The southern Indian state of Kerala has passed a new law that will allow people to seek compensation from the soft-drink giant Coca-Cola.
The company is mired in controversy over its bottling operation in Palakkad district, which campaigners say has caused environmental damage.
They say it has also led to a severe water shortage in the area.
Coca-Cola's Indian subsidiary - Hindustan Coca-Cola Beverages (HCCB) - has rejected the charges.
In a statement, it said it was "disappointed" with the new legislation.
"This bill is devoid of facts, scientific data or any input from or consideration given to HCCB," the statement said.
"At no time was HCCB offered an opportunity to present facts, engage in dialogue around this issue or share independent data before the bill was tabled or approved."
The statement said that "numerous scientific studies have been conducted by various government bodies" to look into any correlation between HCCB's operations and environmental concerns.
"None of these studies have found HCCB's operations responsible for any of the damages alleged in this bill," the statement said.
"The government's decision to proceed with no regard for facts or real data sets a dangerous precedent."
The state government says the plant "over-extracted" ground water at the site, which led to shortages of drinking water.
It says the disposal of sludge containing metals from the plant affected crops as well as the health of local people - causing skin diseases, breathing problems and other ailments.
Under the new law, a three-member tribunal will be set up to deal with compensation claims by those who say they were adversely affected by the Coca-Cola plant.
The company says it is reviewing all options, but is "willing to talk to all stakeholders on the issue".
Civil rights groups have welcomed the government's move, calling it a "landmark moment for the people of Kerala and India".
The plant at Plachimada was shut down more than six years ago following a protracted legal battle and a sustained campaign by civil rights groups.
Two years later, the state government banned the production and sale of Coca-Cola, but that move was later withdrawn following a High Court ruling.
A high-level committee earlier put the cost of damage created by the plant to be around $47m (£30m).