Supreme Court Confirms NGT Power to Use Project Cost and CPCB Methodology for Environmental Compensation

A bench of Justice Dipankar Datta and Justice Vijay Bishnoi heard consolidated appeals by two Pune real estate developers challenging orders of the National Green Tribunal (Western Zone, Pune) that imposed environmental compensation for alleged violations of statutory clearances and consents. The appeals arose from separate Original Applications before the NGT which found that construction proceeded without requisite permissions and continued despite regulatory directions; the principal questions were whether the NGT could base compensation on project cost or turnover and whether it could adopt the CPCB methodology for computing environmental compensation.

The Court dismissed both appeals and upheld the NGT’s exercise of remedial discretion. It held that the NGT Act vested the Tribunal with broad, principled discretion to mould relief and that compensation must be “rational, proportionate and reasoned.” The Court emphasised that project cost or turnover could legitimately inform quantum where there was a nexus with the scale of offending and the capacity of the violator, subject to reasoned application. The Court, in its reasoning, observed: “We are unable to accede to such a submission. 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.” The judgment also recalled the statutory mandate that “The Tribunal shall, while passing any order or decision or award, apply the principles of sustainable development, the precautionary principle and the polluter pays principle.”

Background The consolidated litigation concerned two projects in Pune. M/s Rhythm County undertook a residential‑commercial project at Autade Handewadi and had obtained an environmental clearance in November 2017; the Maharashtra Pollution Control Board later issued a show‑cause and refused Consent‑to‑Establish (CTE) alleging excess construction and non‑revalidated consent, and a stop‑work direction followed. A Joint Committee appointed by the NGT reported deviations including construction of a clubhouse not covered by the original EC. The NGT found violations and enhanced compensation to Rs. 5,00,00,000/-, directing deposit with the MPCB.

M/s Key Stone Properties had obtained post‑facto EC under the MoEF&CC one‑time violation window and furnished a bank guarantee for remediation, but the NGT found distinct violations — construction without CTE from 2013 to 2020, continuing despite closure notices, absence of Consent to Operate and handing over possession — and accepted the Joint Committee’s computation of compensation at Rs. 4,47,42,188/-, directing payment to MPCB.

Before this Court, appellants argued that the CPCB formula was inapplicable to residential projects, that the NGT had mechanically adopted expert reports without independent reasoning, and that turnover or project cost lacked statutory sanction as a yardstick. The Union (represented by the Additional Solicitor General) defended the NGT orders as reasoned and within statutory mandate.

The Supreme Court analysed the NGT Act — in particular Sections 15 and 20 — and precedents including Goel Ganga Developers and Deepak Nitrite, concluding that the NGT had the statutory authority to consider project cost/turnover as one permissible indicium and to adopt structured methodologies such as the CPCB framework as facilitative tools where appropriate. The Court found that the NGT had applied its mind, examined contemporaneous material and expert inputs, and did not abdicate its adjudicatory function. The appeals were dismissed; the Court extended time to pay compensation by three months and directed that parties would bear their own costs.

Case Details: Case No.: Civil Appeal No. 7187 of 2022; Civil Appeal No. 7974 of 2022 Case Title: M/s Rhythm County v. Satish Sanjay Hegde & Ors.; M/s Key Stone Properties v. Shashikant Vithalkamble & Ors. Appearances: For the Petitioner(s): Mr. Saurabh Mishra, Senior Counsel (for M/s Rhythm County); Mr. Dhruv Mehta, Senior Counsel (for M/s Key Stone Properties) For the Respondent(s): Ms. Aishwarya Bhati, Additional Solicitor General of India (for the Union); (Original applicants / local residents represented in NGT proceedings; no counsel for some private respondents recorded before this Court)