Tort Law

Union Carbide Corporation v. Union of India

(1989) 1 SCC 674

Citation: (1989) 1 SCC 674
Court: Supreme Court of India
Date: 14 Feb 1989
Bench: R.S. Pathak CJI; E.S. Venkataramiah, Ranganath Misra, M.N. Venkatachaliah and N.D. Ojha JJ

Facts

• Union Carbide India Ltd. operated a pesticide plant in Bhopal.
• During the night of 2–3 December 1984, a large quantity of methyl isocyanate and other toxic gases escaped from the plant.
• Thousands of persons died, and many more suffered severe or continuing injuries.
• The disaster created an exceptionally large mass-tort claim.
• Parliament enacted legislation authorising the Union of India to represent the victims.
• Proceedings were first pursued in the United States and were later continued in India.
• The Bhopal District Court ordered interim compensation.
• The Madhya Pradesh High Court modified the amount and directed payment of ₹250 crore as interim relief.
• Union Carbide challenged the order before the Supreme Court.
• During the appeals, the Supreme Court facilitated a global settlement.
• Union Carbide agreed to pay US$470 million in full settlement of civil claims connected with the disaster.
• The original settlement orders also purported to terminate criminal proceedings, which were later restored on review in 1991.

• Whether a global settlement could resolve the enormous number of existing and future tort claims.
• Whether the settlement amount was justified in view of urgency, uncertainty and prolonged litigation.
• How courts should respond to mass industrial disasters involving victims unable to litigate individually.
• Whether this case itself created the rule of absolute liability.

• Courts may approve a comprehensive settlement of mass-tort claims where:
o victims require urgent compensation;
o individual litigation would cause extreme delay;
o the represented claims are properly considered; and
o the settlement is treated as just and reasonable in the circumstances.
• Compensation must account for:
o deaths;
o serious and minor injuries;
o continuing medical consequences;
o future claims; and
o administrative distribution.
• Settlement approval is a remedial and procedural response; it does not necessarily determine every disputed principle of substantive liability.
• The absolute-liability rule was formulated in M.C. Mehta, not in this settlement judgment.

• The Court considered that ordinary litigation could continue for years while victims required immediate medical and financial assistance.
• Establishing individual causation and damages for hundreds of thousands of persons would be exceptionally difficult.
• The settlement created a fixed fund intended to provide a practical and immediate source of compensation.
• The Court weighed:
o competing estimates of victims;
o possible damages;
o litigation uncertainty;
o Union Carbide’s proposed payment; and
o the State’s demand.
• The amount fell between the positions previously taken by the parties.
• The Court treated the Union of India as representing the victims under the statutory scheme.
• However, the judgment has been criticised because the victims had limited direct participation and the amount proved controversial.
• For Tort Law purposes, its central significance lies in mass-tort settlement, compensation and distribution rather than formulation of absolute liability.

• The Supreme Court approved the US$470 million global settlement.
• It treated the amount as full settlement of past, present and future civil claims arising from the Bhopal disaster.
• Union Carbide was required to deposit the agreed sum for distribution.
• The decision prioritised immediate compensation and finality over prolonged individual proceedings.
• The termination of criminal proceedings was subsequently reversed in the 1991 review judgment.