Union Carbide Corporation Ltd. v. Union of India — 1994 DIGILAW 1188 (SC)

JUDGMENT : M.N. Venkatachaliah, CJI. These two applications filed by the "Bhopal Gas Peedit Sangharsh Sahyog Samiti" and the "Bhopal Group for Information and Action" respectively on 13th April, 1994/14th July, 1994 seek a review of the order dated 14th February, 1994, made at the instance of the Sole Trustee of the "Bhopal Hospital Trust". 2. By the said order dated 14th February, 1994, the Court permitted the sale of 1,65,84,750 shares in the Union Carbide India Limited held by the Union Carbide Corporation (UCC for short). The said shares were ordered to be attached by the Chief Judicial Magistrate, Bhopal by his order dated 30th April, 1992 in criminal proceedings - R.T. No. 2792 of 1987, in which U.C.C. and other accused were proclaimed as absconders. 3. By these applications, these applicants, which are or represent victim-groups, seek a review of the said order. We have heard Ms. Indra Jaising, learned senior counsel appearing in support of these applications and Sri Dipankar P. Gupta, learned Solicitor General for the Union of India. We have also heard Sir Ian Percival, the Sold Trustee of the Bhopal Hospital Trust, who was present in Court in connection with a Report submitted by him. 4. Ms Indra Jaising urged three contentions in support of the prayer for Review. 5. The first is that while modifying the order of attachment at the instance of the Sole Trustee of the "Bhopal Hospital Trust", it should have been ensured that the Union Carbide Corporation agreed to submit itself to the jurisdiction of the Indian courts and to appear in the pending criminal proceedings. It is also urged that the earlier order of this Court has, by implication, approved the transfer of the shares by the U.C.C. to the Trust. 6. The second is that while the permission for application and appropriation of a sum of Rs. 51 crores out of the sale proceeds towards construction of the Hospital could be considered unexceptionable on humanitarian considerations, the further direction in the order dated 14th February, 1994 that the rest of the funds be held in a separate account in the name of the Sole Trustee, "Bhopal Hospital Trust", though subject to the subsistence of the attachment was not appropriate and that the account should have been in the name of the Union Carbide Corporation alone. 7. The third contention was that the allocation of Rs. 7. The third contention was that the allocation of Rs. 5 crores towards the administrative-expenses of the Trust would not be justified and that those expenses come out of met the Union Carbide Corporation. 8. The first contention has no merit. It is not the Union Carbide Corporation that has sought to invoke the jurisdiction of this Court. It is the Trustee of the "Bhopal Hospital Trust" who has moved the Court. Therefore, the contention that the earlier order should have been conditional upon the U.C.C. submitting to the jurisdiction of this Court is not Germane to the enquiry. The only question before us was whether a part of the attached funds should be released for purposes of Hospital. Therefore, we find no merit in the first contention which is accordingly rejected. 9. We make it clear that by order dated 14th February, 1994 we have neither expressly nor by implication, pronounced on the question whether the purported pledge of the shares by the Union Carbide Corporation with the Sole Trustee was bona-fide and valid or whether the order of attachment was properly made. The Chief Judicial Magistrate had held that the transfer was not bona-fide. It would appear that there are some proceedings in the High Court in connection therewith, challenging the correctness of that order. It would depend on the outcome of the proceedings in the High Court on the question whether the decision of the Chief Judicial Magistrate, Bhopal, assumes finality. This clarification should allay the apprehensions of the applicants that a finding as to the genuineness and bona-fides of the transaction between Union Carbide Corporation on the one hand and the Sole Trustee of the "Bhopal Hospital Trust" on the other is implicit in the order dated 14th February, 1994. 10. The second contention is that the deposit of surplus funds ought to be in the name of the Union Carbide Corporation and not in the name of the Sole Trustee. Ms. Indra Jaising sought to point out that the attached shares in their entirety were not endowed to the Trust but were merely pledged for the securement of a stipulated Trust-fund not exceeding Rs. 51 crores and that any realisation from the sale of the shares in excess of Rs. 51 crores would revert to the author of the Trust. 11. Indra Jaising sought to point out that the attached shares in their entirety were not endowed to the Trust but were merely pledged for the securement of a stipulated Trust-fund not exceeding Rs. 51 crores and that any realisation from the sale of the shares in excess of Rs. 51 crores would revert to the author of the Trust. 11. We see some merit in this submission though, however, the fact that funds remain in the account of the Sole Trustee does not really determine the title to the funds; nor touch the validity or efficacy of the order of attachment. However, as the Sole Trustee does not lay claim to the surplus sale proceeds as part of the Trust funds, it is appropriate that the account stood in the name of both the Union Carbide Corporation and the Sole Trustee of the Bhopal Hospital Trust till the validity of the order of attachment is finally settled subject of course to the attachment. We, accordingly, direct that appropriate changes be made in the account. However, the only authority authorised to operate the account on behalf of Union Carbide Corporation would be Chief Judicial Magistrate, Bhopal, who has ordered the attachment. 12. It is incidentally to be mentioned that subsequent and pursuant to the order made on 14th February 1994, the shares have been sold and have fetched a sum of Rs. 290.2 crores as sale proceeds and that after setting apart a sum of Rs. 60 crores towards the Hospital, the balance together with accrued dividends remains in the account with the State Bank of India subject to attachment. To this extent, we accept the second contention of Ms. Indra Jaising and modify the earlier order accordingly. 13. The third contention is that the administrative expenditure of Rs. 5 crores should not have been permitted to the Sole-Trustee. It is urged that under the Instrument of Trust, the U.C.C. has to bear the expenses of administration. 14. We are afraid, there is some fallacy in this argument. The administrative expenses towards which a sum of Rs. 5 crores are allocated are administrative expenses connected with the incidental to the sale of the shares and connected with the construction of the Hospital in India. 14. We are afraid, there is some fallacy in this argument. The administrative expenses towards which a sum of Rs. 5 crores are allocated are administrative expenses connected with the incidental to the sale of the shares and connected with the construction of the Hospital in India. It may be recalled here that by the earlier order Sir Ian Percival, the Sole Trustee, was requested to act as the co-chairman of the Hospital Construction Committee. These items of expenditure cannot be said to relate entirely to the administration of the Trust but, in our opinion, pertain to the construction of the Hospital and all legitimate expenditure in this behalf should be provided out of the sale proceeds. The sum of Rs. 5 crores set apart is 'on account' and accounts from time to time shall be furnished by the Trustee and scrutinised by the Court. The views of the Union Government as to the permissibility of the outgoings shall be ascertained and appropriate orders made. Any expenditure other than those connected with or incidental to the sale of securities and the Hospital construction shall have to be borne by the Union Carbide Corporation independently of the sale proceeds. 15. These Interlocutory applications are disposed of accordingly.