Project Turnover Or Cost Can Be Relevant Factor For Computing Environmental Compensation: Supreme Court Upholds NGT Order

Invoking the doctrines of sustainable development, precautionary principle, and polluter pays principle, the Court held that subsequent compliance or post-facto approvals do not erase earlier environmental damage. Finding no perversity in the NGT’s reasoning, the Court affirmed that project scale and gravity of breach are valid determinants and declined to interfere with the enhanced compensation.

Justice Dipankar Datta and Justice Vijay Bishnoi, accordingly observed, “environmental compensation must rest on a foundation of rationality, proportionality and reasoned assessment. While project turnover or cost cannot be applied mechanically as a blunt instrument, it nevertheless remains a relevant and permissible factor where the factual matrix so warrants"

Senior Advocate Saurabh Mishra appeared for the appellant, and Advocate Mukesh Verma appeared for the respondent.

The lead appeal was filed by M/s Rhythm County, which challenged the National Green Tribunal’s (NGT) order dated 22-08-2022. The Tribunal had found that the developer undertook construction beyond the scope of its Environmental Clearance (EC) and continued activity despite regulatory objections. Applying environmental compensation principles, the NGT directed payment of ₹5 crore to the Maharashtra Pollution Control Board (MPCB). The overall project cost was stated to be approximately ₹335 crore.

The connected appeal concerned M/s Keystone Properties, against whom the NGT, by order dated 01-09-2022, imposed compensation of ₹4.47 crore for raising construction without prior EC and other statutory compliances.

While the Committee had assessed environmental compensation at Rs. 2,39,53,125/-, the NGT found the amount to be inadequate.

Before the Tribunal, compensation assessment drew from the Central Pollution Control Board (CPCB) methodology, which provides a structured framework considering duration of violation, project size, pollution potential, and environmental risk.

Now the Court had to assess:

1. Can the NGT enhance environmental compensation based on project cost even when no specific statutory formula for quantification exists?
2. Do Sections 15, 17 and 20 of the NGT Act empower the Tribunal to use a project proponent’s turnover or project cost as a relevant factor in computing environmental compensation?

Upholding the approach, and answering in affirmative, the Supreme Court observed that CPCB guidelines are normative benchmarks, not rigid ceilings or adjudicatory. Further that the Tribunal is empowered to depart from the formula where facts justify higher liability.

The Court, while referring to M/s. Goel Ganga Developers India Pvt. Ltd. v. Union of India (2018) 18 SCC 257, observed, “…Such quantification cannot be characterised as excessive, particularly when viewed inter alia in the light of the dictum in Goel Ganga Developers (supra), which treated 5% of the project cost as a general guiding principle and not as an inflexible ceiling. Equally, the adoption of the CPCB framework by the NGT, in the facts of the present case, does not stand ousted merely because project cost could also have been taken into account. On the whole, the statutory discretion vested in the NGT to determine environmental compensation on the basis of appropriate methodologies, including expert-driven and guideline-based frameworks, remains intact and has been exercised in a manner that is neither arbitrary nor disproportionate”.

The Court further emphasised that environmental compensation is not a mere fee for regularisation but a restorative and preventive measure. Therefore, on finding no ground to interfere with the impugned computation of environmental compensation in both the appeals under consideration, the appeals were dismissed.

Cause Title: M/S. Rhythm County v. The Principal Secretary & Ors. [Neutral Citation: 2026 INSC 102]

Appearances:

Appellant: Saurabh Mishra, Sr. Adv. Manya Hasija, Ana Upadhyay, T. illayarasu, Saurabh Guha, Shubhanshu Patel, Anupriya Poddar, Mani Aneja, Nirnimesh Dube, AOR, Antima Bazaz, Tanuj Bagga Sharma, AOR, Dr. M.K. Ravi, Advocates.

Respondent: Mukesh Verma, Pankaj Kumar Singh, Shashank Singh, AOR, Vatsala Tripathi, Krishna Prakash Dubey, Gaurav Gupta, Jayesh Hemrajani, Shrirang B. Varma, Aaditya Aniruddha Pande, AOR Siddharth Dharmadhikari, Sourav Singh, Gurmeet Singh Makker, AOR, Advocates.