Supreme Court clarifies consent requirements for retail petroleum outlets: Indian Oil Corporation Limited vs. V.B.R. Menon & Others (2023) INSC 231 (14 March 2023)

Date of the Judgment: 14 March 2023
Citation: (2023) INSC 231
Judges: Justice J.B. Pardiwala, Justice Sudhanshu Dhulia
Can the National Green Tribunal (NGT) mandate that all retail petroleum outlets obtain “Consent to Establish” (CTE) and “Consent to Operate” (CTO)? The Supreme Court recently addressed this question, clarifying the extent of the NGT’s powers and the necessity of such consents. This case involved appeals against an NGT order that required all new and existing petroleum retail outlets to obtain CTE and CTO, raising concerns about the practicality and necessity of such a mandate. The Supreme Court, while recognizing the NGT’s authority to protect the environment, modified the order to ensure a balance between environmental protection and ease of doing business.

Case Background

The case originated from an application filed by Mr. V.B.R. Menon before the National Green Tribunal (NGT), Southern Zone, Chennai, concerning the non-installation of Vapour Recovery Systems (VRS) at petroleum outlets. The applicant sought to compel oil marketing companies (OMCs) to install and operate VRS in all new and existing outlets in Tamil Nadu. The NGT, Chennai, while addressing the issue of VRS installation, also directed the Central Pollution Control Board (CPCB) and State Pollution Control Boards to mandate CTE and CTO for all new and existing retail petroleum outlets. This directive led to the present appeals by several oil marketing companies, including Indian Oil Corporation Limited.

Timeline:

Course of Proceedings

The National Green Tribunal (NGT), Chennai, adjudicated the Original Application No. 138 of 2020 (SZ) and issued directions on 23.12.2021. The NGT directed that retail petroleum outlets in cities with a population of more than 10 lakh, having a turnover of more than 300 KL/Month, should have installed VRS mechanisms. It also directed that new petroleum outlets and storage depots must install Stage 1 and Stage 2 VRS within the time fixed by the CPCB. Furthermore, the NGT mandated that the CPCB and State Pollution Control Boards issue directions to make it compulsory to obtain CTE and CTO for new and existing petroleum outlets. This order was challenged by several oil marketing companies before the Supreme Court.

Legal Framework

The judgment primarily revolves around the interpretation of the following legal provisions:

• Section 5 of the Environment (Protection) Act, 1986: This section empowers the Central Government to issue directions for protecting and improving the quality of the environment. The Supreme Court noted that this power can also be exercised by authorities delegated by the Central Government.
• Section 18 of the Water (Prevention and Control of Pollution) Act, 1974: This section deals with the powers of State Boards to give directions to ensure the prevention and control of water pollution.
• Section 18 of the Air (Prevention and Control of Pollution) Act, 1981: This section deals with the powers of State Boards to give directions to ensure the prevention and control of air pollution.
• Section 25 of the Water (Prevention and Control of Pollution) Act,1974: This section deals with restrictions on new outlets and new discharges and requires prior consent for establishing new outlets.
• Section 21 of the Air (Prevention and Control of Pollution) Act, 1981: This section places restrictions on establishing or operating any industrial plant in an air pollution control area without prior consent from the Board.
• Section 22 of the National Green Tribunal Act, 2010: This section provides for appeals to the Supreme Court on substantial questions of law arising from the orders of the NGT.
• Section 33 of the National Green Tribunal Act, 2010: This section gives the NGT Act an overriding effect over other laws.
• Rule 24 of the National Green Tribunal (Practices and Procedures) Rules, 2011: This rule allows the NGT to make orders or give directions to give effect to its order or to secure the ends of justice.

The Supreme Court also considered the guidelines issued by the CPCB on 07.01.2020, which outline measures for setting up new petrol pumps, including containment of spillages, leak detection, and installation of Vapour Recovery Systems (VRS).

Arguments

Appellant’s Submissions (Oil Marketing Companies):

• The directions issued by the NGT to make CTE and CTO mandatory are legislative in nature and beyond the NGT’s jurisdiction.
• There is no rational basis to issue directions making it mandatory for the ROs to obtain CTE and/or CTO.
• The directions conflict with the CPCB’s classification of petroleum retail outlets as “green,” which are exempt from mandatory CTE and CTO.
• The process of setting up a retail outlet already involves numerous approvals, and adding CTE and CTO would cause hardship and delays.
• The CPCB’s guidelines of 07.01.2020 adequately address environmental concerns, making additional approvals unnecessary.

Respondent No. 2’s Submissions (Original Applicant):

• The NGT did not commit any error in issuing the impugned directions.
• The appeal does not involve any substantial question of law.

Respondent No. 1’s Submissions (CPCB):

• The NGT’s directions for mandatory CTE and CTO were unnecessary, especially given the CPCB’s detailed guidelines of 07.01.2020.
• Compliance with the CPCB guidelines can achieve the same objectives without the need for CTE and CTO.
• Asking all existing ROs to obtain CTO is unreasonable and time-consuming.
• It is debatable whether the NGT can direct the CPCB to mandate CTE and/or CTO under Section 5 of the Environment (Protection) Act, 1986.

Issues Framed by the Supreme Court

The primary issue framed by the Supreme Court was:

1. Whether the NGT has the jurisdiction to direct the CPCB to make obtaining CTE and CTO mandatory for all petroleum retail outlets across the country under Section 5 of the Environment (Protection) Act, 1986?

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The following authorities were considered by the Supreme Court:

The following legal provisions were also considered by the court:

Judgment

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

How each authority was viewed by the Court?

✓ M.C. Mehta v. Union of India [(1986) 2 SCC 176]*, Indian Council for Enviro Legal Action v. Union of India [(1996) 3 SCC 212]*, A.P. Pollution Control Board v. M.V. Nayudu [(1999) 2 SCC 718]*, A.P. Pollution Control Board v. M.V. Nayudu [(2001) 2 SCC 62]*: These cases were cited to provide the background and context for the establishment of the National Green Tribunal, emphasizing the need for specialized environmental courts.
✓ Municipal Corporation of Greater Mumbai v. Ankita Sinha, 2021 SCC OnLine SC 897*: This case was used to explain the wide discretionary powers of the NGT to secure the ends of justice and to highlight that the NGT’s role is not just adjudicatory but also preventative and remedial in nature.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the need to balance environmental protection with the practicalities of business operations. The Court recognized the importance of the NGT’s role in safeguarding the environment but also considered the potential burden imposed by mandatory CTE and CTO requirements. The Court emphasized that the existing guidelines issued by the CPCB, if strictly followed, are sufficient to address environmental concerns related to petroleum retail outlets. The Court was also concerned about the potential delays and hardships that mandatory CTE and CTO requirements would impose on both new and existing outlets.

Logical Reasoning:

The Court considered alternative interpretations, including the NGT’s view that mandatory CTE and CTO were necessary for effective monitoring. However, the Court rejected this interpretation, emphasizing that strict adherence to CPCB guidelines would suffice. The Court also considered the potential for overreach by the NGT, noting that its powers, while broad, are not unlimited. The final decision was reached by balancing the NGT’s environmental mandate with the need to avoid unnecessary regulatory burdens.

The Supreme Court held that while the NGT has the power to direct the CPCB to take measures for environmental protection, the specific direction to make CTE and CTO mandatory for all petroleum outlets was unreasonable. The Court emphasized that the CPCB’s existing guidelines, if strictly followed, are sufficient to address environmental concerns. The Court also noted that the NGT’s directions were not prayed for by the original applicant.

The Court stated:

“The upshot of our aforesaid discussion is that the NGT was well within its powers and jurisdiction to issue the directions which have been impugned before us.”

“We would like to impress upon the CPCB to ensure that its guidelines referred to above are scrupulously followed and once the guidelines are scrupulously adhered to, no direction to obtain CTE and CTO for starting/operating a RO is warranted.”

“Even directing the ROs that may come up in future to obtain the CTE and CTO would be cumbersome and time consuming and thus we do not find it reasonable.”

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

• The NGT has the power to issue directions for environmental protection, but this power is not unlimited.
• The CPCB’s guidelines of 07.01.2020 provide adequate measures for environmental protection in petroleum retail outlets.
• Mandatory CTE and CTO would impose an unnecessary burden on businesses, leading to delays and hardships.
• The NGT’s directions were not prayed for by the original applicant.

There were no dissenting opinions in this judgment. The bench consisted of two judges, both of whom agreed on the final order.

The Supreme Court’s decision clarifies the scope of the NGT’s powers, emphasizing that while the NGT can issue directions for environmental protection, such directions must be reasonable and not unduly burdensome. The judgment also highlights the importance of regulatory guidelines issued by bodies like the CPCB and the need for strict adherence to these guidelines.

The decision could have implications for future cases involving environmental regulations, particularly in balancing environmental protection with the ease of doing business. It also underscores the importance of comprehensive guidelines and their effective implementation by regulatory bodies.

The judgment does not introduce any new doctrines or legal principles but reaffirms the existing legal framework and the need for a balanced approach to environmental regulation.

Key Takeaways

• The Supreme Court modified the NGT’s order, setting aside the mandatory requirement for CTE and CTO for all petroleum retail outlets.
• The Court emphasized that the CPCB’s guidelines of 07.01.2020 are adequate for environmental protection if strictly followed.
• The decision balances environmental protection with the practicalities of business operations, avoiding unnecessary regulatory burdens.
• The State Pollution Control Boards are now obligated to ensure compliance with the CPCB guidelines.

Directions

The Supreme Court directed the following:

• The CPCB shall ensure that all retail petroleum outlets in cities with a population of more than 10 lakh and a turnover of more than 300 KL/Month install the VRS mechanism within the timeline prescribed in the CPCB Circular dated 04.06.2021.
• The CPCB shall instruct all State Pollution Control Boards to ensure strict adherence to the guidelines issued by the CPCB vide Office Memorandum dated 07.01.2020.
• If there is a breach of any of the guidelines issued by the CPCB, the concerned State Pollution Control Board shall take action against the erring outlet in accordance with the law.

Development of Law

The ratio decidendi of the case is that while the National Green Tribunal (NGT) has the power to issue directions for environmental protection, such directions must be reasonable and not unduly burdensome. The decision reinforces the importance of existing guidelines issued by regulatory bodies like the Central Pollution Control Board (CPCB) and emphasizes the need for strict adherence to these guidelines. There is no change in the previous positions of law, but the judgment clarifies the extent of the NGT’s powers in relation to existing regulatory frameworks.

Conclusion

The Supreme Court’s decision in Indian Oil Corporation Limited vs. V.B.R. Menon & Others clarifies that while the NGT has the authority to issue directions for environmental protection, these directions must be reasonable and balanced. The Court set aside the NGT’s mandate for compulsory CTE and CTO for petroleum retail outlets, emphasizing that strict adherence to the CPCB’s existing guidelines is sufficient for environmental compliance. This judgment underscores the importance of a balanced approach to environmental regulation, ensuring both environmental protection and ease of doing business.