M.C. Mehta v. Union of India and Ors (Oleum Gas Case 3)

1987 AIR 1086; 1987 SCR (1) 819; 1987 SCC (1) 395; JT 1987 (1) 1; 1986 SCALE (2) 1188
Download Judgment: English

Shriram Foods and Fertiliser Plant, Delhi (Shriram) was situated amidst a population of 200,000 people. It manufactured items such as glycerin soap, and technical hard oil. The petitioner, M.C. Mehta, filed a writ petition in the Supreme Court to obtain an order for closure of the plant and its relocation to an area where it “would not be any real danger to the health and safety of the people.”

The Supreme Court permitted the plant to restart power and function, pending disposal of the petition. During the pendency of the petition, oleum gas leaked from the plant causing significant detrimental health effects to the local population, pursuant to which compensation claims were filed.

The Supreme Court held that “since the issues raised involved substantial questions of law relating to the interpretation of Articles 21 and 32 of the Constitution, the case should be referred to a larger Bench…” The larger bench was to interpret Article 32 in order to determine whether a writ in conjunction with compensation could be awarded. Article 21, which establishes the right to protection of life and liberty, was to be interpreted in relation to a private corporation “vital to public interest.”

On the point of a technical flaw pointed out by counsel for Shriram, the Court noted that the substance, not the form, of the writ should be its concern, and that a hyper-technical approach was inappropriate in applying fundamental rights.

In relation to awarding compensation for a violation of fundamental rights, the Court held that it had “all incidental and ancillary power including the power to forge new remedies.” This was necessary to grant compensation as otherwise the fundamental rights provisions of the Constitution would be frustrated. The Court noted that compensation for violation of a fundamental right could be sought under Article 32 only when the breach is “gross and patent,” “incontrovertible and ex facie glaring.” Otherwise, a claim for compensation must be sought in the civil courts.

In order to address the alleged fundamental rights violations under Article 21, the Court had to first determine whether Shriram, a private corporation, could fall within the definition of State. The Court outlined the five criteria enunciated in R. D. Shetty v. Airport Authority of India ((1979) 3 SCR 1014) to decide whether a corporation could be deemed to be an “instrumentality or agency of the State”, for the purposes of enforcing fundamental rights against them. It listed the factors as follows:

“(1) [F]inancial assistance given by the State and magnitude of such assistance (2) any other form of assistance whether of the usual kind or extraordinary (3) control of management and policies of the corporation by the State-nature and extent of control (4) State conferred or State protected monopoly status and (5) functions carried out by the corporation, whether public functions closely related to government functions.”

The Court held that the government exercised control on all those activities of Shriram which jeopardized public interest and that not only did the government exercise “extensive functional control” over Shriram but also assisted it financially in terms of loans and overdrafts. The Court also held that Shriram was engaged in an activity “which has the potential to invade the right to life of large sections of people.” The Court, however, declined to rule whether Shriram was “State” for the purposes of Article 21, preferring to leave the questions open for a later date.

Regarding the liability of a corporation due to injurious consequences of hazardous activities conducted by it, the Court held that a corporation “owes an absolute and non-delegable duty to the community to ensure that no harm results to anyone on account of the hazardous or inherently dangerous nature of the activity which it has undertaken.” Extending the principle of strict liability in Rylands v. Fletcher (L.R. 3 H.L.330), the Court, for the first time, enunciated the principle of absolute liability of corporations when they undertake hazardous and dangerous activity. Such activity, according to the Court, should be allowed only on the condition that the enterprise “indemnifies all those who suffer on account of the carrying on of such hazardous or inherently dangerous activity regardless of whether it is carried on carefully or not.”

“It is not correct to say that in India once a corporation is deemed to be 'authority', it would be subject to the constitutional limitation of fundamental rights in the performance of all its functions and that the appellation of 'authority' would stick to such corporation, irrespective of the functional context.” (1987) 1 SCR 819, pg. 841.

“This Court has throughout the last few years expanded the horizon of Article 12 primarily to inject respect for human-rights and social conscience in our corporate structure. The purpose of expansion has not been to destroy the raison d'etre of creating corporations but to advance the human rights jurisprudence.” (1987) 1 SCR 819, pg. 841.

“The enterprise must be held to be under an obligation to provide that the hazardous or inherently dangerous activity in which it is engaged must be conducted with the highest standards of safety and if any harm results on account of such activity, the enterprise must be absolutely liable to compensate for such harm and it should be no answer to the enterprise to say that it had taken all reasonable care and that the harm occurred without any negligence on its part.” (1987) 1 SCR 819, pg. 843.

View full summary and print   |   Download summary as PDF