Supreme Court | NGT Cannot Impose Turnover-Based Environmental Compensation or Direct ED Probe Under PMLA
Kiran Raj
The Supreme Court of India Division Bench of Chief Justice B. R. Gavai and Justice K. Vinod Chandran allowed the appeal against directions issued by the National Green Tribunal (NGT) that had imposed ₹50 crores in compensation and referred the matter to the Enforcement Directorate under the Prevention of Money Laundering Act, 2002. The Court directed that while continuous monitoring and auditing of pollution control measures must remain in force, the penalty based on turnover and the referral under PMLA were unsustainable. The Bench held that compliance reports submitted by statutory authorities had to be given due weight and sweeping closure directions were not warranted.
The proceedings originated before the National Green Tribunal in 2019 on an application alleging environmental degradation by the appellant industry, which was engaged in multiple manufacturing activities, including Metal Art Ware, Glass Art Ware, Thermocol Blocks, Marble Art Ware, and Corrugated Boxes. The applicant claimed that the industry was releasing untreated effluents into a tributary of the Ganga, extracting groundwater illegally, and causing widespread pollution. Allegations were also made that statutory authorities such as the State Pollution Control Board, the Central Pollution Control Board, the Central Ground Water Authority, and the District Collector had failed to prevent or address the violations.
The NGT constituted a Joint Committee comprising the Central Pollution Control Board (CPCB), Uttar Pradesh Pollution Control Board (UPPCB), and other agencies to inspect and report on the appellant’s compliance. The Committee’s initial report dated 7 May 2019 identified ineffective effluent treatment, improper storage of hazardous waste, and the Thermocol unit’s operation without consent. The report proposed closure and recommended an environmental compensation of ₹10 lakhs.
Subsequent reports dated 16 July 2019 and 3 December 2019 assessed compensation under CPCB’s methodology for illegal groundwater extraction, imposing a total environmental compensation of ₹2,49,71,157. The appellant deposited ₹1,16,39,727 after certain waivers.
In July 2021, a report confirmed complete compliance with statutory conditions and recommendations. Despite this, the NGT in its order imposed an additional compensation of ₹50 crores, calculated with reference to the appellant’s turnover, and directed the Enforcement Directorate to investigate under the PMLA. The NGT also ordered closure of any non-compliant divisions of the industry.
The appellant argued before the Supreme Court that environmental compensation had already been paid, compliance was certified by statutory reports, and the imposition of ₹50 crores based on turnover lacked rational nexus. Reliance was placed on precedents including Benzo Chem Industrial (P) Ltd. v. Arvind Manohar Mahajan (2024 SCC OnLine SC 3543) and Waris Chemicals (P) Ltd. v. U.P. Pollution Control Board (2025 SCC OnLine SC 1261), which had deprecated similar methodologies.
The Pollution Control Board acknowledged present compliance but defended NGT’s power to impose penalties as deterrents. It suggested that penalty calibration could follow CPCB multipliers rather than a flat turnover percentage and sought upholding of certain structural directions issued by the NGT.
Further inspection conducted between 23 and 25 August 2022, with a report filed on 24 December 2022 before the Supreme Court, noted normal soil parameters, no crop damage, and no significant disease burden attributable to pollution. It recorded installation of extensive monitoring mechanisms by the appellant, including flow meters and piezometers, with negligible variance between water abstraction and consumption. It also confirmed advanced effluent treatment facilities in operation.
The Supreme Court extensively considered the NGT’s directions. The Bench recorded: “We are not inclined to consider the question of maintainability of the PIL, at this stage especially when the initial reports of the Joint Committee constituted by the NGT clearly indicate violations of the environmental laws which led to the penalisation by imposition of EC.”
On the compliance report, the Court noted: “Yet another report dated 30.07.2021 was submitted before the NGT which even according to the NGT… confirms full compliance with all prior recommendations/suggestions.”
Referring to the NGT’s imposition of ₹50 crores compensation, the Court observed: “Generation of revenue, or its quantum, would have no nexus with the amount of penalty to be ascertained for environmental damages. The methodology adopted by the NGT for imposition of penalty was held to be totally unknown to any principle of law.”
On the turnover-based approach, the Court stated: “Rule of law does not permit State or its agencies to extract a ‘pound of flesh’, even in environmental matters. Though in the present case there is an observation made that there was admitted turnover of ₹550 crores; we still notice the absence of nexus between the turnover and the pollution alleged.”
On the direction referring the matter to the Enforcement Directorate, the Court recorded: “Neither is there registration of FIR for any scheduled offence nor any complaint is filed alleging such offences under the various environmental protection statutes scheduled under the PMLA… The NGT should act within the contours of the powers conferred on it which is Section 15 of the NGT Act of 2010.”
The Court further observed: “We cannot but indicate that application of mind is not proportionate to the number of pages… In the context of the last of the reports having found complete compliance, we cannot but observe that unfortunately this was an exercise in futility. Judicious consideration is the sum and substance of adjudication and the Courts/Tribunals should restrain themselves from engaging in mere rhetoric.”
The Supreme Court issued clear directions setting aside several parts of the NGT’s order. It struck down the ₹50 crores compensation imposed on the basis of turnover, holding that it lacked any rational nexus with environmental damage. The Bench recorded that penalties must be based on CPCB’s methodology and not on revenue generation figures. It clarified that while the statutory environmental compensation previously imposed remained undisturbed, the appellant retained liberty to challenge such imposition subject to limitation, and Pollution Control Boards retained authority to recover any shortfall or impose further compensation in case of future violations.
The Court also set aside the NGT’s sweeping closure directions. It held that once compliance had been certified by reports, closure could not be ordered in general terms. Instead, jurisdictional Pollution Control Boards retained authority to proceed under statutory provisions if fresh violations were found.
The directive referring the matter to the Enforcement Directorate under the Prevention of Money Laundering Act, 2002, was quashed. The Court held that without a registered FIR or complaint under scheduled offences, invocation of PMLA could not be sustained and the NGT lacked jurisdiction to direct such action.
At the same time, the Bench upheld directions relating to audit, monitoring, and restoration of the environment. It directed that continuous monitoring, groundwater audits, recycling of treated water, reduced withdrawal, and robust compliance mechanisms would remain in force, consistent with the NGT’s jurisdiction under the NGT Act, 2010.
The Court concluded by allowing the appeal and setting aside the NGT order to the extent noted, while leaving undisturbed the structural compliance regime designed to safeguard the environment.
Advocates Representing the Parties
For the Appellant(s): Ms. Bhuvneshwari Pathak, AOR; Mr. Shivam Parashar, Adv.; Mr. Garv Vikas, Adv.
For the Respondent(s): Ms. Preeti Singh, AOR; Mr. Pradeep Misra, AOR; Mr. Saurabh Mishra, AOR; Mrs. Aishwarya Bhati, A.S.G.; Mr. R. Bala, Sr. Adv.; Mr. Rajesh Kr. Singh, Adv.; Mr. Apoorv Kurup, Adv.; Mr. Vanshaja Shukla, Adv.; Mr. Amit Sharma (II), Adv.; Mr. Rajeshwari Shankar, Adv.; Mr. Vijay Lakshmi, Adv.; Dr. N. Visakamurthy, AOR.
Case Title: M/s C.L. Gupta Export Ltd. v. Adil Ansari & Ors.
Neutral Citation: 2025 INSC 1035
Case Number: Civil Appeal No. 2864 of 2022
Bench: Chief Justice B. R. Gavai, Justice K. Vinod Chandran
