New Delhi: The Supreme Court has held that pollution control boards have the authority to impose and collect restitutionary and compensatory damages or require bank guarantees from polluting entities, not just after harm has occurred but as a precautionary measure against potential environmental impacts.
Overturning a Delhi High Court order, a SC bench of justices P.S. Narasimha and Manoj Misra ruled that various provisions—such as sections 33A of the Water (Prevention and Control of Pollution) Act, 1974 and 31A of the Air (Prevention and Control of Pollution) Act, 1981—confer power on pollution control boards to demand either fixed monetary sums or bank guarantees as an ex-ante measure to addressing actual harm and prevent potential damages.
This power is deemed incidental and ancillary to their existing authority under section 33A of the water pollution control act and section 31A of the air pollution control act.
“While we hold that the Boards have the power to direct the payment of environmental damages, we make it clear that this power must always be guided by two overarching principles. First, that the power cannot be exercised in an arbitrary manner; and second, the process of exercising this power must be infused with transparency,” the judgment said.
The court further clarified that the powers must be exercised only after a proper subordinate legislation, guided by the principle of natural justice, details the governing principles and procedures.
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Background of the case
The case originates from actions initiated by the Delhi Pollution Control Committee (DPCC) in 2006 against various residential and commercial complexes, including shopping malls, found to be operating in violation of environmental norms.
Specifically, these entities had failed to obtain the mandatory “consent to establish” and “consent to operate” under section 25 of the water pollution control act and section 21 of the air pollution control act.
The DPCC, acting on directions from the Ministry of Environment, Forest and Climate Change (MoEFCC), issued show cause notices to these defaulting entities. This led to a series of writ petitions before the Delhi High Court, where a single judge bench ruled against the DPCC.
The HC bench contended in 2015 that boards lacked the power to levy penalties or damages, viewing such actions as penal in nature and requiring explicit statutory backing, which was absent under sections 31A or 33A of the acts. The monetary demands imposed as a pre-condition for granting consent were criticised for having “no statutory backing”.
This stance was upheld by a division bench of the high court in 2018 concurring that the power to issue directions under sections 33A and 31A did not confer the power to levy ‘penalty’.
The high court emphasised that penalties, under chapter VII of the water pollution control act and chapter VI of the air pollution control act, could only be levied by courts, after taking cognisance of offences and following prescribed procedures.
The division bench explicitly stated that the DPCC’s actions were “ultra-vires its power under the two statutes and the levy of penalty is without any authority of law.” It further directed the discharge of bank guarantees and refund of collected penalties.
The DPCC moved the SC against these orders.
Although the Supreme Court overturned the high court’s interpretation of law, it declined to revive the 2006 show cause notices issued by the DPCC. The court ordered that any amounts collected based on the now-quashed notices must be returned within six weeks.
The show cause notices were first quashed by a single judge bench of the Delhi High Court in 2015, and the decision was upheld by a division bench in 2018, which also directed that any money collected and guarantees furnished be returned.
‘Restitution, not punishment’
The Supreme Court’s Monday order setting aside the HC decisions marks a pivotal moment in India’s environmental jurisprudence.
“We hold that the environmental regulators, the Pollution Control Boards, can impose and collect as restitutionary and compensatory damages fixed sums of monies or require furnishing bank guarantees as an ex-ante measure towards potential environmental damage in exercise of powers under Sections 33A and 31A of the Water and the Air Acts,” the court said in its 37-page order.
It distinguished between remedial damages and criminal penalties.
“There is a distinction between a direction for payment of restitutionary and compensatory damages as a remedial measure for environmental damage or as an ex-ante measure towards potential environmental damage on the one hand; and a punitive action of fine or imprisonment for violations under Chapters VII of the Water Act and VI of the Air Act on the other hand.”
According to the judgment, a polluter’s duty to restore the environment arises as a civil liability and not necessarily from a criminal conviction.
‘Polluter Pays’ principle reaffirmed
The court reiterated the “polluter pays” principle as a cornerstone of Indian environmental law, mandating that the responsibility for repairing environmental damage rests with the offending industry.
Citing earlier judgments, the bench noted, “The actual degradation of the environment is not a necessary condition for the application of polluter pays principle, as long as the offending activities have the potential of degrading the environment.”
The court examined the 2024 legislative amendments which introduced adjudicating officers and decriminalised several offences under the two laws.
It ruled that these amendments do not dilute the powers of Pollution Control Boards.
“There is no conflict between the powers of the State Boards to direct payment of environmental damages under Sections 33A and 31A… and the powers of the Adjudicating Officer to impose penalties….The former is compensatory in nature… The latter is a penalty for an offence under the law and is imposed with the objective of punishing the offender.”
To operationalise these powers fairly and consistently, the court directed the government to notify rules and regulations that incorporate natural justice.
“Necessary subordinate legislation in the form of rules and regulations must be notified. This shall include methods by which environmental damage is determined, and the consequent quantum of damages are assessed.”
The court observed the current formula for calculating environmental compensation relies on Central Pollution Control Board guidelines from 2022, but emphasised the need to formalise them for clarity and accountability.
(Edited by Ajeet Tiwari)
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