Court caseAIR 1987 SC 1086

Shriram Foods and Fertiliser Industries, a unit of Delhi Cloth Mills, ran a caustic chlorine and sulphuric acid plant in a densely populated part of Delhi. On 4 and 6 December 1985, a year after the Bhopal disaster, oleum gas leaked from the plant; an advocate practising in the Tis Hazari courts died and several people were affected. M.C. Mehta, a public-interest lawyer, had already petitioned under Article 32 for the closure of the plant. The Court had to decide whether the plant could reopen, and the applications for compensation raised the questions of the enterprise's liability and the Court's power to award damages under Article 32.

Bhagwati CJ, for a Constitution Bench, declined to be bound by a nineteenth-century English rule "evolved in the context of a totally different kind of economy". The Court held that an enterprise engaged in a hazardous or inherently dangerous industry which poses a potential threat to the health and safety of persons working in it and residing nearby "owes an absolute and non-delegable duty to the community to ensure that no harm results to anyone". If harm results, the enterprise is "absolutely liable to compensate" and it is no answer that it took all reasonable care or that the harm occurred without negligence; none of the exceptions to Rylands v. Fletcher apply. The measure of compensation "must be correlated to the magnitude and capacity of the enterprise", so that it has a deterrent effect: the larger and more prosperous the enterprise, the greater the compensation. Article 32 was held wide enough to include the power to award compensation in appropriate cases. The Article 12 question was left open and the actual claims were left to be pursued in suits with the help of the Delhi Legal Aid and Advice Board.