On Friday, the National Green Tribunal ordered LG Polymers to deposit Rs. 50 Crores with the District Magistrate, Vishakhapatnam, in connection to a major leak of Styrene gas from its polymer plant situated in RR Venkatapuram village.
However, the NGT observed in the order that the situation attracted the principle of "strict liability".
"Leakage of hazardous gas at such a scale adversely affecting public health and environment, clearly attracts the principle of 'Strict Liability' against the enterprise engaged in hazardous or inherently dangerous industry", the Tribunal observed.
The principle of "strict liability", evolved in the year 1868 in the case of Rylands v. Fletcher,  UKHL 1, has become obsolete now with the evolution of "absolute liability" principle.
As per this principle, any person who indulges in "non-natural" use of land and who keeps "hazardous substances" on his premises will be held "strictly liable" if such substances "escapes" the premises and causes any "damage".
The quoted words form the essentials for constituting strict liability of an industry. However, this principle allows for exception from liability if such damage has been caused by :
(i) the Plaintiff's own fault;
(ii) an Act of God;
(iii) act of a Third Party; or
(iv) if the hazardous activity was being carried out with the consent of the Plaintiff (violenti non fit injuria).
In principle, the concept of strict liability contemplates the accountability of a person/ industry carrying out hazardous activity in cases where some sort of "negligence" is attributable to them.
Strikingly, this principle was overturned by the Indian Supreme Court in the celebrated decision of MC Mehta v. Union of India, 1987 SCR (1) 819, whereby the top Court evolved the concept of no-fault liability, formally known as the principle of "Absolute Liability", to remedy the "undeserved suffering of thousands of innocent citizens".
Under this principle, "an enterprise, which is engaged in hazardous or inherently dangerous industry which poses 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-delegatable duty to the community to ensure that no harm results to anyone on account of hazardous or inherently dangerous activity which it has undertaken."
The principle of absolute liability offers no exception to the industries involved in hazardous activities and they are absolutely liable for the damage so caused, despite observance of due diligence.
The decision was passed by a Constitution bench of the Supreme Court in the aftermath of the Oleum gas leak from one of the units of Shriram Foods and Fertilisers Industries, in Delhi in the year 1985, causing significant detrimental health effects to the local population.
Finding the principle of strict liability "woefully inadequate" to protect citizens' rights in an industrialized economy like India, the Apex Court formulated the principle of absolute liability.
"This, rule ( Ryland v. Fletcher ) evolved in the 19th century at a time when all these developments of science and technology had not taken place cannot afford any guidance in evolving any standard of liability consistent with the constitutional norm and the needs of the present day economy and social structure. We do not feel inhibited by this rule 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 this country. As new situations arise the law has to be evolved in order to meet the challenge of such new situations. Law cannot allow our judicial thinking to be constrained by reference of the law as it prevails in England or for the matter of that in other foreign legal order. We in India cannot hold our hands back and I venture to evolve a new principle of liability which English courts have not done," the constitution bench led by then Chief Justice PN Bhagwati had observed.
Considerably, this decision was rendered when the country was still reeling under the shock of the 1984 Bhopal gas tragedy.
The legal proceedings instituted in the upshot of this fatality came to be decided by the Supreme Court in the year 1989 applying the principle laid down in the MC Mehta case.
The principle has thereafter been reaffirmed by the Supreme Court on various occasions, including in the case of Charan Lal Sahu v. Union of India, AIR 1990 SC 1480, whereby it was highlighted that this rule is "absolute and non-delegable" and the enterprise cannot escape liability by showing that it had taken reasonable care or there was no negligence on its part.
In the said case, the Supreme Court had examined the constitutionality of the Bhopal Gas Leak Disaster (Processing of Claim) Act, 1985 which was enacted by the Central Government to ensure that the claims arising out of the disaster were dealt with effectively.
"If the enterprise is permitted to carry on a hazardous or dangerous activity for its profit, the law must presume that such permission is conditional on the enterprise absorbing the cost of any accident arising on account of such activity as an appropriate item of its overheads. The enterprise alone has the resources to discover and guard against hazards or dangers and 'to provide warning against potential hazards," the court had held therein wile upholding the constitutional validity of the Act.
To sum up, the principle of Absolute Liability was evolved by the Supreme Court to ensure that the profit-oriented industrial enterprises carrying on inherently hazardous activities do not escape their liability in terms of the exceptions available under the principle of strict liability.
Therefore, the use of words "strict liability" under the NGT order opens up a convenient window for the company, LG polymers, to escape liability on showing that there was no negligence on their part.
Difference between Absolute & Strict Liability
Apart from availability of various exceptions under the principle of strict liability, the rule is also at variance from the principle of Absolute liability when it comes to the extent of damages to be paid.
Whereas under strict liability, compensation is payable as per the nature and quantum of damages caused but in cases of absolute liability, damages to be paid are exemplary in nature, and depend upon the magnitude and financial capability of the enterprise.
Further, the element of "escape" is not an essential under the doctrine of Absolute Liability. This means that even if any hazardous substance does not leak from the premises of the industry but causes harm to the workers inside, the enterprise may be held absolutely liable.
Inter alia, Absolute Liability can be upheld by the courts even in those cases where a single death is reported and there is no mass destruction of property or pollution of the environment.
In Klaus Mittelbachert v. East India Hotels Ltd., AIR 1997 Delhi 201, the Delhi High Court had applied the principle of Absolute Liability to compensate a German co-pilot who suffered grave injuries after diving into the swimming pool of the five-star restaurant.
In the said case, evidence indicated that the pool was defectively designed and had insufficient amount of water. The pilot's injuries left him paralyzed leading to death after 13 years of the accident. The court held that five-star hotels that charge hefty amounts owe a "high degree of care" to its guests.
Public Liability Insurance Act, 1991
Over and above the compensation that may be awarded by the Courts, the victims are also entitled to compensation under the company's Public Liability Insurance, available in terms of the Public Liability Insurance Act, 1991.
The Act came into being in the aftermath of the Bhopal Gas Tragedy. This law requires all enterprises that own or have control over handling of any hazardous substance, to subscribe to a "public liability insurance policy cover" whereby they are insured against the claims from third parties for death or injury or property damage caused by hazardous substances handled in their enterprise.
The compensation payable under this Act is also irrespective of the company's neglect. The victims who are exposed to hazardous substance used by an industry may file a claim with the Collector within 5 years of the accident.
On receipt of an application, the Collector, after giving notice to the owner and after giving the parties an opportunity of being heard, will hold an inquiry into the claim and may make an award determining the amount of relief which appears to him to be just.
However, the amounts under this Act, as specified in the Schedule, were stipulated nearly two decades ago. Resultantly, the compensation under the Act is very meager and the families of victims' who have died due to the gas leak or have suffered permanently disability, are entitled only to a maximum compensation of Rs 25,000, in addition to a maximum of Rs. 12,500, as reimbursement for medical expenses.
In cases where a victim has suffered permanent partial disability or other injury or sickness, the relief available if (a) reimbursement of medical expenses incurred, if any, up to a maximum of Rs. 12,500 in each case and (b) cash relief on the basis of percentage of disablement as certified by an authorized physician.
For loss of wages due to temporary partial disability which reduces the earning capacity of the victim, a fixed monthly relief not exceeding Rs. 1,000 per month has been stipulated, up to a maximum of 3 months, provided the victim has been hospitalized for a period exceeding 3 days and is above 16 years of age.
For any damage to private property, an amount of up to Rs. 6,000 is payable, depending on the actual damage.