Law of Torts
Absolute Liability and No Fault Liability: The Common Law Rule and the Statutory Schemes
Both dispense with proof of fault, and the resemblance ends there. Absolute liability is a judge made rule of the common law, evolved in M.C. Mehta v. Union of India for the hazardous enterprise, unlimited in amount and expressly deterrent in its measure. No fault liability is the creature of a statute, confined to the situations the statute names, fixed or capped in amount, and designed not to compensate fully but to pay quickly. One replaces the enquiry into fault with an enquiry into the nature of the activity; the other replaces it with an administrative formula.
1. The Comparison
Absolute liability | No fault liability | |
Source | Judicial. M.C. Mehta v. Union of India, (1987) 1 SCC 395 | Statutory |
When it applies | Wherever an enterprise carries on a hazardous or inherently dangerous activity | Only in the situations the statute specifies |
The amount | Unlimited, and correlated to the magnitude and capacity of the enterprise | Fixed or capped by the statute or its schedule |
The object | Full compensation, and deterrence | Immediate relief, not full compensation |
The forum | A civil court, or the writ jurisdiction | A tribunal, a Collector or a designated authority |
Procedure | A suit or a petition, with the usual incidents | Summary, and often on an application in a prescribed form |
Speed | Slow | Quick, and in several schemes within a fixed period |
What the claimant proves | That the activity was hazardous, and that harm resulted from it | The accident, the injury and the statutory nexus |
Defences | None | Only those the statute allows |
Insurance | Not required by the rule itself | Compulsory under several of the schemes |
Effect on other remedies | It is the remedy | Additional. It does not bar a claim for the full amount |
2. Absolute Liability in Brief
- An enterprise engaged in a hazardous or inherently dangerous activity owes an absolute and non delegable duty to the community to ensure that no harm results from it.
- No escape is required, and no non natural use. Harm within the premises is covered, which distinguishes it from Rylands v. Fletcher and answers Read v. Lyons.
- It is subject to none of the Rylands exceptions, so the act of a stranger, an act of God, statutory authority and the rest are all unavailable.
- It is no answer that the enterprise took all reasonable care.
- The measure is deterrent, being correlated to the magnitude and capacity of the enterprise so that the larger and more prosperous the enterprise, the greater the amount payable.
- The subject is examined fully in TORT 056 and the comparison with Rylands in TORT 115.
3. The Indian No Fault Schemes
Section 164, Motor Vehicles Act, 1988, as substituted with effect from 1 April 2022 Where the death or permanent disablement of any person has resulted from an accident arising out of the use of a motor vehicle, the owner of the vehicle or the authorised insurer shall be liable to pay compensation in respect of such death or disablement in accordance with the provisions of this section. The amount is a sum of five lakh rupees in the case of death, and a sum of two lakh fifty thousand rupees in the case of permanent disablement. In any claim for compensation under this section, the claimant shall not be required to plead or establish that the death or permanent disablement in respect of which the claim has been made was due to any wrongful act, neglect or default of the owner of the vehicle concerned or of any other person. |
The scheme | What it provides |
Section 164, Motor Vehicles Act, 1988 | Rs 5,00,000 on death and Rs 2,50,000 on permanent disablement, without proof of fault. In force from 1 April 2022, replacing the old section 140 structured scheme |
Section 161, Motor Vehicles Act, 1988 | Compensation in hit and run cases from the Solatium Fund, where the vehicle is untraced. Rs 2,00,000 on death and Rs 50,000 on grievous hurt under the 2022 Scheme |
Public Liability Insurance Act, 1991 | Relief on a no fault basis for death, injury or damage from an accident involving a hazardous substance, with compulsory insurance and payment on an application to the Collector: TORT 081 |
Employees' Compensation Act, 1923 | Compensation for personal injury by accident arising out of and in the course of employment, computed by a statutory formula from age and wages, without proof of fault: TORT 104 |
Consumer Protection Act, 2019, Chapter VI | Product liability. A manufacturer answers for a defective product notwithstanding that he was not negligent and made no express warranty: TORT 079 and TORT 098 |
4. How the Two Operate Together
- The statutory payment is interim and not exhaustive. It is designed to put money into the hands of an injured family while the real claim is being fought, and it is not the measure of the claim.
- What is paid is deducted from whatever the fault based or absolute liability claim ultimately yields, so there is no double recovery and no reason not to take it.
- The claimant should take the statutory relief at once and pursue the full claim separately. In a motor accident the section 164 award is taken while the section 166 claim proceeds.
- The schemes do not displace the common law, and a statute which provides a no fault remedy is not to be read as taking away the right to full compensation unless it says so.
- The commonest error is to treat the statutory ceiling as the value of the claim. Five lakh rupees is a floor and not a valuation, and a dependency computed on the multiplier method will very often be many times it: TORT 084 and TORT 085.
5. Why the Legislature Chose Caps
- The purpose is speed, and speed is bought with certainty. A scheme that paid full compensation would have to assess it, and assessment is the very thing that takes years.
- A fixed sum requires no enquiry at all beyond the fact of the accident and the injury, which is why it can be administered by a Collector or awarded on an application rather than after a trial.
- Insurance requires predictability. A liability of unknown extent cannot be priced, and a compulsory insurance scheme therefore needs a ceiling for the no fault component even where the fault based liability above it is unlimited.
- And the cap is tolerable only because the common law claim survives. If the statutory sum were the whole entitlement, the scheme would be a limitation of liability dressed as a benefit, which is how such schemes are criticised in jurisdictions where they do bar the common law action.
6. Which to Plead, and in What Order
The situation | What to do |
A motor accident causing death or permanent disablement | Apply under section 164 at once for the fixed sum, and pursue the section 166 claim on fault for the balance |
A motor accident where the vehicle is untraced | Apply under section 161 to the Claims Enquiry Officer under the Scheme |
An accident involving a hazardous substance | Apply to the Collector under the Public Liability Insurance Act, 1991 for the immediate relief, and sue on absolute liability for the full amount |
An industrial escape or emission causing widespread harm | Absolute liability under M.C. Mehta, with the polluter pays principle, and an application to the National Green Tribunal where the harm is environmental |
An injury at work | The Employees' Compensation Act, 1923, or a common law claim in negligence, but not both, the Act barring a suit where compensation has been claimed |
A defective product | Product liability under Chapter VI of the Consumer Protection Act, 2019, and negligence in the alternative |
⚠ Why absolute liability and no fault liability are so often confused, and why the confusion matters The two are run together because both are described as liability without fault, and the expression is accurate of each. But they were created to solve different problems and they behave differently in every respect that matters to a claimant. Absolute liability was the courts' answer to the impossibility of proving what went wrong inside a chemical plant: it removes the enquiry into fault but leaves the compensation at large, so a successful claimant recovers everything he has lost and, where the enterprise is large, something more by way of deterrence. The statutory schemes were the legislature's answer to a different problem, which is that litigation takes years and an injured family cannot wait: they remove the enquiry into fault and the enquiry into quantum together, and pay a conventional sum at once. The practical consequence is that a claimant who understands only the statutory scheme will settle for a fraction of his entitlement, and one who understands only the common law will wait five years for money he could have had in three months. The correct course is almost always to take both, in that order. |
7. The Position Stated Shortly
1. Absolute liability is a judge made rule; no fault liability is statutory.
2. Absolute liability applies wherever an enterprise carries on a hazardous activity; a no fault scheme applies only where the statute says.
3. Absolute liability is unlimited and correlated to the magnitude and capacity of the enterprise; a statutory scheme is fixed or capped.
4. Absolute liability aims at full compensation and deterrence; a no fault scheme aims at immediate relief.
5. Section 164 of the Motor Vehicles Act, 1988, in force from 1 April 2022, gives Rs 5,00,000 on death and Rs 2,50,000 on permanent disablement without proof of fault.
6. Section 161 covers hit and run cases from the Solatium Fund at Rs 2,00,000 and Rs 50,000 under the 2022 Scheme.
7. The Public Liability Insurance Act, 1991, the Employees' Compensation Act, 1923 and Chapter VI of the Consumer Protection Act, 2019 are the other principal schemes.
8. The statutory payment is interim and is deducted from whatever the full claim yields, so it should be taken at once.
9. A statutory no fault remedy does not displace the common law unless the statute says so.
10. The statutory ceiling is a floor and not a valuation, and a properly computed dependency will frequently be many times it.