LG Polymers' Liability: New Age of Deregulation Imminent?

On the morning of May 7, 2020, residents of Vishakhapatnam woke up to a tragic occurrence whereby the leakage of toxic styrene gas from a chemical plant owned by LG polymers Ltd. (LGP) had claimed the lives of 11 people and injured several others. Hours after the incident, a FIR was registered against LGP and a day later, the National Green Tribunal (NGT) began an investigation by taking suo motu cognizance.

Determination of Liability and Remedies

Pursuant to the findings of the investigation, the NGT has stated that LGP bears absolute liability for the loss of life induced by a gas leak at its Vishakhapatnam factory and therefore, an amount of Rs. 50 crores which has already been deposited by the company as penalty, will be used to compensate partial liability. A detailed plan, however, is expected to be devised soon on directing the company to diverge funds that will be spent on environmental restoration and victim compensation borne out of the tragedy.

The concept of absolute liability was etched out in the Bhopal gas tragedy case (1984), wherein the Supreme Court ordered Union Carbide to pay US$470 million against all destruction caused by the leakage of MIC gas from its industrial premise. Unlike strict liability, which bears an exclusion for the company if the dangerous emission escapes the premises via an ‘Act of God’, the rule of absolute liability doesn’t make any such exclusion for the company. This illustrates that companies have an intrinsic responsibility to protect the public and environment from the consequences of their industrial endeavours, however meritorious or exigent those endeavours may be.

Liability arising on account of industrial negligence has been covered under multiple claims of tortious and contractual duty that the companies either abide by with directions from the domestic regulator or owe towards the resident population and environment present in their cluster. The law in India is aptly commensurate with the product liability obligations that are devolved in other parts of the world. However, bearing the occurrence of increasing industrialization and fast-tracked clearance mechanisms to build high-caliber industrial corridors in the country, there are looming concerns regarding effective administration of these remedies.

Recent Regulatory Amendments

The government of India is involved in a wide-spread deregulation effort as a mitigating economic exercise during the COVID-19 pandemic. In the process of attracting more investments and reducing the proverbial red-taping imbroglio that often impedes industrial growth, a slew of legislations is being amended. While rapid growth in the manufacturing sector is crucial to reviving the pandemic-stricken economy, it is not a wise decision to attenuate voluntary enforcement of important regulatory channels such as environment impact assessments, labour laws, decriminalization of corporate offences, etc. without affecting even a marginal increase in industrial penalty.

Corporate Deregulation

To begin with, in March 2020, the Government approved as many as 65 amendments in the Companies Act, 2013, which include reduction in prison sentences for corporate offences, lowering the threshold of expenditure earmarked for Corporate Social Responsibility (CSR), removal of about 23 offences from mandatory judicial scrutiny and opening them up for settlement through alternate dispute resolution and finally, decriminalization of some offences altogether.

The executive intent behind doing so is to promote investments and help ailing industries recover that have been affected due to the lockdown. However, omission of liability is just inversely proportional to the possibility of eroded corporate accountability. Deregulation, thus, may help bring in investments and help support local livelihoods by setting up industries, but it doesn’t lift a finger to help when those families are endangered as a direct consequence of industrial negligence and laxity in safeguard implementation.

Dilution of Labour Laws

Secondly, the change in labour laws in 18 different states that took effect less than two months ago essentially exhausted a number of public remedies that were available earlier to secure workers’ rights. Rights of workers have been curtailed significantly by increasing hours of employment, reducing overtime wages and bringing down the possibilities of unionization in industries. Disincentivizing the workforce is unfortunate in the face of implementing safety standards and thorough regulatory vigilantism because an unhappy worker will be less likely motivated to administer the final order of checks and balances that is necessary to prevent disasters like the one in LG polymers plant from occurring again.

Weakening the Vital EIA Machinery

Thirdly, the proposed Draft Environment Impact Assessment (EIA) Notification 2020, underlines the government’s desire to dilute the regulatory scrutiny and conforming mechanisms that are required for industries to get institutional approval before setting shop. If enforced, this amendment will instrumentalize scores of industrial establishments that were necessarily impeded earlier due to their failure to meet erstwhile EIA qualifications.

Necessity for Review

Although the EIA Notification is yet to assume legislative force, the numerous pleas by the government in defending its cause and crackdown on activist groups opposing the same is unfortunate. Judging the pattern of the proposed and enforced regulatory overhauls as described earlier, the intent to release legal bottlenecks in favour of prime capitalization over resources and rapid industrialization in the country is apparent.

Need to Combat Unrequited Laissez-Faire Approach

Industrialization is neither unfavorable, nor uncalled for, as long as it is achieved in conformity with established standards of safety, environmental protection, labour security and general development. The three instances that have been accounted for in this article, collectively testify to the fact that the kind of industrial strides and manufacturing prowess that our present establishment is seeking, is far from adhering to the previously-stated standards.

The way to ameliorate this crisis is to retract these instruments and seek a balance between economic growth in tandem with community vis-à-vis national interests. The provisions in the Factories Act, 1948 or Special Economic Zone Act, 2005 or Coastal Regulation Notifications which pertain to issue of licenses and environmental clearance must be revisited with a heightened scrutiny. The implementation clauses must be affected with greater standards of examination and more frequent regulatory inspections.

A concerted programme must be designed to address the issues faced by the groups who are impacted by the operation of the industries from the ground-up. Representatives of the local community should be statutorily empowered to keep a vigil over the facilities. The decentralization of surveillance is most important to counter the problem of systematic corruption and help in swift redressal of grievances. One must also keep in mind that in order for such reforms to take lift, it is important to remind the stakeholders about the deterring effects that will be borne by them if they don’t adhere to the required standards. The role of the Judiciary is crucial in this regard because a culture of defiance cannot be eradicated without ushering in a culture of punitive justice.

Conclusion

At a time when incidents such as LGP are on the rise, and the pressure to reinvigorate an ailing economy is beginning to mount, the government must strike a balance in easing investment and regulatory norms with a few prodigal measures to increase industrial compliance, if not many. Attract foreign investments, lax licensing and clearance norms for a while, certainly. But do not reduce the survival of citizens or preservation of the environment to a chance, for there is no quantum of growth that is rightfully warranted in an atmosphere of regulatory anarchy.

(Originally published in United Forum Legal Studies Blog)