In this industrial age, many companies are manufacturing and transporting hazardous substances to populated areas. Ordinary citizens cannot hope to understand the nature of such dangerous activities going on in their neighbourhood. The truck in front of your car in a traffic jam might even be carrying nuclear materials. Who will be liable to pay compensation if an accident occurs? Parliament had passed the Public Liabilities Insurance Act in 1991 to provide for such industrial accidents, but it is hardly noticed owing to the low amount of money prescribed as damages and a general lack of awareness of the entitlements.

The Supreme Court, in the Shriram Fertiliser Industries case (1987), had imposed the "strict liability" principle on erring industries. It ruled that "if the enterprise is permitted to carry on any 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 overhead". The court also emphasised that there are no exceptions to the rule of strict liability. Moreover, the amount of compensation would depend upon the capacity of the enterprise and not the earning capacity of the individual victims.

This principle has so far been applicable only to private concerns. However, in a judgment last month, the Supreme Court has extended it to cover public utilities like the railways, electricity distribution companies, public corporations and local bodies "which may be social utility undertakings not working for private profit". The ruling came in a claim against the railways, Union of India vs Prabhakaran. A woman fell on a railway track and was fatally run over. Her husband demanded compensation. The railways argued that she was negligent as she tried to board a moving train. The Supreme Court rejected this contention and said that her "contributory negligence" should not be considered in such untoward incidents — the railways has "strict liability".

The doctrine of strict liability was propounded in a 19th century English case, Rylands vs Fletcher. According to the doctrine, people who engage in particularly hazardous activities should bear the burden of the risk of damage that their activities generate. Thus, corporations that handle water, electricity, oil, noxious fumes, colliery spoil and poisonous vegetation are covered by this doctrine. Negligence of the victims is no excuse. The doctrine also operates as a loss-distribution mechanism: The person indulging in such hazardous activities (usually a corporation) being in the best position to spread the loss through insurance and higher prices of its products. However, later decisions in England diluted the principle by introducing several exceptions. The Shriram judgment categorically said that such exceptions would not be applicable in India. The present verdict further emphasises this point and expands its scope.

The Supreme Court said that there is a swing in favour of the principle of strict liability. The unfinished stories of the Bhopal holocaust, the Chernobyl nuclear disaster, the crude oil spill of 1988 and other mishaps have aroused jurists to the dangers of industrial activities. But the state of the law of torts varies in common law countries. While the US and English courts do not enforce the doctrine rigorously, French courts (like in India) have accepted the principle.

Earlier, the Supreme Court had applied the doctrine to electricity mishaps. An electric wire had snapped and fallen on the road. On a rainy night, a cyclist came in contact with it. He died on the spot. His widow demanded damages from the electricity authorities, MPSEB vs Shail Kumari, 2002. The board argued that the wire belonged to a pilferer and that it was not negligent. Rejecting this contention, the Supreme Court said: "It is no defence on the part of the board that somebody committed mischief by siphoning off energy to his private property and the electrocution was from such diverted line… Authorities manning such dangerous commodities have extra duty to chalk out measures to prevent such mishaps." The basis of the liability is the "foreseeable risk inherent in the very nature of such activity".

In a road accident case (Kaushnuma Begum vs New India Assurance Co, 2001), the insurer resisted the claim of a widow contending that it was liable to pay only when the death was caused by the negligence of the driver. The court rejected this argument. Strict liability and liability on account of negligence are different in the law of torts. If a person has done his best to avoid harm, he is not liable if the claim is based on negligence. But in strict liability cases, a person engaged in dangerous activities is held liable once the damage is done.