The Supreme Court of India has dealt a significant blow to the National Green Tribunal’s (NGT) approach to environmental penalties, ruling that basing fines solely on a company’s revenue or expert committee recommendations without due process is unjust. In two separate rulings on November 27th, Justice B.R. Gavai and Justice K.V. Viswanathan overturned NGT penalties against Grasim Industries Limited and Bezno Chem Industrial Private Limited for alleged environmental violations.
The court’s decisions highlight a critical flaw in the NGT’s methodology. The judges emphasized the lack of adherence to the principles of natural justice, stating that the NGT cannot simply accept expert committee reports without giving the accused companies a chance to defend themselves. The Supreme Court’s judgment in the Bezno Chem case strongly criticized this practice: “In any case, the generation of revenue would have no nexus with the amount of penalty to be ascertained for environmental damages. It is further to be noted that the learned NGT found the appellant to be guilty of violations; the least that was expected from the NGT is to give a notice to the appellant before imposing such a heavy penalty.” The court’s frustration was palpable, declaring the NGT’s penalty-imposing methodology “totally unknown to the principles of law.”
Similarly, the ruling against Grasim Industries condemned the NGT’s procedure as “totally unknown to the settled principles of natural justice.” The court underscored the importance of a fair hearing and thorough consideration of facts and circumstances before imposing any penalty, emphasizing the NGT’s role as a tribunal bound by legal principles.
Systemic Flaws and Increased Scrutiny:
Legal experts widely agree that while these rulings offer relief to companies facing potentially arbitrary penalties, they also expose deep-seated issues within the NGT’s functioning. The decisions undermine public trust in the tribunal’s ability to impartially handle environmental cases. Raunak Dhillon, a partner at Cyril Amarchand Mangaldas, noted that the Supreme Court’s ruling “removes the arbitrariness associated with revenue-based penalties,” emphasizing the need for penalties to reflect the actual environmental damage and not a company’s financial strength.
Alay Razvi, managing partner at Accord Juris, added that the Supreme Court has repeatedly scrutinized NGT orders based on company revenue, indicating “systemic flaws” within the NGT. This frequent overturning of NGT decisions highlights a concerning trend.
The NGT’s Performance and High Intervention Rate:
Established in 2010 through the National Green Tribunal Act, the NGT aimed to expedite environmental cases. However, its effectiveness is now under serious question. An analysis of the NGT’s report card from 2018-2023 reveals that while compensation was imposed in 35 cases, appeals were filed in 12, with the Supreme Court intervening in 9 (a 75% intervention rate). This far surpasses the general Supreme Court intervention rate of 43.79% on special leave petitions in 2014, according to a 2016 report by the Vidhi Centre for Legal Policy. A recent example includes the Supreme Court’s quashing of an NGT order imposing a ₹3 crore fine on Govardhan Mines and Minerals for illegal mining. The Supreme Court criticized the NGT for not adequately addressing the company’s arguments and relying solely on a committee report.
Amit Kapur, joint managing partner at JSA Advocates & Solicitors, aptly summarized the situation: “Lacking reasoned decisions and at times blindly following expert reports, such judgments have eroded the efficacy of the environment regulator at a crucial juncture in our battle against climate change and energy transition.”
Lack of Standardization and its Consequences:
The NGT Act mandates consideration of sustainable development, the precautionary principle, and the ‘polluter pays’ principle when determining penalties. Yet, a lack of a standardized penalty framework leads to inconsistencies and potentially unfair outcomes. Sudeshna Guha Roy, partner at Saraf and Partners, highlighted that this absence of a uniform method results in penalties based on company revenue rather than the actual environmental harm. Amit Kapoor of JSA Advocates & Solicitors pointed to the lack of a standardized framework 14 years after the NGT’s founding as a sign of India’s under-preparedness in environmental protection and climate change mitigation. This lack of standardization disproportionately affects small businesses, which struggle to absorb unexpected large fines and comply with environmental regulations.
Calls for Reform:
Experts strongly advocate for NGT reforms, including establishing a structured penalty framework within the NGT Act. This framework should explicitly consider factors such as the severity of the environmental harm and the intent of the violator, rather than relying solely on revenue. They emphasize the need for well-reasoned orders clearly explaining the rationale behind penalties, reducing the potential for appeals and enhancing transparency. The over-reliance on external expert committees, instead of utilizing the NGT’s internal expert members, also needs addressing. The overall aim is to create a more just, transparent, and effective environmental regulatory system in India.
