D.P.C.C vs Lodhi Property Co. Ltd.Etc

2025 INSC 923 REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO(S). 757-760 OF 2013 DELHI POLLUTION CONTROL COMMITTEE ...APPELLANT(S) VERSUS

LODHI PROPERTY CO. LTD. ETC. …RESPONDENT(S)

WITH CIVIL APPEAL NO(S). 1977-2011 OF 2013

JUDGMENT

Contents

1. Introduction ............................................................................................ 2

2. Facts....................................................................................................... 3

3. Single Judge’s Judgement and Orders ..................................................... 4

4. Impugned Order of the Division Bench .................................................... 6

5. Submissions ........................................................................................... 8

6. Issue ..................................................................................................... 11

7. Existing Legal Regime for Pollution Control in India .............................. 12

8. Insertion of Sections 33A & 31A in Water and Air Acts .......................... 14

9. Interpretation of and for Environmental Institutions.............................. 18

10. Duty to Restitute v. Power to Punish and Penalise ............................... 20

11. Principles ............................................................................................ 26

A. Board’s Responsibility to Choose Appropriate Course of Action ............. 32 Signature Not Verified Digitally signed by KAPIL TANDON Date: 2025.08.04 19:14:07 IST Reason: B. Powers Must Be Guided by Transparency and Non-Arbitrariness ......... 33

1

1. Introduction.

1. The Delhi Pollution Control Committee (DPCC)1 is in appeal

against the judgment of the Division Bench of the High Court

holding that it is not empowered to levy compensatory damages in

exercise of powers under Section 33A of the Water (Prevention and

Control of Pollution) Act, 1974 and Section 31A of the Air

(Prevention and Control of Pollution) Act, 19812 on the ground that

such an action amounts to imposition of penalty provided for in

Chapters VII and VI of the respective Acts, and as such, procedure

contemplated thereunder will be the only method for imposing and

collecting compensatory damage.

2. Having considered the principles that govern Indian

environmental laws, we have held that the environmental

regulators, the Pollution Control Boards exercising powers under

the Water and Air Acts, can impose and collect restitutionary or

compensatory damages in the form of fixed sum of monies or

require furnishing of bank guarantees as an ex-ante measure to

prevent potential environmental damage. These powers are

1 DPCC is a regulatory body in the National Capital Territory of Delhi, established as a ‘State

Board’. These Boards are constituted under section 4 of the Water Act and under section 4 or section 5 of the Air Act, and exercise powers granted under section 33A of the Water Act and section 31A of the Air Act. Our interpretation of section 33A and 31A herein will apply to any such body established under said Acts.

2 Hereinafter referred to as the Water Act and Air Act respectively.

2 incidental and ancillary to the empowerment under Sections 33A

and 31A of the Water and Air Acts. At the same time, we have

directed that the powers must be exercised as per procedure laid

down by subordinate legislation incorporating necessary

principles of natural justice, transparency and certainty.

2. Facts.

3. It is the case of the Delhi Pollution Control Committee that

pursuant to the directions of the Ministry of Environment, Forest

and Climate Change (MoEFCC) to take appropriate action against

certain entities operating in violation of the environmental norms,

show cause notices were issued for violation of Section 25 of the

Water Act and Sections 21 and 22 of the Air Act. These entities

were either residential complexes, commercial complexes or

shopping malls. The show cause notices were issued on the ground

that they proceeded with construction and in fact, were operating

without obtaining the mandatory “consent to establish” and

“consent to operate” under Section 25 of the Water Act and Section

21 of the Air Act. The show cause notices were challenged by way

of 38 writ petitions before the Delhi High Court. The challenge

culminated in the judgement of a single judge dated 30.09.2010 in

3 the case of Splendor Landbase Ltd. v. DPCC 3. The learned single

judge considered the question as to whether a State Board can levy

environmental damages in the form of fixed sums of money or

require an entity to furnish a bank guarantee as a condition for

grant of consent under Section 33A of Water Act and/or Section

31A of Air Act. Similar writ petitions were considered and decided

by another single judge bench in Bharti Realty Ltd. v. DPCC and

Anush Finlease and Construction v. DPCC on 20.07.2011 and

15.09.2011 and were disposed of in terms of the decision in

Splendor Landbase Ltd. v. DPCC. The reasoning adopted in the

judgement and orders passed by the Single Judges are as follows.

3. Single Judge’s Judgement and Orders.

4. In Splendor Landbase Ltd. v. DPCC 4, the ld. single judge by

his judgement dated 30.09.2010 dealt with two major issues –

firstly, whether proprietors of properties over 20,000 square

meters are required to obtain consent to establish and consent to

operate under Water Act and Air Act independently, despite

obtaining EIA Clearance from the Ministry; and secondly, whether

Boards can levy penalties, fines, environmental damages in form

3 2012 (195) DLT 177.

4 Hereinafter referred to as Splendor.

4 of fixed sums of monies or call for bank guaranties as a condition

to grant consent under Water and Air Acts? While the first question

was answered in the affirmative, the second was answered in the

negative.

4.1 It was held that the power to levy penalty is in the nature of

a penal power and as such a penalty cannot be imposed without

there being an enabling statutory power. For this reason, the single

judge held that Board has no power to levy penalty or damage,

even on the basis of the general powers under Sections 31A or 33A

of the Acts. The learned Judge criticized the monetary demand as

a pre-condition for grant of consent under the Acts on the ground

that it has no statutory backing.

4.2 In the other batch of cases i.e. in Bharti Realty Ltd. v. DPCC

and Anush Finlease and Construction Ltd. v. DPCC, decided on

12.07.2011 and 15.09.2011, the learned Single Judge was

constrained to enquire into the matter in detail as writ appeals

against the judgement in Splendor were already pending before a

Division Bench. Therefore, the Single Judge allowed the writ

petitions following the decision in Splendor and holding that the

Board has no power to impose and collect compensatory damages.

In these cases, the learned Judge also directed refund of the

5 amounts collected. However, no interest was granted to the

respondents as they chose to comply with the demand instead of

challenging the same at the relevant point in time.

4. Impugned Order of the Division Bench.

5. The decisions of the single judges were challenged by the

appellant before the Division Bench of the High Court. By the

judgement impugned before us, the Division Bench upheld the

findings of the Single Judge in Splendor that the power to issue

directions under Sections 33A and 31A under the two Acts does

not confer the power to levy ‘penalty’. The High Court further

observed that under Chapter VII and Chapter VI of the Water and

Air Acts penalties can be levied only by courts and that too after

taking cognizance of offences specified under the two Acts.

Provided that the procedure so prescribed under the statute has

to be followed mandatorily, the Division Bench held that the

appellant would not be entitled to impose compensation or direct

deposit of bank guarantees. The relevant portion of the Division

Bench of the High Court is as follows –

“37. We concur with the reasoning of the learned Single Judge in paras 58 to 64 of the impugned decision and thus do not elaborate any further, but would additionally highlight that, the power to issue directions under Section 33A of the Water Act and the power to issue directions under Section 31A of the

6 Air Act, on their plain language, does not confer the power to levy any penalty. We would further highlight that under Chapter VII of the Water Act and under Chapter VI of the Air Act penalties and procedure to levy the same have been set out. A perusal of the provisions under the Water Act would reveal that penalties can be levied as per procedure prescribed and only Courts can take cognizance of offences under the Act and levy penalties, whether by way of imprisonment or fine. Similar is the position under the Air Act. The legislature having enacted specific provisions for levy of penalties and procedures to be followed has specifically made the offences cognizable by Courts and the power to levy penalties under both Acts has been vested in the Courts. The role of the Pollution Control Boards is to initiate proceedings before the Court of Competent jurisdiction and no more.

40. The language of Sub-Section 5 of Section 25 of the Water Act makes it plain clear that the only solution to a situation of a building being constructed to establish an industry, operation or process without obtaining prior consent of the State Pollution Control Board is the power of the Board to serve upon the person concerned a notice imposing such conditions as might have been imposed on an application, seeking prior consent and we find that the learned Single Judge has correctly so opined and has rightly issued the direction that the only way out, pertaining to the Water Act is to permit DPCC to inspect the shopping malls and the shopping commercial complexes and if it is found that pertaining to discharge of sewage from these buildings any steps are required to prevent water pollution DPCC would be authorized to issue notices requiring the owner of the building to take steps in terms of the notice issued. Pertaining to the Air Act notwithstanding there being no similar provision, but the concept of a post decisional hearing may be made applicable with the modification that no hearing would be required inasmuch as there is no decision, but DPCC should be empowered to inspect the shopping malls and the shopping, commercial complexes and pertaining to air pollution, if the owners of the buildings do not take corrective action, DPCC would always have the power to file criminal complaints before the Courts of Competent Jurisdiction, which Courts would alone have the power to impose fine and additionally impose sentence of imprisonment upon the offending persons.

42. In a few cases, we find that since DPCC was not permitting the buildings to be occupied, under protest, the owners paid the penalty to DPCC and have immediately approached the Court seeking refund and the same has been ordered for the reason neither under the Water Act nor under the Air Act there exists any power in DPCC to levy penalty or impose conditions

7 of furnishing bank guarantee. The decision of the learned Single Judge is correct in directing the bank guarantees to be discharged and penalties levied to be refunded for the reason the said act of DPCC is ultra-vires its power under the two statutes and the levy of penalty is without any authority of law. In the decision reported as 1997 [5] SCC 535 Mafatlal Industries Ltd. & Ors. Vs UOI & Ors., under writ jurisdiction refund can be directed where the levy is without jurisdiction and the same would include a penalty levied without any jurisdiction. In the instant case the penalty levied is unconstitutional being not sanctioned by any power vested in DPCC either under the Water Act or the Air Act. The impugned decisions where penalty levied has been directed to be refunded are upheld.”

5. Submissions.

6. Mr. Pradeep Mishra appearing on behalf of the appellant

DPCC submitted that the High Court erred in holding that the

State Boards are not empowered to impose environmental

damages under Sections 33A and 31A of Water and Air Acts. He

has argued that the application of the principle of Polluter Pays is

distinct from the requirement of authority of law to impose tax or

penalty.

7. On behalf of the respondents, Mr. Ninad Laud has submitted

that as per broad scheme of the Acts and also the statement of

objects and reasons, State Boards are empowered to act on their

own while enforcing Sections 25 and 26 and also while issuing

directions under Sections 33A and 31A. However, when faced with

non-compliances, recourse to judicial process is contemplated

8 under Sections 49 and 43 of Water and Air Acts respectively.

Further, neither Rule 34 of Water (Prevention & Control of

Pollution) Rules 1975 nor Rule 20A of Air (Prevention & Control of

Pollution) Rules 1983, while providing a mechanism to administer

Section 33A and Section 31A, contemplate monetary penalties.

Countering the submission of Mr. Pradeep Misra on the principle

of Polluter Pays to encourage reading the power to impose and

collect environmental damages under Sections 33A and 31A of the

respective Acts, he would submit such an approach is

impermissible as the said power is specifically and separately

provided under Chapters VII and VI therein. Relying on the

decision of this Court in MC Mehta v. Kamal Nath5, he would

submit, after considering the scheme of penal provisions under

Water Act, Air Act and Environment (Protection) Act 1986, the

Supreme Court held that penalties under the Acts befall a person

only after finding of guilt upon trial by a court of law. Referring to

the legitimacy of State Board’s action demanding bank guarantees

to secure compliance with conditions, he would submit that no

penalty, other than that contemplated in the statute or statutory

5 (2000) 6 SCC 213, para 13-17.

9 scheme can be imposed. 6 We have also heard Mr. Pinaki Misra,

Senior Advocate and other learned counsel and they have strongly

supported the decision of the Division Bench.

7.1 Counsel for M/s Laxmi Buildtech Pvt Ltd 7 has submitted that

they have neither violated nor acted in breach of any provision of

environmental laws and therefore they cannot be subjected to any

penalty or criminal prosecution. Counsel for other respondents

further submitted that they have deemed consent as well as EIA

clearance from the Ministry. They have also submitted that

imposition and collection of damages by the State Boards is

outside the powers vested in them under the Water and Air Acts.

7.2 Counsel for M/s Bharti Realty Ltd has submitted that it is a

settled principle of law that if a statute provides for a thing to be

done in a particular manner, then it has to be done in that manner

and no other. 8 This principle, according to the learned counsel,

squarely applies to the present case as Chapter VII and Chapter VI

of the Water and Air Acts have a prescribed procedure to be

followed before imposing penalties. It is further argued that the

6 State of MP v. Centre for Environment Protection Research & Development, (2020) 9 SCC

781. 7 Civil Appeal No. 2001 of 2013. 8 Chandra Kishore Jha v. Mahavir Prasad & Ors, (1999) 8 SCC 266.

10 role of any State Board is in the nature of a complainant and not

that of an adjudicatory authority. In this vein, it is submitted that

any other interpretation would render the chapter on ‘Penalties

and Procedures’ nugatory and otiose. It is also submitted that the

power to give directions under Sections 33A and 31A of the Water

and Air Acts is “subject to provisions of this Act”. Written

submissions also refer to the recent amendments to the Water and

Air Acts, empowering an Adjudicating Officer, not below the rank

of Joint Secretary of Government of India or Secretary to State

Government, for imposing penalties for contravention of provisions

of the Acts.

6. Issue.

8. The core question in these appeals is - whether the regulatory

boards can, in exercise of powers under Section 33A of the Water

Act and Section 31A of the Air Act, impose and collect as

restitutionary and compensatory damages fixed sums of monies or

require furnishing bank guarantees as an ex-ante measure

towards potential environmental damage?

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7. Existing Legal Regime for Pollution Control in India.

9. Under the Water Act and the Air Act, the State Boards have

a broad statutory mandate to prevent, control and abate water

pollution and air pollution. Under Section 17 of the Water Act, the

State Boards are to shoulder enormous responsibilities and their

functions are reproduced herein for ready reference -

“Section 17. Functions of State Board – (1) Subject to the provisions of this Act, the functions of a State Board shall be—

(a) to plan a comprehensive programme for the prevention, control or abatement of pollution of streams and wells in the State and to secure the execution thereof;

(b) to advise the State Government on any matter concerning the prevention, control or abatement of water pollution;

(c) to collect and disseminate information relating to water pollution and the prevention, control or abatement thereof;

(d) to encourage, conduct and participate in investigations and research relating to problems of water pollution and prevention, control or abatement of water pollution;

(e) to collaborate with the Central Board in organising the training of persons engaged or to be engaged in programmes relating to prevention, control or abatement of water pollution and to organise mass education programmes relating thereto;

(f) to inspect sewage or trade effluents, works and plants for the treatment of sewage and trade effluents and to review plans, specifications or other data relating to plants set up for the treatment of water, works for the purification thereof and the system for the disposal of sewage or trade effluents or in connection with the grant of any consent as required by this Act;

(g) to lay down, modify or annul effluent standards for the sewage and trade effluents and for the quality of receiving waters (not being water in an inter-State stream) resulting from the discharge of effluents and to classify waters of the State;

(h) to evolve economical and reliable methods of treatment of sewage and trade effluents, having regard to the peculiar conditions of soils, climate and water resources of different regions and more especially the prevailing flow characteristics of water in streams and wells which render it impossible to attain even the minimum degree of dilution;

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(i) to evolve methods of utilisation of sewage and suitable trade effluents in agriculture;

(j) to evolve efficient methods of disposal of sewage and trade effluents on land, as are necessary on account of the predominant conditions of scant stream flows that do not provide for major part of the year the minimum degree of dilution;

(k) to lay down standards of treatment of sewage and trade effluents to be discharged into any particular stream taking into account the minimum fair weather dilution available in that stream and the tolerance limits of pollution permissible in the water of the stream, after the discharge of such effluents;

(l) to make, vary or revoke any order—

(i) for the prevention, control or abatement of discharges of waste into streams or wells;

(ii) requiring any person concerned to construct new systems for the disposal of sewage and trade effluents or to modify, alter or extend any such existing system or adopt such remedial measures as are necessary to prevent, control or abate water pollution;

(m) to lay down effluent standards to be complied with by persons while causing discharge of sewage or sullage or both and to lay down, modify or annul effluent standards for the sewage and trade effluents;

(n) to advise the State Government with respect to the location of any industry the carrying on of which is likely to pollute a stream or well;

(o) to perform such other functions as may be prescribed or as may, from time to time, be entrusted to it by the Central Board or the State Government.

(2) The Board may establish or recognize a laboratory or laboratories to enable the Board to perform its functions under this section efficiently, including the analysis of samples of water from any stream or well or of samples of any sewage or trade effluents.”

10. Section 17 of the Air Act9, substantially similar to its

equivalent under the Water Act, also indicates the crucial

9 Section 17 of Air Act states –

17. Functions of State Boards.— (1) Subject to the provisions of this Act, and without prejudice to the performance of its functions, if any, under the Water (Prevention and Control of Pollution) Act, 1974, the functions of a State Board shall be—

(a) to plan a comprehensive programme for the prevention, control or abatement of air pollution and to secure the execution thereof;

(b) to advise the State Government on any matter concerning the prevention, control or abatement relating to air pollution;

13 responsibilities of the State Boards in discharge of their mandate.

Chapter V of the Water Act and Chapter IV of the Air Act include

provisions that prescribe the regulatory powers of the State

Boards. These powers include the power to issue, modify or

withdraw consent10, power to obtain information11, power of entry

and inspection 12 and power to take samples 13.

8. Insertion of Sections 33A & 31A in Water and Air Acts.

11. In 1988, both Acts were amended. Notably, through

amendments the State Boards were further empowered to give

(c) to collect and disseminate information relating to air pollution;

(d) to collaborate with the Central Board in organising the training of persons engaged or to be engaged in programmes relating to prevention, control or abatement of air pollution and to organise a mass-education programme relating thereto;

(e) to inspect, at all reasonable times, any control equipment, industrial plant or manufacturing process and to give, by order, such directions to such persons as it may consider necessary to take steps for the prevention, control or abatement of air pollution;

(f) to inspect air pollution control areas at such intervals as it may think necessary, assess the quality of air therein and take steps for the prevention, control or abatement of air pollution in such areas;

(g) to lay down, in consultation with the Central Board and having regard to the standards for the quality of air laid down by the Central Board, standards for emission of air pollutants into the atmosphere from industrial plants and automobiles or for the discharge of any air pollutant into the atmosphere from any other source whatsoever not being a ship or an aircraft: Provided that different standards for emission may be laid down under this clause for different industrial plants having regard to the quantity and composition of emission of air pollutants into the atmosphere from such industrial plants;

(h) to advise the State Government with respect to the suitability of any premises or location for carrying on any industry which is likely to cause air pollution;

(i) to perform such other functions as may be prescribed or as may, from time to time, be entrusted to it by the Central Board or the State Government;

(j) to do such other things and to perform such other acts as it may think necessary for the proper discharge of its functions and generally for the purpose of carrying into effect the purposes of this Act.

(2) A State Board may establish or recognise a laboratory or laboratories to enable the State Board to perform its functions under this section efficiently. 10 Sections 25, 27 of Water Act and Section 21 of Air Act 11 Section 20 of Water Act and Section 25 of Air Act 12 Section 23 of Water Act and Section 24 of Air Act 13 Section 21 of Water Act and Section 26 of Air Act

14 directions under Section 33A of the Water Act and Section 31A 14

of the Air Act. These two provisions are identically worded. Section

33A of the Water Act is as under;

“Section 33A. Power to give directions.—Notwithstanding anything contained in any other law, but subject to the provisions of this Act, and to any directions that the Central Government may give in this behalf, a Board may, in the exercise of its powers and performance of its functions under this Act, issue any directions in writing to any person, officer or authority, and such person, officer or authority shall be bound to comply with such directions.

Explanation.—For the avoidance of doubts, it is hereby declared that the power to issue directions under this section includes the power to direct—

(a) the closure, prohibition or regulation of any industry, operation or process; or

(b) the stoppage or regulation of supply of electricity, water or any other service.”

12. The directions contemplated under Sections 33A and 31A of

the Water and Air Acts must be in furtherance of the powers and

functions of the Boards and they must be in writing. These

provisions, declares that the power to issue directions will include

the power to direct closure, prohibition or regulation of any

14 Section 31A of the Air Act states –

31A. Power to give directions.—Notwithstanding anything contained in any other law, but subject to the provisions of this Act, and to any directions that the Central Government may give in this behalf, a Board may, in the exercise of its powers and performance of its functions under this Act, issue any directions in writing to any person, officer or authority, and such person, officer or authority shall be bound to comply with such directions. Explanation.—For the avoidance of doubts, it is hereby declared that the power to issue directions under this section includes the power to direct—

(a) the closure, prohibition or regulation of any industry, operation or process; or

(b) the stoppage or regulation of supply of electricity, water or any other service.

15 industry, operation or process. Further, this power extends to

directing the stoppage or regulation of supply of electricity, water

or any other service. The power to give directions has been worded

broadly, and it allows the Boards significant flexibility in deciding

the nature of directions. The legislative intention of granting these

powers through the 1988 amendment can be inferred from the

Statement of Objects and Reasons of the Water Act, which reads

as follows –

“2. The Water Act is implemented by the Central and State Governments and the Central and State Pollution Control Boards. Over the past few years, the implementing agencies have experienced some more administrative and practical difficulties in effectively implementing the provisions of the Act. The ways and means to remove these difficulties have been thoroughly examined in consultation with the implementing agencies. Taking into account the views expressed, it is proposed to amend certain provisions of the Act in order to remove such difficulties….

3. The Bill, inter alia, seeks to make the following amendments in the Act, namely:— ….

(iv) in order to effectively prevent water pollution, the penal provisions of the Act are proposed to be made stricter and bring them at par with the punishments prescribed in the Air (Prevention and Control of Pollution) Act, 1981 as amended by Act 47 of 1987;

….

(vi) it is proposed to empower the Boards to give directions to any person, officer or authority including the power to direct closure or regulation of offending industry, operation or process or stoppage or regulation of supply of services such as water and electricity;”

16

13. Similar objective is expressed for the amendment introduced

in the Air Act. 15

14. An appeal against directions issued under Section 33A of the

Water Act by the State Board can be filed before the National Green

Tribunal under Section 33B, introduced in 201016. Unlike the

Water Act there is no specific Appeal provision against directions

issued under Section 31A of the Air Act. This asymmetry must be

addressed legislatively.

15. Offences and penalties under the two Acts, and the related

procedures, are covered in Chapter VII of the Water Act and

Chapter VI of the Air Act. These chapters have undergone

significant and substantial amendments. Prior to the

amendments, the two Acts stipulated penalties in the form of

15 Statement of Objects and Reasons for Air Act states, “2. The Air Act is implemented by the

Central and State Governments and the Central and State Boards. Over the past few years, the implementing agencies have experienced some administrative and practical difficulties in effectively implementing the provisions of this Act and have brought these to the notice of Government. The ways and means to remove these difficulties have been thoroughly examined in consultation with the concerned Central Government departments, the State Governments and the Central and State Boards. Taking into account the views expressed, the Government have decided to make certain amendments to the Act in order to remove such difficulties. 3. The Bill, inter alia, seeks to make the following amendments in the Act, namely— ….

iv) In order to prevent effectively air pollution, the punishments provided in the Act are proposed to be made stricter.

….

(vii) It is proposed to empower the Boards to give directions to any person, officer or authority including the power to direct closure or regulation of offending establishments or stoppage or regulation of supply of services such as, water and electricity. (viii) It is proposed to empower the Boards to approach courts to obtain orders restraining any person from causing air pollution.” 16 Act 19 of 2010.

17 imprisonment, monetary fine or both for offences under the

statute. Courts could only take cognizance of an offence if a

complaint was filed by a Board or any officer authorized by it, or

by any person who had given notice of the alleged offence and of

his intention to make a complaint. No court inferior to that of a

Metropolitan Magistrate or a Judicial magistrate of the first class

can try an offence punishable under the two Acts. Be that as it

may, for the present purpose we have to examine and interpret

Sections 33A and 31A of the Water and Air Acts.

9. Interpretation of and for Environmental Institutions.

16. Our constitutionalism bears the hallmark of an expansive

interpretation of fundamental rights. But such creative expansion

is only a job half done if the depth of the remedies, consequent

upon infringement, remain shallow. In other words, remedial

jurisprudence must keep pace with expanding rights and

regulatory challenges. It is not sufficient that courts adopt

injunctory, mandatory and compensatory remedies, but our

regulators also must be empowered in that regard. However, the

legislative grammar must be elastic for us to infuse the regulators

with power to fashion different remedies. This infusion must also

be tampered with the necessary guidelines and parameters of

18 exercise of remedial powers, failing which such infusion would aid

arbitrary use. Our firm view is that remedial powers or

restitutionary directives are a necessary concomitant of both the

fundamental rights of citizens who suffer environmental wrongs

and an equal concomitant of the duties of a statutory regulator,

which are informed by Part IV A of the constitution. To that extent,

the functions and powers of a regulator must be inspired by the

obligation in Part IV A and Article 48 A. The State’s ‘endeavour to

protect and improve the environment’ will be partial, if it does not

encompass a duty to restitute.

17. Of all the duties imposed under Article 51A, the obligation to

conserve and protect water and air, is perhaps the most

significant, amidst our climate change crisis. The Water Act and

the Air Act institutionalised all efforts and actions that need to be

taken to protect air that we breathe and water that we consume by

creating the Pollution Control Boards. These Boards functioning

as our environment regulators are expected to act with institutional

foresight by evolving necessary policy perspectives and action

plans. Working with perpetual seal and succession, they are to

develop and retain institutional memory so that they can act on the

basis of the experience, data and information that they would have

19 gathered and processed. Institutional expertise is critical, and these

bodies are to employ human resource which have domain expertise

and talent. These bodies are intended to maintain institutional

integrity by taking independent and objective decisions without

governmental or industrial control. These values flow naturally if

there is institutional transparency and accountability. It is in this

perspective that we need to interpret Section 33A of the Water Act

and 31A of the Air Act.

10. Duty to Restitute v. Power to Punish and Penalise.

18. There is a distinction between an action for environmental

damages for restitution or remediation and imposition of penalties

or fines levied at the culmination of a punitive action. This Court

in M.C. Mehta (supra), while referring to the provisions of the Water

Act, Air Act and the Environment Protection Act observed –

“17. All the three Acts, referred to above, also contemplate the taking of the cognizance of the offences by the court. Thus, a person guilty of contravention of provisions of any of the three Acts which constitutes an offence has to be prosecuted for such offence and in case the offence is found proved then alone can he be punished with imprisonment and fine or both. The sine qua non for punishment of imprisonment and fine is a fair trial in a competent court. The punishment of imprisonment or fine can be imposed only after the person is found guilty.”

“24. Pollution is a civil wrong. By its very nature, it is a tort committed against the community as a whole. A person, therefore, who is guilty of causing pollution has to pay

20 damages (compensation) for restoration of the environment and ecology. He has also to pay damages to those who have suffered loss on account of the act of the offender.…”

19. Therefore, Indian law distinguishes between the imposition of

a monetary penalty or fine, which constitutes punitive action

following a determination of guilt after adherence to the statutorily

prescribed procedure, and the payment of damages for restitution

or remediation as compensatory relief.

20. In this context, it is important to turn to one of the key

principles of Indian environmental law – the Polluter Pays

principle. This principle has been a part of Indian jurisprudence

since 1996. In Indian Council for Enviro-Legal Action v. Union of

India 17, this Court held that according to the Polluter Pays

principle the responsibility for repairing the damage is that of the

offending industry. The Court further held that the powers of the

Central Government to issue directions under Section 5 read with

Section 3 of the Environment Protection Act include the power to

impose costs for remedial measures -

“60. … Section 3 of the Environment (Protection) Act, 1986 expressly empowers the Central Government (or its delegate, as the case may be) to “take all such measures as it deems necessary or expedient for the purpose of protecting and improving the quality of environment…”. Section 5 clothes the Central Government (or its delegate) with the power to issue

17 (1996) 3 SCC 212

21 directions for achieving the objects of the Act. Read with the wide definition of ‘environment’ in Section 2(a), Sections 3 and 5 clothe the Central Government with all such powers as are “necessary or expedient for the purpose of protecting and improving the quality of the environment”. The Central Government is empowered to take all measures and issue all such directions as are called for for the above purpose. In the present case, the said powers will include giving directions for the removal of sludge, for undertaking remedial measures and also the power to impose the cost of remedial measures on the offending industry and utilise the amount so recovered for carrying out remedial measures. This Court can certainly give directions to the Central Government/its delegate to take all such measures, if in a given case this Court finds that such directions are warranted. …

67. The question of liability of the respondents to defray the costs of remedial measures can also be looked into from another angle, which has now come to be accepted universally as a sound principle, viz., the “Polluter Pays” principle. …Thus, according to this principle, the responsibility for repairing the damage is that of the offending industry. Sections 3 and 5 empower the Central Government to give directions and take measures for giving effect to this principle. In all the circumstances of the case, we think it appropriate that the task of determining the amount required for carrying out the remedial measures, its recovery/realisation and the task of undertaking the remedial measures is placed upon the Central Government in the light of the provisions of the Environment (Protection) Act, 1986. It is, of course, open to the Central Government to take the help and assistance of State Government, RPCB or such other agency or authority, as they think fit.” (emphasis added)

21. Subsequently, the Court in Vellore Citizens’ Welfare Forum v.

Union of India18, has held that the liability for environmental

damage includes both a compensatory aspect and a restorative or

remedial aspect-

“12. … The “Polluter Pays Principle” as interpreted by this Court means that the absolute liability for harm to the

18 (1996) 5 SCC 647

22 environment extends not only to compensate the victims of pollution but also the cost of restoring the environmental degradation. Remediation of the damaged environment is part of the process of “Sustainable Development” and as such the polluter is liable to pay the cost to the individual sufferers as well as the cost of reversing the damaged ecology.” (emphasis added)

22. Application of the Polluter Pays principle not only includes

payment for restoring the damaged environment, taking remedial

action to deal with the damage and compensating for the direct

harm caused, but also for avoiding pollution. In Research

Foundation for Science (18) v. Union of India19, this Court held -

“29. The polluter-pays principle basically means that the producer of goods or other items should be responsible for the cost of preventing or dealing with any pollution that the process causes. This includes environmental cost as well as direct cost to the people or property, it also covers cost incurred in avoiding pollution and not just those related to remedying any damage. It will include full environmental cost and not just those which are immediately tangible. The principle also does not mean that the polluter can pollute and pay for it. The nature and extent of cost and the circumstances in which the principle will apply may differ from case to case.” (emphasis added)

23. The Court further held that the observations of the Court in

in Deepak Nitrite Ltd. v. State of Gujarat20 that “mere violation of

the law in not observing the norms would result in degradation of

environment would not be correct” were confined to the facts of that

19 (2005) 13 SCC 186.

20 (2004) 6 SCC 402

23 case. The Court clarified that the actual degradation of the

environment is not a necessary condition for the application of

polluter pays principle, as long as the offending activities have the

potential of degrading the environment -

“30…The decision also cannot be said to have laid down a proposition that in the absence of actual degradation of environment by the offending activities, the payment for repair on application of the polluter-pays principle cannot be ordered. The said case is not relevant for considering cases like the present one where offending activities have the potential of degrading the environment. In any case, in the present case, the point simply is about the payments to be made for the expenditure to be incurred for the destruction of imported hazardous waste and amount spent for conducting tests for determining whether it is such a waste or not…” (emphasis added)

24. The distinction between a punitive action and a direction to

pay environmental damages was made by the National Green

Tribunal in State Pollution Control Board, Odisha v M/s Swastik

Ispat Pvt Ltd and Others21. The Tribunal in this case was

considering the legality of forfeiture of bank guarantees in case a

defaulting industry did not comply with the regulatory conditions

within the stipulated timeframe. The Tribunal expressly

considered the opinion of the High Court in the impugned

judgment before us today and held -

“45. It is evident from the above facts and the reasoning that there was actual levy of penalty or damages by the DPCC and

21 2014 SCC OnLine NGT 13.

24 it was in consequence of such imposition of penalty/damages that the Units were called upon to furnish bank guarantees for granting of consent. In other words, bank guarantee was required to be furnished in furtherance to the imposition of a penalty or damages in that case. It was not an act de hors the imposition of penalty and had the element of punitive action. In the present case, it is not a consequence of a punitive or penal action but is in exercise of the powers vested in the Board in relation to recalling the conditions of consent and ensuring their implementation while also making compensatory provision for remedying the apprehended wrong to the environment. In the cases in hand, the Board has not imposed any penalty upon the units but has granted consent to them on certain conditions, none of which is punitive. They squarely fall within the power of the Board to prevent and control pollution in consonance with the scheme of the Acts concerned. Thus, on facts, the judgments of the High Court in Splendor (supra) do not have any application to the present case. In any case, we are of the considered view that asking for a bank guarantee as an interim measure for due performance of the conditions of the consent order being compensatory in nature, is not punitive.

46. We have already noticed above that there is a clear distinction between a penal and a compensatory provision. In such matters, the paramount question that would normally fall for determination before a court or tribunal would be whether the action contemplated is penal or compensatory. This issue shall have to be decided with reference to the facts of the case, the provisions of the law applicable and the intent of the authority concerned. Once it falls in the ‘compensatory’ field, then it will necessarily be beyond the purview of penalty….” (emphasis added)

25. In Swastik Ispat, the Green Tribunal correctly interpreted

Sections 33A and 31A of the Water and Air Acts. The judgment of

the High Court in Splendor had not yet been taken up or

considered by this Court at that time, the Tribunal had to

distinguish the facts of Splendor to arrive at its own conclusion. In

view of our reasoning and interpretation of Sections 33A and 31A

25 of the Water and Air Acts, we have no hesitation to hold that the

Green Tribunal is correct in its approach.

26. More recently, in T.N. Godavarman Thirumulpad, In Re v.

Union of India22, this Court while considering the issue of illegal

construction in the Corbett Tiger Reserve drew the distinction

between action against persons violating the law and measures for

restoration of the environmental damage. The Court held -

“173. … However, the principle of restoration of damaged ecosystem would require the States to promote the recovery of threatened species. We are of the considered view that the States would be required to take steps for the identification and effective implementation of active restoration measures that are localised to the particular ecosystem that was damaged. The focus has to be on restoration of the ecosystem as close and similar as possible to the specific one that was damaged.

175. We find that, bringing the culprits to face the proceedings is a different matter and restoration of the damage already done is a different matter. We are of the considered view that the State cannot run away from its responsibilities to restore the damage done to the forest. The State, apart from preventing such acts in the future, should take immediate steps for restoration of the damage already done; undertake an exercise for determining the valuation of the damage done and recover it from the persons found responsible for causing such a damage.” (emphasis added)

11. Principles.

27. Based on a review of precedents on this issue, the following

legal position emerges –

22 (2025) 2 SCC 641

26 I. There is a distinction between a direction for payment of

restitutionary and compensatory damages as a remedial

measure for environmental damage or as an ex-ante measure

towards potential environmental damage on the one hand;

and a punitive action of fine or imprisonment for violations

under Chapters VII of the Water Act and VI of the Air Act on

the other hand.

II. If directions in furtherance of restitutionary and

compensatory measures are issued, these are not to be

considered as punitive in nature. Punitive action can only be

taken through the procedure prescribed in the statute for

example under chapters VII and VI of the Water and Air Acts

respectively.

III. Indian environmental law has assimilated 23 the principle of

Polluter Pays and there is also a statutory incorporation of

this principle in our laws. 24 The invocation of this principle

is triggered in the situations25; i) when an established

threshold or prescribed requirement is exceeded or

23 Indian Council for Enviro-Legal Action (supra n.12); Vellore (supra n 13). 24 Section 20. Tribunal to apply certain principles- The Tribunal shall, while passing any

order or decision or award, apply the principles of sustainable development, the precautionary principle and the polluter pays principle.

25 Loveleen Bhullar, ‘The Polluter Pays Principle: Scope and Limits or Judicial Decisions’; in

Shibani Ghosh (ed.), Indian Environmental Law (Orient BlackSwan 2019).

27 breached, and it does result in environmental damage, ii)

when an established threshold or prescribed requirement is

not exceeded or breached, nevertheless the act in question

results in environmental damage and also iii) when a

potential risk or a likely adverse impact to the environment

is anticipated, irrespective of whether or not prescribed

thresholds or requirements are exceeded or breached.

IV. Environmental regulators have a compelling duty to adopt

and apply preventive measures irrespective of actual

environmental damage. Ex-ante action shall be taken by

these regulators and for this purpose a certain measure in

exercise of powers under Sections 33A and 31A of the Water

and Air Acts is necessary.

V. The powers of the Boards under Sections 33A and 31A of the

Water and Air Acts are identical to that of Section 5 of the

Environment Protection Act. Under Section 5, the Central

Government or its delegate has the power to issue directions

to the polluting industry to pay certain amounts and utilise

the said fund for carrying out remedial measures. The Boards

are empowered to take similar actions under Sections 33A

and 31A of the Acts.

28

28. Having considered the principles that govern our

environmental laws and on interpretation of Sections 33A and 31A

of the Water and Air Acts, we are of the opinion that that the

Division Bench of the High Court was not correct in restrictively

reading powers of the Boards. We are of the opinion that these

regulators in exercise of these powers can impose and collect, as

restitutionary or compensatory damages fixed sum of monies or

require furnishing bank guarantees as an ex-ante measure

towards potential or actual environmental damage.

29. There is no doubt that Section 33A of the Water Act and

Section 31A of the Air Act give the State Boards powers to issue

necessary directions for environmental restoration, remediation

and compensation and for the payment of costs for the same. The

National Green Tribunal’s judgment in Swastik Ispat correctly

identified the Boards powers to issue directions for payment of

environmental damages under Section 33A of the Water Act and

the Section 31A of the Air Act. A restrictive interpretation which

fails to differentiate between environmental damages and punitive

action significantly encumbers the Boards ability to discharge its

duties.

29

30. The Board’s powers under Section 33A of the Water Act and

Section 31A of the Air Act have to be read in light of the legal

position on the application of Polluter Pays principle as formulated

and explained. This means that State Board cannot impose

environmental damages in case of every contravention or offence

under the Water Act and Air Act. It is only when the State Board

has made a determination that some form of environmental

damage or harm has been caused by the erring entity, or the same

is so imminent, that the State Board must initiate action under

Section 33A of the Water Act and Section 31A of the Air Act.

31. At this stage, we must also take note of the recent 2024

amendments26 to the Water and Air Acts. Two major changes

relevant for our consideration are that of decriminalisation27 and

introduction of the office of “Adjudicatory Officer”28. Even after the

26 The Water (Prevention and Control of Pollution) Amendment Act, 2024, Jan Vishwas

(Amendment of Provisions) Act, 2023.

27 Section 41 in the erstwhile Water Act has been substituted by sections 41 and 41A, whereby contravention of directions issued under section 20 (for obtaining information), 32 (for imposing emergency measures in case of pollution), 33 (for restraining apprehended pollution) or 33A would now be punishable by penalty alone; thereby replacing the earlier penal framework comprising of imprisonment and fine. Similar amendments done for section 42 (penalty for certain acts), section 43 for contravention of directions under section 24 (prohibiting use of stream or well), section 44 (prohibiting alteration of meter, etc.), and section 45A (residuary). Correspondingly, under the Air Act criminal liability under section 37 for contravention of directions under section 22 (restricting emission beyond standards) or section 31A has been restricted to fine alone. Similar amendments have been brought in section 38 and 39 (residuary). Punishment for imprisonment has been retained only for violation of section 21 and failure to pay penalty or additional penalty under section 39D. 28 In the Water Act, section 45B puts in place a new office by the title of ‘Adjudicating Officer’, who would be an officer not below the rank of Joint Secretary to the Centre or Secretary to the State, appointed by the Central Government. Adjudicating Officer is empowered to inquire

30 amendments, in our opinion, there is no conflict between the

powers of the State Boards to direct payment of environmental

damages under Sections 33A and 31A of the Water and Air Acts

and the powers of the Adjudicating Officer to impose penalties

under Chapter VII of the Water Act and Chapter VI of the Air Act.

The decriminalization of offences under these Chapters has not

removed the punitive nature of actions that can be taken under

them. There remains a clear distinction between the nature of

directions that the State Boards can issue under Sections 33A and

31A of the Water and Air Acts for payment of environmental

damage and the determination by Adjudicating Officers. The

former is compensatory in nature and will be resorted to when

remedial measures are being undertaken to restore the degraded

environment or pollution caused. The latter is a penalty for an

offence under the law and is imposed with the objective of

punishing the offender. This penalty collected here will not be

specifically directed towards the restoration of the degraded

environment (for instance, to decontaminate a pond that has been

and impose penalties under sections 41, 41A, 42, 43, 44, 45A and 48. Appeal against such imposition lies before the National Green Tribunal as per section 45C. The Adjudicating Officer is further empowered to file a complaint for cognizance under section 49. Corresponding additions have been made under the Air Act as well under sections 39A (Adjudicating Officer), 39B (Appeal to NGT) and 43 (Cognizance of offences).

31 polluted due to discharge of untreated sewage). It will be deposited

in the Environmental Protection Fund that is to be set up under

Section 16 of the Environment (Protection) Act. According to

Section 16(3) of the EP Act, the Fund shall be used for, (a) the

promotion of awareness, education and research for the protection

of environment; (b) the expenses for achieving the objects and for

purposes of the Air (Prevention and Control of Pollution) Act,

1981(14 of 1981) and under this Act; and (c) such other purposes,

as may be prescribed.

A. Board’s Responsibility to Choose Appropriate Course of Action.

32. Given their broad statutory mandate and the significant duty

towards public health and environmental protection the Boards

must have the power and distinction to decide the appropriate

action against a polluting entity. It is essential that the Boards

function effectively and efficiently by adopting such measures as

is necessary in a given situation. The Boards can decide whether

a polluting entity needs to be punished by imposition of penalty or

if the situation demands immediate restoration of the

environmental damage by the polluter or both.

32 B. Powers Must Be Guided by Transparency and Non- Arbitrariness.

33. While we hold that the Boards have the power to direct the

payment of environmental damages, we make it clear that this

power must always be guided by two overarching principles. First,

that the power cannot be exercised in an arbitrary manner; and

second, the process of exercising this power must be infused with

transparency.

34. This Court has underscored the importance of strong

institutional frameworks in environmental governance that are

effective, accountable and transparent. In Bengaluru Development

Authority v. Sudhakar Hegde29, this Court held -

“95. The protection of the environment is premised not only on the active role of courts, but also on robust institutional frameworks within which every stakeholder complies with its duty to ensure sustainable development. A framework of environmental governance committed to the rule of law requires a regime which has effective, accountable and transparent institutions. Equally important is responsive, inclusive, participatory and representative decision-making. Environmental governance is founded on the rule of law and emerges from the values of our Constitution. Where the health of the environment is key to preserving the right to life as a constitutionally recognised value under Article 21 of the Constitution, proper structures for environmental decision- making find expression in the guarantee against arbitrary action and the affirmative duty of fair treatment under Article 14 of the Constitution. Sustainable development is premised not merely on the redressal of the failure of democratic institutions in the protection of the environment, but ensuring that such failures do not take place.” (emphasis added)

29 (2020) 15 SCC 63

33

35. To ensure that the Boards impose restitutionary and the

compensatory environmental damages in a fair transparent, non-

arbitrary manner, with procedural certainty, necessary

subordinate legislation in the form of rules and regulations must

be notified. This shall include methods by which environmental

damage is determined, and the consequent quantum of damages

are assessed. They may also incorporate certain basic principles of

natural justice for fairness in action. At present environmental

damages are being levied by the Boards on the basis of certain

guidelines issued by the Central Pollution Control Board in its

document “General framework for imposing environmental damage

compensation” issue in December, 2022. These guidelines seem to

have been issued pursuant to the directions of the NGT.30 It is

important that these guidelines are reviewed thoroughly and

issued in the form of Rules and Regulations. This will enable

declaration of a law that applies and ensures its recognition and

easy implementation.

36. These Rules must also create enabling framework for citizens

to file complaints about environmental damage. Public

participation in environmental protection has assumed great

30 Pursuant to the NGT in its order in O.A. No. 606/2018 dated 24.04.2019.

34 importance with climate change threatening to drastically disrupt

our way of living. Boards, being the first line of defence against

polluting activities, must provide easy accessibility and encourage

public participation in their function and decision making.

37. While we have reversed the decision of the High Court on the

principle of law and hold that the environmental regulators, the

Pollution Control Boards, can impose and collect as restitutionary

and compensatory damages fixed sums of monies or require

furnishing bank guarantees as an ex-ante measure towards

potential environmental damage in exercise of powers under

Sections 33A and 31A of the Water and Air Acts, we issue the

following consequential directions.

38. In view of the fact that the show cause notices in these cases

relate to the year 2006 and those show cause notices were set-

aside by the Single as well as by the Division Benches of the High

Court, we are of the opinion that no purpose will be served in

reviving the said show cause notices at this point of time. In the

facts and circumstances of the case while we allow the appeal on

the principle of law there shall not be any consequential direction

for reviving the show cause notices which have been set-aside

concurrently by the Single as well as by the Division Bench of the

35 High Court. If certain amounts have been collected on the basis of

the said show cause notices they shall be returned by DPCC within

a period of six weeks from the date of this order, and if amounts

are not deposited or collected the appellant, DPCC shall not take

any further action.

39. For the reasons stated above:

(a) we allow these appeals and set aside the judgement and order

dated 23.01.2012, passed by the Division Bench of the High Court

of Delhi to the extent of declaration of law but direct that the show

cause notices that have been set aside by the High Court shall not

be revived.

(b) we direct that the Pollution Control Boards can impose and

collect as restitutionary and compensatory damages fixed sums of

monies or require furnishing bank guarantees as an ex-ante

measure towards potential environmental damage in exercise of

powers under Sections 33A and 31A of the Water and Air Acts.

(c) it is further directed that the power to impose or collect

restitutionary or compensatory damages or the requirement to

furnish bank guarantees as an ex-ante measure under Sections

33A and 31A of the Water and Air Acts shall be enforced only after

36 detailing the principle and procedure incorporating basic

principles of natural justice in the subordinate legislation.

………………………………....J. [PAMIDIGHANTAM SRI NARASIMHA]

………………………………....J. [MANOJ MISRA]

NEW DELHI;

AUGUST 04, 2025

37