Green regulators can seek bank guarantees from polluters: Supreme Court

The Supreme Court ruled that Pollution Control Boards can impose environmental compensation and seek bank guarantees as preventive measures for potential environmental damage

The Supreme Court on Monday ruled that environmental regulators, such as the Pollution Control Boards, can impose environmental compensation and seek bank guarantees from polluting entities as part of their preventive measures against potential environmental damage.

 

“We hold that the environmental regulators, the Pollution Control Boards, can impose and collect as restitutionary and compensatory damages fixed sums of money 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,” the Supreme Court said.

 

A Bench of Justices PS Narasimha and Manoj Misra held that such actions by State Boards are lawful and fall within their powers. However, the Bench stressed that this authority must be exercised fairly and transparently.

 

 

“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,” the judgment said.

 

The court emphasized that such action must be distinguished from a penalty.

 

“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.”

 

The Bench also referred to the polluter pays principle in Indian environmental jurisprudence, stating that actual environmental degradation is not a prerequisite for demanding compensation. Instead, the potential for environmental harm is sufficient.

 

“The actual degradation of the environment is not a necessary condition for the application of the polluter pays principle, as long as the offending activities have the potential of degrading the environment," the judgment said.

 

The Court also echoed the view taken by the National Green Tribunal in Swastik Ispat Pvt Ltd, where the tribunal had upheld the use of bank guarantees as a lawful method of securing environmental compliance.

 

In the present case, the Delhi Pollution Control Committee had appealed against the judgment of the Division Bench of the High Court, which had held that it was not empowered to levy compensatory damages 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, 1981. The High Court ruled that such action amounted to a penalty under Chapters VII and VI of the respective Acts, and as such, the procedure for imposing and collecting compensatory damages outlined thereunder should be the only method available.