Supreme Court Strikes Down NGT’s Rs.50 Crore Penalty and PMLA Direction; Retains Monitoring and Restoration Orders
A Bench of Chief Justice B.R. Gavai and Justice K. Vinod Chandran heard an appeal by M/s C.L. Gupta Export Ltd. challenging an order of the National Green Tribunal (NGT) that imposed environmental compensation of Rs.50 crore, directed closure of non-compliant divisions and asked the Enforcement Directorate to examine the matter under the Prevention of Money Laundering Act (PMLA). The appeal contested the quantum and basis of the compensation, the jurisdiction of the NGT to direct PMLA proceedings, and the scope of closure directions issued against the industrial units.
The Court allowed the appeal in part. It held that the NGT lacked a rational nexus in fixing the Rs.50 crore compensation on the basis of the appellant’s turnover and set aside that portion of the order. The Supreme Court also quashed the direction to the Enforcement Directorate to examine the matter under the PMLA as beyond the NGT’s powers, while retaining the Tribunal’s structural directions relating to continuous monitoring, fresh water audit, remediation and restoration where those were consistent with NGT’s mandate. The Court emphasised that enforcement measures must conform to legal principles and statutory competence, and cautioned against disproportionate penal measures. The Court, in its reasoning, observed: The Court further noted that the NGT should act within the contours of Section 15 of the NGT Act and must not direct prosecutions under statutes like the PMLA, which required separate jurisdictional processes.
Background The dispute originated from a public interest petition before the NGT brought in 2019 by the then applicant alleging that the appellant’s industrial units emitted effluents into a tributary of the Ganga, extracted groundwater illegally and caused environmental degradation. The NGT constituted a Joint Committee of the Central Pollution Control Board (CPCB) and the Uttar Pradesh Pollution Control Board (UPPCB), which in interim reports recorded defects including ineffective effluent treatment, hazardous waste storage issues and operation of a thermocol unit without consent. Initial computation of environmental compensation under CPCB methodology led to an EC demand of approximately Rs.2.49 crore, part of which the appellant deposited.
A compliance report dated 30.07.2021 recorded full adherence to prior recommendations, including installation of advanced treatment systems, flow meters and piezometers and negligible variance in water use. Despite that, the NGT proceeded to impose an enhanced compensation of Rs.50 crore based on an alleged turnover figure and issued directions for closure of divisions not meeting standards and for the ED to examine money‑laundering aspects. The appellant challenged the enhanced penalty, the closure directions and the PMLA invocation before the Supreme Court, relying on precedents including Benzo Chem Industrial (P) Ltd. v. Arvind Manohar Mahajan and the Court’s recent restraint in Waris Chemicals on the NGT’s PMLA directions.
The Supreme Court found the NGT’s penalty fixation disproportionate and without legally cognisable methodology, set aside the Rs.50 crore compensation and struck down the ED/PMLA direction as beyond the NGT’s remit. The Court sustained NGT’s orders requiring ongoing audit, monitoring and restoration measures and permitted statutory authorities to act on any future non‑compliance, allowing PCBs the right to recover any shortfall in compensation or impose further EC subject to law. The appellant retained the liberty to challenge any EC imposed by statutory bodies in appropriate proceedings; pending applications stood disposed of.
Case No.: Civil Appeal No. 2864 of 2022 Case Title: M/s C.L. Gupta Export Ltd. v. Adil Ansari & Ors. Appearances: For the Petitioner(s): Sh. Vikas Singh, learned Counsel For the Respondent(s): Sh. Saurabh Mishra, Advocate‑on‑Record for Uttar Pradesh Pollution Control Board / Pollution Control Board; none appeared for Respondent No.1.