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CASE NO.: Appeal (civil)  1521 of 2001

PETITIONER: Deepak Nitrite Ltd.

RESPONDENT: State of Gujarat & Ors.

DATE OF JUDGMENT: 05/05/2004

BENCH: CJI & G.P. MATHUR.

JUDGMENT: JUDGMENT

(WITH C.A. No. 1522/2001, 1523/2001, 1524/2001, 1525- 1526/2001, 1527/2001 1528/2001)

RAJENDRA BABU,  CJI.  :

       These appeals arise out of a series of orders made by the  High Court of Gujarat.  A petition was filed before the High  Court in public interest alleging large scale pollution caused by  industries located in the Gujarat Industrial Development  Corporation (GIDC) Industrial Estate at Nandesari.  It is alleged  that effluents discharged by the said industries into the effluent  treatment project had exceeded certain parameters fixed by the  Gujarat Pollution Control Board (GPCB) thereby causing  damage to the environment.  Some of the industries have set  up their own effluent treatment plants in their factory premises,   while some of them have not.  The High Court, by an order  made on 17.4.1995, directed that the chemical industries in  Nandesari should be made parties to the proceedings thereby  252 industrial units located in the Nandesari Industrial Estate,  Baroda were  made parties to the proceedings, apart from the  State of Gujarat, Central Pollution Control Board, Gujarat  Industrial Development Corporation and Nandesari Industries  Association.  The High Court also issued notices to the financial  institutions or banks in respect of these proceedings.                     On May 5, 1995 the High Court appointed a Committee  under the Chairmanship of Dr. V.V. Modi to ascertain the  position with regard to the extent of pollution in Nandesari  Industrial Estate.  A Common Effluent Treatment Plant (CETP)  was erected by the GIDC in Nandesari Industrial Estate  on the  contribution made by the industrial units in the Nandesari  Industrial Estate to the extent of about Rs. 300 lakhs.    Inasmuch as CETP was not achieving the required parameters  laid down by the GPCB, the High Court,   by an order made on  7.8.1996, appointed NEERI as a consultant to assess the  treatment facilities and to provide suitable rectification  measures for upgrading the CETP and effluent treatment plant  facilities. Dr.Committee made a report on 7.9.1996. The High  Court restrained several industries from removing their products  from their plant without prior permission of the High Court and  thereafter, by an order made on 13.9.1996, the High Court  permitted them to dispatch materials by depositing a certain  sum of money which was the value of the materials.  NEERI  submitted its report on 31.10.1996.  The High Court, while  granting permission to some of the industries to carry on their

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activities, called for turnover figures and profitability data.  On  9.5.1997 the High Court passed an order directing the  industries to pay 1% of the maximum annual turnover of any of  the preceding three years towards compensation and  betterment of environment within a stipulated time.   It is against  this order that the appellants are before us.

       The High Court  in its impugned order followed a decision  of the High Court of Gujarat in Pravinbhai Jashbhai Patel &  Anr.  Vs.  State of Gujarat & Ors., 36 Guj. Law Reports1210,  wherein it was noticed that the industrial units though aware of  the requirements of law had not complied with the same nor did  they meet the GPCB parameters and they were irresponsible in  not wanting or caring to set up effluent treatment plants but  continued to manufacture and pollute the environment and the  concern shown now in meeting with the pollution control norms  is only because of the threatened court order; that pollution  caused by these industrial units was adversely affecting large  number of citizens residing in the adjacent cities or villages; that   in particular water and air pollution is not only continued to the  immediate area in which the pollution is generated, but the  same affects other areas  as well wherever  water or air went;   that this Court in M.C. Mehta vs.   Union of India,  AIR 1988  SC 1037,  Virender Gaur & Ors.  Vs.  State of Haryana &  Ors.,  1995 (2) SCC 577 and CERC   vs.  Union of India,   AIR  1995 SC 922, invoked the provisions of Article 21 of the  Constitution of India to declare that the citizens have a  fundamental right to live decently unaffected by pollution.   After  noticing various contentions,  the High Court took the view that  1% of the turnover would be a good measure of assessing  damages for the pollution caused by the industrial units and  that amount should be kept apart by the Ministry of  Environment and should be utilized for the works of socio- economic uplift of the population of the aforesaid affected areas  and for the betterment of educational, medical and veterinary  facilities and the betterment  of the agriculture and livestock in  the said villages with certain additional directions in this regard.

       It is now submitted before us by the appellants that a  court has no power to either impose penalty or fine or make any  levy for general betterment unless the statute authorized the  same; that, however, in awarding damages it is permissible to  make the same exemplary or penal;  that award of damages is  way of restitution for the damage caused to victims and for  restoration or restitution and for restoration of ecology by way of  punishment;  that,  unless a finding is given by the High Court  that there had been degradation of environment, question of  restitution or awarding damages could not arise;  that there is  no finding of degradation of environment and, therefore,  it is  not open to the High Court to impose 1% of the turnover by way  of damages.   The appellants relied upon a decision of this  Court in Vellore Citizens’ Welfare Forum  vs.  Union of India  & Ors.,  1996 (5) SCC 647, in support of this contention.  Their  argument is that principle of ’polluter to pay’ cannot be applied  unless a finding has been given that the industrial unit  concerned is the polluter.  In what manner pollution has been  caused should have been ascertained, particularly when a  separate common effluent treatment plant had been erected  and a channel was provided through which water would flow  into river which would reach the sea thereby not causing any  damage anywhere.   They seek to bring about difference  between Pravinbhai Jashbhai Patel’s case (supra) and the  present proceedings to contend that in those cases there was  direct evidence of damage having taken place and by way of  rule of thumb the High Court adopted the standard of 1% of

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turnover to be paid by way of damages and that this principle  cannot always uniformally be applied. They commend us to  apply the principle set out by this Court in Vellore Citizens’  Welfare Forum’s case (supra) wherein  principle of ’polluter to  pay’  has been applied and wherein it is noticed that any  principle evolved in this behalf should be simple, practical and  suited to the conditions obtaining in this country;  once the  activity carried on is hazardous or inherently dangerous,  the  person carrying on such activity is liable to make good the loss  caused to any other person by his activity irrespective of the  fact whether he took reasonable care while carrying on his  activity; consequently,  the polluting industries are absolutely  liable to compensate for the harm caused by them to villagers  in the affected areas, to the soil and to the underground water  and hence,  they are bound to take all necessary measures to  remove sludge and other pollutants lying in the affected areas;  that the ’polluter pays principle’ as interpreted by this Court  means that the absolute liability for harm to the environment  extends not only to compensate the victims of pollution but also  the cost of restoring the environmental degradation; that  remediation of the damaged environment is part of the process  of sustainable development and as such the polluter is liable to  pay the cost to the individual sufferers as well as the cost of  reversing the damaged ecology.

       Shri T.R. Andhyarujina,  learned Senior Advocate, who  assisted this Court as Amicus Curiae with great ability,  explained to us the background in which the High Court had  passed the impugned order.   He submitted that the High Court  had followed the earlier decision in Pravinbhai Jashbhai  Patel’s case (supra) wherein standard of 1% of turnover was  adopted for closure of polluting units and payment of  compensation by such units for polluting river and land; that the  basis of this decision in that case was that the polluting  industrial units were not meeting GPCB norms and the  continued violation of the law by industrial units had become a  habit;  that after elaborate discussion,  the High Court had  concluded that these industries had caused pollution and,  therefore,  gave certain directions, including for closure of the  industrial units until they observe GPCB norms; that the  directions given by the High Court regarding closure and  payment of compensation were complied with by the industrial  units and this Court did not interfere with the order made by the  High Court,  therefore,  the methodology adopted by the High  Court in Pravinbhai Jashbhai Patel’s case (supra) can be  applied to other industrial units which are causing pollution;  that, after investigation made by the Committee or by an expert  body there were reports that the industrial units were causing  pollution by not complying with the norms prescribed by GPCB  and High Court, in fact, noticed that a number of units have  voluntarily agreed to pay 1% of the turnover of a year out of the  last three years and there was consensus between all the  industries and for betterment of environment, they voluntarily  stated before the Court that 1% shall be paid; that one may say  that even some of the units having no treatment plant or having  inadequate facilities appeared before the High Court stating  that they would voluntarily stop manufacturing till installation of  proper treatment plant and were in a position to discharge trade  effluent meeting with GPCB norms.   Thus, in these cases,  the  High Court restrained firstly several industries from removing  their products from their plant without prior permission of the  High Court and thereafter, such units themselves suspended  operation of the polluting activities.  The High Court, after  having considered further reports of the Committee; NEERI and  GPCB permitted to restart activities on a trial basis and at the

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same time, directed that "with regard to 1% payment an order  will be passed after the details furnished by the learned  counsel."   The High Court thereafter adopted payment of 1% of  the turnover method as indicated in Pravinbhai Jashbhai  Patel’s case (supra).  He submitted that in these cases the  High Court has through its investigation either by Committee  appointed by itself or expert agency like NEERI found that the  industrial units in question were polluting units and had not  conformed with the norms prescribed by GPCB and each of the  units were discharging effluents into the effluent channel project  constructed by GIDC which in turn discharged the effluents into  the Mahi river which ultimately reached sea.  Thus the High  Court had found that there was extensive environmental  degradation as a result of the pollution because of the violatioin  of the pollution laws and on account of such damage, the High  Court ordered the payment of 1% compensation as a one time  payment for pollution and damage for a number of years from  1993 to 1996.   He further submitted that in no case the High  Court ordered compensation without giving a finding that there  was environmental degradation and damage as a result of  violation of prescribed norms.  He also adverted to various  decisions of this Court in M.C. Mehta  vs. Union of India,    1987 (1) SCC 395, to support the proposition that the measure  of compensation must be co-related to the magnitude and  capacity of the enterprise because such compensation must  have a deterrent effect and such damage not only extends to  restitution for the harm to the environment to compensate the  victims of the pollution but also cost of restoring the  environment by degradation. This Court reiterated the principle  of "polluter to pay"  to the effect that one of the principles is to  levy damages of a certain percentage of total turnover and the  right to a clean and hazardless environment has been  recognised as a fundamental right under Article 21 of the  Constitution.  The Court has innovated new methods and  strategies for the purpose of securing enforcement of  fundamental rights.

       The fact that the industrial units in question have not  conformed with the standards prescribed by GPCB cannot be  seriously disputed in these cases.  But the question is whether  that circumstance by itself can lead to the conclusion that such  lapse has caused damage to environment.  No finding is given  on that aspect which is necessary to be ascertained because  compensation to be awarded must have some broad co-relation  not only with the magnitude and capacity of the enterprise but  also with the harm caused by it.  May be, in a given case the  percentage of the turnover itself may be a proper measure  because the method to be adopted in awarding damages on  the basis of  ’polluter to pay’ principle has got to be practical,  simple and easy in application.   The appellants also do not  contest legal position that if there is a finding that there has  been degradation of environment or any damage caused to any  of the victims by the activities of the industrial units certainly  damages have to be paid.  However, to say that mere violation  of the law in not observing the norms would result in  degradation of environment would not be correct.   

Therefore, we direct the High Court to further investigate  in each of these cases and find out broadly whether there has  been any damage caused by any of the industrial units by their  activities in not observing the norms prescribed by the GPCB  as reported by the Modi Committee appointed by the High  Court or by an expert body like NEERI and that exercise need  not be undertaken by the High Court as if the present  proceeding is an action in tort but an action in public law.   A

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broad conclusion in this regard by the High Court would be  sufficient.  We, therefore, direct the High Court to re-examine  this aspect of the matter as to whether there is degradation of  environment and as a result thereof any damage is caused to  any victim, and what norms should be adopted in the matter of  awarding compensation in that regard.   In this process it is  open to the High Court to consider whether 1% of the turnover  itself would be an appropriate formula or not as applicable to  the present cases.

       We record our appreciation and gratitude to Shri T.R.  Andhyarujina in assisting this Court as Amicus Curiae.  

       With these observations, these appeals stand disposed  of.