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Understanding The Public Liability Insurance Act, 1991

Mudit Maheshwari
25 May 2020 4:56 AM GMT
Understanding The Public Liability Insurance Act, 1991
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The Public Liability Insurance Act, 1991 ("Act") was enacted after the outbreak of Bhopal Gas Leak, to provide immediate relief to persons affected by an accident occurring while handling any hazardous substance. The Act came into force from 01.04.1991.

Section 3 of the Act incorporates the principle of "Absolute Liability" or payment of compensation on "No-Fault Basis". The Owner is liable to pay compensation to the Claimant for Death, Damage, or Injury. The amount of compensation required to be paid by the Owner is specified in Schedule of the Act. The maximum amount of compensation in the case of Fatal Accident is Rs. 25,000/- which is in addition to the reimbursement of medical expenses up to Rs. 12,500/-.

For claiming compensation prescribed in the Schedule, the Claimant would be required to make an application to the Collector, having jurisdiction over the area in which the accident had taken place, within 5 years from the date of incident/accident.[1] The Claimant is not required to plead and establish that the death, injury or damage was on account of wrongful act, negligence or default of any person.[2] Upon receipt of the Application, the Collector would be required to conduct an inquiry and thereafter pass an Award after providing an opportunity of hearing to the Owner.[3]

The Claimant's right to claim relief under this Act is in addition to any other right to claim compensation under any other law for the time being in force. However, in case, the Owner is also directed to pay compensation under any other law, the Owner would be entitled to adjust the compensation already paid under this Act.[4]

The compensation under this Act can be claimed only when the Owner is dealing with a Hazardous Substance. Under the Act, "hazardous substance" means any substance or preparation which is defined as hazardous substance under the Environment (Protection) Act, 1986 (29 of 1986), and exceeding such quantity as may be specified, by notification, by the Central Government"[5]. A bare perusal of this definition would make it abundantly clear that only if the substance or preparation is defined as hazardous substance under the Environment Protection Act, 1986, then only it will be considered as Hazardous Substance for this Act.

But what happens when an accident has taken place and there was no notification w.r.t. to the substance of the Industry being declared as Hazardous Substance by the Central Government. Can the Collector deny granting immediate relief under this Act in absence of the notification by the Central Government?

The High Court of M.P.[6] while dealing with the question of whether Electricity is a "Hazardous Substance" or not in absence of any notification by the Central Government. The Court conjointly read the definition of Hazardous Substance under this Act and the Environment Protection Act and concluded that a thing/material/substance, which is known as intensely hazardous, then it has to be treated as a hazardous substance to effectuate the purposes for the enactment of the Public Liability Insurance Act and therefore, the issuance of notification by the Central Government is not sine-qua-non to make a substance hazardous.

The High Court further observed that some articles may not be hazardous in small quantities and these articles have to be notified as Hazardous over a certain quantity and for this purpose notification is required to be issued by the Central Government. To come to this conclusion the Court relied upon the judgment delivered by the Allahabad High Court[7] wherein it was observed that the Notification can only narrow down the scope of Hazardous Substance defined in the Environment Protection Act, and if the substances are not specified in the notification they will be regarded as Hazardous Substance if they come within the definition of Hazardous Substance under the Environment Protection Act. The Court concluded that Electricity is a Hazardous substance irrespective of the quantity.

Owner under the Act is defined as "a person who owns, or has control over handling, any hazardous substance at the time of accident and includes,— (i) in the case of firm, any of its partners; (ii) in the case of an association, any of its members; and (iii) in the case of a company, any of its directors, managers, secretaries or other officers who is directly in charge of, and is responsible to, the company for the conduct of the business of the company;".[8] The Act also defined the term handling which "in relation to any hazardous substance, means the manufacture, processing, treatment, package, storage, transportation by vehicle, use, collection, destruction, conversion, offering for sale, transfer or the like of such hazardous substance"[9]. Thus, the "owner" not only means a person who owns but also who has control over handling any hazardous substance at the time of the accident.[10]

The Owner is required to take out insurance policies against liability to give relief under Section 3 of the Act[11] and comply with the directions issued by the Central Government w.r.t. handling of Hazardous Substance.[12] Failing which, the owner may be imprisonment for a term not less than one year and six months but which may extend to six years, or with a fine which shall not be less than one lakh rupees, or both.[13]

Thus, once a claimant can establish that the substance or material is hazardous as per the definition of Hazardous Substance under the Environment Protection Act, then the Claimant would be entitled to payment of compensation under this Act from the person was owning or was having control over the handling of the Hazardous Substance at the time of the Accident.

Views Are Personal Only.

[1] Section 6

[2] Section 3(2)

[3] Section 7

[4] Section 8

[5] Section 2(d)

[6] M.P. Electricity Board v/s Collector Mandla, 2002 SCC Online MP 352: AIR 2003 MP 156

[7] U.P. State Electricity Board v. District Magistrate Dehradun, 1997 SCC OnLine All 103: AIR 1998 All 1

[8] Section 2(g)

[9] Section 2(c)

[10] Meena Jain v. State of M.P. (W.P. No. 25994/2018 – High Court of M.P., Bench at Indore)

[11] Section 4

[12] Section 12

[13] Section 14

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