Rule of Absolute Liability

In M.C. Mehta v Union of India (AIR 1987 SC 1086), the Supreme Court evolved the rule of `absolute liability’ as part of Indian law in preference to the rule of strict liability laid down in Rylands v Fletcher. It expressly declared that the new rule was not subject to any of the exceptions under the Rylands rule. Because those who had established hazardous industries in, and around thickly populated areas could escape the liability for the havoc caused thereby pleading some exception to the Rylands rule. For instance, when the escape of the substance causing damage is due to the act of a stranger, say due to sabotage, there is no liability under the Rylands rule.

The Court observed: -This’ rule (Rylands v Fletcher) evolved in the 19th century at a time when all these developments of science and technology had not taken place….We have to evolve new principles and lay down new norms which would adequately deal with the new problems which arise in a highly industrialized economy.”

The Supreme Court also laid down that the measure of compensation should be correlated to the magnitude and capacity of the enterprise, so that the compensation can have the deterrent effect. The larger and more prosperous the enterprise, the greater must be the amount of compensation payable by it (‘Deep pocket’ theory). Thus, unlike the strict liability where ordinary or compensatory damages are awarded, under absolute liability, exemplary damages are awarded. In Bhopal case (AIR 1990 SC 273), the Mehta principle was applied in determining the compensation payable to the gas victims.

The Bhopal Gas Leak disaster and the Shriram Gas Leak tragedy provided an impetus for the passing of the Public Liability Insurance Act, 1991. The Act provides for ‘mandatory insurance’ for the purpose of providing an immediate relief to the persons affected by accidents occurring while handling any hazardous substance. The Act covers every industry, public or private, which handles hazardous substances. The Act incorporates the ‘no-fault’ liability standard.