Pollution Control Boards Can Impose And Collect As Restitutionary & Compensatory Damages Fixed Sums Of Monies: Supreme Court

The Supreme Court held that the Pollution Control Boards (PCBs) 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.

The Court held thus in Civil Appeals filed by the Delhi Pollution Control Committee (DPCC) against the Judgment of the High Court’s Division Bench, which held 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, 1981 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.

The two-Judge Bench of Justice P.S. Narasimha and Justice Manoj Misra directed, “… 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.”

The Bench 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 detailing the principle and procedure incorporating basic principles of natural justice in the subordinate legislation.

AOR Pradeep Mishra appeared on behalf of the Appellant while Senior Advocate Pinaki Misra and Advocate Ninad Laud appeared on behalf of the Respondents.

Facts of the Case

As per the Appellant-DPCC’s case, 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 (SCNs) 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 SCNs were issued on the ground that they proceeded with construction and were operating without obtaining the mandatory “consent to establish” and “consent to operate” under the relevant provisions.

The said SCNs were challenged by way of 38 Writ Petitions before the Delhi High Court. The 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. The Single Judge held that the Board has no power to impose and collect compensatory damages and the Division Bench upheld the same. Hence, the case was before the Apex Court.

Court’s Observations

The Supreme Court after hearing the contentions of the counsel, observed, “… 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.”

The Court noted that the 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.

The Court further took note of the following important points –

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 the principle of Polluter Pays and there is also a statutory incorporation of this principle in our laws. The invocation of this principle is triggered in the situations; i) when an established threshold or prescribed requirement is exceeded or 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.

The Court was of the opinion that the Division Bench of the High Court was not correct in restrictively reading powers of the Boards and 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.

“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”, it said.

Conclusion

The Court emphasised that the Boards must have the power and distinction to decide the appropriate action against a polluting entity as 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”, it added.

Furthermore, the Court clarified 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.

“This Court has underscored the importance of strong institutional frameworks in environmental governance that are effective, accountable and transparent. … Public participation in environmental protection has assumed great 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”, it concluded.

Accordingly, the Apex Court allowed the Appeals, set aside the impugned Judgment to the extent of declaration of law, and directed that the SCNs that have been set aside by the High Court shall not be revived.

Cause Title- Delhi Pollution Control Committee v. Lodhi Property Co. Ltd. Etc. (Neutral Citation: 2025 INSC 923)

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