The Public liability Insurance Act, 1991(the Act) is a pivotal piece of legislation enacted by Indian government to ensure the safety and protection of the public from accidents caused by hazardous industrial operations. The Act mandates that businesses handling dangerous substances must maintain a public liability insurance policy, ensuring that in the event of an industrial accident, immediate compensation is provided to affected individuals without the need for extensive legal proceedings. Enacted in the wake of growing industrial activities and environmental risks, the legislation aims to strike a balance between industrial development and public safety, promoting accountability within hazardous industries.

Objectives: The key objectives of the Act are:  

• Safeguards individuals: To safeguards the individuals from accidents and incidents involving hazardous substances by ensuring they receive prompt compensation for any harm or damage caused.
• Quick and Efficient Compensation: To ensure that affected persons receive quick and efficient compensation without the need for prolonged legal disputes, easing the financial burden on victims of industrial accidents.
• Straightforward mechanism: To reduce the need for lengthy court proceedings by providing a straightforward compensation mechanism, thereby speeding up the process of providing financial relief to affected parties.
• Creating the Environment Relief Fund (ERF): Establish a financial mechanism for environmental rehabilitation in case of industrial accidents.
• Imposing Strict Liability: to hold industries accountable regardless of negligence.

Bhopal gas tragedy: A major reason for the enactment of this Act

The Bhopal disaster occurred on night of December 3, 1984, when a deadly gas methyl isocyanate (MIC) leaked from Union Carbide (India) Limited plant, enveloping the city and its surroundings. This catastrophic industrial disaster killed nearly 3000 people and left thousand more injured or permanently affected. Wildlife was also impacted and the environment suffered significant contamination. With 40 tons of toxic gas released, this tragedy remains the world’s worst industrial disaster.

This Act was enacted in response to the Bhopal gas tragedy, aiming to provide swift relief to victims of accidents. However, activists argue that enforcement by designated authorities remains weak.

• As per Section 4, companies handling hazardous substances are required to take out insurance to cover liabilities for accidents causing death or injury.
• Section 7A mandates the establishment of a Central Government Environmental Relief Fund to compensate victims of such accidents.
• The law also requires businesses to maintain insurance coverage, with a minimum equivalent to the company’s paid-up capital and a maximum of ₹50 crore.

Liability for relief on No-Fault Basis (Section 3):

• If an accident cause death, injury (excluding workmen), or property damage, the owner must provide relief as specified in the schedule.
• In the claim for relief, the claimant is not required to prove that the death, injury, or damage resulted from any wrongful Act, negligence, or default.

Duty of owner to take out insurance policies (Section 4):

• Every owner shall take out one or more insurance policies before he start handling hazardous substance providing for contracts of insurance whereby, he is insured against liability to give relief under sub-section (1) of section 3. Any owner handling any hazardous substance immediately before the commencement of the Jan Vishwas (Amendment of Provisions) Act, 2023 shall take out such insurance policy or policies as soon as may be and in any case within a period of one year from commencement of that Act. 

• Every owner must renew the insurance policy before it expires to ensure continuous coverage while handling hazardous substances.
  • No insurance policy taken or renewed by an owner shall be for less than the company’s paid-up capital and no more than ₹500 crore
  • The insurer’s liability under an insurance policy cannot exceed the amount stated in the policy’s terms.
  • Each owner must pay the insurer, along with the premium, an additional amount for the Relief Fund under section 7A, which will not exceed the premium amount.
  • The insurer must send the amount received from the owner under section 7A (2C) to the specified authority, in the prescribed manner and time. If the insurer fails to do so, the amount will be recovered as arrears of land revenue or public demand.
• The Central Government may exempt certain owners from sub-section (1) by notification, including:
  • (a) the Central Government;
  • (b) any State Government;
  • (c) corporations owned or controlled by the Central or State Government;
  • (d) any local authority.

However, this exemption is only allowed if the owner has set up and maintains a fund, as per the rules, to cover liabilities under section 3(1).

Application for claim for relief (section 6):

(1). An application for claim for relief may be made

1. by the person who has sustained the injury;
2. by the owner of the property to which the damage has been caused;
3. Where death has resulted from the accident, by all or any of the legal representatives of the deceased; or
4. By any agent duly authorised by such person or owner of such property or all or any of the legal representatives of the deceased, as the case may be

Provided that if not all legal representatives of the deceased have joined the application for relief, it must be filed on behalf of all legal representatives. Those who have not joined will be added as respondents to the application.

(2) Every application under sub-section (1) shall be made to the Collector and shall be in such form, contain such particulars and shall be accompanied by such documents as may be prescribed.

(3) No application for relief shall be entertained unless it is made within five years of the occurrence of the accident.

Establishment of Environmental Relief Fund (section 7A):

(1) The Central Government may establish an Environmental Relief Fund by notification.

(1A) There shall be credited to the Relief Fund established under sub-section (1)

(a) the amount referred to in sub-section (2C) of section 4;

(b) the amount of penalty imposed under this Act;

(c) the interest or other income received out of investments made from the Fund; and

(d) any other amount from such sources, as may be prescribed.

(2) The fund will be used to pay relief as awarded by the Collector under section 7, according to the provisions of this Act and the scheme made under sub-section (3).

(3) The government may, by notification, create a scheme detailing the authority managing the fund, how it will be administered, how money will be withdrawn, and other related matters concerning the fund’s management and relief payments.

Power to Issue Directions (Section 12):

The central government, despite any other laws but in accordance with this Act, has the authority to issue written directions for implementing of this Act. These directions must be followed by any owner, person, officer, authority, or agency involved.

Explanation:
The power to issue directions includes the authority to:

(a) Prohibit or regulate the handling of hazardous substances.
(b) Stop or regulate the supply of services such as electricity or water.

Publication of right to claim for relief by the Industrial unit

• Rule 5A: It is the duty of industrial unit to publicise w.r.t Right to claim for relief under the act to the person who was affected in case of any accident occurred in any industrial unit.

Penalty for Contravention of Section 4 (Section 14):

Penalty for contravention —

1. Where any person contravenes any of the provisions of sub-section (1), sub-section (2), sub-section (2A) or sub-section (2C) of section 4, he shall be liable to penalty equal to the amount of annual premium for insurance policy and may extend to twice the amount of such premium.
2. Where contravention under subsection (1) continues, an additional penalty may be imposed by the adjudicating officer, which shall not exceed the amount of premium to be paid, for each month or part thereof during which the contravention continues

Penalty for non-compliance of directions issued under section 12 (Section 15):

Penalty for non-compliance of directions—

1. Where any person does not comply with any direction issued under section 12, he shall be liable to penalty which shall not be less than ten thousand rupees which may extend to fifteen lakh rupees.
2. Where any person continues non-compliance under sub-section (1), he shall be liable to additional penalty to be imposed by the adjudicating officer, which shall not be less than ten thousand rupees for every day during which such non-compliance continues.
3. Where any owner does not comply with the direction issued under section 9 or obstructs any person in discharge of his functions under section 10 or under sub-sections (1), (2) or (3) of section 11, he shall be liable to penalty which shall not be less than ten thousand rupees but which may extend to fifteen lakh rupees.
4. Where any person continues non-compliance under sub-section (3), he shall be liable to additional penalty of ten thousand rupees for every day during which such non-compliance continues.

Offences by Companies

1 If an offence under this Act is committed by a company, every person in charge of and responsible for the company’s operations at the time of the offence, along with the company itself, shall be deemed guilty and subject to legal action and punishment.

Provided that such a person will not be held liable if they can prove that the offence occurred without their knowledge or that they took all necessary precautions to prevent it.

2. Notwithstanding anything contained in sub-section (1), where an offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent or connivance of, or is attributable to any neglect on the part of, any director, manager, secretary or other officer of the company, such director, manager, secretary or other officer shall also be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly