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

2. The Environmental Impact Assessment ( EIA) notification of 27 January 1994 mandated prior Environmental Clearances ( EC) for setting up and expansion of industrial projects falling within thirty categories. The deadline for obtaining an EC under the EIA notification of 1994 was extended by various circulars to 31 March 1999 and thereafter to 30 June 2001. By the circular of 14 May 2002, which was quashed by the NGT, MoEF extended the period till 31 March 2003 for those industrial units which had gone into production without obtaining an EC under the EIA 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 defaulting units could avail of this last and final opportunity to obtain ex-post-facto environmental clearance3. The circular of 14 May 2002, allowed for ex post facto ECs, subject to a graded contribution into an earmarked fund based on the investment cost of the project. The first and the second respondents challenged the circular of 14 May 2002 before the High Court of Gujarat. The proceedings were subsequently transferred to the NGT. The NGT by its decision dated 8 January 2016 held that the law did not permit the grant of an ex post facto clearances and that the circular of 14 May 2002 was an internal communication and did not override the provisions of the EIA notification dated 27 January 1994 which had been issued in exercise of statutory powers conferred by Section 3 of the Environment (Protection) Act 1986 ( Environment Protection Act 1986)4. Having held that the concept of an ex post facto environmental clearance 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 (GPCB) and District Collectors shall not grant consent for an industrial activity covered by the EIA notification of 1994 without the steps mandated by the notification such as screening, scoping, public hearing and decision being fulfilled;(ii) The ECs granted to the industrial units of the sixth to ninth respondents shall be revoked;(iii) All the industrial activities which were being operated without a valid EC and consent to operate shall be closed down within one month;(iv) Each of the units shall deposit a compensation of ? 10 lakhs for having caused environmental degradation; and(v) The amount deposited shall be used for the restoration of the environment in and around the industrial area of Ankleshwar in the State of Gujarat5. The private respondents before the NGT who were affected by the above directions are:(i) United Phosphorous Ltd - the sixth respondent;(ii) Unique Chemicals - the seventh respondent;(iii) Darshak Private Limited - the eight respondent; and(iv) Nirayu Private Limited - the ninth respondentThe private respondents are engaged in the manufacture of pharmaceuticals and bulk drugs at the industrial area of Ankleshwar in the State of Gujarat. Alembic Pharmaceuticals Limited is the appellant in the lead appeal before this Court. Darshak Private Limited merged with the appellant in 2002 pursuant to a scheme of amalgamation sanctioned by the High Court of Gujarat. Nirayu Private Limited was acquired by the appellant under a slump sale on 1 January 2008. Following this exercise, the manufacturing units of erstwhile Darshak Private Limited and Nirayu Private Limited have come to be known as API – I and API – II, respectively6. The EIA notification was issued by the MoEF on 27 January 1994, in exercise of its powers under Section 3(1) and clause (v) of Section 3(2) of the Environment Protection Act 1986 read with Rule 5(3)(d) of the Environment (Protection) Rules 1986 ( Environment Protection Rules) . The EIA notification stipulated that:…on and form the date of publication of this notification in the Official Gazette, expansion or modernization of any activity (if pollution load is to exceed the existing one) or new project listed in Schedule I to this notification, shall not be undertaken in any part of India unless it has been accorded environmental clearance by the Central Government in accordance with the procedure hereinafter specified in this notification7. The EIA notification stipulated that any person who desired to undertake a new project, or the expansion or modernisation of an existing industry, listed in Schedule-I shall submit an application to the Secretary, MoEF. Entry 8 of Schedule - I includes industries engaged in manufacturing bulk drugs and pharmaceuticals. The application had to be accompanied by a project report including, inter alia, an EIA report and an environmental management plan prepared in accordance with the guidelines issued by the Union Government through the MoEF from time to time. The notification spelt out the procedure to be followed upon the submission of the application including an evaluation and assessment by a stipulated agency. Clause 3(a) (Which was (substituted on 4 May 1994)) provided that:...no construction work primarily or otherwise relating to the setting up of the project may be undertaken till the environmental and site clearances is obtained8. On 10 April 1997, the EIA notification of 1994 was amended by making a public hearing mandatory for thirty categories of activities which required an EC. On 5 November 1998, the MoEF issued a circular recording that though the EIA notification of 1994 was in effect since 27 January 1994, units covered by the notification had been set up without obtaining prior ECs. The GPCB had despite the advice of the MoEF allowed units to operate without valid ECs. In this backdrop, the circular of 5 November 1998 provided that:Since number of such proposals are large in number and many of the units have not applied for environmental clearance genuinely out of ignorance it has been decided to consider their case for environmental clearance on merits. This will apply only to those proposals which are received in the Ministry till 31 st March 1999. Simultaneously State Pollution Control Boards have also been advised to issue requisite notices to the units to apply for environmental clearance. In case of those units which have already started production, we may consider the proposals on merits and if necessary suggest additional mitigative measures. A formal environmental clearance will be issued in these cases after approval by the competent authority9. By a circular dated 27 December 2000, the MoEF directed all state pollution control boards to issue fresh notices to all defaulting units and extended the deadline to obtain ECs from 31 March 1999 to 30 June 2001. Inspite of this, there were delinquent units which had either failed to apply for an EC or had failed to complete the requirement of a public hearing before the extended date. By the circular of 14 May 2002, the deadline was extended to 31 March 2003. The circular stated that:Keeping the foregoing in view, it has been decided to extend the deadline upto 31 March 2003 so that defaulting units could avail of this last and final opportunity to obtain ex-post- facto environmental clearance. This would apply to all such units, which had commenced construction activities/operations without obtaining prior environmental clearance in violation of the EIA Notification of 27 January 199410. In terms of the circular, those defaulting units seeking an expansion were to earmark a separate fund for eco-development measures including community development measures in Indian projects areas on a graded scale linked to the investment in the project. This was indicated in a tabulated form which read thus:Units which failed to comply with the extended deadline were to be proceeded againstThe challenge to the ex post facto circular dated 14 May 200211. A petition was instituted under Article 226 of the Constitution by the first and second respondents in the present lead appeal before the High Court of Gujarat challenging the circular dated 14 May 2002 and seeking the revocation of the clearances which were granted to the industrial units in question. The case was transferred to the Western Zonal Bench of the NGT by the High Court of Gujarat on 21 April 2015. The NGT by its judgment dated 8 January 2016 set aside the circular dated 14 May 2002 and issued consequential directions which have been noted in the earlier part of this judgment. Unique Chemicals Limited, the seventh respondent before the NGT, preferred a review petition against the judgment of the NGT which was dismissed. The affected industrial units and the MoEF are in appeal before this Court.

Court's reasoning:
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.