M.C. Mehta and Anr. v. Union of India & Ors. & Shriram Foods and Fertiliser Industries

Soon after oleum gas leaked from a plant owned by Shriram Foods and Fertiliser Industries (“Shriram”), a district magistrate ordered Shriram to temporarily cease operating a chlorine plant within the company’s 76-acre complex located in a densely populated area of around 200,000 people in Delhi. Petitioner, M.C. Mehta, an environmental activist and lawyer, fearful that the plant would recommence its toxic chlorine manufacturing and endanger the health and lives of its workers and those residing within its vicinity, filed a Public Interest Litigation (PIL) in the Supreme Court of India to prevent the plant from reopening. 

During the course of the hearings, the Court and Mr. Mehta sent multiple expert committees to inspect Shriram’s chlorine plant, finding inadequacies in its safety devices, equipment, operations and maintenance, and in its safety standards and procedures. The experts compiled recommendations aimed at minimizing the chlorine plant’s threat to its workers and the surrounding community, favoring future relocation due to the impossibility of eliminating the dangers of operating a hazardous chemical plant close to human residences. 

The petitioner argued for the permanent closure of the caustic chlorine plant given that “chlorine is a dangerous gas and even with the utmost care, the possibility of its accidental leakage cannot be ruled out.” On the other hand, respondent Shriram argued that the detrimental consequences of closing the plant outweighed the benefits, since around 4,000 jobs would be lost due to the plant closure, and it would also halt other operations that depended on the running of the chlorine plant. 

The Court reasoned that although chlorine was indeed a hazardous gas which could seriously endanger life if leaked, and Shriram was previously clearly negligent in running its plants, the company had complied with the recommendations and so recommencing plant operations no longer posed an immediate risk to the community. The Court further considered the significant job loss and the occurrence of chlorine shortages to the Delhi water supply and downstream products if the plant was permanently closed. 

Thus, the Court concluded “with considerable hesitation, bordering almost on trepidation” that the Shriram caustic chlorine plant could reopen, “subject to stringent conditions.” Some of these conditions included: (1) establishment of an Expert Committee that would conduct visits every two weeks and submit report to the court regarding the adequacy of the “design, materials, fabrication” of the plant, with Committee expenses covered by Shriram; (2) establish personal liability of one plant operator as well as the head of the caustic chlorine division of Shriram; (3) weekly surprise visit by the Chief Inspector of Factories and a senior Inspector of The Central Board; (4) requirement that Shriram’s management be personally responsible for payment of compensation in the event of death or injury resulting from gas leakage to workmen or people living in the vicinity of the plant; (5) establishment of an additional oversight board made up by three congressional representatives; and (6) establishment of a fund, managed by the court, for the payment to victims who submit claims due to the original gas leak. The Court also warned that Shriram’s plants could be closed by government agencies if it failed to comply with standards set out in the Air and Water Acts, and if monitoring evaluations revealed that it failed to continue to comply with the expert recommendations previously set out.

The Court also opined that the Indian government should legislate national policy regarding the functioning, standards, and location of hazardous industries, institutions that brought many dangers. The Court also requested the development of an ecological science expert group to be used as a resource bank by courts and government agencies, and suggested that the Indian government create regional environmental courts to handle cases like this one. Finally, the Court thanked Mr. Mehta for bringing the PIL and the issue of hazardous industries to the Court’s attention, and ordered Shriram to pay Mr. Mehta 10,000 rupees in costs.

Finally, the Court referred the case to a larger Bench of five judges to decide important constitutional interpretation questions around Articles 21 (protection of life and personal property) and 32 (right to remedy) of the Indian Constitution, separate from the re-opening of the chlorine plant. These constitutional matters had been brought up by the individual claims for compensation filed by persons in the community and workmen who had been injured or detrimentally affected by the gas leaks.  In the subsequent decision, also known as Oleum Gas Leak III, the Court found the right to live in a healthy environment to be a fundamental right under Article 21 of the Indian Constitution and heightened the liability for corporations engaged in dangerous or inherently dangerous activities.

The Court was unable to render a final decision on whether or not Article 21 was available against Shriram, given that the considerations were many and they had only a four-day window to issue their judgment. However, the Court seemed to suggest that Shriram would be subject to Article 21 by way of Article 12. It rejected Shriram’s argument that cautioned it against expanding Article 12 so as to bring within its scope private corporations, and thus have private enterprises subject to Article 21. 

Additionally, the Court found that Shriram could fall within the strict categories under the Industrial Policy Resolution, which would render it essentially a “state actor” and thus subject to Article 21 by way of Article 12 applicability. Due to the nature of Shriram’s business, it was (1) “subject to this stringent system of registration and licensing”; (2) subject to “extensive environment regulation under Water Prevention and Control of Pollution Act”; (3) received significant financial aid from the government; and (4) engaged in an activity which has the potential to invade the right to life of large sections of people. 

While the court did not pronounce on the ultimate applicability of Article 12 and thus Article 21 on Shriram, it did engage in an important and expansive interpretation of fundamental human rights protected by the Indian Constitution. The Court reasoned that “it is dangerous to exonerate corporations from the need to have constitutional conscience”. Additionally,  the Court noted that “whenever a new advance is made in the field of human rights, apprehension is always expressed by the status quo that it will create enormous difficulties in the way of smooth functioning of the system and affect its stability” but that ultimately decided that “such apprehension… need not deter the court from widening the scope of human rights and expanding their reach ambit”.

The final issue considered by the Court was determining the extent of a corporation’s liability when the nature of its industry is hazardous or inherently dangerous to human life and health. The Court rejected the strict liability precedent set by Ryland v. Fletcher, because it did not account for the technological advancements of the modern industrial age. Ryland v. Fletcher held that “a person who for his own purposes being on to his land and collects and keeps there anything likely to do mischief if it escapes must keep at his peril, and if he fails to do so, is prima facie liable for the damage which is the natural consequence of its escape.” This did not account for “acts of God” or “where the escape is due to an act of God and an act of a stranger.” As such, the Court created a new rule: Corporations engaged in hazardous or inherently dangerous industries which poses a potential threat to the health and safety of the persons working in the factory and residing in the surrounding areas will be absolutely liable to compensate for such harm to the community that results from the hazardous or inherently dangerous nature of the activity which it has undertaken. This absolute duty to the community must be taken into account as an “appropriate item of its over-heads” and the measure of compensation must be proportionate to the magnitude and capacity of the enterprise, in order to achieve deterrence. As such, “the larger and more prosperous the enterprise,  the greater must be the amount of compensation payable by it.”