Keystone Realtors Pvt. Ltd. vs Anil V. Tharthare

Keystone Realtors Pvt. Ltd. …Appellant

Versus

Shri Anil V Tharthare & Ors. …Respondents

JUDGMENT

Dr Dhananjaya Y Chandrachud, J

1. The present Civil Appeal arises from an order dated 11 February 2019 of

the Principal Bench of the National Green Tribunal1. In its order, the NGT held

that the increase in the total construction area of the appellant‟s project was an

“expansion” under a notification (bearing number S.O. 1533) dated 14 September

20062 of the Ministry of Environment and Forests. The NGT found that the

appellant had undertaken an “expansion” as set out in Paragraph 2 of the EIA 1 NGT 2 EIA Notification

1 Notification without complying with the regulatory procedure prescribed. The

appellant was directed to deposit an amount of Rupees one crore with the

Central Pollution Control Board3. Noting that the construction at the project site

had been completed, the NGT appointed a five-member expert committee to

study the impact of the appellant‟s expanded project and to suggest remedial

measures.

The facts

2. The appellant is the project proponent of a residential redevelopment,

called „Oriana Residential Project‟ situated at CTS no 646, 646 (Pt) Gandhinagar,

Bandra (East), Mumbai 400050. On 8 June 2010 the appellant received a

Commencement Certificate to carry out the development and erect a building

situated at the project property. The appellant began construction. When the

construction commenced, the total construction area was 8,720.32 square

metres. The ambit of the project was expanded, and the constructed area was

increased to 32,395.17 square metres. Under the EIA Notification, an

Environmental Clearance4 was necessary if the total construction area exceeded

20,000 square metres. Hence, the appellant applied for an EC under the EIA

Notification.

3. The fourth respondent, the State Level Expert Appraisal Committee for

Maharashtra5 recommended the grant of an EC for the project. On 2 May 2013

the third respondent, the State Level Environment Impact Assessment Authority

3 CPCB 4 EC 5 SEAC

2 for Maharashtra6, based on the recommendations of the SEAC granted an EC. It

is not in dispute that at the time when the EC dated 2 May 2013 was granted, the

total construction area of the project was 32,395.17 square metres. The grant of

the EC was conditional on the appellant obtaining a „consent for establishment‟

from the Maharashtra Pollution Control Board under the Air (Prevention and

Control of Pollution) Act 1981 and the Water (Prevention and Control of Pollution)

Act 1974.

4. By a letter dated 24 September 2013, the appellant informed the

Environment Department of the Government of Maharashtra, the second

respondent, that the construction area was being further increased by 8,085.71

square metres, as a result of which the total construction area of the project

would stand enhanced to 40,480.88 square metres. In its letter, the appellant

sought an „amendment‟ to the EC dated 2 May 2013 by the third respondent to

reflect the increase in the total construction area. On 13 March 2014, the third

respondent granted an „amendment‟ to the EC dated 2 May 2013 on the ground

that there was only a “marginal increase in built up and construction area”. The

third respondent noted the changes in the specification of the project as follows:

Description As per EC dated 2 May Amendment 2013 FSI area 16,346.32 sq mts 21,365.54 sq mts

Non FSI area 16,048.85 sq mts 19,115.34 sq mts

Total Construction area 32,395.17 sq mts 40,480.88 sq mts

Nos of tenements Members Sale 61 Members Sale 77 64 64 6 SEIAA

3 Building Configuration Member 2 Member 2 Basement Basement

5. The first respondent, claiming to be a resident of MIG Colony,

Gandhinagar, Bandra East, Mumbai, challenged the grant of the amended EC

dated 13 March 2014 before the Pune Bench of the NGT. In response, the

appellant filed two applications, challenging the standing of the first respondent

and contending that the challenge was barred by limitation. By an order dated 4

May 2016, the Pune Bench of the NGT rejected the applications questioning the

maintainability of the proceedings and setting up the bar of limitation. The

appellant filed a writ petition before the High Court of Judicature at Bombay to

challenge the decision of the Pune Bench of the NGT. The Bombay High Court,

allowing the writ petition held by an order dated 12 August 2016, that the appeal

was not maintainable at the behest of the first respondent, and the challenge

against the grant of the amended EC dated 13 March 2014 was barred by

limitation. By an administrative order dated 31 July 2018, the dispute was

transferred from the Pune Bench of the NGT to the Principal Bench which heard

the parties and delivered the impugned order.

Relevant clauses of the EIA Notification

6. The present dispute raises important questions regarding the interpretation

the EIA Notification. The EIA Notification seeks to ensure the protection and

preservation of the environment during the execution of new projects and the

expansion or modernisation of existing projects. It imposes restrictions on the

execution of new projects and on the expansion of existing projects, until their

4 potential environmental impact has been assessed and approved by the grant of

an EC. Paragraph 2 of the EIA Notification reads thus:

“2. Requirement for prior Environmental Clearance (EC): -

The following projects or activities shall require prior environmental clearance from the concerned regulatory authority, which shall hereinafter be referred to as the Central Government in the Ministry of Environment and Forests for matters falling under Category „A‟ in the Schedule and at State level the State Environment Impact Assessment Authority (SEIAA) for matters falling under Category „B‟ in the said Schedule, before any construction work, or preparation of land by the project management except for securing the land, is started on the project or activity:

(i) All new projects or activities listed in the Schedule to this notification;

(ii) Expansion and modernisation of existing projects or activities listed in the Schedule to this notification with addition of capacity beyond the limits specified for the concerned sector, that is, projects or activities which cross the threshold limits given in the Schedule after expansion or modernisation;

(iii) Any change in product – mix in an existing manufacturing unit included in Schedule beyond the specified range.”

(Emphasis supplied)

The Schedule to the EIA Notification classifies potential projects into Category „A‟

and Category „B‟ based on their size and potential environmental impact.

Category „A‟ projects require project proponents to secure an EC from the

Ministry of Environment, Forests and Climate Change. Category „B‟ projects

require project proponents to secure an EC from the SEIAA, based on the

recommendations of the SEAC. Where a project falls within the parameters

stipulated in the Schedule, paragraph 2 of the EIA Notification provides that no

construction work shall begin unless an EC is granted in regard to three types of

activity: (i) new projects or activities provided in the Schedule, (ii) expansion or

5 modernisation of existing projects or activities provided in the Schedule, and (iii)

changes in the product mix in existing manufacturing units provided in the

Schedule beyond the specified range. The present dispute raises questions as to

how the second type of activity, the “expansion” of existing projects, should be

construed under the EIA Notification.

7. In order to secure an EC, the project proponent must submit an application

in the manner set out in Form 1 and Supplementary Form 1A (if applicable) of the

EIA Notification. Under paragraph 7(i) of the EIA Notification, the project

proponent must also submit a pre-feasibility report. However, in the case of

projects under item 8 of the Schedule, only a conceptual plan is required to be

submitted. Paragraph 7(ii) of the EIA Notification states that:

“7(ii) Prior Environmental Clearance (EC) process for Expansion or Modernisation of Change of product mix in existing projects:

All applications seeking prior environmental clearance for expansion with increase in the production capacity beyond the capacity for which prior environmental clearance has been granted under this notification or with increase in either lease area or production capacity in the case of mining projects or for the modernisation of an existing unit with increase in the total production capacity beyond the threshold limit prescribed in the Schedule to this notification through change in process and or technology or involving a change in the product mix shall be made in Form 1 and they shall be considered by the concerned Expert Appraisal Committee or State Level Expert Appraisal Committee within sixty days, who will decide on the due diligence necessary including preparation of EIA and public consultation and the application shall be appraised accordingly for grant of environmental clearance.”

(Emphasis supplied)

6 Clause (ii) of paragraph 2 of the EIA Notification requires the project proponent to

secure an EC from the relevant regulatory authority prior to undertaking any

“expansion” of an existing project. Paragraph 7(ii) further stipulates that all

applications for an EC in cases of “expansion” resulting in the increase of

production capacity or lease area beyond the capacity/area stipulated in the

previous EC shall be made in the manner set out in Form 1 or 1A (as applicable).

8. The appellant‟s application in Form 1 acknowledges that the project fell

under entry 8(a) of Schedule 1 of the EIA Notification. Entry 8 deals with „Building

and Construction projects having a built-up area of or greater than 20,000 square

metres but less than 1,50,000 square metres.‟ Entry 8 of the Schedule to the EIA

Notification is as follows:

8 – Building / Construction projects / Area Development projects and Townships 8(a) Building and Construction ≥20,000 sq mts Built-up area for projects and <1,50,000 sq covered mts of built-up construction: in area the case of facilities open to the sky, it will be the activity area

8(b) Townships and Area Covering an area All projects under Development projects ≥ 50 ha and or item 8(b) shall be built up area appraised as ≥1,50,000 sq mts Category B1

7 Issue

9. In applying for the original EC, the appellant submitted an application in

Form 1 as required under the provisions of the EIA Notification. The total

construction area identified in the appellant‟s Form 1 was 32,395.17 square

metres. However, in September 2013 the appellant informed the second

respondent of an increase by 8,085.71 square metres as a result of which the

total construction area of the project would be 40,480.88 square metres. In

seeking an „amendment‟ to the EC dated 2 May 2013 the appellant did not submit

an updated Form 1. Further, the „amendment‟ to the EC was granted by the

SEIAA without the recommendations of the SEAC. The issue before this Court is

whether the „amended‟ EC dated 13 March 2014 granted by the SEIAA without

following the procedure stipulated in paragraph 7(ii) of the EIA Notification is

valid.

Submissions

10. Mr Mukul Rohatgi, learned Senior Counsel appearing on behalf of the

appellant submitted that:

(i) When construction began, the total construction area of the

appellant‟s project was 8,720.32 square metres. As the EIA

Notification requires projects with a total built up area of or more

than 20,000 square metres to procure an EC prior to the start of

construction, no EC was required before construction of the

appellant‟s project commenced;

8

(ii) Pursuant to the first increase, when the appellant‟s project crossed

the 20,000 square metre threshold provided for in the EIA

Notification, the appellant submitted a Form 1 and was granted a

valid EC dated 2 May 2013 by the third respondent;

(iii) Pursuant to the second increase, the built up area of the appellant‟s

project only marginally increased by 8,085.71 square metres to a

total construction area of 40,480.88 square metres, which is within

the upper limit of 1,50,000 square metres prescribed by entry 8(a) of

the Schedule to the EIA Notification. Therefore, the second increase

was not an “expansion” within the meaning of clause (ii) of

paragraph 2 of the EIA Notification and no fresh Form 1 or EC was

required at the time of the second increase;

(iv) Clause (ii) of paragraph 2 only applies to situations where the

project crosses the lower or upper threshold limits stipulated in the

Schedule. Any increase in production capacity or construction area

within the limits set out in the Schedule would not constitute an

“expansion” within the meaning of Clause (ii) of paragraph 2 and

does not require compliance with the procedure under paragraph

7(ii) of the EIA Notification;

(v) The increase in the appellant‟s project is only marginal and does not

have an adverse impact on the environment;

(vi) The SEIAA applied its mind to the appellant‟s request for an

„amendment‟; noted that the increase in construction area was only

9 marginal and issued an amendment to the original EC dated 2 May

2013; and

(vii) The NGT had no basis to impose the fine of Rupees one crore on

the appellant.

11. Joining issue with the above submissions, Mr Aditya Pratap, learned

counsel appearing on behalf of the first respondent submitted that:

(i) Under clause (ii) of paragraph 2 read with paragraph 7(ii) of the EIA

Notification, any expansion beyond the “threshold limit” requires a

fresh EC. The appellant‟s project had crossed the threshold limit of

20,000 square metres and the second increase of 8,085.71 square

metres constituted an „expansion beyond the threshold limit‟ and

hence required a fresh EC;

(ii) Once a project breaches the lower threshold limit set out in the

Schedule to the EIA Notification, any expansion or modernisation,

even within the upper threshold set out in the Schedule, will require

the submission of a fresh Form 1 and the matter to be placed before

the Expert Appraisal Committee or the SEAC, as applicable in

accordance with paragraph 7(ii) of the EIA Notification;

(iii) Adopting the appellant‟s interpretation of clause (ii) of paragraph 2

would defeat the object and purpose of the EIA Notification as a

whole. It would allow project proponents to incrementally increase

10 the construction area and over time significantly impinge on the

environmental impact of the project without seeking a fresh EC;

(iv) If the law prescribes an act to be done in a particular manner, it

must be done only in that manner and no other. Under paragraph

7(ii) of the EIA Notification, it was incumbent on the SEIAA to place

the matter before the SEAC for appraisal and recommendations;

and

(v) The EIA Notification is an operationalisation of the precautionary

principle, which forms a part of the environmental law of India. The

EIA Notification must be read in a manner which gives effect to the

precautionary principle.

Interpreting paragraphs 2 and 7

12. The central controversy between the parties to the present dispute is the

manner in which paragraphs 2 and 7 of the EIA Notification should be interpreted.

Clause (ii) of paragraph 2 of the EIA Notification stipulates that a project

proponent shall require an EC prior to the start of construction in the case of an

“expansion”. Clause (ii) uses the phrase “expansion…beyond the limits specified

for the concerned sector”. The first respondent sought to lay emphasis on this

construction to argue that any expansion beyond the lower limit stipulated in the

Schedule would attract the requirement of a prior EC under paragraph 2.

However, the above language in clause (ii) is further qualified by the phrase “that

is, projects or activities which cross the threshold limits given in the Schedule

11 after expansion or modernisation.” A plain reading of the second half of clause (ii)

would indicate that it applies to cases where a project was initially below the

threshold limits stipulated in the Schedule but after the proposed expansion,

would breach the threshold limits. Clause (ii) of paragraph 2 of the EIA

Notification therefore would not appear to cover a case where a project had

already crossed the lower threshold limit set out in the Schedule and the

expansion does not cross the upper limit stipulated by the Schedule.

13. However, clause (ii) of paragraph 2 must be read with paragraph 7(ii) of

the EIA Notification. Paragraph 7(ii) lays down the exact procedure to be followed

by a project proponent in the case of an expansion. Two crucial points must be

noted with respect to paragraph 7(ii). First, it uses the phrase, “expansion with

increase in production capacity beyond the capacity for which prior environment

clearance has been granted”. Second, the qualifying language referring to

breaching the threshold limits “after expansion” is absent. An “expansion” can

occur even after the grant of an EC when the project first crossed the lower limit

stipulated in the threshold and it is not necessary for the project to breach the

upper limit after the expansion. Therefore, a close reading of paragraph 7(ii)

would support the interpretation put forth by the first respondent – that even after

obtaining an EC if the project is expanded beyond the limits for which the prior

EC was obtained, a fresh application would need to be made even if the

expansion is within upper the limit prescribed in the Schedule.

12

14. The dangers effectively articulated by the learned counsel for the first

respondent are real. If clause (ii) of paragraph 2 does not cover a case where the

expansion is within the limits stipulated by the Schedule, a project proponent may

incrementally keep increasing the size of the project area over time resulting in a

significant increase in the project size without an assessment of the

environmental impact resulting from the expansion. Such an outcome would

defeat the entire scheme of the EIA Notification which is to ensure that any new

or additional environmental impact is assessed and certified by the relevant

regulatory authorities. In the present case, the lower limit of Entry 8(a) of the

Schedule is a built up area of 20,000 square metres and the upper limit is

1,50,000 square metres. It cannot be doubted that the environmental impact of a

construction of 1,50,000 square metres is drastically more than construction of

20,000 square metres. If the appellant‟s argument is accepted in totality, a project

proponent could potentially secure an EC for constructing 20,000 square metres

and by „amendment‟ steadily increase the area of construction up to 1,50,000

square metres without submitting an updated Form 1 or any substantive review

by the SEAC.

15. We note that subsequent to the EIA Notification being published in 2006, a

draft notification was issued on 19 January 2009.7 The draft notification proposed

the following amendment:

“in para 2 [of the EIA Notification], after sub-para (iii), the following shall be inserted; namely:-

7

Notification S.O. 195 (E) dated 19 January 2009.

13 However modernisation or expansion proposals without any increase in pollution load, and, or without any additional water and or land requirement are exempted from the provisions of this Notification:

Provided that, a self certification, stating that the proposals shall not involve any additional pollution load, waste generation or water requirement, be submitted to the regulatory authority by the project proponent.”

Prior to adopting the draft notification, hearings were conducted and written

comments were solicited from various stakeholders including: (i) Central

Ministries and Departments, (ii) State Governments and their Agencies, (ii)

Industries and their Associations and (iv) Civil Society including NGOs. A

committee was constituted by the Ministry of Environment and Forests,

Government of India which published a report in October 2009. The committee

specifically recommended against the adoption of the above amendment, noting:

“The amendments propose to exempt modernisation and expansion of projects based on a self certification by project authorities that there is no increase in pollution load. It is totally unacceptable that the modernisation and expansion of projects be removed from the environmental clearance regime, with or without the requirement of self certification. There are several industries operating in critically polluted areas or are in violation of their environmental clearance conditions, which need to be considered before the expansion of a project is considered. What is to be considered is not just whether there is an increase in pollution load but also the current impact of the project and its compliance with environmental clearance conditions. We can provide clear examples wherein the non- compliance of the clearance conditions has not been considered while granting clearance for expansion which includes adding new components to the existing industrial operations etc. This has allowed several projects to continue their activities and expand despite blatant non compliance. Finally, it is only with industrial, thermal power and other such related operations that one can decide on parameters of pollution. Development projects like highways, airports and other infrastructure projects which seek to expand might have a detrimental impact due to factors such as

14 change in land use (i.e. construction over a wetland, grassland or agricultural land etc). Despite this, the project proponent can certify that there is no change in pollution load and hence expansion is to be allowed. The current process seeks a detailed EIA report to determine whether impacts can be mitigated. If the amendment is brought into force, it will simply do away with this critical and necessary step in the environmental clearance process. Therefore, this amendment should not be allowed.

…

The draft notification takes a myopic view of environmental and social impact of modernisation and expansion. Any modernisation/expansion projects will necessarily entail increase in production, increase in transportation, increase in pressure on the local infrastructure and local natural resources and increase in the pollution load during the construction phase. So, even if a modernisation/expansion does not lead to an increase in the pollution load or water or land requirement within the factory premises during the operation phase, it will lead to an increase in environmental and social impact outside the premise.”

(Emphasis supplied)

The draft amendment was not adopted in subsequent amendments to the EIA

Notification. We find considerable merit in the observations of the committee that

the requirement of an EC at the time of expansion forms a critical step in the

environmental clearance regime. According to the committee, it assists officials

not just in evaluating and mitigating any adverse impact caused by the expansion

but also in assessing whether the project proponent is in compliance with their

existing obligations. Crucially, any form of expansion necessarily puts a strain on

the local environment and infrastructure and needs to be carefully evaluated in a

holistic manner.

15 16. In a case where the text of the provisions requires interpretation, this Court

must adopt an interpretation which is in consonance with the object and purpose

of the legislation or delegated legislation as a whole. The EIA Notification was

adopted with the intention of restricting new projects and the expansion of new

projects until their environmental impact could be evaluated and understood. It

cannot be disputed that as the size of the project increases, so does the

magnitude of the project‟s environmental impact. This Court cannot adopt an

interpretation of the EIA Notification which would permit, incrementally or

otherwise, project proponents to increase the construction area of a project

without any oversight from the Expert Appraisal Committee or the SEAC, as

applicable. It is true that there may exist certain situations where the expansion

sought by a project proponent is truly marginal or the environmental impact of

such expansion is non-existent. However, it is not for this Court to lay down a

bright-line test as to what constitutes a „marginal‟ increase and what constitutes a

material increase warranting a fresh Form 1 and scrutiny by the Expert Appraisal

Committee. If the government in its wisdom were to prescribe that a one-time

„marginal‟ increase (e.g. 5% or 10%) in project size, within the threshold limit

stipulated in the Schedule, could be subject to a lower standard of scrutiny

without diluting the urgent need for environmental protection, conceivably this

Court may give effect to such a provision. This would be subject to any challenge

on the ground of their being a violation of the precautionary principle. However,

as the EIA Notification currently stands, an expansion within the limits prescribed

by the Schedules would be subject to the procedure set out in paragraph 7(ii).

16

17. At the time of the second increase, the total construction area of the

appellant‟s project was enlarged from 32,395.17 square metres to 40,480.88

square metres. As a result of the expansion, the appellant constructed sixteen

additional flats which were sold at the prevailing market rate. The appellant did

not comply with the procedure set out under paragraph 7(ii) of the EIA

Notification but rather sought an „amendment‟ to the EC. The third respondent did

not require the appellant to submit an updated Form 1 nor was the proposal

processed and evaluated by the fourth respondent. The „amendment‟ to the EC

dated 13 March 2014 does not discuss the potential environmental impact of the

increase in construction area, but merely records that the construction area now

stands at 40,480.88 square metres. The procedure set out under paragraph 7(ii)

of the EIA Notification exists to ensure that where a project is expanded in size,

the environmental impact on the surrounding area is evaluated holistically

considering all the relevant factors including air and water availability and

pollution, management of solid and wet waste and the urban carrying capacity of

the area. This was not done in the case of the appellant‟s project. It was not open

to the third respondent to grant an „amendment‟ to the EC without following the

procedure set out in paragraph 7(ii) of the EIA Notification.

18. We further note that as on the date of the impugned order construction at

the project site had already been completed. A core tenet underlying the entire

scheme of the EIA Notification is that construction should not be executed until

ample scientific evidence has been compiled so as to understand the true

environmental impact of a project. By completing the construction of the project,

17 the appellant denied the third and fourth respondents the ability to evaluate the

environmental impact and suggest methods to mitigate any environmental

damage. At this stage, only remedial measures may be taken. The NGT has

already directed the appellant to deposit Rupees one crore and has set up an

expert committee to evaluate the impact of the appellant‟s project and suggest

remedial measures. In view of these circumstances, we uphold the directions of

the NGT and direct that the committee continue its evaluation of the appellant‟s

project so as to bring its environmental impact as close as possible to that

contemplated in the EC dated 2 May 2013 and also suggest the compensatory

exaction to be imposed on the appellant.

19. The appeal is dismissed. There shall be no order as to costs.

20. Pending application(s), if any, shall stands disposed of.

.……......................................................J [Dr Dhananjaya Y Chandrachud]

.……......................................................J [Ajay Rastogi]

New Delhi;

December 3, 2019.

18