Alembic Pharmaceuticals Ltd. v. Rohit Prajapati

Three Ankleshwar (Gujarat) drug and chemical makers ran for years without an environmental clearance (EC) (a government approval, needed before a project starts, of its effect on the environment). A 2002 circular of the Environment Ministry let them get an ex post facto clearance (a clearance given after the activity has begun). The Supreme Court held the circular unlawful. It did not order closure. It ordered each industry to pay ₹10 crores for restoring the environment.

Quick Revision

Read the full judgment: Supreme Court of India (sci.gov.in)

Parties

Alembic Pharmaceuticals Limited — appellant in the lead appeal, Civil Appeal No. 1526 of 2016. It runs two units at Ankleshwar, called API-I (formerly Darshak Private Limited) and API-II (formerly Nirayu Private Limited) (para 5).

United Phosphorus Limited — appellant in Civil Appeal No. 3175 of 2016; the sixth respondent before the National Green Tribunal (NGT) (paras 5, 14).

Unique Chemicals (Limited) — appellant in Civil Appeal Nos. 6604-6605 of 2016; the seventh respondent before the NGT. Its review petition was dismissed by the NGT (paras 5, 11, 15).

Union of India (Ministry of Environment and Forests, MoEF) — appellant in the connected appeal. It issued the circular of 14 May 2002 (paras 1, 2).

Rohit Prajapati and another — the first and second respondents. They challenged the circular before the High Court of Gujarat, and the case moved to the NGT (para 11).

Darshak Private Limited and Nirayu Private Limited — the eighth and ninth respondents before the NGT. Darshak merged with Alembic in 2002. Alembic bought Nirayu by a slump sale on 1 January 2008 (para 5).

Procedural History

1. High Court of Gujarat. The first and second respondents filed a petition under Article 226 of the Constitution. They challenged the circular of 14 May 2002 and asked for revocation of the clearances granted to the industrial units (para 11).
2. 21 April 2015. The High Court of Gujarat transferred the case to the Western Zonal Bench of the NGT (para 11).
3. 8 January 2016: NGT judgment. The NGT held that the circular is contrary to law. It held that the concept of an ex post facto EC is not sustainable under any provision of law. It held the circular was an internal communication that did not override the EIA notification of 27 January 1994. The notification was issued under Section 3 of the Environment (Protection) Act, 1986 (paras 1, 3, 4).
4. NGT directions. The NGT directed the following (para 4):
   • The Union, MoEF, State of Gujarat, Gujarat Pollution Control Board (GPCB) and District Collectors must not grant consent for an industrial activity under the 1994 notification. Consent is barred unless screening, scoping, public hearing and decision are completed.
   • The ECs of the sixth to ninth respondents are revoked.
   • All industrial activities running without a valid EC and consent to operate must close within one month.
   • Each unit must deposit ₹10 lakhs as compensation for environmental degradation.
   • The amount is to be used to restore the environment in and around the Ankleshwar industrial area.
5. 17 May 2016. The NGT dismissed a review application filed by one of the affected units, Unique Chemicals Limited (paras 1, 11).
6. Supreme Court. The industrial units and MoEF appealed (paras 1, 11). The judgment lists Civil Appeal No. 1526 of 2016, No. 3175 of 2016, Nos. 6604-6605 of 2016 and No. 1555 of 2017. A footnote lists the Union of India appeal as Civil Appeal no 42756 of 2016.
7. 1 April 2020. The Supreme Court allowed the appeals, subject to the deposit and on the terms in the Judgement section (para 39).

Facts

1. The EIA notification of 27 January 1994 required a prior environmental clearance (EC) for setting up and expanding industrial projects in thirty categories (para 2).
2. The MoEF issued the notification under Section 3(1) and clause (v) of Section 3(2) of the Environment (Protection) Act, 1986. It read them with Rule 5(3)(d) of the Environment (Protection) Rules, 1986 (para 6).
3. The notification said that two kinds of project could not be undertaken without an EC from the Central Government. These were a new project listed in Schedule I, and expansion or modernisation (if the pollution load exceeds the existing one) (para 6).
4. A person planning a new project or expansion had to apply to the Secretary, MoEF. Entry 8 of Schedule I covers industries making bulk drugs and pharmaceuticals (para 7).
5. The application needed a project report with an EIA report and an environmental management plan. The notification set out a procedure with evaluation by a stipulated agency (para 7).
6. Clause 3(a) of the notification said that no construction work relating to setting up the project could start until the environmental and site clearances were obtained (para 7).
7. On 10 April 1997 the notification was amended to make a public hearing mandatory for thirty categories of activities (para 8).
8. On 5 November 1998 the MoEF issued a circular. It recorded that units had been set up without prior ECs, and that GPCB had let units run without valid ECs despite MoEF's advice (para 8).
9. That circular said many units had not applied genuinely out of ignorance. It said their cases would be considered on merits if received by 31 March 1999. Units that had already started production could be considered, and additional mitigation measures could be suggested (para 8).
10. On 27 December 2000 the MoEF directed all State Pollution Control Boards to issue fresh notices to defaulting units. It extended the deadline from 31 March 1999 to 30 June 2001 (para 9).
11. Some units still had not applied or had not completed the public hearing. On 14 May 2002 the MoEF extended the deadline to 31 March 2003 (para 19 says 30 March 2003). It called this the last and final opportunity to obtain an ex post facto EC (paras 2, 9).
12. Under the 2002 circular, defaulting units seeking expansion had to earmark a fund for eco-development and community development. Units that missed the extended deadline were to be proceeded against (para 10).
13. The fund was on a graded scale (para 10):
    • Projects with investment up to ₹100 crores: 1% of the project cost, with a minimum of ₹50,000.
    • Projects with investment beyond ₹100 crores and up to ₹1,000 crores: 0.5% of the project cost, with a minimum of ₹1 crore and a maximum of ₹2.5 crores.
    • Projects with investment above ₹1,000 crores: 0.25% of the project cost, with a maximum of ₹5 crores.
14. The private respondents before the NGT were United Phosphorous Ltd (sixth), Unique Chemicals (seventh), Darshak Private Limited (eighth) and Nirayu Private Limited (ninth). They make pharmaceuticals and bulk drugs in the Ankleshwar industrial area, Gujarat (para 5).
15. Darshak merged with Alembic in 2002 under a scheme of amalgamation sanctioned by the High Court of Gujarat. Nirayu was acquired by Alembic by a slump sale on 1 January 2008. Their units are now API-I and API-II (para 5).
16. GPCB gave the industries various permissions in 1984-1999 (details are in the table summary under Court's Reasoning, para 24). The industries had set up and started production by then (paras 24, 25).
17. GPCB issued a notice on 9 December 2000 to Darshak (API-I) and Nirayu (API-II) to apply for and obtain an EC under the 1994 notification. It issued a notice to United Phosphorus on 30 April 2001 (para 25).
18. Alembic's API-I applied for an EC on 21 July 2001 and got it on 14 May 2003. API-II applied on 20 July 2001 and got its EC on 14 May 2003 (paras 24, 25).
19. United Phosphorus sought its initial EC on 21 August 2002 and got it on 17 July 2003. It attended a public hearing on 16 January 2002 (paras 14, 24, 25).
20. Unique Chemicals applied on 30 June 2001 and got its initial EC on 23 December 2002 (paras 24, 25).
21. Later ECs for expansion were granted to all three. The ECs granted to the three industries are listed in the table summary under Court's Reasoning (paras 13-15, 24, 25).
22. Alembic says it has invested over ₹293 crores and employs over 1000 workers. United Phosphorus and Unique Chemicals each say they employ about 400 workers (paras 13, 14, 15).
23. The Central Pollution Control Board's Comprehensive Environmental Pollution Index (CEPI) reports showed critical pollution levels at Ankleshwar for 2009-2010, 2011, 2013 and 2018. Footnotes give the scores 88.50, 85.75, 80.93 and 80.21 (para 35).

Issues Raised

1. Does the EIA notification of 1994 require a prior EC? If so, could the circular dated 14 May 2002 validly provide for an ex post facto EC? (para 12)
2. Did the NGT have jurisdiction to strike down the circular? In Sterlite, the Court held the NGT cannot strike down rules or regulations made under the Environment (Protection) Act, 1986. (paras 18-21)
3. Whether the three industries were covered by the exemption in Clause 8 of the explanatory note to the 1994 notification? (paras 27-34)
4. What consequence should follow for the industries that operated without a valid EC, and whether closure and revocation of ECs was the right consequence? (paras 35-39)

Arguments Contended

The Court records the arguments of each side (paras 13-16, 19, 22). The arguments are listed by party.

For the appellants

Alembic Pharmaceuticals Limited (Mr Kapil Sibal, Senior Counsel) (para 13):

1. The issue is academic. Both units have got ECs for later expansion to a much higher capacity, after a public hearing and consideration of all material factors.
   • API-I (Darshak): EC on 14 May 2003 for 15 MT per month. EC on 16 April 2008 for expansion from 15 to 25 MT per month. EC on 31 January 2017 for expansion from 25 to 75 MT per month.
   • API-II (Nirayu): EC on 14 May 2003 for 47 MT per month; on 20 December 2016 for expansion to 300 MT per month.
2. The 1994 notification omits the word prior. The notification of 14 September 2006 requires a prior EC. So a prior EC was mandatory under the 2006 notification but not the 1994 one.
3. Once an EC has been granted for a much larger capacity after a public hearing, the validity of the first EC for a lesser capacity is of no significance. The satisfaction for the lesser capacity is subsumed.
4. The 1994 notification did not apply to API-I and API-II. Clause 8 of the explanatory note says an EC is not required in one case. That case is where a no objection certificate (NOC, as used in this case, a GPCB permission to establish a unit) from GPCB was obtained before 27 January 1994. The record relied on:
   • 17 July 1992: GPCB granted an NOC to establish and manufacture at API-I.
   • 29 May 1997 and 27 July 1998: authorisation to operate under the Air Act to API-I.
   • 11 October 1999: authorisation to operate under the Water Act to API-I.
   • 24 May 1985: consent order (an order letting an industry operate within emission norms) under the Water Act to API-II.
   • 9 October 1991: site clearance certificate to API-II.
   • 12 May 1993: NOC to establish and manufacture drugs to API-II.
   • 23 September 1993 and 13 November 1999: consent under the Water Act to API-II.
   • 14 December 2001: authorisation to operate under the Hazardous Waste Rules to API-II.
   • 1 September 1999, 14 December 2001 and 7 March 2008: consolidated consent and authorisation to API-II.
5. A public hearing was not mandatory under the 1994 notification. Clause 4 of the explanatory note gives a discretion to call for one for projects with large-scale displacement or severe environmental effects.
6. If the NGT's order stands, Alembic will suffer irreparable loss. It has invested over ₹293 crores and employs over 1000 workers.
7. The first respondent picked only Alembic and two others out of over ninety entities granted similar clearances. This cherry-picking shows, in Alembic's words, the mala fide nature of the proceedings (as used in para 13).

United Phosphorus Limited (Mr C U Singh, Senior Counsel) (para 14):

1. The circular of 5 November 1998, which extended the deadline to 30 June 2001, was not challenged. That circular noted that the State Pollution Control Board had allowed units to run without valid ECs despite MoEF's advice.
2. United Phosphorus had all the requisite ECs from GPCB for the existing and expanded capacity:
   • 17 July 2003: EC for Phorate and Terbuphose (300 MT per month combined) and Acephate (80 MT per month).
   • 15 April 2008: EC for expansion. Phorate and Terbuphose went from 300 to 500 MT per month, and Acephate to 1000 MT per month.
   • 10 January 2020: EC for an enhanced capacity of 9546 MT per month.
3. The first respondent attended the public hearing on 16 January 2002, before the EC of 17 July 2003, and raised no objection.
4. If the NGT's order stands, the appellant will suffer irreparable loss. It employs about 400 permanent and contract workers.
5. The challenge was to the 1994 notification, which did not apply to the unit. At the relevant time it was exempt because it had all the permissions:
   • 3 October 1992: NOC to set up the unit.
   • 17 November 1995 and 2 April 1996: NOCs for expansion and additional products.
   • 27 August 2009: consolidated consent and authorisation.
   • 25 July 2012: NOC for expansion.
   • 11 May 2015 and 27 May 2017: consolidated consent and authorisation for expanded operations.

Unique Chemicals Limited (Dr Abhishek Singhvi, Senior Counsel) (para 15):

1. The NGT had no jurisdiction to hear the petition, in view of Techi Tagi Tara v Rajendra Singh Bhandari (2018) 11 SCC 734.
2. The EC of 2007 superseded the EC of 2002, so the validity of the earlier EC does not arise. The ECs were:
   • 23 December 2002: capacity of 78.02 MT per month for bulk drugs and intermediates.
   • 8 August 2007: increase from 78.02 to 116.12 MT per month.
   • 30 June 2018: increase to 290 MT per month. This was amended on 10 April 2019 to allow more products.
3. The ex post facto clearance cannot be set aside by the NGT, following Goa Foundation v Union of India (2005) 11 SCC 559 (as printed in the judgment). There, 95 industrial projects were given ex post facto clearances under the circular of 14 May 2002. So closure cannot arise.
4. An ex post facto public hearing was introduced by the 1997 amendment. Its legality was upheld in Lafarge Umiam Mining Pvt Ltd v Union of India (2011) 7 SCC 338.
5. Where the law was violated, the Court has not always ordered closure. In Electrotherm Ltd v Patel (2016) 9 SCC 300, it did not close the plant because the expansion had already taken place.
6. If the NGT's order stands, the appellant will suffer irreparable loss. It employs about 400 workers.
7. The 1994 notification did not apply because the unit was exempt. It had all the requisite permissions:
   • 30 September 1995: air consent order.
   • 9 January 1996: hazardous waste authorisation.
   • 16 April 1996: water consent order.
   • 15 April 2009: consolidated consent and authorisation, amended on 11 June 2010 and 26 June 2012.
   • 30 May 2011: consent for a 400 KW gas-based power plant.
   • 2 November 2013: fresh consolidated consent and authorisation.
   • 25 January 2019 and 25 October 2019: fresh and revised consents.
   The judgment gives the date of the consolidated consent as 13 April 2009 in one place and 15 April 2009 in another.

Union of India (Mr ANS Nadkarni, Additional Solicitor General):

1. Relying on Sterlite, the ASG argued that the circular of 14 May 2002 could be traced to Section 3 of the Environment (Protection) Act, 1986. So the NGT could not strike it down (para 19).
2. The ASG did not support Mr Sibal's argument on the missing word prior. He submitted that the 1994 notification required a prior EC (para 22).

For the respondents

First and second respondents (Mr Siddharth Seem, counsel) (para 16):

1. The circular of 14 May 2002 is illegal because environmental jurisprudence has no concept of ex post facto clearance. Any ex post facto approval is void. The industry cannot get the benefit of the circular. He relied on Common Cause v Union of India (2017) 9 SCC 499.
2. The circular does not state its source of authority. It cannot be traced to Section 3 of the Environment (Protection) Act, 1986, because it does not protect or improve the environment. It lets defaulters get ex post facto clearances instead of encouraging compliance.
3. The CEPI report of the Central Pollution Control Board shows that air, water and soil parameters around Ankleshwar are among the most critical in India.
4. Even if closure is not ordered, the industries should pay compensation for restoring the environment. They have operated shamelessly for years without ECs.

Court's Reasoning

The judgment is a single opinion by Dr Dhananjaya Y Chandrachud, J., signed by both judges of the Bench. Paragraph numbers follow that opinion. Para 17 only says the rival submissions fall for consideration.

Dr Dhananjaya Y Chandrachud, J. (for the Bench)

A. Jurisdiction of the NGT over the circular

1. Noted: the Court first takes up the challenge to the NGT's jurisdiction to strike down rules or regulations made under the Environment (Protection) Act, 1986 (para 18).
2. Noted: in Tamil Nadu Pollution Control Board v Sterlite Industries (I) Ltd, Justice Nariman held that the NGT cannot strike down such rules or regulations. This follows from Section 16 of the National Green Tribunal Act, 2010. The Court relied on Bharat Sanchar Nigam Limited v Telecom Regulatory Authority of India, which read the appellate power in Section 14 of the TRAI Act, 1997 (para 18).
3. Noted: Justice Nariman concluded that "the NGT has no general power of judicial review akin to that vested under Article 226" of the Constitution (para 18).
4. Noted: the Additional Solicitor General used Sterlite to argue that the circular came under Section 3 of the 1986 Act. Section 3(1) lets the Central Government take all measures it considers necessary or expedient to protect and improve the environment and to prevent, control and reduce pollution (para 19).
5. Noted: this point is crucial. If the circular was a Section 3 measure, the NGT would have exceeded its jurisdiction in striking it down (para 20).
6. Held: there is an inherent difficulty in accepting the submission. The Union did not plead that the circular was traceable to Section 3. It called the circular a "purely administrative decision" (para 20).
7. Noted: ground (iii) of the Union's memo of appeal said the opportunity for an ex post facto EC was given because of loss of livelihood of employees. It said the circular was issued before taking stringent action (para 20).
8. Noted: the omission in the appeal to defend the circular under Section 3 is significant. A measure comes under Section 3 only if it is necessary or expedient to protect and improve the environment and to prevent, control and reduce pollution (para 21).
9. Held: the circular does the opposite. It extended time for units to comply with the EC requirement and, in the Court's words, inexplicably introduced the notion of an ex post facto clearance (para 21).
10. Noted: the 1994 notification is issued under the 1986 Act and the 1986 Rules. It restricts and prohibits new projects and the expansion or modernisation of existing ones. Its measures rest on the precautionary principle (acting to prevent harm even before it is certain) (para 21).
11. Held: the circular let defaulting units that had started work without an EC cure the default by an ex post facto clearance. Being an administrative decision, it is beyond Section 3 and is not a measure to protect and improve the environment (para 21).
12. Held: the concept of ex post facto clearance is fundamentally at odds with the 1994 notification. Why: the notification says expansion or a new project "shall not be undertaken in any part of India unless it has been accorded environmental clearance" (para 21).
13. Held: the words saying that a project shall not be undertaken unless an EC has been accorded can only mean one thing. An EC must be obtained before the project starts or expands. A mandatory provision requires complete compliance (para 21).
14. Held: a prior EC forbids post-activity approval. The circular is contrary to the statutory notification. It does not say how harm to the environment would be dealt with if an ex post facto EC is granted (para 21).
15. Held: the circular substantially alters the 1994 notification. It dilutes the rule that a project must not start or expand unless an EC has been obtained (para 21).
16. Held: the circular is not a measure protected by Section 3. So the NGT was not barred from examining its legitimacy or vires (validity). The circular is contrary to the statutory 1994 notification and is unsustainable in law (para 21).

B. Was a prior EC required under the 1994 notification?

1. Noted: Mr Sibal argued that the 1994 notification leaves out the word prior while the 14 September 2006 notification uses it. The Additional Solicitor General did not support this and submitted that a prior EC was required (para 22).
2. Held: the Court cannot accept Mr Sibal's submission. The 1994 notification leaves no doubt that a prior EC was needed before a new project started or an existing one was expanded or modernised (para 22).
3. Held: the absence of the word prior makes no difference. Why: the words saying a project shall not be undertaken unless an EC is accorded require a prior EC (para 22).
4. Noted: in Common Cause v Union of India, Justice Madan B Lokur rejected the mining leaseholders' submission. They had argued that the chance of an ex post facto EC signalled that an EC was not mandatory or that default was condoned retrospectively (para 22).
5. Noted: Common Cause held that grant of an EC is not a mechanical exercise. It needs due diligence and reasonable care, since damage to the environment has a long-term impact (para 22).
6. Noted: Common Cause said a prior EC is needed if expansion or modernisation exceeds the existing pollution load. It relied on M.C. Mehta v Union of India, (2004) 12 SCC 118, where a prior EC was held necessary even for renewing a mining lease (para 22).
7. Noted: Common Cause held that "The concept of an ex post facto or a retrospective EC is completely alien to environmental jurisprudence". It made clear that an EC comes into force not earlier than the date of its grant (para 22).
8. Held: the concept of an ex post facto EC goes against the basic principles of environmental jurisprudence and is completely opposed to the 1994 notification. As Common Cause holds, it is harmful to the environment and could lead to irreparable degradation (para 23).
9. Why: before an EC, the notification requires careful application of mind and a study of the likely effects on the environment. An EC can be issued only after the stages of decision-making are done (para 23).
10. Noted: a public hearing, screening, scoping and appraisal are parts of that process. They make sure the likely effects of the industrial activity or expansion are weighed (para 23).
11. Held: allowing ex post facto clearance would condone running industrial activity without an EC. Without an EC there would be no conditions to safeguard the environment. If the EC were finally refused, irreparable harm would already have been done (para 23).
12. Held: in either case, environment law cannot accept an ex post facto clearance. It is contrary to the precautionary principle and to the need for sustainable development (development that meets present needs without harming the future) (para 23).

C. The record of consents and clearances

1. Noted: the Court compiled the material produced by the three industries into tables. Table A lists permissions, consents and authorisations. Table B lists ECs (para 24).
2. Noted: the position is based on material disclosed on the record of the proceedings (para 24).
3. Noted, Table A, Alembic, Darshak (API-I): 17 July 1992, GPCB issued an NOC to establish a unit for Ciprofloxacin (1.25 MT pm) and Norfloxacin (2.5 MT pm). On 11 June 1997 it issued an NOC for additional items. On 29 May 1997 it issued an air consent order. On 11 July 1997, 12 July 1997 and 27 July 1998 it issued NOCs for additional items. On 31 March 1999 it issued an air consent order. On 11 October 1999 it issued a water consent order. Between 27 September 2002 and 23 December 2002 it issued various consents under the Air Act, Water Act and Hazardous Waste Rules (para 24).
4. Noted, Table A, Alembic, Nirayu (API-II): a factory licence was issued on 12 July 1984 and a water consent order on 24 May 1985. A site clearance certificate followed on 9 October 1991 for CIMC chloride (2000 kgs pm) and Cloxacillin sodium (500 kgs pm). On 12 May 1993, an NOC was issued. It covered these items: Acetone thiosemicarbazone (2 MT pm), 2 Mercapta (5 MT pm), Methoxy orthoxymethyl chloride (0.3 MT pm) and Solvent ether (7 MT pm). Later entries include authorisations, consents and NOCs (the year is cut off in several rows of the printed table). They also include various consents between 27 September 2002 and 6 January 2015 (para 24).
5. Noted, Table B, Alembic: API-I applied on 21 July 2001 and had a public hearing on 30 January 2002. It got an EC for 15 MT pm on 14 May 2003 under the 1994 notification. It got two ECs for expansion, both under the 2006 notification. The first, from 15 to 25 MT pm, was granted on 16 April 2008 (application 8 December 2006; hearing 9 October 2007). The second, from 25 to 75 MT pm, was granted on 31 January 2017 (application 16 September 2015; hearing 12 June 2015) (para 24).
6. Noted, Table B, Alembic: API-II applied on 20 July 2001, had a hearing on 30 January 2002 and got an EC for 47 MT pm on 14 May 2003. It got an EC for expansion from 47 to 300 MT pm on 20 December 2016 (application 28 March 2016; hearing 12 June 2015) under the 2006 notification (para 24).
7. Noted, Tables A and B, United Phosphorus (unit no 2, plots 3405 and 3406): the Gujarat Industrial Development Corporation granted land on 31 January 1992. GPCB issued NOCs on 9 March 1992 and 3 October 1992 (Carbendazim, Quinalphos, Paraquat). The unit began manufacturing in 1993. NOCs for expansion followed on 17 November 1995 (Phorate and Terbuphose, 300 MT pm combined) and 2 April 1996 (Acephate, 80 MT per month). GPCB granted consolidated consents on 27 August 2009 and 11 May 2015, and a further one whose year is cut off in the table. It gave an NOC for expansion on 25 July 2012. ECs: applied 21 August 2002, public hearing 16 January 2002, granted 17 July 2003. Applied 20 October 2007, granted 15 April 2008. Enhanced capacity of 9546 MT per month, granted 10 January 2020 under the 2006 notification (para 24).
8. Noted, Tables A and B, Unique Chemicals (unit at plot no 5): GPCB issued an NOC on 14 August 1995 and an air consent order on 30 September 1995. It issued an NOC for four items on 25 December (the year is cut off in the table). The items were Dichlotofenance sodium 6 MT pm, Nifedipine 2 MT pm, Indolinone 6.9 MT pm and Pefloxacin 3 MT pm. It issued a hazardous waste authorisation on 9 January 1996 and a water consent order on 16 April 1996. The unit began manufacturing on 24 April 1996. Consents followed on 15 April 2009, 11 June 2010, 26 June 2012 and 2 November 2013. GPCB gave an NOC for a 400 KW power plant on 30 May 2011. The unit was certified as a zero liquid discharge unit on 1 July 2016. New consents came on 25 January 2019 and 25 October 2019 (para 24).
9. Noted, Table B, Unique Chemicals: applied 30 June 2001, hearing 25 January (year cut off in the table), EC for 78.02 MT pm on 23 December 2002 (1994 notification). EC on 8 August 2007 for an increase to 116.12 MT pm, co-products from 103 to 297 MT pm and a 1.3 MW captive power plant. This was under the 2006 notification, and the project was exempt as it was in a notified industrial area. EC on 30 June 2018 for an increase to 290 MT pm. Amendment on 10 April 2019 for more products (para 24).
10. Held: for all three industries, ECs were applied for nearly a decade after the 1994 notification. Meanwhile the industries had been set up and had started production (para 25).
11. Noted: the application and grant dates for each industry are recorded in para 25. For Unique Chemicals, that paragraph gives the grant of the second EC as 8 August 2017 while Table B gives 8 August 2007 (para 25).
12. Held: the documents show that no ECs, as the 1994 notification required, were sought before the industries began or expanded operations. All three industries kept operating in defiance of the notification (para 25).
13. Held: the industries relied on newer pollution-control technology, recent GPCB consents and zero-discharge certification. These do not cure the failure to get ECs before the projects began (para 26).
14. Held: these measures only ensure compliance with today's standards. They cannot undo historical wrongs or compensate for damage from activity carried on without ECs (para 26).

D. The exemption in Clause 8 of the explanatory note

1. Noted: the industries argued that the 1994 notification did not apply to them because of Clause 8 of the explanatory note (para 27).
2. Noted: Clause 8 exempts Schedule I projects in one case. The required land must have been acquired, and all relevant State Government clearances must have been obtained before 27 January 1994. These include the NOC of the State Pollution Control Board. Units that had not started production had to inform the IAA (para 27).
3. Held: it was not enough to obtain only an NOC from the State Pollution Control Board. All relevant State clearances were needed (para 28).
4. Noted: the exemption protected activities that had all state-level clearances after land acquisition. Many would also have begun production before 27 January 1994 (para 28).
5. Held: the burden is on the industry to show that it met the conditions of Clause 8. Why: the 1994 notification is a significant instrument for applying the precautionary principle (para 28).
6. Held: the burden lies on the project proponent who seeks to alter or affect the environment. It must show that the terms of an exemption were fulfilled (para 28).
7. Held: "An exemption must be construed in its strict sense according to its plain terms". None of the three industries gave a full list of the relevant State clearances required under the law then in force (para 28).
8. Noted: the Court assesses each industry separately (para 29).
9. Noted, Darshak (API-I): the NOC of 17 July 1992 covered two products. The NOC for additional items came on 11 June 1997, after the 1994 notification. The 1992 NOC made the location acceptable if pollution-prevention measures were applied. It also said the unit had to obtain consents under the Water Act, Air Act and Hazardous Waste Rules before starting production (para 30).
10. Held: the NOC's language makes clear that obtaining these consents and authorisations was a mandatory (compulsory) pre-condition, not merely directory (para 30).
11. Held: Darshak's air authorisation came only on 29 May 1997 and 31 March 1999. Its water authorisation came on 11 October 1999. It did not have the consents and authorisations under the Air Act, Water Act and Hazardous Waste Rules before the 1994 notification. So API-I is not covered by Clause 8 (para 30).
12. Noted, Nirayu (API-II): a factory licence issued on 12 July 1984 and a water consent order on 24 May 1985, valid only for anaesthetic Ether. A site clearance certificate was issued on 9 October 1991. An NOC issued on 12 May 1993 and one for expansion on 4 December 1995. The 12 May 1993 NOC is worded exactly like the 1992 NOC for API-I (para 30).
13. Noted: Para 13 gives different dates for some Nirayu consents (water consent 13 November 1999, hazardous waste authorisation 14 December 2001). Para 30 says Nirayu's hazardous waste authorisation was issued on 1 September 1993 and its water consent to operate on 12 November 1999. A consolidated consent and authorisation to operate came on 14 December 2010, as printed in the judgment (para 30).
14. Held: all consents and permissions were not obtained before the 1994 notification. So API-II is not covered by Clause 8 (para 30).
15. Noted, United Phosphorus: the Gujarat Industrial Development Corporation granted land on 31 January 1992. GPCB issued NOCs on 9 March 1992 and 3 October 1992. The unit began manufacturing in 1993. The NOC, dated 3 October 1993 as printed in para 31, also said the unit had to obtain consents before starting production (para 31).
16. Held: United Phosphorus did not disclose when it received its authorisations. It filed a consolidated consent and authorisation issued on 27 August 2009 under the Air Act, Water Act and Hazardous Waste Rules, 2008. Its disclosures are patently incomplete (para 31).
17. Held: nothing shows that all relevant State clearances, including the GPCB NOC, were obtained before the 1994 notification. So United Phosphorus does not get the benefit of Clause 8 (para 31).
18. Held: Unique Chemicals got its NOC on 14 August 1995. All its permissions came after the 1994 notification. It is not entitled to the exemption (para 32).
19. Held: the industries failed badly in their responsibility to obtain consents and authorisations from GPCB on time (para 33).
20. Noted: obtaining a State Pollution Control Board clearance differs from obtaining an EC under the 1994 procedure (para 33).
21. Noted: a consent order from the Board lets an industry operate within prescribed emission norms. It does not account for the social cost and effect of the activity on the environment and its surroundings (para 33).
22. Noted: a holistic analysis of environmental impact happens only when all the steps in the 1994 notification are followed. Public hearing, screening, scoping and appraisal are there to promote deliberate decisions and protect environmental concerns (para 33).
23. Noted: one must take an ecologically rational view of development. Environment compliance is not an obstacle to development. It is a measure for sustainable development and inter-generational equity (a term the Court uses here without defining it) (para 33).
24. Held: none of the three industries was entitled to the exemption in Clause 8 (para 34).

E. Consequence of the default

1. Noted: the Court must now decide the consequence of the failure to obtain ECs. The ECs came late on these dates: 14 May 2003 (Alembic), 17 July 2003 (United Phosphorus) and 23 December 2002 (Unique Chemicals) (para 35).
2. Held: running the factories without a valid EC would have harmed the environment, ecology and biodiversity in the area (para 35).
3. Noted: the CEPI report of the Central Pollution Control Board for 2009-2010 describes 88 locations. Ankleshwar showed critical pollution. The Interim Assessment of 2011 showed similar figures. CEPI scores for 2013 and 2018 were also significantly high (para 35).
4. Held: this indicates industrial units operated in an unregulated manner and in defiance of the law. Some of the damage is irreversible, but some can be corrected by protective and conservation measures (para 35).
5. Noted: the exact damage caused by each of the three industries cannot be worked out. Several circumstances weigh with the Court in deciding the measure of restitution (para 36).
6. Noted, first: all three industries did obtain ECs, though several years after the 1994 notification and the start of production (para 36).
7. Noted, second: after those ECs, all three obtained ECs for expanding capacity from time to time (para 36).
8. Noted, third: the MoEF's circular of 5 November 1998 allowed applications by 31 March 1999, extended to 30 June 2001. On 14 May 2002 the deadline was extended to 31 March 2003, on a deposit linked to the investment. These circulars came to the Court's notice in Goa Foundation (I) v Union of India (para 36).
9. Noted, fourth: in Lafarge Umiam Mining Private Limited v Union of India, a three-judge Bench upheld ex post facto clearances for limestone mining in Meghalaya. It did so on the facts of that case (para 36).
10. Noted: Lafarge considered whether the clearances were vitiated by suppression of the nature of the land and by non-application of mind by the MoEF. The Court upheld them because native tribals took part in decision-making and the MoEF took a due diligence approach (para 36).
11. Noted: Chief Justice Kapadia said in Lafarge that the time had come to apply the constitutional doctrine of proportionality to environment matters. This falls within judicial review (a court's power to test whether a decision is legal). He said balancing may involve policy choices, so decisions are tested on judicial-review principles, not on merits. The Court asks four questions. Were all relevant factors considered? Did extraneous factors influence the decision? Is it in line with the legislative policy? Is it consistent with sustainable development? It reviews the decision-making process. Only if the process is fair and fully informed does the margin of appreciation for the decision-maker apply (para 36).
12. Noted: in Electrotherm (India) Limited v Patel Vipulkumar Ramjibhai, a three-judge Bench, per Justice Uday Umesh Lalit, dealt with an expansion EC granted without a public hearing (para 37).
13. Noted: Electrotherm held that the decision to exempt public consultation was not based on correct principles and was invalid and improper (para 37).
14. Noted: in Electrotherm, the plant had already expanded and most of the CPCB's recommendations were complied with. The Court did not close the plant. It set aside only the exemption from public hearing and sent the matter back (para 37).
15. Noted: the Court in Electrotherm changed the public hearing from pre-decisional to post-decisional. If the hearing went against expansion, the authorities were to scale the activity down to the level in the earlier EC. If it favoured expansion, the EC would stay fully operative. The hearing was to be held within three months (para 37).
16. Noted: applying these decisions, the Court takes note that each industry later got ECs, including amended ECs for expansion. Those ECs have operated since 14 May 2003 (Alembic), 17 July 2003 (United Phosphorus) and 23 December 2002 (Unique Chemicals) (para 38).
17. Noted: all three units have made infrastructure investments and employ significant numbers of workers (para 38).
18. Held: the Court must take a balanced approach. It must hold the industries to account for operating without ECs, without ordering closure (para 39).
19. Held: the NGT's directions to revoke the ECs and close the units do not accord with the principle of proportionality (para 39).
20. Held: the Court cannot ignore the environmental degradation caused by the units. They evaded the legally binding regime of ECs and cannot escape liability. Penalties must be imposed for disobeying a binding legal regime (para 39).
21. Held: instead of the NGT's directions, each of the three industries must deposit compensation of ₹10 crores with GPCB. It must be used for restoration and remedial measures to improve the environment in the industrial area (para 39).
22. Held: the compensation is ordered as a facet of preserving the environment under the precautionary principle, even though revocation and closure were not warranted. The directions are issued under Article 142 of the Constitution (para 39).
23. Held: the deposit is in addition to the amount directed by the NGT. Subject to the deposit, the appeals are allowed and the NGT judgment and the review order are set aside as far as stated in the Judgement section (para 39).

Authorities

• Tamil Nadu Pollution Control Board v Sterlite Industries (I) Ltd (Civil Appeal nos 4763-4764 of 2013): followed. Under Section 16 of the NGT Act the NGT cannot strike down rules or regulations under the 1986 Act. Nariman, J. said the NGT has no general power of judicial review like the High Courts under Article 226 (para 18).
• Bharat Sanchar Nigam Limited v Telecom Regulatory Authority of India ((2014) 3 SCC 222): relied on in Sterlite. It read the appellate power in Section 14 of the TRAI Act, 1997 (para 18).
• Techi Tagi Tara v Rajendra Singh Bhandari ((2018) 11 SCC 734): cited by Unique Chemicals on NGT jurisdiction. The Court does not discuss it separately (para 15).
• Common Cause v Union of India ((2017) 9 SCC 499): followed. Lokur, J. held an ex post facto or retrospective EC is alien to environmental jurisprudence. Relied on by the first and second respondents (paras 16, 22, 23).
• M.C. Mehta v Union of India ((2004) 12 SCC 118): quoted within Common Cause. A prior EC is necessary even for renewing a mining lease (para 22).
• Goa Foundation v Union of India ((2005) 11 SCC 559, as printed): cited by Unique Chemicals for the point that 95 projects got ex post facto clearances under the circular. The Court notes that the circulars came to its notice there (paras 15, 36).
• Lafarge Umiam Mining Pvt Ltd v Union of India ((2011) 7 SCC 338): cited by Unique Chemicals as upholding ex post facto public hearing. The Court notes it upheld ex post facto clearances for Meghalaya limestone mining on its facts, and applied proportionality to environment decisions (paras 15, 36).
• Electrotherm (India) Limited v Patel Vipulkumar Ramjibhai ((2016) 9 SCC 300): plant not closed after expansion; public hearing made post-decisional (paras 15, 37).

Provisions mentioned

• Section 3, Environment (Protection) Act, 1986: the Central Government may take all measures it considers necessary or expedient. The aim is to protect and improve the environment and to prevent, control and reduce pollution. The circular was held not to be such a measure (paras 19-21).
• Rule 5(3)(d), Environment (Protection) Rules, 1986: the rule under which the 1994 notification was issued, together with Section 3 (para 6).
• EIA notification of 27 January 1994: requires a prior EC for new projects and expansion or modernisation listed in Schedule I (paras 2, 6, 7, 21, 22).
• Schedule I, Entry 8: covers industries making bulk drugs and pharmaceuticals (para 7).
• Clause 3(a) of the notification: no construction work relating to the project may start until environmental and site clearances are obtained (para 7).
• Clause 4 of the explanatory note: gives a discretion to call a public hearing for projects with large-scale displacement or severe environmental effects (para 13).
• Clause 8 of the explanatory note: exempts projects for which land was acquired before 27 January 1994. All State clearances, including the State Pollution Control Board NOC, must also have been obtained before that date (paras 13, 27, 28).
• Amendment of 10 April 1997: made a public hearing mandatory for thirty categories (para 8).
• EIA notification of 14 September 2006: states the requirement of a prior EC (paras 13, 22, 24).
• Article 226: the writ power of the High Court, under which the petition was filed in Gujarat. Mentioned also in Sterlite (paras 11, 18).
• Article 142: the Supreme Court's power to do complete justice; the compensation was directed under it (para 39).
• Section 16, National Green Tribunal Act, 2010: the NGT's appellate jurisdiction discussed in Sterlite (para 18).
• Section 14, Telecom Regulatory Authority of India Act, 1997: the appellate power read in Bharat Sanchar Nigam Limited v Telecom Regulatory Authority of India (para 18).
• Air (Prevention and Control of Pollution) Act, 1981. Water (Prevention and Control of Pollution) Act, 1974. Hazardous Waste (Management and Handling) Rules, 1989: these required consents and authorisations from GPCB (paras 13, 24, 30, 31). Para 31 also mentions the 2008 Rules.

Judgement

1. The direction of the NGT to revoke the ECs and close the industries is not upheld. The NGT's judgment dated 8 January 2016 is set aside in so far as it directed revocation of the ECs and closure of the industries (para 39).
2. The order in review dated 17 May 2016 is also set aside (para 39).
3. Alembic Pharmaceuticals Limited, United Phosphorous Limited and Unique Chemicals Limited must each deposit compensation of ₹10 crores with GPCB. The deadline is four months from receiving the certified copy of the judgment (para 39).
4. GPCB must use the amount for restoration and remedial measures to improve the quality of the environment in the industrial area where the industries operate (para 39).
5. This deposit is in addition to the amount directed by the NGT (para 39).
6. The directions are issued under Article 142 of the Constitution, and the appeals are allowed subject to the deposit (para 39).
7. Pending applications, if any, stand disposed of (para 39).
8. The judgment records no order on costs.

Legal Principle / Ratio

A circular cannot allow an ex post facto EC where the EIA notification of 27 January 1994 requires a prior EC. The notification's wording, that a project shall not be undertaken unless an EC is accorded, makes a prior EC mandatory. The circular of 14 May 2002 is not a Section 3 measure and the NGT can examine it. An exemption such as Clause 8 is read strictly, and the industry must prove it. Unlawful operation is met with proportionate compensation rather than closure. Key holding: "environment law cannot countenance the notion of an ex post facto clearance" (para 23).

Critical Analysis

Analysis based on the judgment text.

The compensation figure has no stated method. The Court says the exact damage by each industry cannot be worked out (para 36). It then fixes ₹10 crores for each of the three industries (para 39). The judgment does not explain why the amount is the same for all three. It also does not link the amount to the units' different capacities shown in the tables (para 24).

The effect on other units is left unstated. Unique Chemicals said 95 projects got ex post facto clearances under the same circular (para 15). The Court notes that the circulars came up in Goa Foundation (para 36). The judgment does not say whether other clearances given under the circular stand or fall after this decision.

The jurisdiction holding rests on how the Union pleaded its case. The Court found no bar on the NGT because the Union had not pleaded Section 3 and the circular was not a Section 3 measure (paras 20, 21). The judgment does not say what would follow if a circular were pleaded as a Section 3 measure. It does not separately deal with the argument based on Techi Tagi Tara (para 15).

Some arguments are recorded but not answered separately. The judgment records two arguments. One was that the issue was academic (para 13). The other was that the challenge was mala fide because only three of over ninety units were picked (para 13). The reasoning does not address either argument by name.

Significance

• The case applies Common Cause to the 1994 notification and to the MoEF's own circular. It confirms that an EC must come before the project, not after (paras 21-23).
• It holds that ex post facto clearance is contrary to the precautionary principle and to sustainable development (para 23).
• It draws a line between State Pollution Control Board consents and an EC. Consents allow operation within emission norms, but only the EC process weighs the wider environmental impact (para 33).
• It applies proportionality to reject closure while still requiring restitution. This shows how the Court balances livelihood and investment against environmental harm (paras 36-39).
• It shows that later ECs, technology upgrades and zero-discharge certificates do not cure a past failure to get an EC (para 26).

Exam-Important Points

• Rule first: under the 1994 notification a prior EC is mandatory, even though the word prior is missing. The wording that a project shall not be undertaken unless an EC is accorded carries that meaning (para 22).
• Trap: the circular of 14 May 2002 was held invalid, but the ECs were not revoked and the units were not closed. The Court substituted compensation of ₹10 crores each, under Article 142 (para 39).
• Jurisdiction: Sterlite says the NGT cannot strike down rules or regulations under the 1986 Act. It could examine this circular because the Union pleaded it as a purely administrative decision and it was not a Section 3 measure (paras 18-21).
• Clause 8 exemption: all relevant State clearances, not just the SPCB's NOC, were needed before 27 January 1994. The industry bears the burden, and an exemption is read strictly (para 28).
• Consent versus clearance: a consent order from the State Pollution Control Board is not an EC (para 33).
• Cases to link: Common Cause (2017) for ex post facto EC; Lafarge (2011) and Electrotherm (2016) for not closing operating plants; Sterlite for NGT jurisdiction (paras 18, 22, 36, 37).
• Numbers: the NGT directed ₹10 lakhs compensation per unit (para 4). The Supreme Court added ₹10 crores per industry, payable to GPCB within four months (para 39).

Prepared from the full text of the judgment. Paragraph numbers follow the official Supreme Court judgment text; law reports may number the same paragraph differently.