Union Carbide Corporation vs Union Of India Etc – Case Summary

Equivalent citations: 1990 AIR 273, 1989 SCC (2) 540
Union Carbide Corporation
Union Of India Etc
Date of Judgement: 04/05/1989
Pathak, R.S. (Cj), Venkataramiah, E.S. (J), Misra Rangnath, 
Venkatachalliah, M.N. (J), Ojha, N.D. (J)


In the year 1934 American industrial giant Union Carbide with the Union of India incorporated Union Carbide India Limited (hereinafter UCIL) in India for the manufacture of batteries, chemicals, pesticides and other industrial products. The Union Carbide was the majority stakeholder (51%) in the company. In 1970, a new pesticide plant was set up by UCIL in a densely populated area of Bhopal (Madhya Pradesh).

Despite repetitive complaints regarding the safety measures of the pesticide plant by the agronomic engineer of the plant, UCIL ignoring all these complaints kept on producing dangerous & hazardous chemicals in the plant. Unfortunately, on the intervening night of 02-03 December 1984, the Methyl Iso-cynate (MIC) gas (approx. 40 tons) used as a raw material in the production upon mixing with water and creating an exothermic reaction leaked into the atmosphere and unleashed a havoc on the residents of entire Bhopal City and adjoining areas. Due to high wind pressure, the MIC gas traveled as far as the peripheries of Bhopal. Due to the outbreak of this ghost of 1984 in Bhopal as many as 2600 people immediately died and the death toll rose to a huge 8000 within a fortnight, while tens of thousands were displaced, injured and affected. The later estimates indicate that the death toll rose to an enormous 20000 while more than 600000 were left injured. This catastrophe not only left the live human beings, flora and fauna victimized it also injured the babies in the womb. The residents of Bhopal are suffering even today due to this ghastly catastrophe that happened due to the negligence of a multinational company.

Union of India immediately to provide speedy justice to the victims enacted Bhopal Gas Leak Disaster (Processing of Claims) Act, 1985 (the Bhopal Act) making the Union of India representative of the victims by the virtue of Doctrine of Parens patriae. However, the validity of this act was challenged in Supreme Court in Union Carbide Corporation v. Union of India[1]on the ground that since the Union of India was also owner of minority shareholders, they are also responsible for the disaster. However, the court by applying CharanlalSahu v. Union of India[2] ruled in favor of the union of India and held that the state is obligated to protect the interests of its citizens across the globe. The court further held that our Constitution makes it imperative for the state to secure to all its citizens the rights guaranteed by the Constitution and where the citizens are not in a position to assert and secure their rights, the state must come into picture and protect and fight for the rights of the citizens.

However, the Union of India shockingly decided to litigate the case in foreign courts instead of fighting it in Indian courts. The Union of India to support its stance of choosing American courts contended the following:

  1. Indian legal system is not appropriate to entertain such big a matter including the flaws of substantial backlogs in the cases.
  2. Both Indian Lawyers and Indian law is not well versed with the laws of Torts therefore, due to gap in law it is probable that justice might not be delivered.

Therefore, all the appeals against Union carbide were clubbed into one single petition before Keenan’s court. The Keenan’s Court at once dismissed the case on the grounds of forum non conviniens.  The American court wasof the view that all the relevant evidences are within the jurisdiction of India, therefore, it held that Indian courts are better forum for this matter.

Therefore, in September 1986 Union of India initiated proceedings against Union Carbide in Bhopal District Court. The District court asked Union Carbide to deposit as sum of 350 Million as interim compensation. Union Carbide went into appeal in High Court & the court reduced the sum to 250 Million. Finally, Union Carbide reached Supreme Court.     


The validity of settlement ordered by the High Court of Madhya Pradesh


The court in order to not to waste any more time in writing detailed judgment ordered Union Carbide on February 14, 1989 to pay a hefty compensation of US $470 Million before March 31, 1989. However, few months later on May 4, 1989 passed a reasoned order regarding the same.

The Supreme Court ordered Union Carbide to pay US $470 million against all the destruction that the leak of MIC gas from the industrial premise. In the reasoned order Justice Pathak said that it was the duty of the court to secure immediate relief to the victims of the MIC leak and while doing that the court did not entered into any virgin territory. Pathak j. applying the polluters pay principle decided the quantum of compensation to be US $470 Million. The court considered that the counter offers ranged between US $ 426 Million and US $ 500Million. Therefore, US $ 470 Million was calculated as the mean of the counter ranges.

However, this settlement of US $ 470 Million was way less to the promised amount by the government and also various jurists considered it to be an inappropriate compensation. After analyzing the ratio, it seems that an amount less than INR 50,000 was delivered to each victim.

Therefore, the legal validity of this settlement was challenged in Union Carbide Corporation v. Union of India[3]. The petitioners in this case argued that the drop of criminal proceeding against Union Carbide was illegal and the amount of Compensation was inappropriate to the injury the disaster caused. In this case the majority opinion was given by Justice Venkatchaliah on behalf of himself and K.N. Singh and N.D. Ojha JJ. while CJ Mishra concurred with him and Ahmadi J. wrote the minority opinion. The majority opinion directed that the quashing of criminal proceedings against Union Carbide was not justified and held that the criminal proceedings must be initiated. On the point that whether such compensation is adequate or not the majority bench held that the said compensation is adequate, reasonable and fair and in case any deficiency arises in money for rehabilitation, such money shall be tendered by the Union & State government. On this point Ahmadi J. dissented with the majority that when Union of India is not even remotely connected to the MIC leak in UCIL then how it could be made liable to pay the damages. In his opinion any deficiency that may arise in rehabilitation of victims must be tendered by Union Carbide as applying the formula ofRylands v. Fletcher[4].

Critical Analysis

The MIC leak disaster brought out the incompetence in Indian laws as well as the institutions that claim themselves to be the protector of rights vested in the citizens of the nation. From Parliament’s decision to fight the case in U.S. to the ambiguous and inappropriate decision of SC, it was reflected that all the rights and freedom that a citizen is guaranteed is only on papers.

The government’s lack of confidence in the judiciary was a critical criticism on the judicial system of the nation. The Parliament claimed that Indian courts are not well equipped to entertain such huge matters. This shows how less Parliament thinks of Indian Judiciary. Our legislature is asking a foreign state for justice when it should have faith in the Indian Judiciary. Due to huge backlog in pending cases and no scope of Law of Tort in India made Parliament to consider the option to approach US courts.

Further, the Indian courts in order to liberalize its standards did not order a compensation that would suffice the loss of disaster. The judiciary should had considered the fact that Union Carbide despite severe warnings did not adopted proper measures to check harmful substances to escape its premises. The judiciary wasted two chances to revise the quantum of compensation. Further, in 1991 it held that any deficiency in the amount of compensation would be tendered by the Union & State government. The court should have thought that why would public money be wasted for faults of private party.

Therefore, this a lesson from which all the constitutional functionaries should learn a strict lesson. The Parliament must formulate such stringent laws by the virtue of which India becomes self – sufficient in resolving such matters and not brag about its incompetence in International arena. The executive should feel responsible to check such harmful plants that whether they are complying with all the safety measures prescribed by the appropriate laws. The judiciary should also understand when to deal with matters liberally and when not. If the judiciary has in the first place awarded equitable compensation the public exchequer of India shall not have suffered.

Edited by Chiranjeeb Prateek Mohanty


[1]Union Carbide Corporation v. Union of India, (1991) 4 S.C.C. 584.

[2]CharanlalSahu v. Union of India, A.I.R. 1990 S.C. 1480.

[3]Union Carbide Corporation v. Union of India, (1991) 4 S.C.C. 584.

[4]Rylands v. Fletcher, (1868) L.R. 3 H.L. 330.

Hemant Varshney
Hello Readers, I am Hemant Varshney student of B.A.LLB.(Hons.) at Dr. Ram Manohar Lohia National Law University, Lucknow (Uttar Pradesh). Since the beginning of my life as a law student I had a great liking in the Constitutional Laws of various nations. However, apart from Constitutional Law I am also interested in Criminal laws, Human Rights Law and Arbitration laws. I also have great liking in novels both fiction (especially philosophical) and non-fiction. In my free time I often watch Netflix series, Hollywood movies, Web series etc. I love to listen songs almost all the time of the day. I am also a fitness enthusiast and try to keep myself fit. The motto of my life is “Hard work is the key to success” therefore, I try to not to give up in any circumstance and fulfill my obligations no matter how worse the situation is.