ALEMBIC PHARMACEUTICALS LTD. versus ROHIT PRAJAPATI & ORS. on 1 April 2020

ALEMBIC PHARMACEUTICALS LTD.

v.

ROHIT PRAJAPATI & ORS.(Civil Appeal No. 1526 of 2016)

APRIL 01, 2020

[DR. DHANANJAYA Y CHANDRACHUD ANDAJAY RASTOGI, JJ.]

Environment (Protection) Act 1986 – s.3 – 1994 EnvironmentalImpact Assessment (EIA) notification mandated prior EnvironmentalClearance (EC) for setting up and expansion of industrial unitsfalling within thirty categories – Deadline extended by variouscirculars – 2002 Circular while further extending the deadlineallowed for ex post facto ECs – Quashed by National Green Tribunal(NGT) – On appeal, held: Concept of an ex post facto EC is inderogation of the fundamental principles of environmentaljurisprudence – It is an anathema to the 1994 EIA notification –Allowing for an ex post facto clearance would essentially condonethe operation of industrial activities without the grant of an EC – Itwould be contrary to both the precautionary principle as well asthe need for sustainable development – 2002 circular alters theapplication of the 1994 EIA notification which has a statutorycharacter – Being an administrative decision, it is beyond the scopeof s.3 – It cannot be said to be a measure for protecting andimproving the quality of environment and is not protected by s.3 –No jurisdictional bar on NGT to enquire into its vires – In case ofthe three industries in question, no ECs were sought before thecommencement or expansion of operations, as mandated by the 1994EIA notification – They continued to operate in the teeth of the saidnotification – Further, none of these industries are entitled to thebenefit of the exemption contained in Clause 8 to the explanatorynote of the 1994 notification – However, NGT’s directions forrevocation of the ECs and closure of the units do not accord withthe principle of proportionality – Industries to deposit compensationof ` 10 crores each, in addition to the amount directed by NGT –Environment (Protection) Rules 1986 – Constitution of India –Art.142.

Environment (Protection) Act 1986 – Rules/Regulations under– Jurisdiction of NGT to strike down – Discussed.

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678SUPREME COURT REPORTS

AAllowing the appeals, the Court

HELD: 1. Section 3(1), Environment (Protection) Act 1986is an enabling provision for the Central Government to undertakeall such measures as it deems necessary or expedient for thepurpose of protecting and improving the quality of theBenvironment and preventing, controlling and abatingenvironmental pollution. This limb of the submission of theAdditional Solicitor General is crucial to the issue as to whetherthe NGT has exceeded its jurisdiction since the decision in Sterliteholds that the NGT, while exercising its appellate jurisdiction,“cannot strike down rules or regulations made under this Act”.CTo demonstrate that the NGT did not have the jurisdiction tostrike down the circular dated 14 May 2002, it was urged thatthe circular was issued by the MoEF pursuant to its powers underSection 3 of the Environment Protection Act 1986. There is aninherent difficulty in accepting the submission. Before this Court,Dthe Union of India has not pleaded the case that the circular dated14 May 2002 is a measure which is traceable to the provisions ofSection 3. On the contrary, in its pleadings the Union of Indiaconstrued it as a “purely administrative decision”. The omissionin the appeal to make any attempt to sustain the circular dated14 May 2002 with reference to the provisions of Section 3 of theEEnvironment Protection Act 1986 is significant. For an action ofthe Central government to be treated as a measure referable toSection 3 it must satisfy the statutory requirement of beingnecessary or expedient “for the purpose of protecting andimproving the quality of the environment and preventing,Fcontrolling and abating environment pollution”. The circular dated14 May 2002 in fact does quite the contrary. The EIA notificationof 1994 has been issued under the provisions of the EnvironmentProtection Act 1986 and the Environment Protection Rules 1986,with the object of imposing restrictions and prohibitions on settingup of new projects or expansion or modernisation of existingGproject. The measures are based on the precautionary principleand aim to protect the interests of the environment. The circulardated 14 May 2002 allowed defaulting industrial units who hadcommenced activities without an EC to cure the default by an expost facto clearance. Being an administrative decision, it is beyondthe scope of Section 3 and cannot be said to be a measure for theH

purpose of protecting and improving the quality of theenvironment. The EIA notification of 1994 mandates a priorenvironmental clearance. The circular substantially amends oralters the application of the EIA notification of 1994. Theadministrative circular is not a measure protected by Section 3.Hence there was no jurisdictional bar on the NGT to enquire intoits legitimacy or vires. Moreover, the administrative circular iscontrary to the EIA Notification 1994 which has a statutorycharacter. The circular is unsustainable in law. [Paras 20, 21][697- C-F; 698-A-E; 699-C]

Tamil Nadu Pollution Control Board v. Sterlite Industries(I) Ltd. [2019] 3 SCR 777 – referred to.

2.1 The concept of an ex post facto EC is in derogation ofthe fundamental principles of environmental jurisprudence andis an anathema to the EIA notification dated 27 January 1994. Itis detrimental to the environment and could lead to irreparabledegradation. The reason why a retrospective EC or an ex postfacto clearance is alien to environmental jurisprudence is thatbefore the issuance of an EC, the statutory notification warrantsa careful application of mind, besides a study into the likelyconsequences of a proposed activity on the environment. An ECcan be issued only after various stages of the decision-makingprocess have been completed. Requirements such as conductinga public hearing, screening, scoping and appraisal are componentsof the decision-making process which ensure that the likelyimpacts of the industrial activity or the expansion of an existingindustrial activity are considered in the decision-making calculus.Allowing for an ex post facto clearance would essentially condonethe operation of industrial activities without the grant of an EC.In the absence of an EC, there would be no conditions that wouldsafeguard the environment. Moreover, if the EC was to beultimately refused, irreparable harm would have been caused tothe environment. In either view of the matter, environment lawcannot countenance the notion of an ex post facto clearance. Thiswould be contrary to both the precautionary principle as well asthe need for sustainable development. In the case of all the threeindustries, ECs were applied for nearly a decade after theintroduction of the EIA notification 1994. In the meantime, theindustries had been set up and had commenced production. The AB

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Adocuments disclosed by the three industries demonstrate thatno ECs as mandated by the EIA notification of 1994 were soughtbefore the commencement or expansion of operations. The termsof the EIA notification of 1994 envisage that expansion ormodernisation of any activity (if the pollution load is to exceedthe existing one) or a new project listed in Schedule – I shall notBbe undertaken unless it has been granted an EC. In the presentcase, all the three industries continued to operate in the teeth ofthe EIA notification 1994. [Paras 23, 25][700-F-H; 701-A-C; 706- G-H; 707-E-F]

Common Cause v. Union of India (2017) 9 SCC 499 :C[2017] 13 SCR 361– relied on.2.2 Before the exemption contained in Clause 8 applies, itwas necessary for projects listed in Schedule - I to obtain allrelevant clearances from the State government including an NOCfrom the State Pollution Control Board. It was not sufficient toDmerely obtain an NOC from the State Pollution Control Board.The exemption which was carved out in the explanatory notewas to ensure that activities which had received all requiredclearances at the state level, following the acquisition of landshould be protected. In fact, many of them would also involve thecommencement of production prior to 27 January 1994. TheEexplanatory note stated that where production had not yetcommenced, the IAA would have to be intimated. The EIAnotification 1994 is a significant instrument in effectuating theimplementation of the precautionary principle. The burden lieson the project proponent who seeks to alter the state of the Fenvironment or to impact on the environment to demonstratethat the terms on which an exemption has been granted havebeen fulfilled. An exemption must be construed in its strict senseaccording to its plain terms. None of the three industries beforethe Court have furnished an exhaustive catalogue of what werethe “relevant clearances from the State government” that had toGbe obtained under the provisions of the law as it then stood. Withthis background, it will now be assessed individually whether theindustries in question qualified for the exemption provided byClause 8 to the explanatory note.

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Alembic Pharmaceuticals Limited

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Alembic Pharmaceuticals Limited

-(i) Darshak Private Limited (API I)

The material produced on the record indicates that on 17July 1992, Gujarat Pollution Control Board (GPCB) had issuedan NOC to establish an industrial unit and manufacture twopharmaceuticals products. However, the NOC for manufacturingadditional items was issued only on 11 June 1997 subsequent tothe EIA notification dated 27 January 1994. The language usedin the NOC makes it clear that obtaining consents andauthorisations under various environment related legislations wasa mandatory pre-condition and not merely directory. The evidenceproduced on the record by Darshak Private Limited indicatesthat it did not have the requisite consents and authorisationsunder the Air Act, Water Act and Hazardous Waste Rules priorto the EIA notification 1994. Many of the consents andpermissions were obtained subsequently and not prior to the EIAnotification of 1994. Accordingly, the manufacturing unit ofDarshak Private Limited (API – I) is not covered under theexemption under Clause 8 to the explanatory note of the EIAnotification of 1994.

–(ii) Nirayu Private Limited (API II)

A factory license was issued on 12 July 1984 to API – II.On 24 May 1985, GPCB issued a water consent order under theWater Act. This was valid only for the manufacture of anaestheticEther. GPCB issued a site clearance certificate on 9 October1991 for the manufacture of CIMC Chloride and CloxacillinSodium. An NOC to establish an industrial unit and to manufactureproducts was issued on 12 May 1993 and one for expansion on 4December 1995. The NOC dated 12 May 1993 issued to NirayuPrivate Limited (API – II) also mandates that the projectproponent “shall be required to obtain” from the board “prior tocommencement of production” requisite consents andauthorisations under the Air Act, Water Act and Hazardous WasteRules from GPCB. All consents and permissions had not beenobtained prior to the EIA notification of 1994. Accordingly, themanufacturing unit of Nirayu Private Limited (API – II) is notcovered under the exemption under Clause 8 to the explanatorynote of the EIA notification of 1994.

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AUnited Phosphorous Limited

No material has been produced to indicate that all relevantclearances from the State government including the NOC fromGPCB had been obtained prior to the EIA notification 1994.Accordingly, they cannot be granted the benefit of the exemptionBunder Clause 8 to the explanatory note of the EIA notification of1994.

Unique Chemicals Limited

It is evident from the table enlisting the list of relevantpermissions, consents and authorisations that all permissionsCwere received after the EIA notification 1994 was issued. Clearly,Unique Chemicals Limited is not entitled to the benefit of theexemption contained in Clause 8 of the explanatory note to theEIA notification 1994. [Paras 28-32][708-E-F, G-H; 709-A-B, C-D; 710-D, F-H; 711-A-C, D-F; 712-A-D]

2.3 From the material placed on the record by the industries,Dit becomes evident that there has been a gross abdication ofresponsibility by all the three industries in terms of obtainingtimely consents and authorisations from the GPCB. There existsa distinction between obtaining relevant clearances and consentsfrom the State Pollution Control Board and obtaining anEenvironmental clearance in accordance with the procedure laiddown under the EIA notification of 1994. A consent order issuedby the State Pollution Control Board allows an industry to operatewithin the prescribed emission norms. However, the consentorders do not account for the social cost and impact of undertakingan industrial activity on the environment and its surroundings. AFholistic analysis of the environmental impact of an industrialactivity is only accounted for once all the steps listed out in EIAnotification of 1994 are followed. The purpose of setting in placespecific requirements such as public hearing, screening, scopingand appraisal is to foster deliberative decisions and protectGenvironmental concerns. The detailed process listed out in theEIA notification of 1994 for obtaining an EC allows for minimisingthe adverse environmental impact of any industrial activity andimproving the quality of the environment. One must adopt anecologically rational outlook towards development. Given thesocial and environmental impacts of an industrial activity,Henvironment compliance must not be seen as an obstacle to development but as a measure towards achieving sustainabledevelopment and inter-generational equity. None of the threeindustries were entitled to the benefit of the exemption containedin Clause 8 of the explanatory note to the EIA notification of1994. [Paras 33, 34][712-D-H; 713-A]

2.4 The MoEF had issued a circular on 5 November 1998permitting applications for ECs to be filed by 31 March 1999,which was extended subsequently to 30 June 2001. On 14 May2002, the deadline was extended until 31 March 2003 subject toa deposit commensurate to the investment made. Though thethree industries operated without an EC for several years afterthe EIA notification of 1994, each of them had subsequentlyreceived ECs including amended ECs for expansion of existingcapacities. These ECs have been operational since 14 May 2003(in the case of Alembic Pharmaceuticals Limited), 17 July 2003(in the case of United Phosphorous Limited), and 23 December2002 (in the case of Unique Chemicals Limited). In addition, allthe three units have made infrastructural investments andemployed significant numbers of workers in their industrial units.The directions of the NGT for the revocation of the ECs and forclosure of the units do not accord with the principle ofproportionality. At the same time, the Court cannot be obliviousto the environmental degradation caused by all three industriesunits that operated without valid ECs. The breach by theindustries cannot be left unattended by legal consequences. Thethree industries are directed to deposit compensation quantifiedat ` 10 crores each. The amount shall be deposited with GPCBand duly utilised for restoration and remedial measures to improvethe quality of the environment in the industrial area in which theindustries operate. This deposit shall be in addition to the amountdirected by the NGT. The impugned judgment of the NGT is setaside in so far as it directed the revocation of the ECs and closureof the industries as well as the order in review. [Paras 36, 38 and39][713-G; 714-A; 716-C-D, E-F, G-H; 717-B-C]

Lafarge Umiam Mining Pvt Ltd v. Union of India (2011)7 SCC 338 : [2011] 7 SCR 954; Electrotherm Ltd v.Patel Vipulkumar Ramjibhai (2016) 9 SCC 300 – reliedon.

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AGoa Foundation v. Union of India (2005) 11 SCC 559;Techi Tagi Tara v. Rajendra Singh Bhandari & Ors.(2018) (11) SCC 734 : [2017] 12 SCR 956; BharatSanchar Nigam Limited v. Telecom Regulatory Authorityof India (2014) 3 SCC 222 : [2013] 12 SCR 999 –referred to.

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Case Law Reference

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1526Dof 2016.

From the Judgment and Order dated 08.01.2016 of the NationalGreen Tribunal (Western Zone) Bench, Pune in Application No. 66 (THC)of 2015 (WZ) Special Civil Application No. 17417 of 2003.

WithEC.A. No. 3175 of 2016, C.A. No. 6604-6605 of 2016, C.A. No.1555 of 2017.

A.N.S. Nadkarni, ASG, Kapil Sibal, Huzefa Ahmadi, DevangNanavati, C.U. Singh, Dr. Abhishek M. Singhvi, Parag P. Tripathi,Sr. Advs., Ms. Ruby Singh Ahuja, Ms. Deepti Sarin, Ms. KritikaFSachdeva, Ashutosh P. Shukla (for M/s. Karanjawala & Co.), SandeepNarain, Ankit Virmani, M. Chandra Sekhar, Joyti Prakash Sahu (forM/s. S. Narain & Co.), Mahesh Agarwal, Rishi Agrawala, Ankur Saigal,Anirudha Bhatia, Rohan Talwar, E. C. Agrawala, D.L. Chidanand, S.S.Rebello, Arzu Paul, Neeleshwar Pavani, Ms. Riya Soni, Gurmeet SinghGMakker, Siddharth Seem, Satya Mitra, Ms. Hetvi Patel, A.P. Mayee, A.Rajarajan, Sanjeev Kr. Choudhary, Mrs. Hemantika Wahi, Ms. JesalWahi, Ms. Puja Singh, Ms. Ruchi Kohli, Ms. Nidhi Jaswal, Ms. ManyaaChandok, Ajay Marwah, Advs. for the appearing parties.

ALEMBIC PHARMACEUTICALS LTD. v. ROHIT PRAJAPATI& ORS.

The Judgment of the Court was delivered by DR. DHANANJAYA Y CHANDRACHUD, J.

1. By a judgment dated 8 January 2016, the Bench of the NationalGreen Tribunal[1] for the Western Zone held that a circular issued by theUnion Ministry of Environment and Forests[2] on 14 May 2002 is contraryto law. The circular envisaged the grant of ex post facto environmentalclearances. The NGT issued a slew of directions including the revocationof environmental clearances and for closing down industrial units operatingwithout valid consents. On 17 May 2016, the NGT dismissed anapplication for review filed by one of the affected industrial units. Theindustrial units and MoEF are in appeal[3].

2. The Environmental Impact Assessment[4] notification of 27January 1994 mandated prior Environmental Clearances[5] for setting upand expansion of industrial projects falling within thirty categories. Thedeadline for obtaining an EC under the EIA notification of 1994 wasextended by various circulars to 31 March 1999 and thereafter to 30June 2001. By the circular of 14 May 2002, which was quashed by theNGT, MoEF extended the period till 31 March 2003 for those industrialunits which had gone into production without obtaining an EC under theEIA notification of 1994 to apply for and obtain an ex post facto EC.The circular indicated that it had been decided:

“... to extend the deadline upto 31 March 2003 so that defaultingunits could avail of this last and final opportunity to obtain ex-post-facto environmental clearance...”

3. The circular of 14 May 2002, allowed for ex post facto ECs,subject to a graded contribution into an earmarked fund based on theinvestment cost of the project. The first and the second respondentschallenged the circular of 14 May 2002 before the High Court of Gujarat.The proceedings were subsequently transferred to the NGT. The NGTby its decision dated 8 January 2016 held that the law did not permit thegrant of an ex post facto clearances and that the circular of 14 May 1 “NGT”

2 “MoEF”

3 Civil Appeal no 1526 of 2016 (Alembic Pharmaceuticals Limited); Civil Appeal no3175 of 2016 (United Phosphorus Limited); Civil Appeal nos 6604-6605 of 2016(Unique Chemicals); and Civil Appeal no 42756 of 2016 (Union of India)

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5 “EC”

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A2002 was an internal communication and did not override the provisionsof the EIA notification dated 27 January 1994 which had been issued inexercise of statutory powers conferred by Section 3 of the Environment(Protection) Act 1986[6].

4. Having held that the concept of an “ex post facto environmentalBclearance” was not sustainable with reference to any provision of law,the NGT issued the following directions:

(i) The authorities of the Union of India, including the MoEF,State of Gujarat, Gujarat Pollution Control Board[7] and DistrictCollectors shall not grant consent for an industrial activityCcovered by the EIA notification of 1994 without the stepsmandated by the notification such as screening, scoping, publichearing and decision being fulfilled;

(ii) The ECs granted to the industrial units of the sixth to ninthrespondents shall be revoked;D(iii) All the industrial activities which were being operated withouta valid EC and consent to operate shall be closed down withinone month;

(iv) Each of the units shall deposit a compensation of ` 10 lakhsfor having caused environmental degradation;andE

(v) The amount deposited shall be used for the restoration of theenvironment in and around the industrial area of Ankleshwarin the State of Gujarat.

5. The private respondents before the NGT who were affectedby the above directions are:F

(i) United Phosphorous Ltd - the sixth respondent;

(ii) Unique Chemicals - the seventh respondent;

(iii) Darshak Private Limited - the eight respondent; and G(iv) Nirayu Private Limited - the ninth respondent.

The private respondents are engaged in the manufacture ofpharmaceuticals and bulk drugs at the industrial area of Ankleshwar inthe State of Gujarat. Alembic Pharmaceuticals Limited is the appellant 6 “Environment Protection Rules”H7 “GPCB”

in the lead appeal before this Court. Darshak Private Limited mergedwith the appellant in 2002 pursuant to a scheme of amalgamationsanctioned by the High Court of Gujarat. Nirayu Private Limited wasacquired by the appellant under a slump sale on 1 January 2008. Followingthis exercise, the manufacturing units of erstwhile Darshak PrivateLimited and Nirayu Private Limited have come to be known as API – Iand API – II, respectively.

EIA Notification of 1994

6. The EIA notification was issued by the MoEF on 27 January1994, in exercise of its powers under Section 3(1) and clause (v) ofSection 3(2) of the Environment Protection Act 1986 read with Rule5(3)(d) of the Environment (Protection) Rules 1986[8]. The EIA notificationstipulated that:

“…on and form the date of publication of this notification in theOfficial Gazette, expansion or modernization of any activity (ifpollution load is to exceed the existing one) or new project listedin Schedule I to this notification, shall not be undertaken in anypart of India unless it has been accorded environmental clearanceby the Central Government in accordance with the procedurehereinafter specified in this notification.”

7. The EIA notification stipulated that any person who desired toundertake a new project, or the expansion or modernisation of an existingindustry, listed in Schedule-I shall submit an application to the Secretary,MoEF. Entry 8 of Schedule - I includes industries engaged inmanufacturing bulk drugs and pharmaceuticals. The application had tobe accompanied by a project report including, inter alia, an EIA reportand an environmental management plan prepared in accordance withthe guidelines issued by the Union Government through the MoEF fromtime to time. The notification spelt out the procedure to be followedupon the submission of the application including an evaluation andassessment by a stipulated agency. Clause 3(a)[9] provided that:

“...no construction work primarily or otherwise relating to thesetting up of the project may be undertaken till the environmentaland site clearances is obtained.”

8 “Environment Protection Rules”

9 Which was (substituted on 4 May 1994)

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A8. On 10 April 1997, the EIA notification of 1994 was amendedby making a public hearing mandatory for thirty categories of activitieswhich required an EC. On 5 November 1998, the MoEF issued a circularrecording that though the EIA notification of 1994 was in effect since 27January 1994, units covered by the notification had been set up withoutobtaining prior ECs. The GPCB had despite the advice of the MoEFBallowed units to operate without valid ECs. In this backdrop, the circularof 5 November 1998 provided that:

“Since number of such proposals are large in number and manyof the units have not applied for environmental clearance genuinelyout of ignorance it has been decided to consider their case forCenvironmental clearance on merits. This will apply only to thoseproposals which are received in the Ministry till 31[st] March 1999.Simultaneously State Pollution Control Boards have also beenadvised to issue requisite notices to the units to apply forenvironmental clearance. In case of those units which have alreadyDstarted production, we may consider the proposals on merits andif necessary suggest additional mitigative measures. A formalenvironmental clearance will be issued in these cases after approvalby the competent authority.”

9. By a circular dated 27 December 2000, the MoEF directed allEstate pollution control boards to issue fresh notices to all defaulting unitsand extended the deadline to obtain ECs from 31 March 1999 to 30 June2001. Inspite of this, there were delinquent units which had either failedto apply for an EC or had failed to complete the requirement of a publichearing before the extended date. By the circular of 14 May 2002, thedeadline was extended to 31 March 2003. The circular stated that:F

“Keeping the foregoing in view, it has been decided to extend thedeadline upto 31 March 2003 so that defaulting units could availof this last and final opportunity to obtain ex-post- factoenvironmental clearance.This would apply to all such units, whichhad commenced construction activities/operations without obtainingGprior environmental clearance in violation of the EIA Notificationof 27 January 1994.”

10. In terms of the circular, those defaulting units seeking anexpansion were to earmark a separate fund for “eco-developmentmeasures including community development measures in Indian projectsH

areas” on a graded scale linked to the investment in the project. Thiswas indicated in a tabulated form which read thus:

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Units which failed to comply with the extended deadline were tobe proceeded against.

The challenge to the ex post facto circular dated 14 May2002

11. A petition was instituted under Article 226 of the Constitutionby the first and second respondents in the present lead appeal before theHigh Court of Gujarat challenging the circular dated 14 May 2002 andseeking the revocation of the clearances which were granted to theindustrial units in question. The case was transferred to the WesternZonal Bench of the NGT by the High Court of Gujarat on 21 April2015.The NGT by its judgment dated 8 January 2016 set aside the circulardated 14 May 2002 and issued consequential directions which have beennoted in the earlier part of this judgment. Unique Chemicals Limited, theseventh respondent before the NGT, preferred a review petition againstthe judgment of the NGT which was dismissed. The affected industrialunits and the MoEF are in appeal before this Court.

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12. The issue to be adjudicated is whether in view of therequirement of a prior EC under the EIA notification of 1994, a provisionfor an ex post facto EC to industrial units could be validly made bymeans of the circular dated 14 May 2002.

13. During the course of the submissions, Mr Kapil Sibal, learnedSenior Counsel appearing on behalf of Alembic Pharmaceuticals Limitedhas urged the following submissions:

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(i) The issue is academic as both the units of the appellant havebeen granted an EC for subsequent expansion to a much highercapacity after conducting a public hearing and upon H

Aconsideration of all material factors. The relevant details insupport of the submission arethus:

Darshak Private Limited (API - I)

(a) An EC was granted on 14 May 2003 for a capacity of 15 MTper month; B

(b) An EC was granted on 16 April 2008 for expansion of capacityfrom 15 MT per month to 25 MT per month;and

(c) An EC was granted on 31 January 2017 for a furtherexpansion of capacity from 25 to 75 MT per month.

CNirayu Private Limited (API – II)

(a) An EC was granted on 14 May 2003 for a capacity of47 MT per month; and (b)An EC was granted on 20 December 2016 for anexpanded capacity of 300 MT permonth.D

(ii) The EIA notification of 1994 omits the expression “prior”.This is contrasted with the EIA notification dated 14 September2006 which stipulates the requirement of a “prior” EC. Whilea prior EC is mandatory under the notification dated 14September 2006, it was not under the earlier notification datedE27 January 1994;

(iii) Once an EC has been granted for a much larger capacityafter conducting a prior public hearing, the question as towhether the first EC for a lesser capacity was valid, is of nosignificance. Since both the units have an EC for a largerFcapacity, the satisfaction for granting an EC for a lessercapacity would be subsumed;

(iv) The EIA notification of 1994 did not apply to the two units ofthe appellant (API – I and API – II). Clause 8 of theexplanatory note to the EIA notification of 1994 provides thatGwhere a no objection certificate[10] from GPCB has beenobtained before 27 January 1994, an EC is not required. Inthis context it has been submitted that:

(a) On 17 July 1992, GPCB granted an NOC to establish andmanufacture to the manufacturing unit of API - I; (b) On 29 May 1997 and 27 July 1998, GPCB granted anauthorisation to operate under the Air (Prevention and Controlof Pollution) Act 1981[11 ]to API - I; B

(c) On 11 October 1999, GPCB granted API – I an authorisationto operate under the Water (Prevention & Control of Pollution)Act 1974[12]; (d) On 24 May 1985,GPCB granted API - II a consent orderunder the Water Act;

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(e) On 9 October 1991, GPCB granted a site clearance certificateto API – II; (f) On 12 May 1993,GPCB granted an NOC to API - II toestablish and for the manufacture drugs; D

(g) On 23 September 1993 and 13 November 1999, GPCBgranteda consent under the Water Act to API -II; (h) On 14 December 2001, GPCB granted an authorisation toAPI - II to operate under the Hazardous Waste (Managementand Handling) Rules 1989[13]; and E

(i) On 1 September 1999, 14 December 2001 and 7 March 2008,GPCB granted a consolidated consent and authorisation toAPI -II.

(v) A public hearing was not mandatory under the EIA notificationof 1994.

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Clause 4 of the explanatory note confers a discretion to callfor a hearing in case of projects that may cause large scaledisplacement or with severe environmental ramifications;

(vi) If the order of the NGT prevails, the appellant would beprejudiced and suffer an irreparable loss.The appellant hasGmade an investment of over ` 293 crores and employed alabour force of over 1000 workers; and 11 “Air Act”

12 “Water Act”

13 “Hazardous Waste Rules”

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A(vii) The first respondent who was the petitioner before the NGTchose to target only the appellant and two others out of overninety different entities which were granted similarclearances. This cherry picking of certain select unitsdemonstrates the mala fide nature of the proceedings.

B14. During the course of his submissions, Mr C U Singh, learnedSenior Counsel appearing on behalf of United Phosphorus Limited hasurged the following submissions:

(i) The circular dated 5 November 1998, by which the deadlinefor obtaining ECs under the EIA notification of 1994 wasCextended to 30 June 2001 was not challenged. The circulardated 5 November 1998 specifically noted that the StatePollution Control Board had despite the advice of the MoEFallowed units to operate without valid ECs;

(ii) United Phosphorus Limited had all requisite ECs that wereDgranted by GPCB for the existing and expanded capacity. Inthis context it has been submitted:

(a) An EC was granted on 17 July 2003 for manufacturingPhorate and Terbuphose (300 MT per month combined)and Acephate (80 MT per month); E(b)An EC was granted on 15 April 2008 for the expansionof capacity for manufacturing pesticides andintermediate products. Production of Phorate andTerbuphose was increased from 300 MT per month to500 MT per month, and production of Acephate wasFincreased to 1000 MT per month;

(c) An EC was granted on 10 January 2020 for an enhancedcapacity of 9546 MT per month;

(iii) The complainant, the first respondent in the lead appeal,attended the public hearing held on 16 January 2002 prior toGthe grant of an EC on 17 July 2003 and raised no objections;

(iv) If the order of the NGT prevails, the appellant would beprejudiced and suffer an irreparable loss. The appellant hasemployed approximately 400 permanent and contract workersat its manufacturing unit;and H

(v) The challenge by the first and second respondents was to theEIA notification 1994 which did not apply to the manufacturingunit of the appellant. At the relevant time, the appellant wasexempted from obtaining an EC since it had all requisitepermissions. In this context it has been submitted:

(a) On 3 October 1992, GPCB granted an NOC to theappellant for setting up a manufacturing unit; (b)On 17 November 1995 and 2 April 1996, GPCB grantedNOCs for expansion and manufacturing additionalproducts;

(c) On 27 August 2009, GPCB granted a consolidatedconsent and authorisation to the appellant smanufacturingunit;

(d) On 25 July 2012, GPCB issued an NOC for theexpansion of the appellant s manufacturing unit;and (e)On 11 May 2015 and 27 May 2017,GPCB granted aconsolidated consent and authorisation for expandedoperations.

15. Appearing for Unique Chemicals Limited, Dr Abhishek Singhvi,learned Senior Counsel urged the following submissions:

(i) The NGT did not have the jurisdiction to entertain the petitionfiled by the first and second respondents in view of the decisionof this Court in Techi Tagi Tara v Rajendra Singh Bhandari& Ors[14];

(ii) The EC granted in 2007 superseded the earlier EC granted in2002.

Therefore, the question of validity of the earlier EC does not arise.In this context it has been submitted:

(a) An EC was granted on 23 December 2002 for a capacity of78.02 MT per month for manufacturing bulk drugsandintermediates; (b) An EC was granted on 8 August 2007 for an increase inmanufacturing capacity from 78.02 MT per month to 116.12MT per month; and A

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A(c) An EC was granted on 30 June 2018 for an increase in themanufacturing capacity to 290 MT per month. On 10 April2019, the above EC was amended allowing an increase in thenumber of products permitted to be manufactured by theappellant.

B(iii) The ex post facto clearance granted to the appellant cannotbe set aside by the order of the NGT in terms of the decisionof this Court in Goa Foundation v Union of India[15], where95 industrial projects were accorded ex post facto clearancesin terms of the circular dated 14 May 2002. Accordingly, noquestion of closing down the manufacturing units of theCappellants can arise;

(iv) The requirement of an ex post facto public hearing wasintroduced by an amendment in 1997 to the EIA notificationof 1994. The legality of an ex post facto public hearing hasbeen upheld by this Court in Lafarge Umiam Mining PvtDLtd v Union of India[16];

(v) In various cases where there has been a violation of law, thiscourt has not ordered the closure considering the significantinvestment and expansion undertaken by the industry. InElectrotherm Ltd v Patel[17], this Court did not order closureEof the plant since a significant expansion had already takenplace and the industry was functioning;

(vi) If the order of the NGT prevails, the appellant would beprejudiced and suffer an irreparable loss. The appellant hasemployed approximately 400 employees at its manufacturingFunit;

(vii) The EIA notification 1994 did not apply to the manufacturingunit of the appellant. The manufacturing unit of the appellantwas exempt from obtaining an EC as it had all the requisitepermissions. In this context it has been submitted:G

(a) On 30 September 1995, GPCB issued an ‘air consent order’under the Air Act; 15 (2005) 11 SCC 55916 (2011) 7 SCC 338H17 (2016) 9 SCC 300

(b) On 9 January 1996 GPCB issued an authorisation under theHazardous Waste Rules; A

(c) On 16 April 1996 GPCB issued a ‘water consent order’ underthe Water Act; (d) On 15 April 2009 GPCB granted a consolidated consent andBauthorisation to the manufacturing unit of the appellant; (e) On 11 June 2010 and 26 June 2012, GPCB amended theconsolidated consent and authorisation granted to the appellanton 13 April 2009; (f) On 30 May 2011, GPCB granted consent to set up a gas-based power generation plant having a capacity of 400 KWat the manufacturing unit of the appellant; C

(g) On 2 November 2013, GPCB granted a fresh consolidatedconsent and authorisation to the manufacturing unit of theappellant; and D

(h) On 25 January 2019 and 25 October 2019, GPCB granted afresh and revised consolidated consent and authorisation,respectively for an increase in the number of productspermitted to be manufactured at the manufacturing unit ofthe appellant.

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16. Appearing for the first and second respondents, Mr SiddharthSeem, learned counsel has urged the following submissions before thisCourt:

(i) The circular dated 14 May 2002 is illegal because environmentaljurisprudence does not recognise any concept of ex post factoclearances. Any ex post facto approval is void and the benefitof the circular cannot be given to such an industry. In thisregard, reliance was placed upon the decision of this Court inCommon Cause v Union of India[18]; F

(ii) The circular dated 14 May 2002 does not mention its sourceor authority of law. The source of the circular is not traceableto Section 3 of the Environment Protection Act 1986 becausethe circular does not protect or improve the quality of theenvironment. The circular allows defaulters to get ex post G

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(iii) The Comprehensive Environmental Pollution Index report bythe Central Pollution Control Board indicates that the air, waterand soil parameters in and around the industrial area ofBAnkleshwar in the State of Gujarat, where the three industrialunits are located, are among the most critical in India: and

(iv) Even if this court were to hold that the closure of the industriesshould not be ordered, compensation should be directed to bepaid by them for restoration of the environment. TheseCindustries have brazenly operated for years withoutenvironmental clearances.

17. The rival submissions fall for our consideration.

18. We first address the challenge to the jurisdiction of the NGTto strike down rules or regulations made under the Environment ProtectionDAct 1986. In Tamil Nadu Pollution Control Board v SterliteIndustries (I) Ltd[19] (“Sterlite”) this Court analysed the adjudicatoryfunctions which have been entrusted to the NGT under the NationalGreen Tribunal Act 2010[20]. Justice R F Nariman, speaking for a twojudge Bench held that while exercising its jurisdiction under Section 16,Ethe NGT cannot strike down rules or regulations made under theEnvironment Protection Act 1986. In coming to this conclusion, the Courtrelied on the decision in Bharat Sanchar Nigam Limited v TelecomRegulatory Authority of India[21], where the appellate power containedin Section 14 of the Telecom Regulatory Authority of India Act[22] 1997was interpreted. After adverting to this decision, Justice R F NarimanFconcluded that:

“53…the NGT has no general power of judicial review akin tothat vested under Article 226 of the Constitution of India possessedby the High Courts of this country.”

19. While placing reliance on the above decision, Mr ANSGNadkarni, learned Additional Solicitor General made an attempt todemonstrate that the power to issue the circular dated 14 May 2002 that 19 2019 SCC Online SC 221 / Civil Appeal nos 4763-4764 of 201320 “NGT Act”

21 (2014) 3 SCC 22222 “TRAI Act”H

extended the deadline for defaulting units to avail of an ex post factoclearance until 30 March 2003 could well be traceable to Section 3 ofthe Environment Protection Act 1986. Section 3, to the extent relevant,provides thus:

“Section 3. Power of central government to take measures toprotect and improve environment.- (1) Subject to the provisionsof this Act, the Central Government, shall have the power to takeall such measures as it deems necessary or expedient for thepurpose of protecting and improving the quality of the environmentand preventing controlling and abating environmental pollution.”

20. Section 3(1) is an enabling provision for the CentralGovernment to undertake all such measures as it deems necessary orexpedient for the purpose of protecting and improving the quality of theenvironment and preventing, controlling and abating environmentalpollution. This limb of the submission of the Additional Solicitor Generalis crucial to the issue as to whether the NGT has exceeded its jurisdictionsince the decision in Sterlite holds that the NGT, while exercising itsappellate jurisdiction, “cannot strike down rules or regulations made underthis Act”. In the present case, to demonstrate that the NGT did nothave the jurisdiction to strike down the circular dated 14 May 2002, itwas urged that the circular was issued by the MoEF pursuant to itspowers under Section 3 of the Environment Protection Act 1986. Thereis an inherent difficulty in accepting the submission. Before this Court,the Union of India has not pleaded the case that the circular dated 14May 2002 is a measure which is traceable to the provisions of Section 3.On the contrary, in its pleadings the Union of India construed it as a“purely administrative decision”. Ground (iii) in paragraph 3 of the memoof appeal states the position of the Union government:

“Because the Hon ble Tribunal failed to appreciate that after theEIA, Notification 1994 the opportunity to seek ex-post factoenvironmental clearance was given to industries in background offar reaching impact in terms of direct loss of livelihood in theemployees working in the units which also supply inputs to otherunits and their indirect employment. It was submitted to theHon’ble High Court of Gujarat that issuance of circulardated 14/05/2002, based on which environmental clearancewas given, was purely an administrative decision beforetaking string entaction.”

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A21. The omission in the appeal to make any attempt to sustain thecircular dated 14 May 2002 with reference to the provisions of Section3 of the Environment Protection Act 1986 is significant. For an action ofthe Central government to be treated as a measure referable to Section3 it must satisfy the statutory requirement of being necessary or expedient“for the purpose of protecting and improving the quality of the environmentBand preventing, controlling and abating environment pollution”. Thecircular dated 14 May 2002 in fact does quite the contrary. It purportedto allow an extension of time for industrial units to comply with therequirement of an EC. The EIA notification dated 27 January 1994mandated that an EC has to be obtained before embarking on a newCproject or expanding or modernising an existing one. The EIA notificationof 1994 has been issued under the provisions of the EnvironmentProtection Act 1986 and the Environment Protection Rules 1986, withthe object of imposing restrictions and prohibitions on setting up of newprojects or expansion or modernisation of existing project. The measuresare based on the precautionary principle and aim to protect the interestsDof the environment. The circular dated 14 May 2002 allowed defaultingindustrial units who had commenced activities without an EC to cure thedefault by an ex post facto clearance. Being an administrative decision,it is beyond the scope of Section 3 and cannot be said to be a measurefor the purpose of protecting and improving the quality of the environment.EThe circular notes that there were defaulting units which had failed tocomply with the requirement of obtaining an EC as mandated. The circularprovided for an extension of time and inexplicably introduced the notionof an expost facto clearance. In effect, it impacted the obligation of theindustrial units to be in compliance with the law. The concept of ex postfacto clearance is fundamentally at odds with the EIA notification datedF27 January 1994. The EIA notification of 1994 contained a stipulationthat any expansion or modernisation of an activity or setting up of a newproject listed in Schedule – I “shall not be undertaken in any part of Indiaunless it has been accorded environmental clearance”. The language ofthe notification is as clear as it can be to indicate that the requirement isGof a prior EC. A mandatory provision requires complete compliance.The words “shall not be undertaken” read in conjunction with theexpression “unless” can only have one meaning : before undertaking anew project or expanding or modernising an existing one, an EC must beobtained. When the EIA notification of 1994 mandates a prior EC, itproscribes a post activity approval or an ex post facto permission. WhatH

is sought to be achieved by the administrative circular dated 14 May2002 is contrary to the statutory notification dated 27 January 1994. Thecircular dated 14 May 2002 does not stipulate how the detrimental effectson the environment would be taken care of if the project proponent isgranted an ex post facto EC. The EIA notification of 1994 mandates aprior environmental clearance. The circular substantially amends or altersthe application of the EIA notification of 1994. The mandate of notcommencing a new project or expanding or modernising an existing oneunless an environmental clearance has been obtained stands diluted andis rendered ineffective by the issuance of the administrative circulardated 14 May 2002. This discussion leads us to the conclusion that theadministrative circular is not a measure protected by Section 3. Hencethere was no jurisdictional bar on the NGT to enquire into its legitimacyor vires. Moreover, the administrative circular is contrary to the EIANotification 1994 which has a statutory character. The circular isunsustainable in law.

22. Mr Kapil Sibal, learned Senior Counsel appearing on behalf ofAlembic Pharmaceuticals Limited sought to urge that the EIA notificationdated 27 January 1994 contains an omission of the expression “prior”and contrasted this with the EIA notification dated 14 September 2006which stipulates the requirement of a “prior” EC. This, in his submissionis an indicator that a prior EC is mandatory under the notification dated14 September 2006 but was not so under the earlier notification dated 27January 1994. This interpretation was not supported by Mr ANSNadkarni, learned Additional Solicitor General who categorically submittedthat the requirement under the notification dated 27 January 1994 wasof a prior EC. We are unable to accept the submission of Mr KapilSibal. The terms of the EIA notification dated 27 January 1994 leave nomanner of doubt that a prior EC was mandated before a new projectwas commenced or before undertaking any expansion or modernisationof an existing project. The absence of the expression “prior” in the EIAnotification dated 27 January 1994 makes no difference since the words“shall not be undertaken…unless” postulate the requirement of a priorEC. Speaking for a two judge Bench of this Court in Common Causev Union of India[23] (“Common Cause”), Justice Madan B Lokurrejected the submission which was urged on behalf of mining lease holdersthat:

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“108… the possibility of getting an ex post facto EC was a signalto the mining leaseholders that obtaining an EC was not mandatoryor that it if was not obtained, the default was retrospectivelycondonable.”

Disagreeing with the submission, the Court held:

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“125. We are not in agreement with the learned counsel for themining leaseholders. There is no doubt that the grant of anEC cannot be taken as a mechanical exercise. It can onlybe granted after due diligence and reasonable care sincedamage to the environment can have a long-term impact.CEIA 1994 is therefore very clear that if expansion ormodernisation of any mining activity exceeds the existingpollution load, a prior EC is necessary and as already heldby this Court in M.C. Mehta [M.C. Mehta v. Union ofIndia, (2004) 12 SCC 118] even for the renewal of a mininglease where there is no expansion or modernisation of anyDactivity, a prior EC is necessary. Such importance havingbeen given to an EC, the grant of an ex post factoenvironmental clearance would be detrimental to theenvironment and could lead to irreparable degradation ofthe environment. The concept of an ex post facto or aEretrospective EC is completely alien to environmentaljurisprudence including EIA 1994 and EIA 2006. We makeit clear that an EC will come into force not earlier than the date ofitsgrant.”

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23. The concept of an ex post facto EC is in derogation of thefundamental principles of environmental jurisprudence and is an anathemato the EIA notification dated 27 January 1994. It is, as the judgment inCommon Cause holds, detrimental to the environment and could leadto irreparable degradation. The reason why a retrospective EC or an exGpost facto clearance is alien to environmental jurisprudence is that beforethe issuance of an EC, the statutory notification warrants a carefulapplication of mind, besides a study into the likely consequences of aproposed activity on the environment. An EC can be issued only aftervarious stages of the decision-making process have been completed.

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Requirements such as conducting a public hearing, screening,scoping and appraisal are components of the decision-making processwhich ensure that the likely impacts of the industrial activity or theexpansion of an existing industrial activity are considered in the decision-making calculus. Allowing for an ex post facto clearance wouldessentially condone the operation of industrial activities without the grantof an EC. In the absence of an EC, there would be no conditions thatwould safeguard the environment. Moreover, if the EC was to beultimately refused, irreparable harm would have been caused to theenvironment. In either view of the matter, environment law cannotcountenance the notion of an ex post facto clearance. This would becontrary to both the precautionary principle as well as the need forsustainable development.

24. In order to enable the Court to assess the status of compliance,the material which has been produced on the record by (i) AlembicPharmaceuticals Limited; (ii) United Phosphorous Limited; and (iii)Unique Chemicals Limited has been compiled in a tabulated form foreach of the three industries. For Alembic Pharmaceuticals Limited, thedata for its two industrial units - Darshak Private Limited (API – I) andNirayu Private Limited (API – II) - has been analysed separately. Foreach of the three industries, Table A below consists of the list ofpermissions, consents and authorisations obtained by the industry fromvarious authorities. Table B contains a list of ECs which were grantedfrom time to time to each industrial unit. The position as tabulated belowis based on the material which has been disclosed on the record of theseproceedings:

Table A: List of permissions, consents and authorisations granted to Alembic Pharmaceuticals Limited Darshak (API–I)Date Permission/Consent/Authorisation Granted 17 July 1992 GPCB issued a no objection certificate to establish an industrial unit for the manufacture of the following items at API–I: (i) Ciprofloxacin (1.25 MT pm); and (ii) Norfloxacin (2.5 MT pm)11June 1997GPCB granted noobjectioncertificatefor manufacturingadditional items at API–I 29 May 1997 GPCB issued air consent order authorising to operate API–I 11 July 1997, GPCB granted no objection certificate for manufacturing of 12 July 1997 and 27 July additional items at API–I 1998 31 March 1999 GPCB issued air consent order authorising to operate API–I 11 October GPCB issued water consent order authorising to operate AP–I 1999 Between 27 September GPCB issued various consents under the Air Act, Water Act 2002 – 23 and Hazardous Waste Rules. December 2011

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ATable A: List of permissions, consents and authorisations granted to Alembic Pharmaceuticals Limited –Darshak (APII)Date Permission/Consent/Authorisation Granted 17 July 1992 GPCB issued a no objection certificate to establish an industrial unit for the manufacture of the following items at API–I: (i) BCiprofloxacin (1.25 MT pm); and (ii) Norfloxacin (2.5 MT pm)11June 1997GPCB granted noobjectioncertificatefor manufacturingadditional itemsat API–I 29 May 1997 GPCB issued air consent order authorising to operate API–I 11 July 1997, GPCB granted no objection certificate for manufacturing of 12 July 1997 and 27 July additional items at API–I C1998 31 March 1999 GPCB issued air consent order authorising to operate API–I 11 October GPCB issued water consent order authorising to operate AP–I 1999 Between 27 September GPCB issued various consents under the Air Act, Water Act 2002 – 23 and Hazardous Waste Rules. December 2011 D–Nirayu Private Limited(APIII)Date Permission/Consent/Authorisation Granted 12 July 1984 Factory license was issued in favour of Nirayu Private Limited 24 May 1985 GPCB issued water consent order authorising to operate API–II E9 October 1991 GPCB issued a site clearance certificate to establish an industrial unit and manufacture the following items at API–II: (i) CIMC chloride (2000 kgs pm); and (ii) Cloxacillin sodium (500 kgs pm)12 May 1993 GPCB granted a no objection certificate to establish an industrial unit and manufacture the following items: (i) Acetone thiosemicarbazone (2MTpm);(ii)2Mercapta(5MTpm);(iii)Methoxyorthoxymethyl Fchloride(0.3 MT pm);and(iv)Solventether (7 MT pm)1 September GPCB issued authorisation to operate API–II under the Hazardous1993 Waste Rules 23 September GPCB issued water consent order authorising to operate API–II 1993 4 December GPCB granted no objection certificate for manufacturing G1995 additional itemsat API–II 4 October 1996 GPCB issued air consent order to operate API–II and 17 April1998

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ATable B: List of environmental clearances granted to Unique Chemicals Limited Unit at plot no 5Date ofDate of PublicEC for Expansion Date ECApplication Hearing (Quantity) Granted 30 June 2001 25 January 2002 Total capacity 78.02 MT 23 December 2002 as pm of bulk drugs and per EIA notification intermediates. 1994 Manufacturing of (i) BDiclofenac sodium intermediates and derivates (40 MT pm); (ii) Nifedipine and its intermediates (2 MT pm); (iii) Indelinone (7 MT pm); (iv) Pefloxacin and its intermediates (3 MT pm); C(v) 2 methyl imldazole (15 MT pm); (vi) Phentolamine HCL (10 MT pm); (vii) Diltazem HCL (1MT pm); and (viii) other co-products12 January 2007 Exempt – For an increase in 8 August 2007 as per proposed project manufacturing of bulk drugs EIA notification 2006 located in notified and intermediates from a Dindustrial area total capacity from 78.02 MT pm to 116.12 MT pm For an increase in manufacturing of co-products from a total capacity of 103 MT pm to 297 MT pm For setting up a captive Epower plant with 1.3 MW capacity16 March 2018 Exempt – For an increase in 30 June 2018 as per EIA proposed project manufacturing of bulk drugs notification2006 located in notified and intermediates from a industrial area total capacity from 78.02 MT pm to 290 MT pm bysetting up of Fsynthetic organic chemicals manufacturing plantAmendment to the EC dated 10 April 2019 30 June 2018 increasing the as per the 2006 number ofproducts permittedEIA notification manufactured by the Gappellant at the unit at plot no 5

25. The position that emerges from the record is that in the caseof all the three industries, ECs were applied for nearly a decade afterthe introduction of the EIA notification 1994. In the meantime, theHindustries had been set up and had commenced production. GPCB issued

a notice to United Phosphorus Limited on 30 April 2001 directing themto apply for an EC. On 9 December 2000, GPCB issued a notice toDarshak Private Limited (API – I) and Nirayu Private Limited (API –II) directing them to apply for and obtain an EC in accordance with theEIA notification of 1994. Darshak Private Limited (API – I) of AlembicPharmaceuticals Limited, applied for an EC on 21 July 2001 which itwas granted on 14 May 2003. Subsequent applications for expansion ofcapacity were submitted on 8 December 2006 and 16 September 2015for which ECs were granted on 16 April 2008 and 31 January 2017,respectively. Nirayu Private Limited (API – II), initially applied for anEC on 20 July 2001 and the EC was granted on 14 May 2003. Theapplication for the grant of an EC for an extended capacity was submittedon 28 March 2016 and the EC was granted on 20 December 2016. Inthe case of United Phosphorous Limited, the initial EC was sought on 21August 2002 and it was granted on 17 July 2003. An application forexpansion of capacity was submitted on 20 October 2007 and it wasgranted on 15 April 2008. An EC for the further expansion of capacitywas granted on 10 January 2020. In the case of Unique Chemicals Limited,the initial application for an EC was submitted on 30 June 2001 and itwas granted on 23 December 2002. Subsequent applications forexpansion in capacity were submitted on 12 January 2007 and 16 March2018 for which ECs were granted on 8 August 2017 and 30 June 2018,respectively. An amendment to the EC dated 30 June 2018 was grantedon 10 April 2019. The documents disclosed by the three industriesdemonstrate that no ECs as mandated by the EIA notification of 1994were sought before the commencement or expansion of operations. Theterms of the EIA notification of 1994 envisage that expansion ormodernisation of any activity (if the pollution load is to exceed the existingone) or a new project listed in Schedule – I shall not be undertakenunless it has been granted an EC. In the present case, all the threeindustries continued to operate in the teeth of the EIA notification 1994.

26. Learned counsel appearing for the three industries have reliedon a range of additional measures adopted, such as the installation oflatest pollution capturing technologies, recent consents from GPCB andcertification of “zero discharge” units. These measures adoptedsubsequently will not cure the failure to obtain ECs before the projectscommenced operation. These measures are simply to ensure compliancewith the pollution standards and requirements of law that exist as ofdate. These submissions have no bearing on determining whether the AB

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Aindustrial units were in the past operating in compliance with the requisiteenvironmental standards. These measures cannot act as correctives forhistorical wrongs and cannot compensate for the damage already causedto the environment as a result of manufacturing activities which werecarried on without ECs.

B27. Learned counsel for the three industries urged that the EIAnotification of 1994 did not apply to their manufacturing units as theywere covered by the exemption in terms of Clause 8 of the explanatorynote. The issue which needs to be considered is whether the industrieswere covered by the exemption and were not required to obtain ECs.Clause 8 to the explanatory note to the EIA notification of 1994 statesCthus:

“8. Exemption for projects already initiated

For projects listed in Schedule – I to the notification in respect ofwhich the required land has been acquired and all relevantDclearances of the State Government including NOC from therespective State Pollution Control Board have been obtained before27th January 1994, a project proponent will not be required toseek environmental clearance from the IAA. However, those unitswho have not as yet commenced production will inform the IAA”

E28. Before the exemption contained in Clause 8 applies, it wasnecessary for projects listed in Schedule - I to obtain all relevantclearances from the State government including an NOC from the StatePollution Control Board. It was in other words not sufficient to merelyobtain an NOC from the State Pollution Control Board. The exemptionwhich was carved out in the explanatory note was to ensure that activitiesFwhich had received all required clearances at the state level, followingthe acquisition of land should be protected. In fact, many of them wouldalso involve the commencement of production prior to 27 January 1994.The explanatory note stated that where production had not yetcommenced, the IAA would have to be intimated. In order to be coveredGwithin the scope of the exemption, the burden is on the industry todemonstrate before this Court that they fulfilled conditions spelt out inClause 8 of the explanatory note. The EIA notification 1994 is a significantinstrument in effectuating the implementation of the precautionaryprinciple. The burden lies on the project proponent who seeks to alterthe state of the environment or to impact on the environment toH

demonstrate that the terms on which an exemption has been grantedhave been fulfilled. An exemption must be construed in its strict senseaccording to its plain terms. None of the three industries before theCourt have furnished an exhaustive catalogue of what were the “relevantclearances from the State government” that had to be obtained underthe provisions of the law as it then stood.

29. With this background, we will now assess individually whetherthe industries in question qualified for the exemption provided by Clause8 to the explanatory note.

30. Alembic Pharmaceuticals Limited

-(i) Darshak Private Limited (API I)

The material produced on the record indicates that on 17 July1992, GPCB had issued an NOC to establish an industrial unit andmanufacture two pharmaceuticals products. However, the NOC formanufacturing additional items was issued only on 11 June 1997subsequent to the EIA notification dated 27 January 1994. The NOCdated 17 July 1992 issued by GPCB clearly states:

“We would like to inform you that the proposed location for thisindustrial plant is acceptable to us provided that you willimplement the following measure for the prevention andcontrol of environmental pollution:- (A)

(B)

(C)

(D) Adequate arrangement for the management and handling ofhazardous waste shall be made:

IMPORTANT NOTE

(3) The applicant/entrepreneur shall be required to obtain thefollowing from the Board prior to commencement ofproduction:

(a) Consent under the Water (Prevention and Control of Pollution)Act 1974.

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A(b) Consent under the Air (Prevention and Control of Pollution)Act 1981.

(c) Authorisation under the Hazardous Waste (Management andHandling) Rules 1989 under the Environment (Protection) Act1986.”

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GPCB while granting the NOC to establish an industrial unitrequired the project proponent to undertake certain measures for theprevention and control of environmental pollution including installation oftreatment plants, discharge of effluents within prescribed limits and theCcreation of a green belt around the industrial unit. One of the pointsunder the “Important Note” states that the project proponent “shall berequired to obtain” from the board “prior to commencement of production”requisite consents and authorisations under the Air Act, Water Act andHazardous Waste Rules. The language used in the NOC makes it clearDthat obtaining consents and authorisations under various environmentrelated legislations was a mandatory pre-condition and not merelydirectory. In the present case, the authorisation under the Air Act wasissued only on 29 May 1997 and 31 March 1999. The authorisation underthe Water Act was issued on 11 October 1999. Clause 8 of the explanatorynote states that for the exemption to apply, it was necessary for projectsElisted in Schedule - I to have obtained all relevant clearances from theState government including an NOC from the State Pollution ControlBoard. The evidence produced on the record by Darshak Private Limitedindicates that it did not have the requisite consents and authorisationsunder the Air Act, Water Act and Hazardous Waste Rules prior to theFEIA notification 1994. Many of the consents and permissions wereobtained subsequently and not prior to the EIA notification of 1994.Accordingly, the manufacturing unit of Darshak Private Limited (API –I) is not covered under the exemption under Clause 8 to the explanatorynote of the EIA notification of 1994.

–G(ii) Nirayu Private Limited (API II)

A factory license was issued on 12 July 1984 to API – II. On 24May 1985, GPCB issued a water consent order under the Water Act.This was valid only for the manufacture of anaesthetic Ether. GPCBissued a site clearance certificate on 9 October 1991 for the manufacture H

of CIMC Chloride and Cloxacillin Sodium. An NOC to establish anindustrial unit and to manufacture products was issued on 12 May 1993and one for expansion on 4 December 1995. It is relevant to note thatthe NOC dated 12 May 1993 issued by GPCB to Nirayu PrivateLimited(API – II) is worded in exactly the same manner as the NOCdated 17 July 1992 issued to Darshak Private Limited (API – I). TheNOC dated 12 May 1993 issued to Nirayu Private Limited (API – II)also mandates that the project proponent “shall be required to obtain”from the board “prior to commencement of production” requisite consentsand authorisations under the Air Act, Water Act and Hazardous WasteRules from GPCB. In the case of Nirayu Private Limited (API – II),authorisation under the Hazardous Waste Rules was issued on 1September 1993. Consent to operate API – II under the Water Act wasissued on 12 November 1999. GPCB issued consolidate consent andauthorisation to operate API – II on 14 December 2010. From the abovenarration which is based on the disclosures made by Nirayu PrivateLimited, it is evident that all consents and permissions had not beenobtained prior to the EIA notification of 1994. Accordingly, themanufacturing unit of Nirayu Private Limited (API – II) is not coveredunder the exemption under Clause 8 to the explanatory note of the EIAnotification of 1994.

31. United PhosphorousLimited

31. United PhosphorousLimited

On 31 January 1992, Gujarat Industrial Development Corporationgranted land to the appellant to establish and run its unit. On 9 March1992 and 3 October 1992, GPCB issued an NOC for the operation ofthe unit. The unit commenced manufacturing in 1993. It is relevant tonote that the NOC dated 3 October 1993 also mandates that the projectproponent “shall be required to obtain” from the GPCB “prior tocommencement of production” requisite consents and authorisationsunder the Air Act, Water Act and Hazardous Waste Rules. UnitedPhosphorous Limited has not disclosed the dates on which it receivedauthorisations under the relevant environmental legislation. It has placedon record a consolidated consent and authorisation that was issued muchlater on 27 August 2009 under the Air Act, Water Act and HazardousWaste (Management, Handling and Trans boundary Movement) Rules AB

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A2008. The disclosures which have been made are patently incomplete.No material has been produced to indicate that all relevant clearancesfrom the State government including the NOC from GPCB had beenobtained prior to the EIA notification 1994. Accordingly, they cannot begranted the benefit of the exemption under Clause 8 to the explanatorynote of the EIA notification of 1994.

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32. Unique ChemicalsLimited

The material produced on the record indicates that GPCB issuedan NOC to establish and run the manufacturing unit on 14 August 1995.It is evident from the table enlisting the list of relevant permissions,Cconsents and authorisations that all permissions were received after theEIA notification 1994 was issued. Clearly, Unique Chemicals Limited isnot entitled to the benefit of the exemption contained in Clause 8 of theexplanatory note to the EIA notification1994.

33. From the material placed on the record by the industries, itDbecomes evident that there has been a gross abdication of responsibilityby all the three industries in terms of obtaining timely consents andauthorisations from the GPCB. There exists a distinction betweenobtaining relevant clearances and consents from the State PollutionControl Board and obtaining an environmental clearance in accordancewith the procedure laid down under the EIA notification of 1994. A consentEorder issued by the State Pollution Control Board allows an industry tooperate within the prescribed emission norms. However, the consentorders do not account for the social cost and impact of undertaking anindustrial activity on the environment and its surroundings. A holisticanalysis of the environmental impact of an industrial activity is onlyFaccounted for once all the steps listed out in EIA notification of 1994 arefollowed. The purpose of setting in place specific requirements such aspublic hearing, screening, scoping and appraisal is to foster deliberativedecisions and protect environmental concerns. The detailed process listedout in the EIA notification of 1994 for obtaining an EC allows forminimising the adverse environmental impact of any industrial activityGand improving the quality of the environment. One must adopt anecologically rational outlook towards development. Given the social andenvironmental impacts of an industrial activity, environment compliancemust not be seen as an obstacle to development but as a measure towardsachieving sustainable development and inter-generational equity.

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34. We have therefore come to the conclusion that none of thethree industries were entitled to the benefit of the exemption containedin Clause 8 of the explanatory note to the EIA notification of 1994.

35. The issue which must now concern the Court is theconsequence which will emanate from the failure of the three industriesto obtain their ECs until 14 May 2003 in the case of AlembicPharmaceuticals Limited, 17 July 2003 in the case of United PhosphorousLimited, and 23 December 2002 in the case of Unique Chemicals Limited.The functioning of the factories of all three industries without a valid ECwould have had an adverse impact on the environment, ecology andbiodiversity in the area where they are located. The ComprehensiveEnvironmental Pollution Index[24] report issued by the Central PollutionControl Board for 2009-2010 describes the environmental quality at 88locations across the country. Ankleshwar in the State of Gujarat, wherethe three industries are located showed critical levels of pollution[25]. Inthe Interim Assessment of CEPI for 2011, the report indicates similarcritical figures[26] of pollution in the Ankleshwar area. The CEPI scoresfor 2013[27] and 2018[28] were also significantly high. This is an indicationthat industrial units have been operating in an unregulated manner and indefiance of the law. Some of the environmental damage caused by theoperation of the industrial units would be irreversible. However, to theextent possible some of the damage can be corrected by undertakingmeasures to protect and conserve the environment.

36. Even though it is not possible to individually determine theexact extent of the damage caused to the environment by the threeindustries, several circumstances must weigh with the Court in determiningthe appropriate measure of restitution. First, it is not in dispute that allthe three industries did obtain ECs, though this was several years afterthe EIA notification of 1994 and the commencement of production.Second, subsequent to the grant of the ECs, the manufacturing units ofall the three industries have also obtained ECs for an expansion of capacityfrom time to time. Third, the MoEF had issued a circular on 5 November1998 permitting applications for ECs to be filed by 31 March 1999, which 24 “CEPI”

25 CEPI score - 88.50

26 CEPI score - 85.75

27 CEPI score - 80.93

28 CEPI score - 80.21

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Awas extended subsequently to 30 June 2001. On 14 May 2002, thedeadline was extended until 31 March 2003 subject to a depositcommensurate to the investment made. The circulars issued by the MoEFextending time for obtaining ECs came to the notice of this Court in GoaFoundation (I) v Union of India[29]. Fourth, though in the context of thefacts of the case, this Court in Lafarge Umiam Mining Private LimitedBv Union of India[30] (“Lafarge”) has upheld the decision to grant expost facto clearances with respect to limestone mining projects in theState of Meghalaya. In Lafarge, the Court dealt with the question ofwhether ex post facto clearances stood vitiated by alleged suppressionof the nature of the land by the project proponent and whether thereCwas non-application of mind by the MoEF while granting the clearances.While upholding the ex post facto clearances, the Court held that thenative tribals were involved in the decision-making process and that theMoEF had adopted a due diligence approach in reassuring itself throughreports regarding the environmental impact of the project. Chief Justice

SH Kapadia speaking for the three judge Bench observed:D“119. The time has come for us to apply the constitutional“doctrine of proportionality” to the matters concerningenvironment as a part of the process of judicial review incontradistinction to merit review. It cannot be gain saidthat utilization of the environment and its natural resourcesEhas to be in a way that is consistent with principles ofsustainable development and intergenerational equity, butbalancing of these equities may entail policy choices. In thecircumstances, barring exceptions, decisions relating to utilizationof natural resources have to be tested on the anvil of the well-Frecognized principles of judicial review. Have all the relevantfactors been taken into account? Have any extraneous factorsinfluenced the decision? Is the decision strictly in accordance withthe legislative policy underlying the law (if any) that governs thefield? Is the decision consistent with the principles of sustainabledevelopment in the sense that has the decision-maker taken intoGaccount the said principle and, on the basis of relevantconsiderations, arrived at a balanced decision? Thus, the Courtshould review the decision-making process to ensure that thedecision of MoEF is fair and fully informed, based on the correct 29 (2005) 11 SCC 559H30 (2011) 7 SCC 338

principles, and free from any bias or restraint. Once this is ensured,then the doctrine of “margin of appreciation” in favour of thedecision-maker would come intoplay.”

37. After adverting to the decision in Lafarge, another Bench ofthree learned judges of this Court in Electrotherm (India) Limited vPatel Vipulkumar Ramjibhai[31], dealt with the issue of whether an ECgranted for expansion to the appellant without holding a public hearingwas valid in law. Justice Uday Umesh Lalit speaking for the Bench heldthus:

“19…the decision-making process in doing away with or in grantingexemption from public consultation/public hearing, was not basedon correct principles and as such the decision was invalid andimproper.”

The Court while deciding the consequence of granting an ECwithout public hearing did not direct closure of the appellant's unit andinstead held thus:

“20. At the same time, we cannot lose sight of the fact that inpursuance of environmental clearance dated 27-1-2010, theexpansion of the project has been undertaken and as reported byCPCB in its affidavit filed on 7-7-2014, most of therecommendations made by CPCB are complied with. In ourconsidered view, the interest of justice would be subserved if thatpart of the decision exempting public consultation/public hearingis set aside and the matter is relegated back to the authoritiesconcerned to effectuate public consultation/public hearing.However, since the expansion has been undertaken andthe industry has been functioning, we do not deem itappropriate to order closure of the entire plant as directedby the High Court. If the public consultation/public hearing resultsin a negative mandate against the expansion of the project, theauthorities would do well to direct and ensure scaling down of theactivities to the level that was permitted by environmental clearancedated 20-2-2008. If public consultation/public hearing reflects infavour of the expansion of the project, environmental clearancedated 27-1-2010 would hold good and be fully operative. In other 31 (2016) 9 SCC 300

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Awords, at this length of time when the expansion has alreadybeen undertaken, in the peculiar facts of this case and inorder to meet ends of justice, we deem it appropriate tochange the nature of requirement of public consultation/public hearing from pre-decisional to post-decisional. Thepublic consultation/public hearing shall be organised by theBauthorities concerned in three months from today.”

38. Guided by the precepts that emerge from the above decisions,this Court has taken note of the fact that though the three industriesCoperated without an EC for several years after the EIA notification of1994, each of them had subsequently received ECs including amendedECs for expansion of existing capacities. These ECs have beenoperational since 14 May 2003 (in the case of Alembic PharmaceuticalsLimited), 17 July 2003 (in the case of United Phosphorous Limited), and23 December 2002 (in the case of Unique Chemicals Limited). InDaddition, all the three units have made infrastructural investments andemployed significant numbers of workers in their industrial units.

39. In this backdrop, this Court must take a balanced approachwhich holds the industries to account for having operated withoutenvironmental clearances in the past without ordering a closure ofEoperations. The directions of the NGT for the revocation of the ECs andfor closure of the units do not accord with the principle of proportionality.At the same time, the Court cannot be oblivious to the environmentaldegradation caused by all three industries units that operated withoutvalid ECs. The three industries have evaded the legally binding regimeFof obtaining ECs. They cannot escape the liability incurred on accountof such non- compliance. Penalties must be imposed for the disobediencewith a binding legal regime. The breach by the industries cannot be leftunattended by legal consequences. The amount should be used for thepurpose of restitution and restoration of the environment. Instead and inplace of the directions issued by the NGT, we are of the view that itGwould be in the interests of justice to direct the three industries to depositcompensation quantified at ` 10 crores each. The amount shall bedeposited with GPCB and it shall be duly utilised for restoration andremedial measures to improve the quality of the environment in theindustrial area in which the industries operate. Though we have come toHthe conclusion, for the reasons indicated, that the direction for the revocation of the ECs and the closure of the industries was not warranted,we have issued the order for payment of compensation as a facet ofpreserving the environment in accordance with the precautionaryprinciple. These directions are issued under Article 142 of the Constitution.Alembic Pharmaceuticals Limited, United Phosphorous Limited andUnique Chemicals Limited shall deposit the amount of compensationwith GPCB within a period of four months from the date of receipt ofthe certified copy of this judgment. This deposit shall be in addition to theamount directed by the NGT. Subject to the deposit of the aforesaidamount and for the reasons indicated, we allow the appeals and setaside the impugned judgment of the NGT dated 8 January 2016 in so faras it directed the revocation of the ECs and closure of the industries aswell as the order in review dated 17 May 2016.

Pending application(s), if any, shall stand disposed of.

Divya Pandey

Appeals allowed.

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