Supreme Court Modifies NGT Order on Consent for Petroleum Outlets: Indian Oil Corporation Limited vs. V.B.R. Menon & Others (2023) INSC 227 (14 March 2023)

Date of the Judgment: 14 March 2023
Citation: (2023) INSC 227
Judges: Justice Sudhanshu Dhulia and Justice J.B. Pardiwala
Can the National Green Tribunal (NGT) mandate that all petroleum retail outlets obtain “Consent to Establish” (CTE) and “Consent to Operate” (CTO)? The Supreme Court of India recently addressed this question, modifying a previous order by the NGT. The core issue revolved around whether the NGT had the authority to issue such a directive and whether it was necessary given existing environmental regulations. This judgment clarifies the powers of the NGT and balances environmental concerns with the practicalities of operating petroleum retail outlets. The judgment was authored by Justice J.B. Pardiwala.

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) in petroleum outlets. Mr. Menon sought orders to compel oil marketing companies (OMCs) to install and operate VRS in all new and existing petroleum retail outlets in Tamil Nadu. The NGT, Chennai, while addressing the issue of VRS, also directed the Central Pollution Control Board (CPCB) and State Pollution Control Boards to make it mandatory for all new and existing retail petroleum outlets to obtain CTE and CTO. This directive was challenged by several OMCs, leading to the present appeals before the Supreme Court.

Timeline

Course of Proceedings

The National Green Tribunal (NGT), Chennai, adjudicated the Original Application No. 138 of 2020 (SZ) and directed that retail petroleum outlets in cities with more than 10 lakh population and a turnover of more than 300 KL/Month should install VRS mechanism. It also directed that new petroleum outlets and storage depots should install Stage 1 and Stage 2 VRS within the time fixed by the CPCB. Furthermore, it directed the CPCB and State Pollution Control Boards to make it mandatory to obtain CTE and CTO for new and existing petroleum outlets. Several oil marketing companies (OMCs) filed appeals before the Supreme Court challenging the NGT’s order, particularly the mandatory CTE and CTO requirement.

Legal Framework

The judgment refers to several key 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 National Green Tribunal (NGT) directed the Central Pollution Control Board (CPCB) to use this power to mandate Consent to Establish (CTE) and Consent to Operate (CTO) for petroleum outlets.
• ✓ Section 18 of the Water (Prevention and Control of Pollution) Act, 1974: This section deals with the powers of State Pollution Control Boards to issue directions for preventing and controlling water pollution.
• ✓ Section 21 of the Air (Prevention and Control of Pollution) Act, 1981: This section places restrictions on establishing and operating any industrial plant in an air pollution control area without prior consent from the Board.
• ✓ Section 25 of the Water (Prevention and Control of Pollution) Act, 1974: This section deals with restrictions on new outlets and new discharges.
• ✓ Section 22 of the National Green Tribunal Act, 2010: This section provides for appeals to the Supreme Court on substantial questions of law.
• ✓ Section 33 of the National Green Tribunal Act, 2010: This section gives the Act overriding effect over other laws.
• ✓ Rule 24 of the National Green Tribunal (Practices and Procedures) Rules, 2011: This rule empowers the Tribunal to make orders or give directions necessary to give effect to its order or to secure the ends of justice.

The Supreme Court noted that the NGT Act was enacted to provide a specialized forum for environmental disputes, with powers to enforce environmental laws and provide relief to victims of pollution. The NGT’s powers are derived from the Environment (Protection) Act, 1986, and other environmental laws.

Arguments

The arguments presented before the Supreme Court can be categorized as follows:

Appellant’s Arguments (Oil Marketing Companies)

• ✓ The NGT’s directions to make CTE and CTO mandatory are legislative in nature and beyond its jurisdiction.
• ✓ There is no rational basis to mandate CTE and CTO for petroleum retail outlets, especially considering they fall under the “green” category as classified by the CPCB.
• ✓ The process of setting up a retail outlet already involves numerous approvals from various authorities, and adding CTE and CTO would cause unnecessary hardship and delays.
• ✓ The CPCB’s guidelines issued on 07.01.2020 are exhaustive and address the concerns raised by the NGT, making additional approvals unnecessary.

Respondent No. 2’s Arguments (Original Applicant)

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

Respondent No. 1’s Arguments (CPCB)

• ✓ The NGT’s directions for mandatory CTE and CTO were unnecessary, especially in light of the detailed guidelines issued by the CPCB.
• ✓ Ensuring compliance with CPCB’s guidelines is sufficient, and mandatory CTE and CTO would be unreasonable and time-consuming.
• ✓ It is debatable whether the NGT could direct the CPCB to make CTE and CTO mandatory under Section 5 of the Environment (Protection) Act, 1986.

The innovativeness of the arguments lies in the appellants highlighting the practical difficulties and redundancy of the mandatory CTE and CTO requirement, given the existing regulatory framework and the “green” classification of petroleum retail outlets. The CPCB’s support for the appellants’ position further strengthened the argument against the NGT’s directions.

Submissions Table

Issues Framed by the Supreme Court

The Supreme Court framed the following issue for consideration:

1. Whether the NGT has the jurisdiction to direct the CPCB to make obtaining of 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

Authorities

The Supreme Court considered the following authorities:

Cases

• ✓ M.C. Mehta v. Union of India [(1986) 2 SCC 176] – Supreme Court of India. This case was referred to highlight the directions issued by the Supreme Court which led to the creation of the National Green Tribunal.
• ✓ Indian Council for Enviro Legal Action v. Union of India [(1996) 3 SCC 212] – Supreme Court of India. This case was referred to highlight the directions issued by the Supreme Court which led to the creation of the National Green Tribunal.
• ✓ A.P. Pollution Control Board v. M.V. Nayudu [(1999) 2 SCC 718] – Supreme Court of India. This case was referred to highlight the directions issued by the Supreme Court which led to the creation of the National Green Tribunal.
• ✓ A.P. Pollution Control Board v. M.V. Nayudu [(2001) 2 SCC 62] – Supreme Court of India. This case was referred to highlight the directions issued by the Supreme Court which led to the creation of the National Green Tribunal.
• ✓ Municipal Corporation of Greater Mumbai v. Ankita Sinha, 2021 SCC OnLine SC 897 – Supreme Court of India. This case was referred to emphasize the wide discretionary powers of the NGT to secure the ends of justice.

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.
• ✓ Section 18 of the Water (Prevention and Control of Pollution) Act, 1974: This section deals with the powers of State Pollution Control Boards to issue directions for preventing and controlling water pollution.
• ✓ Section 21 of the Air (Prevention and Control of Pollution) Act, 1981: This section places restrictions on establishing and operating any industrial plant in an air pollution control area without prior consent from the Board.
• ✓ Section 25 of the Water (Prevention and Control of Pollution) Act, 1974: This section deals with restrictions on new outlets and new discharges.
• ✓ Section 22 of the National Green Tribunal Act, 2010: This section provides for appeals to the Supreme Court on substantial questions of law.
• ✓ Section 33 of the National Green Tribunal Act, 2010: This section gives the Act overriding effect over other laws.
• ✓ Rule 24 of the National Green Tribunal (Practices and Procedures) Rules, 2011: This rule empowers the Tribunal to make orders or give directions necessary to give effect to its order or to secure the ends of justice.

Authority Table

Judgment

Treatment of Submissions

Treatment of Authorities

The Supreme Court acknowledged the wide powers of the NGT as established in Municipal Corporation of Greater Mumbai v. Ankita Sinha [2021 SCC OnLine SC 897]. The court also recognized the legislative intent behind the environmental laws and the need for a specialized tribunal to handle environmental disputes. However, it also considered the practical aspects and the existing regulatory framework. The court emphasized that while the NGT has the power to issue directions, such directions should be reasonable and not lead to unnecessary hardship.

The Court used the authorities to establish the NGT’s jurisdiction and powers, but also to emphasize the need for a balanced approach that considers both environmental protection and practical feasibility. The court did not overrule any authority, but rather interpreted and applied them in the context of the specific facts and circumstances of the case.

The Court’s reasoning was as follows:

The Court considered alternative interpretations, such as fully upholding the NGT’s order, but rejected them in favor of a more balanced approach. The court reasoned that while environmental protection is crucial, it should not come at the cost of unnecessary bureaucratic hurdles and practical difficulties. The existing CPCB guidelines were deemed sufficient to address the concerns raised by the NGT.

The Supreme Court held that while the NGT has the power to direct the CPCB to exercise its powers under Section 5 of the Environment (Protection) Act, 1986, for environmental protection, the specific directions to make CTE and CTO mandatory were unreasonable. The court emphasized that the CPCB’s guidelines, if strictly followed, are sufficient to ensure environmental safety. The court also noted that the petroleum retail outlets are classified as “green” and should not be subjected to unnecessary regulatory burdens.

The court’s decision was unanimous, with both judges concurring on the modification of the NGT’s order.

The court quoted the following from the judgment:

“The Central Government is empowered to take all measures and issue all such directions as are called for the above purpose.”

“The Tribunal may make such orders or give such directions as may be necessary or expedient to give effect to its order or to prevent abuse of its process or to secure the ends of justice.”

“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.”

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by a combination of legal and practical considerations. The court acknowledged the NGT’s role in environmental protection but also emphasized the need for a balanced approach that considers the practical difficulties and existing regulatory mechanisms. The court was particularly concerned about the potential for unnecessary harassment and delays that mandatory CTE and CTO could cause.

The sentiment analysis of the reasons given by the Supreme Court indicates a strong emphasis on practicality and reasonableness, while also upholding environmental protection. The court’s reasoning was primarily influenced by the fact that the existing guidelines issued by the CPCB were comprehensive enough to address the concerns raised by the NGT.

Here’s a ranked table showing the sentiment analysis of the reasons given by the Supreme Court:

The ratio of fact to law that influenced the court’s decision can be summarized as follows:

Key Takeaways

• ✓ Petroleum retail outlets are not required to obtain mandatory CTE and CTO for establishment or operation.
• ✓ The CPCB’s guidelines for setting up new petroleum pumps must be strictly adhered to.
• ✓ State Pollution Control Boards are responsible for ensuring compliance with CPCB guidelines.
• ✓ The NGT has the power to issue directions for environmental protection, but such directions must be reasonable and not cause undue hardship.
• ✓ The judgment underscores the importance of balancing environmental concerns with the practicalities of operating businesses.

Directions

The Supreme Court issued the following directions:

• ✓ The CPCB shall ensure that all retail petroleum outlets in cities with more than 10 lakh population and a turnover of more than 300 KL/Month install the VRS mechanism within the timeline prescribed in its Circular dated 04.06.2021.
• ✓ The directions issued by the NGT in para 69(iii) and (iv) of the impugned order are set aside.
• ✓ The CPCB shall instruct all State Pollution Control Boards to ensure that the guidelines issued by it vide the Office Memorandum dated 07.01.2020 are strictly adhered to.
• ✓ If there is a breach of any of the guidelines, the concerned State Pollution Control Board shall proceed against the erring outlet in accordance with law.

Development of Law

The ratio decidendi of this 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 cause undue hardship. The Supreme Court clarified that the existing guidelines issued by the Central Pollution Control Board (CPCB) are sufficient for regulating petroleum retail outlets, and mandatory Consent to Establish (CTE) and Consent to Operate (CTO) are not required. This judgment does not change the previous position of law regarding the powers of the NGT, but it does provide a more nuanced interpretation of those powers in the context of practical implementation and existing regulatory frameworks.

Conclusion

In conclusion, the Supreme Court’s judgment modifies the NGT’s order by setting aside the mandatory requirement for petroleum retail outlets to obtain CTE and CTO. The court emphasized that while the NGT has the authority to issue directions for environmental protection, these directions must be reasonable and consider the practical aspects of implementation. The judgment underscores the importance of adhering to the CPCB’s guidelines and ensures a balanced approach between environmental protection and regulatory feasibility.