Holding

The $5 million interim relief is not a separate award but forms part of the settlement fund, and the Supreme Court's directions are consistent with the original US court order, so the applications for modification are dismissed.

Summary

The Union of India sued Union Carbide Corporation (UCC) in the US District Court, which ordered a $5 million interim relief to be paid to the Indian Red Cross Society for Bhopal gas victims, stating the amount was an advance payment and would be set‑off against any final judgment. After the US case was dismissed on forum non‑conveniens grounds, the matter was pursued in the Bhopal court and settled, with the Supreme Court directing that the $5 million be treated as part of the settlement fund and transferred to the Registrar’s credit. The Indian Red Cross Society later applied to modify this direction, arguing that the interim fund was a separate award and that its agreement with the American Red Cross should free it from any contingent obligations. The Court examined the original US order, the transcript of the 1985 hearing, and the lack of any amendment to the interim relief’s character, concluding that the interim payment was not a distinct award but a credit to the defence. Consequently, the Court held that the settlement direction was consistent with the original order and dismissed the Red Cross Society’s applications.

Issues considered

Whether the $5 million interim relief is a distinct award independent of the final adjudication of the Bhopal gas litigation.
Whether the Supreme Court's order treating the unutilised interim relief as part of the settlement fund is inconsistent with the terms under which the fund was entrusted to the Indian Red Cross Society.
Whether the inter‑societal agreement between the American Red Cross and the Indian Red Cross Society can override the US District Court's order.
Whether the directions of the Supreme Court need to be modified in light of the settlement and review proceedings.

Subjects

Bhopal gas disasterinterim reliefsettlement fundset‑offadvance paymentRed Cross Societyforum non convenienscourt order modification

Judgment

UNION CARBIDE CORPORATION ETC. ETC. A
v.
UNION OF INDIA ETC. ETC.

OCTOBER 3, 1991

[RANGANATH MISRA, CJ., K.N. SINGH, M,N. B
VENKATACHALIAH, A.M. AHMADI AND N.D. OJHA, JJ. J

Bhopal Gas Disaster-Court assisted settlement arrived at between
Union Carbide Cotporation and Union of India-S Million U.S. Dollars
deposited by Union Carbide Co,.Poration prior to settlement and lying un- C
utilised 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.
In the suit filed by the Union of India against Union Carbide Corpora·
tion (UCC) tiled before the Southem District Court at New York, the presid·
Ing Judge directed the utilisation of 5 Million Dollars deposited by UCC D
towards lnteri1,11 Relief Fund, for affording relief to the victims of the Bhopal
Gas leak disaster through the Indian Red Cross Society. 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 disaster. 'The Indian E
Red Cross Society sought to stipulate with the American Red Cross tliat the
Indian Red Cross Society should be free from any contingent obligations
stemming from the ftnal result of the litigation one way or the other. How·
ever, the terms of the order were not changed. ·

After the proceedings in the U.S. District Court terminated upon
UCC•s plea of forum non-conveniens being upheld, Union of India in· F
stituted a suit in the ~istrict 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 Dollars was
treated as part of the settlement Fund and a direction was given to the ·
Registrar to have the amount transferred to his credit which was lying
unutilised with the Indian Red Cross Society. . , :. . G
The Indian Red Cross Society has filed the present applications. It
contended that the order dated 15th February, 1989 insofar as it treated
the unutmsed 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
H
381
382 SUPREME COURT REPORTS [1991] SUPP. 1 S. C.R.

A 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 ad·
judication,. dismissing the applications, this Court,
HELD: 1. The agreement between the American Red Cross and the
B Indian Red Cross Society came to be discussed be~ore the District Court,
New York, during the hearing on 20th November 1985. The portions of
--\'- ...
the transcript of what transpired 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
c relief as an "advance payment" or "credit to the defence" were left undis-
turbed. The transcript 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 Inter·
Im payment had been altered in terms of the inter-se arrangements
pleaded by the Indian Red Cross Society. In the circumstances, the agree-
D ment between the American Red Cross and the Indian Red Cross Society
cannot prevail over the effect of the order dated 7th June, 198! 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, re·
quire any modlncation. (386 B·F]
2. Now that the terms of the settlement have been upheld In the
E review proceedings the unutllised part of. the Interim relief of 5 Mllllon
U.S. Dollars will become part of the Bhopal gas relief fund and shall have y
to be administered as such. The Registrar of the Sup1-eme Court shall be
entitled to call-up the funds with the Indian Red Cross Society which
stood unutlllsed as on 15th February, 1989. (386 F·G]
F . CIVIL APPELLATE JURISDICTION : Interim Application Nos.1,
2 and 3of1989.
IN
Civil Appeal Nos. 3187 and 3188 of 1988.
From the Judgment and Order dated 4.4.1988 of the Madhya
~
G 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, AM. Khanwilkar, Ms. Madhu Khatri,
P .Parameswaran, Ms. A Subhashini and C.S. Vaidyanathan for the. appear-
ing parties.
H
UNION CARBIDE v. U.0.1. 383

The following Order of the Court was delivered: A
By these applications the Indian Red Cross Society seeks a modifica-
tion 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
Bhopal Gas leak disaster. B
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 Cor-
poration "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 report·
ing-requirements as to the utilisation of the funds. Union of India did not D
agree to subject itself to those conditions. Referring to the alternative
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 E
onerous as to compel the Union of India to decline the five mil-
lion 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 . F
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 bow this interim relief fund was to be treated and ac- G
counted 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 Corporation 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: H
384 SUPREME COURT REPORTS (1991) SUPP. 1 S. C.R.

A
l
'
"Neither the promulgation, impleinentation nor anything con-
tained 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 settleruent of the
claims against U nioo Carbide Corporation arising out of the
Bhopal gas leak of December, 1984."
B
After the proceedings in the US District Court terminated 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, 3188of1988 by the orders dated 14th/15th February, 1989.
c 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 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:
D "(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 pur-
suant 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 UQ.der these
orders of the Court shall b'e deposited to the credit of the
Registrar of this Court in a bank under directions to be. taken
from this Court.

F This order will be sufficient ·authority for the Registrar of the
Supreme Court to have the amount transfemd to his credit which
is lying unutilised with the Indian Red. Cross Society pursuant to
the directions from the I11ternatio11al Red Cross Society."
[Emphasis supplied]
The case of the applicant-Indian Red Cross Society-is that in the ~-
G 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 under-
H standing that it accepted the engagement to administer the funds in India.
UNION CARBIDE v. U.0.1. 385

J.. Accordingly, the Indian Red Cross Society contends that the order dated A
15th 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
the 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 February, 1989 require to be deleted. B
5. We have heard Dr. Chitaley for the Indian Red Cross Society,
... ..,.-Shri F.S. Nariman for the Union Carbide Corporation .and the learned··
1
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
c
the 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 susceptible of an inference of rectification
by it of the settlement.

-4 The Union Carbide Corporation while disputing the claim of the D
Indian Red .Cross Society that the said 5 million US dollars constituted
subject matter of a separate and Jistinct 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.
E
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 independently and outside of the final adjudica-
tion. 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 F
sought to stipulate with its American counterpart 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 c0n-
sideration of the District Court at New York. .
G
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 Corporation indicates that from the very inception this. interim
H
386 SUPREME COURT REPORTS (1991) SUPP. 1 S. C.R.

A relief fund was intended to be in the nature of an "advance payment" or
"creJit to the defence". The following observations 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
B 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 American Red
Cross and the Indian Red Cross Society came to be discussed before the
District Court, New York, during hearing on 20th November, 1985. The
C portions of the transcript of what transpi.r.ed 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 transcript
D 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".
r--
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
E the Indian Red Cross Society. In the circumstances, the .agreement be·
tween 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 therewith and do not, therefore, require any
modification.
F 9. Now that the terms of the settlement have been upheld in the
review pr-oceedings the unutilised part of the interim relief of S million US
dollars will become part of the Bhopal gas relief fund, and shall have to be
administered as i:;uch. The Registrar of the Supreme Court shall be en-
titled to call-up· the funds with the Indian Red Cross ~ociety which stood
G unutilised as on 15th February, 1989.
10. The present applications of the Indian Red· Cross Society are,
accordingly, dismissed. · ·

G.N. Applications dismissed.