Indian Council For Enviro-Legal Action vs Union Of India & Ors

Indian Council for Enviro-Legal Action ... Petitioners

Versus

Union of India & Others ... Respondents

JUDGMENT

Dalveer Bhandari, J.

1. This is a very unusual and extraordinary litigation where

even after fifteen years of the final judgment of this court (date

of judgment 13th February, 1996) the litigation has been

deliberately kept alive by filing one interlocutory application or

the other in order to avoid compliance of the judgment. The

said judgment of this Court has not been permitted to acquire

finality till date. This is a classic example how by abuse of the

process of law even the final judgment of the apex court can

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be circumvented for more than a decade and a half. This is

indeed a very serious matter concerning the sanctity and

credibility of the judicial system in general and of the apex

court in particular.

2. An environmentalist organisation brought to light the

sufferings and woes of people living in the vicinity of chemical

industrial plants in India. This petition relates to the

suffering of people of village Bichhri in Udaipur District of

Rajasthan. In the Writ Petition No.967 of 1989, it was

demonstrated how the conditions of a peaceful, nice and small

village of Rajasthan were dramatically changed after

respondent no. 4 Hindustan Agro Chemicals Limited started

producing certain chemicals like Oleum (concentrated form of

sulphuric acid) and Single Super Phosphate. Respondent

numbers 4 to 8 are controlled by the same group and they

were known as chemical industries. The entire chemical

industrial complex is located within the limits of Bichhri

village, Udaipur, Rajasthan. Pursuit of profit of entrepreneurs

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has absolutely drained them of any feeling for fellow human

beings living in that village.

3. The basic facts of this case are taken from the judgment

delivered in the Writ Petition No.967 of 1989. In the

beginning of the judgment of this court delivered on February

13, 1996, it is observed as under:

"It highlights the disregard, nay, contempt for

law and lawful authorities on the part of some

among the emerging breed of entrepreneurs, taking

advantage, as they do, of the country's need for

industrialisation and export earnings. Pursuit of

profit has absolutely drained them of any feeling for

fellow human beings - for that matter, for anything

else. And the law seems to have been helpless.

Systemic defects? It is such instances which have

led many people in this country to believe that

disregard of law pays and that the consequences of

such disregard will never be visited upon them

-particularly, if they are men with means. Strong

words indeed - but nothing less would reflect the

deep sense of hurt, the hearing of this case has

instilled in us."

4. It seems that the court was prophetic when it made

observation that at times men with means are successful in

avoiding compliance of the orders of this court. This case is a

classic illustration where even after decade and a half of the

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pronouncement of the judgment by this court based on the

principle of `polluter pays', till date the polluters (concerned

industries in this case) have taken no steps to ecologically

restore the entire village and its surrounding areas or

complied with the directions of this court at all. The orders of

this court were not implemented by keeping the litigation alive

by filing interlocutory and interim applications even after

dismissal of the writ petition, the review petition and the

curative petition by this court.

5. In the impugned judgment, it is mentioned that because

of the pernicious wastes emerging from the production of 'H'

acid, its manufacture is stated to have been banned in the

western countries. But the need of 'H' acid continues in the

West and that need is catered to by the industries like the

Silver Chemicals and Jyoti Chemicals in this part of the world.

6. In the impugned judgment, it is also mentioned that

since the toxic untreated waste waters were allowed to flow

out freely and because the untreated toxic sludge was thrown

in the open in and around the complex, the toxic substances

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have percolated deep into the bowels of the earth polluting the

aquifers and the sub-terrain supply of water. The water in the

wells and the streams has turned dark and dirty rendering it

unfit for human consumption. It has become unfit for cattle to

drink and for irrigating the land. The soil has become polluted

rendering it unfit for cultivation, which is the main source of

livelihood for the villagers. The resulting misery to the

villagers needs no emphasis. It spreads disease, death and

disaster in the village and the surrounding areas. This sudden

degradation of earth and water had an echo in Parliament too

and the concerned Minister said that action was being taken,

but nothing meaningful was done on the spot. The villagers

then rose in virtual revolt leading to the imposition of Section

144 of the Criminal Procedure Code by the District Magistrate

in the area and the closure of Silver Chemicals in January,

1989. It is averred by the respondents that both the units,

Silver Chemicals and Jyoti Chemicals have stopped

manufacturing 'H' acid since January, 1989 and are closed.

We may assume it to be so, yet the consequences of their

action remain - the sludge, the long-lasting damage to earth,

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to underground water, to human beings, to cattle and the

village economy.

7. The Rajasthan State Pollution Control Board (for short

"R.S.P.C.B.") in pursuance of the show cause notice filed a

counter affidavit and stated the following averments:

(a) Re.: Hindustan Agro Chemicals Limited

(respondent for short) [R-4]: The unit obtained

'No-Objection Certificate' from the R.S.P.C.B. for

manufacturing sulphuric acid and Aluminum

sulphate. The Board granted clearance subject

to certain conditions. Later 'No-Objection

Certificate' was granted under the Water

[Prevention and Control of Pollution] Act, 1974

[Water Act] and Air (Prevention and Control of

Pollution) Act, 1981 [Air Act], again subject to

certain conditions. However, this unit changed

its product without clearance from the Board.

Instead of sulphuric acid, it started

manufacturing Oleum and Single Super

Phosphate [S.S.P.]. Accordingly, consent was

refused to the unit on February 16, 1987.

Directions were also issued to close down the

unit.

(b) Re.: Silver Chemicals [R-5]: This unit was

promoted by the fourth respondent without

obtaining 'No-Objection Certificate' from the

Board for the manufacture of 'H' acid. The waste

water generated from the manufacture of 'H' acid

is highly acidic and contains very high

concentration of dissolved solids along with

several dangerous pollutants. This unit was

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commissioned in February, 1988 without

obtaining the prior consent of the Board and

accordingly, notice of closure was served on April

30, 1988. On May 12, 1988, the unit applied for

consent under Water and Air Acts which was

refused. The Government was requested to issue

directions for cutting off the electricity and water

to this unit but no action was taken by the

Government. The unit was found closed on the

date of inspection, viz., October 2, 1989.

(c) Re.: Rajasthan Multi Fertilizers [R-6]: This unit

was installed without obtaining prior 'No-

Objection Certificate' from the Board and

without even applying for consent under Water

and Air Acts. Notice was served on this unit on

February 20, 1989. In reply thereto, the Board

was informed that the unit was closed since last

three years and that electricity has also been cut

off since February 12, 1988.

(d) Re.: Phosphates India [R-7]: This unit was also

established without obtaining prior 'No-

Objection Certificate' from the Board nor did it

apply for consent under the Water and Air Acts.

When notice dated February 20, 1989 was

served upon this unit, the Management replied

that this unit was closed for a long time.

(e) Re.: Jyoti Chemicals [R-8]: This unit applied for

'No-Objection Certificate' for producing ferric

alum. 'No-Objection Certificate' was issued

imposing various conditions on April 8, 1988.

The 'No-Objection Certificate' was withdrawn on

May 30, 1988 on account of non-compliance

with its conditions. The consent applied for

under Water and Air Acts by this unit was also

refused. Subsequently, on February 9, 1989, the

unit applied for fresh consent for manufacturing

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'H' acid. The consent was refused on May 30,

1989. The Board has been keeping an eye upon

this unit to ensure that it does not start the

manufacture of 'H' acid. On October 2, 1989,

when the unit was inspected, it was found

closed.

8. The Government of Rajasthan filed counter-affidavit on

January 20, 1990. The Para 3 of the affidavit reads as under:-

"That the State Government is now aware of the

pollution of under-ground water being caused by

liquid effluents from the firms arrayed as

Respondent Nos. 4 to 8 in the writ petition.

Therefore, the State Government has initiated

action through the Pollution Control Board to

check further spread of pollution."

9. The State Government stated that the water in certain

wells in Bichhri village and some other surrounding villages

has become unfit for drinking for human beings and cattle,

though in some other wells, the water remains unaffected.

10. The Ministry of Environment and Forests, Government of

India (for short `MOEF') in its counter affidavit filed on

February 8, 1990 stated that M/s. Silver Chemicals was

merely granted a Letter of Intent but it never applied for

conversion of the Letter of Intent into industrial licence.

9 Commencing production before obtaining industrial licence is

an offence under Industries [Development and Regulation]

Act, 1951. So far as M/s. Jyoti Chemicals is concerned, it is

stated that it has not approached the Government at any time

even for a Letter of Intent. The Government of India stated

that in June, 1989, a study of the situation in Bichhri village

and some other surrounding villages was conducted by the

Centre for Science and Environment. A copy of their report

was enclosed with the counter affidavit. The report states the

consequences emanating from the production of 'H' acid and

the manner in which the resulting wastes were dealt with by

Respondents Nos. 4 to 8 thus:

"The effluents are very difficult to treat as many of

the pollutants present are refractory in nature.

Setting up such highly polluting industry in a

critical ground water area was essentially ill-

conceived. The effluents seriously polluted the

nearby drain and overflowed into Udaisagar main

canal, severely corroding its cement-concrete lined

bed and banks. The polluted waters also seriously

degraded some agricultural land and damaged

standing crops. On being ordered to contain the

effluents, the industry installed an unlined holding

pond within its premises and resorted to spraying

the effluent on the nearby hill-slope. This only

resulted in extensive seepage and percolation of the

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effluents into ground water and their spread down

the aquifers. Currently about 60 wells appear to

have been significantly polluted but every week a

few new wells, down the aquifers start showing

signs of pollution. This has created serious

problems for water supply for domestic purposes,

cattle-watering crop irrigation and other beneficial

uses, and it has also caused human illness and

even death, degradation of land and damage to

fruit, trees and other vegetation. There are serious

apprehensions that the pollution and its harmful

effects will spread further after the onset of the

monsoon as the water percolating from the higher

parts of the basin moves down carrying the

pollutants lying on the slopes - in the holding pond

and those already underground."

11. This court passed number of orders during the period

1989-1992.

12. On February 17, 1992, this Court passed a fairly

elaborate order observing that respondent nos. 5 to 8 are

responsible for discharging the hazardous industrial wastes;

that the manufacture of 'H' acid has given rise to huge

quantities of iron sludge and gypsum sludge - approximately

2268 MT of gypsum-based sludge and about 189 mt. of iron-

based sludge; that while the other respondents blamed

respondent no.9 as the main culprit but respondent no. 9

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denied any responsibility, therefore, according to the Courts,

the immediate concern was the appropriate remedial action.

The report of the R.S.P.C.B. presented a disturbing picture. It

stated that the respondents have deliberately spread the

hazardous material/sludge all over the place which has only

heightened the problem of its removal and that they have

failed to carry out the orders of this Court dated April 4, 1990.

Accordingly, this Court directed the MOEF to depute its

experts immediately to inspect the area to ascertain the

existence and extent of gypsum-based and iron-based sludge,

to suggest the handling and disposal procedures and to

prescribe a package for its transportation and safe storage.

The cost of such storage and transportation was to be

recovered from the concerned respondents.

13. Pursuant to the above order, a team of experts visited

the area and submitted a report along with an affidavit dated

March 30, 1992. The report presented a highly disturbing

picture. It stated that the sludge was found inside a shed and

also at four places outside the shed but within the premises of

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the complex belonging to the respondents. It further stated

that the sludge has been mixed with soil and at many places

it is covered with earth. A good amount of sludge was said to

be lying exposed to sun and rain.

14. The report stated: "Above all, the extent of pollution in

the ground water seems to the very great and the entire

aquifer may be affected due to the pollution caused by the

industry. The organic content of the sludge needs to be

analysed to assess the percolation property of the contents

from the sludge. It is also possible that the iron content in the

sludge may be very high which may cause the reddish

colouration. As the mother liquor produced during the process

(with pH-1) was highly acidic in nature and was

indiscriminately discharged on land by the unit, it is possible

that this might have eroded soil and caused the extensive

damage. It is also possible that the organic contents of the

mother liquor would have gone into soil with water together

with the reddish colour." The report also suggested the mode

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of disposal of sludge and measures for re-conditioning the

soil.

15. In view of the above report, the Court made an order on

April 6, 1992 for entombing the sludge under the supervision

of the officers of the MOEF. Regarding revamping of the soil,

the Court observed that for this purpose, it might become

necessary to stop or suspend the operation of all the units of

the respondent but that, the Court said, requires to be

examined further.

16. The work of entombment of sludge again faced several

difficulties. While the respondents blamed the Government

officers for the delay, the Government officials blamed the said

respondents of non-cooperation. Several Orders were passed

by this Court in that behalf and ultimately, the work

commenced.

Orders passed in 1993, filing of Writ Petition (C) No. 76 of

1994 by Respondent No. 4 and the orders passed therein:

17. With a view to find out the connection between the

wastes and sludge resulting from the production of 'H' acid

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and the pollution in the underground water, the Court

directed on 20th August, 1993 that samples should be taken

of the entombed sludge and also of the water from the affected

wells and sent for analysis. Environment experts of the MOEF

were asked to find out whether the pollution in the well water

was on account of the said sludge or not. Accordingly,

analysis was conducted and the experts submitted the Report

on November 1, 1993. Under the heading "Conclusion", the

report stated:

5.0 Conclusion

5.1 On the basis of the observations and analysis

results, it is concluded beyond doubt that the

sludge inside the emoted pit is the contaminated

one as evident from the number of parameters

analysed.

5.2 The ground water is also contaminated due to

discharge of H- acid plant effluent as well as H-acid

sludge/contaminated soil leachiest as shown in the

photographs and also supported by the results. The

analysis result revealed good correlation between

the colour of well water and H-acid content in it.

The analysis results show high degree of impurities

in sludge/soil and also in well water which is a

clear indication of contamination of soil and ground

water due to disposal of H-acid waste.

15 The report which is based upon their inspection of

the area in September, 1993 revealed many other

alarming features. It represents a commentary on

the attitude and actions of the respondents. In

Para-2, under the heading "Site Observations &

Collection of Sludge/Contaminated Soil Samples",

the following facts are stated:

2.1. The Central team, during inspection of the

premises of M/s. HACL, observed that H-acid

sludge (iron gypsum) and contaminated soil are still

lying at different places, as shown in Figure 1,

within the industrial premises(Photograph 1) which

are the left overs. The area, where the solar

evaporation pond was existing with H-acid sludge

dumped here and there, was observed to have been

leveled with borrowed soil (Photograph 2). It was

difficult to ascertain whether the sludge had been

removed before filling. However, there are visual

evidences of contaminated soil in the area.

2.2 As reported by the R.S.P.C.B. representatives,

about 720 tonnes out of the total contaminated soil

and sludge scraped from the sludge dump sites is

disposed of in six lined entombed pits covered by

lime/flash mix, brick soling and concrete

(Photographs were placed on record). The remaining

scraped sludge and contaminated soil was lying

near the entombed pits for want of additional

disposal facility. However, during the visit, the left

over sludge and contaminated soil could not be

traced at site. Inspection of the surrounding area

revealed that a huge heap of foreign soil of 5 metre

height heap of foreign soil of 5 metre height

(Photograph was placed on record) covering a large

area, as also indicated in Fig. I, was raised on the

sloppy ground at the foot hill within the industry

premises. The storm water run-off pathway over the

area showed indication of H-acid sludge leachate

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coming out of the heap. Soil in the area was

sampled for analysis.

2.3 M/s. HACL has a number of other industrial

units which are operating within the same premises

without valid consents from the R.S.P.C.B. These

plants are sulphuric acid (H2SO4), fertilizer (SSP)

and vegetable oil extraction. The effluents of these

units are not properly treated and the untreated

effluent particularly from the acid plant is passing

through the sludge dump area playing havoc

(Photograph was placed on record). The final

effluent was collected at the outlet of the factory

premises during operation of these units, at the

time of groundwater monitoring in September 1993,

by the RSPCB. Its quality was observed to be highly

acidic (pH : 1.08, Conductivity : 37,100 mg/1, SO4

: 21,000 mg/1, Fe : 392 mg/1, COD : 167 mg/1)

which was also revealed in the earlier visits of the

Central teams. However, these units were not in

operation during the present visit.

Under Para 4.2.1, the report stated inter alia:

The sludge samples from the surroundings of the

(presently nonexistent) solar evaporation and the

contaminated soil due to seepage from the newly

raised dump site also exhibited very high values of

the above mentioned parameters. This revealed that

the contaminated soil is buried under the new

dump found by the team.

25. So much for the waste disposal by the

respondents and their continuing good conduct. To

the same effect is the Report of the R.S.P.C.B.

which is dated October 30, 1993.

26. In view of the aforesaid Reports, all of which

unanimously point out the consequences of the 'H'

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acid production, the manner in which the highly

corrosive waste water (mother liquor) and the

sludge resulting from the production of 'H' acid was

disposed of and the continuing discharge of highly

toxic effluents by the remaining units even in the

year 1993, the authorities [R.S.P.C.B.] passed

orders closing down, in exercise of their powers

Under Section 33A of the Water Act, the operation of

the Sulphuric Acid Plant and the solvent extraction

plant including oil refinery of the fourth respondent

with immediate effect. Orders were also passed

directing disconnection of electricity supply to the

said plants.

The fourth respondent filed Writ Petition (C) No. 76

of 1994 in this Court, under Article 32 of the

Constitution, questioning the said Orders in

January, 1994. The main grievance in this writ

petition was that without even waiting for the

petitioner's [Hindustan Agro Chemicals Limited]

reply to the show-cause notices, orders of closure

and disconnection of electricity supply were passed

and that this was done by the R.S.P.C.B. with a

malafide intent to cause loss to the industry. It was

also submitted that sudden closure of its plants is

likely to result in disaster and, may be, an

explosion and that this consideration was not taken

into account while ordering the closure. In its Order

dated March 7, 1994, this Court found some

justification in the contention of the industry that

the various counter-affidavits filed by the R.S.P.C.B.

are self-contradictory. The Board was directed to

adopt a constructive attitude in the matter. By

another Order dated March 18, 1994, the

R.S.P.C.B. was directed to examine the issue of

grant of permission to re-start the industry or to

permit any interim arrangement in that behalf. On

April 8, 1994, a 'consent' order was passed

whereunder the industry was directed to deposit a

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sum of Rupees sixty thousand with R.S.P.C.B.

before April 11, 1994 and the R.S.P.C.B. was

directed to carry on the construction work of

storage tank for storing and retaining ten days

effluents from the Sulphuric Acid Plant. The

construction of temporary tank was supposed to be

an interim measure pending the construction of an

E.T.P. on permanent basis. The Order dated April

28, 1994 noted the Report of the R.S.P.C.B. stating

that the construction of temporary tank was

completed on April 26, 1994 under its supervision.

The industry was directed to comply with such

other requirements as may be pointed out by

R.S.P.C.B. for prevention and control of pollution

and undertake any works required in that behalf

forthwith. Thereafter, the matter went into a

slumber until October 13, 1995.

NEERI REPORT:

27. At this juncture, it would be appropriate to refer

to the Report submitted by NEERI on the subject of

"Restoration of Environmental Quality of the

affected area surrounding Village Bichhri due to

past Waste Disposal Activities". This Report was

submitted in April, 1994 and it states that it is

based upon the study conducted by it during the

period November, 1992 to February, 1994. Having

regard to its technical competence and reputation

as an expert body on the subject, we may be

permitted to refer to its Report at some length:

18. The judgment also dealt with damaging of crops and

fields. The finding of the Court was that the entire

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contaminated area comprising of 350 hectares of

contaminated land and six abandoned dump sites outside the

industrial premises has been found to be ecologically fragile

due to reckless past disposal activities practised by M/s.

Silver Chemicals Ltd. and M/s. Jyoti Chemicals Ltd.

Accordingly, it is suggested that the whole of the

contaminated area be developed as a green belt at the expense

of M/s. Hindustan Agrochemicals Ltd. during the monsoon of

1994.

19. Mr. Shanti Bhushan, learned senior counsel appearing

for the respondents-industries made the following

submissions:

(1) The respondents are private corporate bodies.

They are not 'State' within the meaning of

Article 12 of the Constitution. A writ petition

under Article 32 of the Constitution, therefore,

does not lie against them.

(2) The RSPCB has been adopting a hostile

attitude towards these respondents from the

very beginning. The Reports submitted by it or

obtained by it are, therefore, suspect. The

respondents had no opportunity to test the

veracity of the said Reports. If the matter had

been fought out in a properly constituted suit,

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the respondents would have had an

opportunity to cross-examine the experts to

establish that their Reports are defective and

cannot be relied upon.;

(3) Long before the respondents came into

existence, Hindustan Zinc Limited was already

in existence close to Bichhri village and has

been discharging toxic untreated effluents in

an unregulated manner. This had affected the

water in the wells, streams and aquifers. This

is borne out by the several Reports made long

prior to 1987. Blaming the respondents for the

said pollution is incorrect as a fact and

unjustified.

(4) The respondents have been cooperating with

this Court in all matters and carrying out its

directions faithfully. The Report of the

R.S.P.C.B. dated November 13, 1992 shows

that the work of entombment of the sludge

was almost over. The Report states that the

entire sludge would be stored in the

prescribed manner within the next two days.

In view of this report, the subsequent Report

of the Central team, R.S.P.C.B. and NEERI

cannot be accepted or relied upon. There are

about 70 industries in India manufacturing 'H'

acid. Only the units of the respondents have

been picked upon by the Central and Sate

authorities while taking no action against the

other units. Even in the matter of disposal of

sludge, the directions given for its disposal in

the case of other units are not as stringent as

have been prescribed in the case of

respondents. The decision of the Gujarat High

Court in Pravinbhai Jashbhai Patel case

shows that the method of disposal prescribed

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there is different and less elaborate than the

one prescribed in this case.

(5) The Reports submitted by the various so-

called expert committees that sludge is still

lying around within and outside the

respondents' complex and/or that the toxic

wastes from the Sulphuric Acid Plant are

flowing through and leaching the sludge and

creating a highly dangerous situation is

untrue and incorrect. The R.S.P.C.B. itself had

constructed a temporary E.T.P. for the

Sulphuric Acid Plant pursuant to the Orders

of this Court made in Writ Petition (C) No. 76

of 1994. Subsequently, a permanent E.T.P.

has also been constructed. There is no

question of untreated toxic discharges from

this plant leaching with sludge. There is no

sludge and there is no toxic discharge from

the Sulphuric Acid Plant.

(6) The case put forward by the R.S.P.C.B. that

the respondents' units do not have the

requisite permits/ consents required by the

Water Act, Air Act and the Environment

[Protection] Act is again unsustainable in law

and incorrect as a fact. The respondents' units

were established before the amendment of

Section 25 of the Water Act and, therefore did

not require any prior consent for their

establishment.

(7) The proper solution to the present problem

lies in ordering a comprehensive judicial

enquiry by a sitting Judge of the High court to

find out the causes of pollution in this village

and also to recommend remedial measures

and to estimate the loss suffered by the public

as well as by the respondents. While the

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respondents are prepared to bear the cost of

repairing the damage, if any, caused by them,

the R.S.P.C.B. and other authorities should be

made to compensate for the huge losses

suffered by the respondents on account of

their illegal and obstructionist policy adopted

towards them.

(8) The decision in Oleum Gas Leak. Case has

been explained in the opinion of Justice

Ranganath Misra, CJ., in the decision in

Union Carbide Corporation etc. etc. v. Union

of India etc. etc. AIR 1992 SC 248. The law

laid down in Oleum Gas leak Case is at

variance with the established legal position in

other Commonwealth countries.

20. The Court dealt with the submissions of the respondents

in great detail and did not find any merit in the same.

21. In the impugned judgment, the Court heavily relied on

the observations of the Constitution Bench judgment in M.C.

Mehta and Another v. Union of India and Others (1987)

1 SCC 395 popularly known as Oleum Gas Leak Case,

wherein it was held thus:

"We are of the view that an enterprise which is

engaged in a hazardous or inherently dangerous

industry which poses a potential threat to the

health and safety of the persons working in the

factory and residing in the surrounding areas owes

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an absolute and non-delegable duty to the

community to ensure that no harm results to

anyone on account of hazardous or inherently

dangerous nature of the activity which it has

undertaken. 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. Since

the persons harmed on account of the hazardous or

inherently dangerous activity carried on by the

enterprise would not be in a position to isolate the

process of operation from the hazardous

preparation of substance or any other related

element that caused the harm the enterprise must

be held strictly liable for causing such harm as a

part of the social cost for carrying on the hazardous

or inherently dangerous activity. If the enterprise is

permitted to carry on an hazardous or inherently.

dangerous activity for its profit, the law must

presume that such permission is conditional on the

enterprise absorbing the cost of any accident

arising on account of such hazardous or inherently

dangerous activity as an appropriate item of its

overheads. Such hazardous or inherently

dangerous activity for private profit can be tolerated

only on condition that the enterprise engaged in

such hazardous or inherently dangerous activity

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....We would therefore

hold that where an enterprise is engaged in a

hazardous or inherently dangerous activity and

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harm results to anyone on account of an accident

in the operation of such hazardous or inherently

dangerous activity resulting for example, in escape

of toxic gas the enterprise is strictly and absolutely

liable to compensate all those who are affected by

the accident and such liability is not subject to any

of the exceptions which operate vis-`-vis the

tortuous principle of strict liability under the rule in

Ryland v. Fletcher (1868) LR 3 HL 330.

We would also like to point out that the measure of

compensation in the kind of cases referred to in the

preceding paragraph must be corelated to the

magnitude and capacity of the enterprise because

such compensation must have a deterrent effect.

The larger and more prosperous the enterprise, the

greater must be the amount of compensation

payable by it for the harm caused on account of an

accident in the carrying on of the hazardous or

inherently dangerous activity by the enterprise."

22. This court in M.C. Mehta's case (supra) further observed

as under:

31. We must also deal with one other question

which was seriously debated before us and that

question is as to what is the measure of liability of

an enterprise which is engaged in an hazardous or

inherently dangerous industry, if by reason of an

accident occurring in such industry, persons die or

are injured. Does the rule in Rylands v. Fletcher

apply or is there any other principle on which the

liability can be determined? The rule in Rylands v.

Fletcher was evolved in the year 1866 and it

provides that a person who for his own purposes

brings on to his land and collects and keeps there

25

anything likely to do mischief if it escapes must

keep it at his peril and, if he fails to do so, is prima

facie liable for the damage which is the natural

consequence of its escape. The liability under this

rule is strict and it is no defence that the thing

escaped without that person's wilful act, default or

neglect or even that he had no knowledge of its

existence. This rule laid down a principle of liability

that if a person who brings on to his land and

collects and keeps there anything likely to do harm

and such thing escapes and does damage to

another, he is liable to compensate for the damage

caused. Of course, this rule applies only to non-

natural user of the land and it does not apply to

things naturally on the land or where the escape is

due to an act of God and an act of a stranger or the

default of the person injured or where the thing

which escapes is present by the consent of the

person injured or in certain cases where there is

statutory authority. Vide Halsbury Laws of

England, Vol. 45 para 1305. Considerable case law

has developed in England as to what is natural and

what is non-natural use of land and what are

precisely the circumstances in which this rule may

be displaced. But it is not necessary for us to

consider these decisions laying down the

parameters of this rule because in a modern

industrial society with highly developed scientific

knowledge and technology where hazardous or

inherently dangerous industries are necessary to

carry out part of the developmental programme,

this rule evolved in the 19th Century at a time

when all these developments of science and

technology had not taken place cannot afford any

guidance in evolving any standard of liability

consistent with the constitutional norms and the

needs of the present day economy and social

structure. We need not feel inhibited by this rule

which was evolved in this context of a totally

26

different kind of economy. Law has to grow in order

to satisfy the needs of the fast changing society and

keep abreast with the economic developments

taking place in the country. As new situations arise

the law has to be evolved in order to meet the

challenge of such new situations. Law cannot afford

to remain static. We have to evolve new principles

and lay down new norms which would adequately

deal with the new problems which arise in a highly

industrialised economy. We cannot allow our

judicial thinking to be constricted by reference to

the law as it prevails in England or for the matter of

that in any other foreign country. We no longer

need the crutches of a foreign legal order. We are

certainly prepared to receive light from whatever

source it comes but we have to build up our own

jurisprudence and we cannot countenance an

argument that merely because the law in England

does not recognise the rule of strict and absolute

liability in cases of hazardous or inherently

dangerous activities or the rule as laid down in

Rylands v. Fletcher as is developed in England

recognises certain limitations and exceptions. We in

India must hold back our hands and not venture to

evolve a new principle of liability since English

courts have not done so. We have to develop our

own law and if we find that it is necessary to

construct a new principle of liability to deal with an

unusual situation which has arisen and which is

likely to arise in future on account of hazardous or

inherently dangerous industries which are

concomitant to an industrial economy, there is no

reason why we should hesitate to evolve such

principle of liability merely because it has not been

so done in England.

27 23. This Court applied the principle of Polluter pays and

observed thus:

"The polluter pays principle demands that the

financial costs of preventing or remedying damage

caused by pollution should lie with the undertakings

which cause the pollution, or produce the goods

which cause the pollution. Under the principle it is

not the role of government to meet the costs involved

in either prevention of such damage, or in carrying

out remedial action, because the effect of this would

be to shift the financial burden of the pollution

incident to the taxpayer. The 'polluter pays' principle

was promoted by the Organisation for Economic Co-

operation and Development [OECD] during the

1970s when there was great public interest in

environmental issues. During this time there were

demands on government and other institutions to

introduce policies and mechanisms for the

protection of the environment and the public from

the threats posed by pollution in a modern

industrialised society. Since then there has been

considerable discussion of the nature of the polluter

pays principle, but the precise scope of the principle

and its implications for those involved in past, or

potentially polluting activities have never been

satisfactory agreed."

24. After hearing the learned counsel for the parties at

length, this Court gave the following directions:

"1. The Central Government shall determine the

amount required for carrying out the remedial

measures including the removal of sludge

28

lying in and around the complex of

Respondents 4 to 8, in the area affected in

village Bichhri and other adjacent villages, on

account of the production of 'H' acid and the

discharges from the Sulphuric Acid Plant of

Respondents 4 to 8. Chapters-VI and VII in

NEERI Report [submitted in 1994] shall be

deemed to be the show-cause notice issued by

the Central Government proposing the

determination of the said amount. Within six

weeks from this day, Respondents 4 to 8 shall

submit their explanation, along with such

material as they think appropriate in support

of their case, to the Secretary, Ministry of

Environment and Forests, Government of

India (for short, M.E.F.). The Secretary shall

thereupon determine the amount in

consultation with the experts of his Ministry

within six weeks of the submission of the

explanation by the said Respondents. The

orders passed by the Secretary, [M.E.F.] shall

be communicated to Respondents 4 to 8- and

all concerned - and shall also be placed before

this Court. Subject to the Orders, if any,

passed by this Court, the said amount shall

represent the amount which Respondents 4 to

8 are liable to pay to improve and restore the

environment in the area. For the purpose of

these proceedings, the Secretary, [M.E.F.] and

Respondents 4 to 8 shall proceed on the

assumption that the affected area is 350 ha,

as indicated in the sketch at Page 178 of

NEERI Report. In case of failure of the said

respondents to pay the said amount, the same

shall be recovered by the Central Government

in accordance with law. The factories, plant,

machinery and all other immovable assets of

Respondents 4 to 8 are attached herewith. The

amount so determined and recovered shall be

29

utilised by the M.E.F. for carrying out all

necessary remedial measures to restore the

soil, water sources and the environment in

general of the affected area to its former state.

2. On account of their continuous, persistent

and insolent violations of law, their attempts

to conceal the sludge, their discharge of toxic

effluents from the Sulphuric Acid Plant which

was allowed to flow through the sludge, and

their non-implementation of the Orders of this

Court - all of which are fully borne out by the

expert committees' Reports and the findings

recorded hereinabove - Respondents 4 to 8

have earned the dubious distinction of being

characterised as "rogue industries". They have

inflicted untold misery upon the poor,

unsuspecting villagers, despoiling their land,

their water sources and their entire

environment - all in pursuance of their private

profit. They have forfeited all claims for any

consideration by this Court. Accordingly, we

herewith order the closure of all the plants

and factories of Respondents 4 to 8 located in

Bichhri village. The R.S.P.C.B. is directed to

seal all the factories/ units/plants of the said

respondents forthwith. So far as the Sulphuric

Acid Plant is concerned, it will be closed at the

end of one week from today, within which

period Respondent No. 4 shall wind down its

operations so as to avoid risk of any untoward

consequences, as asserted by Respondent No.

4 in Writ Petition (C) No. 76 of 1994. It is the

responsibility of Respondent No. 4 to take

necessary steps in this behalf. The R.S.P.C.B.

shall seal this unit too at the end of one week

from today. The re-opening of these plants

shall depend upon their compliance with the

directions made and obtaining of all requisite

30

permissions and consents from the relevant

authorities. Respondents 4 to 8 can apply for

directions in this behalf after such

compliance.

3. So far as the claim for damages for the loss

suffered by the villagers in the affected area is

concerned, it is open to them or any

organisation on their behalf to institute suits

in the appropriate civil court. If they file the

suit or suits in forma pauperis, the State of

Rajasthan shall not oppose their applications

for leave to sue in forma pauperis.

4. The Central Government shall consider

whether it would not be appropriate, in the

light of the experience gained, that chemical

industries are treated as a category apart.

Since the chemical industries are the main

culprits in the matter of polluting the

environment, there is every need for

scrutinising their establishment and

functioning more rigorously. No distinction

should be made in this behalf as between a

large-scale industry and a small-scale

industry or for that matter between a large-

scale industry and a medium-scale industry.

All chemical industries, whether big or small,

should be allowed to be established only after

taking into considerations all the

environmental aspects and their functioning

should be monitored closely to ensure that

they do not pollute the environment around

them. It appears that most of these industries

are water-intensive industries. If so, the

advisability of allowing the establishment of

these industries in arid areas may also require

examination. Even the existing chemical

industries may be subjected to such a study

31

and if it is found on such scrutiny that it is

necessary to take any steps in the interests of

environment, appropriate directions in that

behalf may be issued under Section 3 and 5 of

the Environment Act, the Central Government

shall ensure that the directions given by it are

implemented forthwith.

5. The Central Government and the R.S.P.C.B.

shall file quarterly Reports before this Court

with respect to the progress in the

implementation of Directions 1 to 4 aforesaid.

6. The suggestion for establishment of

environment courts is a commendable one.

The experience shows that the prosecutions

launched in ordinary criminal courts under

the provisions of the Water Act, Air Act and

Environment Act never reach their conclusion

either because of the work-load in those

courts or because there is no proper

appreciation of the significance of the

environment matters on the part of those in

charge of conducting of those cases. Moreover,

any orders passed by the authorities under

Water and Air Acts and the Environment Act

are immediately questioned by the industries

in courts. Those proceedings take years and

years to reach conclusion. Very often, interim

orders are granted meanwhile which effectively

disable the authorities from ensuring the

implementation of their orders. All this points

to the need for creating environment courts

which alone should be empowered to deal with

all matters, civil and criminal, relating to

environment. These courts should be manned

by legally trained persons/judicial officers and

should be allowed to adopt summary

procedures. This issue, no doubt, requires to

32

be studied and examined indepth from all

angles before taking any action.

7. The Central Government may also consider

the advisability of strengthening the

environment protection machinery both at the

Center and the States and provide them more

teeth. The heads of several units and agencies

should be made personally accountable for

any lapses and/or negligence on the part of

their units and agencies. The idea of an

environmental audit by specialist bodies

created on a permanent basis with power to

inspect, check and take necessary action not

only against erring industries but also against

erring officers may be considered. The idea of

an environmental audit conducted periodically

and certified annually, by specialists in the

field, duly recognised, can also be considered.

The ultimate idea is to integrate and balance

the concern for environment with the need for

industrialisation and technological progress."

25. The orders of this Court have not been implemented till

date because by filing of number of interlocutory applications

the respondent nos.4 to 8 have kept the litigation alive. These

respondents have been successful in avoiding compliance of

the judgment of this Court for more than fifteen years.

ORDER IN CONTEMPT PETITION

33

26. The original record of Writ Petition No. 967 of 1989

shows that the R.S.P.C.B. has filed a report of the National

Environmental Engineering Research Institute, for short

`NEERI' in this Court on 6.1.1996. It is on this report that

reliance was placed by the Court while disposing off the said

writ petition. If the report which was submitted in this Court

by the R.S.P.C.B. was different from the final report which

was submitted by NEERI to the said Board, then it may have

been possible to contend that the R.S.P.C.B. and its officers

were guilty of fabrication. The affidavit of Mr. S.N. Kaul,

Acting Director of NEERI clearly shows that what was filed in

this Court was the copy of the final report dated 16.5.1994

which has been prepared by the NEERI. In other words, the

NEERI itself states that the report filed in this Court by the

Board was a copy of the final report and that there was no

fabrication made therein by the Board or any of its officials.

27. It appears that the two scientists had inspected the

report in the office of the NEERI and then observed that there

has been a fabrication carried out by the Pollution Control

34

Board. From what has been stated hereinabove, the charge of

fabrication is clearly unfounded. It is possible that these two

scientists may have seen the draft report which would be with

NEERI but the original report when prepared would be one

which was, ultimately, submitted to the sponsoring agency,

namely, the R.S.P.C.B., and it is only a copy of the same

which could have been retained by NEERI. Be that as it may,

it is clear that what has been filed in this Court as being the

final report of the NEERI was the copy of the final report

which was received by it. There is no basis for contending

that any of the respondents have been guilty of fabrication.

The whole application to our mind is devoid of any merit. The

contempt petition was dismissed with costs.

IA NO.36 IN WRIT PETITION (C) No.967 OF 1989

28. This Interlocutory Application has been filed on behalf of

M/s Hindustan Agro Chemical Ltd. (for short "HACL") whose

industrial units situated in Udaipur were directed to be closed

down by this Court on the premise that the said units had

caused pollution in village Bichhri. This Court while directing

35

for closure of the industrial units of HACL vide its order dated

13.2.1996 had further held that the units be not permitted to

run until they deposit the remediation costs for restoring the

environment in the area. The Court accordingly directed for

the attachment of the properties of HACL.

29. There is a serious attempt to reopen the entire concluded

case which stands fully concluded by the judgment of this

Court delivered on 13th February, 1996. It may be pertinent

to mention that even the review and curative petitions have

also been dismissed. By this application, the applicant has

also made an attempt to introduce before this Court the

opinion of various experts, such as, Dr. M.S. Govil, Mr. S.K.

Gupta, Dr. P.S. Bhatt and Ms. Smita Jain who visited the

Bichhri village at the instance of the applicant in the year

2004 to provide a different picture regarding the conditions of

water and soil in the area. These experts submitted reports to

demonstrate that now hardly any remediation measures are

required in Bichhri village or adjoining areas.

36 30. The applicant in this application is seeking a declaration

that as of now there is no pollution existing in the area which

may have been caused by HACL and accordingly there is no

necessity for this Court to sell the assets of HACL in order to

carry out any remediation in the area. This application also is

a serious attempt to discredit the NEERI report of 1996 once

again.

31. The sole object of filing of the present application is to

introduce before this Court recent reports prepared by experts

at the behest of the applicant to demonstrate to the Court that

before embarking upon remediation measures and for the said

purposes putting the properties of the applicant to sell, the

status and conditions of water, soil and environment in the

area as at present be reviewed with a view to realistically

ascertain whether any measures for remediation are called for

at all in the area and if yes, then the nature and the current

cost of the same may be ascertained.

32. The applicant submitted that the report of the NEERI

which was the basis for the earlier orders of this Court does

37

not specify the nature of remediation measures which were

considered necessary. The report merely indicates a lump

sum amount without giving its break up as being a rough

estimate of amount considered by them necessary for carrying

out remediation measures.

33. It is stated in the application that the Secretary, MOEF

after issuing notices to the parties called for the expert

opinion of Water and Power Consultancy (WAPCO) and of

Engineers India Limited (EIL), both these institutions were

established by the Government of India. Both these

institutions wrote to the Secretary that the data available was

not sufficient to determine the cost of remediation, if any. The

Secretary, who under the directions of the Court was directed

to determine the amount within six weeks was left with no

alternative but to simply affirm the lump sum amount

determined by the NEERI.

34. It is stated that now almost fifteen years have passed

since the final judgment of this Court and the situation in the

area needs to be inspected again to find out as to whether any

38

remediation is necessary or whether with passage of time

nature on its own has taken care of the pollution in the area

and because of the same no further remediation is required to

be done in the area. This submission is being made without

prejudice to the right of the applicant to contend that the

applicant had not caused any pollution in the area but the

applicant for the limited purpose of this application is ready to

assume for the sake of arguments that the applicant had

caused pollution in the area and that the nature in the last so

many years has taken care of the pollution and on that basis

there is no pollution existing in the area at present.

35. One of the issues that came up for consideration before

this Court was the liability of the Union of India to take

remediation measures in the area even if the applicant were

not to pay the remediation costs as determined by the

Secretary, MOEF. In these proceedings the counsel on behalf

of the applicant made a suggestion to the Court that a fresh

team be sent to the units of the applicant to find out whether

there is still any pollution existing in the area and also

39

whether any remediation as of today is required to be done or

not. It was suggested during the course of hearing that the

remediation cost being sought to be recovered from the

applicant is not some kind of a decree in which the applicant

is a judgment debtor but is merely a cost which the applicant

is being made liable to pay on the "Polluter Pays" principle

and there is no necessity of payment if there is no pollution

existing. Till date there is no working out as to how the cost

of remediation has been worked out by NEERI which had been

affirmed by the Secretary, MOEF and which had been further

affirmed by this Court.

36. According to the applicant, on the basis of the reports of

some experts it is quite evident that there is no pollution in

and around the factory premises of the applicant and

accordingly there is no need for any remediation to be done in

the area and the factory of the applicant is required to be

handed over to the applicant forthwith so that the applicant

may take proper steps to re-start the factory and generate

40

resources to meet the liabilities of the financial institutions

and banks.

37. It is further prayed that if this Court for any reason

doubts the opinion of the experts placed by the applicant in

any manner, then this Court may appoint any reputed

expert/experts to visit the area and to submit a detailed

report to this Court relating to the pollution existing in the

area as of now. In other words, the effort is to reopen the

concluded case and that also after the review and the curative

petitions have been dismissed by this Court.

38. There are two main prayers in this application, the first

prayer is that no remediation is required to be done in and

around the industrial units of the applicant on the basis of

the four reports placed by the applicant along with this

application or on the basis of the report submitted by the

expert/experts appointed by this Court; and secondly, that

the Court may pass consequential order directing for closing

of these proceedings and thus lift the attachment order dated

13.2.1996.

41 39. Reply Affidavits to the Interlocutory Application have

been filed by the Union of India and other respondents. In the

reply affidavits of the respondents it is mentioned that on

13.2.1996 this Court directed closure of the units of the

applicant for the reason that the said industries had caused

environmental pollution in and around the areas where

applicant's units are located. This Court had further directed

that the units of the applicant would be permitted to operate

only after depositing necessary costs for taking measures to

restore the environment of the areas. The judgment of this

Court was based upon a report dated 5.4.1994 of the NEERI

which was filed by the R.S.P.C.B. on 6.1.1996.

40. The applicant questioned the credibility of the NEERI's

report. It is submitted that the remediation cost for restoring

the environmental quality of the area was only Rs.3 crores

whereas in the report submitted in this Court the remediation

cost was stated to be Rs.37.385 crores.

42 41. The applicant prayed that in the interest of justice the

report dated 25.1.2005 submitted by the expert group to the

MOEF be ignored and either accept the reports prepared at

the instance of the applicant or fresh direction be issued for

constitution of an independent expert group not having any

association with NEERI to carry out investigation with relation

to the environment in the village Bichhri.

42. According to the applicant, the report of NEERI relied

upon by this Court was not the authentic report which was

officially prepared. Even the copy which was actually filed in

this matter was without any supporting affidavit and the same

was merely handed over to this Court at the time of hearing.

The applicant made his own enquiry and was officially given

the report of NEERI. After comparing the report made

available to the applicant from the one filed in this matter it

came to light that the report actually filed in this Court was

not bearing any resemblance to the conclusion and findings

mentioned in the actual report.

43 43. It was also submitted that there have also been attempts

on the part of authorities to shield the role of M/s. Hindustan

Zinc Limited in causing environment damage in village

Bichhri. This issue needs to be addressed and the same can

be possible only if an organization having credibility and not

having any association with the NEERI actually carries out a

detailed investigation.

44. Reply affidavit has also been filed by the R.S.P.C.B. It is

stated in the said affidavit:

3 (i) That M/s. Hindustan Agro Chemical Ltd.,

Village Bichhri, Tehsil Girva, District Udaipur,

Rajasthan; respondent no.4, established its

Sulphuric Acid and Oleum Plant in the year

1985 without obtaining prior consent of the

State Board under the provisions of Sections

25 and 26 of the Water (Prevention and

Control of Pollution) Act, 1974; and section 21

of the Air (Prevention an Control of Pollution)

Act, 1981;

(ii) That the State Board vide its letter dated

16.2.1987 refused consent to respondent no.4

under the provisions of section 25 and 26 of

the Water Act for discharging trade effluent

from its Sulphuric Acid Plant.

(iii) That the State Board issued directions vide

order dated 26.11.1993, for closure of

Sulphuric Acid Plant under the provisions of

44 section 33A of the Water Act, 1974 as it was

discharging trade effluent without proper

treatment and in excess of the prescribed

standards. The District Collector Udaipur

implemented the directions of closure of

Sulphuric Acid Plant passed by the State

Board.

4 (i) That M/s. Hindustan Agro Chemical Ltd.,

Village Bichhri, Tehsil Girva, District Udaipur,

Rajasthan; respondent no.4 established its

Solvent Extraction coupled with Oil Refinery

Plant in the year 1991 without obtaining prior

consent of the State Board under the

provisions of section 25 and 26 of the Water

Act and section 21 of the Air Act.

(ii) That the State Board vide its letter dated

24.7.1992 refused consent to respondent no.4

under the provisions of section 25, 26 of the

Water Act for discharging trade effluent from

its Solvent Extraction Plant.

(iii) That the State Board issued directions, vide

order dated 26.11.1993, for closure of Solvent

Extraction Plant under the provisions of

section 33A of the Water Act, as it was

discharging trade effluent without proper

treatment and in excess of the prescribed

standards. The District Collector Udaipur

implemented the directions of closure of

Solvent Extraction Plant passed by the State

Board.

5 (i) That respondent no.4 preferred a petition

before this Court being Writ Petition (C) No.76

of 1994 Hindustan Agro Chemical Ltd. & Anr.

v. State of Rajasthan & Ors. challenging the

directions dated 26.11.1993 of the State

45

Board closing down Sulphuric Acid Plant and

Solvent Extraction Plant under the provisions

of section 33A of the Water Act, 1974. It was

alleged that the action of the State Board

closing down Sulphuric Acid Plant and Solvent

Extraction Plant was arbitrary and

highhanded.

(ii) That this Court during hearing in the matter

on 7.3.94, in WP (C) No.76/94 passed the

following direction inter-alia:-

"We thought of having the

complaints of the petitioner as to

harassment, examined by an

independent Commissioner to

ascertain the bona fides of the

action taken by the officers of the

Pollution Control Board and also to

fix their responsibility. But we

thought that at this stage it would

be appropriate to ask the learned

Advocate-General, who appears for

the State of Rajasthan, to have the

matter examined at his instance

and direct the Pollution Control

Board to act more constructively

and to suggest measures by which

the Plant could be re-commissioned

immediately."

(iii) That the said writ petition again came up for

hearing on 18.3.94 before this Court. This

Court was pleased to pass the following

directions inter alia:-

"In the meanwhile, the Pollution

Control Board is not prevented from

and it shall indeed by its duty to

46

indicate what, according to it, are

such minimal requirements for

grant of permission to re-start the

industries or to permit any interim

arrangements in this behalf."

(iv) That in pursuance of the aforesaid order dated

18.3.94, the respondent Board took

appropriate steps and granted permission to

restart industry subject to certain conditions

communicated vide permission order.

It is submitted that the industry was

restarted. However, on subsequent inspection

it was found that the industry was violating

the prescribed norms and also has not

bothered to comply with the conditions

mentioned in the permission order. As such

an application was moved before this Court for

appropriate directions in the matter.

(v) That despite all efforts for re-commissioning of

the plants, respondent no.4 failed to take

measures required for prevention and control

of pollution.

(vi) That this court vide order and judgment dated

13.2.96, dismissed the above mentioned writ

petition in view of the decision in writ petition

(Civil) No.967 of 1989.

6(i) That M/s. Hindustan Agro Chemical Ltd.,

Village Bichhri, Tehsil Girva, District Udaipur,

Rajasthan, respondent no.4, established its

Chlorosulphonic Acid Plant in June 1992

without obtaining prior consent of the State

Board under the provisions of Section 25 and

47 26 of the Water Act and section 21 of the Air

Act.

(ii) That the State Board issued directions vide

order dated 30.12.1992, for closure of

Chlorosulphonic Acid Plant under the

provisions of section 33A of the Water Act and

31A of Air Act. The District Collector Udaipur

implemented the directions of closure of

Chlorosulphonic Acid Plant passed by the

State Board.

(iii) That respondent no.4 preferred a petition

before this Court being Writ Petition (C)

No.824 of 1993, Hindustan Agro Chemical

Ltd. & Anr. v. State of Rajasthan & Ors.,

challenging the directions dated 30.12.1992 of

the State Board closing down Chlorosulphonic

Acid Plant under the provisions of Section 33A

of the Water Act, and 31A of the Air Act. It

was alleged that the action of the State Board

closing down Chlorosulphonic Acid Plant was

arbitration and highhanded.

(iv) That this Court dismissed the above

mentioned writ petition by judgment dated

13.2.96 in W.P. (Civil) No.824 of 1993 in view

of the decision in Writ Petition (Civil) 967 of

1989.

7(i) That M/s Silver Chemicals, Village Bichhri,

Tehsil Girva, District Udaipur Rajasthan,

respondent no.5 came into existence in

February 1988 to manufacture H-Acid and

continued its operations upto March 1989

without obtaining prior consent of the State

Board under the provisions of section 25 and

26 of the Water Act and Section 21 of the Air

Act.

48 (ii) That the State Board vide its letter dated

9.1.1989 refused consent application

submitted by M/s. Silver Chemicals under the

provisions of Section 25/26 of the Water Act

as the unit was discharging trade effluent

beyond the prescribed standard and without

having installed a plant for the treatment of

trade effluent. The State Board under the

provisions of section 25(5) of the Water Act

also imposed several conditions on the

industry and informed it that failure to make

compliance of the conditions of the conditions

shall render it liable for prosecution.

(iii) That the industry however continued its

operations and looking to the continued

violations of the provisions of the aforesaid

Acts, the State Board filed an injunction

application under the provisions of section 33

of the Water Act for restraining the industry

from discharging polluted trade effluent in

excess of the prescribed standards and from

causing pollution of underground water n

24.3.89 before the court of Chief Judicial

Magistrate, Udaipur.

(iv) That the Court of Chief Judicial Magistrate,

Udaipur by order dated 15.6.1989 issued

injunction against M/s. Silver Chemicals

restraining it from discharging polluted trade

effluent without any treatment.

(v) That the State Board also filed a criminal

complaint No.176/99 against M/s. Silver

Chemicals and its Director on 24.3.89 under

the provisions of section 43 and 44 for

violation of the provisions of section 24, 25

and 26 of the Water Act.

49 (vi) That the court of Chief Judicial Magistrate,

Udaipur by order and judgment dated

11.8.2004 has convicted M/s. Silver

Chemicals with fine of Rs.10 lakh each under

section 43 & 44 of the Act. The Court has also

sentenced Shri O.P. Agarwal, Director of the

said company with simple imprisonment of

one year and fine of Rs.10,000/- under

section 43 and simple imprisonment of six

months and fine of Rs.10,000/- under section

44 of the Act. The company and its Director

have preferred criminal appeal no.92 of 2004

under section 374 (3)(a) of the Code of

Criminal Procedure before the Sessions Judge,

Udaipur. The appeal is pending before the Ld.

Sessions Judge.

8(i) That M/s. Rajasthan Multi Fertilizers, Vilalge

Bichhri, Tehsil Girva, District Udaipur,

Rajasthan respondent no.6, established NKP

Fertilizer Plant at the site, without obtaining

previous consent of the State Board under the

provisions of section 25, 26 of the Water Act

and section 21 of the Air Act.

(ii) That the State Board on 20.2.89 issued a

notice and directed respondent no.6 to obtain

consent of the State Board under the provision

of the Water Act for discharging trade effluent

from its plant.

9(i) That M/s. Phosphate India, Vilalge Bichhri,

Tehsil Girva, District Udaipur, Rajasthan,

respondent no.7 established Single Super

Phosphate Plant at the site, without obtaining

previous consent of the State Board under the

provisions of section 25, 26 of the Water Act

and section 21 of the Air Act.

50 (ii) That the State Board on 20.2.89 issued a

show cause notice and directed respondent

no.7 to obtain consent of the State Board

under the provisions of the Water Act for

discharging trade effluent from its plant.

10(i) That M/s Jyoti Chemicals, Village Bichhri,

Tehsil Girva, District Udaipur, Rajasthan;

respondent no.8 established its plant, at the

site, in the year 1987, to manufacture Ferric

Alum without obtaining previous consent of

the State Board under the provisions of

section 25 and 26 of the Water Act and section

21 of the Air Act.

(ii) That the State Board vide its letter dated

4.8.1988 issued N.O.C. to respondent no.8 for

adequacy of pollution control measures for

Ferric Alum Plant. The respondent No.8,

however, started manufacturing H-Acid and

continued its operation till March, 1989.

(iii) That the State Board vide letter dated 30.5.88

withdrew the NOC for the reason that

respondent no.8 violated the conditions of the

NOC.

(iv) That the State Board vide its letter dated

30.5.89 also refused application filed by

respondent no.8 for discharging trade effluent

under section 25, 26 of the Water Act for the

reasons, inter alia, that it failed to install

pollution control measures and changed its

product from Ferric alum to H-Acid without

the consent of the State Board.

11. That this Court by its common order and

judgment dated 13.2.96 in the aforesaid Writ

51

Petition (Civil) No.967/89, Indian Council for

Enviro Legal Action v. Union of India &

Others; Writ Petition (Civil) No.76/94

Hindustan Agro Chemical v. State Pollution

Control Board & Others and Writ Petition

(Civil) No.824/93 Hindustan Agro Chemical v.

State Pollution Control Board and Others

attached the factories, plant, machinery and

all other immovable assets of respondent

nos.4 to 8. The State Pollution Control Board

was directed to seal all the factories, plants of

respondent nos.4 to 8 forthwith. The State

Board in compliance of the aforesaid direction

sealed the plants of respondent nos.4 to 8 as

directed by this Court.

45. The written submissions were also filed by the Union of

India and the R.S.P.C.B. in response to the order dated

03.05.2005 in IA No.36. It is stated in the said affidavit:

2. That the Ministry of Environment & Forests,

Government of India vide its affidavit dated

29.1.2005 submitted a summary report

prepared by a consortium of SENES

Consultants Limited, Canada; and NEERI,

Nagpur before this Court. The Ministry of

Environment & Forest, Government of India

and the Rajasthan State Pollution Control

Board are making joint submissions herein

below for remediation of the environmental

damage caused in village Bichhri. Based on

the recommendations given in the report of

July, 2002, prepared by SENES/NEERI for

remediation of degraded environment of

Bichhri, District Udaipur, Rajasthan, the

52

following works will be undertaken on priority-

wise:

First Priority:

Phase-I: Source Remediation (Short Term)

7 Clean up of water near the plant site with highest H-acid contamination.

7 Remediation of contaminated soil and sludge management within the plant site.

Second Priority:

Phase-II: Hot Spots Remediation (Medium Term)

7 Clean up of ground water at hot spots.

Third Priority:

Phase-III: Residual Contamination Remediation (Long

Term)

7 Clean up of residual contaminated water.

Fourth Priority:

Phase-IV (long-term):

7 Clean up of contaminated soil outside plant boundary.

53

3. While dealing with the first phase called as short-

term remedies, it has been divided in two parts

namely:-

(i) Clean up of water near the plant site with highest

H-acid contamination.

(ii) Soil and Sludge management within the plant site.

46. The said recommendation given in the SENES/NEERI

report further suggests as follows:

"Considering the available water quality data the

following alternatives were evaluated in the

preliminary review:

7 Lime soda process plus Fe coagulation 7 Reverse osmosis (RO) 7 Electro-dialysis 7 Ion exchange 7 Activated carbon Sorption and 7 Activated carbon filtration

Similarly, for the second short-term measures

namely, the remediation of soil and sludge

management many alternative suggestions have

been made. The said report has suggested the

following four alternatives for clean up of soil:

7 Excavation and relocation in a capped landfill.

7 Ex-situ remediation (soil washing) 7 Phyto-remediation 7 Natural attenuation

54

4. That out of the aforesaid alternative technologies,

the most suitable alternative with regard to the

human habitation, plantation and vegetation etc.,

will have to be decided keeping in view the local

conditions and priority requirement. This job will

have to be done by Technical Advisory Committee

having sufficient technical know-how in respect of

the remedial measures. The committee may also

like to look into the techno-economic feasibility in

this regard.

5. In order to go ahead with the above mentioned

works on priority-wise, the following steps will be

taken:

a) Reconfirmation of National Productivity Council

(NPC) New Delhi as the Project Management

Consultant (PMC) by the Ministry of

Environment & Forests (MoEF). NPC was the

PMC for the purpose of conducting feasibility

studies by SENES & NEERI in pursuance of the

directions dated 4.11.1997 of this Court. The

role of PMC will be to -

i) Co-ordinate preparatory activities such

as bidding and selection of a suitable

expert agency for undertaking

remediation work before execution of the

remediation works.

ii) Organise Technical Advisory Committee

meetings from time to time to guide,

review and supervise the progress of

remediation works.

iii) Co-ordinate activities/works pertaining

to actual remediation and submit

progress reports to the MoEF.

55

b) Constitution of a Technical Advisory Committee

by the MoEF having representations of MoEF,

CPCB, Government of Rajasthan, RSPCB,

NEERI, NPC & Technical Experts of National

repute in the relevant fields to -

i) Evaluation the recommendations of

SENES NEERI Report (July 2002);

ii) Finalise the detailed line of action and

plan for remediation of environmental

damages;

iii) Review the alternative technologies from

the technologies recommended in the

SENES-NEERI report and to recommend

suitable technology for remediation of

contaminated water and soil.

iv) Supervise the work of actual

remediation.

6. As the remediation of environmental damage

would require a large sum of money...

47. All issues raised in this application have been argued

and determined by an authoritative judgment of this Court

about fifteen years ago. This application has been filed to

avoid liability to pay the amount for remediation and costs

imposed by the Court on the settled legal principle that

polluter pays principle. In other words, the applicant through

56

this application is seriously making an effort to avoid

compliance of the order/judgment of this Court delivered

fifteen years ago. The tendency must be effectively curbed.

The applicant cannot be permitted to avoid compliance of the

final order of this court by abusing the legal process and keep

the litigation alive.

48. The applicant is in business where sole motto of most

businessmen is to earn money and increase profits. If by filing

repeated applications he can delay in making payment of

huge remediation costs then it makes business sense as far as

the applicant is concerned but the Court must discourage

such business tactics and ensure effective compliance of the

Court's order. It is also the obligation and bounden duty of

the court to pass such order where litigants are prevented

from abusing the system.

I.A. NO. 44 IN W.P.(C)No.967 OF 1989

49. In this matter the final judgment of the court was

delivered on 13.2.1996. A Review Petition filed was also

dismissed. Thereafter, a Curative Petition was filed and that

57

was also dismissed on 18.7.2002. The applicant did not

comply with the orders passed by this court even after

dismissal of curative petition and has filed this application.

50. This application has been filed by respondent No. 4,

Hindustan Agro Chemicals Limited. By this application

respondent No. 4 sought an investigation into the reports of

April, 1994 prepared by the NEERI, which was employed by

the R.S.P.C.B. in September, 1992 to evaluate the extent of

contamination done by the applicant's plant in Bichhri village

in Rajasthan.

51. It is on the basis of the report that applicant's units in

Bichhri village were closed down and the applicant was asked

to pay a sum of Rs.37.385 crores towards the costs of

remediation to the government. The reports of April, 1994

had alleged that the applicant's units polluted the whole area

by discharging its H-acid on the land which would cost

Rs.37.385 crores to clean-up.

58 52. According to the applicant various experts employed by

the applicant had found no evidence of H-acid pollution from

the applicant's units in the area. In the application, serious

effort has been made to discredit the NEERI report. It may be

pertinent to mention all objections of the said reports were

heard and disposed by the judgment dated 13.2.1996:

"In fact, while one report mentioned the cost of

remediation to be 3 crores, the one which was

presented to the Court showed it as 37.385 crores.

As per the original report it was reported by RSPCB

that most of wells within 1.5 k.m. radius of the

plants were contaminated while the modified report

says, wells within 6.5 k.m. radius.

While the original report noted that the sludge had

been stored under the supervision of the RSPCB

whereas the modified report stated that the

industry had scattered the sludge in an unmindful-

clandestine manner causing gross pollution to

avoid penal liability."

53. According to the reports of the experts, (who visited the

site at the instance of the applicant, after the dismissal of

Review and Curative petition) the report of the NEERI filed in

April 1994 was untenable and unsustainable. According to

the applicant the said report was fabricated. In the

59

application it is also mentioned that this is a fraud in which

this court had been unwittingly dragged by the officers of the

RSPCB and the NEERI to destroy several industries and the

livelihood of about 1700 persons and it has been prayed that

this court to direct an investigation into the report of April,

1994 prepared by the NEERI at the instance of the RSPCB to

examine whether it was false or malafide.

54. A reply has been filed on behalf of the RSPCB. At the

outset it has been mentioned that similar challenge by the

respondent Nos. 4 to 8 regarding the factum of pollution in

village Bichhri and it being attributed to the said respondents

had been dismissed by this court on many occasions. This

court conclusively reached the finding that the respondent

Nos. 4 to 8, by indiscriminate discharge of their polluted trade

effluent is in utter disregard and violation of the provisions of

the Pollution Control and Environmental Protection Laws had

caused intense severe pollution of underground water and of

soil in village Bichhri. The veracity of the report of the NEERI

60

has already been upheld by this court. This court on

4.11.1997 passed the following order:

"... ... ...In the affidavit of Progress Report, the

Government of India has proposed that for the

purpose of undertaking the work relating to

remedial measures for the National Productivity

Council (NPC) may be appointed as the Project

Management Consultants and on the basis of the

feasibility report submitted by the NPC, tenders

may be invited for entrusting the remedial work. It

is also proposed that a High Level Advisory

Committee would be constituted consisting of the

representatives from (1) Ministry of Environment &

Forests (2) National Productivity Council (3) Central

Pollution Control Board (4) NEERI and (5)

Rajasthan State Pollution Control Board to review

periodically and give directions and also to approve

decisions to be taken. According to the said

affidavit work would be undertaken in two phases.

The cost of Phase-I would be Rs.1.1 crores

(Rs.50.00 lakhs for Project Management

Consultancy and Rs.60.00 lakhs for feasibility

studies) and the cost of Phase-II (Actual

Remediation) would come to Rs.40.1 crores. In the

additional affidavit of Dr. M. Sengupta detailed

reasons have been given why it has not been

possible to accept the report of the Experts on

which reliance was placed by the respondents. We

have perused the said reasons given in the said

additional affidavit filed on behalf of the Ministry of

Environment and Forests and keeping in view the

reasons given therein. We are unable to accept the

report of the Experts on which reliance has been

placed by the respondents. We accept the proposal

submitted by the Government of India for the

purpose of taking remedial measures by appointing

National Productivity Council as the Project

61

Management Consultant. In our opinion, the

Ministry of Environment & Forests, Government of

India has rightly made a demand of Rs.37.85

crores.

... ... ...Since, we have accepted the aforesaid

proposal of the Government of India, we put it to

Shri N.D. Nanavati that in order that further steps

as per the said proposal are taken the respondents

should immediately deposit a sum of Rs.5.00 crores

in advance so that the National Productivity

Council may be asked to undertake the work of

Project Management Consultant and have the

feasibility studies conducted and prepare the Terms

of Reference for inviting the tenders. Shri Nanavati,

after taking instructions from the representative of

the respondents, expressed the inability of the

respondents to deposit the said amount and states

that they are in a position to deposit Rs.5.00 lakhs

only. In these circumstances, the only alternative

left is to direct that the Ministry of Environment

and Forests shall take the necessary steps to

implement the directions contained in the judgment

of this Court. All that we will say at this stage is

that the decision regarding remedial measures

taken on the basis of the NEERI Report shall be

treated as final. The I.As. are disposed of

accordingly."

55. In the reply of RSPCB it is mentioned that respondent

No. 4 had preferred a Contempt Petition (Criminal) No.

7/1999 entitled Hindustan Agro Chemical v. Alka Kala

and others and this court dismissed the contempt petition

with the costs computed at Rs.10,000/- while observing that

62

there was no basis for contending that any of the respondents

have been guilty of fabrication and the whole contempt

application was without any merit.

56. In the reply it is also mentioned that the respondent Nos.

4 to 8 had been operating their industrial plants without

obtaining consent from the State Board, as required under the

provisions of the Water (Prevention & Control of Pollution) Act,

1974 and the Air (Prevention & Control of Pollution) Act, 1981

and discharging polluted trade effluent indiscriminately

without providing any treatment so as to bring it in conformity

to the prescribed standards. Discharge of this trade effluent

by the respondent Nos. 4 to 8 resulted into severe pollution of

underground water and of soil. For the above violation, the

State Pollution Control Board filed a Criminal complaint No.

176/1999, under the provisions of Section 43 read with

Sections 24 and 44 read with Sections 25/26 of the Water Act

before the Court of Chief Judicial Magistrate, Udaipur. The

learned Chief Judicial Magistrate, Udaipur by its order dated

11.8.2004 found the accused guilty and convicted him with

63

imprisonment and fine both under Sections 43 and 44 of the

Water Act. The said conviction and sentence was upheld by

the learned Session Judge, Udaipur in its judgment dated

21.7.2005. Against the judgment dated 21.7.2005 of the

learned Sessions Judge, the accused preferred Criminal

Revision Petition No. 634/2004 before the Rajasthan High

Court at Jodhpur. The Criminal Revision Petition is pending

adjudication before the High Court of Rajasthan at Jodhpur.

57. While denying the averments of the application, the

RSPCB has relied on paragraphs 14 and 15 of the affidavit

dated 18.9.2007 filed by M. Subba Rao, Director, MOEF. The

said paras reads as under:

"14. The applicant is making reference and reliance

upon the recent affidavit filed by the Ministry of

Environment and Forests, Government of India

dated 08.03.2007 to contend that the earlier report

submitted by the NEERI was a result of

falsehood/malafide on the parts of some officers

responsible for preparing the report. At the outset

it is submitted that neither in the report nor in the

affidavit of the Union of India dated 08.03.2007 it

has been stated that the earlier report submitted by

National Environmental Engineering Research

Institute was incorrect. The affidavit submitted by

the Union of India on 08.03.2007 has only given

the present status. The report submitted by Union

64

of India along with the affidavit has not dealt with

the correctness/incorrectness of the earlier reports

submitted by National Environmental Engineering

Research Institute to this Hon'ble Court. It is

submitted that on the basis of the affidavit filed by

Union of India on 08.03.2007 and the report

submitted therewith, it cannot be contended that

the report submitted by National Environmental

Engineering Research Institute in April 1994 was

incorrect. It is further submitted that the experts of

Union of India have also not gone into an examined

the merits of the earlier reports.

15. It is seen from paras 46-47 of the judgment of

this Hon'ble Court reported in the order dated

13.2.1996 (reported at (1996) 3 SCC 212 at 227-

231) that a challenge was already attempted by the

respondents on the reports of NEERI before this

Hon'ble Court at the time of hearing."

58. It may be pertinent to mention here that on 22.8.1990

this court had appointed Mr. Mohinder Vyas as Commissioner

to inspect the wells and assess the degree of pollution created

by the operation of H-acid plant and the nature and extent of

the remedial operations. In pursuance of the directions, the

Commissioner visited the site from 31st August to 4th

September, 1990, conducted detailed survey and also

collected samples from a number of wells and drains. The

Commissioner in his report dated 20.7.1991 indicated that

65

the overall quality of ground water in the area had become

highly polluted, the water had become unfit for consumption

by man or animal and was not even fit for irrigation.

59. This Court by its order dated 17.2.1992 further directed

that the MOEF to inspect the area and ascertain about the

existence and extent of Gypsum and Iron based sludge over

there. In pursuance of the above directions, a team of experts

of MOEF visited the site on 6.3.1992 and assessed the

position in regard to storage of sludge collected from various

sites and presence of sludge in the factory premises. Samples

of water of wells around the factory were also collected for

analysis. The Union of India in an affidavit filed before this

court in pursuance of the said directions stated as follows:

"... ... ... That the report would reveal that the

extent of pollution in ground water seems to be very

great and the entire aquifer may be effected due to

the pollution caused by the industry.

... ... ...As the mother liquor produced during the

process (with pH-1.0) was highly acidic in nature

and was indiscriminately discharged on land by the

unit, it is possible that this might have eroded the

soil and caused the extensive damage. It is also

possible that organic contents of mother liquor

66

would have gone into soil with water to give radish

colour.

In another inspection in July, 1992 carried out by a

team of experts of Ministry of Environment &

Forests and Central Pollution Control Board, it was

observed:

"... ... ...A part of effluent from

Sulphuric Acid Plant is being discharged

inside the factory. The effluent dissolves

H-acid sludge, which on percolation is

likely to cause further pollution of

ground water... ... ..."

60. In pursuance to the order dated 15.7.1992 of this court,

the officials of the MOEF conducted inspection on 7.10.1992

and observed as under:

"... ... ...Untreated effluent from the solvent

extraction plant and the sulphuric acid plant were

passing through the sludge dump sites unabated,

which was resulting in further leaching of colour to

ground water. ... ... ..."

61. The MOEF in the month of September, 1993 submitted a

report which reads as under:

"5.0 Conclusion

5.1 On the basis of the observations and analysis

results, it is concluded beyond doubt that the

sludge inside the entombed pit is the contaminated

67

one as is evident from the number of parameters

analysed.

5.2 The ground water is also contaminated due to

discharge of H-acid plant effluent as well as H-acid

sludge/contaminated soul leachates as shown in

the photographs and also supported by the results.

The analysis results revealed good correlation

between the colour of well water and H-acid content

in it. The analysis results show high degree of

impurities in sludge/soil and also in well water

which is a clear indication of contamination of soil

and ground water due to disposal of H-acid waste."

62. The report which was based upon the inspection of the

area in September, 1993 revealed many other alarming

features. In para 2, under the heading "Site Observations and

Collection of Sludge/Contaminated Soil Samples", the

following facts were stated:

"2.1 The Central team, during inspection of the

premises of M/s. HACL observed that H-acid

sludge (iron/gypsum) and contaminated soil

are still lying at different places, as shown in

Fig.1, within the industrial premises

(photograph 1) which are the leftovers. The

area, where the solar evaporation pond was

existing with H-acid sludge dumped here and

there, was observed to have been leveled with

borrowed soil (photograph 2). It was difficult

to ascertain whether the sludge had been

removed before filling. However, there are

visual evidences of contaminated soil in the

area.

68

2.2 As reported by the Rajasthan State Pollution

Control Board (RSPCB) representatives, about

720 tonne out of the total contaminates soil

and sludge scraped from the sludge dump

sites id disposed in six lined entombed pits

covered by lime/fly ash mix, brick soling and

concrete (photographs 3 and 4). The

remaining scrapped sludge and contaminated

soil was lying near the entombed pits for want

of additional disposal facility. However,

during the visit, the left over sludge and

contaminated soil could not be traced at site.

Inspection of the surrounding area revealed

that a huge heap of foreign soil of 5 meter

height (photograph 5) covering a large area, as

also indicated in Fig. 1, was raised on the

sloppy ground at the foothill within the

industry premises. The storm water run-off

pathway over the area showed indication of H-

acid sludge leachates coming out of the heap.

Soil in the area was sampled for analysis.

2.3 M/s. HACL has a number of other industrial

units which are operating within the same

premises without valid consents from the

Rajasthan State Pollution Control Board

(RSPCB). These plants are Sulphuric Acid

(H SO ), fertilizer (SSP) and vegetable oil 2 4

extraction. The effluent of these units are not

properly treated and the untreated effluent

particularly from the acid plant is passing

through the sludge dump area playing havoc

(photograph 7). The final effluent was collected

at the outlet of the factory premises during

operation of these units, at the time of ground

water monitoring in September, 1993, by the

RSPCB. Its quality was observed to be highly

acidic ( H: 1.08, Conductivity: 37,100 mg/l, p

69

SO :21,000 mg/l, Fe: 392 mg/l, COD: 167 4

mg/l) which was also revealed in the earlier

visits of the Central teams. However, these

units were not in operation during the present

visit."

63. Under para 4.2.1, the reported stated inter alia:

"The sludge samples from the

surroundings of the (presently non-existent)

solar evaporation and the contaminated soil

due to seepage from the newly raised dump

site also exhibited very high values of the

above mentioned parameters. This revealed

that the contaminated soil is buried under the

new dump found by the team."

64. In the reply it is also mentioned that the NEERI

submitted its report in April, 1994 on the restoration of

environmental quality of the area surrounding village Bichhri,

severally affected due to discharge of trade effluent and other

industrial wasters by respondent Nos. 4 to 8. The report was

submitted before this court in pursuance of its directions in

the matter. The report states that the studies were carried

out by the NEERI between September, 1992 and February,

1994. The report had been considered by this court at length

on its own merits and the observations of the court on the

70

report are contained in the judgment pronounced by it on

13.2.1996.

65. In the reply it is also stated that this court besides

considering the report of the NEERI also looked into a number

of reports pertaining to inspections, surveys, studies and

analysis of wastes and waste waters carried out by the experts

of the MOEF, Central Pollution Control Board (for short

`CPCB') and the R.S.P.C.B on various occasions, while hearing

the matter and pronouncing the judgment therein on

13.2.1996. Therefore, it is totally incorrect and erroneous to

contend that the order dated 13.2.1996 was solely based

upon the report submitted by the NEERI. Para IV of the

conclusions of the judgment dated 13.2.1996 observed as

follows:

"... ... ...this court has repeatedly found and

has recorded in the orders that it is respondents

who have caused the said damage. The analysis

reports obtained pursuant to the directions of the

court clearly establish that the pollution of the

wells is on account of the wastes discharged by

respondent Nos. 4 to 8 i.e. production of `H' Acid...

... ..."

71

66. In its reply the RSPCB further stated that the respondent

Nos. 4 to 8 filed a Writ Petition No. 338/2000 challenging the

judgment of this court dated 13.2.1996. This court dismissed

the petition, by order dated 18.7.2002, having regard to the

principles laid down in Rupa Ashok Hurra v. Ashok Hurra

& Another (2002) 4 SCC 388.

67. The RSPCB also stated in its reply that this court by

order dated 4.11.1997 directed the MOEF to take necessary

steps to implement the directions contained in the judgment

dated 13.2.1996 and accepted the proposals submitted by the

MOEF for the purpose of taking remedial measures by

appointing National Productivity Council (for short NPC), New

Delhi as Project Management Consultant. Pursuant to these

directions, the MOEF awarded the work of conducting

feasibility studies for suggesting alternative methods for

remediation of affected environment in Bichhari, to a

consortium of consultants namely: M/s. SENES Consultant

Limited, Canada and the NEERI, Nagpur. The above

consultants in their report stated that an area of 540 hectares

72

had been affected due to industrial waste and needed

remediation of contaminated ground water and soil. The said

report categorically stated about contamination of ground

water and of soil by H-acid. The report has been submitted by

the MOEF before this court in January, 2005. This court on

9.12.2004 made the following order:

"... ... ...The company M/s. Hindustan Agro

Chemical Limited, which is one of the respondents

in the main Writ Petition has filed a Petition

supported by an affidavit of one Shri D.P. Agarwal,

a Director in the respondent Nos. 4-8 companies

enclosing therewith certain reports of the experts.

It is the claim of the applicant that at present, the

effects caused by pollution on account of operation

of the concerned industries do not exist and

remedial measures, as contemplated in the main

judgment of this Court need not be undertaken.

The respondents namely: UOI, the State of

Rajasthan and the Rajasthan State Pollution

Control Board as well as the petitioner will give

their responses, if any, to this I.A. The Government

of India may depute an expert and be along with

the expert nominated by the Rajasthan State

Pollution Control Board and the nominee of the

State Rajasthan shall visit the spot after giving

intimation to the Petitioner-Indian Council for

Enviro Legal Action and verify the facts stated in

the affidavit and report the latest position to the

Court by the next date of hearing... ... ..."

73

68. An additional affidavit was also filed on behalf of MOEF

on the same lines and graphic description of existence of the

pollution has affected the ground water to an extent that the

entire aquifer may be affected due to the pollution caused by

the industry. The report further reveals that the problem in

relation to the area in question is basically the contamination

of water and the major factor contributing to the cause has

been the improper disposal of sludge and liquid wastes from

the unit. It has been recommended by the expert team that

due to leachable components of the sludge the industry

should prepare a double line pit containing impervious liners

comprising impervious clay and polyethylene sheets. The

sludge should be placed in this lined pit and covered with

water proof layering to such extent that no water can

percolate through the stored sludge. The soil in the premises

of the industry has also been contaminated by the disposal of

liquid effluents as well as the sludge on the ground. The

contaminated soil needs to be removed and the entire area

should be revamped. All industrial activities going on in the

premises should be stopped to enable the revamping process.

74 69. Mr. Shanti Bhushan and Mr. Prashant Bhushan,

learned senior counsel in the written submissions filed by the

respondent Nos. 4 to 8 have quoted this court's direction. The

same is reproduced as under :-

"The Central Government shall determine the

amount required for carrying out the remedial

measures....The Secretary shall thereupon

determine the amount in consultation with the

experts of the Ministry.........the said amount shall

represent the amount which respondents 4 to 8 are

liable to pay to improve and restore the

environment in the area....the factories, plant,

machinery and all other immovable assets of

respondents 4 to 8 are attached herewith. The

amount so determine and recovered shall be

utilized by the MEF for carrying out all necessary

remedial measures to restore the soil, water

resources and the environment in general of the

affected area to its former state."

70. According to respondent nos. 4 to 8, two reports of the

NEERI of the same date were at variance with each other. In

one report, the cost of remediation is mentioned as Rs.3

crores whereas in other report presented before the court, the

amount was 37.385 crores.

75 71. Mr. Bhushan, learned senior counsel has submitted in

his written submission that according to the original report, it

was reported by the RSPCB that most of the wells within 1.5

km radius of the chemical plants of the respondents were

contaminated whereas according to the modified report those

wells were located within 6.5 km radius.

72. Mr. Bhushan has also submitted that the sludge had

been stored under the supervision of the RSPCB whereas

according to the modified report the industry had scattered

the sludge in an unmindful clandestine manner causing gross

pollution to avoid penal liability.

73. Reference has been made to the opinion of some experts

whose opinions were obtained at the behest of respondent

nos. 4 to 8. Their reports are contrary to the earlier reports

given by the other experts.

74. In the written submissions it is mentioned that M/s

Hindustan Zinc Limited was responsible for discharging

noxious and polluting effluents.

76 75. According to the applicant-industry, the RSPCB has not

taken a consistent stand.

76. In the supplementary submissions filed by Mr. K.B.

Rohatagi, the learned counsel appearing on behalf of

R.S.P.C.B., it is mentioned that in Interlocutory Application

Nos. 36 and 44 the applicant-industry has resurrected the

same grounds which have previously been settled by this

court in Indian Council for Enviro-Legal Action and others

v. Union of India and Others (1996) 3 SCC 212.

77. Mr. Rohatagi also submitted in the supplementary

submissions that the question of liability and the amounts

payable by the applicants based on the NEERI report has

been decided by the judgment in the writ petition. The review

petition against the said judgment was also dismissed by this

court. On 4.11.1997 the applicants had even given an

undertaking that they would not dispute any fresh estimate

for remedial measures as prepared by the NEERI. The

question of fraud and tampering of the NEERI report of 1994

77

has been dealt with by this court while dismissing the

contempt petition filed by the applicants against the

R.S.P.C.B. Even the Curative Petition filed by the applicants

was also dismissed by this court on 18.7.2002.

78. In the supplementary submissions it is also mentioned

that through Interlocutory Application Nos. 36 and 44 the

applicants are merely trying to evade paying the amounts to

be paid as remedial measures by reopening issues already

settled by this court. In the submissions Mr. Rohatagi has

drawn our attention to para 66 of the said judgment regarding

the applicant's liability, which reads as under:

"66. Once the law in Oleum Gas Leak case is held

to be the law applicable, it follows, in the light of

our findings recorded hereinbefore, that

Respondents 4 to 8 are absolutely liable to

compensate for the harm caused by them to the

villagers in the affected area, to the soil and to the

underground water and hence, they are bound to

take all necessary measures to remove the sludge

and other pollutants lying the affected area (by

affected area, we mean the area of about 350 has

indicated in the sketch at p. 178 of NEERI report)

and also to defray the cost of the remedial

measures required to restore the soil and the

underground water resources."

78

79. It is also submitted in the written submissions that the

Central Government was directed to determine the amounts

for remedial measures for the affected area of 350 hectares, as

mentioned in the NEERI report, after allowing the applicants

to make a representation. This court in para 70 of the said

judgment observed as under:

"Chapters VI and VII in the NEERI Report

(submitted in 1994) shall be deemed to be the show

cause notice issued by the Central Government

proposing the determination of the said amount.

Within six weeks from this day, Respondents 4 to 8

shall submit their explanation, along with such

material as they think appropriate in support of

their case, to the Secretary, Ministry of

Environment and Forests, Government of India

(MOEF). The Secretary shall thereupon determine

the amount in consultation with the experts of his

Ministry within six weeks of the submission of the

explanation by the said respondents. The orders

passed by the Secretary (MOEF) shall be

communicated to Respondents 4 to 8 - and all

concerned - and shall also be placed before this

Court"

80. This court in the said judgment also directed that the

factories, plant, machinery and all other immovable assets of

Respondents 4 to 8 are attached herewith. The court also

observed that the amount so determined and recovered shall

79

be utilized by the MOEF for carrying out all necessary

remedial measures to restore the soil, water resources and the

environment in general of the affected area in the former

state.

81. It is also submitted in the supplementary submissions of

RSPCB that this court in para 70 of the said judgment also

observed that the applicants have inflicted untold misery

upon the poor, unsuspecting villagers, despoiling their land,

their water resources and their entire environment, all in

pursuance of their private profit. They have forfeited all

claims for any consideration by this court.

82. In the supplementary submissions filed by Mr. Rohatagi

it is also mentioned that the court even settled the issue of the

alleged hostility of the RSPCB towards the applicants and felt

no reason to suspect the veracity of the reports submitted by

the RSPCB. This court in para 39 of the said judgment

observed as under:

"If the respondents establish and operate their

plants contrary to law, flouting all safety norms

provided by law, the RSPCB was bound to act. On

80

that account, it cannot be said to be acting out of

animus or adopting a hostile attitude. Repeated

and persistent violations call for repeated orders.

That is no proof of hostility. Moreover, the reports

of RSPCB officials are fully corroborated and

affirmed by the reports of the Central team of

experts and of NEERI. We are also not prepared to

agree with Shri Bhat that since the report of NEERI

was prepared at the instance of RSPCB, it is

suspect."

83. It is further submitted in the supplementary

submissions that in para 55 of the said judgment this court

specifically held that Hindustan Zinc Limited is not

responsible for the pollution at Bichhri village. The court has

observed as under:

"No report among the several reports placed before

us in these proceedings says that Hindustan Zinc

Limited is responsible for the pollution at Bicchhri

village. Shri Bhat brought to our notice certain

reports stating that the discharges from Hindustan

Zinc Limited were causing pollution in certain

villages but they are all downstream, i.e., to the

north of Bichhri village and we are not concerned

with the pollution in those villages in these

proceedings. The bringing in of Hindustan Zinc

Limited in these proceedings is, therefore, not

relevant. If necessary, the pollution, if any, caused

by Hindustan Zinc Limited can be the subject-

matter of a separate proceeding."

81

84. It is also further mentioned in the written submission of

RSPCB that the issue of quantification of amounts to be paid

by the industry has been settled by this court in its order

dated 4.11.1997. The relevant portion of the order reads as

under:

"... ... ...remedial measures taken on the basis of

the NEERI report shall be treated as final.

We accept the proposal submitted by the

Government of India for the purpose of taking

remedial measures by appointing National

Productivity Council as the Project Management

Consultant. In our opinion the Ministry of

Environment and Forests, Government of India has

rightly made a demand for Rs.37.385 crores."

85. It is also mentioned in the supplementary submissions

that this court on 3.8.2005 directed that the sale should take

place expeditiously to realize the amount for remedial

measures. The assessment of areas affected by the pollution

and settled by the District Collector at 642 hectares was also

accepted by this court vide its order dated 3.8.2005.

86. It may be pertinent to mention that this court had

accepted the affidavit of Mr. S.N. Kaul, Acting Director, NEERI

82

regarding tampering with the report and this court by its

order dated 1.10.1999 observed as under:

"It appears that two scientists appointed by

the petitioner had inspected a report in the office of

NEERI and then observed that there has been a

fabrication carried out by the Pollution Control

Board. From what has been stated hereinabove,

the charge of fabrication is clearly unfounded. It is

possible that these two scientists may have seen

the draft report which would be with the NEERI but

the original report when prepared would be one

which was, ultimately, submitted to the sponsoring

agency, namely the Rajasthan Pollution Control

Board and it is only a copy of the same which could

have been retained by the NEERI. Be that as it

may, it is clear that what has been filed in this

Court as being the final report of NEERI was the

copy of the final report which was received by it.

There is no basis for contending that any of the

respondents have been guilty of fabrication. The

whole application to our mind is without any

merit."

87. It is further submitted in his supplementary

submissions that this court in para 54 of its order dated

13.2.1996 had upheld the integrity of the reports submitted

by the NEERI. Para 54 of order dated 13.2.1996 reads as

under:

"Moreover, the reports of RSPCB officials are fully

corroborated and affirmed by the reports of the

central team of experts and of the NEERI. We are

83

also not prepared to agree with Shri Bhat that since

the report of the NEERI was prepared at the

instance of RSPCB, it is suspect. This criticism is

not only unfair but is also uncharitable to the

officials of NEERI who have no reason to be inimical

to the respondents. If, however, the actions of the

respondents invite the concern of the experts and if

they depict the correct situation in their reports,

they cannot be accused of any bias.

... ... ...

... ... ...

The persons who made the said reports are all

experts in their field and under no obligation either

to the RSPCB or for that matter to any other person

or industry. It is in view of their independence and

competence that their reports were relied upon and

made the basis of passing orders by this court from

time to time."

88. In the supplementary submissions it is also mentioned

that the report of 25th January, 2005 is a joint report by the

NEERI, R.S.P.C.B. and officers of Department of Environment,

Government of Rajasthan. The team collected soil samples

from 7 sites, one sample from lake Udaisagar and 17 well

water samples from the impacted and nearby areas. The

report concluded as under:

"All the well water samples in the impacted zone

have also shown colour from pale yellow to dark

brown. As the industries located within the HACL

plant premises were the only source of H-acid,

HACL alone is responsible for causing pollution by

84

H-acid and its derivatives in the impacted area.

Considering the remediation goal of Omg/l for H-

acid and its derivatives are potential carcinogenic,

all well waters, contaminated with H-acid and its

derivatives, require remediation.

... ... ...

... ... ...

Sudden emergence of H-acid in wells W7(Aug.99)

and W9 (Aug. 99) clearly indicate that the plume of

H-acid contaminated groundwater is moving away

from the source of origin and spreading in the

direction of groundwater flow. This is further

confirmed from another fairly conservative

parameter TDS whose emergence has been

documented in all the wells (W7, W9, W1, W13 and

W16) from time to time. Similar trend could be

observed with respect to sulphate and chloride in

well water samples collected from these five wells.

Comparison of the results obtained in the present

study with that of earlier studies establish that the

ground water plume contaminated by H-acid and

its derivatives is still moving in the direction of

ground water flow thereby contamination area

being larger than that earlier. This was predicted

in the joint report prepared by SENES and the

NEERI (SENES and the NEERI, 2002)."

89. This report was submitted to the court along with the

affidavit dated 8.3.2007 filed by the Union of India.

90. In the supplementary submissions it is also submitted

that due to some alleged variations, the Director of ITRC

(Indian Toxicological Research Centre) was asked to make a

85

rapid assessment on 6.5.2006. In response, the Director of

ITRC stated that there may be a variation due to a lapse of

time between the 2002 and 2005 reports. Based on this,

MOEF asked the National Chemical Laboratory, Pune to

undertake a study, the results of which (placed before the

Court in affidavits of 22.1.07 and 8.3.2007) showed that no

aspersions can be cast on the NEERI report of 1994.

Further, it would be incorrect to suggest that the remedial

measures as imposed on the applicants were limited to

neutralizing the presence of H-acid in the soil alone, in fact it

is clear from the judgment of 1996 and subsequent reports

that what has to be done is:

a) removal of sludge which has also percolated

down in the soil; and

b) restoration of the area including perforce,

making it possible for farmers and others to

return to the natural uses of the affected land.

91. It is further submitted in the supplementary

submissions of RSPCB that the Interlocutory Applications

Nos. 36 and 44 are just another example of obstructive

litigation undertaken to avoid responsibility. Since 1996 the

86

applicants have filed various applications and petitions in this

court to delay the payment of damages. It is also submitted

that any delay caused in the payment of damages for remedial

measures has, therefore, been on the part of the applicants.

It would be wrong to suggest that the Union is responsible for

the delay in sale of assets of the industry. The applicants

have violated orders of this court in relation to disclosure of

assets dated 18.8.04, 9.12.04 and 17.3.05, because of which

it was impossible for the Union of India to sell the applicant's

attached properties.

92. Mr. Rohatagi submitted that the applicants relied upon a

series of reports by private consultants, filed subsequent to

the decision, which are as follows:

a) IIT Bombay Report of May 2005 suggesting that

the samples collected on 5th April, 2005 show

that there is no H-acid or other pollutants.

b) A report by Dr. BR Bamniya dated 22.4.04

stating that no soil pollutants or water pollutants

found and

"...the presence of H-acid has not been

recorded in any water sample of well and

in tube well."

87

c) Report of Expert Group on Water Pollution of

March 1981 showing that pollution caused by

M/s. Hindustan Zinc Ltd. Further no action has

been taken against M/s. Hindustan Zinc Limited

on the basis of that report.

d) Report of M/s. Shah Doctor Associates of April,

1994 critical of the analysis in the NEERI report.

e) Report of SP Mahajan of IIT Bombay dated

19.8.1999 stating that no H-Acid found in the

well waters.

93. It is further submitted in the supplementary

submissions that the NEERI report of 2005 also dealt with

three private reports which were rejected on the basis that

they were superficial.

94. Mr. Rohatagi further submitted that the liability of the

applicants-industries has been fixed far back in 1996. Merely

because there may be a diminution in respect of some

pollutants due to the passage of time does not, in any way,

take away from the responsibility on the applicant to

undertake remedial measures for the past and continuing

damage to the people and the environment caused by the

applicants-industries. The individual claims of farmers may

be dealt within individual cases, which would not obviate the

88

need for restoration of the area. This flows from a joint

reading of directions of the court in para 71 of the judgment

reported in Indian Council for Enviro-Legal Action (supra).

95. According to the RSPCB Interlocutory Application Nos.

36 and 44 are blatant examples of vexatious litigation

indulged in to avoid the responsibility fixed by this court.

These applications should be dismissed with heavy costs on

the applicants.

96. Mr. M.C. Mehta, Advocate has filed written submissions

on behalf of Indian Council for Enviro Legal Action. It is

reiterated in the submissions that these applications are

blatant disregard towards complying with the directions of

this court. They have made mockery with the environmental

justice delivery system by filing these applications. They have

shown no contrition for causing irreparable damage to the life,

health and property of the people affected by their commercial

activities. The applicants are trying to delay the payment of

Rs.37.385 crores for carrying out remedial measures. This

89

court in para 70 of the judgment reported in Indian Council

for Enviro-Legal Action (supra) observed as under:

"On account of (the respondents) continuous,

persistent and insolent violations of the law....and

their non-implementation of the orders of this....

(the respondents) have earned the dubious

distinction of being characterized as "rogue

industries". They have inflicted untold misery upon

the poor, unsuspecting villagers, despoiling their

land, their water sources and their entire

environment - all in pursuit of private profit."

97. Mr. Mehta also submitted in his submissions that the

applicants (respondent Nos. 4 to 8) are related to the

discharge of untreated chemical effluents in violation of the

laws of the land in Bichhri and surrounding villages and

caused grave harm to the environment and people in Bichhri

and surrounding villages.

98. In the written submissions Mr. Mehta also submitted

that the reports procured by the respondent companies by

hiring consultants do not hold any weight due to lack of

substantial scientific investigations. They cannot in any way

question the credibility of nine scientific reports, submitted

following extensive field visits, survey and research by

90

scientists from reputed scientific institutions such as the

CPCB, NEERI, SENES, RSPCB and the Centre for Science and

Environment and other reports, respectively submitted by the

district collector and the Court Commissioner appointed by

this court.

99. Mr. Mehta also mentioned in his written submissions

that the veracity of the contents of the NEERI report has been

affirmed in at least four subsequent reports from reputed

scientific organizations, MOEF, State of Rajasthan as well as

the district collector.

100. Mr. Mehta has also submitted that assuming, though

not conceding, that there is currently no pollution in Bichhri

village, this cannot absolve the applicants-industries from the

obligation to pay monies necessary for eco-restoration and

damages caused to the life and health of the people as well as

their property in the past. The polluters/respondents

recklessly destroyed the environment, surface and

underground water and the soil and killed fruit trees, animals

and vegetation apart from causing suffering and irreparable

91

damages to the lands, property, life and health of the people

in flagrant violation of environmental laws and directions

given by various authorities including the orders of this court.

The civil and criminal liability upon the respondents for the

environmental crimes, irreparable damages caused to the

environment, flora and fauna, life, health and property of

innocent people living in Bichhri and surrounding villages

cannot be condoned at any cost.

101. Mr. Mehta submitted that even if it was possible to

accept that all H-acid traces have been removed, the presence

of other contaminants in the affected area (including highly

toxic wastes emanating from the Sulphuric Acid Plant and

other plants) would necessitate remediation. The amount can

be deposited in a Fund and utilized for remediation, providing

potable water, tree plantation, and such other measures

which would be helpful to the environment of the area apart

from paying damages to the people.

102. Mr. Mehta has further submitted that this court may

impose upon the errant industries as exemplary punitive

92

damages apart from the amount required for eco-restoration

by way of remediation of the land, water and the environment.

This may be considered in the light of the continuing public

nuisance and suffering due to pollution, severely degraded

environment, loss to the property, irreparable damage to the

ecology and precious natural resources - land, air, aquifers,

surface water, flora and fauna - for over twenty years since

the original petition was filed. The implications of failing to

remediate the affected land, water and environment over such

an extensive period of time are far more severe than had the

applicants-industries immediately complied with the orders of

this court.

103. Mr. Mehta also placed reliance on a judgment of this

court in the case of M.C. Mehta v. Kamal Nath and others

(2000) 6 SCC 213, in which the court observed as under:

"...pollution is a civil wrong. By its very

nature, it is a tort committed against the

community as a whole. A person, therefore, who is

guilty of causing pollution, has to pay damages

(compensation) for restoration of the environment

and ecology. He has also to pay damages to those

who have suffered loss on account of the act of the

offender. The powers of this court under Article 32 93

are not restricted and it can award damages in a

PIL or a Writ Petition as has been held in a series of

decisions. In addition to damages aforesaid, the

person guilty of causing pollution can also be held

liable to pay exemplary damages so that it may act

as a deterrent for others not to cause pollution in

any manner."

104. Mr. Mehta submitted that having regard to the

respondent's conduct in the present case, it would be

reasonable to impose an additional pecuniary penalty on

them. Reliance is placed on Minister for the environment

and Heritage v. Greentree (No.3) [2004] FCA 1317,

wherein the Federal Court imposed a pecuniary penalty

against the respondents totaling $450,000 for having illegally

cleared declared a Ramsar wetland. A strong factor

contributing to the imposition of a substantial penalty was

because the actions of the respondent were deliberate,

sustained and serious, they took place over a substantial

period of time and the respondents did not exhibit any

contrition.

94 105. Mr. Mehta also submitted that the present case would

warrant a severe penalty because the respondents carried out

their activities without even possessing any appropriate

licenses. Respondents must be required to pay exemplary

damages so as to act as a deterrent for others, as also to

remedy the harm they have caused to the environment and

the villagers of Bichhri.

106. Mr. Mehta has also placed reliance on the famous "Love

Canal Case" United States v. Hooker Chems and Plastics

Corp., 722 F. Supp 960 (W.D.N.Y. 1989). This case was

initiated after it was discovered that a school, homes and

rental units were built over approximately 21,000 tonnes of

chemical waste at Niagara Falls, New York. The Federal Court

of New York allowed a claim against the defendants based on

public nuisance. This case was ultimately settled with the

defendant agreeing to pay $129 million to the Environment

Protection Authority. This case led to the development of the

Comprehensive Response Compensation and Environmental

Liability Act, 1980, more commonly referred to as the

95

"Superfund", into which polluters contribute monies to enable

clean-up of toxic sites.

107. In the written submissions filed by Mr. Mehta he has

also mentioned about principle of accountability and it is the

duty and obligation of the court to protect the fundamental

rights of the citizens under Article 32 of the Indian

constitution. Pollution and public nuisance resulting from

mis-regulation infringes on the fundamental rights, including

the right to life under Article 21 of the Indian constitution.

Mr. Mehta also submitted that applicants are liable for

causing continuous suffering to the people in Bichhri and

surrounding villages.

108. Mr. Mehta also submitted in his written submissions

that in several cases of environmental pollution the courts

have ordered the payment of damages by the errant

industries/individuals responsible for causing pollution in

violation of environmental related issues and the money

recovered be spent for remediation or eco-restoration and

damages be paid to the victims or spent for their benefit. It

96

is the duty of the government to ensure proper administration

of this fund in a transparent and accountable manner. The

establishment of such a fund would ensure that polluters take

responsibility for their actions and that monies derived from

penalties, damages and settlement are directly invested

towards remediating the environmental damage that has

occurred.

109. Mr. Mehta further mentioned in his submissions that

creation of such a fund would be consistent with the

precautionary principle which has been evolved and accepted

by this court. He has also mentioned that similar funds have

been set-up in United States of America, Canada, Australia,

Malaysia and other countries.

110. Mr. Mehta also made a reference regarding Public

Liability Insurance Act, 1991 which makes it mandatory for

industries handling hazardous material to be insured against

environmental hazards. However, this legislation only

provides relief to persons affected by accidents whilst

handling hazardous materials, who are most likely to be

97

workers. Members of the local community would not obtain

relief under this legislation, though they are also adversely

affected by hazardous industries. This is most pertinently

exemplified in the present case.

111. In his written submissions Mr. Mehta also submitted

that the applicants clearly show defiance of the environmental

laws and the orders of this court. Mr. Mehta prayed for

dismissal of Interlocutory Application Nos. 36 of 2004 and 44

of 2007 with heavy costs and direct the respondents to

deposit Rs.37.385 crores with the MOEF as per the judgment

of this court.

112. This case raises many substantial questions of law. We

would briefly deal with some of them.

113. We would also like to discuss the concept of Finality of

the Judgment passed by the Apex Court.

FINALITY OF JUDGMENT

114. The maxim `interest Republicae ut sit finis litium' says

that it is for the public good that there be an end of litigation

after a long hierarchy of appeals. At some stage, it is

98

necessary to put a quietus. It is rare that in an adversarial

system, despite the judges of the highest court doing their

best, one or more parties may remain unsatisfied with the

most correct decision. Opening door for a further appeal

could be opening a flood gate which will cause more wrongs in

the society at large at the cost of rights.

115. It should be presumed that every proceeding has gone

through infiltration several times before the decision of the

Apex Court. In the instant case, even after final judgment of

this court, the review petition was also dismissed. Thereafter,

even the curative petition has also been dismissed in this

case. The controversy between the parties must come to an

end at some stage and the judgment of this court must be

permitted to acquire finality. It would hardly be proper to

permit the parties to file application after application

endlessly. In a country governed by the rule of law, finality of

the judgment is absolutely imperative and great sanctity is

attached to the finality of the judgment. Permitting the

parties to reopen the concluded judgments of this court by

99

filing repeated interlocutory applications is clearly an abuse of

the process of law and would have far reaching adverse

impact on the administration of justice.

116. In Manganese Ore (India) Ltd. v. The Regional

Assistant Commissioner of Sales Tax, Jabalpur (1976) 4

SCC 124 this court held that the doctrine of stare decisis is a

very valuable principle of precedent which cannot be departed

from unless there are extraordinary or special reasons to do

so.

117. In Green View Tea & Industries v. Collector,

Golaghat and Another (2002) 1 SCC 109 this court

reiterated the view that finality of the order of the apex court

of the country should not lightly be unsettled.

118. A three-Judge Bench of this court in M/s Northern

India Caterers (India) Ltd. v. Lt. Governor of Delhi (1980) 2

SCC 167 held that a party is not entitled to seek a review of

this court's judgment merely for the purpose of rehearing and

for a fresh decision of the case. Departure from the normal

principle that the court's judgment is final would be justified

100

only when compelling our substantial circumstances make it

necessary to do so. Such circumstances may be that a

material statutory provision was not drawn to the court's

attention at the original hearing or a manifest wrong has been

done.

119. Relying on Union of India & Another v. Raghubir

Singh (Dead) by L.Rs. (1989) 2 SCC 754, this Court in

Krishna Swami v. Union of India and Others (1992) 4 SCC

605 held that the plea for reconsideration is not to be

entertained merely because the petitioner chooses to reagitate

the points concluded by the earlier decision in Sub-

committee on Judicial Accountability v. Union of India

(1991) 4 SCC 699.

120. In Mohd. Aslam v. Union of India & Others (1996) 2

SCC 749, the Court considered the earlier decisions and held

that the writ petition under article 32 of the Constitution

assailing the correctness of a decision of the Supreme Court

on merits or claiming reconsideration is not maintainable.

101 121. In Khoday Distilleries Ltd. and Another v. Registrar

General, Supreme Court of India (1996) 3 SCC 114, the

Court held the reconsideration of the final decision of the

Supreme Court after review petition is dismissed by way of

writ petition under article 32 of the Constitution cannot be

sustained.

122. In Gurbachan Singh & Another v. Union of India &

Another (1996) 3 SCC 117, the Court held that the judgment

order of this court passed under Article 136 is not amenable

to judicial review under Article 32 of the Constitution.

123. Similar view was taken in Babu Singh Bains and

others v. Union of India and Others (1996) 6 SCC 565, a

three-Judge bench of this Court held that a writ petition

under Article 32 of the Constitution against the order under

Article 136 of the Constitution is not maintainable.

124. Another three-Judge bench of this Court in P. Ashokan

v. Union of India & Another (1998) 3 SCC 56, relying upon

the earlier cases held that the challenge to the correctness of

a decision on merits after it has become final cannot be

102

questioned by invoking Article 32 of the Constitution. In the

instant case the petitioner wants to reopen the case by filing

the interlocutory application.

125. In Ajit Kumar Barat v. Secretary, Indian Tea

Association & Others (2001) 5 SCC 42, the Court placed

reliance on the judgment of a nine-judge Bench in Naresh

Shridhar Mirajkar v. State of Maharashtra and another

AIR 1967 SC 1 and the Court observed as under:

"It is difficult to see how this decision can be

pressed into service by Mr. Setalvad in support of

the argument that a judicial order passed by this

Court was held to be subject to the writ jurisdiction

of this Court itself.... In view of this decision in

Mirajkar case it must be taken as concluded that

judicial proceedings in this Court are not subject to

the writ jurisdiction thereof."

126. The Court in the said case observed that having regards

to the facts and circumstances of the case, this is not a fit

case to be entertained to exercise jurisdiction under Article 32

of the Constitution.

127. In Mr. "X" v. Hospital "Z" (2000)9 SCC 439, this Court

held thus:

103 "Writ petition under Article 32 of the

Constitution against the judgment already passed

by this Court cannot be entertained. Learned

counsel for the petitioner stated that prayer (a)

which seeks overruling or setting aside of the

judgment already passed in Mr X v. Hospital Z may

be deleted. This prayer shall accordingly be deleted.

So also, the other prayers which indirectly concern

the correctness of the judgment already passed

shall stand deleted. Learned counsel for the

petitioner stated that the petition may not be

treated as a petition under Article 32 of the

Constitution but may be treated as an application

for clarification/directions in the case already

decided by this Court, viz., Mr X v. Hospital Z (CA

No. 4641 of 1998)."

128. In Triveniben v. State of Gujarat (1989)1 SCC 678

speaking for himself and other three learned Judges of the

Constitution Bench through Oza, J., reiterated the same

principle. The court observed: (SCC p. 697, para 22)

"...It is well settled now that a judgment of

court can never be challenged under Articles 14 or

21 and therefore the judgment of the court

awarding the sentence of death is not open to

challenge as violating Article 14 or Article 21 as has

been laid down by this Court in Naresh Shridhar

Mirajkar (supra) and also in A.R. Antulay v. R.S.

Nayak, the only jurisdiction which could be sought

to be exercised by a prisoner for infringement of his

rights can be to challenge the subsequent events

after the final judicial verdict is pronounced and it

is because of this that on the ground of long or

104

inordinate delay a condemned prisoner could

approach this Court and that is what has

consistently been held by this Court. But it will not

be open to this Court in exercise of jurisdiction

under Article 32 to go behind or to examine the

final verdict reached by a competent court

convicting and sentencing the condemned prisoner

and even while considering the circumstances in

order to reach a conclusion as to whether the

inordinate delay coupled with subsequent

circumstances could be held to be sufficient for

coming to a conclusion that execution of the

sentence of death will not be just and proper...."

129. In Rupa Ashok Hurra (supra), this Court observed thus:

24. ... when reconsideration of a judgment of this

Court is sought the finality attached both to the law

declared as well as to the decision made in the

case, is normally brought under challenge. It is,

therefore, relevant to note that so much was the

value attached to the precedent of the highest court

that in The London Street Tramways Co. Ltd. v.

London County Council (1898 AC 375) the House

of Lords laid down that its decision upon a question

of law was conclusive and would bind the House in

subsequent cases and that an erroneous decision

could be set right only by an Act of Parliament.

... ... ...

... ... ...

26. ...This Court will not sit as a court of appeal

from its own decisions, nor will it entertain

applications to review on the ground only that one

of the parties in the case conceives himself to be

aggrieved by the decision. It would in our opinion

be intolerable and most prejudicial to the public

105

interest if cases once decided by the Court could be

reopened and reheard:

"There is a salutary maxim which

ought to be observed by all courts of last

resort -- interest reipublicae ut sit finis

litium. (It concerns the State that there

be an end of lawsuits. It is in the interest

of the State that there should be an end

of lawsuits.) Its strict observance may

occasionally entail hardship upon

individual litigants, but the mischief

arising from that source must be small in

comparison with the great mischief

which would necessarily result from

doubt being thrown upon the finality of

the decisions of such a tribunal as this."

32. "...When this Court decides questions of law, its

decisions are, under Article 141, binding on all

courts within the territory of India, and so, it must

be the constant endeavour and concern of this

Court to introduce and maintain an element of

certainty and continuity in the interpretation of law

in the country. Frequent exercise by this Court of

its power to review its earlier decisions on the

ground that the view pressed before it later appears

to the Court to be more reasonable, may

incidentally tend to make law uncertain and

introduce confusion which must be consistently

avoided. That is not to say that if on a subsequent

occasion, the Court is satisfied that its earlier

decision was clearly erroneous, it should hesitate to

correct the error; but before a previous decision is

pronounced to be plainly erroneous, the Court

must be satisfied with a fair amount of unanimity

amongst its members that a revision of the said

view is fully justified. It is not possible or desirable,

and in any case it would be inexpedient to lay down

106

any principles which should govern the approach of

the Court in dealing with the question of reviewing

and revising its earlier decisions."

33. In Maganlal Chhaganlal (1974) 2 SCC 402

case a Bench of seven learned Judges of this Court

considered, inter alia, the question: whether a

judgment of the Supreme Court in Northern India

Caterers case (1967) 3 SCR 399 was required to be

overruled. Khanna, J. observed: (SCC p. 425, para

22)

"At the same time, it has to be

borne in mind that certainty and

continuity are essential ingredients of

rule of law. Certainty in law would be

considerably eroded and suffer a serious

setback if the highest court of the land

readily overrules the view expressed by it

in earlier cases, even though that view

has held the field for a number of years.

In quite a number of cases which come

up before this Court, two views are

possible, and simply because the Court

considers that the view not taken by the

Court in the earlier case was a better

view of the matter would not justify the

overruling of the view. The law laid down

by this Court is binding upon all courts

in the country under Article 141 of the

Constitution, and numerous cases all

over the country are decided in

accordance with the view taken by this

Court. Many people arrange their affairs

and large number of transactions also

take place on the faith of the correctness

of the view taken by this Court. It would

create uncertainty, instability and

confusion if the law propounded by this

107

Court on the basis of which numerous

cases have been decided and many

transactions have taken place is held to

be not the correct law."

42. The concern of this Court for rendering justice

in a cause is not less important than the principle

of finality of its judgment. "We are faced with

competing principles -- ensuring certainty and

finality of a judgment of the Court of last resort and

dispensing justice on reconsideration of a judgment

on the ground that it is vitiated being in violation of

the principles of natural justice or giving scope for

apprehension of bias due to a Judge who

participated in the decision-making process not

disclosing his links with a party to the case, or on

account of abuse of the process of the court. Such a

judgment, far from ensuring finality, will always

remain under the cloud of uncertainty. Almighty

alone is the dispenser of absolute justice -- a

concept which is not disputed but by a few. We are

of the view that though Judges of the highest court

do their best, subject of course to the limitation of

human fallibility, yet situations may arise, in the

rarest of the rare cases, which would require

reconsideration of a final judgment to set right

miscarriage of justice complained of. In such case it

would not only be proper but also obligatory both

legally and morally to rectify the error. After giving

our anxious consideration to the question, we are

persuaded to hold that the duty to do justice in

these rarest of rare cases shall have to prevail over

the policy of certainty of judgment as though it is

essentially in the public interest that a final

judgment of the final court in the country should

not be open to challenge, yet there may be

circumstances, as mentioned above, wherein

declining to reconsider the judgment would be

108

oppressive to judicial conscience and would cause

perpetuation of irremediable injustice."

130. A four-judge bench of this court in Sumer v. State of

U.P. (2005) 7 SCC 220 observed as under:

"In Rupa Ashok Hurra (supra) while

providing for the remedy of curative petition, but at

the same time to prevent abuse of such remedy and

filing in that garb a second review petition as a

matter of course, the Constitution Bench said that

except when very strong reasons exist, the court

should not entertain an application seeking

reconsideration of an order of this Court which has

become final on dismissal of review petition. In this

view, strict conditions including filing of certificate

by a Senior Advocate were provided in Rupa Ashok

Hurra (supra). Despite it, the apprehension of the

Constitution Bench that the remedy provided may

not open the flood gates for filing a second review

petition has come true as is evident from filing of

large number of curative petitions. It was expected

that the curative petitions will be filed in

exceptional and in rarest of rare case but, in

practice, it has just been opposite. This Court,

observing that neither it is advisable nor possible to

enumerate all the grounds on which curative

petition may be entertained, said that nevertheless

the petitioner is entitled to relief ex debito justitiae

if he establishes (1) violation of principles of natural

justice in that he was not a party to the lis but the

judgment adversely affected his interests or, if he

was a party to the lis, he was not served with notice

of the proceedings and the matter proceeded as if

he had notice, and (2) where in the proceedings a

learned Judge failed to disclose his connection with

109

the subject-matter or the parties giving scope for an

apprehension of bias and the judgment adversely

affects the petitioner. To restrict filing of the

curative petitions only in genuine cases, Rupa

Ashok Hurra (supra) provided that the curative

petition shall contain a certification by a Senior

Advocate with regard to the fulfilment of all the

requirements provided in the judgment.

Unfortunately, in most of the cases, the certification

is casual without fulfilling the requirements of the

judgment."

131. In Sita Ram Bhandar Society, New Delhi v.

Lieutenant Governor, Government of NCT, Delhi & Others

(2009)10 SCC 501, this Court held thus:

"41. We must also observe that the petitioner has

been able to frustrate the acquisition and

development of the land right from 1980 onwards

by taking recourse to one litigation after the other.

The record reveals that all the suits/writ petitions,

etc. that had been filed had failed. Undoubtedly,

every citizen has a right to utilise all legal means

which are open to him in a bid to vindicate and

protect his rights, but if the court comes to the

conclusion that the pleas raised are frivolous and

meant to frustrate and delay an acquisition which

is in public interest, deterrent action is called for.

This is precisely the situation in the present matter.

42. The appeals are, accordingly, dismissed with

costs which are determined at rupees two lakhs.

The respondents, shall, without further loss of time

proceed against the appellant."

110

132. This court in a recent judgment in M. Nagabhushana

v. State of Karnataka and others (2011) 3 SCC 408

observed that principle of finality is passed on high principle

of public policy. The court in para 13 of the said judgment

observed as under:

"That principle of finality of litigation is based

on high principle of public policy. In the absence of

such a principle great oppression might result

under the color and pretence of law inasmuch as

there will be no end of litigation and a rich and

malicious litigant will succeed in infinitely vexing

his opponent by repetitive suits and actions. This

may compel the weaker party to relinquish his

right. The doctrine of res judicata has been evolved

to prevent such an anarchy. That is why it is

perceived that the plea of res judicata is not a

technical doctrine but a fundamental principle

which sustains the rule of law in ensuring finality

in litigation. This principle seeks to promote

honesty and a fair administration of justice and to

prevent abuse in the matter of accessing court for

agitating on issues which have become final

between the parties."

133. In order to discourage a litigation which reopens the final

judgment of this court, while dismissing the petition imposed

costs of rupees 10 lakhs.

111 134. We find full corroboration of this principle from the cases

of other countries. We deem it appropriate to mention some

of these relevant cases in the succeeding paragraphs.

ENGLAND

135. The England cases have consistently taken the view that

the judgments of final court must be considered final and

conclusive. There must be certainty in the administration.

Uncertainty can lead to injustice. Unless there are very

exceptional or compelling reasons the judgment of apex courts

should not be reopened.

136. In Regina v. Gough, [1993] 1 A.C. 646, with regards to

setting aside judgments due to judicial bias, the House of

Lords held that there "is only one established special category

and that exists where the tribunal has a pecuniary or

proprietary interest in the subject matter of the proceedings

as in Dimes v. Proprietors of Grand Junction Canal ,

(1852) 3 H.L. Cases 759. The courts should hesitate long

before creating any other special category since this will

112

immediately create uncertainty as to what are the parameters

of that category and what is the test to be applied in the case

of that category." Lord Goff of Chievely stated that

"I wish to draw attention to the fact that there are

certain cases in which it has been considered that

the circumstances are such that they must

inevitably shake public confidence in the integrity

of the administration of justice if the decision is to

be allowed to stand. Such cases attract the full

force of Lord Hewart C.J.'s requirement that justice

must not only be done but must manifestly be seen

to be done. These cases arise where a person sitting

in a judicial capacity has a pecuniary interest in

the outcome of the proceedings. In such a case, as

Blackburn J. said in Reg. v. Rand (1866) L.R. 1

Q.B. 230, 232: "any direct pecuniary interest,

however small, in the subject of inquiry, does

disqualify a person from acting as a judge in the

matter." The principle is expressed in the maxim

that nobody may be judge in his own cause (nemo

judex in sua causa)... In such a case, therefore, not

only is it irrelevant that there was in fact no bias on

the part of the tribunal, but there is no question of

investigating, from an objective point of view,

whether there was any real likelihood of bias, or

any reasonable suspicion of bias, on the facts of the

particular case. The nature of the interest is such

that public confidence in the administration of

justice requires that the decision should not stand"

(p. 661).

137. In R v. Bow Street Metropolitan Stipendiary

Magistrate, ex parte Pinochet Ugarte (No 2) (1999) 2 W.L.R.

113

272, the House of Lords set aside one of its earlier orders. In

this case, the majority at the House of Lords had earlier ruled

whether Augusto Pinochet, the former dictator of Chile, could

be extradited to Spain in order to stand trial for alleged crimes

against humanity and was not entitled to sovereign immunity.

Amnesty International had been an intervener in this case in

opposition to Pinochet. Lord Hoffman, one of the majority

judges, was a director of Amnesty International Charitable

Trust, an organization controlled by Amnesty International,

and Lady Hoffman had been working at AI's international

secretariat since 1977. The respondent was not aware of Lord

Hoffman's relationship to AI during the initial trial. In this

case, the House of Lords cited with approval the respondents'

concession acknowledging the House of Lords' jurisdiction to

review its decisions -

"In principle it must be that your Lordships, as the

ultimate court of appeal, have power to correct any

injustice caused by an earlier order of this House.

There is no relevant statutory limitation on the

jurisdiction of the House in this regard and

therefore its inherent jurisdiction remains

unfettered."

114

138. According to the English law, the judgment of the Apex

Court can be reviewed in exceptional circumstances

particularly when the judge associated with any of the

organizations to be a good ground for reviewing the judgment.

139. In Pinochet test in Regina (Edwards) v Environment

Agency and others [2010] UKSC 57, the Supreme Court of

the United Kingdom overruled an earlier order of costs made

by the erstwhile apex court, the House of Lords, on the

grounds that the House of Lords had made a substantive

error in the original adjudication. However, this appeal was

lodged under Rule 53 of the The (U.K.) Supreme Court

Rules, 2009, 2009 No. 1603 (L. 17). Rule 53 provides as

follows:

53. (1) A party who is dissatisfied with the

assessment of costs made at an oral hearing may

apply for that decision to be reviewed by a single

Justice and any application under this rule must

be made in the appropriate form and be filed within

14 days of the decision.

(2) The single Justice may (without an oral hearing)

affirm the decision made on the assessment or

may, where it appears appropriate, refer the matter

115

to a panel of Justices to be decided with or without

an oral hearing.

(3) An application may be made under this rule

only on a question of principle and not in respect of

the amount allowed on any item in the claim for

costs.

140. In this case, Lord Hope, citing the Pinochet case stated

that:

The Supreme Court is a creature of statute. But it

has inherited all the powers that were vested in

the House of Lords as the ultimate court of

appeal. So it has the same powers as the House

had to correct any injustice caused by an earlier

order of the House or this Court... In this case it

seems that, through no fault of the appellant, an

injustice may have been caused by the failure of

the House to address itself to the correct test in

order to comply with the requirements of [certain

EU] directives [at para. 35].

CANADA

141. The Canadian Supreme Court is of the same view that

judicial bias would be a ground for reviewing the judgment.

In Wewaykum Indian Band v. Canada [2003] 2 SCR 259

the court relied on Taylor Ventures Ltd. (Trustee of) v.

Taylor 2005 BCCA 350 where principle of judicial bias has

been summarized.

116 142. The principles stated in Roberts regarding judicial bias

were neatly summarized in Taylor Ventures Ltd. (Trustee

of) (supra), where Donald J.A. stated -

(i) a judge's impartiality is presumed;

(ii) a party arguing for disqualification must

establish that the circumstances justify a

finding that the judge must be disqualified;

(iii) the criterion of disqualification is the

reasonable apprehension of bias;

(iv) the question is what would an informed,

reasonable and right-minded person, viewing

the matter realistically and practically, and

having thought the matter through, conclude;

(iv) the test for disqualification is not satisfied

unless it is proved that the informed,

reasonable and right-minded person would

think that it is more likely than not that the

judge, whether consciously or unconsciously,

would not decide fairly;

(v) the test requires demonstration of serious

grounds on which to base the apprehension;

(vi) each case must be examined contextually

and the inquiry is fact-specific (at para 7).

117 143. Cases from Australia also support the proposition that a

final judgment cannot ordinarily be reopened, and that such

steps can be taken only in exceptional circumstances.

144. In State Rail Authority of New South Wales v.

Codelfa Constructions Propriety Limited (1982) 150 CLR

29, the High Court of Australia observed:

"... it is a power to be exercised with great caution.

There may be little difficulty in a case where the

orders have not been perfected and some mistake

or misprision is disclosed. But in other cases it will

be a case of weighing what would otherwise be

irremediable injustice against the public interest in

maintaining the finality of litigation. The

circumstances that will justify a rehearing must be

quite exceptional. ..."

145. In Bailey v. Marinoff (1971) 125 CLR 529, Judge Gibbs

of the High Court of Australia observed in a dissenting

opinion:

"It is a well-settled rule that once an order of a

court has been passed and entered or otherwise

perfected in a form which correctly expresses the

intention with which it was made the court has no

jurisdiction to alter it. .. ....The rule tests on the

obvious principle that it is desirable that there be

an end to litigation and on the view that it would be

mischievous if there were jurisdiction to rehear a

matter decided after a full hearing. However, the

118

rule is not inflexible and there are a number of

exceptions to it in addition to those that depend on

statutory provisions such as the slip rule found in

most rules of court. Indeed, as the way in which I

have already stated the rule implies, the court has

the power to vary an order so as to carry out its

own meaning or to make plain language which is

doubtful, and that power does not depend on rules

of court, but is inherent in the court...."

And, further:

"The authorities to which I have referred leave

no doubt that a superior court has an inherent

power to vary its own orders in certain cases. The

limits of the power remain undefined, although the

remarks of Lord Evershed already cited suggest

that it is a power that a court may exercise "if, in its

view, the purposes of justice require that it should

do so".

146. In DJL v. Central Authority (2000) 170 ALR 659, the

High Court of Australia observed:

"...It is now recognized both in Australia and

England that orders made by ultimate appellate

courts may be reopened by such courts in

exceptional circumstances to repair accidents and

oversights which would otherwise occasion a

serious injustice. In my view, this can be done

although the order in question has been perfected.

The reopening may be ordered after due account is

taken of the reasons that support the principle of

finality of litigation. The party seeking reopening

bears a heavy burden to demonstrate that the

119

exceptional course is required "without fault on his

part. ..."

147. Lastly, in Lexcray Pty. Ltd. v. Northern Territory of

Australia 2003 NTCA 11, the Court appeals of the Supreme

Court of the Northern Territory expressly stated:

"...As a final court of appeal the High Court of

Australia has inherent jurisdiction to vacate its

orders in cases where there would otherwise be an

irremediable injustice...."

148. American courts also follows a similar pattern. In

United States of America v. Ohio Power Company 353 US

98 (1957), the U.S. Supreme Court vacated its earlier order

denying a timely petition for rehearing, on the ground that

"the interest in finality of litigation must yield where interests

of justice would make unfair, strict application of Supreme

Court's Rules.

149. In Raymond G. Cahill v. The New York, New Haven

and Hartford Railroad Company 351 US 183, the Supreme

Court observed:

"...There are strong arguments for allowing a

second petition for rehearing where a rigid

120

application of this rule would cause manifest

injustice."

FIJI

150. The Supreme Court of Fiji Islands incorporating

Australian and British case law summarized the law

applicable to review of its judgments. It has been held that the

Supreme Court can review its judgments pronounced or

orders made by it. The power of the appellate courts to re-

open and review their orders is to be exercised with great

caution.

151. The cases establish that the power of appellate courts to

re-open and review their orders is to be exercised with great

caution. The power, and the occasions for its exercise were

considered in In Re Transferred Civil Servants (Ireland)

Compensation (1929) AC 242, 248-52; and State Rail

Authority NSW v Codelfa Construction Pty Ltd (1982) HCA

51 : (1982) 150 CLR 29, 38-9, 45-6, where earlier Privy

Council cases are referred to. The principles were summarised

121

in Smith v NSW Bar Association (1992) 176 CLR 252, 265

where the High Court of Australia said:

"The power is discretionary and, although it exists

up until the entry of judgment, it is one that is

exercised having regard to the public interest in

maintaining the finality of litigation. Thus, if

reasons for judgment have been given, the power is

only exercised if there is some matter calling for

review ... these considerations may tend against the

re-opening of a case, but they are not matters

which bear on the nature or the review ... once the

case is re-opened ... the power to review a judgment

... where the order has not been entered will not

ordinarily be exercised to permit a general re-

opening ... But ... once a matter has been re-

opened, the nature and extent of the review must

depend on the error or omission which has led to

that step being taken."

152. The principles were further considered in Autodesk Inc

v Dyason (No 2) (1993) HCA 6 : (1993) 176 CLR 300, 303

where Mason CJ said:

"What must emerge, in order to enliven the exercise

of the jurisdiction, is that the Court has apparently

proceeded according to some misapprehension of

the facts or the relevant law and this ... cannot be

attributed solely to the neglect of the party seeking

the rehearing. The purpose of the jurisdiction is not

to provide a backdoor method by which

unsuccessful litigants can seek to reargue their

cases."

122

153. The ratio of these judgments is that a court of final

appeal has power in truly exceptional circumstances to recall

its order even after they have been entered in order to avoid

irremediable injustice.

154. Reviewing of various cases of different jurisdictions lead

to irresistible conclusion that though the judgments of the

apex court can also be reviewed or recalled but it must be

done in extremely exceptional circumstances where there is

gross violation of principles of natural justice.

155. In a case where the aggrieved party filing a review or

curative petition was not a party to the lis but the

judgment adversely affected his interest or he was party to

the lis was not served with notice of the proceedings and the

matter proceeded as if he had notice. This court in State of

M.P. v. Sugar Singh & Others on 9th March, 2010 passed the

following order in a curative petition :

"Though there were eight accused persons, only

four accused were arrayed as party respondents in

the said appeals namely, Sughar, Laxman, Onkar

and Ramesh. Other accused, namely,Bhoja,

Raghubir, Puran and Balbir were not impleaded as

123

respondents in these Criminal Appeals and

consequently notices were not issued to them. This

Court, by judgment on 7th November, 2008 in the

aforesaid Criminal Appeals, reversed the acquittal

of the accused by the High Court and found them

guilty of the offences punishable under Section 304

Part-II read with Section 149 of the I.P.C. and

sentenced them to undergo imprisonment for a

period of six years. The conviction of the accused

for the offences punishable under Section 148 as

also Section 326 read with the Section 149 of the

I.P.C. and the sentence imposed by the Sessions

Court in regard to the said offences was upheld by

this Court.

We have heard learned counsel for the

petitioners. The respondent State, though served

with a notice through standing counsel, has not

chosen to enter appearance. These Curative

Petitions have been filed by accused No.2

(Raghubir) and by accused no.4 and 5 (Sughar

Singh and Laxman) on the ground that acquittal of

Bhoja, Raghubir, Puran and Balbir have been

reversed without affording an opportunity of being

heard. We see that there is serious violation of

principles of natural justice as the acquittal of all

the accused has been set aside even though only

four of them were made respondents before this

Court and the others were not heard. We are,

therefore, constrained to recall the 3 judgment

passed by this Court in Criminal Appeal Nos.1362-

1363 of 2004 on 7th November, 2008.

Consequently, the accused Sughar Singh,

Laxman, Onkar and Ramesh, if they are in custody,

are directed to be released forthwith.

In the result, these Curative Petitions are

disposed of and the Criminal Appeal Nos.1362-

124

1363 of 2004 are restored to the file for being heard

afresh with a direction that the other four accused

(Bhoja, Raghubir, Puran and Balbir) be impleaded

as respondents and all accused be served with

fresh notices."

156. In the instant case, the applicants had adequate

opportunity and were heard by the court at length on number

of occasions and only thereafter the writ petition was disposed

of. The applicants aggrieved by the said judgment filed a

review petition. This review petition was also dismissed. In

the instant case even the curative petition has also been

dismissed. The applicants now want to reopen this case by

filing these interlocutory applications.

157. The applicants certainly cannot be provided an entry by

back door method and permit the unsuccessful litigant to re-

agitate and reargue their cases. The applicants have filed

these applications merely to avoid compliance of the order of

the court. The applicants have been successful in their

endeavour and have not permitted the judgment delivered on

3.2.1996 to acquire finality till date. It is strange that other

125

respondents did not implement the final order of this court

without there being any order or direction of this court. These

applications being devoid of any merit deserve to be dismissed

with heavy costs.

The other important principles which need elucidation are

regarding unjust enrichment, restitution and compound

inte rests.

158. Dr. Arun Mohan, Senior Advocate of this court in a

recently published book with the title "Justice, Courts and

Delays" analytically, lucidly while taking in view pragmatic

realities elucidated concepts of unjust enrichment, restitution

and compound interest.

159. By the judgment dated 13.02.1996 this court fixed the

liability but did not fix any specific amount, which was

ordered to be ascertained. It was on the lines of a preliminary

decree in a suit which determines the liability, but leaves the

precise amount to be ascertained in further proceedings and

upon the process of ascertainment being completed, a final

decree for payment of the precise amount is passed.

126 160. By judgment dated 4.11.1997 this Court, accepting the

ascertainment, fixed the amount. The order reads as under:

"... ... ...remedial measures taken on the basis

of the NEERI report shall be treated as final.

We accept the proposal submitted by the

Government of India for the purpose of taking

remedial measures by appointing National

Productivity Council as the Project Management

Consultant. In our opinion the Ministry of

Environment and Forests, Government of India has

rightly made a demand for Rs.37.385 crores."

161. The exact liability was quantified which the applicant-

M/s Hindustan Agro Chemical Ltd. was under an obligation to

pay. The liability to pay arose on that particular date i.e.

4.11.1997. In other words, this was in the lines of a final

decree pursuant to a preliminary decree.

162. On that judgment being passed, the position of the

applicant in Application No.44 was that of `judgment-debtor'

and the applicant became liable to pay forthwith.

163. Admittedly, the amount has not been paid. Instead, that

payment they sought to postpone by raising various

challenges in this court and in the meantime `utilised' that

127

money, i.e., benefitted. As a consequence, the non-applicants

(respondents-states herein) were `deprived' of the use of that

money for taking remedial measures. The challenge has now

- nearly 14 years later - been finally decided against them.

164. The appellant they must pay the amount is one thing but

should they pay only that amount or something more? If the

period were a few days or months it would have been different

but here it is almost 14 years have been lapsed and amount

has not been paid. The questions therefore are really three:

1. Can a party who does not comply with the court

order be permitted to retain the benefits of his own

wrong of non-compliance?

2.Whether the successful party be not compensated

by way of restitution for deprivation of its legitimate

dues for more than fourteen years? and

3.Whether the court should not remove all incentives

for not complying with the judgment of the court?

Answering these questions will necessitate analysis of

certain

128

concepts.

165. It is settled principle of law that no one can take

advantage of his own wrong.

166. Unless courts disgorge all benefits that a party availed by

obstruction or delays or non-compliance, there will always be

incentive for non compliance, and parties are ingenious

enough to come up with all kinds of pleas and other tactics to

achieve their end because they know that in the end the

benefit will remain with them.

167. Whatever benefits a person has had or could have had

by not complying with the judgment must being disgorged and

paid to the judgment creditor and not, allowed to be retained

by the judgment-debtor. This is the bounden duty and

obligation of the court.

168. In fact, it has to be looked from the position of the

creditor. Unless the deprivation by reason of delay is fully

restituted, the creditor as a beneficiary remains a loser to the

extent of the un-restituted amount.

129 UNJUST ENRICHMENT

169. Unjust enrichment has been defined as: "A benefit

obtained from another, not intended as a gift and not legally

justifiable, for which the beneficiary must make restitution or

recompense." See Black's Law Dictionary, Eighth Edition

(Bryan A. Garner) at page 1573.

170. A claim for unjust enrichment arises where there has

been an "unjust retention of a benefit to the loss of another, or

the retention of money or property of another against the

fundamental principles of justice or equity and good

conscience."

171. `Unjust enrichment' has been defined by the court as the

unjust retention of a benefit to the loss of another, or the

retention of money or property of another against the

fundamental principles of justice or equity and good

conscience. A person is enriched if he has received a benefit,

and he is unjustly enriched if retention of the benefit would be

unjust. Unjust enrichment of a person occurs when he has

130

and retains money or benefits which in justice and equity

belong to another.

172. Unjust enrichment is "the unjust retention of a benefit to

the loss of another, or the retention of money or property of

another against the fundamental principles of justice or equity

and good conscience." A defendant may be liable "even when

the defendant retaining the benefit is not a wrongdoer" and

"even though he may have received [it] honestly in the first

instance." (Schock v. Nash, 732 A.2d 217, 232-33 (Delaware.

1999). USA)

173. Unjust enrichment occurs when the defendant

wrongfully secures a benefit or passively receives a benefit

which would be unconscionable to retain.

174. In the leading case of Fibrosa v. Fairbairn, [1942] 2 All

ER 122, Lord Wright stated the principle thus :

"....(A)ny civilized system of law is bound to

provide remedies for cases of what has been

called unjust enrichment or unjust benefit,

that is, to prevent a man from retaining the

money of, or some benefit derived from another

which it is against conscience that he should

keep. Such remedies in English law are

131

generically different from remedies in contract

or in tort, and are now recognized to fall within

a third category of the common law which has

been called quasi-contract or restitution."

175. Lord Denning also stated in Nelson v. Larholt, [1947]

2 All ER 751 as under:-

"It is no longer appropriate, however, to

draw a distinction between law and equity.

Principles have now to be stated in the light

of their combined effect. Nor is it necessary

to canvass the niceties of the old forms of

action. Remedies now depend on the

substance of the right, not on whether they

can be fitted into a particular frame-work.

The right here is not peculiar to equity or

contract or tort, but falls naturally within

the important category of cases where the

court orders restitution if the justice of the

case so requires."

176. The above principle has been accepted in India. This

Court in several cases has applied the doctrine of unjust

enrichment.

RESTITUTION AND COMPOUND INTEREST

177. American Jurisprudence 2d. Volume 66 Am Jur 2d

defined Restitution as follows:

132 "The word `restitution' was used in the earlier

common law to denote the return or

restoration of a specific thing or condition.

In modern legal usage, its meaning has

frequently been extended to include not only

the restoration or giving back of something to

its rightful owner, but also compensation,

reimbursement, indemnification, or

reparation for benefits derived from, or for

loss or injury caused to, another. As a

general principle, the obligation to do justice

rests upon all persons, natural and artificial;

if one obtains the money or property of

others without authority, the law,

independently of express contract, will

compel restitution or compensation."

178. While Section (') 3 (Unjust Enrichment) reads as under:

"The phrase "unjust enrichment" is used in

law to characterize the result or effect of a

failure to make restitution of, or for, property

or benefits received under such

circumstances as to give rise to a legal or

equitable obligation to account therefor. It is

a general principle, underlying various legal

doctrines and remedies, that one person

should not be permitted unjustly to enrich

himself at the expense of another, but should

be required to make restitution of or for

property or benefits received, retained, or

appropriated, where it is just and equitable

that such restitution be made, and where

such action involves no violation or

frustration of law or opposition to public

policy, either directly or indirectly."

133

179. Unjust enrichment is basic to the subject of

restitution, and is indeed approached as a fundamental

principle thereof. They are usually linked together, and

restitution is frequently based upon the theory of unjust

enrichment. However, although unjust enrichment is often

referred to or regarded as a ground for restitution, it is

perhaps more accurate to regard it as a prerequisite, for

usually there can be no restitution without unjust

enrichment. It is defined as the unjust retention of a benefit

to the loss of another or the retention of money or property

of another against the fundamental principles of justice or

equity and good conscience. A person is enriched if he has

received a benefit, and he is unjustly enriched if retention of

the benefit would be unjust. Unjust enrichment of a person

occurs when he has and retains money or benefits which in

justice and equity belong to another.

180. While the term `restitution' was considered by the

Supreme Court in South-Eastern Coalfields 2003 (8) SCC

648 and other cases excerpted later, the term `unjust

134

enrichment' came to be considered in Sahakari Khand

Udyog Mandal Ltd vs Commissioner of Central Excise &

Customs ((2005) 3 SCC 738).

181. This Court said:

"`Unjust enrichment' means retention of a

benefit by a person that is unjust or

inequitable. `Unjust enrichment' occurs

when a person retains money or benefits

which in justice, equity and good

conscience, belong to someone else."

182. The terms `unjust enrichment' and `restitution' are like

the two shades of green - one leaning towards yellow and the

other towards blue. With restitution, so long as the

deprivation of the other has not been fully compensated for,

injustice to that extent remains. Which label is appropriate

under which circumstances would depend on the facts of the

particular case before the court. The courts have wide powers

to grant restitution, and more so where it relates to misuse or

non-compliance with court orders.

183. We may add that restitution and unjust enrichment,

along with an overlap, have to be viewed with reference to the

135

two stages, i.e., pre-suit and post-suit. In the former case, it

becomes a substantive law (or common law) right that the

court will consider; but in the latter case, when the parties are

before the court and any act/omission, or simply passage of

time, results in deprivation of one, or unjust enrichment of

the other, the jurisdiction of the court to levelise and do

justice is independent and must be readily wielded, otherwise

it will be allowing the Court's own process, along with time

delay, to do injustice.

184 . For this second stage (post-suit), the need for

restitution in relation to court proceedings, gives full

jurisdiction to the court, to pass appropriate orders that

levelise. Only the court has to levelise and not go further into

the realm of penalty which will be a separate area for

consideration altogether.

185. This view of law as propounded by the author

Graham Virgo in his celebrated book on "The Principle of Law

of Restitution" has been accepted by a later decision of the

House of Lords (now the UK Supreme Court) reported as

136

Sempra Metals Ltd (formerly Metallgesellschaft Limited)

v Her Majesty's Commissioners of Inland Revenue and

Another [2007] UKHL 34 = [2007] 3 WLR 354 = [2008] 1 AC

561 = [2007] All ER (D) 294.

186. In similar strain, across the Altantic Ocean, a nine

judge Bench of the Supreme Court of Canada in Bank of

America Canada vs Mutual Trust Co. [2002] 2 SCR 601 =

2002 SCC 43 (both Canadian Reports) took the view :

"There seems in principle no reason why

compound interest should not be awarded.

Had prompt recompense been made at the

date of the wrong the plaintiff should have

had a capital sum to invest; the plaintiff

would have received interest on it at regular

intervals and would have invested those sums

also. By the same token the defendant will

have had the benefit of compound interest.

Although not historically available, compound

interest is well suited to compensate a

plaintiff for the interval between when

damages initially arise and when they are

finally paid."

187. This view seems to be correct and in consonance with

the principles of equity and justice.

137 188. Another way of looking at it is suppose the judgment-

debtor had borrowed the money from the nationalised bank as

a clean loan and paid the money into this court. What would

be the bank's demand.

189. In other words, if payment of an amount equivalent of

what the ledger account in the nationalised bank on a clean

load would have shown as a debit balance today is not paid

and something less than that is paid, that differential or

shortfall is what there has been : (1) failure to restitute; (2)

unfair gain by the non-complier; and (3) provided the

incentive to obstruct or delay payment.

190. Unless this differential is paid, justice has not been done

to the creditor. It only encourages non-compliance and

litigation. Even if no benefit had been retained or availed even

then, to do justice, the debtor must pay the money. In other

words, it is this is not only disgorging all the benefits but

making the creditor whole i.e. ordering restitution in full and

not dependent on what he might have made or benefitted is

what justice requires.

138 LEGAL POSITION UNDER THE CODE OF CIVIL

PROCEDURE

191. One reason the law has not developed on this is because

of the wording of Section 34 of the Code of Civil Procedure

which still proceeds on the basis of simple interest. In fact, it

is this difference which prompts much of our commercial

litigation because the debtor feels - calculates and assesses -

that to cause litigation and then to contest with obstructions

and delays will be beneficial because the court is empowered

to allow only simple interest. A case for law reform on this is

a separate issue.

192. In the point under consideration, which does not arise

from a suit for recovery under the Code of Civil Procedure, the

inherent powers in the court and the principles of justice and

equity are each sufficient to enable an order directing

payment of compound interest. The power to order compound

interest as part of restitution cannot be disputed, otherwise

there can never be restitution.

139 PRECEDENTS ON EXERCISE OF POWERS BY THE

COURT TOMAKE THE BENEFICIARY WHOLE -

RESTITUTION

193. This court in Grindlays Bank Limited vs Income Tax

Officer, Calcutta (1980) 2 SCC 191 observed as under :-

"...When passing such orders the High Court

draws on its inherent power to make all

such orders as are necessary for doing

complete justice between the parties. The

interests of justice require that any

undeserved or unfair advantage gained by a

party invoking the jurisdiction of the court,

by the mere circumstance that it has

initiated a proceeding in the court, must be

neutralised. The simple fact of the

institution of litigation by itself should not

be permitted to confer an advantage on the

party responsible for it. ..."

194. In Ram Krishna Verma and Others vs State of U.P.

and Others (1992) 2 SCC 620 this court observed as under :-

"The 50 operators including the appellants/

private operators have been running their stage

carriages by blatant abuse of the process of the

court by delaying the hearing as directed in

Jeevan Nath Bahl's case and the High Court

earlier thereto. As a fact, on the expiry of the

initial period of grant after Sept. 29, 1959 they

lost the right to obtain renewal or to ply their

vehicles, as this Court declared the scheme to

be operative. However, by sheer abuse of the

process of law they are continuing to ply their

vehicles pending hearing of the objections. This

Court in Grindlays Bank Ltd. vs Income-tax

140

Officer - [1990] 2 SCC 191 held that the High

Court while exercising its power under Article

226 the interest of justice requires that any

undeserved or unfair advantage gained by a

party invoking the jurisdiction of the court must

be neutralised. It was further held that the

institution of the litigation by it should not be

permitted to confer an unfair advantage on the

party responsible for it. In the light of that law

and in view of the power under Article 142(1) of

the Constitution this Court, while exercising its

jurisdiction would do complete justice and

neutralise the unfair advantage gained by the

50 operators including the appellants in

dragging the litigation to run the stage carriages

on the approved route or area or portion thereof

and forfeited their right to hearing of the

objections filed by them to the draft scheme

dated Feb. 26, 1959. ..."

195. This court in Kavita Trehan vs Balsara Hygiene

Products (1994) 5 SCC 380 observed as under :-

"The jurisdiction to make restitution is inherent

in every court and will be exercised whenever

the justice of the case demands. It will be

exercised under inherent powers where the case

did not strictly fall within the ambit of Section

144. Section 144 opens with the words "Where

and in so far as a decree or an order is varied or

reversed in any appeal, revision or other

proceeding or is set aside or modified in any suit

instituted for the purpose, ...". The instant case

may not strictly fall within the terms of Section

144; but the aggrieved party in such a case can

appeal to the larger and general powers of

restitution inherent in every court."

141

196. This court in Marshall Sons & Co. (I) Ltd. v. Sahi

Oretrans (P) Ltd. and Another (1999) 2 SCC 325 observed

as under :-

"From the narration of the facts, though it

appears to us, prima facie, that a decree in favour

of the appellant is not being executed for some

reason or the other, we do not think it proper at

this stage to direct the respondent to deliver the

possession to the appellant since the suit filed by

the respondent is still pending. It is true that

proceedings are dragged for a long time on one

count or the other and on occasion become highly

technical accompanied by unending prolixity, at

every stage providing a legal trap to the unwary.

Because of the delay unscrupulous parties to the

proceedings take undue advantage and person

who is in wrongful possession draws delight in

delay in disposal of the cases by taking undue

advantage of procedural complications. It is also

known fact that after obtaining a decree for

possession of immovable property, its execution

takes long time. In such a situation for

protecting the interest of judgment creditor, it is

necessary to pass appropriate order so that

reasonable mesne profit which may be equivalent

to the market rent is paid by a person who is

holding over the property. In appropriate cases,

Court may appoint Receiver and direct the person

who is holding over the property to act as an

agent of the Receiver with a direction to deposit

the royalty amount fixed by the Receiver or pass

such other order which may meet the interest of

justice. This may prevent further injury to the

plaintiff in whose favour decree is passed and to

142

protect the property including further alienation."

197. In Padmawati vs Harijan Sewak Sangh - CM (Main)

No.449 of 2002 decided by the Delhi high Court on 6.11.2008, the

court held as under:-

"The case at hand shows that frivolous defences

and frivolous litigation is a calculated venture

involving no risks situation. You have only to

engage professionals to prolong the litigation so

as to deprive the rights of a person and enjoy

the fruits of illegalities. I consider that in such

cases where Court finds that using the Courts

as a tool, a litigant has perpetuated illegalities

or has perpetuated an illegal possession, the

Court must impose costs on such litigants

which should be equal to the benefits derived by

the litigant and harm and deprivation suffered

by the rightful person so as to check the

frivolous litigation and prevent the people from

reaping a rich harvest of illegal acts through the

Court. One of the aims of every judicial system

has to be to discourage unjust enrichment

using Courts as a tool. The costs imposed by

the Courts must in all cases should be the real

costs equal to deprivation suffered by the

rightful person."

198. We approve the findings of the High Court of Delhi in

the aforementioned case.

199. The Court also stated: "Before parting with this case,

143

we consider it necessary to observe that one of the main

reasons for over-flowing of court dockets is the frivolous

litigation in which the Courts are engaged by the litigants

and which is dragged as long as possible. Even if these

litigants ultimately loose the lis, they become the real victors

and have the last laugh. This class of people who

perpetuate illegal acts by obtaining stays and injunctions

from the Courts must be made to pay the sufferer not only

the entire illegal gains made by them as costs to the person

deprived of his right and also must be burdened with

exemplary costs. Faith of people in judiciary can only be

sustained if the persons on the right side of the law do not

feel that even if they keep fighting for justice in the Court

and ultimately win, they would turn out to be a fool since

winning a case after 20 or 30 years would make wrongdoer

as real gainer, who had reaped the benefits for all those

years. Thus, it becomes the duty of the Courts to see that

such wrongdoers are discouraged at every step and even if

they succeed in prolonging the litigation due to their money

power, ultimately they must suffer the costs of all these

144

years long litigation. Despite settled legal positions, the

obvious wrong doers, use one after another tier of judicial

review mechanism as a gamble, knowing fully well that dice

is always loaded in their favour, since even if they lose, the

time gained is the real gain. This situation must be

redeemed by the Courts."

200. Against this judgment, Special Leave to Appeal (Civil)

No 29197/2008 was preferred to the this Court. The Court

passed the following order:

"We have heard learned counsel appearing for

the parties. We find no ground to interfere with

the well-considered judgment passed by the

High Court. The Special Leave Petition is,

accordingly, dismissed."

Interest on interest

201. This court in Alok Shanker Pandey vs Union of India

& Others (2007) 3 SCC 545 observed as under:-

"We are of the opinion that there is no hard and

fast rule about how much interest should be

granted and it all depends on the facts and

circumstances of the each case. We are of the

145

opinion that the grant of interest of 12% per

annum is appropriate in the facts of this

particular case. However, we are also of the

opinion that since interest was not granted to

the appellant along with the principal amount

the respondent should then in addition to the

interest at the rate of 12% per annum also pay

to appellant interest at the same rate on the

aforesaid interest from the date of payment of

instalments by the appellant to the respondent

till the date of refund on this amount, and the

entire amount mentioned above must be paid to

the appellant within two months from the date

of this judgment.

It

may be mentioned that there is misconception

about interest. Interest is not a penalty or

punishment at all, but it is the normal accretion

on capital."

Compound Interest

202. To do complete justice, prevent wrongs, remove incentive

for wrongdoing or delay, and to implement in practical terms

the concepts of Time Value of Money, restitution and unjust

enrichment noted above - or to simply levelise - a convenient

approach is calculating interest. But here interest has to be

calculated on compound basis - and not simple - for the latter

leaves much uncalled for benefits in the hands of the

wrongdoer.

146 203. Further, a related concept of inflation is also to be kept

in mind and the concept of compound interest takes into

account, by reason of prevailing rates, both these factors, i.e.,

use of the money and the inflationary trends, as the market

forces and predictions work out.

204. Some of our statute law provide only for simple interest

and not compound interest. In those situations, the courts

are helpless and it is a matter of law reform which the Law

Commission must take note and more so, because the serious

effect it has on administration of justice. However, the power

of the court to order compound interest by way of restitution

is not fettered in any way. We request the Law Commission to

consider and recommend necessary amendments in relevant

laws.

205. `Compound interest' is defined in Black's Law

Dictionary, Eighth Edition (Bryan A. Garner) at page 830 as

`Interest paid on both the principal and the previously

accumulated interest.' It is a method of arriving at a figure

147

which nears the time value of money submitted under Head-2

earlier.

206. As noted, compound interest is a norm for all

commercial transactions.

207. Graham Virgo in his important book on `The Principles

of the Law of Restitution" at pp26-27 has stated and relevant

portion is reproduced as under:

"In Westdeutsche Landesbank Girozentrale v

London Borough Council 1996 A.C. 669 the

issue for the House of Lords was whether

compound interest was available in respect of all

restitutionary claims. By a majority it was

decided that, since the jurisdiction to award

compound interest was equitable, compound

interest could only be awarded in respect of

equitable restitutionary claims. Consequently,

where the claim was for money had and received

the claimant could only obtain simple interest

because this was a common law claim. The

majority supported their conclusion by reference

to a number of different arguments. In

particular, they asserted that, since Parliament

had decided in 1981 that simple interest should

be awarded on claims at common law, it was not

for the House of Lords to award compound

interest in respect of such claims. But the

Supreme Court Act 1981 does not specifically

exclude the award of compound interest in

respect of common law claims. Rather, it

recognizes that the court can award simple

interest for such claims. The equitable

148

jurisdiction to award compound interest is still

available in appropriate cases.

In two very strong dissenting judgments, Lords

Goff and Woolf rejected the argument of the

majority. They asserted that, since the policy of

the law of restitution was to remove benefits from

the defendant, compound interest should be

available in respect of all restitutionary claims,

regardless of whether they arise at law or in

equity. This argument can be illustrated by the

following example. In the straightforward case

where the claimant pays money to the defendant

by mistake and defendant is liable to repay that

money, the liability arises from the moment the

money is received by the defendant, who has the

use of it and so should pay the claimant for the

value of that benefit. This was accepted by all

the judges in the case. The difficulty relates to

the valuation of this benefit. If the defendant

was to borrow an equivalent amount of money

from a financial institution, he or she would be

liable to pay compound interest to that

institution. It follows that the defendant has

saved that amount of money and so this is the

value of the benefit which the defendant should

restore to the claimant, in addition to the value

of the money which the defendant received in the

first place. If it could be shown that, had the

defendant borrowed the equivalent amount of

money, the institution would only have paid

simple interest, it would be appropriate for the

interest awarded to the claimant to be simple

rather than compound. Usually, however, the

interest awarded in commercial transactions will

be compound interest."

149

208. In Marshall sons and company (I) Limited v. Sahi

Oretrans (P) Limited and another (1999) 2 SCC 325 this

court in para 4 of the judgment observed as under:

"...It is true that proceedings are dragged for a

long time on one count or the other and, on

occasion, become highly technical accompanied by

unending prolixity at every stage providing a legal

trap to the unwary. Because of the delay,

unscrupulous parties to the proceedings take

undue advantage and a person who is in wrongful

possession draws delight in delay in disposal of the

cases by taking undue advantage of procedural

complications. It is also a known fact that after

obtaining a decree for possession of immovable

property, its execution takes a long time. In such a

situation, for protecting the interest of the

judgment-creditor, it is necessary to pass

appropriate orders so that reasonable mesne profit

which may be equivalent to the market rent is paid

by a person who is holding over the property. In

appropriate cases, the court may appoint a Receiver

and direct the person who is holding over the

property to act as an agent of the Receiver with a

direction to deposit the royalty amount fixed by the

Receiver or pass such other order which may meet

the interest of justice. This may prevent further

injury to the plaintiff in whose favour the decree is

passed and to protect the property including

further alienation. ..."

209. In Ouseph Mathai and others v. M. Abdul Khadir

(2002) 1 SCC 319 this court reiterated the legal position that

150

the stay granted by the court does not confer a right upon a

party and it is granted always subject to the final result of the

matter in the court and at the risk and costs of the party

obtaining the stay. After the dismissal, of the lis, the party

concerned is relegated to the position which existed prior to

the filing of the petition in the court which had granted the

stay. Grant of stay does not automatically amount to

extension of a statutory protection.

210. This court in South Eastern Coalfields Limited v.

State of M.P. and others (2003) 8 SCC 648 on examining

the principle of restitution in para 26 of the judgment

observed as under:

"In our opinion, the principle of restitution takes

care of this submission. The word "restitution" in

its etymological sense means restoring to a party on

the modification, variation or reversal of a decree or

order, what has been lost to him in execution of

decree or order of the court or in direct

consequence of a decree or order (see Zafar Khan

v. Board of Revenue, U.P - (1984) Supp SCC 505)

In law, the term "restitution" is used in three

senses: (i) return or restoration of some specific

thing to its rightful owner or status; (ii)

compensation for benefits derived from a wrong

done to another; and (iii) compensation or

reparation for the loss caused to another." 151

211. The court in para 28 of the aforesaid judgment very

carefully mentioned that the litigation should not turn into a

fruitful industry and observed as under:

"... ... ...Litigation may turn into a fruitful industry.

Though litigation is not gambling yet there is an

element of chance in every litigation. Unscrupulous