This Article is written by Arushi Chopra (pursuing BBA LLB from Symbiosis Law School, Noid)
Introduction
Rapid industrialization in India has led to the emergence of various manufacturing units that use hazardous substances for their production process. This has resulted in a number of accidents and catastrophes caused due to the escape of these hazardous substances into the environment. The victims include not only the workmen employed in these industries but also the innocent citizens who are in the vicinity.
In this backdrop, the concept of absolute liability was enunciated and no-fault liability was provided in Public Liability Insurance Act, 1991[1]. The act came into force due to the hue and cry for justice after the Bhopal Gas Tragedy coupled with the Oleum Gas Leak case, both of which claimed thousands of lives and left the legal system in a conundrum due to the lack of a legal framework to deal with such a catastrophe. The Act is legislation that provides for no-fault liability in the true sense. The principle and the Act have now been used in a variety of cases by the court to provide justice to the victims. This forms an integral part of the subject of environmental law as the environment entails the interaction of natural forces with human beings and other living creatures. This covers a wide area of subjects and thus escape from harmful substances in the nature due to which human beings suffer comes under the scope of environmental law.
The emergence of no-fault liability in India
The understanding that the person making any non-natural use of land like using hazardous substances should be made liable for industrial accidents came after the landmark case of Rylands v. Fletcher[1] in the late 19th century. This concept of strict liability was also applied in India to make enterprises liable for industrial accidents caused due to escape of hazardous materials. Through judicial precedents, various exceptions for the principle of strict liability were framed. The person handling hazardous substances could escape liability if he could establish the fault of a third party or the victim himself or if the act was being done with the consent of the victim or in the discharge of public duty. These exceptions were widely used to escape liability and the hapless victims could not avail justice. The strictness of the principle was almost absolutely done away with and the rule slowly became obsolete.
The Supreme Court in MC Mehta v. Union of India[2]carved the doctrine of absolute liability by doing away with all the exceptions of the strict liability. Absolute liability made the person making non-natural use of land absolutely liable for all accidents. Thus, no exceptions for the same could be taken by the owner to escape his liability. This was based on the deep pocket theory which states that compensation should be paid by one who is the most capable to pay the same.
With the rise in the need for legislation for dealing with major catastrophes like Bhopal Gas Tragedy and Oleum Gas Leak case, the Public Liability Insurance Act, 1991 was passed which provides for no-fault liability of the owner in industrial accidents. Section 4 of the Act lays down that insurance must be taken by owners of industrial units handling hazardous substances to cover claims from accidents.
The principle of no fault liability is a divergence from the traditional fault principle which holds the person who was at fault liable for damages with the main objective of reducing the persons in faulting in their duties. No-fault liability dispenses with the fault concept and holds a person liable if he is handling or storing hazardous materials even if he is taking all precautions to prevent their escape. The principle of no fault liability covers the concept of both strict liability and absolute liability and makes the owner of the enterprise handling hazardous substances liable for any accidents absolutely.
Essential Provisions relating to no-fault liability in the Act
Post-Bhopal Gas Tragedy which claimed countless lives and disabled many and in the Oleum Gas Leak case, a strong need was felt for legislation providing for speedy and expeditious justice mechanism for victims of such industrial accidents. Pursuant to this, the Public Liability Insurance Act, of 1991 was framed with an objective to provide speedy justice and compensation to the victims.
Section 3 of the Act laid down the concept of no-fault liability. According to Section 3, in case of any death or injury or loss of property caused due to an accident, the owner shall be absolutely liable for providing relief mentioned under the Schedule to the Act. The word ‘shall’ in Section 3 suggests that this liability of the owner is mandatory and absolute. Section 3(2) clearly indicates the absolute liability by no wrongful act of the owner has to be proved. Thus, the section has been framed in such a manner that no exceptions are carved out of the same and owner is made liable. Section 3 specifically excludes claims of workmen and any claims for temporary disability. Workmen are excluded from the Act to ensure that there is no dual liability as liability has also been mentioned in the Workmen Compensation Act.
In furtherance of the implementation of Section 3, Section 4 has been laid down which makes it a duty of all owners dealing with hazardous substances to take insurance policies in order to deal with the potential claims due to accidents. Along with the insurance premium, the owner would provide the insurer with a certain amount of money for the Environment Relief fund which is to be used for satisfying claims. This environment relief fund is set up by Central Government and is provided under Section 7A of the Act.
A separate compensation mechanism is provided in the Act for accident claims. After an accident, a collector will invite applications from people claiming relief. There are three levels of compensation mechanism provided in the Act. The claims would first be satisfied from insurance undertaken by the owner. Compensation can then be satisfied out of the relief fund under Section 7A. The remaining amount can be satisfied by the owner himself. This compensation structure clearly points towards the no-fault liability.
Analysis
The purpose of this Section is to analyse the provisions of the Act to understand whether it has been able to achieve its objective of speedy and expeditious delivery of justice to the victims. The basis for the principle of no-fault liability and its disjunction with the traditional policy of torts is looked into. It also focuses on whether the compensation structure provided in the Act is able to provide adequate compensation to the people.
The principle of no-fault liability
No-fault liability is completely divergent from the concept of fault liability. The question that arises is whether fixing liability even if the person is not at fault is in the interest of justice. Society and its perceptions do not always remain the same and no-fault liability has been bought into the picture due to the change in the outlook of people. Coleman (1976)[3] stated that the principle of fault liability was based on the theory of retribution. The cry for justice for victims gave rise to the theory of compensation which later manifested in no-fault liability. The basic aim of fixing no-fault liability is to pay adequate compensation to the victims rather than making the person at fault suffer[4]. It is based on the deep pocket theory so that a person having the resources to pay compensation is made accountable even if he is not at fault.
The principle though is a digression of the traditional tort system is necessary for the present time, especially in situations of industrial accidents. If industrial accidents are treated by applying the fault principle, the owners could many times escape liability by proving that they had taken the necessary precautions. However, it must be understood that any industry has a responsibility towards society and its people. The owner should be held accountable for the escape of hazardous materials in their industry as they derive revenue from such acts and thus are socially responsible to provide compensation in case of any accidents.
In the case of the no-fault liability principle, generally, there is a cap on the compensation that has to be paid. This is a major disadvantage in the doctrine as even the theory of compensation is not fully satisfied. The amount of compensation, being limited, is not justifiable in the case of each victim and this could lead to lesser damages to a victim in proportion to the damage he suffered. However, it must be taken into consideration that if fault liability is applied in industrial accident cases, it may happen that the victims do not get damaged at all if the fault is not established on part of any person. In such cases, the victim would get better justice by applying no fault liability instead of the fault principle.
Loopholes in the Act
The Public Liability Insurance Act, of 1991 was enacted to provide speedy compensation to the victims of accidents. However, it must be considered that the Act was last amended in 1992 and it has been three decades since an amendment was passed to revise the compensation provided under this Act. This long-overdue has led to inadequate compensation being mentioned in the first schedule. For instance, for fatal accidents, a meagre sum of Rs. 25000 is provided along with the medical expenses of Rs. 12500[5]. These figures have now become obsolete. It is well-known that hospital expenses have skyrocketed and the sum specified in the Act is not enough to even pay for the medicines in case of fatal accidents, let alone the hospital bills.
Also, with regards to the definition of hazardous substances as provided in Section 2(d), the term has been contradictorily interpreted by various High Courts. The definition of hazardous substances is the same as that provided under the Environmental Protection Act[6] with additional criteria that it would constitute hazardous substances if it exceeds the quantity notified by the Central Government. The definition is about the treatment of substances that are not altogether notified by the government. It only talks about the substances whose maximum limit has been notified.
This question has been answered differently by different courts. Indian Council for Enviro Legal Action v. Union of India[7], the court held that if a substance is not notified by the government, it would not fall under the category of hazardous substances. However, in the case of MP State Electricity Board, Jabalpur v. Collector Mandla[8], it was held that if the definition of hazardous substances under Public Liability Insurance Act and Environment Protection Act is harmoniously construed, we can come to a conclusion that the definition is wide in nature and should not be taken in a confined sense. This difference in interpretation creates a difficulty in understanding the scope of this Section. Thus, an amendment in the definition of an observation by the Supreme Court is required to avoid such contradictions. For proper justice in accident claims, the definition adopted in the latter case should be preferred. This would be in the interest of justice as there can be various substances that though not notified, can cause industrial accidents and rejecting claims of victims of such accidents would be unjust at the very least.
Conclusion
The concept of no-fault liability can be understood as an umbrella term encompassing concepts of both strict liability and absolute liability[9]. It is a digression to the principle of fault liability in tort law. Before the 19th century, fixing liability on someone who has no fault was highly criticized but with a change in the outlook, concepts like strict liability, absolute liability and no-fault liability were introduced in the legal regime.
As an answer to major catastrophes, the Public Liability Insurance Act was framed which provided for the principle of no-fault liability making the owner responsible for industrial accidents due to escape of hazardous materials. There is a detailed compensation structure for the same provided in the Act itself for expeditious justice to the victims. However, there are certain loopholes in the act which lead to multiple interpretations making the justice delivery system difficult. Also, the act needs further amendment to revise the rate of compensation provided in Schedule 1 as the amount is not adequate on today’s date.
Despite the loopholes present in the Act, it is a step in the right direction to ensure that the victims of industrial accidents get speedy compensation. It has been able to give justice to the victims of major accidents like the Oleum Gas Leak tragedy owing to which the faith of people in the justice delivery system remained intact even after a catastrophe of such huge magnitude.
[1]Rylands v. Fletcher, (1868) I.R.H.L. 330
[2]MC Mehta v. Union of India, A.I.R. 1987 S.C. 1086
[3]Jules L. Coleman, The Morality of Strict Tort Liability, 18 William and Mary Law Review, 259 (1976)
[4]Nathan Isaacs,Fault and Liability, 31 Harvard Law Review,954(1918)
[5]The Public Liability Insurance Act, 1991, sch. 1, cl. (i)
[6]The Environment Protection Act, 1986, s. 2, cl. (e)
[7]Indian Council for Enviro-Legal Action v. Union of India, (1996) 3 SCC 212
[8]M.P. State Electricity Board, Jabalpur vs. Collector Mandla, 2003 AIR MP 0-156
[9]GazalSancheti, No-fault Principle in the Public Liability Insurance Act, 1991: Legislative History, Implementation and Present-day Relevance of Compensation Structure,3 International Journal of Law, Management and Humanities, 555(2020)
[1] Hereinafter referred to as “the Act”
