Case: ALEMBIC PHARMACEUTICALS LTD Vs. ROHIT PRAJAPATI &amp; ORS

(I) v Union of India (2005) 11 SCC 559 . Fourth, though in the context of the facts of the case, this Court in Lafarge Umiam Mining Private Limited v Union of India (2011) 7 SCC 338 ( Lafarge) has upheld the decision to grant ex post facto clearances with respect to limestone mining projects in the State of Meghalaya. In Lafarge, the Court dealt with the question of whether ex post facto clearances stood vitiated by alleged suppression of the nature of the land by the project proponent and whether there was non-application of mind by the MoEF while granting the clearances. While upholding the ex post facto clearances, the Court held that the native tribals were involved in the decision-making process and that the MoEF had adopted a due diligence approach in reassuring itself through reports regarding the environmental impact of the project. Chief Justice SH Kapadia speaking for the three judge Bench observed: 119. The time has come for us to apply the constitutional doctrine of proportionality to the matters concerning environment as a part of the process of judicial review in contradistinction to merit review. It cannot be gainsaid that utilization of the environment and its natural resources has to be in a way that is consistent with principles of sustainable development and intergenerational equity, but balancing of these equities may entail policy choices. In the circumstances, barring exceptions, decisions relating to utilization of natural resources have to be tested on the anvil of the well- recognized principles of judicial review. Have all the relevant factors been taken into account? Have any extraneous factors influenced the decision? Is the decision strictly in accordance with the legislative policy underlying the law (if any) that governs the field? Is the decision consistent with the principles of sustainable development in the sense that has the decision-maker taken into account the said principle and, on the basis of relevant considerations, arrived at a balanced decision? Thus, the Court should review the decision-making process to ensure that the decision of MoEF is fair and fully informed, based on the correct principles, and free from any bias or restraint. Once this is ensured, then the doctrine of margin of appreciation in favour of the decision-maker would come into play. (Emphasis supplied) 37. After adverting to the decision in Lafarge, another Bench of three learned judges of this Court in Electrotherm (India) Limited v Patel Vipulkumar Ramjibhai (2016) 9 SCC 300, dealt with the issue of whether an EC granted for expansion to the appellant without holding a public hearing was valid in law. Justice Uday Umesh Lalit speaking for the Bench held thus: 19…the decision-making process in doing away with or in granting exemption from public consultation/public hearing, was not based on correct principles and as such the decision was invalid and improper. The Court while deciding the consequence of granting an EC without public hearing did not direct closure of the appellants unit and instead held thus: 20. At the same time, we cannot lose sight of the fact that in pursuance of environmental clearance dated 27-1-2010, the expansion of the project has been undertaken and as reported by CPCB in its affidavit filed on 7-7-2014, most of the recommendations made by CPCB are complied with. In our considered view, the interest of justice would be subserved if that part of the decision exempting public consultation/public hearing is set aside and the matter is relegated back to the authorities concerned to effectuate public consultation/public hearing. However, since the expansion has been undertaken and the industry has been functioning, we do not deem it appropriate to order closure of the entire plant as directed by the High Court. If the public consultation/public hearing results in a negative mandate against the expansion of the project, the authorities would do well to direct and ensure scaling down of the activities to the level that was permitted by environmental clearance dated 20-2-2008. If public consultation/public hearing reflects in favour of the expansion of the project, environmental clearance dated 27-1-2010 would hold good and be fully operative. In other words, at this length of time when the expansion has already been undertaken, in the peculiar facts of this case and in order to meet ends of justice, we deem it appropriate to change the nature of requirement of public consultation/public hearing from pre-decisional to post-decisional. The public consultation/public hearing shall be organised by the authorities concerned in three months from today. (Emphasis supplied) 38. Guided by the precepts that emerge from the above decisions, this Court has taken note of the fact that though the three industries operated without an EC for several years after the EIA notification of 1994, each of them had subsequently received ECs including amended ECs for expansion of existing capacities. 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 December 2002 (in the case of Unique Chemicals Limited). In addition, all the three units have made infrastructural investments and employed significant numbers of workers in their industrial units. 39. In this backdrop, this Court must take a balanced approach which holds the industries to account for having operated without environmental clearances in the past without ordering a closure of operations. The directions of the NGT for the revocation of the ECs and for closure of the units do not accord with the principle of proportionality. At the same time, the Court cannot be oblivious to the environmental degradation caused by all three industries units that operated without valid ECs. The three industries have evaded the legally binding regime of obtaining ECs. They cannot escape the liability incurred on account of such non- compliance. Penalties must be imposed for the disobedience with a binding legal regime. The breach by the industries cannot be left unattended by legal consequences. The amount should be used for the purpose of restitution and restoration of the environment.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]In the present case, to demonstrate that the NGT did not have the jurisdiction to strike down the circular dated 14 May 2002, it was urged that the circular was issued by the MoEF pursuant to its powers under Section 3 of the Environment Protection Act 1986. There is an inherent difficulty in accepting the submission. Before this Court, the Union of India has not pleaded the case that the circular dated 14 May 2002 is a measure which is traceable to the provisions of Section 321. The omission in the appeal to make any attempt to sustain the circular dated 14 May 2002 with reference to the provisions of Section 3 of the Environment Protection Act 1986 is significant. For an action of the Central government to be treated as a measure referable to Section 3 it must satisfy the statutory requirement of being necessary or expedient for the purpose of protecting and improving the quality of the environment and preventing, controlling and abating environment pollution . The circular dated 14 May 2002 in fact does quite the contrary. It purported to allow an extension of time for industrial units to comply with the requirement of an EC. The EIA notification dated 27 January 1994 mandated that an EC has to be obtained before embarking on a new project or expanding or modernising an existing one. The EIA notification of 1994 has been issued under the provisions of the Environment Protection Act 1986 and the Environment Protection Rules 1986, with the object of imposing restrictions and prohibitions on setting up of new projects or expansion or modernisation of existing project. The measures are based on the precautionary principle and aim to protect the interests of the environment. The circular dated 14 May 2002 allowed defaulting industrial units who had commenced activities without an EC to cure the default 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 measure for the purpose of protecting and improving the quality of the environment. The circular notes that there were defaulting units which had failed to comply with the requirement of obtaining an EC as mandated. The circular provided for an extension of time and inexplicably introduced the notion of an ex post facto clearance. In effect, it impacted the obligation of the industrial units to be in compliance with the law. The concept of ex post facto clearance is fundamentally at odds with the EIA notification dated 27 January 1994. The EIA notification of 1994 contained a stipulation that any expansion or modernisation of an activity or setting up of a new project listed in Schedule – I shall not be undertaken in any part of India unless it has been accorded environmental clearance. The language of the notification is as clear as it can be to indicate that the requirement is of a prior EC. A mandatory provision requires complete compliance. The words shall not be undertaken read in conjunction with the expression unless can only have one meaning : before undertaking a new project or expanding or modernising an existing one, an EC must be obtained. When the EIA notification of 1994 mandates a prior EC, it proscribes a post activity approval or an ex post facto permission. What is sought to be achieved by the administrative circular dated 14 May 2002 is contrary to the statutory notification dated 27 January 1994. The circular dated 14 May 2002 does not stipulate how the detrimental effects on the environment would be taken care of if the project proponent is granted an ex post facto EC. The EIA notification of 1994 mandates a prior environmental clearance. The circular substantially amends or alters the application of the EIA notification of 1994. The mandate of not commencing a new project or expanding or modernising an existing one unless an environmental clearance has been obtained stands diluted and is rendered ineffective by the issuance of the administrative circular dated 14 May 2002. This discussion leads us to the conclusion that the administrative circular is not a measure protected by Section 3. Hence there was no jurisdictional bar on the NGT to enquire into its legitimacy or vires. Moreover, the administrative circular is contrary to the EIA Notification 1994 which has a statutory character. The circular is unsustainable in lawWe are unable to accept the submission of Mr Kapil Sibal. The terms of the EIA notification dated 27 January 1994 leave no manner of doubt that a prior EC was mandated before a new project was commenced or before undertaking any expansion or modernisation of an existing project. The absence of the expression prior in the EIA notification dated 27 January 1994 makes no difference since the words shall not be undertaken…unless postulate the requirement of a prior ECThese measures adopted subsequently will not cure the failure to obtain ECs before the projects commenced operation. These measures are simply to ensure compliance with the pollution standards and requirements of law that exist as of date. These submissions have no bearing on determining whether the industrial units were in the past operating in compliance with the requisite environmental standards. These measures cannot act as correctives for historical wrongs and cannot compensate for the damage already caused to the environment as a result of manufacturing activities which were carried on without ECs28. Before the exemption contained in Clause 8 applies, it was necessary for projects listed in Schedule - I to obtain all relevant clearances from the State government including an NOC from the State Pollution Control Board. It was in other words not sufficient to merely obtain an NOC from the State Pollution Control Board. The exemption which was carved out in the explanatory note was to ensure that activities which had received all required clearances at the state level, following the acquisition of land should be protected. In fact, many of them would also involve the commencement of production prior to 27 January 1994. The explanatory note stated that where production had not yet commenced, the IAA would have to be intimated. In order to be covered within the scope of the exemption, the burden is on the industry to demonstrate before this Court that they fulfilled conditions spelt out in Clause 8 of the explanatory note. The EIA notification 1994 is a significant instrument in effectuating the implementation of the precautionary principle. The burden lies on the project proponent who seeks to alter the state of the environment or to impact on the environment to demonstrate that the terms on which an exemption has been granted have been fulfilled. An exemption must be construed in its strict sense according to its plain terms. None of the three industries before the Court have furnished an exhaustive catalogue of what were the relevant clearances from the State government that had to be obtained under the provisions of the law as it then stood(i) Darshak Private Limited (API - I)The material produced on the record indicates that on 17 July 1992, GPCB had issued an NOC to establish an industrial unit and manufacture two pharmaceuticals products. However, the NOC for manufacturing additional items was issued only on 11 June 1997 subsequent to the EIA notification dated 27 January 1994The language used in the NOC makes it clear that obtaining consents and authorisations under various environment related legislations was a mandatory pre-condition and not merely directory. In the present case, the authorisation under the Air Act was issued only on 29 May 1997 and 31 March 1999. The authorisation under the Water Act was issued on 11 October 1999. Clause 8 of the explanatory note states that for the exemption to apply, it was necessary for projects listed in Schedule - I to have obtained all relevant clearances from the State government including an NOC from the State Pollution Control Board. The evidence produced on the record by Darshak Private Limited indicates that it did not have the requisite consents and authorisations under the Air Act, Water Act and Hazardous Waste Rules prior to the EIA notification 1994. Many of the consents and permissions were obtained 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 explanatory note of the EIA notification 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 the Water Act. This was valid only for the manufacture of anaesthetic Ether. GPCB issued a site clearance certificate on 9 October 1991 for the manufacture of CIMC Chloride and Cloxacillin Sodium. An NOC to establish an industrial unit and to manufacture products was issued on 12 May 1993 and one for expansion on 4 December 1995. It is relevant to note that the NOC dated 12 May 1993 issued by GPCB to Nirayu Private Limited (API – II) is worded in exactly the same manner as the NOC dated 17 July 1992 issued to Darshak Private Limited (API – I). The NOC 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 consents and authorisations under the Air Act, Water Act and Hazardous Waste Rules from GPCB. In the case of Nirayu Private Limited (API – II), authorisation under the Hazardous Waste Rules was issued on 1 September 1993. Consent to operate API – II under the Water Act was issued on 12 November 1999. GPCB issued consolidate consent and authorisation to operate API – II on 14 December 2010. From the above narration which is based on the disclosures made by Nirayu Private Limited, it is evident that all consents and permissions had not been obtained prior to the EIA notification of 1994. Accordingly, the manufacturing unit of Nirayu Private Limited (API – II) is not covered under the exemption under Clause 8 to the explanatory note of the EIA notification of 1994On 31 January 1992, Gujarat Industrial Development Corporation granted land to the appellant to establish and run its unit. On 9 March 1992 and 3 October 1992, GPCB issued an NOC for the operation of the unit. The unit commenced manufacturing in 1993. It is relevant to note that the NOC dated 3 October 1993 also mandates that the project proponent shall be required to obtain from the GPCB prior to commencement of production requisite consents and authorisations under the Air Act, Water Act and Hazardous Waste Rules. United Phosphorous Limited has not disclosed the dates on which it received authorisations under the relevant environmental legislation. It has placed on record a consolidated consent and authorisation that was issued much later on 27 August 2009 under the Air Act, Water Act and Hazardous Waste (Management, Handling and Trans boundary Movement) Rules 2008. The disclosures which have been made are patently incomplete. No material has been produced to indicate that all relevant clearances from the State government including the NOC from GPCB had been obtained prior to the EIA notification 1994. Accordingly, they cannot be granted the benefit of the exemption under Clause 8 to the explanatory note of the EIA notification of 1994The material produced on the record indicates that GPCB issued an NOC to establish and run the manufacturing unit on 14 August 1995. It is evident from the table enlisting the list of relevant permissions, consents and authorisations that all permissions were received after the EIA notification 1994 was issued. Clearly, Unique Chemicals Limited is not entitled to the benefit of the exemption contained in Clause 8 of the explanatory note to the EIA notification 199433. From the material placed on the record by the industries, it becomes evident that there has been a gross abdication of responsibility by all the three industries in terms of obtaining timely consents and authorisations from the GPCB. There exists a distinction between obtaining relevant clearances and consents from the State Pollution Control Board and obtaining an environmental clearance in accordance with the procedure laid down under the EIA notification of 1994. A consent order issued by the State Pollution Control Board allows an industry to operate within the prescribed emission norms. However, the consent orders do not account for the social cost and impact of undertaking an industrial activity on the environment and its surroundings. A holistic analysis of the environmental impact of an industrial activity is only accounted for once all the steps listed out in EIA notification of 1994 are followed. The purpose of setting in place specific requirements such as public hearing, screening, scoping and appraisal is to foster deliberative decisions and protect environmental concerns. The detailed process listed out in the EIA notification of 1994 for obtaining an EC allows for minimising the adverse environmental impact of any industrial activity and improving the quality of the environment. One must adopt an ecologically rational outlook towards development. Given the social and environmental impacts of an industrial activity, environment compliance must not be seen as an obstacle to development but as a measure towards achieving sustainable development and inter-generational equity34. We have therefore come to the conclusion that none of the three industries were entitled to the benefit of the exemption contained in Clause 8 of the explanatory note to the EIA notification of 1994The functioning of the factories of all three industries without a valid EC would have had an adverse impact on the environment, ecology and biodiversity in the area where they are located. The Comprehensive Environmental Pollution Index ( CEPI) report issued by the Central Pollution Control Board for 2009-2010 describes the environmental quality at 88 locations across the country. Ankleshwar in the State of Gujarat, where the three industries are located showed critical levels of pollution (CEPI score - 88.50 ) . In the Interim Assessment of CEPI for 2011, the report indicates similar critical figures (CEPI score - 85.75) of pollution in the Ankleshwar area. The CEPI scores for 2013 (CEPI score - 80.93 ) and 2018 (CEPI score - 80.21) were also significantly high. This is an indication that industrial units have been operating in an unregulated manner and in defiance of the law. Some of the environmental damage caused by the operation of the industrial units would be irreversible. However, to the extent possible some of the damage can be corrected by undertaking measures to protect and conserve the environment36. Even though it is not possible to individually determine the exact extent of the damage caused to the environment by the three industries, several circumstances must weigh with the Court in determining the appropriate measure of restitution. First, it is not in dispute that all the three industries did obtain ECs, though this was several years after the EIA notification of 1994 and the commencement of production. Second, subsequent to the grant of the ECs, the manufacturing units of all the three industries have also obtained ECs for an expansion of capacity from time to time. Third, the MoEF had issued a circular on 5 November 1998 permitting applications for ECs to be filed by 31 March 1999, which was extended subsequently to 30 June 2001. On 14 May 2002, the deadline was extended until 31 March 2003 subject to a deposit commensurate to the investment made. The circulars issued by the MoEF extending time for obtaining ECs came to the notice of this Court in Goa Foundation (I) v Union of India(2005) 11 SCC 559  .  Fourth, though in the context of the facts of the case, this Court in Lafarge Umiam Mining Private Limited v Union of India(2011) 7 SCC 338   ( Lafarge) has upheld the decision to grant ex post facto clearances with respect to limestone mining projects in the State of Meghalaya38. Guided by the precepts that emerge from the above decisions, this Court has taken note of the fact that though the three industries operated without an EC for several years after the EIA notification of 1994, each of them had subsequently received ECs including amended ECs for expansion of existing capacities. 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 December 2002 (in the case of Unique Chemicals Limited). In addition, all the three units have made infrastructural investments and employed significant numbers of workers in their industrial units39. In this backdrop, this Court must take a balanced approach which holds the industries to account for having operated without environmental clearances in the past without ordering a closure of operations. The directions of the NGT for the revocation of the ECs and for closure of the units do not accord with the principle of proportionality. At the same time, the Court cannot be oblivious to the environmental degradation caused by all three industries units that operated without valid ECs. The three industries have evaded the legally binding regime of obtaining ECs. They cannot escape the liability incurred on account of such non- compliance. Penalties must be imposed for the disobedience with a binding legal regime. The breach by the industries cannot be left unattended by legal consequences. The amount should be used for the purpose of restitution and restoration of the environment.