Polluting Company’s Turnover Can Be A Relevant Factor In Fixing Environmental Damage Compensation, Supreme Court
Kiran Raj
The Supreme Court Division Bench of Justice Dipankar Datta and Justice Vijay Bishnoi on Friday (January 30, 2026) upheld the National Green Tribunal’s orders directing two real estate developers to pay substantial environmental compensation for construction carried out without required environmental clearances and related permissions. The Court accepted that, when assessing compensation for environmental harm, the scale of a company’s operations may be a relevant yardstick, since higher turnover or comparable indicators can reflect the size of activity and may correspond to the extent of damage caused. Finding no reason to interfere with the compensation imposed by the Tribunal, the Bench dismissed both appeals and extended the time to deposit the amounts by three months.
The appeals challenged separate NGT orders directing the real estate developers M/S. Rhythm County and M/S. Key Stone Properties to pay environmental compensation—₹5 crore in the case of M/S. Rhythm County and about ₹4.47 crore in the case of M/S. Key Stone Properties—for alleged breaches of environmental requirements during the execution of large residential housing projects in Pune. In fixing the amounts, the Tribunal treated the scale of the developers’ operations, including project-related financial indicators such as turnover and cost, as relevant to the assessment.
Before the Supreme Court, the developers argued that the NGT had no prescribed statutory formula to compute environmental compensation and therefore could not quantify it by relying on project cost or turnover without defined parameters. They also contended that the CPCB’s compensation framework, developed primarily for industrial pollution violations, was inapplicable to residential real estate construction. The developers further submitted that the Tribunal had adopted the Joint Committee reports without sufficient independent evaluation, which, according to them, amounted to an improper delegation of its adjudicatory function.
The Supreme Court recorded: “Neither the NGT Act nor the jurisprudence of this Court calls for the adoption of a uniform formula for the quantification of environmental compensation; on the contrary, the statutory scheme as discussed in the previous paragraphs, vests the NGT with the discretion to mould the relief guided by the ‘polluter pays’ principle, having due regard to the scale of the offending activity and the capacity of the violator.”
On the linkage between operational scale and environmental harm, the Court observed: “In cases relating to protection of environment, linking a company’s scale of operations (like turnover, production volume, or revenue generation) to the environmental harm can be a powerful factor for determining compensation. Bigger operations signify a bigger footprint. Larger scale often means more resource use, more emissions, more waste leading to more environmental stress. If a company profits more from its scale, it is logical that it bears more responsibility for the environmental costs. Linking scale to impact sends a message that bigger players need to play by greener rules.”
On turnover as a relevant factor, the Court stated: “If a company has a high turnover, it reflects the sheer scale of its operations. Such a company, if found to contribute generously to environmental damage, its turnover can have a direct co-relation with the extent of damage that is caused. Thus, in our considered opinion, to contend that turnover can never form a relevant factor in quantifying compensation to match the magnitude of harm is fallacious.”
While summarising the approach adopted by the National Green Tribunal in the matter concerning RHYTHM, the Court recorded: “With respect to RHYTHM, the NGT recorded clear findings of construction without requisite statutory permissions, continuation of work despite a stop-work direction and deviations from the sanctioned plan, and, finding the compensation recommended by the Joint Committee to be grossly inadequate, consciously adopted the project cost as the relevant yardstick in line with Goel Ganga Developers (supra) to enhance the environmental compensation to Rs. 5,00,00,000/-, thereby ensuring a rational nexus between the scale of the project and the objectives of deterrence and environmental restitution.” It added: “The NGT cannot be held to be divested of its statutory authority to employ project turnover as a relevant yardstick for the determination of environmental compensation.”
In relation to KEYSTONE and the use of the Central Pollution Control Board methodology, the Court recorded: “Insofar as KEYSTONE is concerned, the NGT drew a clear distinction between violations already subsumed under the one-time violation window and separate statutory infractions relating to prolonged construction without CTE, continuation of activities despite closure directions and occupation without CTO, and, upon independent consideration of the nature, duration and gravity of such violations, accepted the Joint Committee’s computation based on the CPCB methodology as an appropriate measure of environmental compensation.”
The Court further stated: “The CPCB framework… makes it abundantly clear that the formula-based methodology is confined to limited categories of violations… and that in other classes of cases, the determination of environmental compensation must be preceded by a detailed, site-specific and expert-driven assessment with emphasis on remediation and restitution.” It recorded: “The CPCB framework, therefore, operates as a facilitative and indicative tool, and not as a rigid or exhaustive code.”
Finally, the Court stated: “In respect of both the appellants, the NGT proceeded on the basis of contemporaneous material and expert inputs, afforded due opportunity of hearing, applied its independent mind to the issues of liability and quantum, and exercised its powers under Sections 15 and 20 of the NGT Act in a manner that is reasoned, proportionate and consistent with the polluter pays principle.”
The Court directed: “We, thus, find no ground to interfere with the impugned computation of environmental compensation in both the appeals under consideration. The appeals are without merit and, accordingly, stand dismissed. Parties shall, however, bear their own costs. Time to pay the amounts on account of compensation is extended by three months from date.”
Advocates Representing the Parties
For the Petitioners: Mr. Saurabh Mishra, Sr. Adv. Mr. Siddhesh Shirish Kotwal, Adv. Ms. Vaidehi Kolhe, Adv. Mr. T.illayarasu, Adv. Mr. Nirnimesh Dube, AOR Mr. Dhruv Mehta, Sr. Adv. Ms. Antima Bazaz, Adv. Mrs. Tanuj Bagga Sharma, AOR Dr. M. K. Ravi, Adv.
For the Respondents: Mr. Mukesh Verma, Adv. Mr. Pankaj Kumar Singh, Adv. Mr. Shashank Singh, AOR Mrs. Vatsala Tripathi, Adv. Mr. Krishna Prakash Dubey, Adv. Mr. Gaurav Gupta, Adv. Mr. Jayesh Hemrajani, Adv. Mr. Gaurav Agrawal, Adv. Mr. Aaditya Aniruddha Pande, AOR Ms. Aishwarya Bhati, A.S.G. Mr. Gurmeet Singh Makker, AOR Ms. Ruchi Kohli, Adv. Ms. Chitrangda Rastravara, Adv. Ms. Shradha Deshmukh, Adv. Mr. Rohan Gupta, Adv. Ms. Shivika Mehra, Adv.
Case Title: M/S. RHYTHM COUNTY v. SATISH SANJAY HEGDE & ORS. WITH M/S KEY STONE PROPERTIES v. SHASHIKANT VITHALKAMBLE & ORS.
Neutral Citation: 2026 INSC 102
Case Number: CIVIL APPEAL No. 7187 OF 2022 WITH CIVIL APPEAL No. 7974 OF 2022
Bench: Justice Dipankar Datta, Justice Vijay Bishnoi
