1. Environmental pollution and groundwater extraction allegations — NGT proceedings — Imposition of environmental compensation and directions for closure and PMLA investigation. (Para 1 , 5 , 6 , 7 , 8 )
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2025 Supreme(SC) 1260
SUPREME COURT OF INDIA
B.R. GAVAI, CJI, K. VINOD CHANDRAN, J.
M/s C.L. Gupta Export Ltd. – Appellant
Versus
Adil Ansari and Others – Respondents
Civil Appeal No. 2864 of 2022
Decided On : 22-08-2025
Advocates appeared:
For the Appellant(s): Ms. Bhuvneshwari Pathak, AOR Mr. Shivam Parashar, Adv. Mr. Garv Vikas, Adv.
For the Respondent(s): Ms. Preeti Singh, AOR Mr. Pradeep Misra, AOR Mr. Saurabh Mishra, AOR Mrs. Aishwarya Bhati, A.S.G. Mr. R.Bala, Sr. Adv. Mr. Rajesh Kr.singh, Adv. Mr. Apoorv Kurup, Adv. Mr. Vanshaja Shukla, Adv. Mr. Amit Sharma-(II), Adv. Mr. Rajeshwari Shankar, Adv. Mr. Vijay Lakshmi, Adv. Dr. N. Visakamurthy, AOR
For the Appellant(s): Ms. Bhuvneshwari Pathak, AOR Mr. Shivam Parashar, Adv. Mr. Garv Vikas, Adv.
For the Respondent(s): Ms. Preeti Singh, AOR Mr. Pradeep Misra, AOR Mr. Saurabh Mishra, AOR Mrs. Aishwarya Bhati, A.S.G. Mr. R.Bala, Sr. Adv. Mr. Rajesh Kr.singh, Adv. Mr. Apoorv Kurup, Adv. Mr. Vanshaja Shukla, Adv. Mr. Amit Sharma-(II), Adv. Mr. Rajeshwari Shankar, Adv. Mr. Vijay Lakshmi, Adv. Dr. N. Visakamurthy, AOR
The Supreme Court ruled that environmental compensation cannot be based on a company's turnover due to lack of rational nexus with pollution. It further held that the NGT lacks jurisdiction to direct PMLA prosecutions and cannot order closure of units once full compliance is reported.
Headnote:(A) National Green Tribunal Act, 2010 - Environmental Compensation - Imposition of EC without rational nexus to turnover - Previous NGT rulings questioned for lack of compliance basis and excess penalty parameters - Directions to close divisions of industry found unwarranted after compliance demonstration. (Paras 2, 7, 10, 11, 12)
(B) Pollution Control and Environmental Law - Principle of 'Polluter Pays' examined - NGT's powers scrutinized in directing actions under PMLA and environmental compliance roles defined. (Paras 10, 11, 12)
(C) Jurisdictional Authority - NGT's exceeding of statutory powers under represented Laws discussed. (Paras 12, 13)
Facts of the case:
The National Green Tribunal held proceedings against the industry for environmental degradation from groundwater extraction and pollution over three years, with the appellant alleging compliance to directives before facing a substantial compensation order from the NGT. (Paras 1, 2, 9)
Findings of Court:
The Supreme Court found NGT exceeded its powers, especially in imposing high penalties without sufficient evidence correlating them to environmental impact, and directed continuous monitoring instead. (Paras 10, 11, 12)
Issues: The primary issues revolved around the legitimacy of the imposed penalties and the appropriateness of the NGT's sweeping directives regarding industry closures. (Paras 2, 11, 12)
Ratio Decidendi: The Court emphasized the necessity for penalties to have a direct relationship with environmental harm and questioned the NGT's methods for assessing such penalties, reiterating that jurisdiction does not allow arbitrary imposition unrelated to actual damages. (Paras 10, 11, 12)
Result: The appeal is allowed, setting aside the order of the NGT concerning excessive penalties and unnecessary industry closures. (Paras 11, 13)
Legal Category Hierarchy
- environmental law
- administrative law
- crime and sentencing
Table of Contents
2. Challenge to turnover-based penalty nexus — Maintainability of PIL — Validity of directions for PMLA investigation — Legality of closure orders despite compliance reports. (Para 2 , 4 )
3. Turnover lacks rational nexus with environmental damage — NGT lacks jurisdiction to direct PMLA prosecution — Closure orders are unwarranted following reports of complete compliance. (Para 3 , 9 , 10 , 11 , 12 , 13 )
4. Environmental penalties cannot be based on turnover without nexus to damage — NGT cannot direct PMLA prosecution as it exceeds statutory powers under the NGT Act. (Para 11 , 12 )
5. Appeal allowed — Turnover-based compensation, PMLA investigation directions, and closure orders set aside — Monitoring and audit directions retained. (Para 10 , 11 , 12 , 13 )
6. Can environmental compensation be calculated based on the annual turnover of the polluter?
No. There is no rational nexus between revenue generation and the amount of penalty for environmental damages. Penalties should be based on established methodologies, such as those framed by the CPCB, rather than a flat percentage of turnover. (Para 11 )
7. Does the National Green Tribunal have the jurisdiction to direct the Enforcement Directorate to initiate proceedings under the PMLA?
No. The NGT must act within the powers conferred by Section 15 of the NGT Act, 2010. It lacks the jurisdiction to direct prosecution under the PMLA, which requires illegal gain from a scheduled offence. (Para 12 )
8. Can a tribunal order the closure of industrial divisions after a compliance report has been accepted?
No. Once a report of complete compliance with statutory conditions and recommendations is accepted, sweeping directions for closure are unwarranted, although jurisdictional boards retain the right to act on future violations. (Para 10 )
JUDGMENT :
K. VINOD CHANDRAN, J.
1. The respondent no. 1, the applicant before the National Green Tribunal (for brevity ‘NGT’) alleged that the appellant, the respondent no. 1 before the NGT, as an industry was actively perpetrating environmental degradation and pollution as also extracting ground water; thus polluting the surroundings and also releasing effluents into the nearby river which is a tributary of the Ganga. It was also alleged that the other official respondents, the Pollution Control Board of the State & the Centre, the Central Ground Water Authority and the District Collector were mute spectators to the activities of the appellant and often colluding, in polluting and damaging the environment. The proceedings before the NGT extended over a period of three years in which various reports were called for from a Joint Committee constituted by the NGT and eventually based on the reports, the matter was disposed of with certain directions, with which the appellant is aggrieved.
2. Shri Vikas Singh, learned Counsel appearing for the appellant would point out that the environmental compensation (for brevity ‘EC’) as determined by the statutory bodies were paid up by the appellant. The appellant also had brought about all the mitigating measures, eventually leading to a report of complete compliance of the statutory conditions and the terms imposed by the Pollution Control Board (for brevity ‘PCB’). Despite that last report of 30.07.2021, clearly recording compliance, the NGT went ahead and imposed a compensation of Rs. 50 crores based on the allegedly admitted turnover of the appellant. There is no rational nexus in thus computing the penalty, which has also been deprecated by this Court in Benzo Chem Industrial (P) Ltd. vs. Arvind Manohar Mahajan, 2024 SCC Online SC 3543. The NGT also directed the Enforcement Directorate (for brevity ‘ED’) to examine the matter in the light of the observations made in the judgment and take appropriate action under the Prevention of Money Laundering Act, 20021 [for brevity “PMLA”] wherein the environmental laws are also included in Part-A of Schedule I. The said measure has also been frowned upon in Waris Chemicals (P) Ltd. vs. U.P. Pollution Control Board, 2025 SCC Online SC 1261. The contours of maintainability of a Public Interest Litigation (for brevity ‘PIL’) is explicitly declared in Ashok Kumar Pandey vs. State of West Bengal , (2004) 3 SCC 349 within which contours the present litigation does not fall.
3. None appears for respondent no. 1 who was the applicant before the NGT. It is to be observed at the outset that we are not inclined to consider the question of maintainability of the PIL, at this stage especially when the initial reports of the Joint Committee constituted by the NGT clearly indicate violations of the environmental laws which led to the penalisation by imposition of EC. The proceedings were commenced by the applicant in the year 2019 and it was only in the year 2021 that a modicum of compliance was reported.
4. Mr. Saurabh Mishra, learned Advocate-on-Record, appearing for the Pollution Control Board submits that as of now there is full compliance of the environmental laws. However, it is urged that the NGT was within its power in enhancing the penalty since it is a deterrent measure. It is also pointed out that the calibration of the quantum of penalty could also be with reference to multipliers under CPCB, 2019 methodology, instead of a flat turnover percentage. It is also sought that structural directions in paragraph 569-571 of the NGT judgment may be upheld.
5. The appellant was earlier engaged in four manufacturing activities when the proceedings commenced, which were Metal Art Ware, Glass Art Ware, Thermocol Blocks which later, were expanded with two additions; Marble Art Ware and Corrugated Boxes. There was also a residential area where 500-600 people, the employees of the appellant, resided. The appellant is said to be an exporter of handicraft items and has
