2011 (10) TMI 712 - SC - Companies Law

Seeking adequate compensation for the victims of the Uphaar tragedy - violations of fundamental and indefeasible rights guaranteed under Article 21 of the Constitution of India and the statutory obligations - acts of omission and commission by the public authorities concerned namely Delhi Vidyut Board ( DVB ) MCD Fire Force and the Licensing Authority - The High Court after exhaustive consideration of the material including the reports recorded statements and other material allowed the writ petition. In the said order the High Court identified the causes that led to the calamity and persons responsible therefore. It held the theatre owner DVB MCD and the Licensing Authority responsible for the fire tragedy and held jointly and severally liable to compensate the victims. It exonerated the Delhi Fire Force. The High Court approved the recommendations of Naresh Kumar Committee which were extracted in detail in the judgment of the High Court. The theatre owner Delhi Police and MCD have not accepted the judgment of HC and have filed these appeals. In regard to performance of statutory functions and duties the courts will not award damages unless there is malice or conscious abuse. The cases where damages have been awarded for direct negligence on the part of the statutory authority or cases involving doctrine of strict liability cannot be relied upon in this case to fasten liability against MCD or the Licensing Authority. The position of DVB is different as direct negligence on its part was established and it was a proximate cause for the injuries to and death of victims. It can be said that in so far as the licensee and DVB are concerned there was contributory negligence. The position of licensing authority and MCD is different. They were not the owners of the cinema theatre. The cause of the fire was not attributable to them or anything done by them. Their actions/omissions were not the proximate cause for the deaths and injuries. The Licensing Authority and MCD were merely discharging their statutory functions (that is granting licence in the case of licensing authority and submitting an inspection report or issuing a NOC by the MCD). In such circumstances merely on the ground that the Licensing Authority and MCD could have performed their duties better or more efficiently they cannot be made liable to pay compensation to the victims of the tragedy. There is no close or direct proximity to the acts of the Licensing Authority and MCD on the one hand and the fire accident and the death/injuries of the victims. But there was close and direct proximity between the acts of the Licensee and DVB on the one hand and the fire accident resultant deaths/injuries of victims. In view of the well settled principles in regard to public law liability in regard to discharge of statutory duties by public authorities which do not involve malafides or abuse the High Court committed a serious error in making the licensing authority and the MCD liable to pay compensation to the victims jointly and severally with the Licensee and DVB. It was contended that DVB have installed a transformer of a capacity of 1000 KV without obtaining the statutory sanction/approval and without providing all the safety measures which it was duty bound to provide under the relevant Electricity Rules and therefore DVB alone should be responsible for the tragedy. This contention has no merit. In fact none in the main hall (ground floor of the theatre) died. Those on the second floor also escaped. It is only those in the balcony caught in noxious fumes which died of asphyxiation. The deaths were on account of the negligence and greed on the part of the licensee in regard to installation of additional seats in regard to closing of an exit door parking of cars in front of transformer room by increasing parking from 15 to 35 and other acts. We therefore reject the contention that DVB should be made exclusively liable to pay the compensation. We have already held that the Licensing Authority and MCD are not liable. Therefore the liability will be 85% (Licensee) and 15% (DVB). Whether the income and multiplier method adopted to finally determine compensation can be arrived while awarding tentative or palliative compensation by way of a public law remedy under Article 226 or 32 of the Constitution - It can be by way of making monetary amounts for the wrong done or by way of exemplary damages exclusive of any amount recoverable in a civil action based on tortuous liability. But in such a case it is improper to assume admittedly without any basis that every person who visits a cinema theatre and purchases a balcony ticket should be of a high income group person. In the year 1997 15, 000 per month was rather a high income. It is known that zealous movie goers even from low income groups would not mind purchasing a balcony ticket to enjoy the film on the first day itself. To make a sweeping assumption that every person who purchased a balcony class ticket in 1997 should have had a monthly income of 15, 000 and on that basis apply high multiplier of 15 to determine the compensation at a uniform rate of 18 lakhs in the case of persons above the age of 20 years and 15 lakhs for persons below that age as a public law remedy may not be proper. While awarding compensation to a large group of persons by way of public law remedy it will be unsafe to use a high income as the determinative factor. Therefore the proper course would be to award a uniform amount keeping in view the principles relating to award of compensation in public law remedy cases reserving liberty to the legal heirs of deceased victims to claim additional amount wherever they were not satisfied with the amount awarded. Taking note of the facts and circumstances the amount of compensation awarded in public law remedy cases and the need to provide a deterrent we are of the view that award of 10 lakhs in the case of persons aged above 20 years and 7.5 lakhs in regard to those who were 20 years or below as on the date of the incident would be appropriate. We do not propose to disturb the award of 1 lakh each in the case of injured. The amount awarded as compensation will carry interest at the rate of 9% per annum from the date of writ petition as ordered by the High Court reserve liberty to the victims or the LRs. of the victims as the case may be to seek higher remedy wherever they are not satisfied with the compensation. Any increase shall be borne by the Licensee (theatre owner) exclusively. three factors are available the compensation can be determined - The first is the age of the deceased the second is the income of the deceased and the third is number of dependants (to determine the percentage of deduction for personal expenses). For convenience the third factor can also be excluded by adopting a standard deduction of one third towards personal expenses. Therefore just two factors are required to be ascertained to determine the compensation in 59 individual cases. First is the annual income of the deceased two third of which becomes the annual loss of dependency the age of the deceased which will furnish the multiplier in terms of Sarla Verma. The annual loss of dependency multiplied by the multiplier will give the compensation. we direct the Registrar General of Delhi High Court to receive applications in regard to death cases from the claimants (legal heirs of the deceased) who want a compensation in excess of what has been awarded that is 10 lakhs/Rs. 7.5 lakhs. Such applications should be filed within three months from today. He shall hold a summary inquiry and determine the compensation. Re Punitive damages the question of award of punitive damages of 2, 50, 00, 000/- against the licensee. Before examining whether such punitive damages could be awarded at all we have to notice the apparent mistake in arriving at the sum of 2.5 crores. What were illegal seats were the 15 seats that were added by securing an order dated 4.10.1980. The remaining 37 seats were found to be valid by the authorities. Therefore if at all the licensee is to be made liable to reimburse the profits earned from illegal seats it should be only in regard to these 15 seats and the eight seats in the Box which was the cause for closing one of the exits. In so far as the eight seats in the owner s box though it is alleged that they were intended to be used only as complimentary seats for the purpose of award of punitive damages they are treated at par with other balcony seats. The High Court also wrongly assumed that the ticket value to be 50/- from 1979 to 1996 because it was 50/- in the year 1997 for a balcony seat. Another erroneous assumption made is that for all shows on all the days all these additional seats would be fully occupied. On a realistic assessment (at a net average income of 12/- per seat with average 50% occupancy for 23 seats) the profits earned from these seats for 17 years would at best 25, 00, 000/-. Be that as it may. the appropriateness and legality of award of punitive damages. In this context we may refer to the decision in M C Mehta v. Union of India 1986 (12) TMI 378 - SUPREME COURT wherein this Court considered the question as to what should be the measure of liability of an enterprise which is engaged in a hazardous or inherently dangerous industry if by reason of an accident occurring in such industry persons die or are injured. K.S. Panicker Radhakrishnan J. Consenting Decision - In this case where life and personal liberty have been violated the absence of any statutory provision for compensation in the Statute is of no consequence. Right to life guaranteed under Article 21 of the Constitution of India is the most sacred right preserved and protected under the Constitution violation of which is always actionable and there is no necessity of statutory provision as such for preserving that right. Article 21 of the Constitution of India has to be read into all public safety statutes since the prime object of public safety legislation is to protect the individual and to compensate him for the loss suffered. Duty of care expected from State or its officials functioning under the public safety legislation is therefore very high compared to the statutory powers and supervision expected from officers functioning under the statutes like Companies Act Cooperative Societies Act and such similar legislations. When we look at the various provisions of the Cinematographic Act 1952 and the Rules made there under the Delhi Building Regulations and the Electricity Laws the duty of care on officials was high and liabilities strict. Constitutional Torts and Punitive Damages - Constitutional courts can in appropriate cases of serious violation of life and liberty of the individuals award punitive damages. However the same generally requires the presence of malicious intent on the side of the wrong doer i.e. an intentional doing of some wrongful act. Compensatory damages are intended to provide the claimant with a monetary amount necessary to recoup/replace what was lost since damages in tort are generally awarded to place the claimants in the position he would have been in had the tort not taken place which are generally quantified under the heads of general damages and special damages. Punitive damages are intended to reform or to deter the wrong doer from indulging in conduct similar to that which formed the basis for the claim. We have highlighted all these facts only to indicate that rapid changes are taking place all over the world to uphold the rights of the citizens against the wrong committed by Statutory Authorities and local bodies. Despite the concern shown by this Court it is unfortunate that no legislation has been enacted to deal with such situations. We hope and trust that utmost attention would be given by the legislature for bringing in appropriate legislation to deal with claims in Public Law for violation of fundamental rights guaranteed to the citizens at the hands of the State and its officials.

Summary

Issues Involved:
1. Liability of Municipal Corporation of Delhi (MCD) and Licensing Authority for compensation.
2. Apportionment of liability among the parties.
3. Whether the compensation awarded is excessive.
4. Justification of punitive damages against the Licensee.

Detailed Analysis:

1. Liability of MCD and Licensing Authority for Compensation:
The MCD and Licensing Authority were held liable by the High Court for their failure to perform statutory duties, contributing to the tragedy. However, the Supreme Court ruled that the MCD had no role in the construction of the parapet wall and was not the inspecting authority until 1994. The Licensing Authority was also not liable as it was merely discharging statutory functions without malafides or conscious abuse. The Court stated, "The Licensing Authority and MCD were merely discharging their statutory functions... they cannot be made liable to pay compensation to the victims of the tragedy."

2. Apportionment of Liability:
The High Court had apportioned liability as 55% on the theatre owner and 15% each on DVB, MCD, and Licensing Authority. The Supreme Court modified this, holding the theatre owner and DVB jointly and severally liable, with 85% liability on the theatre owner and 15% on DVB. The Court stated, "Therefore, the liability will be 85% (Licensee) and 15% (DVB)."

3. Whether the Compensation Awarded is Excessive:
The High Court awarded compensation based on an assumed income of Rs. 15,000 per month for each deceased, which the Supreme Court found to be excessive and without basis. The Supreme Court reduced the compensation to Rs. 10 lakhs for those aged above 20 years and Rs. 7.5 lakhs for those aged 20 years or below. The Court noted, "While awarding compensation to a large group of persons, by way of public law remedy, it will be unsafe to use a high income as the determinative factor."

4. Justification of Punitive Damages Against the Licensee:
The High Court awarded Rs. 2.5 crores as punitive damages against the Licensee, calculated based on profits from illegally installed seats. The Supreme Court found this calculation erroneous and reduced the punitive damages to Rs. 25 lakhs. The Court stated, "We therefore uphold in principle the liability of the Licensee to return and reimburse the profits from the illegally installed seats, but reduce it from Rs. 2.5 crores to Rs. 25 lakhs."

Conclusion:
1. MCD and Licensing Authority Exoneration: The Supreme Court exonerated MCD and Licensing Authority from monetary liability, emphasizing that their role was limited and not the proximate cause of the tragedy.
2. Apportionment of Liability: The liability was apportioned as 85% on the theatre owner and 15% on DVB.
3. Compensation Adjustment: The compensation was reduced to Rs. 10 lakhs for those above 20 years and Rs. 7.5 lakhs for those 20 years or below, with the injured receiving Rs. 1 lakh each.
4. Punitive Damages: Punitive damages against the Licensee were reduced to Rs. 25 lakhs.

The judgment underscores the importance of stringent adherence to safety regulations and the responsibilities of public authorities in ensuring public safety, while also providing a framework for liability and compensation in cases of such tragedies.