Data source
Date of text
20 Dec 1986
Seat of court
New Delhi
Original language


Type of text
National - higher court
Reference number
(1986) INSC 282
Court name
Supreme Court of India
compensation, liability

The petitioners sought a direction for closure of the various units of Shriram Foods & Fertilizers Industries on the ground that they were hazardous to the community. During the pendency of the petition, there was escape of oleum gas from one of the units of Shriram. The Delhi Legal Aid and Advice Board and the Delhi Bar Association filed applications for award of compensation to the persons who had suffered harm on account of escape of oleum gas.
The Supreme Court had to decide, among others, what the measure of liability of an enterprise was which was engaged in an hazardous or inherently dangerous industry, if by reason of an accident occurring in such industry, persons die or were injured. Did the rule in Rylands v. Fletcher (1866 Law Report 1 Exchequer) apply or was there any other principle on which the liability could be determined?
There was a constitutional obligation on the Court to protect the fundamental rights of the people and for that purpose the Court had all incidental and ancillary powers including the power to forge new remedies and fashion new strategies designed to enforce the fundamental rights.
The court explained that the rule in Rylands v. Fletcher had laid down a principle of liability that if a person who brought on to his land and collected and kept there anything likely to do harm and such thing escaped and did damage to another, he was liable to compensate for the damage caused. This rule had evolved in the 19th century at a time when many developments of science and technology had not taken place and could not afford any guidance in evolving any standard of liability consistent with the needs of the present day economy and social structure. In a modern industrial society with highly developed scientific knowledge and technology where hazardous or inherently dangerous industries were necessary to carry on as part of developmental programme, the Court did not need to feel inhibited by this rule merely because the new law did not recognise the rule of strict and absolute liability in case of an enterprise engaged in hazardous and dangerous activity. The Court could not allow judicial thinking to be constricted by reference to the law as it prevailed in England or in any other foreign country.
An enterprise which was engaged in a hazardous or inherently dangerous industry which posed a potential threat to the health and safety of the persons working in the factory and residing in the surrounding areas owed an absolute non-delegable duty to the community to ensure that if any harm resulted to anyone, the enterprise was under an obligation to provide that the hazardous or inherently dangerous activity had to be conducted with the highest standards of safety and if any harm resulted on account of such activity the enterprise had to be absolutely liable to compensate for such harm irrespective of the fact that the enterprise had taken all reasonable care and that the harm occurred without any negligence on its part.
If the enterprise was permitted to carry on an hazardous or inherently dangerous activity for its profit, the law had to presume that such permission was conditional on the enterprise absorbing the cost of any accident arising on account of such activity as an appropriate item of its overheads. The measure of compensation in such kind of cases had to be co-related to the magnitude and capacity of the enterprise because such compensation had to have a deterrent effect.