Mumbai/Bangalore: The Bombay high court on Wednesday said the environment ministry will take a final call on the fate of India’s first hill city Lavasa, located near Pune, where construction has been halted.

Lavasa Corp. Ltd, the company that is developing the city, can challenge the final decision of the environment ministry if it is not happy with it, the court said on Wednesday.

Till the ministry of environment and forests (MoEF) passes its final order, the company cannot resume construction of the project.

The court passed the order after hearing a petition filed by Lavasa, challenging a 25 November show-cause notice by the environment ministry, which asked Lavasa to prove within 15 days that it did not violate environmental norms in its hill city development, stalling construction at the project site.

In its notice, the ministry alleged that Lavasa had not secured environmental clearances before starting the construction activity on the area, measuring some 5,000 hectares.

Lavasa covers a 20,000-acre area in the Western Ghats and has seen an investment of 4,000 crore so far. Hindustan Construction Co. Ltd holds a 64.9% stake in Lavasa, with the Avantha Group having 16%, Venkateshwara Hatcheries Group 12.79% and a private investor 12.79%. Environment minister Jairam Ramesh said in an interview that “the law would take its own course," when asked about Lavasa’s future.

A Lavasa spokesperson told Mint that the company was losing 2 crore a day since construction was stopped.

In November, Lavasa had got an approval from market regulator Securities and Exchange Board of India to raise 2,000 crore through an initial public offering.

The high court, on Wednesday, also asked the environmental impact assessment committee, part of MoEF, to visit Lavasa and inspect the site for three days in the last week of December or the first week of January and pass a final order by 10 January and submit the report to the high court by 14 January.

On Wednesday, the high court also heard three separate public interest litigation (PIL) suits filed against Lavasa by non-governmental organizations, including Medha Patkar’s National Alliance of People’s Movements.

The organization has alleged that Lavasa bought more than 10,000 acres of land in violation of certain sections of the Maharashtra Agricultural Lands (Ceiling on Holdings) Act, 1961.

“We have noticed that the three PILs are pending before the court. These PILs have challenged the allocation of land to Lavasa by government of Maharashtra and also highlighted the issues related to displacement and rehabilitation of villagers and the adverse impact on the supply of water to Pune city and other parts of Western Ghats for irrigation," said a division bench of justice B.H. Marlapalle and U.D. Salvi.

“We have suggested that the issue raised by the PILs is required to be considered and, hence, should be clubbed together." The high court will hear the case on 27 January.

The court said it has noticed that the NGO People’s Commission of Inquiry had submitted a report in 2005 on alleged violation of the Maharashtra Agricultural Lands (Ceiling on Holdings) Act, 1961, by Lavasa.

Lavasa, in its petition, has argued that being a “tourism project" it didn’t need the environmental clearances under a 2004 notification issued by the environment ministry. It also drew comparisons with Sahara India’s Aamby Valley project, saying that hill station project didn’t require environmental clearance under the same notification.

The petition also said that over 8,000 employees will be forced to leave work mid-way and their livelihoods would be affected if the project was stalled.

Besides, several third-party rights had been created and these innocent investors would suffer losses, says Lavasa.

The court has suggested to the state government that it constitute a committee headed by Umesh Chandra Sarangi, additional chief secretary (home) of Maharashtra, to appraise the report by the NGOs on the allotment of land to Lavasa, displacement and rehabilitation of villagers and impact on water supply to Pune city and other areas.

Advocate general Ravi Kadam, representing the state government, said he will revert on the suggestion made by the court after consulting the government.

Shekhar Naphade, senior counsel of Lavasa, denied all allegations that environment norms had been violated. “We have scrupulously complied with the environment norms and submitted three detailed replies to the notice issued by the ministry. In fact, there is no substantial evidence indicated in the show-cause notice of environment degradation by Lavasa," he said.

An official spokesperson of Lavasa said in an email statement, “Lavasa’s petition questioning applicability of the notification by the MoEF has been admitted by the honourable Bombay high court, based on merit of the case, which is an encouraging development."

“The high court’s order binds all related groups to conclude the issues in a timely manner and bring it to a speedy conclusion," the statement said.

Padmaparna Ghosh contributed to this story.