Environment Law

PROJECT
ON
Public liability insurance act, 1991

BY : TO:
Porush Jain Dr. Jatinder Mann
Roll No. : 209/19
B.Com.LL.B(Hons)-D
Sem. : 8th
Introduction
The advent of the industrial revolution had triggered the social impact of accidents in
manufacturing plants. With the evolution of sophisticated manufacturing product lines and
implementation of heavy machinery, chemicals, and robotic engineering – the risk for humans
deployed is high. The growth of hazardous industries, processes and operations in India has been
accompanied by growth risks from accidents, not only to the workmen employed in
undertakings, but also innocent members of public. Such accidents lead to death and injury to
human beings and other living beings and damages to properties. 1 The most of people affected
are from the economically weaker section of the society because of their delayed relief and
compensation. For the protection of worker there are many other acts like Workmen
Compensation Act, Workmen Safety rules and many others. But for the protection of general
public there were no such law, rules as such and public were not assured of any relief except the
long legal process.

There were many events were the compensation were not given to the general public for their
loss and there were strict need for the rules to be made. It was felt essential to provide for the
mandatory Public Liability Insurance for installation handling hazardous substances to provide
minimum relief to the victims. It also provides cover and enable the industry to discharge its
liability to settle large claims arising out of major accidents. India has strived to keep the
workplace safety component intact and established the Public Liability Insurance Act in
1991.The Public Liability Insurance Act, 1991 (the Act) was brought into effect to provide
immediate relief and support to those affected by any accident while working/ dealing with
hazardous substances at the workplace.

The Act applies to all owners or any person controlling the handling of hazardous substances.
The owner is deemed to undertake one or more insurance policies providing insurance contracts,
which insures him against the liability of providing relief claimed by the person, who may have
suffered loss or damage due to any activity of handling the hazardous substances.

Evolution
The concept of Strict liability was brought into the area of environmental and industrial accidents
by the English landmark decision, Rylands v. Fletcher2, in which the principle of strict liability
was enunciated. As per the principle of strict liability, in case a person has a potentially
hazardous substance in his land, which amounts to a “non-natural use” of such land, and if such a

1
Sinha, Debadityo, “The Management of Environment Relief Fund”, March 2020
2
Rylands v. Fletcher, (1868) I.R.H.L. 330.
substance escapes, then the owner of the land shall be held liable for the injury and damage
caused as a result of such an escape.3 This principle was also applied by the Indian courts in a
plethora of cases, and with such application, various exceptions were also evolved for the
application of the principle. The exceptions were as such which show fault on the part of plaintiff
leading to the escape of the hazardous substance, or the accident happened due to the fault of 3 rd
party, or any act being done with consent or for the benefit of plaintiff, or any act of god, or any
act performed in discharge of public duty authorized by law. By giving way to these many
exceptions, the very strictness of the principle of strict liability was diluted. With time, this
principle became obsolete and was eventually disapproved of by the courts.

Bhopal Gas Tragedy is a catastrophic incident that tarnished the people's entire existence and
their surroundings in the city of Bhopal and cited as one of the world's biggest industrial
catastrophes, formed the basis for constituting the Act. The tragedy dates back to 1984, where
over 30 tons of methyl isocyanate gas was released from the Union Carbide pesticide plant,
which as per investigations was a result of an inadequate governance structure of the plant. The
death toll is estimated to be between 15 to 20 thousand; with more than half a million survivors
and their subsequent generations suffering from respiratory issues, eye irritation or blindness and
other maladies due to exposure to the toxic gas. Thirty six years since the catastrophe, the
adverse impact of the gas leak continues to affect the lives of the survivors, who are still awaiting
justice, seeking exemplary punishment to that responsible, adequate compensation to the victims,
proper rehabilitation and medical facilities for survivors and eradication of toxic chemicals. 4
Then the Oleum Gas Leak case came forth, the memories of the tragic accident in Bhopal,
coupled with the hue and cry of the Oleum Gas Leak from every corner of the country and the
deep effect it left on whole country, finally made the Government as well as the judiciary to take
note and make apt provisions. The Hon’ble Supreme Court while deciding the case of M.C.
Mehta v. Union of India5(popularly known as Oleum Gas Leak Case) propounded the rule of
“absolute liability”, court held the enterprise or the industry alone has the capacity, opportunity
and resources discover and mitigate potential hazards, because of which there should lies an
absolute and non-delegable duty upon them, which cannot be escaped simply by showing that all
necessary statutory precautions had been taken. This rule made an industries Absolutlyliable for
any hazardous act.

With the sequal of both the case of Bhopal Case Tragedy and Oleum Gas Leak Case, the
parliament in year 1991 enacted e Public Liability Insurance Act, 1991 (hereinafter referred to as
“PLIA” or “the Act”). The purpose of this Act is to provide immediate relief to the victims of
industrial accidents and incidents occurring as a result of handling hazardous substances 6. This
Act puts an obligation on an owner of the company to take insurance policies before dealing with

3
Id
4
https://www.mondaq.com/india/employee-benefits
5
M.C. Mehta v. Union of India, A.I.R. 1987 S.C. 1086
6
Preamble Public Liability Insurance Act, 1991
and handling any sort of hazardous substances in their enterprise. The motive of parliament here
was to cover the monetary coverage against any potential liability that may arise due to an
accident involving these hazardous substances.

Object and Purpose.

As the section 3 of act provides for the “No Fault Liability” the ain object to enact this act was
to protect the general public or to compensate general public for any losses occurred due to the
company or industries dealing with hazardous substances. On a bare reading of the
aforementioned provision, it is clear that the legislature has left no leeway for the enterprise to
raise any defence or to avail any exception so as to not pay the requisite relief. The provision
uses the term “shall”, thereby making the payment of relief a statutory mandate. As the opening
statement of act is states that “provide for public liability insurance for the purpose of providing
relief to the persons affected by accident occurring while handling any hazardous substance
connected therewith or incidental therto”7 to'. In the background of the principles of the Oleum
Gas Leak case, discussed earlier and the Bhopal litigation, the Act was passed to consolidate the
law relating to enterprise liability particularly in relation to hazardous activity. It seeks to provide
relief to the members of the general public who become the victims of industrial accident

Important Definition
Hazardous Substance, the definition of hazardous substance is embodied in ss. 2(d) of act
which is being adopted from the Environment Protection Act, 1986, which provides “hazardous
substance means any substance or preparation which, by reason of its chemical or physio-
chemical properties or handling, is liable to cause harm to human beings, other living creatures,
plants, micro-organisms, property, or the environment.” 8 A hazardous substance as defined under
Environment Protection Act comes under the meaning of the term in PLIA only if it is in such
exceeding quantity as the Central Government specifies by notification but in the case of U.P.
State Electricity Board v. District Magistrate, Dehradun 9, the Allahabad High Court held that
“ 'hazardous substance' as defined in Section 2 (d) of the 1991 Act is not to be confined to a
substance specified in the notification issued by the Central Government, but also includes all
substances which come under the definition of 'hazardous substance' under the Environment
(Protection) Act, 1986.

7
Preamble Public Liability Insurance Act, 1991
8
Section 2 of Environment Protection Act, 1986
9
U.P. State Electricity Board v. District Magistrate, Dehradun , 1997 UPLBEC (2) 1344
Handling, The term 'handling' is defined to comprehend, manufacture, processing, treatment,
package, storage, transportation by vehicle, use, collection, destruc- tion, conversion, offering for
sale, transfer or the like of such hazardous sub- stances10.

Compulsory Insurance, this act imposes a mandatory duty on an owners of company or

industries who are handling hazardous substance to take an insurance policies to cover the claim
for No Fault Liability as mentioned in section 3(1) of the act. This insurance needed to be rened
before the expiry of insurance policy from time to time during the handing of the hazardous
substance continues. The value of policy can’t be less than the paid up capital f the enterprise, or
enterprise other than company then the value of sum of insurance should be the market value of
all and assests and stocks on the date of contract of insurance shall be relevant minimum value.
However, the Central Government is empowered to exempt any enterprise owned by the Central
Government, State Government, any corporation owned or controlled by the Central or State
Government or any local authority from the statutory mandate of taking out insurance policy

Environment Relief Fund, as per section 7A of the Public Liability Insurance Act, 1991
An amount in addition to the premium, is to be paid by the owner to the insurer which in turn is
to be deposited by the insurer into a special pool called the Environmental Relief Fund. If he
does not remit this sum, it shall be recovered from him in the same way as arrears of land
revenue. This fund under Ss. 7A of PLIA, is to be utilised for the paying of relief to be given
under the mechanism prescribed by PLIA.11

Procedure for securing relief

Section 5 to Section 7 deals with the procedure for securing relief by the injured person or legal
representative of deceased person on behalf of deceased person due to any hazardous substance.
An application for claim or relief under this Act must be made to the District Collector, within
whose jurisdiction the accident occurred. This application had to be accompanied by all the
necessary documents and the collector was required to make an award after hearing both the
parties concerned The Collector under has the powers of Civil Court for seeking evidence on
oath, attendance of a witness and so on. The application for claim or relief sought must be made
within 5 years from the occurrence of the accident.

Upon accepting the application, the Collector conducts a detailed inquiry into the matter and the
claim sought. Thereafter, basis the inquiry, the Collector passes an award stating the final
compensation amount to be paid by the insurer. Such award is required to be delivered to both

10
Ss. 2(c) of Public Liability Insurance Act, 1991
11
Raghavan, Vikram. “PUBLIC LIABILITY INSURANCE ACT: BREAKING NEW GROUND FOR INDIAN ENVIRONMENTAL
LAW” , Journal of the Indian Law Institute , January-March 1997
the parties within 15 days from the date of delivery of the award and stands binding on all the
parties thereto.

The insurer is required to make the payment within 30 days from the date of announcement of
the award, in a manner as prescribed by the Collector. Where the owner is liable to pay relief,
resorts to disposal of the property to evade payment of such relief; in such cases, the Collector
may restrain the act by granting a temporary injunction on such disposal under Order XXXIX of
the Code of Civil Procedure, 1908.

Measurement for amount of Compensation

The compensation structure of the Act is laid down in the Schedule to the Act. . It can be
summarised in a tabular form as follows12:

Head of Compensation Relief to be awarded

1. Reimbursement of medical expenses Rs. 12,500 in each case (upper limit)

2. Fatal Accidents a .Rs. 25,0000 per person, and

b. Reimbursement of medical expenses up to

Rs. 12,500 per person

3. Permanent total or permanent disability

a. Reimbursement of medical expenses up to

Rs. 12,500 per person, and

b. Cash relief on the basis of percentage of

disablement. If the disability is total and
permanent, then relief will be Rs. 25,000.

4. Loss of wage due to temporary disability

Rs. 1000 per month (upper limit) up to a

maximum of 3 months [This relief is
awarded only when victim has been
hospitalised for a period exceeding 3 days
and is above 16 years of age]

12
Ibid 1.
 5. Damage to private property Rs. 6000 depending on actual damage13

Powers and Penalties

The Central Government has been given extensive power under provision of Public Liability
Insurance Act, 1991. They are authorize to call any person for information for ascertaining as to
whether the requirements of PLIA have been fulfilled. They also have the power to entry and
inspect the place. They even has power to search and seizure the of premises or vehicle where
the hazardous substances are being handles. They have the power to give direction and to to
make an application to a court of law for restraining an owner from handling hazardous
substances in contravention of the provisions of PLIA14.

Any form of non-compliance with the provisions of this Act shall attract both imprisonment and
a fine. In case of repeated offenders, the imprisonment shall not be less than 2 years extending
up-to 7 years and a fine of not less than one lakh rupees. 15 There is also a penalty for obstructing
the carrying on of functions under sections 10 and 11. The principles of corporate criminal
liability are also recognized in the Act, by stipulating that companies can also be proceeded
against for offence.16

In case of Company commits an offence, every person in-charge or responsible for the business
operations of such company when the offence was committed, stands guilty of the offence and is
liable for punishment accordingly.

Conclusion
This act enacted in pretext of the section 13 of the Rio Declaration on the Environment, 1992,
Bhopal Gas Tragedy and the Oleum gas leak case, the Act stipulates a sense of social
responsibility to facilitate and ensure adequate relief to the victims against any accident that
occurs on handling hazardous substances. As the Act provides, the accident may occur due to
misconduct, mismanagement, negligence or other reasons. There is duty of company handling
with hazardous substance have to take insurance for the purpose of “No Fault Liability”.
However, the person in control of handling such substances is under an obligation to insure the
establishment against adequate relief/ compensation for any casualty, injury or damage to
personal or public property.

13
Schedule 1 of PLIA 1991
14
Section 9 to Section 13 of Public Liability Insurance Act, 1991
15
Section 14 of PLIA 1991
16
Ibid 11