Ex Post Facto Environmental Clearances deemed illegal: Supreme Court in Alembic Pharmaceuticals Ltd. vs. Rohit Prajapati & Ors. (2020)

Introduction

Date of the Judgment: April 1, 2020

Citation: (2020) INSC 284

Judges: Dr. Dhananjaya Y Chandrachud, J and Ajay Rastogi, J

Can industries that began operations without obtaining prior environmental clearances be allowed to continue operating by obtaining clearances after the fact? The Supreme Court of India addressed this critical question in a judgment concerning several pharmaceutical companies operating in Gujarat. The court examined the validity of a circular that allowed for ex post facto environmental clearances, ultimately ruling against it and emphasizing the importance of prior clearances for environmental protection.

Case Background

The case involves appeals by several industrial units, including Alembic Pharmaceuticals Ltd., United Phosphorus Limited, and Unique Chemicals, against a decision of the National Green Tribunal (NGT). The NGT had quashed a circular issued by the Union Ministry of Environment and Forests (MoEF) on May 14, 2002, which allowed for ex post facto environmental clearances. The NGT also ordered the revocation of environmental clearances granted to these units and directed their closure for operating without valid consents.

The Environmental Impact Assessment (EIA) notification of January 27, 1994, mandated prior Environmental Clearances (ECs) for setting up and expansion of industrial projects. The deadline for obtaining an EC was extended multiple times, eventually to March 31, 2003, by the circular of May 14, 2002. This circular allowed industrial units that had already commenced operations to apply for an ex post facto EC, subject to certain conditions.

The first and second respondents challenged the circular of May 14, 2002, before the High Court of Gujarat, which was later transferred to the NGT. The NGT ruled that the law did not permit ex post facto clearances and that the circular was invalid, leading to the appeals before the Supreme Court.

Timeline

Course of Proceedings

The first and second respondents challenged the circular of May 14, 2002, before the High Court of Gujarat. The case was subsequently transferred to the Western Zonal Bench of the NGT. The NGT, in its judgment dated January 8, 2016, held that the concept of ex post facto environmental clearance was not sustainable under any provision of law. The NGT stated that the circular of May 14, 2002, was an internal communication and did not override the EIA notification of 1994, which was issued under statutory powers.

The NGT issued several directions, including that authorities should not grant consent for industrial activities covered by the EIA notification of 1994 without fulfilling the steps mandated by the notification. It also ordered the revocation of ECs granted to the industrial units involved and directed the closure of all industrial activities operating without a valid EC. Additionally, the NGT directed each unit to deposit a compensation of ₹10 lakhs for causing environmental degradation, to be used for restoration efforts in the Ankleshwar industrial area.

A review petition filed by Unique Chemicals Limited against the NGT’s judgment was dismissed, leading to the appeals before the Supreme Court by the affected industrial units and the MoEF.

Legal Framework

The primary legal framework for this case is the Environment (Protection) Act 1986, specifically Section 3(1) which grants the Central Government the power to take measures to protect and improve the environment. Section 3(1) states:

“Subject to the provisions of this Act, the Central Government, shall have the power to take all such measures as it deems necessary or expedient for the purpose of protecting and improving the quality of the environment and preventing controlling and abating environmental pollution.”

The EIA notification of January 27, 1994, issued under Section 3(1) and clause (v) of Section 3(2) of the Environment (Protection) Act 1986 read with Rule 5(3)(d) of the Environment (Protection) Rules 1986, mandates prior environmental clearances for certain industrial projects. The notification states:

“…on and form the date of publication of this notification in the Official Gazette, expansion or modernization of any activity (if pollution load is to exceed the existing one) or new project listed in Schedule I to this notification, shall not be undertaken in any part of India unless it has been accorded environmental clearance by the Central Government in accordance with the procedure hereinafter specified in this notification.”

The notification also specifies that no construction work relating to the project can be undertaken until environmental and site clearances are obtained.

Arguments

The appellants, including Alembic Pharmaceuticals Ltd., United Phosphorus Limited, and Unique Chemicals, argued that:

• The issue is academic as they have obtained ECs for subsequent expansions.
• The EIA notification of 1994 did not explicitly require a “prior” EC, unlike the 2006 notification.
• Their units were exempt from the 1994 notification as they had obtained No Objection Certificates (NOCs) from the Gujarat Pollution Control Board (GPCB) before January 27, 1994.
• A public hearing was not mandatory under the 1994 notification.
• They have made significant investments and employ a large workforce, which would be prejudiced by closure.
• The first respondent selectively targeted them out of many similar units.
• The circular dated November 5, 1998, which extended the deadline for obtaining ECs, was not challenged.
• The NGT lacked jurisdiction to entertain the petition.
• The ex post facto clearances were valid based on the decision of the Supreme Court in Goa Foundation v Union of India.
• The legality of an ex post facto public hearing has been upheld by the Supreme Court in Lafarge Umiam Mining Pvt Ltd v Union of India.
• Closure should not be ordered, considering the significant investment and expansion undertaken by the industry, as held in Electrotherm Ltd v Patel.

The respondents, Rohit Prajapati and others, argued that:

• The circular of May 14, 2002, is illegal as environmental jurisprudence does not recognize ex post facto clearances, relying on Common Cause v Union of India.
• The circular lacks a legal basis under Section 3 of the Environment (Protection) Act 1986, as it does not protect the environment.
• The Comprehensive Environmental Pollution Index (CEPI) indicates critical pollution levels in the Ankleshwar industrial area.
• Compensation should be paid for environmental restoration even if closure is not ordered, due to years of operations without ECs.

Submissions by Parties

Issues Framed by the Supreme Court

The primary issue framed by the Supreme Court was:

1. Whether, in view of the requirement of a prior EC under the EIA notification of 1994, a provision for an ex post facto EC to industrial units could be validly made by means of the circular dated May 14, 2002.

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

On the jurisdiction of the NGT:

• Tamil Nadu Pollution Control Board v Sterlite Industries (I) Ltd, 2019 SCC Online SC 221: The Supreme Court held that the NGT cannot strike down rules or regulations made under the Environment Protection Act 1986.
• Bharat Sanchar Nigam Limited v Telecom Regulatory Authority of India, (2014) 3 SCC 222: The Supreme Court interpreted the appellate power under the TRAI Act, which was relied upon in the Sterlite case.

On the interpretation of the EIA notification and ex post facto clearances:

• Common Cause v Union of India, (2017) 9 SCC 499: The Supreme Court rejected the possibility of ex post facto ECs, stating that they are detrimental to the environment.

On the validity of ex post facto clearances:

• Goa Foundation v Union of India, (2005) 11 SCC 559: The appellants argued that ex post facto clearances were valid based on this decision, but the court distinguished it.
• Lafarge Umiam Mining Pvt Ltd v Union of India, (2011) 7 SCC 338: The appellants argued that the legality of an ex post facto public hearing was upheld in this case, but the court distinguished it.

On the consequence of violation of law:

• Electrotherm Ltd v Patel, (2016) 9 SCC 300: The appellants argued that closure should not be ordered, but the court distinguished this case.

Legal Provisions:

• Section 3(1) of the Environment (Protection) Act 1986: This section empowers the Central Government to take measures to protect and improve the environment.
• EIA notification of January 27, 1994: This notification mandates prior environmental clearances for certain industrial projects.

Judgment

The Supreme Court held that the circular of May 14, 2002, allowing for ex post facto environmental clearances, was illegal and contrary to the EIA notification of 1994. The court emphasized that the EIA notification requires a prior EC before any industrial activity can commence.

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• Tamil Nadu Pollution Control Board v Sterlite Industries (I) Ltd: Followed to establish the limits of the NGT’s jurisdiction.
• Bharat Sanchar Nigam Limited v Telecom Regulatory Authority of India: Followed to interpret the appellate power under the TRAI Act, which was relied upon in the Sterlite case.
• Common Cause v Union of India: Followed to reject the concept of ex post facto ECs.
• Goa Foundation v Union of India: Distinguished, as the facts and legal issues were different.
• Lafarge Umiam Mining Pvt Ltd v Union of India: Distinguished, as the facts and legal issues were different.
• Electrotherm Ltd v Patel: Distinguished, as the facts and legal issues were different.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the need to uphold the precautionary principle and ensure environmental protection. The court emphasized that prior environmental clearances are essential for sustainable development and that ex post facto clearances undermine the statutory requirements of the EIA notification of 1994.

Sentiment Analysis of Reasons Given by the Supreme Court

Fact:Law Ratio

The court’s reasoning was based on the following points:

• The EIA notification of 1994 mandates a prior EC, and the circular of May 14, 2002, is contrary to this.
• The concept of ex post facto clearance is alien to environmental jurisprudence.
• The industries failed to demonstrate that they met the conditions for exemption under Clause 8 of the explanatory note to the EIA notification of 1994.
• The environmental damage caused by the industries, as evidenced by the CEPI reports, is a significant concern.
• While the court acknowledged the investments made and the employment generated by the industries, these factors could not override the need for environmental compliance.

The court rejected the argument that the absence of the word “prior” in the 1994 notification meant that prior ECs were not mandatory. It held that the language of the notification clearly implied the need for a prior EC. The court also rejected the argument that the industries were exempt under Clause 8, as they had not obtained all relevant clearances before the notification.

The court considered the decisions in Lafarge and Electrotherm, but distinguished them based on the specific facts of those cases. It emphasized that the present case involved a fundamental violation of the EIA notification of 1994, which could not be condoned.

The court also considered the fact that the industries had subsequently obtained ECs and had undertaken expansion activities. However, it held that these subsequent actions did not cure the initial violation of operating without prior ECs.

The court, while setting aside the NGT’s order for closure of industries, ordered the industries to pay compensation of ₹ 10 crores each for environmental restoration.

Logical Reasoning Flowchart

Key Takeaways

• Industries must obtain prior environmental clearances before commencing any new project or expanding existing ones, as mandated by the EIA notification of 1994.
• Ex post facto environmental clearances are not permissible under the law and are detrimental to the environment.
• Industries cannot claim exemption from the EIA notification of 1994 unless they have obtained all relevant clearances from the State government, including NOCs from the State Pollution Control Board.
• The Supreme Court has emphasized the importance of environmental compliance and has held that economic considerations cannot override environmental concerns.
• The judgment underscores the need for sustainable development and inter-generational equity.

Directions

The Supreme Court directed the three industries, Alembic Pharmaceuticals Limited, United Phosphorous Limited, and Unique Chemicals Limited, to deposit a compensation of ₹10 crores each with the Gujarat Pollution Control Board (GPCB) within four months from the date of receipt of the certified copy of the judgment. This amount is to be used for the restoration and remedial measures to improve the quality of the environment in the industrial area where the industries operate.

Specific Amendments Analysis

There is no specific amendment analysis in this judgment.

Development of Law

The ratio decidendi of this case is that ex post facto environmental clearances are illegal and contrary to the EIA notification of 1994. The Supreme Court has clarified that prior environmental clearances are mandatory for industrial projects and that industries cannot operate without obtaining them. This judgment reinforces the importance of the precautionary principle and sustainable development in environmental law. The court has also emphasized that economic considerations cannot override environmental concerns.

Conclusion

The Supreme Court’s judgment in Alembic Pharmaceuticals Ltd. vs. Rohit Prajapati & Ors. is a landmark decision that clarifies the requirements for prior environmental clearances and rejects the concept of ex post facto clearances. The court has emphasized that industries must comply with environmental regulations and that economic considerations cannot override the need for environmental protection. The judgment underscores the importance of sustainable development and inter-generational equity. While the court did not order the closure of the industries, it imposed a significant penalty to address the environmental damage caused by their past violations.