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Opinion on liability waiver based on legality, says AG

J. Venkatesan
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G.E. Vahanvati
G.E. Vahanvati

: Attorney General G.E. Vahanvati, who has said it is for the operator of a nuclear plant to decide whether it wishes to exercise the ‘right of recourse’ provided to it by section 17 of the Civil Liability for Nuclear Damage Act, 2010 observes that his opinion is based purely on legality and not on policy. Thereby, he clearly separates the legality question and policy intent.

The question that was put to the AG was, “In the light of the Inter-Governmental Agreement between the governments of India and Russia, will it be legally sustainable to authorise Nuclear Power Corporation of India Ltd. (NPCIL) not to exercise right to recourse under section 17?”

In his answer, the AG says: “I am formulating an answer to this question purely from the point of view of legality and not a policy issue. To approach this from the point of view of law, legality and not policy it appears that as a matter of legal permissibility, it can be done. This would appear from the wording of section 17 itself, which reads as follows:-

“Section 17: The operator of the nuclear installation after paying the compensation for nuclear damage, in accordance with section 6, shall have a right of recourse where-such right is expressly provided for in a contract in writing; the nuclear incident has resulted as a consequence of an act of supplier or his employee, which includes supply of equipment or material with patent or latent defects or sub-standard services; the nuclear incident has resulted from the act of commission or omission of an individual done with the intent to cause nuclear damage.”

“Section 17 (a) provides for recourse if such right is expressly provided for in a contract in writing. If the operator chooses not to incorporate such a provision in the contract, it would be open to him to do so. I repeat that whether the operator should do this or not is not a matter of legality but one of policy.”

Another important question put to him was “Whether a decision not to exercise right to recourse u/s 17 can be taken at the stage of signing of Techno Commercial Agreement with Russia?

For this, he says: “Legally such a decision can be taken at the stage of signing Techno Commercial Agreement but I repeat this is a serious issue raising policy consideration.”

On “Whether it will be prudent to waive the right to recourse in regard to Russia only when section 17 is applicable to all nuclear installation, keeping in view the provisions of Inter-Governmental Agreement with Russia? No such provision exists in the existing pact with other countries,” he says: “This again is not an issue of law but one of propriety and prudence. The ultimate test would be whether there is no choice available commercially and whether there is no option but to agree to waiver, as demanded. As far as the other countries are concerned, I do not agree with the view of the MEA [Ministry of External Affairs] that there could be no objection to the international law angle and a third State cannot be demanding similar rights as a matter of right. The fact is that no other bilateral agreement has such a provision. It cannot also be forgotten that as mentioned by the MEA itself, other States have laws providing for recourse. The impact of giving a waiver to one country with regard to an agreement with other countries cannot be kept out of consideration.”

According to the AG: “it is interesting to note the views of the Ministry of External Affairs in paragraph 6 (r) of its note…”We consider that section 17 of CLND Act is a kind of enabling provision; it gives a specific right to the operator but does not place any mandatory obligation or requirement to exercise the right to recourse against supplier. In the absence of a mandatory obligation, the operator could choose not to exercise that right. It is a statutory right and not a fundamental right under the Constitution. A fundamental right cannot be given up or contracted out of an individual even voluntarily or willingly.”

The AG says: “the views of the MEA cannot be said to be legally unsustainable, but a question may arise about advisability of such a waiver, particularly when NPCIL is a PSU. The failure to provide for and have recourse against the supplier would ultimately impact public funds. One of the grounds which has been taken in the proceedings [pending in the Supreme Court], is that non recourse or limited recourse ultimately will entail a burden on the tax payer, particularly, when the nuclear programme is being implemented through a PSU and having regard to the provisions of section 7, where the ultimate liability is that of the Central government. In my opinion this raises serious policy issues and that policy is ordinarily a matter for Government to decide.”


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