The Supreme Court reinforcing the importance of legal principles and fair procedures in environment penalty cases has rejected the NGT order in Benzo Chem Industrial Private Limited v. Arvind Manohar Mahajan & Ors.1 that imposed the penalty based on the company’s revenue.
Introduction
The National Green Tribunal (NGT) recently faced scrutiny from the Supreme Court in the case of Benzo Chem (supra) The Court sharply criticized the NGT for imposing a significant environmental penalty on the company based solely on its estimated revenue, finding no legal basis for such a determination.
NGT’s Order
In this case, the NGT had imposed a penalty of Rs. 25 crores on Benzo Chem Industrial Private Limited for environmental violations. The Tribunal justified this substantial penalty by citing the company’s estimated revenue, which it placed between Rs. 100 crores and Rs. 500 crores. This broad revenue range was obtained from public sources and not based on any specific financial data from the company itself.
“As per information in public domain, operative 11 revenue range of the PP is Rs. 100 to 500 crores. Learned Counsel for the PP, on instructions, states that its turnover is Rs. 250 to 300 crores. CSR amount as per section 135 of the Companies Act 2013 is 2% of profit per year. Taking into account totality of circumstances, we determine liability of the PP for violations from 2012 to 2020 at Rs.25 crore which is 10% of the turnover for one year i.e. Rs. 250 crores or 1% of turnover for 10 years at that rate”
Supreme Court’s Observations and Judgment
The Supreme Court, in a critical review of the NGT’s order, found several significant flaws.
“With deep anguish we have to say that the methodology adopted by the learned NGT for imposing penalty is totally unknown to the principles of law.”
The Court emphasized that there is no logical connection between a company’s revenue and the appropriate penalty for environmental violations. The quantum of the penalty should be determined based on the severity of the environmental harm caused and the extent of the violation. The Court also highlighted the inaccuracy of basing the penalty on a broad and uncertain revenue estimate obtained from public sources. Furthermore, the Court criticized the NGT for imposing the penalty without providing the company with an opportunity to be heard, a fundamental principle of natural justice.
“the least that was expected from the NGT is to give a notice to the appellant before imposing such a heavy penalty”
Finally, the Court strongly disapproved of the NGT’s methodology, stating that it lacked any basis in law and was detrimental to the principles of fair adjudication.
Conclusion
The Supreme Court’s judgment in Benzo Chem(supra) serves as a crucial reminder of the importance of adhering to established legal principles and ensuring procedural fairness in environmental cases. The Court’s strong disapproval of the NGT’s approach underscores the need for a more reasoned and evidence-based approach to determining penalties for environmental violations.
1.MANU/SC/1269/2024
