In a significant ruling for the real estate and infrastructure sectors, the Supreme Court (SC) on Wednesday struck down the Centre’s 2021 policy that allowed projects to obtain environmental clearance retrospectively, after construction had already started without prior approval.
However, the apex court upheld the government's one-time 2017 scheme allowing the regularisation of certain such projects, emphasising that it was an exceptional measure and cannot be treated as a permanent policy.
The 2017 amnesty scheme effectively saved 53 central and state government infrastructure projects worth nearly ₹19,500 crore that were awaiting post-facto environmental clearance. These included the AIIMS Medical College and Hospital in Odisha, the Vijayanagar Greenfield Airport in Karnataka and common effluent treatment plants.
Legal guardrails
A three-judge bench comprising Chief Justice of India Surya Kant, Justice Joymalya Bagchi and Justice Vipul M. Pancholi held that while the Centre has the power under the Environment (Protection) Act, 1986, to grant post-facto environmental clearance in exceptional cases, it cannot create a permanent system that allows projects that violate the law to obtain approval later through executive orders.
The bench said the Centre can introduce a new amnesty scheme only through a valid notification issued under Section 3 of the Environment (Protection) Act, 1986, and only where keeping such projects alive is necessary in the larger public interest.
The court said this would otherwise go against the 2006 Environmental Impact Assessment (EIA) notification, which requires many projects, including large housing projects, highways, mines, factories and airports, to obtain environmental clearance before construction or operations begin.
"The Central Government has ample power under Section 3 to issue appropriate notifications for new amnesty schemes with regard to such classes or categories of non-compliance projects whose sustainability is necessary to subserve larger public interest." the SC ruling notes
The judgment came on petitions filed by the Centre, the Confederation of Real Estate Developers' Associations of India (CREDAI) and others against the Supreme Court's May 2025 ruling, which had struck down both the Centre's 2017 notification and the 2021 office memorandum (OM).
An office memorandum is an administrative order issued by the government. It explains how a policy will be implemented but cannot change or override the law.
While striking down the 2021 OM, the bench upheld the 2017 notification, saying it was a one-time scheme introduced to deal with a specific group of projects. It gave projects that had already started without environmental clearance a one-time opportunity to apply for approval after undergoing environmental assessment and meeting the required conditions.
However, the court said the 2021 OM went much further by creating a permanent system for giving environmental clearance to projects after they had violated the law. It held that the government cannot use an executive order to change the rules laid down under the 2006 EIA notification.
The bench also said the 2021 policy gave a continuing amnesty to projects that had broken environmental rules without explaining why such a policy was needed in the larger public interest. It, therefore, declared the policy arbitrary and unconstitutional.
The top court clarified that if the government wants to introduce a similar scheme in future, it must do so through a proper legal notification. Any such scheme must be limited, time-bound and supported by a clear public interest.
The case began in 2023 when Mumbai-based environmental non-government organisation (NGO) Vanashakti challenged the Centre's policy that allowed projects to obtain environmental clearance after construction had already begun. The NGO argued that this weakened environmental safeguards and encouraged developers to break the law by seeking approval retrospectively, only after starting work.
In May 2025, the Supreme Court accepted Vanashakti's challenge and struck down both the 2017 Notification and the 2021 OM. The Centre, CREDAI and other stakeholders then sought a review, arguing that the earlier ruling had created uncertainty for several housing, infrastructure, industrial and public projects.
The latest ruling now makes it clear that obtaining environmental clearance before starting construction remains the rule, while any future exception must be backed by a valid legal notification and justified in the larger public interest.