NEW YORK (Reuters) - A lawsuit contending that thousands of people in India were exposed to polluted drinking water after the 1984 Union Carbide toxic-gas disaster in Bhopal was reinstated on Monday by a U.S. appeals court, which said a lower court improperly threw out the case.

Indian survivors of the Bhopal gas tragedy attend a protest march in New Delhi March 27, 2006. REUTERS/B Mathur

The U.S. Court of Appeals for the Second Circuit in New York sent the lawsuit back to a Manhattan federal court judge for further proceedings.

A three-judge panel of the appeals court found that the lower court had erred by granting the defendants’ request for summary judgment in the case before giving the plaintiffs the opportunity to gain access to certain pretrial documents and other information they had sought.

A December 1984 gas leak at the Union Carbide Corp pesticide plant in central India -- the world’s worst industrial disaster -- killed an estimated 3,800 people who inhaled toxic fumes, according to figures from the Indian government. Many more have died from gas-related illnesses.

Union Carbide, now owned by Dow Chemical Co, paid $470 million in compensation in 1989. Union Carbide, along with former chief executive Warren Anderson, are defendants in the water pollution lawsuit.

The lawsuit was brought on behalf of people who lived or worked near the Bhopal plant who say they suffered ailments including cancer and neurological damage caused by contaminated groundwater. The legal claims were first brought in 1999 after a study by environmental group Greenpeace found widespread water contamination in the area, said Richard Lewis, one of the lawyers for the plaintiffs.

“We’ve waited since 1999 to get our day in court and we look forward to proceeding,” Lewis, of law firm Cohen Milstein Hausfeld & Toll, said on Monday.

Union Carbide said that the appeals court ruling was based on a procedural issue -- not the merits of the case -- and that it believed the claims would ultimately be dismissed.

“The Second Circuit did not discuss the merits of the case or the merits of the trial judge’s ruling of dismissal, and its decision should not be interpreted as a ruling on the merits,” said Union Carbide spokesman Tomm Sprick. He said the trial judge “has consistently ruled to dismiss claims” against the defendants as the issues have come before him.

In its ruling, the appeals court said the lower court judge, U.S. District Judge John Keenan, had erred by converting a motion to dismiss by the defendants into a motion for summary judgment -- which closed the case.

By doing that, “we conclude that the district court did not give the plaintiffs sufficient notice to allow them adequately to respond to the converted summary judgment motion,” the ruling said.

The lawsuit is seeking class-action status and unspecified monetary damages. The plaintiffs contend there are potentially thousands of people in Bhopal who have suffered injuries linked to the polluted water.