SC slams NGT for linking fines to revenue of company

A bench, comprising justices Bhushan R Gavai and KV Viswanathan, underscored that such a methodology is alien to established legal principles

The Supreme Court has ruled that the quantum of penalty for environmental damage cannot be linked to a company’s revenue, criticising the National Green Tribunal (NGT) for its lack of due consideration and violation of natural justice principles.

A bench, comprising justices Bhushan R Gavai and KV Viswanathan, underscored that such a methodology is alien to established legal principles, while quashing an order by the NGT that imposed a ₹25 crore penalty on Benzo Chem Industrial Private Limited.

Expressing “deep anguish” at the NGT’s rationale in tying the penalty amount to the company’s publicly reported revenue range of ₹100 crore to ₹500 crore, the bench clarified that revenue generation and environmental damages are unrelated factors.

“The generation of revenue would have no nexus with the amount of penalty to be ascertained for environmental damages,” the bench held in its November 27 judgment that was released later.

The case arose from the NGT’s orders dated August 29, 2022, and November 22, 2022, wherein Benzo Chem was penalised for alleged non-compliance with environmental norms. The company, represented by senior advocate ANS Nadkarni contested the orders, asserting that reports from the Maharashtra Pollution Control Board (MPCB) and the National Environmental Engineering Research Institute (NEERI) had found no violations during inspections conducted between 2011 and 2020.

The court noted that both the MPCB and NEERI reports contradicted NGT’s conclusion of sustained violations since 2010. The counsel for the MPCB also acknowledged the absence of violations, stating they could not counter the company’s claims based on their own inspection records.

Justice Gavai, delivering the judgment, berated the NGT for its lack of due consideration. “This is the third matter today where we are considering orders passed by the NGT that depict total violation of principles of natural justice and lack of due consideration.”

Not only the bench took issue with the NGT’s approach of deriving the penalty from the company’s revenue range that it said reflected a lack of precision and fairness, but it also pointed out that the tribunal failed to provide notice to the appellant before imposing such a significant penalty, a fundamental lapse in procedural fairness.

“It is further to be noted that the learned NGT found the appellant to be guilty of violations. The least that was expected from the NGT is to give a notice to the appellant before imposing such a heavy penalty. The methodology adopted by the learned NGT for imposing the penalty is totally unknown to the principles of law,” the judgment stated.

The court quashed the NGT’s orders and set aside the ₹25 crore penalty. However, it clarified that the judgment does not preclude any party from approaching the appropriate forum if future environmental violations are suspected. The bench underscored that such cases must adhere to natural justice principles and proper legal procedures.

The judgment reinforces the principle that penalties for environmental damages must be grounded in substantive evidence of violations and proportionality, rather than speculative or arbitrary metrics like revenue. The ruling further highlights the judiciary’s expectation of procedural rigour and fairness from quasi-judicial bodies, such as the NGT.