THE MANAGEMENT OF

ENVIRONMENT
RELIEF FUND
DEBADITYO SINHA
Cover image: Ruth Waterman Memorial Statue, Bhopal

The statue depicting a woman with a child trying to escape the toxic gas was created by Sanjay Mitra
and Ruth Waterman, a Dutch sculptor. It became the first public memorial statute of the Bhopal gas
leak disaster of 1984 and was installed in 1986 outside the Union Carbide factory.

Image credit- Bhopal Medical Appeal on Flickr.com (CC BY-SA 2.0)

Debadityo Sinha is a Senior Resident Fellow in the Vidhi Aid initiative at the Vidhi Centre for Legal Policy.

The author would like to thank Dr. Dhvani Mehta, Senior Resident Fellow and Prashant Reddy T., former Senior
Resident Fellow at Vidhi Centre for Legal Policy for their valuable inputs and feedback. The author is also grateful
to Saumya Jaju and Tarika Jain, Research Fellows at Vidhi Centre for Legal Policy for their research assistance.

This project is supported by Tata Education and Development Trusts.

1. About this Study ............................................................................................................................................................................... 1
2. Introduction ....................................................................................................................................................................................... 2
A. What is the Environment Relief Fund? ............................................................................................................................. 2
B. Historical Background ............................................................................................................................................................ 2
Absolute Liability in India (Oleum Gas Leak Case)........................................................................................................ 2
Need for an Industrial Disaster Fund (Bhopal Gas Tragedy Case) .......................................................................... 4
C. Legal Framework of the ERF ................................................................................................................................................ 4
The Public Liability Insurance Act, 1991 .......................................................................................................................... 4
D. The Environment Relief Fund Scheme, 2008 ................................................................................................................. 8
3. Status of the ERF ............................................................................................................................................................................10
A. Contributions to the ERF .....................................................................................................................................................10
B. Investment of the Corpus ....................................................................................................................................................13
4. Problems ...........................................................................................................................................................................................14
A. No Account of Compensation awarded by the National Green Tribunal ..........................................................14
B. State and Union Territory wise contributions not available ..................................................................................16
C. Irregularities with Form III ..................................................................................................................................................16
Non-submission of Form III .................................................................................................................................................16
Irregularities in Form-III submitted to the Fund Manager ......................................................................................17
D. Confusion over legal status of the ERF ...........................................................................................................................17
E. Problems in the manner of issuing insurance to industry owners ........................................................................18
F. Unsatisfactory functioning of the Advisory Committee ..........................................................................................19
G. No penal action on defaulting companies ......................................................................................................................21
5. Overview of the ERF .....................................................................................................................................................................22
6. Way Forward ...................................................................................................................................................................................23
A. Expanding Scope ..........................................................................................................................................................................23
B. Increase the Quantum of Relief ..............................................................................................................................................24
C. Revise the Indemnity Limit .......................................................................................................................................................24
D. Digitize the process of Form-III submission ......................................................................................................................25
E. Ensuring Compliance ............................................................................................................................................................25
Appendix I ......................................................................................................................................................................................................27
Appendix II ....................................................................................................................................................................................................31

2 The Management of Environment Relief Fund

The Public Liability Insurance Act (“PLIA”), 1991 is a landmark in environmental legal development in India
because it makes industries handling hazardous chemicals absolutely liable for accidents. However, a law is only
as good as its implementation, and the Ministry of Environment, Forest & Climate Change (“MoEFCC”) itself has
admitted that the implementation of the PLIA has proved to be a challenge. In a press release dated 7th
September 2015, the MoEFCC stated that it had issued directions to industries and Pollution Control Boards to
ensure compliance with the PLIA. It appeared that many owners had failed to subscribe to public liability
insurance policies out of ignorance. Apart from this, there had been no expenditure from the fund as of the date
of the press release, despite the Environment Relief Fund (“ERF”) having Rs 573 crore as of 31st March 2015. As
of March 2019, the ERF has a corpus of Rs 810 crores.

It is important that such a large sum of money is utilized appropriately to serve the purpose for which it was
intended, thereby ensuring that the principle of absolute liability is translated from its judicial and statutory
expression to relief on the ground. However, there has been no systematic study of the utilization and
effectiveness of the ERF, not even by the Comptroller and Auditor General of India. At the same time, there is
neither a comprehensive record of accidents occurring at industries involving hazardous chemicals, nor an
assessment of the damage that such accidents may have caused to life or property.

This study examines the working of the ERF and the PLIA to generate more information about the following
aspects of this innovative legal mechanism:

a. Compliance by industries handling hazardous chemicals with their obligation to subscribe to public
liability insurance policies

b. Compliance with insurance companies with their obligation to deposit money in the ERF

c. Management of the ERF by the Fund Manager

The information was collected using secondary information available in published articles and available on the
websites of MoEFCC, United India Insurance Company Limited (“UIICL”) and the Insurance Regulatory and
Development Authority (“IRDAI”). A file inspection was carried out at the headquarters of UIICL in Chennai in
June 2019 where copies of annual audit reports prepared by Chartered Accountants, communications with
MoEFCC, insurance companies and other important correspondence were physically verified. Copies of
documents like Form III were also obtained. Information was also obtained by filing applications under the Right
to Information Act (“RTI”), 2005 with the MoEFCC, IRDAI, and National Green Tribunal (“NGT”) New Delhi. This
information was carefully analyzed and deliberated upon before being produced in this form in this report.

On this basis, this report analyzes challenges to the enforcement of the PLIA and the utilization of the ERF and
makes recommendations to strengthen public liability insurance mechanisms and ensure compliance with the
PLIA.

1
The ERF1 was established under the PLIA. Founded on the principle of no-fault liability, and in response to the
Indian Supreme Court’s (“SC”) pronouncements on absolute liability (discussed below), the PLIA requires
industries dealing with hazardous substances to subscribe compulsorily to public liability insurance. The Fund
created by such subscriptions is to be utilized to provide immediate relief to the victims of accidents involving
hazardous substances as provided in Section 7A of the Act.

The PLIA builds on the judgments delivered by the Supreme Court of India (“SC”) in the M.C. Mehta v. Union of
India2 3 and the Union Carbide Corporation vs Union of India4 along with Charan Lal Sahu vs Union of India & Ors5 ,
which broke new ground in environmental jurisprudence by introducing the standard of absolute liability. The Act
also appears to have been enacted in response to an observation by the SC regarding the need for legislation on
public liability insurance,6 which would allow victims of industrial accidents to obtain immediate relief without
having to wait for the tedious court process to reach its conclusion (discussed in more detail in the next section). 7

There were two incidents of leakage of oleum gas in Delhi from one of the units of Shriram Foods and Fertilizer
Industries on 4th and 6th December 1985. Several people living around the plant were affected and a lawyer
practicing at Tis Hazari court died. The Inspector of Factories and Commissioner vide its order dated 8th and 24th
December 1985 ordered the closure of the factories. It is important to keep in mind that by this time, the Bhopal
gas disaster, which took place on 2nd and 3rd December 1984, had already triggered a whole new era of
environmental consciousness for people living around industries dealing with hazardous chemicals. At the time of
the oleum gas leak, public interest litigation (“PIL”) filed by Advocate M.C. Mehta under Articles 21 and 32 of the
Constitution of India for the closure and relocation of the Shriram Caustic Chlorine and Sulphuric Acid Plant was
already pending before the SC due to the risk that the plant posed in such a heavily populated area. After the leak,
another petition was filed in the apex court by the Delhi Legal Aid & Advisory Board and Delhi Bar Association,
demanding compensation for the victims. The SC heard all these matters together and passed directions. These
matters, along with the PIL filed by M.C. Mehta 8 came to be famously known as the ‘Oleum Gas Leak Case’ and
became a harbinger of several reforms in environmental regulation and governance in the coming years. Before
the Oleum gas leak case, the traditional principle of strict liability, as laid down in Rylands v Fletcher9 was applied to
determine liability in industrial accidents.

1
Please note that Section 7A of the Public Liability Insurance Act, 1991, refers to an Environmental Relief Fund, while the notification issued
by the Ministry of Environment and Forests on 4 November, 2008, refers to an Environment Relief Fund. For the purposes of this brief, we
shall refer to it as the Environment Relief Fund.
2 [1987] AIR 965
3
[1987] AIR1086
4
[1992] AIR 248, 1991 SCR Supl. (1) 251
5
[1990] AIR 1480
6
Raghavan V, ‘Public Liability Insurance Act: Breaking New Ground for Indian Environmental Law’ (1997) 39 Journal of the Indian Law
Institute, 96
7
Subramanya TR and Dighe A, ‘Public Liability Insurance: Its Relevance, Application, Shortcomings and the Way Forward’ (2018) 5 Journal on
Environmental Law Policy and Development 17
8
M.C. Mehta (n 2 & n 3)
9
[1868] UKHL 1, LR 3 HL 330

2 The Management of Environment Relief Fund

The bench consisting of Chief Justice P.N. Bhagwati, G.L. Oza and Justice D.P. Madon while allowing the factory
to restart, also directed Shriram Industries to deposit Rs 20 Lakhs as security for the payment of compensation
claims from the victims of the oleum gas leak and an additional Rs 15 lakhs as bank guarantee to the Court
Registrar which would be encashed should any chlorine gas escape within a period of 3 years and cause the death
or injury to any workmen or any person living in the vicinity. 12

Although it passed these directions, the SC still had to consider whether the traditional standard of strict liability
would apply to Shriram Industries. In light of the advancements in industrialisation and the increased risk of
hazards, and perhaps mindful of the vast compensation claims in the Bhopal Gas Case pending before it, it looked
beyond strict liability to evolve absolute liability’ in another judgment (in the same case) by a Constitutional
bench.13 An excerpt from the said judgment is reproduced below:

We are of the view that an enterprise which is engaged in a hazardous or inherently dangerous industry which poses a
potential threat to the health and safety of the persons working in the factory and residing in the surrounding areas owes
an absolute and non- delegable duty to the community to ensure that no harm results to anyone on account of hazardous
or inherently dangerous nature of the activity which it has undertaken. The enterprise must be held to be under an
obligation to provide that the hazardous or inherently dangerous activity in which it is engaged must be conducted with
the highest standards of safety and if any harm results on account [sic] of such activity, the enterprise must be absolutely
liable to compensate for such harm and it should be no answer to the enterprise to say that it had taken all reasonable
care and that the harm occurred without any negligence on its part. Since the persons harmed on account of the
hazardous or inherently dangerous activity carried on by the enterprise would not be in a position to isolate the process
of operation from the hazardous preparation of substance or any other related element that caused the harm the
enterprise must be held strictly liable for causing such harm as a part of the social cost for carrying on the hazardous or
inherently dangerous activity. If the enterprise is permitted to carry on an 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 overheads. Such
hazardous or inherently dangerous activity for private profit can be tolerated only on condition that the enterprise
engaged in such hazardous or inherently dangerous activity indemnifies all those who suffer on account of the carrying
on of such hazardous or inherently dangerous activity regardless of whether it is carried on carefully or not. This principle
is also sustainable on the ground that the enterprise alone has the resource to discover and guard against hazards or
dangers and to provide warning against potential hazards. We would therefore hold that where an enterprise is engaged
in a hazardous or inherently dangerous activity and harm results to anyone on account of an accident on the operation of
such hazardous or inherently dangerous activity resulting for example, in escape of toxic gas the enterprise is strictly and

10
Rylands (n 9)
11
M.C. Mehta (n 3)
12
M.C. Mehta (n 2)
13
M.C. Mehta (n 3)

3
absolutely liable to compensate all those who are affected by the accident and such liability is not subject to any of the
exceptions which operate vis-a-vis the tortious principle of strict liability under the rule in Ryland v. Fletcher (supra). 14

In the meanwhile, on 29th March 1985, the Bhopal Gas Leak Disaster (Processing of Claims) Act 1985 was passed
by the Government of India for the expeditious disposal of claims arising out of or connected with the Bhopal gas
leak disaster. The Act was challenged in the SC for its constitutional validity. On 22nd December 1989, while
disposing the matter, the SC stressed the need for a fresh legislation to ensure the speedy disbursal of
compensation to industrial victims and creation of an industrial disaster fund. 15 The Court also suggested the
broad contours of this legislation.

We are, therefore, of the opinion that the old antiquated Act should be drastically amended or fresh legislation should be
enacted which should, inter alia, contain appropriate provisions in regard to the following matters: (i) The payment of a
fixed minimum compensation on a "no-fault liability" basis (as under the Motor Vehicles Act), pending final adjudication
of the claims by a prescribed forum; (ii) The creation of a special forum with specific power to grant interim relief in
appropriate cases; (iii) The evolution of a procedure to be followed by such forum which will be conducive to the
expeditious determination of claims and avoid the high degree of formalism that attaches to proceedings in regular
courts; and (iv) A provision requiring industries and concerns engaged in hazardous activities to take out compulsory
insurance against third party risks. In addition to what we have said above, we should like to say that the suggestion
made by our learned brother, K.N. Singh J., for the creation of an Industrial Disaster Fund (by whatever name called)
deserves serious consideration.16

This section will discuss the key provisions of the PLIA to provide the context for the discussion on the
management of the ERF later in this brief.

The Public Liability Insurance Act assented to by the President of India on the 22nd January 1991.17 The Public
Liability Rules, 1991 were later notified on 1st May 1991.18

14
M.C. Mehta (n 3)
15
Charan Lal Sahu (n 5)
16
Ibid
17
Lok Sabha Debate, Third Session (1992) Tenth series, Vol IX No. 13
18
The Public Liability Insurance Rules 1991 (PLIR 1991)

4 The Management of Environment Relief Fund

The Act makes the owner of an industry handling20 hazardous substances21 liable to provide relief on a no-fault
basis for any death or injury to a person (other than a workman) or damage to property as a result of an accident.
Claimants need not establish that the death, injury or damage occurred was a result of a wrongful act, neglect or
default by any person. 22 Flowing from this broad obligation, the Act specifically requires the owner of such an
industry, before they commence handling hazardous substances, to subscribe to an insurance policy under the
Act, which will insure such owner against liability arising out of the claims for death, injury or damage in an
accident. The owner must pay the insurer not only the amount of the premium, but also an additional sum not
exceeding the amount of the premium. This latter sum must be remitted by the insurer to a specified authority, for
being credited to the ERF (Please note that the ERF was established only after an amendment to the PLIA in
1991.23

An application for relief for death, injury, or damage to property resulting from an accident24 must be made to the
Collector within 5 years of the occurrence of the accident. The Collector, after giving the owner and the claimants
the opportunity of being heard, must hold an inquiry to determine the amount of relief that appears just to them
and specifies the person(s) to whom such relief shall be paid. When the Collector makes an award, the following
obligations arise: first, the insurer is required to deposit the amount under the award (to the extent of the limit
under the insurance policy) in a manner directed by the Collector within 30 days of the award’s announcement;
second, the Collector must arrange payment from the ERF in accordance with the ERF Scheme; third, the owner

19
Statement of Objects and Reasons, Public Liability Bill, 1991
20
Under Public Liability Act, 1991 (PLIA 1991) "handling" is ‘in relation to any hazardous substance, means the manufacture, processing,
treatment, package, storage, transportation by vehicle, use, collection, destruction, conversion, offering for sale, transfer or the like of such
hazardous substance’
21
Under PLIA 1991, "hazardous substance" means ‘any substance or preparation which is defined as hazardous substance under the
Environment (Protection) Act, 1986 (29 of 1986), and exceeding such quantity 2 as may be specified, by notification, by the Central
Government’
22
PLIA 1991, s 3
23
PLIA 1991, s 4 (2C)
24
‘Under PLIA 1991, "accident" means ‘an accident involving a fortuitous or sudden or unintended occurrence while handling any hazardous
substance resulting in continuous or intermittent or repeated exposure to death of, or injury to, any person or damage to any property but
does not include an accident by reason only of war or radio-activity’

5
may be directed to deposit an amount decided by the Collector. This latter obligation arises only if the amount
awarded exceeds both the insurance limit and all the funds available in the ERF.25 Otherwise, if the award exceeds
only the insurance limit, the balance must be met through the ERF.

Since 1991, the quantum of relief has remained unchanged till date. The table below reproduces the Schedule to
the Act, listing the various categories under which relief may be permitted under the Act and their corresponding
amounts.26

S.No. Category of relief Maximum award (Rs)

1 Reimbursement of medical expenses incurred 12,500

2 Fatal accidents (in addition to medical expenses) 25,000
3 For permanent total or partial disability or other injury or
sickness

a) Reimbursement of medical expense (in each case) 12,500

b) Cash relief on the basis of percentage of disablement 25,000 for total permanent
as certified by an authorized physician disability

4 Loss of wages due to temporary partial disability which reduces 1,000 per month (maximum 3
earning capacity of the victim, provided the victim has been months)
hospitalized for a period exceeding 3 days and is above 16 years
of age.

5 Any damage to private property, on the basis of actual damage 6,000

Table 1- Quantum of relief for the corresponding damages under the PLIA

The PLIA 1991 confers power on the Central Government or any person authorized by the Government to make
an application to a court not inferior to Metropolitan/Judicial Magistrate of first class to restrain any owner from
handling hazardous substances in contravention of the Act if they have reason to so believe.27 The list of
authorized persons was notified on 19th March 199328 as follows.

Level of Jurisdiction Person, Authority or Officer

Whole of India Any Director, Joint Director, Adviser or Additional Secretary to the
Government of India in the Department of Environment, Forests and Wildlife

25
Public Liability Insurance Rules 1991 (PLIR 1991), s 10(3)
26
PLIA 1991, sch 1
27
PLIA 1991, s 13
28
MoEF [1993] S.O. 282(E)

6 The Management of Environment Relief Fund

 The Chairman or Member-Secretary of Central Pollution Control Board
constituted under Section 3 of the Water (Prevention and Control of Pollution)
Act, 1974 (6 of 1974)

Joint Director (Legal) in the Department of Environment, Forests and Wildlife,

Ministry of Environment, Forests and Wildlife, Ministry of Environment and
Forests, Government of India.

State The Government of the State (Represented by the Secretary to the State
Government in-charge of Environment)

The Chairman or Member-Secretary of The State Pollution Control Board

constituted under section 4 of the Water (Prevention and Control of
Pollution) Act, 1974 ( 6 of 1974) or a State Board for the Prevention and
Control of Air Pollution constituted under Section 5 of the Air (Prevention
and Control of Pollution) Act, 1981 ( 14 of 1981)

Union Territories or areas The Chairman or the Member Secretary of the Pollution Control Committees
as laid down by the Central of the Union Territories who have been delegated powers under clause (4) of
Board Section 4 of the Water (Prevention and Control of Pollution) Act, 1974 and
Section 6 of the Air (Prevention and Control of Pollution) Act, 1981 by Central
Pollution Control Board

Revenue District District Collector

Area as laid down by the Regional Officers of the Central Pollution Control Board who have been
Central Board delegated powers under Section 20, 21 and 23 of the Water (Prevention
and Control of Pollution) Act, 1974 (6 of 1974) and Section 24 of the Air
(Prevention and Control of Pollution) Act, 1981 (14 of 1981)

Area as laid down by the Regional Officers of the State Pollution Control Board who have been
State Board delegated powers under Section 20, 21, and 23 of the Water (Prevention and
Control of Pollution) Act, 1974.

Regional Officers of the State Pollution Control Board who have been
delegated powers under Section 24 of the Air (Prevention and Control of
Pollution) Act, 1981.

Zonal/Regional Area as Any Regional/Zonal Officers or a Director In-charge of a Regional/Zonal Office

laid down by the Ministry of the Ministry of Environment & Forests.
of Environment & Forests.

Table 2- List of various authorities and their respective jurisdiction notified under the PLIA

7
Section 7A of the PLIA empowers the Central Government to establish a central fund to be known as the
‘Environmental Relief Fund’29. From a combined reading of the PLIA and its rules, it appears that the main purpose
of the fund is to provide immediate relief to the victims of accidents (as defined in the Act) as determined by the
District Collector, but only in cases where the relief amount awarded by the Collector exceeds the amount
covered by the insurance policy. The section also empowers the Central Government to notify a scheme that
specifies in which the ERF will vest, how the Fund will be administered and other administrative details relating to
the payment of money into and out of the Fund.

In the exercise of this power, ‘The Environment Relief Fund Scheme’ (ERF Scheme) was notified by the Ministry of
Environment and Forests on 4th November 200830 with the UIICL appointed as its Fund Manager for five years.
The funds existing in the custody of various insurance companies at the time of notifying the Scheme were ordered
to be transferred to the ERF within 60 days of publication of the notification.31 UIICL was subsequently
reappointed as Fund Manager up to 31st December 201432, and then 30th June 201533, 31st December 201534 31st
March 201635 and 31st March 201936.

Key provisions of the ERF Scheme, 200837 along with the relevant excerpts are discussed below.

❖ Amounts equal to that of the premium of the insurance policy taken out by the owner38, along with
income from investments and any other money specified in sub-section 2C of Section 4 of the Act shall
be credited to the ERF. An owner is required to contribute a sum equal to the premium payable to
insurer. 39
❖ The amount remitted by the owner as compensation for environment damages under the National
Environment Tribunal Act (NETA), 1995 to be credited to the ERF. (The NETA is no more functional and is
superseded by National Green Tribunal, which will be discussed later)

❖ All owners contributing to the Relief Fund shall inform the Fund Manager and the Collector about their
payment to the insurer, of the premium and contribution to the ERF within fifteen days of the payment.
This information must be submitted in a specific format, which is contained in Form-III of the Scheme
notification.
❖ In case of delay in payment by the owner or insurer, interest at the rate of 18% per annum shall be
charged on the owners or insurer, as the case may be.

29
This provision was inserted through the Public Liability Insurance (Amendment) Act, 1992.
30
MoEF [ 2008] G.S.R.768(E)
31
Ibid s 5(2)
32
MoEF [2014] G.S.R.497(E)
33
MoEF [2015] S.O.287(E)
34
MoEF [2015] S.O.1878(E)
35
MoEF [2016] S.O.256(E)
36
MoEF [2016] G.S.R.606(E)
37
MoEF (n 30)
38
PLIR 1991, s 11
39
PLIA 1991, s 4

8 The Management of Environment Relief Fund

❖ Amounts in the Relief Fund account shall be invested in fixed deposits preferably in the nationalized
banks immediately, after leaving the minimum agreed balance in the Relief Fund account, in consultation
with the Reserve Bank of India and standing instructions shall be given to the bankers to convert funds
over and above the minimum balance to the fixed deposits.
❖ The Fund Manager shall submit to the Central Government the annual statement of accounts on the
management of funds.
❖ The recovery of tax deducted at source on account of credit in the Relief Fund, conditions of Permanent
Account Number and the legal status of funds from the point of taxation shall be decided in consultation
with the Central Board of Direct Taxes and shall be binding on the Fund Manager

❖ It is the responsibility of the insurance company or Fund Manager to deposit with the Collector, the sum
awarded within 30 days of the receipt of the demand from the Collector.
❖ Where money is paid from the ERF, the owner must reimburse this money within a period of 6 months to
the Collector who in turn will remit it to the ERF. The Collector is responsible for the recovery of this
amount from the owner along with interest as arrears of land revenue or of public demand.
❖ Where the relief is higher than the insurance limit and the money in the ERF, the Collector must demand
the remaining money from the owner as arrears of land revenue or of public demand. Where this liability
of the owner is higher than the total assets or where the owner is declared insolvent, the matter must be
referred to the arbitrator to be appointed by the Central Government who would decide about the
liabilities and the recovery of amount from the owner.
❖ The Collector is responsible for disbursal of the money to claimants within 15 days of receiving it.
❖ The Collector shall furnish the accounts related to disbursement of relief amounts under ERF within 45
days to the Fund Manager.

Figure 1- Process of claim disbursal under the ERF Scheme 2008

9
As per the latest information obtained IRDAI from its website and using RTI, there are 21 general insurance
companies (“GIC”) which issue insurance policies under PLIA. The latest entrant to the list is Kotak Mahindra GIC
Ltd. One insurance company- L&T GIC Ltd which existed on the IRDAI website as registered in 2010-11 is not
present in the latest list of companies authorized by the IRDAI.40 Documents with UIICL show the contribution
from L&T GIC Ltd as ‘nil’ since the financial year 2016-17.

Before the ERF Scheme 2008, there were 11 insurance companies which were registered with IRDAI for issuing
insurance under PLIA. The opening contribution to the ERF was Rs 2,82,79,83,107. New India Assurance Co. Ltd
(Rs 82,01,08,022), United India Insurance Co. Ltd (Rs 67,94,95,838), The Oriental Insurance Co. Ltd (Rs
57,29,84,614), National Insurance Co. Ltd (Rs 52,00,00,000) and ICICI Lombard GIC Ltd (Rs 58888011) were
among the highest contributors to the ERF when it was established.

The cumulative contribution by different general insurance companies till 2018-19 stood at Rs 3,74,89,95,487.
The top five contributors till date to the ERF are New India Assurance Co. Ltd (Rs 99,69,04,399), United India
Insurance Co. Ltd (Rs 83,90,34,367), The Oriental Insurance (Rs 68,17,17,424), National Insurance Co. Ltd (Rs
62,11,97,605) and Tata-AIG GIC Ltd (Rs 12,48,33,333).

First contributions from Insurance Companies Amount (INR)

New India Assurance Co. Ltd 82,01,08,022
United India Insurance Co. Ltd 67,94,95,838
The Oriental Insurance Co. Ltd 57,29,84,614
National Insurance Co. Ltd 52,00,00,000
ICICI Lombard GIC Ltd 5,88,88,011
Tata AIG GIC Ltd 4,44,85,404
IFFCO Tokio GIC Ltd 4,25,58,487
Bajaj Allianz GIC Ltd 4,12,96,021
Reliance GIC Ltd 3,57,67,332
Cholamandalam MS GIC Ltd 1,23,99,378
TOTAL 2,82,79,83,107
Table 3- Amounts contributed by different insurance companies to ERF for the first time (Source- UIICL)

40
Insurance Regulatory and Development Authority of India (IRDAI), RTI response dated 20 August 2019

10 The Management of Environment Relief Fund

 S. No. Insurer name IRDAI Registration First Contribution Contribution till 2018-19

1 National Insurance Co. Ltd 2000-01 2008-09 62,11,97,605

2 New India Assurance Co. Ltd 2000-01 2008-09 99,69,04,399

3 Tata-AIG GIC Ltd 2000-01 2008-09 12,48,33,333

4 Bajaj Allianz GIC Ltd 2001-02 2008-09 10,71,81,854

5 ICICI Lombard GIC Ltd 2001-02 2008-09 10,26,51,145

6 IFFCO Tokio GIC Ltd 2001-02 2008-09 8,38,66,894

7 Reliance GIC Ltd 2001-02 2008-09 5,53,95,093

8 Cholamandalam MS GIC Ltd 2002-03 2008-09 2,73,03,359

9 The Oriental Insurance Co. Ltd 2005-06 2008-09 68,17,17,424

10 United India Insurance Co. Ltd 2007-08 2008-09 83,90,34,367

11 Royal Sundaram GIC Ltd 2000-01 2008-09 1,86,33,068

12 HDFC Ergo GIC Ltd41 2008-09 2008-09 2,55,53,108

Future Generali India Insurance

2008-09 2009-10 2,06,22,917
13 Company Limited

14 Universal Sompo GIC Ltd 2008-09 2009-10 36,27,524

15 Bharati-Axa GIC Ltd 2008-09 2010-11 71,49,586

16 Raheja QBE GIC Ltd 2009-10 2009-10 29,07,001

17 Shriram GIC Ltd 2009-10 2014-15 1,79,745

18 L&T GIC Ltd42 2010-11 2011-12 12,93,113

19 SBI GIC Ltd 2011-12 2012-13 47,99,094

20 Liberty Videocon GIC Ltd 2012-13 2014-15 6,95,866

21 Magma HDI 2012-13 2014-15 10,59,194

22 Kotak Mahindra GIC Ltd 2017-18 NA NA

23 Others

Most probably contribution from Not applicable 2012-13 2,23,89,798

compensation awarded by National
Green Tribunal.

TOTAL 3,74,79,23,069

Table 4- Total contribution by different insurance companies till 31st March 2019 (Source- UIICL)

41
Information from IRDAI under RTI listed it to be registered in 2010-11 (n 39). The IRDAI website shows it as registered in 2008-09.
42
text to n 40

11
 Year wise Contribution to the ERF

Year General Insurance Companies Others Amount (INR)

First contribution to ERF 2,82,79,83,107 - 2,82,79,83,107

2008-09 2,15,73,868 - 2,15,73,868

2009-10 8,57,77,011 - 8,57,77,011

2010-11 5,78,51,377 - 5,78,51,377

2011-12 10,84,25,370 - 10,84,25,370

2012-13 8,15,01,053 - 8,15,01,053

2013-14 10,50,89,346 6,00,000 10,56,89,346

2014-15 9,30,16,501 4,50,000 9,34,66,501

2015-16 8,72,53,673 43,94,434 9,16,48,107

2016-17 7,96,15,048 1,53,10,908 9,49,25,956

2017-18 8,39,25,287 6,25,000 8,45,50,287

2018-19 9,46,03,505 10,00,000 9,56,03,505

Table 5- Year wise contributions to the ERF (Source- UIICL)

Figure 2- Chart depicting top contributors to the ERF till 31st March 2019 (Source- UIICL)

12 The Management of Environment Relief Fund

As on 31st March 2019, Rs 8,10,32,00,000 has been invested as fixed deposits in 13 different banks. The Fund
Manager informed Vidhi that the selection of banks for such investment is made based on the rate of interest
offered and the accessibility of their branch offices. Vidhi accessed one note of the Board and Secretarial
Department, UIICL dated 10th February 2018 where decisions on investment in fixed deposits were made. The
note showed that there had been discussions on the limits on maximum amounts to be invested in public and
private sector banks. However, no discussions appear to have taken place on which banks should be selected for
fixed deposits.

As on 31 March 2019 As on 31 March 2018 Change in Investment

Axis Bank 32,72,00,000 - 32,72,00,000

Canara Bank 1,12,59,50,000 - 1,12,59,50,000

City Union Bank 56,91,50,000 40,00,00,000 16,91,50,000

Federal Bank 26,86,00,000 28,61,70,000 -1,75,70,000

Indian Overseas Bank 1,50,00,00,000 1,48,34,00,000 1,66,00,000

IndusInd Bank 60,00,00,000 39,85,30,000 20,14,70,000

Karnataka Bank 4,91,50,000 37,61,50,000 -32,70,00,000

Kotak Mahindra Bank 41,31,50,000 27,68,00,000 13,63,50,000

Lakshmi Vilas Bank 15,00,00,000 40,00,00,000 -25,00,00,000

South Indian Bank 40,00,00,000 40,00,00,000 -

Tamilnad Mercantile Bank 60,00,00,000 40,00,00,000 20,00,00,000

Vijaya Bank 1,50,00,00,000 1,13,93,90,000 36,06,10,000

Yes Bank 60,00,00,000 35,77,00,000 24,23,00,000

Andhra Bank - 34,62,00,000 -34,62,00,000

IDFC - 40,00,00,000 -40,00,00,000

Karur Vysya bank - 40,00,00,000 -40,00,00,000

TOTAL 8,10,32,00,000 7,06,43,40,000 1,03,88,60,000

Table 6- A summary of the fixed deposits in various banks for the years 2017-18 and 2018-19 (Source- UIICL)

13
The NGT was established on 18th October, 2010, vide notification No. S.O 2569(E) under the National Green
Tribunal Act, 2010. The objective for setting up NGT was the effective and expeditious disposal of cases relating
to the environment, granting relief and compensation for environmental damages and ordering restitution of
damaged property or the environment.

Section 24 of the NGT Act, 2010 requires the compensation or relief awarded for damage to the environment to
be remitted to the ERF.

24. Deposit of amount payable for damage to environment

(1) Where any amount by way of compensation or relief is ordered to be paid under any award
or order made by the Tribunal on the ground of any damage to environment, that amount shall
be remitted to the authority specified under sub-section (3) of section 7A of the Public Liability
Insurance Act, 1991 (6 of 1991) for being credited to the Environmental Relief Fund
established under that section.

(2) The amount of compensation or relief credited to the Environmental Relief Fund under sub-
section (1), may, notwithstanding anything contained in the Public Liability Insurance Act,
1991 (6 of 1991) be utilised by such persons or authority, in such manner and for such
purposes relating to environment, as may be prescribed. 43

As per verified documents, the Fund Manager has not kept any separate account for contributions to the ERF as a
result of awards or orders made by the NGT for compensation or relief for environmental damage. Instead, they
appear to have been included as ‘Others’ for audit purposes. The first contribution to the ‘Others’ category came
in the year 2012-13, and the total contribution stands at Rs 2.24 Crores as on March 2019. The Fund Manager
informed Vidhi that a new account for compensation or relief awarded by the NGT has been opened recently, but
we were unable to access any official documentation to this effect. 44 We could only retrieve one receipt dated 25th
September 2018 from the Fund Manager which acknowledged receipt of Rs 10 lakhs towards the head
‘Contributions to ERF- New Fund (Tribunal Award Compensation)’.

It is also particularly important to highlight that a separate RTI application filed with Public Information Officer
(“PIO”) of MoEFCC seeking statement of accounts of ERF for years 2010-2018 was transferred to the NGT. The
NGT responded that the said information is not available with the PIO of NGT. Appeals under Section 19(1) of RTI
Act were filed separately with MoEFCC and NGT. The First Appellate Authority of MoEFCC upheld the order of
PIO of MoEFCC providing the following reason:

The National Green Tribunal was established by the Act of Parliament for effective and expeditious disposal of cases
relating to environment. The compensation or relief is ordered to be paid under any award or order made by the tribunal

43
National Green Tribunal Act 2010 (NGTA 2010), s 24
44
Rule 35(4) of the National Green Tribunal (Practice and Procedure) Rules, 2011 requires a separate account to be created and maintained
by the fund manager in order to receive and disburse amounts pursuant to orders or awards of the NGT.

14 The Management of Environment Relief Fund

on the ground of any damages to environment. The accounts is maintained by National Green Tribunal itself. The matter
is therefore, transferred to NGT for further necessary action.45

The First Appellate Authority of NGT also disposed the first appeal against the PIO of NGT and gave following
reason in its order:

4.In terms of Section 24 of NGT Act, 2010 the amount of compensation or relief may be remitted to the authority
specified under Sub-Section 3 of Section 7A of the Public Liability Insurance Act, 1991(6 of 1991) for being credited to
the Environmental Relief Fund established under that Section.

5.NGT is a judicial authority and not a regulatory authority of Environmental Fund hence information sought by the RTI
applicant is not available in the records of the NGT in terms of para 2 (f) of RTI Act, 2005. 46

Therefore, it is clear that neither MoEFCC or NGT has maintained any records of the compensation awarded by
NGT in terms of Section 24(1) of the NGT Act. It is also unclear whether any amount has been utilized from the
ERF in terms of Section 24(2) of the NGT Act, as we were unable to access any records at the Fund Manager’s
office.

The MoEFCC' press release of 2015 stated that there had been no expenditure from the fund so far, except fees
to the Fund Manager. 47 In an email correspondence from UIICL accessed by us dated 20th March 2019, the Fund
Manager stated that there had been no utilization of the fund in the financial year 2017-18. It should be noted
that, as on the date of this email from UIICL, the NGT has already been in operation, and has been awarding
compensation for more than 8 years.

As per an analysis carried out by Vidhi of 116 judgments of the NGT delivered between 2014-2019, a total sum of
approx. Rs 645 Crores was awarded as compensation for environmental damages. It was observed that in 13 such
cases, the NGT had explicitly asked the respondents to deposit the compensation amount to the ERF (total: Rs 90
Lakh); in 99 cases, the amount was ordered to be paid to the victim or government authorities like the District
Collector, Forest Officer, Pollution Control Boards (total: Rs 343.75 Cr) ; and in 4 cases it was not specified to
whom the amount should be deposited (total: Rs 300.35 Cr). Irrespective of whether or not any NGT direction
specifically stated that the amount awarded as compensation or relief should be deposited with the ERF, it is clear,
from a reading of section 24 of the NGT Act and section 35 of the NGT (Practice and Procedure) rules that the
award must be deposited to ERF. While the amount awarded by the NGT as of December 2019 is approximately
645 crores, only Rs 2 crores appears to have been deposited with the ERF.

Even if it is assumed that orders of the NGT awarding compensation have been appealed to the SC under section
22 of the NGT Act, there is a glaring disparity between the total amount awarded by the NGT and the amount
credited with the ERF. This could be indicative of the following possibilities:

• Amounts awarded by the NGT are not first being credited to the ERF before disbursal as required by the
NGT Act and its rules, and are instead directly being disbursed to victims or government authorities 48
• An overwhelming proportion of orders awarding compensation have been appealed to SC and have not
yet been disposed;
• There is simply no compliance with orders of the NGT awarding compensation or relief i.e. money is
neither being credited to the ERF nor is it being directly disbursed.

This is a matter of serious concern because it suggests that the purpose for which the NGT was created is not being
served. Apart from the extremely low amount of money credited to the ERF as a result of orders or awards of the

45
Tarika Jain v Central Public Information Officer (MoEFCC), order of First Appellate Authority dated 01 February 2019
46
Tarika Jain v Central Public Information Officer (NGT), order of First Appellate Authority dated 01 March 2019
47
‘Ministry of Environment, Forest & Climate Change (MoEFCC), ‘Environment Ministry Directs CPCB to Ensure Better Implementation of
Public Liability Insurance Act, 1991’ (Press Information Bureau Government of India, 7 September 2015)
<https://pib.gov.in/newsite/PrintRelease.aspx?relid=126680> accessed 3 March 2020

48
Bhushan C, Banerjee S and Bezbaroa I, ‘Green Tribunal, Green Approach: The Need for Better Implementation of the Polluter Pays Principle’
(Centre for Science and Environment 2018)

15
NGT, Vidhi was unable to access any accounts that demonstrated that money from the ERF had been disbursed
under this head. It would be a serious miscarriage of environmental justice if it were the case that not a single
disbursal had been made from the ERF in the manner contemplated by the NGT Act nearly 10 years after the Act
came into force.

As per Section 8 of The ERF Scheme, 2008, the Fund Manager shall maintain proper accounts and other relevant
records and prepare an annual statement of accounts for each State and Union Territory (“UT”) up to 31st March
of every year showing the collection of amounts by insurance companies in respect of hazardous industries in their
respective territories crediting the said amounts into the Relief Fund.

The Fund Manager admitted that the State and UT wise accounts have not been maintained since the fund was
constituted. The main reason for this is because of the unavailability of Form III, which is required to be submitted
by the insurer to the Fund Manager. This fact has been reiterated in the auditor’s report on ERF of the year 2010-
11 which stated that because of the lack in submission of Form III by the owners, the State-wise and Union
Territory-wise accounts and other relevant records have not been maintained.

As per Section 5(5) of the ERF Notification, 200849, all owners contributing to the Relief Fund shall inform the
Fund Manager and the Collector about payment of such contribution in Form-III within fifteen days of making the
payment of this contribution to the insurer. An explanatory note appended to Form-III states that the insurer is
responsible for submitting Form-III to the Fund Manager.

There are 16 different heads of information which are required to be filled by the industry owner in Form-III,
including the name of the owner, business, territorial limits, information on hazardous chemicals handled, financial
capacity, amount of premium, contribution to the ERF, and date of payment to the insurer. This information is
critical to have an accurate record of the risk, premium amount and the agreement under the PLIA between the
owner and the insurer. If the basic information in Form-III is compromised, then there is a great possibility that the
entire process of making claims under the public liability insurance may be vitiated. The insurance is the first port
of relief for victims of accidents involving hazardous chemicals. Once the Collector makes an award, it is the
insurance company or the Fund Manager that must deposit the sum awarded within 30 days of the receipt of the
demand to the Collector or as directed by the Collector. 50 The submission of Form-III allows the Fund Manager to
verify that industries involving hazardous chemicals have taken the insurance under PLIA 1991 and made the
required contributions to the ERF. Form III also gives several critical information like the name of hazardous
chemicals handled, its quantity, policy period etc. Therefore, it is vital that owners fill out this information
accurately and that insurance companies regularly submit this form to the Fund Manager.

It was observed that the Fund Manager does not have Form-III in respect of many of the contributions to the ERF.
The Fund Manager informed Vidhi that they have followed up with insurance companies but Form-III is still not
being submitted regularly. Vidhi has accessed a copy of one such email sent by the Fund Manager to a reputed
insurance company highlighting this irregularity and sending a reminder to submit Form-III. The Fund Manager
also informed Vidhi that even in the forms which are submitted, the information remains incomplete or irregular.
Vidhi obtained copies of correspondences intimating deposit of amount collected towards ERF by 13 different
insurance companies to the Fund Manager for 2018-19 and analyzed them from the perspective of the

49
MoEF (n 30)
50
Ibid s 7(3)

16 The Management of Environment Relief Fund

completeness of the information submitted. Out of the submissions by 13 insurance companies, 4 lacked any Form
III.

The first audit report of the ERF for the year 2008-09 noted:

All owners contributed to the Relief Fund have not informed the fund manager about the amount of contribution made
towards the fund for the year ended 31.03.2009 in Form III as required by the government notification. Consequently,
the penalty as stated in the notification has not been accounted in the books.

A similar note also appeared for the audit reports in the following years right up to the latest audit report accessed
by us for the year 2017-18 where lack of Form III has been highlighted by the auditor. This demonstrates that the
non-submission of information vital to the effective working of the PLIA and the ERF is a persistent problem.

There were several inconsistencies observed in the manner in which Form-III is filled by the owners. One of the
major inconsistencies was the manner in which the information for ‘Name & Quantities of hazardous substances
handled by owner’ is provided in Form-III. In most of the forms analyzed, the information has been filled in a very
casual manner. There were widespread inconsistencies in the manner in which the information is provided in Form
III including some forms where the information is not provided at all (See Appendix I). In some of the forms
analyzed, the quantity of hazardous quantity is shown as ‘nil’. This is perplexing- the PLIA is only intended to apply
to owners of industries involving hazardous chemicals. If there is no hazardous substance involved, then it is
unclear why they would even be bound by the obligation to subscribe to a public liability insurance under the PLIA.
Some examples are provided below:

Owner company Insurer Name & quantities of hazardous Form-III dated

substance handled by owner (declared
in Form III)
Parle Biscuits Pvt Ltd Future Generali Nil 31st Mar 2019
Sreepathi Lab Pvt Ltd Future Generali Nil 23rd Apr 2019
Tata Ceramics Ltd TATA AIG Nil 27th Mar 2019
Carlsberg India Pvt Ltd TATA AIG Nil 17th Jan 2019
Table 7- Examples of companies which opted for insurance under PLIA and showed quantities of hazardous substance
handled as ‘nil’

Similar inconsistencies were observed in the submission of information under the head ‘Address of Collector
under which Territorial limit is the unit handling hazardous substance falls’ of Form III. Some forms provided only
the district or city name, while in several forms it was blank. This is especially problematic because the Collector
is the authority charged with disbursing relief under the PLIA. It is a serious impediment to access to relief if it is
not clear which Collector is to be approached.

In some of the forms, there were inconsistencies in the information provided under ‘date of proposal and
declaration’. In one of the forms, it was written ‘NA’. Even the space for ‘Name & Designation of Authorized
Signatory’ were blank and incomplete in some of the forms analyzed. If this information is not provided, it raises
serious concerns about the validity of the insurance policies themselves.

A detailed analysis of the manner in which the information required under Form-III has been recorded by owners
is provided in Appendix II.

The audit reports of the ERF since the year 2008-09 have consistently mentioned the fact that the fund does not
have a Permanent Account Number, Tax Deduction and collection number (TAN) and service tax registration. The
audit report for the years 2008-09, 2009-10, 2010-11, 2011-12 states the reason for not having PAN, TAN and
service tax registration as ‘pending finalization of the legal status by the Ministry’.

The UIICL has responded to this issue vide letter dated 25th June 2012 to the auditor where they stated that the
Ministry of Environment and Forests is yet to respond to the clarification sought by them. The letter also stated

17
that the Fund Manager could only apply for TDS exemption and service tax registration once the ERF itself is
registered,

The audit reports for the years 2012-13 and 2013-14 again highlighted the issue of not having PAN, TAN and
service tax registration as ‘pending finalization of the legal status by the Ministry’. However, the audit report of the
year 2014-15 gave no reasoning for the same and just stated that the fund is unable to apply for PAN, TAN and
service tax registration. It was also stated that consequent to this, the bank accounts, fixed deposits and other
banking transactions of the fund are carried on by Fund Manager in the name and style of “United India Insurance
Company Limited, Environment Relief Fund” without legal status. In the audit reports of 2015-16, 2016-17, it is
stated that the fund is unable to apply for PAN, TAN and service tax registration, since its constitution is not
defined.

The audit report of 2016-17 referred to a note that the fund has obtained an advocate’s opinion dated 22 nd
December 2016 stating that the fund does not require a separate legal constitution since it is enacted under the
PLIA. The same statement has been reiterated in the audit report for the year 2017-18 as well.

Though the note referring to the advocate’s opinion was not available with the audit report, Section 6(7) of the
ERF notification, 2008 clearly has a provision on how these matters are to be decided. It states that:

The recovery of tax deducted at source on account of credit in the Relief Fund, conditions of Permanent Account Number
and the legal status of funds from the point of taxation shall be decided in consultation with the Central Board of Direct
Taxes (CBDT) and shall be binding on the Fund Manager.

It was unclear from the files inspected on whether the CBDT was consulted to resolve the confusion. The audit
report for the year 2017-18 shows that Rs 1,78,586 has been deducted as TDS by the State Bank of Mysore which
is shown as receivable from United India Insurance Company Limited under Sundry Debtors in Balance Sheet.
Similarly, TDS of Rs 1,87,19,037 was shown to be deducted by Andhra Bank and State Bank of Travancore for the
year 2016-17. Without clarity on the legal status of the fund, there might be problems in getting the refund in lieu
of the TDS collected by income tax department.

As stated in Part II, in some instances, insurers have issued policies under PLIA to industries not dealing with
hazardous substances. In other instances, a single insurance under the PLIA was taken out by companies for
multiple units and even multiple businesses. For e.g., Form III accessed for Finolex Industries (annual turnover-Rs
3500 Cr; paid up capital- Rs 124 Cr) having units handling hazardous substances at Pune, Vadodara, Ratnagiri,
Cuttack and Indore was issued just one policy of indemnity limit of Rs 15 Cr (aggregate) through TATA AIG GIC
Ltd. In another instance, Rallis India Ltd. (annual turnover-Rs 2035 Cr; paid up capital- 19.45 Cr) and having
different businesses which includes pesticides, seeds, seed treatment chemicals, fertilizers, polymer PEKK, solar
power and pharma intermediates (all of which involve hazardous chemicals) took one policy of indemnity limit of
Rs 15 Cr (aggregate) through the same insurer. Form-III in respect of these companies even mentioned ‘India’ in
the column corresponding to ‘territorial limits’ and ‘address of collectors under which territorial limit is the unit
handling hazardous substance falls.51

Form-III clearly contemplates that insurance policies and contributions to the ERF must be made in respect of
individual units. This is especially important because the indemnity limit in respect of multiple accidents in a year
has been capped at Rs 15 crores.52 Owners with multiple units will drastically reduce their liability under the Act
if they subscribe to a single insurance policy for all units. This is not contemplated by the scheme of the Act, which
requires owners to take out a separate insurance policy in respect of each undertaking. Although undertaking has

51
Based on Form III accessed for the respective companies at UIICL under RTI
52
PLIR 1991, s 10

18 The Management of Environment Relief Fund

not been defined under the PLIA, it would appear that this is closest in meaning to a unit, rather than the entire
industry.

Section 21 of the PLIA prescribes the following purpose and constitution of the Advisory Committee—

(1) The Central Government may, from time to time, constitute an Advisory Committee on the matters relating to
the insurance policy under this Act.

(2) The Advisory Committee shall consist of—

(a) three officers representing the Central Government;

(b) two persons representing the insurers;

(c) two persons representing the owners; and

(d) two persons from amongst the experts of insurance or hazardous substances, to be appointed by the Central
Government.

(3) The Chairman of the Advisory Committee shall be one of the members representing the Central Government,
nominated in this behalf by that Government.

The information on name and designations of the members of the Advisory Committee and the minutes of its
meetings since the year 2015 was obtained from the MoEFCC under the RTI Act.

The MoEFCC vide its notification dated 20th November 201453 reconstituted the Advisory Committee by
appointing following officers and persons.

Joint Secretary/Advisor (HSM) Division

1. Ministry of Environment, Forest and Climate Change Chairman

Joint Secretary (Chemicals) or his nominee

2. Ministry of Chemicals and Fertilizers, Department of Chemicals and Member
Petrochemicals

Joint Secretary (Insurance) or his nominee

3. Member
Ministry of Finance, Department of Economic Affairs

Chairman or his nominee

4. Member
General Insurer’s (Public Sector) Association of India

Chairman & Managing Director or his nominee

5. Member
United Indian Insurance Co. Ltd

6. Representative of Confederation of Indian Industry (CII) Member

Director
7. Member
National Insurance Academy

53
MoEFCC, ‘Reconstitution of the Advisory Committee on Matters Relating the Insurance Policy under Section 21 of the Public Liability
Insurance Act, 1991’ (2014) F.No. 27-1/2014-HSMD

19
 Executive Director or his nominee
8. Oil Industries Safety Directorate Member
Ministry of Petroleum& Natural Gas

Addl. Director/Director (HSM) Division

9. Member Secretary
Ministry of Environment, Forests & Climate Change

The terms of reference for the Committee were also laid down in the 2014 notification which states that the
committee must advise the Ministry regarding:

i) Validity period, policy and premium amounts for insurance;

ii) Drawing up the methodology for payment of insurance claims;
iii) Execution of insurance scheme;
iv) Drawing up and execution of Environment Relief Fund Scheme and payment of relief under the
scheme;
v) Selection/appointment of Fund Manager; review of eligibility criteria and procedure for selection of
Fund Manager;
vi) Handling cases where cheques for policy premium/contribution to ERF scheme bounced;
vii) Amendments and policy changes, if any.

The response of the MoEFCC to a query under the RTI Act states that there have been two meetings of the
Advisory Committee since it was reconstituted on 20th November 2014.54 The minutes of its meeting indicate that
the meeting dated 8th March 2016 was a detailed one where decisions regarding the eligibility of insurance
companies for managing the fund was discussed. It was observed by the committee that there is an overall lack of
interest among general insurance companies for managing the ERF. The Committee rejected two companies viz.
SBI Funds Management Private Ltd and SBI General Insurance Company Ltd as they did not meet the eligibility
criteria.

The eligibility criteria for the Fund Manager as discussed by the Advisory Committee are set out below.

i) The organization should have a valid registration with IRDAI;

ii) The Fund Manager should be a public sector company of repute with minimum 5 years of
experience in the field of management of corpus of similar kinds of funds;
iii) The organization should have assets worth more than 5 times of the amount accumulated in the ERF
and know how to successfully manage such funds;
iv) The organization fulfilling the above-mentioned criteria is ready to work at a service fee equal to 1%
of the amount added in the corpus per annum.

The meeting ended with recommendations to reappoint UIICL as Fund Manager for a period of 5 years and to
discuss in the next meeting, the enabling of private insurance companies to participate in the exercise of
appointment of the Fund Manager. The meeting was attended by all members except the representatives of CII
and the Ministry of Finance.

The subsequent meeting was held after 3 years on 6th March 2019 where the main discussions were about
increasing the financial limits of the relief awarded under the PLIA to a minimum of Rs 5,00,000. There was also
advice by the Chairman on the transfer of powers of the District Magistrate to the State, although no detailed
discussion and reasoning has been noted in the minutes. The minutes were very short with a recommendation to
extend the tenure of the UIICL as Fund Manager for 3 months and inviting expressions of interest from public
sector insurance companies for the appointment of the Fund Manager after 30th June 2019.

There was no discussion on the issues discussed in its previous meeting, such as enabling private insurance
companies to apply for Fund Manager. Surprisingly, the meeting was attended by 3 representatives of MoEFCC,
as against 2 authorized members, 1 representative from CII and 3 representatives of UIICL, as against 1

54
MoEFCC, RTI response from HSM Division (25 September 2019)

20 The Management of Environment Relief Fund

authorized member. Other official members were not present in the meeting. The participation of unofficial
members in the Advisory Committee meeting is a bad practice as it is bound to create conflict of interest,
especially when decisions on the appointment of new Fund Managers are undertaken with three out of the seven
participating members from the existing Fund Manager.

It is also important to highlight that except selection of Fund Manager; the Advisory Committee did not deliberate
on other issues in detail. This includes issues like validity period of the policy, methodology for payment of
insurance, execution of insurance scheme and ERF, payment of relief, handling cases where cheques for policy
premium/ERF bounced- all of which were part of the original terms of reference during their appointment.

Sections 13, 14 and 15 of the PLIA deal with a range of penalties for not complying with different provisions under
the Act. The MoEFCC in its press release of 7th September 2015 admitted that there are many cases where owners
have failed to subscribe to PLI policies because of ignorance. 55 However, in a response to a question asked under
the RTI Act about action taken for such default, the MoEFCC has replied that no penal action under the said
sections has been taken by the Ministry till date. 56

55
MoEFCC (n 47)
56
MoEFCC, RTI response from HSM Division (02 January 2020)

21
Since November 2008, when the Environment Relief Fund was notified, till March 2019, the fund has grown from
Rs 283 Crores to Rs 810 Crores. The corpus is invested in fixed deposits in 13 different banks. A major portion of
the fund is invested in the Indian Overseas Bank and Vijaya Bank (Rs 150 Cr each) and the Canara Bank (Rs 112.6
Cr).

The cumulative contribution by different general insurance companies till 2018-19 stood at Rs 3,74,89,95,487.
The top five cumulative contributors to the fund are New India Assurance (26.8%) followed by United India
Insurance (22.5%), Oriental Insurance (18.3%), National Insurance (16.7%) and Tata AIG (3.3%).

Contributions pursuant to compensation or relief awarded by the National Green Tribunal are not maintained
properly and are merely shown in the statement of accounts of the fund under the head “Others” since the year
2012-13. The amount under this head which stands at only Rs 2 Crores, although the NGT has awarded
approximately Rs 645 crore in orders passed between 2014 and 2019.

There is also ambiguity regarding the legal status and tax status of the fund, which was first highlighted in the audit
report for the year 2008-09 and reiterated every year since. The Fund Manager has expressed its difficulty in
applying for PAN, TAN, exemption from TDS and meeting compliance with service tax requirements because of
this ambiguity.

Several insurance companies are not submitting Form-III to the Fund Manager as mandated by the ERF scheme
notification, because of which the fund manager is not able to maintain comprehensive, up-to-date records of the
fund. There were many irregularities observed in the manner in which Form-III is filled, with very few insurers
providing complete information. It was also observed that insurance policies under the PLIA have been issued to
companies which are not handling hazardous substances.

Section 4 (2A) of the PLI Act mandates that no insurance policy shall be purchased or renewed for an amount less
than the paid-up capital of the undertaking and not exceeding Rs 50 crores. The maximum indemnity limit for the
insurance under PLI Act is presently capped at 5 Cr per accident and Rs 15 Cr annually as prescribed in the PLI
Rules, 1991 and have not been increased since. In one of the forms analysed, a single policy with an indemnity limit
of Rs 15 Cr has been issued to one company having multiple units located in different districts. In another such
case, it was observed that a single insurance policy, again with an indemnity limit of Rs 15 Cr has been issued to a
company running different kinds of industries. This has serious implications because it allows companies that are
riskier in terms of the potential harm they pose to health and the environment to reduce their liability, thereby
defeating the objective of the PLIA.

The Advisory Committee constituted under Section 21 of the PLI Act has met only twice between January 2015
and August 2019. The manner and circumstance in which important decisions were taken by the committee in its
last meeting is a matter of concern.

22 The Management of Environment Relief Fund

The discussion in the previous section demonstrated that there are problems with the implementation and
enforcement of the PLIA, attributable to a general lack of interest, awareness and coordination among different
stakeholders. Additionally, there are weaknesses in the Act itself. The Act appears to have been drafted in haste,
with some unclear provisions that are not in harmony with other contemporary laws, policies, scientific
advancements and practices. This section addresses both these problems and suggests measures that can be
taken in the immediate and short-term to strengthen the Act as well as its enforcement.

The definitions under the Act have been criticized since its enactment by academics as well as lawmakers57.
Liability under the PLIA is contingent on the occurrence of an accident. An accident under the Act must occur
while ‘handling’ a hazardous substance. The Act is already very limited and its scope is further narrowed by the
manner in which ‘handling’ is defined. Under the PLIA, the ‘handling’, in relation to any hazardous substance,
means the manufacture, processing, treatment, package, storage, transportation by vehicle, use, collection,
destruction, conversion, offering for sale, transfer or the like of such hazardous substances.

The selective use of only ‘transportation by vehicle’ excludes accidents which may take place while transporting
hazardous substances via air, railways and ships.58 This exclusion is particularly significant in light of the fact that
the Indian Waterways Act, 2016 increased national waterways from 5 river systems to 116 rivers across the
country. One of the justifications while introducing the National Waterways Bill, 2015 was that the inland water
transport is recognized as fuel efficient, cost effective and environment friendly mode of transport, especially for
bulk goods, hazardous goods and over dimensional cargos59. If it is the intention of the government to promote
inland transport via waterways, particularly for hazardous substances, it follows that an effective regime for
liability for harm from accidents during such transport must also be in place. Therefore, the handling of hazardous
substances under the PLIA should include all modes of transport.

The Act defines “hazardous substance” as any substance or preparation which is defined as hazardous substance
under the Environment (Protection) Act, 1986 (29 of 1986), and exceeding such quantity as may be prescribed, by
notification, by the Central Government. These substances and their quantities were notified by the Ministry of
Environment and Forests on 24 March 1992 but have never been amended since then. Additionally, these notified
substances are not as comprehensive as the list of hazardous chemicals under the Manufacture, Storage and
Import of Hazardous Chemical (MSIHC) Rules, 1989. It should also be noted that the Environment Protection Act,
1986, also contains a definition of ‘hazardous substances.’ It is unclear whether such substances would qualify as
substances under the PLIA, if quantities in respect of such substances were not notified. We recommend that the
list of hazardous substances under the PLIA should include all substances notified under MSIHC Rules and should
be periodically updated.

There have been also concerns regarding the exclusion of ‘workman’ (defined under Workmen’s Compensation
Act, 1923) as an affected party under the PLIA. As the Act currently stands, a workman cannot claim relief under
the PLIA. Questions have also been raised about the liability to grant relief to non-contractual workers on a daily
wage or workers working beyond their working hours. This also creates distinction between the workmen and
other people who are affected.60 Although workmen may claim compensation under the Workmen’s

57
Lok Sabha (n 17)
58
Raghavan (n 6), Subramanya (n 7)
59
The National Waterways Bill, 2015
60
Subramanya (n 7)

23
Compensation Act, 1923, this statute offers the employer more defenses than the PLIA, which is based on no-fault
liability.61

There have been also criticisms regarding the power of the Central Government to exempt Government owners
under Section 4(3) from the mandatory requirement to subscribe to a public liability insurance policy. The Central
Government may exempt an owner, who is the Central Government, State Government, local authority or any
corporation owned or controlled by the Central/State government or State Government. Such exemption may be
granted only if a fund has been established and maintained by such owner in accordance with rules under the Act.
This provision is seen as discriminatory, provides scope for non-compliance in public sector companies and lacks
any valid reasoning.62 Thus, this provision should be removed in its entirety.

When the Public Liability Insurance Bill was introduced in parliament, as also when subsequent amendment bills
came up for discussion, a key suggestion was increasing the amount of relief stated in the PLIA, which was very
low. The Minister who introduced the original bill and subsequent bill for amendment reiterated that the relief
under the PLIA is merely interim and immediate relief. It is not intended to act as a substitute for full compensation
which may be awarded by court of law. 63 64 However, given that the Indian judicial system is notorious for delay,
it is all the more important that the interim relief awarded by robust.

In this regard, it should be noted that the quantum of relief provided under the PLIA is negligible when compared
with present day expenses as well as the quantum of relief provided in the course of other accidents not involving
hazardous substances. For e.g. Insurance provided by Indian Railways for its passengers at Re 1 provides the
following relief for accidents. 65

Death Permanent total Permanent partial Hospitalization Transportation of

Disability Disability expenses for injury mortal remains
Rs. 10,00,000 Rs. 10,00,000 Rs. 7,50,000 Rs. 2,00,000 Rs. 10,000

The quantum of relief, which was considered meagre at the time of enactment of the PLIA and which has never
been updated since, must be revised.

The PLIA limits the liability under insurance to not less than the paid-up capital of the undertaking, but not
exceeding Rs 50 crores.66 A limit on the liability of insurers was introduced for the first time through an
amendment to the PLIA in 1992, less than a year after the Act came into force.67 Before this amendment, there
was unlimited liability under insurance policies subscribed to under the Act. This amendment was brought
because insurance companies were not issuing policies with unlimited liability. This limitation in insurance cover

61
Raghavan (n 6)
62
Subramanya (n 7)
63
Maneka Gandhi, Ninth Lok Sabha Debate, Sixth Session (1991) Ninth series, Vol XIII No. 6
64
Kamal Nath, Lok Sabha Debate, Third Session (1992) Tenth series, Vol IX No. 13
65
‘Optional Travel Insurance For E-Ticket Passengers’ (Indian Railway Catering and Tourism Corporation Limited)
<http://contents.irctc.co.in/en/InsuranceTermCondition.pdf>
66
Section 4(2A) of the PLI Act.
67
The Public Liability Insurance (Amendment) Act, 1992

24 The Management of Environment Relief Fund

was complemented by creating the ERF, which was supposed to be built up over the course of time from the
surcharge on the insurance premium to meet any expense beyond the insurance policy.68

The Public Liability Insurance Rules, 1991 notified on 1st May 1991 further limit the liability of the insurer to
rupees five crores per accident and in case of more than one accident during the policy period or one year,
whichever is less, to rupees fifteen crores in the aggregate. Any award of relief which exceeds the amount payable
under the insurance policy is to be met from the ERF. The Rules therefore, further lower the liability of the insurers
by more than one third of the limit originally set by the principal Act in an exercise of excessive delegated
legislation.

We recommend that the indemnity limit under the insurance policies should be proportionate to the paid-up
capital of the owner and the potential of the risk imposed by a particular industrial settlement. A certain minimum
insurance value should be set for any hazardous industry. Any amount that goes beyond the indemnity limit should
be paid from the ERF.

If the relief awarded under the Act is not covered by the policy, it is to be met from the ERF. When such a payment
is made from the Fund, the owner is required to reimburse this money to the ERF within a period of six months
along with interest. This appears to double the liability of the owner in an unjustified manner. The owner is already
paying a sum equivalent to the insurance premium to the ERF to cover precisely this kind of contingency i.e. when
the insurance policy is not able to meet the relief awarded. A fund, by definition, is a pool of resources that can be
used to cover unforeseen expenses. Requiring owners to reimburse the fund appears to negate the purpose for
which a fund is created. Instead the upper limit of the liability should be removed and the owners should be
allowed to go for higher insurance covers for a higher premium.

Form-III is a very important document for the insurer as well as industries. The manner in which the form III has
been filled is a matter of great concern. We recommend that information sought in the Form-III needs to be
updated to make it simpler.

It is also important to simplify the process of submission of Form-III to ensure compliance and better management
of the fund. One basic change should mandatorily be shifting the submission of Form-III from paper mode to digital
mode. This will ensure that incomplete forms cannot be submitted by the owners. The MOEFCC informed Vidhi
that a web-based ‘Public Liability Insurance Policy Management System (PLIMPS) is in place to update information
with respect to industries covered under the PLIA as well as information about their policies and contributions to
the ERF. At present, data from approx. 1600 industries are available on PLIMPS which is based on information
received from all Chief Inspectors of Factories on major accident hazards units located in their respective
State/UTs for which PLI policy is must. 69 However, the PLIMPS could not be accessed on the website of MOEFCC,
nor it could be found using a simple internet search. Making PLIMPS accessible in the public domain is very
important because it has the potential to make the entire process transparent, accountable and self-compliant.
Some examples followed could be that of the Environmental Clearances and Consent Management applications
available online on the websites of the MoEFCC and State/UT Pollutions Control Boards.

The MoEFCC has been struggling to make industries comply with the PLIA ever since its enactment and has issued
several directions in the past,70 the success of which is still to be assessed systematically. Other recommendations
to improve compliance are:

68
Kamal Nath (n 64)
69
MoEFCC (n 56)
70
Ibid

25
 i) Make suitable amendments in the Companies Act, 2013 to bring the information on hazardous
activities and the status of insurance under the PLIA under the ‘mandatory website disclosure’.
ii) Make it mandatory to provide information about the status of insurance under the PLIA in
applications for Consents under the Air Act 1981 and the Water Act 1974, conditions for
Environmental Clearances and the six-monthly compliance reports which are submitted by the
industries under Environment Impact Assessment Notification, 2006. Consents to Operate and
Environmental Clearances should be suspended or revoked for owners who fail to subscribe to PLIA
insurance
iii) Amend the PLIA to increase the minimum penalty71 for failure to take out insurance policies.

This study was primarily focused on management of the Environment Relief Fund by the Fund Manager. Given the
poor state of management and utilization of the fund, the usefulness of the PLIA in addressing the concerns of
immediate relief to industrial disaster doesn’t seems to be very promising. However, we do not yet have the
information of the number of accidents involving hazardous industries, the losses incurred and status of claims
accepted or rejected by District Collector. For a complete understanding and assessment of the effectiveness of
the ERF, all this information has to be gathered which we plan as the subject of further study.

71
PLIA 1991, s 14

26 The Management of Environment Relief Fund

Copies of some selected Form III accessed at the fund manager’s office

27
28 The Management of Environment Relief Fund
29
30 The Management of Environment Relief Fund
Inconsistencies in Form III submitted by insurance companies to the fund manager

Magma ICICI Future

Company Uni. Sompo TATA AIG Cholamandalam Reliance SBI
HDI* Lombard Generali
Name of
Insured Yes Yes Yes Yes Yes Yes Yes Yes
Owner
Business Yes Yes Yes Yes Yes Yes Yes Yes

Address Yes Yes Yes Yes Yes Yes Yes Yes

Territorial
Inconsistent Yes Yes Yes Yes Yes Inconsistent Yes
Limits
Name &
Quantities
of hazardous
Inconsistent Inconsistent Inconsistent Inconsistent Inconsistent Inconsistent Inconsistent Inconsistent
substances
handled by
owner
Address of
Inconsistent Inconsistent Inconsistent Inconsistent Inconsistent Inconsistent Inconsistent Inconsistent
Collector
Annual turn
Yes Yes Yes Yes Yes Yes Yes Yes
over
Paid up
capital as
defined Sec Inconsistent Yes Inconsistent Yes Yes Yes Inconsistent
4 92A) of the
Act Yes
Policy
Yes Inconsistent Yes Yes Yes Yes Yes
period Yes
Indemnity
Inconsistent Inconsistent Yes Yes Yes Yes Yes
Limit Yes
Premium Yes Yes Inconsistent Yes Yes Yes Yes Yes

Contribution
Yes Yes Inconsistent Inconsistent Yes Yes Yes Yes
to ERF
Date of
Proposal
Inconsistent Inconsistent Inconsistent Inconsistent Inconsistent Yes Inconsistent Inconsistent
and
declaration
Address of
Policy
Inconsistent Inconsistent Inconsistent Inconsistent Inconsistent Yes Inconsistent Inconsistent
Issuing
Office
Date and
Particular of
Inconsistent Inconsistent Inconsistent Inconsistent Inconsistent Yes Inconsistent Inconsistent
payment to
insurer

Date Yes Inconsistent Inconsistent Yes Yes Yes Inconsistent Inconsistent

Place Yes Inconsistent Inconsistent Yes Yes Yes Inconsistent Inconsistent

Signature Yes Yes Yes Yes Yes Yes Yes Yes

Name &
Designation
of Inconsistent Inconsistent Inconsistent Inconsistent Inconsistent Inconsistent Inconsistent Inconsistent
Authorised
Signatory
Inconsis
Yes Fine Inconsistent
tent

31
 For any queries and clarification regarding this report,
please contact [email protected]

www.vidhilegalpolicy.in

Vidhi Centre for Legal Policy

A-232, Defence Colony
New Delhi – 110024
011-43102767/43831699
[email protected]

32 The Management of Environment Relief Fund