court

may, in order to do complete justice under Ar­

ticle

142 of the constitution, require retention of the moneys

for such period

as it may

deem· fit, in order to satisfy any

decree that

may be passed in the

suit· including the enforceable

order of the M.P. High Court dated 4th April 1988."

48. It is urged by the learned Attorney General that restitution being

in the nature of a proceedings inexecution, the party claiming that benefit

must be relegated to the court of first instance to work out its remedies. It

is also urged that the

UCC did not bring in the funds on the faith of the

D court's order, but did so deliberately and on its own initiative and choice

and deposited the funds to serve its own interest even after it was aware of

the institution of the proceedings challenging the settlement

in an attempt

to effectuate a fait-accompli. It

is further said that the order of the High

Court directing payment of interim compensation of Rs.

250 crores is

operative and since the UCC has not sought or obtained any stay of opera-

E tion of that order, the sums to the extent of Rs. 250 crores should not, at all

events, be permitted to be repatriated.

Learned Attorney General also sought to point out that the UCC

. had, subsequent to the settlement, effected certain corporate and ad­

ministrative changes and without a

full disclosure by the

UCC of these

F changes and their effect on the interests of the claimants, the funds should

not be permitted to be taken out of the court's jurisdiction, though,

how­

ever, Government of India should not also

be free to appropriate or use the

funds.

49. We are not impressed by any of these contentions. It is not

G shown that the

UCC brought-in the monies with any undue haste with a

view to confronting Union of India with a fait accompli. The records indi­

cate a different complexion of the matter. The payment appears

to have

been expedited at instance

by the

Union of India itself.

50. Strictly speaking no restitution in the sense that any funds ob­

H tained and appropriated by the Union of India requiring to be paid back

UNION CARBIDE v. U.0.L [VENKATACHALIAH,J.] 343

arises. The funds brought in by the UCC are deposited in the Reserve A

-~ Bank oflndia and remain under this Court's control and jurisdiction. Res­

titution

is an equitable principle and is subject to the discretion of the

Court.

Section 144, Code of Civil Procedure, embodying the doctrine of

restitution does not confer any new substantive right to the party not

·al­

ready obtaining under the general law. The section merely regulates the

power of the court in that behalf.

B

51. But, in the present case,

Section 144 CPC does not in terms

apply. There is always an inherent jurisdiction to order restitution a for­

tiorari where a party has acted on the faith of an order of the court. A

litigant should not go back with the impression that the judicial-process so

operated

as to weaken his position and whatever it did on the faith of the

court's order operated to its disadvantage. It

is the duty of the court to

ensure that no litigant goes back with a feeling that he was prejudiced

by an

act which he did on the faith of the court's order. Both on principle and

authority it becomes the duty of the court to -

as much moral as it is legal

-to order refund and

restitution of the amount to the UCC -if the

settlement

is set aside.

In Binayak v. Ramesh, [1966] 3

SCR 24 this Court dealing with scope

of Section 144 CPC observed:

c

D

" .......... The principle of the doctrine of restitution is that on the

reversal of a decree, the law imposes an obligation on the party

E

to the suit who received the benefit of the erroneous decree to

make restitution to the other party for what

he has lost. This

obligation arises automatically on the reversal or modification

of the decree and necessarily carries with it the right to restitu-

tion of all that has been done under the erroneous decree; and

the court

in making restitution is bound to restore the parties,

so far as they can be restored, to the same position they were

in

at the time when the Court by its erroneous action had dis-

placed them from ...........

"

[p.27]

-" In Jai Berham and others v. Kedar Nath Marwari and Others [1922)

P.C. 269 at 271 the Judicial Committee noticed that:

"The auction-purchasers have parted with their purchase­

rnoney which they paid into ~ourt on the faith of the order of

F

G

H

A

B

c

D

E

F

344 SUPREME COURT REPORTS [1991] SUPP. 1 S. C.R.

confirmation and certificate of sale already referred to ....... ".

and said:

" ............ and it would be inequitable and contrary to justice that

the judgment-debtor should be restored to this property

without making good to the auction-purchaser the moneys

which have been applied for his benefit."

In L. Guran Ditta v; T.R. Ditta, [1935] PC 12 Lord Atkin said:

" ........... The duty of the Court when awarding ·restitution under

sec. 144 of the Code is imperative. It shall place the applicant

in the position in which

he would have been if the order had

not made:

and for th.is purpose the Court is armed with powers

[the 'may' is empowering, not discretionary] as to mesne

profits, interest and so forth. As long ago as 1871 the Judicial

Committee in 3

P.C. 465 (1) made it clear that interest was part

of the normal relief given in restitution: and this decision seems

right

to have grounded the practice in India in such cases .......

."

(p.13]

In Jagendra Nath Singh v. Hira Salm and others. AIR 1948 All. 252

F.B. Motham J. observed:

-"Every Court has a paramount duty to ensure that it does no

injury

to any litigant and the provisions of

Sec. 144 lay down a

procedure where effect can be given to that general provision

of the law. The Court should be slow so to construe this sec­

tion as

to impose a restriction upon its obligation to act right

and fairly according to the circumstances towards all parties

involved."

[p.253]

52.

We are satisfied in this case that the

UCC transported the funds

to Jndia and deposited the foreign currency in the Reserve Bank of India

G on the faith of the Court's order. If the settlement is set aside they shall be

entitled to have their funds remitted to them back in the United States

together with such interest as has accrued thereon. So far as the point

raised by the learned Attorney-General as to the

corporate changes of the UCC is concerned, we think, a direction to the UCC to prove and establish

compliance with the District Court's

order dated

30the November, 1986,

H

UNION CARBIDE v. U.0.1. [ VFNKATACHALIAH,J. J 345

should be sufficient safeguard and should meet the ends of justice.

A

__...J'

Accordingly, in the event of the settlement being set aside the 53

UCC shaU be entitled to have 420 million US Dollars brought in by it

remitted to it

by the

Union of India at the United States along with such

interest as !las accrued on it in the account.

But this right to have the restitution shall be strictly subjeet to the

B

condition that the UCC shall restore its undertaking dated 27.11.1986

which was recorded on 30.11.1986 by District Court at Bhopal and on the

strength of which the court vacated the order of injunction earlier granted

against the UCC. Pursuant to the order recording the Settlement, the said

order dated 30.11.1986 of the District Court was set-aside by this Court. If

c

the settlement goes, the order dated 30.11.1986 of the District Court will

automatically stand restored and the UCC would be required to comply

with that order to keep and maintain unencumbered assets of the value of

US 3 billion dollars during the pendency of the suit. The right of the UCC

to obtain the refund of and repatriate the funds shall be subject to the

performance and effectuation

of its obligations under the said order of

D

--'.,

30.11.1986 of the District Court at Bhopal. Till then the funds shall remain

within the jurisdiction of this Court and shall not be amenable to any other

legal process. The Contention (H) is disposed of accordingly.

Re: Contention(/)

54. The contention is that notices to and opportunities for hearing of

E

the victims, whom the Union of India claims to represent, were imperative

before the proposed settlement was recorded and this, admittedly, not

having been done the orders dated 14th and 15th February,

1989 are nul-

lities as these were made in violation of the rules of nafural justice. Shri

Shanti Bhushan urged that the invalidity of the settlement is squarely

F

covered and concluded, as a logical corollary, by the pronouncement of the

Constitution Bench

in Sahu case. He referred to and relied upon the

following observatior.s of Chief Justice Sabyasachi Mukharji

in Sa/m's case:

----+

"It has been canvassed on behalf of the victims that the Code of

Civil Procedure is an instant example of what is a just, fair and

G

~

reasonable procedure, at least the principles embodied therein

and the Act would be unreasonable if there

is exclusion of the

victims to vindicate properly their

views and rights. This ex-

clusion may amount to denial of justice.

In any case, it has been

sugsested and in our opinion there is a good deal of force in this

"

co11tentio11, that ifa part of the claim, for good reasons or bad, is H

t

346

A

B

c

D

E

F

G

H

SUPREME COURT REPORTS (1991] SUPP. 1 S. C.R .

.

sought to be compromised or adjusted without at least consider­

ing the views of the victims that would be unreasonable depriva-

tion

of

the rights of the victims .......... "

" ............. Right to a hearing or representation before entering

into a compromise seems to be embodied

in the due process of

law understood in the sense the term has been used in the con~titutional jargon of this country though perhaps not

originally intended .............. "

"In view of the principles settled by this court and accepted all

over the world,

we are of

the opi11ion that i11 a case of this

magnitude a11d nature, wizen the victims have been given some

say by

sectio11 4 of

the Act, in order to make that opportunity

contemplated by sec. 4

of the Act

meaningful and effective, it

should be so read that the victims have to be give11 a11 opportllnity

of the making their representation before the collrt comes to any

conclusion in respect of any settlement."

xx xxx xx

"In our opinion, the constitutional requirements, the language

of the section, the purpose of the Act and the principles of

natural justice lead

us to this interpretation of section 4 of the

Act that

in case of a proposed or contemplated settlement,

notice should be given to the victims who

a;e affected or whose

rights are to be affected to ascertain their

views. Section 4 is

significant. It enjoins the Central Government only to have

"due regard" to any matters which such person may require to

be urged.

So the obligation is

011 the Central Govt. in the situa­

tion contemplated by Sec. 4 to /lave dlle regard to the views of the

victims and that obligation cannot be discharged by the Central

Govemment unless the victims are _told that a settlement is

proposed, intended or contemplated. It is not necessary that such

views would reqllire consent of all the victims. The Central

Govt. as the Representative of the victims must have the

views

of the victims and place such views before the court in such

manner

it considers necessary before a settlement is entered

into.

If the victims want to advert to certain aspects of the

matter during the proceedings under the Act and settlement

indeed

is an important stage in the proceedings, opportunities

must be given to the

victims. Individual notices may not be

necessary. The court can, and

in our opinion should, in such

situation

fo_rmulate modalities of giving notice and public

;

UNION CARBIDE v. U.0.1. [ VENKATACHALIAH,J.] 347

notice

can also be given inviting views of the victims by the A

help of mass media."

" ........... The Act would be bad if it is not constrned in the light that

notice before any settlement under sec.4 of the Act was required to be

given .......... "

(Emphasis Supplied] B

'Shri Shanti Bhushan urged that with these findings and conclusions

the only logical resultant is that the settlement must be declared a nullity

as

one reached in violation of the rules of natural justice. For

Shri Shanti

Bhushan, the .matter is as simple as that.

But after making the observation excerpted above, the Constitution

Bench, having

regard to the nature of this litigation, proceeded to spell

out its views and conclusions on the effect of non-compliance of natural

justice and whether there were other remedial and curative exercise. Chief

Justice Mukharji noticed the problem arising out of non-compliance thus:

" ........ .It further appears that that type of notice which is re-

quired to be given had not been given. The question there/ ore, is

what is to be done a11d what is the co11seque11ce ? The Act

would be bad if it is not construed in the light that notice

before any settlement under sec. 4 of the Act was required to

be given. Then arises the question of consequences of not giving

the notice ........ "

[Emphasis supplied]

Learned Chief Justice proceeded to say:

" .......... Jn this adjudication, we are not strictly concerned with

the validity or otherwise of the settlement, as we have indicated

hereinbefore. But constitutional adjudication cannot be.

divorced from

the reality of a situation, or the impact of an

adjudication. Constitutional deductions are never made in the

vacuum. These deal with life's problems in the reality of a

given situation.

And no

constitutional adjudication is also pos­

sible unless

one is aware of the consequences of such an ad­

judication.

One hesitates in matters of this type where large

consequences follow one way or the other to put as under what

others have put together. It is well to remember, as old Justice

Holmes, that time has upset many fighting faiths and one mu'S>t

always wager one's salvation upon some prophecy based upon

c

D

E

F

G

H

A

B

c

D

E

F

G

H

348

SUPREME COURT REPORTS (1991) SUPP. 1 S. C.R.

imperfect knowledge. Our knowledge changes; our perception

of truth also changes ........ "

" ............ No man or no man's right should be affected without

an opportunity to ventilate his

views. We are also conscious

that justice

is a psychological yearning, in which men seek ac-

ceptance

of

their_ view point by having an opportunity of vin-

dication of their view point before the forum or the authority

enjoined

or obliged to take a decision affecting their right.

Yet,

i11 the particular situatio11s, one has to bear in mind how an

i11fraction of that should be sought to be removed in accordance

with justice. !11 the facts a11d the circumsta11ces of this case where

sufficie11t opportunity is available when review application is

heard 011 notiae, as directed by Court, no further opportunity is

necessary a11d it can11ot be said that injustice has been done. "To

do a great right" after all, it is permissible sometimes "t.o do a

little wrong". In the facts and circumstances of the case, this is

one of those rate occasions .......... "

[Emphasis supplied]

Chief Justice Mukharji also observed;

" ........... But having regard to the urgency o1 the situation and

having regard to the need for the victims for relief and help

and having regard to the.fact that.so much effort has' gone

in

finding a basis for the settlement, we, at

011e poi11t of time,

thought that a post-decisio11al hearing in the facts and cir-

cumstances of this case might be considered to be sufficient com-

plia11ce with the requireme11ts of principles of 11atural justice as

embodied u11der Sec. 4 of the Act ......... "

(p._63)

" .......... .In the facts and the circumstances of this, therefore, we

are of the opi11io11, to.· direct that notice should be given 11ow,

would not result in doing justice in the situation. In the premises,

110 further conseque11tial order is 11ecessary by this Court ......... "

(p. 65)

While Shri Nariman understandably strongly relies on these observa­

tions as the ll!_W of the case, Shri Shanti Bhushan seeks to deny them any

binding force on the ground that they were mere passing observations

i...

("

~-

>-·

'r"

UNION CARBIDE v. U.O.L [VENKATACHALIAH).) 349

inasmuch as the question of validity of the settlement was not before the A

court in Sahu case Shri Shanti Bhushan relied upon several prQnounce­

ments

of this Court : viz. National Textile

Worker.r Union v. P.R. Ramakrish-

nan, (1983) 1 SCC 228 Institute of Chartered Accountants v. L.K Ratna,

(1986) 4 SCC 537, Kl. Shephard v. Union of India, (1987) 4 SCC 431, R.B.

Shreeram Durga Prasad v. Settlement Commission, (1989) 1 SCC 628 and

H.L. Treltan v. Union of India, [1989} 1 SCC 764 to emphasise the imperatives B

of observance of natural justice and the inevitability of the consequences the

flow from a non-compliance of the requirements of a pre-decisional hearing.

~ These are all accepted principles. Their wisdom, verity and univer-

sality in the discipline of law are well established. Omission to comply with

the requirements of the rule of

Audi Alteram Partem, as a general rule, C

vitiates a decision.

Wh"'re there is violation of natural justice no resultant

or independent prejudice need be shown, as the denial of natural justice is,

in itself, sufficient prejudice and it is no answer to say that even with

observance

of natural justice the same conclusion would have been

reached. The citizen "is entitled to be under the Rule of

law and not the Rule

of Discretion" and "to remit the maintenance of constitutional right to judicial D

discretion is to shift the foundation of freedom from the rock to the sand". ·

But the effects and consequences of non-compliance may alter with

situational variations and particularities, illustrating a "flexible use

of dis­

cretionary remedies to meet novel legal situations".

"One motive" says Prof.

Wade "for holding administrative acts to be voidable where according to E

principle they are void may be a desire to extend the discretionary powers

of the Court". As observed

by Lord Reid in Wiseman v. Bomeman (1971

AC 297) natural justice should not degenerate

into a set of hard and fast

rules. There should be a circumstantial tlexibility.

In

Sahu case this Court held that there was no compliance with the F

principles of natural justice but also held that the result of the non-com­

pliance should not be a mechanical invalidation. The Court suggested

curatives. The Court was not only sitting in judicial review of legislation;

but was a court

of construction also, for, it is upon proper constructiori of

the provisions, questions of constitutionality come to be decided. The

Court

was considering the scope and content of the obligations to afford a G

hearing implicit in Section 4 of the Act. It cannot be said to have gone

~ beyond the pale of the enquiry when it considered the further question as

to the different

ways in which that obligation could be complied with or

satisfied. This is, in substance, what the Court has done and that is the law

of the case. ·It cannot be said that these observations were made by the way

and had no binding force. H

350 SUPREME COURT REPORTS [1991] SUPP. 1 S. C.R.

A Sri Garg submitted that when the Union of India did not, even prima-

facie, probabilise that the quantification reflected in the settlement was

arrived on the basis of rational criteria relevant to the matter, the deter­

mination fails as the statutory authority had acted ultra-vires its powers and

trusts under the statutory scheme. Sri Garg said that it would be a perver­

sion of the process to call upon the victims to demonstrate how the settle-

B ment is inadequate. There was,

accordi11g to Sri Garg, no material to shift

the risk of non-persuasion. Sri Garg urged that unless the elements of

reasonableness and adequacy -even to the extent a settlement goes -

are not established and the quantification shown

to. be justified on some

tenable basis the settlement would incur the criticism of being the result of

an arbitrary action of Government.

c

D

E

F

G

H

Shri Shanti Bhushan, however, strongly commended the following

observations of Megarry

J in Leary

v: National Union of Vehicle Builders

[1971) Ch.34 which were referred to with approval by the court in Institute

of Chartered Accountants v. L.K. Ratna [1986) 4 SCC 537 as to the effect of

non-observance of natural justice:

"If one accepts the contention that a defect of natural justice in

the trial body can be cured

by the presence of natural justice in

the appellate body, this has the result of depriving the member

of his right of appeal from the expelling body. If the rules and

the law combine to

give the member the right to a fair trial and

the right of appeal,

why should he be told that he ought to be

satisfied with

al! unjust trial and a fair appeal? Even if the

appeal

is treated as a hearing de novo, the member is being

stripped of his right to appeal to another body from the effec­

tive decision to expel

_him . I cannot think that natural justice is

satisfied by a process whereby an unfair trial, though not

resulting

in a valid expulsion, will never-the-less have the effect

of depriving the member

·of his right of appeal when a valid

decision to expel him

is subsequently made.

Such a depriva­

tion would be a powerful result to

be achieved by what in law is

a mere nullity; and it is no

mere triviality that might be justified

on the ground that natural justice does not mean perfect jus­

tice. As a general rule, at all events, I hold that a failure of

natural justice in the trial body cannot ~ cured by a sufficiency

of natural justice in an appellate body."

Prof. Wade in his treatise on Administrative Law observes:

"If natural justice is violated at the first stage, the right of ap­

peal is not so much a true right of appeal

as a corrected initial

UNION CARBIDE v. U.0.1. [ VENKATAGIALIAH,J.] 351

hearing: instead

of fair trial followed by appeal, the procedure A

is reduced to unfair trial followed by fair trial."

We might recall here that the Privy Council in

Calvin v. Carr [1980]

AC 576 had expressed its reservations about Megarry J's 'General Rule' in

Leary's case. However, the reservations were in the area of domestic juris­

diction, where contractual

or conventional Rules operate. The case did

not involve a public law situation. But the House of Lords in Llyod v. Memahan [1987] AC 625 applied the principle to a clearly public law situa­

tion.

The principle in Leary's might, perhaps, be too broad a generalisa­

tion.

But

the question here

is not so much as to the consequences of the

omission on the part of the Union oflndia to have "due regard" to the views

of the victims on the se~tlement or the omission on the part of the Court to

afford an opportunity to the victims of being heard before recording a

settlement as

it is one of the effects and implications of the pronouncement

in

Sahu case which is the law of the case. In Salm case the Court expressly

held that the non-compliance with

the obligation to issue notices did not,

by such reason alone, in

the circumstances of the case, vitiate the settle­

ment,

and that the affected persons may avail themselves of an opportunity

of being heard in the course of the review petitions. It is not

proper to

isolate and render apart the two implications and hold the suggested cura­

tive as a

mere obiter.

55. While reaching this conclusion, we are not unmindful

of the

force of the petitioner's case. The

Sa/m's case laid down that Section 4 of

the Act contemplated and conferred a right on the victims of being heard.

It also held that they were

not so heard before the Government agreed to

the terms of the settlement. According to the Sahu's case, the victims

should have an opportunity

of being heard in the Review

Proceedings. The

petitioners who were litigating the matter did not represent all the victims

and victim-groups.

56.

In the ultimate analysis, the

crucial question is whethe~ the op­

portunity to the affected persons predicated in the Sahu case can

reasonably be said to have been afforded. Indeed, at the very commence­

ment

of the hearing of the review petitions, Smt. Indira Jaising made a

pertinent submission that

the court should determine and clarify the nature

and scope of the review hearing: whether they partake of the nature of a

"Fairness Hearing"

or of the nature of a "post-decisional hearing" or

whether the court would device some way in which the victims at large

B

c

D

E

F

G

H

352 SUPREME COURT REPORTS (1991) SUPP. 1 S. C.R.

A would have an effective sense of participation as envisaged in the Sahu

decision. Smt. Indira Jaising submitted that opportunity of being heard in

the review suggested and indicated by the Sahu decision cannot be under­

stood to confer the opportunity only to those

who were eo-nomine parties

to the review petitions.

B

SJ. In the present hearings Shri Nariman placed before us a number

of press-clippings to show that, from time to time, largely circulated

newspapers

in the country carried detailed news reports of the settlement

and of the subsequent legal proceedings questioning them.

Shri Nariman's

contention

is that in view of this wide publicity the majority of the affected

persons must be presumed to

have had notice, though not .in a formal way

C and to have accepted the settlement as they had not bestirred themselves to

move the Court.

58.

Shri Nariman also raised what he urged were basic objection as

to the scope of the review jurisdiction and to the enlargement of the scope

of the review hearings to anything resembling a "Fairness Hearing"

by treat-

D ing the concluded settlement as a mere proposal to settle.

Shri Nariqian

said that the Court could either review the orders dated 14th and 15th

February,

1989 if legal grounds for such review under law were strictly

made out or dismiss the review petitions

if petitioners fail to make

out a

case in accordance with the accepted principles regulating the

review juris-E diction; but the court could not adopt an intermediate course by treating

the settlement

as a proposed or provisional settlement and seek now to do

what the

Union of India was expected to .do before the settlement was

reached.

59. The whole issue, shorn

of legal subtleties, is a moral and

F humanitarian one. What was transacted with the court's assistance be­

tween the

Union of India on one side and the UCC on the other is now

sought to be made binding on the tens of thousands of innocent victims

who,

as the law has now declared, had a right to be heard before the

settlement could be reached or approved. The implications of the settle­

ment and

its effect on the lakhs, of citizens of this country are, indeed,

G crucial in their grim struggle to reshape and give meaning to their torn

lives. Any paternalistic condescension that what has been,done is after all

for their own good is out of place. Either they should have been heard

before a settlement

was approved in accordance with the law declared by

this Court or it, at least, must become demonstrable in a process in which

they have a reasonable sense of participation that the settlement has been .

H to their evident advantage or, at .least, the adverse consequences are effec-

UNION CARBIDE v. U.0.1. ( VENKATACHALIAH,J.] 353

tively neutralised. The ultimate directions on Point J that we propose to A

issue will, we think, serve to achieve the last mentioned expectation. Legal

and procedural technicalities should yield to the paramount considerations

of justice and humanity. It is of utmost importance that in an endeavour of

such great magnitude where the court is trusted with the moral

respon­

sibility of ensuring justice to these tens of thousand innocent victims, the

issues

of human suffering do not become obscure in procedural thickets. B

We find it difficult to accept

Shri Nariman's stand on the scope of the

review. We think that in a situation of-this nature and magnitude, the

Review-proceeding should not be strict, orthodox and conventional but

one whose scope would accommodate the great needs of justice. That

·apart, quite obviously, the individual petitioners and the petitioner-or- C

ganisations which have sought review cannot, be held to represent and

exhaust the interest

of all the victims.

Those represented by the petitioner-organisations-even if their

claims of membership are accepted on face

value--constitute only a small

percentage of the total number of persons medically evaluated. The rest of

D

the victims

~onstitute the great silent majority.

When an order affects a person not a party to the proceedings, the

remedy

of an affected person and the powers of the Court to grant it are

well-settled. For instance, in

Sliivdeo Singh & Ors. v. State of Punjab & Ors.

AIR 1963 SC 1909 on a writ petition filed under Article 226 of the Con­

stitution l?Y A for cancellation of the order of allotment passed by the

Director

of Rehabilitation in favour of B, the High Court

made an order

cancelling the allotment though 'B' was not a party. Later, B filed a writ

petition under Article

226 for impleading him as a party and for

re-hearing

the whole matter. The High Court granted it. Before this Court, the objec-

tion was this: ·

"Learned counsel contends that Art. 226 of the Constitution

does not confer

any power on the High Court to review its own

order and, therefore, the second order of Khosla,

J ., was

without

jurisdiction."

This Court rejected the contention observing that:

"It is sufficient to say that there is nothing in Art. 226 of the

Constitution to preclude a High Court from exercising the

power

of review which inheres in every court of plenary

juris­

diction to prevent miscarriage of justice or to correct grave and

E

F

G

H

A

B

c

D

E

354 SUPREME COURT REPORTS (1991) SUPP. 1 S. C.R.

palpable errors committed by it. Here the previous order of

Khosla, J ., affected the interests of persons who are not made

parties to the proceedings before him. It was at their instance

and for giving them a hearing that Khosla,

J., entertained the

second petition. In doing so, he merely did what the principles

of natural justice required him to do. It is said that the

respon­

dents before us had no right to apply for review because they

were not parties to the previous proceedings. As we have al-

ready pointed out, it is precisely because they were not made

parties to the previous proceedings, though their interests were

sought

to be affected by the decision of the High Court, that

the second application was entertained by Khosla,

J."

60. The nature of the present reView ·proceedings is indeed sui­

ge11eris. Its scope is pre-set by the terms of the order dated 4th May 1989 as

well as what are further n~cessarily implicit in Sahu decision. In the course

of the order dated 4th May 1989, it was observed.

" ....... .If, owing to the pre-settlement procedures being limited

to the main contestants in the appeal, the! benefit of some con­

trary or supplem~ntal information or material, having a crucial

bearing on the fundamental assumptions basic to the settle­

ment, have been denied to the Court and that as a result,

serious miscarriage of justice, violating the constitutional and

legal rights of the persons affected, has been occasioned, it will

be the endeavour of this Court to undo any such injustice. But .

that, we reiterate, must

be by procedures recognised by

law.

Those who trust this Court ~II not have eause for despair."

The scope of the review in the present case is to ensure that no mis-

carriage

of justice occurs in a matter of such great moment. This is, per-

~

F haps, the last opportunity to verify our doubts and to undo injustice, if any,

which may have occurred. The fate

and fortunes of tens of thousands of

persons depend on the effectiveness and fairness of these proceedings.

The

kgal and procedural technicalities should yield to the paramount con­

siderations of justice and fairness. The considerations go beyond legalism

and are largely humanitariam. It is of utmost importance that great issues

G of human suffering are not subordinated to legal technicalities.

But in view of our '::onclusion on point J that on the material on T

record, the settlement-fund should be sufficient to meet the needs of a just

compensation and the

order we propose to pass with regard to point J, the

grievance of the petitioners on the present contention

would not, in our

H opinion really survive. Contention (I) is answered accordingly.

UNION CARBIDE v. U.0.1. [VENKATACHALIAH,J.] 355

Re: Point (J)

A

61. Before we go into the question whether the settlement should be

set aside on grounds of inadequacy of the settlement fund, certain sub­

sidiary contentions and arguments

may be noticed. They deal with (i) that

there has been an exclusion of a large number of claims on the ground that

despite service

c;f notices they did not respond and appear for medical

documentation and (ii) that the whole exercise of medical documentation

B

is faulty and is designed and tends to exclude genuine victims. These con­

tentions are really not directly germane

to the question of the validity of the

settlement. However, they were put forward to d,iscredit

•the statistics

emerging from the medical documentation done

by the Directorate of

Claims on which the

UCC sought to rely. We may as well deal with these

c

two contentions.

· 62. The first contention is that the claims of a large number of per-

sons

who had filed their claims are not registered on the ground that they

did not respond to the notices calling upon them to undergo the requisite

medical tests for medical documentation. It was urged that nc effective

service of notice had taken place and that the claims

of a large number of D

claimants-according to them almost over

30% of the total number--have

virtually gone for default. While the victim-groups allege that there

was a

systematic attempt to suppress the claims, the Directorate of Claims would

say that the lack of response indicated that the claims were speculative and

spurious and, therefore, the claimants did not offer themselves to medical

examination.

In order to appreciate

this grievance of the victim-groups it is, per-

. haps, necessary to advert to the provisions of the Act and the Scheme

attracted to this stage of processing of the claims. Section 9 of the Act

enjoins upon the Central Government to frame a Scheme providing for any

E

or all of the matters enumerated in clauses (a) to (i) of Sub-section (2) of F

Sec. 9. The Scheme, known as the ''Bhopal Gas Leak Disaster (Registra-

tion and

Processing of Claims) Scheme, 1985," was promulgated by

notification dated 24th September, 1985, published in the Gazette of India.

Para 4 of the Scheme deals with the manner of filing of claims and specifies

the

forms in which they should be filed.

Pa~a. 5( 1) requires the Deputy

Commissioner of Claims to place the claims

in the appropriate category

amongst those enumerated

in sub-para (2) of para 5. Sub-para (2)

re­

quires the registration of the claim under various heads such as "death";

"total disablement resulting in permanent disability to earn livelihood";

"permanent partial disablement affecting the overall capacity of a person to

earn hi~ livelihood"; "temporary partial disablement resulting in reduced

G

H

356 SUPREME COURT REPORTS (1991) SUPP. 1 S. C.R.

A capacity to earn livelihood" and so on. Sub-paras (3), ( 4) and (5) of para 5

of the Scheme provide: ·

B

c

D

"(3) On the consideration of a claim made under paragraph 4

of the Scheme, if the Deputy Commissioner is of the opinion

that the claim falls

in a category different from the category

mentioned

by the claimant, he may

dedde the appropriate

category after giving an opportunity to the claimant to be

heard and also after taking into consideration any facts made

available to him in this behalf

by the Government or the

authorities authorised

by the Government in this behalf.

(

4)

Where the Deputy Commissioner is of the opinion that a

claim made under paragraph 4 does not fall in any of the

categories specified in sub-paragraph (2) he may refuse to

register the claim:

Provided that before so refusing he shall give a reasonable

opportunity for a personal hearing to the claimant. ·

(5) If the claimant is not satisfied with the order of the Deputy

Commissioner under sub-paragraph (3) or sub-paragraph (4)

he

may prefer an appeal against such order to the Commis­

sioner,

who shall decide the same."

E The stage at which medical examination was required related

presumably to the exercise under sub-paragraph (3) of

Para 5 of the

Scheme. Failure of a elaimant to respond to the notice and offer himself

for medical examination would entail a refusal to register the claim.

It is

·

manifest that such a refusal is apealable under the scheme. But this ~-

grievan.:e does not survive in view of the stand taken by the Government in

F these. proceedings. In the affidavit of Sri Ramesh Yashwant Durve, dated

5th December,

1989 in

W.P. No. 843/88, it is stated:...:.. ·

G

H

''That all claimants who did not respond to the first notice were

given a second and then a third notice to appear at one of the

medical documentation centers for their medical examination.

Wide publicity

was also done by way of beating of drums in

mohallas, radio announcements and newspaper advertise­

ments.

In addition to all these, ward committee members were

also involved

in motivating the claimants to get

themselves

medically examined. All those claimants who approach the

Director of Claims even now are given a fresh date on which to

appear for.medical examination and are informed accordingly.

UNION CARBIDE v. U.0.1. [ VENKATACHALIAH,J.] 357

Although the medical documentation exercise is completed, A

even then if a claimant fails to appear for medical examination

after service

of all three

notices and he makes an application

for medical examination,

his medical examination is arranged

at one

of the two medical documentation centers--TB Center

and

JP Hospital--specially kept functioning for such

claimants. It is relevant to point out that this arrangement has B

been approved by Supreme Court vide order dated 29 Septem-

ber,

1989 ..........

"

"For the reasons given above, a fresh public notice and fixing of

dates for .medical documentation is also not needed. It may be

pointed out here that these people will still have an oppor-C

tunity to file claims when the Commissioner for Welfare of the

gas victims issues a notification in terms

of para 4{i) of Bhopal

Gas Leak Disaster (Registration

&

Processing of Claims)

Scheme,

1985 inviting claims."

This assurance coupled with the right

of appeal should sufficiently D

safeguard the interests of genuine claimants.

63. It was urged by the petitioners that the very concept of injury' as

an element

in the eligibility for medical documentation was erroneous as it

tended to exclude victims who did not have or retain some medical

documentation of their initial treatment immediately after the exposure.

E

· The stand of the Director of Claims on the point is this: -

"That it

is unlikely that a person who was injured and suffered

during the

post-exposure, period is not in possession of any

form

of medical record. The line of treatment was widely

publicised. Therefore, the patient must have received treat-

F

ment from:

on~ of the private practitioners, if not from one of

· the many temporary and permanent govt./semi-govt. institu­

tions or institutions run by voluntary organisations,

and he

must be

in possession of some form of record. Every Claimant is advised to bring relevant medical record at G

the time of medical examination. Documents of post-expon-

sure medical

record are accepted even after the medical

documentation

of the claimant is over.

It

is incorrect to say that the documents for post-exposure

H

A

B

c

D

E

358 SUPREME COURT REPORTS (1991) SUPP. 1 S. C.R.

period are just not available. Had it been so, 55% of the

claimants who

fall in category 'B' to 'CF would also have been

categorised as 'A'. In this connection it may be clarified that

even in post-exposure period prescriptions were issued. Be­

sides this, private practitioners were

also issuing prescriptions

in printed form. It

is therefore incorrect to say that there is

dearth

of documentation. However, bearing this point in mind,

a very liberal approach in admitting documents

was adopted as

will be clear from the guidelines for evaluation. It will also be

relevant here to state that the claimants are being helped to get

the benefit

of any medical records available in any hospital or

dispensary. Institutions like ICMR,

COM (Gas Relief),

Jawahar Lal Nehru Hospital, Bhopal Eye Hospital, Indian

Red

Cross Society,

BUEL Hospital and the Railway Hospital have

treated numerous gas victims during the post-exposure period.

The relevant medical records from them have been retrieved

and are being linked with the respective claim folders so that

the benefit of such post-exposure record

is extended to these

claimants.

It

will be irrational and unscientific to admit all claims without

reference to any documentary evidence as suggested by the

petitioner ........

"

(See the affidavit dated 5th December, 1989 of Sri Ramesh

Yeshwant Durve filed i~ W.P. No. 843/88.)

63. As to the charge that after the purported settlement, Govern-

ment is playing down the seriousness

of the effects of the disaster, and that

~

the medical documentation did not help proper evaluation it is, perhaps,

F necessary to read the affidavit dated 5th December, 1989 of the Additional

G

H

Director of Claims, in W.P. No. 843 of 1988. The Additional Director says:

"The Medical Documentation Exercise ha~ been an unique ef­

fort.

It was possibly for the

first time that such a comprehen­

sive medical examination (with documentation evaluation and

categorisation)

of such a large population was undertaken

anywhere in the world.

There was no earlier experience or

expertise to fall back upon. The whole exercise

had, therefore,

to be conceived, conceptualised and concretised locally. But

care was taken to ensure

that .the guidelines

were approved by

legal and medical experts not only

at the

State level but also at

··~

UNION CARBIDE v. U.0.1. ( VENKATACHALIAH,.J.] 359

the National level. The guidelines were also approved by A

GOl's Committee of Experts on Medical Documentation. In

other words, a systematic arrangement was organised to make

the most objective assessment

of the medical health status of

the claimants in a scientific manner.

It has

to be recognised in this context that the guidelines for B

categorisation can only be a broad indicator as it

is not pos­

sible for anyone

to envisage all types of situations and

prescribe for them. Likewise, the examples cited are only 'il­

lustrative examples' and not 'exhaustive instructions'.

Hundreds

of graduate

and post-graduate doctors assisted by C

qualified para-medical staff have examined the claimants with

the help

of sophisticated equipments. It cannot be reasonably

contended that all

of them have

crilluded with the Government

to distort the whole exercise.

The exercise

of categorisation is not just an arithmetical exer- D

cise directly flowing from the evaluation sheet. Had it been so,

the same Assistant Surgeon, who does the evaluation can

him~

self do the categorisation also. Post graduate specialists have

• been engaged for this work because the total medical folder

has to be assessed keeping the evaluation sheet as a basic in­

dicator.

In doing the categorisation, the postgraduate E

specialist takes into account symptoms reported, clinical find­

ings, specialist's opinions

and investigation reports."

The Additional Director accordingly assests:

"

.. .it will be meaningless to suggest that the Guvt. is jeopard-F

ising the interests of the claimants by deliberately distorting

the

Medical Documentation Exercise. Similarly, it will be absurd

to suggest that the Govt.

is

trying to help UCC in any way."

The Additional Director also refers to the attempts by unscrupulous

persons to exploit the situation

in pursuit of unjust gains and how the G

authorities had to encounter attempts of impersonation and "attempts by

claimants to pass

of other's urine as their own." It was said that there were

urine-donors. The affidavit also discloses certain malpractices involving

medical prescriptions and certificates

by some members of the medical

profession and ante-dated urine-thiocynate estimations. The Additional

Di(ector says that despite

all this Government endeavoured to give the H

360 SUPREME COURT REPORTS [1991} SUPP. 1 S. C.R.

A benefit to the claimants wherever possible. It is stated :

B

"The State Govt. had to preserve the scientific character and

ensure the credibility of the exercise of evaluation. Bearing

this limitation

in mind, wherever possible, the government has

attempted to

give the benefit to the claimants. The various

guidelines relating to documentation of the immediate post­

disaster phase are proof of this intention. At the same time,

government

have had to adhere to certain quality standards so

that the exercise could stand up to scrutiny

in any Court of law

or in any scientific

form."

C The stand of the Directorate cannot be brushed aside as arbitrary.

However, provisions of appeal ensure that in genuine cases there

will be no

miscarriage of justice.

64.

Shall we set aside the settlement on the mere possibility that

medical documentation and categorisation are faulty? And that the figures

D of the various kinds of injuries and disablement indicated are undepen-

dable? As of now, medical documentation discloses that "there

is no con-

f-'

elusive evidence to establish a casual link between cancer-incidence and

MIC exposure".

It is true that this inference is tentative as it would appear

studies are continuing and conclusions of scientific value

in this behalf can

only be drawn after the studies are over. While the medical literature

E relied upon by the petitioners suggests possibilities of the exposure being

carcinogenic, the ICMR studies show that as of now the annual

incidt{nce

of cancer registration is more among the unexposed population as com-

pared to the exposed population." (See Sri Ramesh Yeshwant Durve's -'f.

affidavit dated 5th December, 1989, para 9). Similarly, "there is no definite

evidence that derangement

in immune system of the gas exposes have

F taken place". But the literature relied ·upon by petitioners does indicate

that

such prognosis cannot be ruled out. These matters are said to be

under close study of the ICMR and other research agencies

using, as indi­

cated, the "multi-test CMI technique to screen the status of the immune system".

G

65. But the whole controversy about the adequacy of the settle-

ment-fund arises on account of the possibility that the totality of the

awards made on

all the claims may exceed the settlement-fund in which

event the settlement-fund

will be insufficient to satisfy all the Awards. This

is the main concern of the victims and victim-groups. There is, as

-it now

H stands, a fund of one thousand two hundred crores of rupees for the

UNION CARBIDE v. U.0.1. [ VENKATAOIALIAH,J.] 361

benefit

of the victims. The main attack on its adequacy rests solely on the A

possibility that the medical documentation and categorisation based there-

on,

of the victims' medical status done by the Directorate of Claims is

faulty.

The charge

that medical documentation was faulty and was calcu­

lated to play down the ill-effects

of the exposure to MIC is, in our opinion,

not substantiated.

This attack itself implies that if the categorisation of the

claimants on the basis

of the

sevetjty of the injuries is correct then the B

settlement-fund may not, as a settle~ent, be unreasonable.

66. At the same time, it is necessary to remind ourselves that in

bestowing a second thought whether the settlement

is just, fair and ade­

quate.

We should not proceed on the premise that the liability of the

UCC

has been firmly established. It is yet to be decided if the matter goes to C

trial. Indeed, UCC has seriously contested the basis of its alleged liability.

But it is true that even to the extent a settlement goes, the idea

of its

fairness and adequacy must

necessa~!l.Y be related to the magnitude of the

problem and the question

of its

reasonableness must be assessed putting

many considerations into the scales.

It may be hazardous to belittle the

advantages

of the settlement in a matter of such complexity. Every effort D

should be made to protect the victims from the prospects of a protracted,

exhausting and uncertain litigation. While we

do not intend to comment on

the merits of the claims

and of the defences, factual and legal, arising in the

suit, it

is

fair to recognise that the suit involves complex questions as to the

basis

of

UCC's liability and assessment of the quantum of compensation in

a mass tort action. One of the areas of controversy is as to the admissibility E

of scientific and .statistical data in the quantification of damages without

resort to the .evidence as to injuries in individual cases.

67. Sri Nariman contended that scientific and statistical evidence

for estimates

of damages in toxic tort actions is permissible only in fairness

headngs and such evidence would not

be so admissible in the proceedings F

of adjudication, where personal injury must be proved by each individual

plaintiff. That would, indeed, be

a struggle with infinity as it would involve

individual adjudication

of tens of thousands of claims for purposes of

quantification of damages.

In an article

on 'Scientific and Legal Standards of Statistical G

Evidence in

Toxic Tort and Discrimination Suits' by Carl Cranor and Kurt

Nutting (See: Law

and Philosophy Vol. 9 No. 2 May,

1990) there is an

interesting discussion as

to what would be the appropriate standard of

evidence in presenting and evaluating scientific and statistical information

for use in legal proceedings. The· learned authors

say:

H

A

B

c

D

362 SUPREME COURT REPORTS [1991) SUPP. 1 S. C.R.

~

"These are two of the main sides in the controversy concerning

the kind and amount of scientific evidence necessary to sup­

port legally a verdict for the plaintiff. Black seems to urge that

courts should only accept evidence that is scientifically valid,

and adhere to the standards of evidence implicit in the dis­

cipline, while the

Ferebee court urges that plaintiffs in present­ing scientific eVidence and expert scientific testimony should

be held to legal standards of evidence. Powerful forces are

arrayed on both sides of this issue. On the side of requiring

scientific testimony only

to measure up to legal standards of

evidence, the social forces include plaintiffs or potential plain­

tiffs, plaintiffs' attorneys, public interest groups, consumer ad­

vocacy groups, all individuals who

are

'Concerned to make it

somewhat easier to recover damages

under personal injury law

for alleged injuries suffered as a

consequ~nce of activities of

others. On the other side of the same. issue are defendants,

poteni:ial

defendants (typically

corporations,· manufacturing

firms) and, interestingly, the scientific community." [Page 118)

In Sterling v. Ve/sicol Chemical Corp. (855 F 2d 1188 (1988)) the US '!<-·

Court of Appeals tended to the view that generalised proof of damages is

not sufficient to prove individual damages and that damages in mass tort

personal injury cases must

be proved individually by each individual plain-

E .tiff. The Court held:

F

"We cannot emphasise this point strongly -enough because

generalised proof will not suffice to prove individual damages.

The main problem on review stems from a failure to differen­

tiate between the·general and the particular. This is an under-

standably easy

trap to fall into in mass tort litigation. Although

many common issues

of fact and law will be capable of resolu­

tion

on a group basis, individual particularised damages still

must be proved on an individual basis."

68. While Shri Nariman contends that admissibility of scientific

and statistical evidence is confined to Fairness Hearings alone and not in

G adjudication where personal injury by each individual plaintiff must be

proved, the learned Attorney-General; however, urges that such evidence

and estimates of damages are permissible in toxic-tort actions and Says t.hat

the fundamental principle is and should be that countless injured persons

must not suffer because

of the difficulty of proving damages with certainty

H or because of the delay involved in pursuing each individual

elaim_. · He

UNIQN CARBIDE v. U.0.1. [ VENKATACHALIAH,.J.) 363

referred to the following passage in Florance B. Bigelow v. RKO Radio A

Pictures Inc., (327 US 251, 264 (1946):

"the most elementary conceptions of justice and public policy

require that the wrong doer shall bear the risk of the uncer­

tainty which

his own wrong has created."

B

Learned Attorney General also urged that in tort actions of this kind

the true rule

is the one stated in

Story Parchment Company v. Paterson

Parchment Paper Co. (282 US 555, 568):

"The rule which precludes the recovery of uncertain damages

applies to such as are not the certain result of the wrong, not to

C

those damages which are definitely attributable to the wrong

and only uncertain in respect of their amount.

Taylor v. Brad-

ley, 4 Abb. App. DEc. 363,366, 367,

100 Am. Dec. 415:

It is sometimes said that speculative damages cannot be

recovered, because the amount

is uncertain; but such remarks D

will generally be found. applicable to such damages as it is

uncertain whether sustained at all from the breach.

Sometimes

the claim is rejected as being too remote. This is another

mode of saying that

it is uncertain whether such damages

resulted necessarily and immediately from the breach com-

plained

of. E

The general rule is, that all damages resulting necessarily and

immediately and directly from the breach are recoverable, and

not those that are contingent and uncertain. The later descrip-

tion embraces, as I

think, such only as are not the certain result

of the breach, and does not embrace such as are the certain

F

result, but uncertain in amount.

Where the tort itself

is of such a nature as to preclude the

ascertainment

of the amount of damages with certainty, it

would be a perversion of fundamental principles of justice to

deny all relief to the injured person, and thereby relieve the

G

wrongdoer from making any amend for his acts. In such case,

while the damages may not be determined

by mere speculation

or guess,

it will be enough if the evidence show the extent of

the damages as a matter of just and reasonable inference,

al­

thousit the result be only approximate. The wrongdoer is not

entitled to complain that they cannot be measured with the H

A

B

c

D

364 SUPREME COURT REPORTS [1991) SUPP. 1 S. C.R..

exactness and precision that would be possible if the case,

which he alone is responsible for making, were otherwise."

And in Frederick Thomas

J(jngsley v. The Secretary of State for India,

(AIR 1923 Calcutta 49), it was observed:

. "Shall the injured party be allowed to recover no damages (or

merely nominal) because he cannot show the exact amount

of

the certainty, though he is ready to show, to the satisfaction of

the Jury, that he has suffered large damages by the

injury?

Certainty, it is true, would be thus attained, but it would be the

certainty

of

injustice. Juries are allowed to act upon probable

and inferential, as well as direct and positive proof. And when,

from the nature

of the case, the amount of damages cannot be

estimated with certainty, or onJy a part of them can be so es­

timated,

we can see no objection to placing before the Jury all

the facts and circumstances of the case, having any tendency to

show damages,

or their probable amount, so as to enable them

to make the most intelligible and probable estimate which the

nature of the case

will permit."

The risk of the uncertainty, says learned Attorney-General, should,

. in such cases, be thrown upon the wrongdoer instead of upon t~e injured

party. Learned Attorney General also urged that, on first principle, in

E : · cases where ·thousands ·have been injured, it . is far . simpler . to prove the

amount

of damages to the members of the class by establishing their total damages than by c:Ollecting and aggregating individual claims as a sum to

·. be assessed against the defendants. He said statistical methods are com-

monly accepted and used . as admissible evidence in a variety of contexts ~ ·

including· quantification of damages in such mass tort actions. He said that

. F . · these principles are essential principles of justice and the Bhopal disaster is

· an ideal setting for an: innovative application of these salutary principies.

69. The foregoing serve~ to highlight the complexities.of the area.

I11deed, in many tort actions the world~over spe.edy adjudications and ex­

peditious reliefs are not easily accomplished and many of them have ended

G in settlements. In the context ·of the problems presented by. the issues of

liability in cases ofcertain corporate torts beyond the corporate veil there y

·is an impressive hody of academic opinion amongst the school men that the

very theories of limited corporate liability which initially served as 'iiieen-

tives for commercialrisk~taking needs re-thinking iri certain areas of tor-

. tious liability of Corporations. Some scholars have advocated abolition of

H; ..

UNION CARBIDE v. U.0.1. [VENKATACHALIAH,J.) 365

limited liability for "knowable tort risks". (See "An Economic Analysis of A

Limited Liability in Corporation Law" (30 U.Toronto LJ.117, (1980); "The

Place of Enterprise Liability in the Control of Corporate Conduct" ·

(90Yale Law Journal 1 (1980); "Should Shareholders be personally liable

for the torts

of their Corporations?". (76 Yale Law Journal

1190 (1967).

This,

of course, has the limitation of one more shade of an academician's

point of

view for radical changes in law. B 70. With the passage of time there are more tangible details avail-

able by way of the proceedings of the Directorate of Claims which has

medically evaluated and categorised nearly 3,60,000 affected persons. We

have looked into the formats and folders prepared by the Directorate of

Claims for the medical evaluation

of the conditions of the victims.

Some C

sample medical riossiers pertaining to some individual claimants containing

an evaluation

of the data pertaining to the medical status of the persons

have also been shown to us. It

is on the basis of such medical dossiers that

evaluation and categorisation are stated to

have been done. The guidelines

for carrying out these medical evaluations, it is stated, have been formu-

lated and issued by the Government

of India. D

71.

Petitioners seriously assail the correctness of the guidelines for

medical evaluation as also the result of the actual operational processes of

evaluation based thereon. Petitioners described the results indicated by

the medical categorisation done by the Directorate of Claims which

showed only 40 cases of total permanent disablement as shocking and E

wholly unrelated to the realities. Indeed, some learned counsel for the

petitioners, of course in a lighter vein, remarked that if these were the final

figures

of injuries and incapacitations caused by the Bhopal Gas Leak

Disaster, then

UCC should be entitled to a refund out of the sum settled

and wondered

why, in the circumstances,

UCC was taking shelter under

the settlement and fighting

shy of a trial. F

It appears to us that particulars care has gone into the prescription

of the medical documentation tests and the formulation

of the results for

purposes of evaluation and categorisation.

72. After a careful thought, it appears to us that while it may not G

be wise or proper to deprive the victims of the benefit of the settlement, it

is, however, necessary to ensure that in

the-perhaps unlikely-event of

the settlement-fund being found inadequate to meet the compensation

determined in respect of

all the present claimants, those persons who may have their claims determined after the fund is exhausted are not left to fend

themselves. But, such a contingency may not arise having regard to the size

H

366 SUPREME COURT REPORTS (1991) SUPP. 1 S. C.R.

A of the settlement-fund. If it should arise, the reasonable way to protect

the interests of the victims

is to hold that the

Union of India, as a welfare

State and

in the circumstances in which the settlement was made, should

not

be found wanting in making good the deficiency, if any. We hold and

declare accordingly.

B 73. It is relevant here that the

Union of India while, quite fairly,

acknowledging that there was in fact such a settlement, however, sought to

assail its validity on certain legal issues. But the factum of the settlement

was not disputed. Indeed, Union of India did not initiate any substantive

proceedings of its own to assail the agreement or the consensual element

constituting the substratum of the order of the Court. The legal conten-

C tions as to the validity of the settlement were permitted to be raised in as

much as that

ag order made on consent would be at no higher footing and

could be assailed on the grounds on which an agreement could be. But, as

stated earlier, the factum of the consensual nature of the transaction and

its existence as a fact was not disputed. Those legal conte~tions as to the

D

validity have now failed. The result is that the agreement subsists. . .

For all these· reasons we leave the settlement and the orders dated

14/lSth February, 1989-except to the extent set aside or modified pur­

suant to the other findings-undisturbed.

74. We may here refer to and set at rest one other contention which

E had loomed in the hearings. The petitioners had urged that the principles

of the liability and the standards of assessment of damages in a toxic mass

tort arising out of a hazardous enterprise should be not only on the basis of

absolute liability-not merely on Rylands v. Fletcher principle of strict

liability-not admitting of any exceptions ~ut also that the size of the award

be proportional to the economic superiority of the offender, containing a

F deterrent and punitive element. Sustenance was sought from

M.C. Mehta

v. Union of India, AIR 1987 SC 1086. This argument in relation to a

proceeding assailing a settlement

is to be understood as imputing an

infir­

mity to the settlement process as not being informed by the correct prin­

ciple of assessment of damages. Respondents, however, raised several

contentions

as to the soundness of the Mehta principle and its applicability.

G It was also urged that Mehta principle, even to the extent it goes, does not

solve the issues of liability of the

UCC as distinct from that of UCIL as

Mehta case only spoke of the liability of the offending enterprise and did

not deal with principles guiding the determination of a holding-company

for the torts of its subsidiaries.

H It is not necessary to go into this controversy. The settlement was

UNION CARBIDE v. U.0.1. [ VENKATACHALIAH,J.} '367

arrived at and is left undisturbed on an over-all view. The settlement can- A

not be assailed as violative of Mehta principle which might have arisen for

consideration in a strict adjudication. In the matter

of determination of

compensation also under the Bhopal Gas Leak Disaster

(P.C) Act, 1985,

and the Scheme framed thereunder, there is no scope for applying the

Mehta principle inasmuch as the tort-feasor, in terms of the settlement-

for all practical purpose~tands notipnally substituted by the settlement- B

fund which now represents and exhausts the liability of the alleged hazard-

ous entrepreneurs

viz., UCC and UCIL. We must also add that the Mehta

principle

can have no application against Union of India inasmuch as re­

quiring it to make good the deficiency,

if any, we do not impute to it the

position of a joint tort-feasor

but only of a welfare

State. There is, there­

fore, no substance in the point that Mehta principle should guide the quan-

C

tifi.cation of compensation to the victim-claimants.

75. This necessarily takes us to the question of the medical surveil­

lance costs; and the operational expenses of the Hospital. We are

of the

view that for at least a period of eight years from now the population of

Bhopal exposed to the hazards

of MIC toxicity should have provision for D

medical surveillance by periodic medical check-up for gas related afflic­

tions. This shall have to be ensured by setting up long-term medical

facilities in the form

of a perman-nt specialised medical and research

es·

tablishment with the best of expertise. An appropriate action-plan should'

be drawn up. It will be proper that expert medical facility in the form of

the establishment of a full-fledged hospital of at least 500 bed strength with E

the best of equipment for treatment of MIC related affliction should be

provided for medical surveillance and for expert medical treatment. The

State of Madhya Pradesh shall provide suitable land free of cost. The

allocation

of the land shall be made within two months and the hospital

shall be constructed, equipped

and made functional within 18 months. It

shall be equipped as a Specialist Hospital for treatment and research

of F

MIC related afflictions and for medical surveillance of the exposed popula­

tion.

76. We hold that the capital outlays on the hospital and its opera-

tion expenses for providing free treatment

and services to the victims

should, both on humanitarian considerations and in fulfilment

of the offer G

made before the Bhopal court, be borne by the UCC and

UCIL. We are

conscious that it

is not part of the function of this Court to re-shape the

settlement or restructure its terms. This aspect

of the further liability is

also not a

matter on which the UCC and the UCIL had an opportunity to

express their views. However, from the tenor of the written submissions

H

368 SUPREME COURT REPORTS (1991} SUPP. 1 S. C. It

A made before the District Court at Bhopal in response to the proposal of

the Court for "reconciliatory substantial interim relief' to the gas victims,

both the UCC and UCIL had offered to fund and provide a hospital for the·

gas victims. The UCC had re-called that in January, 1986, it had offered "to

fund

the construction of hospital for the treatment of gas victims the

amount being contributed by the

UCC and the UCIL in equal propor-

B tions". Shri N:ariman bad also referred to this offer during the submissions

in the context of the

bona fides of the

UCC in that behalf. It is, no doubt,

true that the offer was made in a different context and before an overall

settlement. But that should

not detract the

UCC and the UCIL from

fulfilling these obligations, as indeed, the moral sensibilities to the immense

need for relief in

all forms and ways should make both the

UCC and UCIL

C forthcoming in this behalf. Such a hospital should be a fully equipped

hospital with provision for maintenance for a period of eight years which in

our estimate might together involve the financial outlay of around Rs. 50

crores. We hope and trust that UCC and UCIL will not be found wanting

in this behalf. ·

D 77. ·Then comes the question which we posed at the end of para-

E

graph 44. This concerns the exposed members of the populace of Bhopal

who were put

at risk and who though presently a symptomatic and filed no

claim for compensation might become symptomatic in future. How should

cases

of yet unborn children of mothers exposed to MIC toxicity where the

children are found to have

or develop congenital defects be taken care of?

The question is as to who would provide compensation for such

cases?

We are

of the view that such contingencies shall be taken care of by

obtaining an appropriate medical group insurance cover from the General

F Insurance.Corporation of India or the Life Insurance Corporation of India

for compensation to this contingent class

of possible prospective victims.

There shall be no individual upper monetary limit for the insurance

liability. The period

of insurance cover should be

a period of eight years in

the future. The number

of persons to be covered by this Group Insurance

scheme should

be about and not less than one lakh of persons. Having

G regard to the population of the seriously affected wards

of Bhopal city at

the time of the disaster

and having regard to the addition to the population

by the subsequent births extrapolated

on the basis of national average of

birth

rates over the past years and the future period of surveillance, this

figure broadly accords with the percentage

of population of the affected . wards bears to the number of persons found to be affected by medical

H categorisation. This insurance cover will virtually serve to render the set-

UNION CARBIDE v. U.O.l [ VENKATACHALIAH).] 369

tlement an open ended one so far as the contingent class of future victims A

both existing and after-born are concerned. The possible claimants fall

into two categories: those

who were in existence at the time of exposure;

and those

who were yet unborn and whose congenital defect.s

are traceable

to MIC toxicity inherited or derived congenitally.

In so far as the second class of cases

is concerned, some aspects have B

been dealt with in the report of the Law Commission in

United Kingdon;i

on "Injuries to Unborn Children". The Commission, referring to the then­

existing

Law, said:

"7. Claims for damages for pre-natal injuries have been made

in many other jurisdictions but there is no English or Scottish

authority

as to whether a claim would lie and, if it did, what C

rules and limitations should govern it. In our working

p~per

w~ did not attempt to forecast how such a claim would be

decided if it came before a court in this country, although we

did add, as an appendix to the paper, a brief account

of some

of the decisions of courts in other jurisdictions

...

"

" 8. It is, however, important from our point of view to express D

our opinion (reinforced by our general consultation and sup­

ported

by the report of the Scottish Law Commission) that it is

highly probable that the common law would, in appropriate

circumstances, provide a remedy for a plaintiff suffering from a

pre-natal injury caused by another's fault. It

is important to E

make our opinion on this point clear because, on consultation,

it has become apparent that many people think that

we were,

in our working paper, proposing the creation of new liabilities,

whereas it

is probable that liability under the common law

already exists

..... ".

F

Thereafter in United Kingdom, the Congenital Disabilities (Civil

Liability) Act,

1976, was brought forth.

Section 1 (1) of that Act says:

" 1 (1~ If a child is born disabled as the result of such an

occurrence before its birth

as is mentioned in sub-section (2)

below, and a person (other than the child's

own mother) is G

under this section answerable to the child in respect of the

occurrence, the child's disabilities

are to be regarded as

damage resulting from the wrongful act of that person and

·

actionable accordingly at the suit of the child."

It is not necessary for the present purpose to go into other features of H

370 SUPREME COURT REPORTS (1991) SUPP. 1 S. C.R.

A that legislation and the state of corresponding law in India. Our present.

question

is as to how and who would provide compensation to the two class

of cases referred to us earlier. We hold that these two classes of cases are

compensatable if the claimants are able to prove injury in the course

of the

next eight years from

now.

·

B The premia for the insuran~ shall be paid by the Union of India out

of the settlement fund. The eligible claimants shall be entitled to be paid r­

by the insurer compensation, on such principles and upon establishment of

the nature of the gas related toxic morbidity by such medical standards as

are applicable to the other claimants under the Bhopal Gas

Leak Disaster

(Processing

of Claims) Act, 1985, and the scheme framed thereunder. The

C individual claimants shall be entitled to have their claims adjudicated

under the statutory scheme.

"

78. We must, however, observe that there is need for expeditious

adjudication and disposal

of the claims. Even the available

funds would

not admit of utilisation unless the claims are adjudicated upon and the -...,,__,. ·

D quantum of compensation determined. We direct both the Union of India

and the State Government to take expeditious steps and set-up adequate

machinery for adjudication of claims and determination

of the

compensa·

tion. The appointment of the Claim Commissioners shall be completed

expeditiously and the adjudicative process ·must commence within four

months from today. In the first instance, there shall at least be 40 Claim

E Commissioners with necessary secretarial assistance to start the adjudica·

tion of the claims under the Scheme.

79. In the matter of disbursement of the amounts so adjudicated and

determined it

will be proper for the authorities administering the funds to

ensure· that the compensation-amounts, wherever the beneficiaries are

il-

F literate and

are susceptible to exploitation, are properly invested for the

benefit of the ·beneficiaries so that while they receive the income therefrom

they do not, owing to their illiteracy and ignorance, deprive themselves of

what

may turn out to be the sole source of their living

~nd sustenance for

the future.

We

ma1 usefully refer to the guide-lines laid down in the case of

Muljibhai Ajarambhai Harijan & Anr. v. United India Insurance c;o.Ltd. &

G Ors., 1982 (1) Gujarat Law Reporter 756. We approve and endorse the

guidelines formulated

by the Gujarat High Court. Those guidelines,

With

appropriate modifications, could usefully be adopted. We may briefly

recapitulate those guidelines:

H

(i) The Claims Commissioner should, in the case of minors,

invariably order the amount of compensation awarded to the

,.

' '

}

UNION CARBIDE v. U.0.1. [ VENKATACHALIAH,J. J 371

minor to be invested in long term fixed deposits at least till the A

date of the minor attaining majority. The expenses incurred by

the guardian or next friend may, however, be allowed to be

withdrawn;

(ii) In the case of iUiterate claimants also the Claims commis­

sioner should follow the procedure set out in (i) above, but if B

lump sum payment is required for effecting purchases of any

movable or immovable property such as, agricultural imple­

ments, assets utilisable to earn a living, the Commissioner may

consider such a request after making sure that the amount is

actually spent for the purpose and the demand is not a ruse to

withdraw

money; C

(iii) In the case of semi-literate persons the Commissioner

should ordinarily resort to the procedure set out in (ii) above

unless he is satisfied that the whole or part of the amount is

required for expanding any existing business or for purchasing

some property for earning a livelihood. D

(iv) In the case of widows the Claims Commissioner should

invariably follow the procedure set out in (i) above;

(v) In personal injury cases if further treatment is necessary · withdrawal of such amount as may be necessary for incurring E

the expenses for such treatment may be permitted;

(vi) In· all cases in which investment in long term fixed

deposits is made it should be on condition that the Bank wiil

not permit any loan or advance on the fixed deposit and inter~

est on the amount invested is paid monthly directly to the p

claimant or his guardian, as the case may be.

It should be stipulated that the FDR shall carry a note on the

face of the document that no loan or advance will be allowed

on the security of the said document without express permis­

sion.

(vii) In all cases liberty to apply for withdrawal in case of an

emergency should be available to the claimants.

G

Government might also consider such investments being handled by

promulgating an appropriate scheme under the Unit Trust of India Act so H

372 SUPREME COURT REPORTS (1991) SUPP. 1 S. C.R.

A as to afford to the beneficiaries not only adeqpate returns but also ap­

propriate capital appreciation to neutralise the effect of denudation by

inflation.

80. Point (J) is disposed pf in terms of the foregoing directions.

81. We might now sum up tlie conclusions reached, the fmdinp

B recorded and directions issued on the various contention5:

c

D

E

F

G

(i) The contention that the Apex Court had no jurisdiction to

withdraw to itself the original suits pending in the District

Court at Bhopal and dispose of the same in terms of the settle­

ment and the further contention that, similarly, the Court had·

no jurisdiction to withdraw the criminal proceedings are

rejected.

It

is held that under

Article 142(1) of the Constitution, the

Court had the necessary jurisdiction and power to do so.

Accordingly, contentions (A) and (B) are held and answered

against the petitioners.

(ii) The contention' that the settlenient is void for

non-com­

pliance with the requirements of Order XXIII Rule 38, CPC is

rejected. Contention (C) is held and answered against the

petitioners.

(iii) The contention that the Court had no jurisdiction to

quash the criminal proceedings

in exercise of power under Ar­

ticle 142(1) is rejected. But, in the particular facts and cir­

cumstances, it is held that the quashing

of the criminal

proceedings

was not justified.

The

criminal proceedings are, accordingly, directed to be

proceeded with. Contention (D) is answered accordingly.

(iv) The orders dated 14th /15th of February, 1989 in so far as

they seek to prohibit future criminal proceedings are held not

to amount to a conferment of criminal immunitY; but are held

to be merely consequential to the quashing of the criminal

proceedings.

Now that the quashing is reviewed; this

pad of the order is

UNION CARBIDE v. U.O.I. [ VENKATACHALIAH).] 373

also set aside. Contention (E) is answered accordingly.

(v) The contention (F) that the settlement, and the orders

of

the Court thereon, are void as opposed to public policy and as

amounting

fo a stifling of criminal proceedings is rejected.

A

(vi) Having regard to the scheme of the Bhopal Gas Leak B

Disaster (Processing of Claims) Act, 1985, the incidents and

imperatives of the American Procedure

of 'Fairness Hearing'

is not strictly attracted to the Court's sanctioning of a settle­

ment. Likewise, the absence of a

"Re-opener" clause does not,

ipso facto, vitiate the settlement. Contention (G) is rejected.

(vii) It is held, per invitim, that if the settlement is set aside

the UCC shall be entitled to the restitution of the US 420

million dollars brought in by it pursuant to the orders of this

Court.

c

But, such restitution shall be subject to the compliance with D

and proof of satisfaction of the terms of the order dated

30th

November 1986, made by the Bhopal District Court. · Conten-

tion (H)

is rejected subject to the condition aforesaid.

(viii) The settlement

is not vitiated for not affording .the victims

and victim-groups an opportunity

of being heard. However, if

the settlement-fund

is found to be insufficient, the deficiency is E

to be made good by the

Union of India as indicated in para­

graph

72. Contention (I) is disposed of accordingly.

(ix)

On point (J), the following findings are recorded and

directions issued:

F

. (a) For an expeditious disposal of the claims a time-bound

consideration and determination

of the claims are necessary.

Directions are issued as indicated in paragraph

77.

(b) In the matter of administration and disbursement of the

compensation amounts determined, the guide-lines contained

G

in the judgment of the Gujarat High Court in

Muljibhai v.

United India Insurance Co, are required to be taken into ac­

count and, wherever apposite, applied. Union of India is also

directed to examine whether

an appropriate scheme under the Unit Trust of India Act could be evolved for the benefit of the

Bhopal victims.

H

A

B

c

D

E

F

374

SUPREME COURT REPORTS (1991) SUPP. 1 S. C.R.

(c) For a period of 8 years facilities for medical surveillance of

the population of the Bhopal exposed to MIC should be

provided

by periodical medical check-up. For this purpose a

hospital with at least

500 beds strength, with the best of equip­

ment and facilities should be established. The facilities shall

be provided free of cost to the victims at least for a period of 8

years from now. The state Government shall provide suitable

land free of cost. ·

(d) In respect of the population of the affected wards, [ex­

cluding those who have filed claims], Government of India

shall take out an appropriate medical group insurance cover

from the Life Insurance Corporation of India or the General

Insurance Corporation of India for compensation to those

who, though presently asymtomatic and filed no claims for

compensation, might become symptomatic

in future and to

those later-born children

who might manifest congenital or

prenatal MIC related afflictions. There shall be no upper in-.

dividual monetary limit

for· the insurance liability. The period

of insurance shall be for a period of eight years in future. The

number of persons to be covered

by this group shall be about

one lakh persons. The premia shall be paid out of the settle­

ment fund.

(e)

On humanitarian consideration and in fulfilment of the

offer made earlier, the UCC and UCIL should agree to bear

the financial burden for the establishment and equipment of a

hospital, and its operational expenses for a period of eight

years.

82. In the result, the Review Petitions are allowed in part and all the

contentions raised

in the Review-Petitions and the I.As in the civil appeals

are disposed of

in terms of the findings recorded· against the respective

contentions. In the light of the disposal of the Review-petitions, the ques­

tion raised

in the writ-petitions do not survive. The writ-Petitions are dis-

G missed accordingly without any order as to costs.

H

AHMADI, J. I have carefully gone through the elaborate judgment

prepared

by my learned Brother Venkatachaliah,J. and I am by and large

in agreement with his conclusions except on a couple of aspects which l

will presently indicate.

t·

.... ---,

---

UNION CARBIDE v. U.0.1. [AHMADI, J.] 375

The points which arise for determination on the pleadings, docu- A

ments and submissions made at the Bar in the course of the hearing of

these petitions have been formulated at points (A) to (J) in paragraph 8 of

my learned Brother's judgment and the conclusions reached by him have

been summarised and set out in the penultimate paragraph of his judgment

at (i) to

(ix), with their sub-paragraphs. I am in agreement with the con­

clusions at (i) to

(vii) which answer contentions (A)

to (H). So far as B

conclusion (viii) pertaining contention (I) is concerned. I agree that the

settlement is not vitiated for not affording the victims or victim-groups an

opportunity of being heard but I find it difficult to persuade myself to the

view that

if the settlement. Fund is found to be insufficient the shortfall

must

be made good by the

Union of India. For reasons which I will

presently state I am unable to comprehend how the Union of India can be C

directed to suffer the burden of the shortfall, if any, without finding the

Union of India liable in damages on any count. As regards conclusion (ix)

referable to contention(J). I am in agreement with sub-paragraphs (a), (b)

arid (d) thereof but so far as sub-paragraphs (c) and (e) are concerned I

agree with the directions therein

as I understand them to be only recom- D

mendatory in nature and not linked with the settlement.

In

Charan Lal

Saliu's case (1990}1SCC613 this Court upheld the

constitutional validity

of the Bhopal Gas Leak Disaster {Processing of

Claims) Act,.

1985 (herein after called 'the Act'). In that case although the

·question referred to the Bench was in regard to the constitutional validity

E

of the said enactment, submissions were made on the question whether the

impugned settlement was liable to be set aside on the ground that

it

was in

flagrant violation of the principles of natural justice, in that, the victims as

well as the victim-groups bad no opportunity to examine the terms of the

settlement and express their

views thereon. Mukharji, CJ. who spoke for F

the :najority (Ranganathan, J. and myself expressing separately) observed

that on the materials available "the victims have not been able to show at all

any other point or material which would

go to impeach the validity of the

settlement".

It was felt that though the settlement without notice to the

victims was not quite proper, justice had in fact been done to the victims

but did

not appear to have been done. Taking the

view that in entering G

upon the settlement regard should have been had to the views of the vic-

tims and for that purpose notices should have been issued before arriving

at_ the settlement, the majority held that "post-decisional notice might be

sufficient but in the facts and circumstances of this case, no useful purpose

would

be served by giving a post-decisional hearing having regard to the H

376 SUPREME COURT REPORTS [1991] SUPP. 1 S. C.R.

A circumstances mentioned in the order of this Court dated May 4, 1989, and

having regard to the fact that there

are no further additional data and facts availabl~ with the· victims which can· profitably and meaningfully be

presented to controvert the basis of the settlement and further having

regard to the fact

that the victims had their say or on their behalf their

B views have been agitated

in· the proceedings. and will have further oppor­

tunity in the pending review proceedings". It would, therefore, appear that

the majority had applied its mind fully to the terms of the settlement in the

light

of the data as well as the facts and circumstances placed before it and

was satisfied that the settlement was a fair and reasonable. one and a

post­

decisional hearing would not be of much avail. Referring to the order of

C May 4, 1989 carrying the Court's assurance that it will be only too glad to

consider any aspect which may have

been overlooked in considering the

terms

of the settlement, Mukharji, CJ., opined that the further hearing

which the victims will receive at the time

of the h.earing of the review

petitions

will satisfy the requirement of the principles of natural justice .

D K.N. Singh, J. while agreeing with the view expressed by

Mukharj~ CJ. did

not express any opinion on the question of inadequacy of the settlement.

In the circumstances it was held that there was no failure of justice neces­

sitating the setting aside of the settlement as violative of. fundamental

rights. After stating this the learned Chief Justice observed that while

justice had in fact been done, a feeling persisted in the minds

of

the victims

E that they did not have a full opportunity to ventilate their grievances in

regard to the settlement. In his view this deficiency would be adequately

met in the hearing on the Review Petitions (the present petitions). After

taking notice

of the aforesaid view

expressed by the learned Chief Justice,

Ranganathan, J. (myself concurring) observed as under:

F

G

"Though we are prima facie

inclined to agree with him that

there

are good reasons why the settlement should not be set

aside

on the ground that the principles of natural justice have

been violated quite

apart from the practical complications that

may arise as a result of such an order, we would not express

anY final opinion on the validity of the settlement but would

leave it

open to be agitated to the extent permissible in law in tht> review petition pending before this Court."

It

is, therefore, manifest from the above that the Sahu Bench was

'prima facie' of the view

that the settle~ent was not liable to be set aside on

·H

UNION CARBIDE v. U.0.1. [ AHMADI, J. ] 377

. the ground that the principles of natural justice had been violated.

Mukharji, CJ. went

on to say that no useful purpose would be served by

a post-decisional hearing and that the settlement was quite reasonable and

fair.

Of course K.N. Singh, J. did not express any opinion on the inade­

quacy

of the settlement amount but he was otherwise in agreement with the

view expressed by Mukharji, CJ. on

all the other points. The view of Ran­

ganathan,

J. and myself is evident from the passage extracted above.

This case has gone through several

. twists and turns. One of the

world's Worst disaster occurred on the night between 2nd and 3rd Decem-

A

B

ber, 1984 choking

several to death and injuring thousands of residents

living near.about the industrial plant

of UCIL. Litigation was initiated on C

behalf

ofse>me of the victims in the U.S. District Court, Southern District

of New-York presided over by Judge Keenan. After the enactment of the

Act on 29th March, 1985, the Union of India also approached Judge

Keenan with a complaint. Judge Keenan ultimately terminated the

proceedings before him on the ground of 'forum~non-convenience'. There-

after the Union

of India representing the victims file a suit for damages in D

the Bhopal District Court

aga_inst the UCIL as 'Yell as the UCC in which an

order for interim compensation was made against which an appeal was

filed in the High Court. The matter was brought to this Court against the

High Court order.

It was during the hearing of the said matter that a court

assisted settlement was struck and orders were passed recording the same

'E

on 14th/15th February, 1989.

On 4th May, 1989 this Court gave its reasons

for the settlement. Soon a hue and cry was raised against the settlement

by

certain victims and victim groups. In the meantime petitions were filed in

this Court challenging the constitutional validity

of the Act on diverse

grounds. In the course

of the hearing of the cases raising the question of F

validity of the Act

submissions were also made regarding the validity of the

settlement. Th<; hearing continued from 8th March, 1989 to 3rd May, 1989

and the same received wide publication in the media. The judgment in the

said case was pronounced on 22nd December, 1989 upholding the validity

of the Act. In the meantime petitions were filed under Article 137 of

the

Constitution to review the settlement. Several Writ Petitions und~r Article G

32 also came to be filed. These came up for hearing before a Constitution

Bench presided over by Mukharji,CJ.

The hearing continued for more

than two weeks and. the media carried reports

of the day to day

court

proceedings throughout the country. Unfortunately, before the judgment

could be pronounced a tragic event took place. Mukharji, CJ. passed away

H

378 SUPREME COQRT REPORTS [1991} SUPP. 1 S. C.R.

A necessitating a rehearing by a Constitution Bench presided over by Misra,

CJ. This hearing lasted for about

18 to 19 days and received the same wide

coverage in the

. press, etc. In fact considerable heat was generated

throughout the court hearings and the press also

was none too kind on the

court.

It is, therefore, difficult to imagine that all those who were inter-

B ested in the review of the settlement were unaware of the proceedings. Mr.

Nariman has placed on record a number of press-clippings to make good

his point that newspapers having large circulation throughout the country

carried news regarding the settlement and subsequent attempts to

chal­

lenge the same. Can it then be said that the victims were unaware of the

proceeding5 before this Court ? To say so would be to ignore the obvious.

c

In view of the observations in Sahu's case, the scope of the inquiry in

the present petitions can be said to be. a narrow one. One way of ap­

proaching the problem is to ask what the Court could have done if a

pre-decisional hearing

was afforded to the victims. The option obviously

D would have been either to approve the terms of the compromise, or to

refuse to super add the Court's seal to the settlement and leave the parties

to go to trial. The Court could

not have altered, varied or modified the

terms

of the settlement without the express consent of the contracting

parties.

If it were to find the compensation amount payable under the

settlement inadequate; the only option left to

it would have been to refuse

· E to approve the settlement and turn it into a decree of the Court. It could

not have unilaterally imposed any additional liability on any of the con­

tracting parties. If it found the settlement acceptable it could turn it into a

Court's decree. According to the interpretation put

by the majority in Salm 's case on the scope of sections 3 and 4 of the Act, a pre-decisional

F hearing ought to have been given but failure to do so cannot vitiate the

settlement as according to the majority the lapse could be cured by a

post-decisional hearing. The . scope of the review petitions cannot be any

different at the post··decisional stage also. Even at that stage the Court can

either approve of the· settlement or disapprove of

it but it cannot, without

the consent of the concerned party, impose

any new or additional financial

G obligations on it. At the post decisional stage

it' must be satisfied that the

victims are informed of or alive to the process of hearing, individually or

through press reports, and if it

is so satisfied it

can apply its mind to the

fairness .and .. reasonableness Of the settlement and either endorse it or

refuse to do so. 'In the present case the majority speakingthrough Brother

H Venkatachaliah, J. has not come to the conclusion that the settlement does

UNION CARBIDE v. U.0.1. [ AHMADI,.J.) 379

not deserve fo be approved nor has it held that the settlement-fund is A

inadequate. Merely on the apprehended possibility that the settlement­

fund may prov~ to be inadequate, the majority has sought to saddle the

Union of India with the liability to make good the deficit, if any. The

Union of India has not agreed to bear this liability. And why should it

burden the Indian tax-payer with this liability when it is neither held liable

in tort nor is it shown to have acted negligently in entering upon the settle-B

ment? The Court has to reach a definite . conclusion on the question

whether the compensation fixed under the agreement is adequate

or other­

wise

and based thereon decide whether or not to convert it into a decree.

But

on a mere possibility of there being a shortfall, a possibility not sup­

ported by any realistic appraisal of the material on record but on a mere

apprehension, quia timet, it would not be proper to saddle the

Union of

India with the liability to make good the shortfall by imposing an additional

term in the settlement without its consent, in exercise of power under

Article 142 of_tlle Constitution or any statute or on the premises of its duty

as a welfare State. To my mind, therefore, it is impermissible in law to

impose the burden of making good the shortfall on the Union of India and

thereby saddle the Indian tax-payer with the tortfeasor's liability, if at all. If

c

D

I had com"e to the conclusion that the settlement-fund was inadequate, I

would have done the only logical thing . of reviewing the settlement and

would have left the parties to work out a fresh. settlement or go to trial in

the pending suit.

In

Sa/m's case as pointed out by Mukharji, CJ. the victims E

had not been able to show any material which would vitiate the settlement.

The voluminous documentary evidence-placed on the record of the present

proceedings also does not make out a case

of inadequacy of.the amount,

necessitating a review

of the settlement. In the circumstances I do not

think that the

Union of India can be saddled with the liability to make good

the deficit, if any, particularly when it is not found

to be a tortfeasor. It's

liability as a tortfeasor, if

at all, would have to be gone into in a separate

proceeding

and not in the present petitions. These, in brief, are my

reasons for

my inability to agree with the latter part of conclusion (viii)·

imposing a liability

on the

Union of India to make good the deficit, if any.

F

G

One word about the shifting stand of the Union of India. It

entered into a

Court assisted settlement but when the review applications

came

up for hearing it supported the review petitioners without seeking the

Court's leave to withdraw from

the settlement on permissible grounds or

itself filing a review petition. To say the least this conduct is indeed H

380 SUPREME COURT REPORTS [1991) SUPP. 1 S. C.R.

A surprising.

I would have liked to reason out my view in greater detail but the.

constraint

of time does not permit me to do so. The draft of the

main

judgment was finalised only yesterday by noon time and since the matter

was already listed for judgment today, I had only a

few hours to state my

B views. I had,

therefore, no time to write a detailed judgment but just a little

time to indicate in brief

the crux of some of the reasons for my inability to

agree with

the view expressed in the judgment of Brother Venkatachaliah,

J. on the question of Union of India's liability to make good the defieiency,

if any.

G.N. Petitions disposed of.

r-·