Supreme Court rulings on environmental damage highlight flaws in National Green Tribunal’s methods

In two separate rulings by a bench of Justice BR Gavai and Justice KV Viswanathan on 27 November, the Supreme Court set aside the NGT’s penalties against Grasim Industries Limited and Bezno Chem Industrial Private Limited for alleged environmental violations.

The court pulled up the NGT for imposing fines based solely on expert committee reports and calculating them as a percentage of total revenue, without following the principle of natural justice.

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“In any case, the generation of revenue would have no nexus with the amount of penalty to be ascertained for environmental damages. It is further to be noted that the learned NGT found the appellant to be guilty of violations; the least that was expected from the NGT is to give a notice to the appellant before imposing such a heavy penalty," the bench said in its decision to quash the NGT order against Bezno Chem.

“With deep anguish, we have to say that the methodology adopted by the learned NGT for imposing penalties is totally unknown to the principles of law," it added.

While quashing the NGT ruling against Grasim Industries, the court said, “The procedure followed by the learned NGT was totally unknown to the settled principles of natural justice… The NGT is a tribunal constituted under the National Green Tribunal Act of 2010. A tribunal is required to arrive at its decision by fully considering the facts and circumstances of the case before it. It cannot outsource an opinion and base its decision on such an opinion."

‘Systemic flaws in the NGT’

Legal experts told Mint that while the Supreme Court’s rulings provide much-needed clarity and relief to companies, they raise serious questions about the NGT’s functioning. This undermines public trust in the tribunal’s ability to deliver fair and just outcomes in environmental violation cases, they said.

“The Supreme Court’s decision removes the arbitrariness associated with revenue-based penalties. It emphasises that penalties should be based on the extent of environmental harm and the actual loss incurred, rather than arbitrary factors such as a company’s revenue," said Raunak Dhillon, a partner at Cyril Amarchand Mangaldas.

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Alay Razvi, managing partner at Accord Juris, said, “Over time, the NGT has been under the scrutiny of the Supreme Court for its order(s) imposing penalties based on the revenue of the company. These orders show there are systemic flaws in the NGT. In certain cases, orders have been overturned or scrutinised by a higher court."

Orders overturned frequently

A growing number of environmental cases and multidisciplinary issues led the government of India to enact the National Green Tribunal Act in 2010 to expedite cases related to environmental protection, including conservation of forests and other natural resources.

"Assessing the environmental and ecological damage is not a simple and straight forward issue. Restoring the damage is also very complicated. It is impossible to determine the quantum of the fine to be levied without an expert agency doing a ground survey and computing the steps to restore the damage and the costs thereof. It is therefore very welcome that the High Courts and the Supreme Courts are setting aside such order," said Debi Goenka, an environmentalist and member of Conservation Action Trust.

The National Green Tribunal (NGT) report card for 2018–2023 reveals that compensation was imposed in 35 cases for alleged violations of environmental norms. Appeals were filed before the Supreme Court in 12 of these cases, and the court intervened in nine instances through stays, remands or notices. This amounts to a 75% intervention rate, significantly exceeding the general Supreme Court intervention rate of 43.79% on special leave petitions (SLPs) in 2014, as noted in a 2016 report by Vidhi Centre for Legal Policy.

As recently as 5 December, a Supreme Court bench led by Chief Justice Sanjiv Khanna quashed an NGT order imposing a fine of around ₹3 crore on Govardhan Mines and Minerals for damaging the environment with illegal stone mining in the Dadam Hills of Tosham, Haryana. The Supreme Court noted that the NGT’s order did not deal with the firm’s contentions and adopted the report of a committee set up to ascertain illegal mining.

“Lacking reasoned decisions and at times blindly following expert reports, such judgments have eroded the efficacy of the environment regulator at a crucial juncture in our battle against climate change and energy transition," said Amit Kapur, joint managing partner, JSA Advocates & Solicitors.

Lack of standardisation

The increased scrutiny of the NGT’s method of calculating fines for environmental violations has revealed a significant gap in its penalty framework.

Section 20 of the NGT Act mandates that the tribunal consider principles of sustainable development, the precautionary principle, and the ‘polluter pays’ principle when issuing orders or awards. However, legal experts said the absence of a systematic and uniform method leads to situations in which the compensation significantly understates or overstates the actual environmental harm.

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“The absence of a uniform method exposes flaws in the tribunal’s ability to conduct quantitative assessments. This in turn causes the tribunal to determine penalties based on a company’s revenue," said Sudeshna Guha Roy, partner at Saraf and Partners.

Amit Kapoor from JSA Advocates & Solicitors added that the lack of a standardised penalty framework 14 years after the NGT was founded is a testament to India’s under-preparedness on protecting the environment and battling climate change. “We need binding norms for computing compensation/damages to meaningfully implement sustainable development with the ‘polluter pays’ principle."

Raunak Dhillon of Cyril Amarchand Mangaldas said small businesses are hit hardest by the NGT’s unclear method of calculating penalties. With limited financial reserves, these firms struggle to absorb sudden fines, which makes it hard for them to comply with environmental regulations and compete effectively. This ambiguity not only imposes financial stress but also hampers their ability to make long-term investments and navigate regulatory requirements, pushing them out of the market, he added.

Change the way NGT functions, experts say

The NGT comprises three main bodies: the chairperson, judicial members, and expert members. The tribunal is required to have between 10 and 20 full-time members, with a balanced composition of judicial and expert input. However many tribunal orders have been called out for being for influenced by external committees.

Sudeshna Guha Roy, partner at Saraf and Partners, said, “This trend indicates that the in-built mechanism of inputs from expert members of the NGT is proving insufficient or dysfunctional and the NGT is repeatedly relying on external expert opinions." This raises concerns about the tribunal’s capacity to independently assess and adjudicate complex environmental issues effectively, she added.

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Several experts advocated for reforms, including guidelines in the NGT Act to establish a structured penalty framework. This framework should consider factors such as the severity of harm and intent, rather than a company’s revenue as the basis for penalties. They also emphasised the need for fines that correspond closely to the extent of the violation. They also called for well-reasoned orders that clearly explain the rationale behind penalties, to prevent confusion and reduce the likelihood of appeals.