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PETITIONER: UNION CARBIDE CORPORATION ETC. ETC.

       Vs.

RESPONDENT: UNION OF INDIA ETC. ETC.

DATE OF JUDGMENT03/10/1991

BENCH: VENKATACHALLIAH, M.N. (J) BENCH: VENKATACHALLIAH, M.N. (J) MISRA, RANGNATH (CJ) SINGH, K.N. (J) AHMADI, A.M. (J) OJHA, N.D. (J)

CITATION:  1992 AIR  248            1991 SCR  Supl. (1) 251  1991 SCC  (4) 584        JT 1991 (6)     8  1991 SCALE  (2)675  CITATOR INFO :  D          1992 SC2084  (28)

ACT:     Bhopal Gas Disaster-Court assisted settlement arrived at between  Union  Carbide Corporation and  Union  of  India--5 Million U.S. Dollars deposited by Union Carbide  Corporation prior  to  settlement and lying unutilised with  Indian  Red Cross  Society--Whether the said award of 5 Million  Dollars made  as  an interim measure would stand  independently  and outside the final adjudication.

HEADNOTE:     In  the suit filed by the Union of India  against  Union Carbide Corporation (UCC) filed before the Southern District Court at New York, the presiding Judge directed the utilisa- tion  of 5 Million Dollars deposited by UCC towards  Interim Relief  Fund,  for affording relief to the  victims  of  the Bhopal Gas leak disaster through the Indian Red Cross Socie- ty. The said payment was intended to be without prejudice to the  contentions of UCC. Also it was to be credited  against the  payment  of  any final judgment or  settlement  of  the claims against UCC arising out of the Bhopal Gas leak disas- ter.  The Indian Red Cross Society sought to stipulate  with the  American  Red Cross that the Indian Red  Cross  Society should be free from any contingent obligations stemming from the  final  result of the litigation one way or  the  other. However, the terms of the order were not changed.     After the proceedings in the U.S. District Court  termi- nated upon UCC’s plea of forum non-conveniens being  upheld, Union  of India instituted a suit In the District  Court  at Bhopal.  The  claim in the suit came to be settled  In  this Court  by its orders dated 14/15th February, 1989. In  terms of  the settlement order, the said sum of 5 Million US  Dol- lars was treated as part of the settlement Fund and a direc- tion  was given to the Registrar to have the  amount  trans- ferred  to  his credit which was lying unutilised  with  the Indian Red Cross Society.     The  Indian  Red  Cross Society has  filed  the  present

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applications. It contended that the order dated 15th  Febru- ary, 1989 in so far as it treated the unutilised part of the interim relief fund and authorising the Registrar to realise it  as such, was not consistent with the terms  under  which the  relief fund was agreed to be entrusted to and  accepted by it and 382 so  the directions given in regard to the said  relief  fund required to be deleted.     On the question whether the interim relief of 5  Million U.S. Dollars was a distant award standing independently  and outside the final adjudication, dismissing the applications, this Court,     HELD:  1. The agreement between the American  Red  Cross and the Indian Red Cross Society came to be discussed before the  District  Court, New York, during the bearing  on  20th November 1985. The portions of the transcript of what  tran- spired  at the hearing indicate that far from approving  the purported  arrangement  inter-se between  the  American  Red Cross  and the Indian Red Cross Society, they show that  the terms of the order dated June 7, 1985, as to the nature  and character  of the interim relief as an "advance payment"  or "credit  to  the defence" were left undisturbed.  The  tran- script  of the hearing also reaffirms that "if there is  any recovery against Union Carbide, it is a set-off’. Also there is nothing on record to show that the terms as to the nature and  character  of the interim payment had been  altered  in terms of the inter-se arrangements pleaded by the Indian Red Cross  Society. In the circumstances, the agreement  between the  American  Red Cross and the Indian  Red  Cross  Society cannot prevail over the effect of the order dated 7th  June, 1985 of Judge Keenan. This Court’s directions in this behalf in the order dated 15th February, 1989, are not inconsistent therewith  and do not, therefore, require any  modification. [386 B-F]     2. Now that the terms of the settlement have been upheld in the review proceedings the unutilised part of the interim relief  of  5 Million U.S. Dollars will become part  of  the Bhopal gas relief fund and shall have to be administered  as such.  The Registrar of the Supreme Court shall be  entitled to call-up the funds with the Indian Red Cross Society which stood unutilised as on 15th February, 1989. [386 F-G]

JUDGMENT:     CIVIL APPELLATE JURISDICTION: Interim Application Nos.1, 2 and 3 of 1989.                 IN Civil Appeal Nos. 3187 and 3188 of 1988.      From  the  Judgment  and Order dated  4.4.1988  of  the Madhya Pradesh High Court in Civil Revision No. 26 of 1988.      Soli J. Sorabjee, Attorney General, P.P. Rao,  Rajinder Sachher,  D.K. Kapur, Mrs. Indu Goswamy, Raju  Ramachandran, Mukul  Mudgal,  S.R. Bhat, M.S. Ganesh,  V.B.  Mishra,  A.M. Khanwilkar, Ms. Madhu Khatri, p. Parameswaran, Ms. A. Subha- shini and C.S.Vaidyanathan for the appearing parties.             383 The following Order of the Court was delivered:     By these applications the Indian Red Cross Society seeks a modification of certain directions issued by this court on 15th February, 1989, in Civil Appeals Nos. 3187 and 3188  of 1988  pursuant to the settlement of the suit  instituted  by the Union of India against Union Carbide Corporation and the Union Carbide Corporation (India) Limited arising out of the

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Bhopal Gas leak disaster.     2.  The prayer of the Indian Red Cross Society in  these applications  arises in the context of the order  dated  7th June,  1985, made by John F. Keenan, Presiding Judge of  the Southern  District  Court at New York (U.S.)  directing  the utilisation  of 5 Million dollars for relief to the  victims of  the gas leak disaster through Indian Red Cross  Society. In  the said order Judge Keenan referred to the  willingness of  the Union Carbide Corporation "to pay 5 million  dollars to aid the victims of the gas plant disaster which  occurred in  December,  1984 in Bhopal, India" and  had  desired  and indicated that in the administration of this fund, which was intended to be at the disposal of the Union of India, should be  subject  to  certain reporting-requirements  as  to  the utilisation  of the funds. Union of India did not  agree  to subject itself to those conditions. Referring to the  alter- native arrangements as to the administration of the  interim relief  necessitated by Union of India’s  disinclination  to take  up  relief operation on the terms  stipulated  by  the Court, Judge Keenan observed:               Counsel  for the Union of India  has  informed               the  Court that the Union of  India  considers               these reporting requirements so onerous as  to               compel the Union of India to decline the  five               million  dollars  in interim  relief  offered.               Accordingly;  the Court directs  that  Liasion               Counsel  and Messrs Bailey and Chesley of  the               Executive  Committee contact the American  Red               Cross Society to arrange for discussions  with               the  Indian  Red Cross Society,  in  order  to               formulate a plan for distribution of the  five               million  dollars  to the victims  of  the  gas               plant disaster."     3.  The US District Court, therefore, proposed a  scheme for  the utilisation of the Interim Relief Fund through  the agency  of  the American Red Cross Society. But what  is  of particular significance in the present context is as to  how this interim relief fund was to be treated and accounted for at  the end of the day when the litigation culminated  in  a final decision. That the payment was intended to be  without prejudice  to the contentions of the Union Carbide  Corpora- tion  and that, further, the amount of interim relief  would form part of the quantum that may finally be adjudicated was rendered  explicit in the last paragraph of the  said  order dated 7th June, 1985 which stipulated: 384               "Neither the promulgation, implementation  nor               anything contained herein shall be asserted or               used  in any manner against the  interests  of               Union  Carbide Corporation. This provision  of               interim  relief by Union  Carbide  Corporation               shall  be credited against the payment of  any               final  judgment  or settlement of  the  claims               against Union Carbide Corporation arising  out               of the Bhopal gas leak of December, 1984."     After the proceedings in the US District Court terminat- ed  upon the Union Carbide Corporation’s plea of forum  non- conveniens being upheld, Union of India instituted suit  No. 1113  of 1986 in the District Court at Bhopal. The claim  in the suit came to be settled in this court in the said  Civil Appeal Nos. 3187, 3188 of 1988 by the orders dated 14th/15th February, 1989.     4. In terms of the said settlement the sum of 5  million US  dollars was treated as part of the settlement  fund.  In the  order of this Court dated 15th February, 1989 this  sum

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of  5  million US dollars was specifically  referred  to  in clause  (a)  of paragraph 2 and paragraph  5.  The  relevant portions of the order are excerpted below:               "(a) a sum of US 425 million (Four Hundred and               Twenty  five  millions) shall be  paid  on  or               before  23rd  March, 1989,  by  Union  Carbide               Corporation to the Union of India, less US $ 5               million  already  paid by  the  Union  Carbide               Corporation  pursuant to the order  dated  7th               June,  1985 of the Judge Keenan in  the  court               proceedings  taken  in the  United  States  of               America."               5.  The amounts payable to the Union of  India               under  these  orders  of the  Court  shall  be               deposited  to the credit of the  Registrar  of               this  Court in a bank under directions  to  be               taken from this Court.               This  order will be sufficient  authority  for               the  Registrar  of the Supreme Court  to  have               tile amount transferred to his credit which is               lying  unutilised with tile Indian  Red  Cross               Society  pursuant to the directions from  tile               International Red Cross Society."               [Emphasis supplied]     The  case of the applicant-Indian Red Cross  Society--is that  in  the course of the negotiations  the  American  Red Cross  had with it in the matter of administration  of  this relief, the Red Cross Society of India had made it clear  to the  American  Red  Cross that it would  not  undertake  the relief  administration  unless the fund was assigned  to  it unconditionally.  Red Cross Society of India would say  that it  was on this specific understanding that it accepted  the engagement to administer the funds in India.                385 Accordingly, the Indian Red Cross Society contends that  the order  dated  5th  February, 1989 in so far  it  treats  the unutilised  part of the interim relief fund as part  of  the settlement  fund and authorises the Registrar of he  Supreme Court to realise it as such is not consistent with the terms under  which the relief fund was agreed to be  entrusted  to and  accepted  by  the Indian Red Cross  Society  and  that, therefore,  those directions in the order dated 15th  Febru- ary, 1989 require to be deleted.     5.  We have heard Dr. Chitaley for the Indian Red  Cross Society, Shri F.S. Nariman for the Union Carbide Corporation and the learned Attorney General for the Union of India.     In  view  of  the circumstance that at  the  time  these applications  were  heard, the validity  of  the  settlement stood  assailed in certain proceedings of Review, the  Union of India abstained from making any statement as to he merits of the claim of the Indian Red Cross Society. Union of India sought  to  steer clear of any possible implication  of  any appropriation of the settlement fund which might be  suscep- tible of an inference of rectification it of the settlement.     The Union Carbide Corporation while disputing the  claim of  the Indian Red Cross Society that the said 5 million  US dollars  constituted subject matter of a separate  and  dis- tinct  fund outside the scope of the litigation  culminating in  the  orders of 14/15th February, 1989,  however,  stated that it had no objection if the Union of India was agreeable to the Indian Red Cross Society retaining and utilising  the money lying with it.     6.  The  grantability of the prayer of  the  Indian  Red Cross  Society really turns upon whether the interim  relief of 5 million US dollars was a distinct award standing  inde-

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pendently  and  outside  of the final  adjudication.  It  is manifestly not so. Judge Keenan’s order dated 7.6.1985 makes that  clear. It, however, appears true that the  Indian  Red Cross Society sought to stipulate with its American counter- part  that  the Indian Red Cross Society be  free  from  any contingent obligations stemming from the final result of the litigation  one way or the other. Indeed, at some  point  of time  the American Red Cross, presumably at the instance  of the  Indian  Red Cross Society, desired to have  the  matter submitted for further consideration of the District Court at New York.     But  nothing has been placed before us to indicate  that the District Court for the Southern District, New York, ever changed the terms of its order dated 7th June, 1985.  On the contrary,  the affidavit dated 20th November, 1989,  of  Mr. John Macdonald filed on behalf of the Union Carbide Corpora- tion indicates that from the very inception this interim 386 relief fund was intended to be in the nature of an  "advance payment" or "credit to the defence". The following  observa- tions of Judge Keenan on 16th April, 1985 as to the intended nature  of  the  proposed interim relief  place  the  matter beyond doubt. Judge Keenan observed:               "It  seems to me that some sort  of  emergency               systematic  relief should be supplied  to  the               survivors on a prompt basis. Any such  funding               supplied by the defendant would be treated  in               the nature of an advance payment or credit  to               the defence."     7. It would appear that the agreement between the Ameri- can  Red Cross and the Indian Red Cross Society came  to  be discussed before the District Court, New York, during  hear- ing  on 20th November, 1985. The portions of the  transcript of  what  transpired at the hearing furnished  in  Mr.  John Macdonald’s affidavit indicate that, far from approving  the purported  arrangement  inter-se between  the  American  Red Cross  and the Indian Red Cross Society, they show that  the terms of the order dated June 7, 1985, as to the nature  and character  of the interim relief as an "advance payment"  or "credit  to  the defence" were left undisturbed.  The  tran- script of the hearing furnished in the affidavit of Mr. John also reaffirms that "if there is any recovery against  Union Carbide, it is a set-off’.     8.  This  is not disputed nor any  independent  material placed before us to show that the terms as to the nature and character  of the interim payment had been altered in  terms of the inter-se arrangements pleaded by the Indian Red Cross Society.  In  the circumstances, the agreement  between  the American  Red  Cross  and Indian Red  Cross  Society  cannot prevail over the effect of the order dated 7th June, 1985 of Judge Keenan. This Court’s directions in this behalf in  the order dated 15th February, 1989, are not inconsistent there- with and do not, therefore, require any modification.     9. Now that the terms of the settlement have been upheld in the review proceedings the unutilised part of-the interim relief  of  5  million US dollars will become  part  of  the Bhopal gas relief fund, and shall have to be administered as such.  The Registrar of the Supreme Court shall be  entitled to call-up the funds with the Indian Red Cross Society which stood unutilised as on 15th February, 1989.     10.  The  present applications of the Indian  Red  Cross Society are, accordingly, dismissed. G.N.                                            Applications dismissed. 387

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