Decided on: 4 August 2025
Coram: Justice P. S. Narasimha and Justice Manoj Misra
Citation: 2025 SCC OnLine SC 1601
Facts
The Delhi Pollution Control Committee (DPCC) appealed a 2012 Delhi High Court ruling that invalidated its practice of demanding fixed “environmental damages” and bank guarantees from builders as pre-conditions for environmental consents.
In 2006, following directives from the Union Ministry of Environment, DPCC issued show-cause notices to several large residential and commercial projects that had allegedly started construction without obtaining mandatory “consent to establish” and “consent to operate” under the Water and Air Acts. DPCC asked these projects to pay fixed amounts or furnish bank guarantees to cover potential pollution damage. The builders challenged these notices in 38 writ petitions.
A Single-Judge of the Delhi High Court asked two questions; (1) whether large projects (over 20,000 m²) still needed state Board consents even if they had central EIA clearance, and (2) whether DPCC could levy fixed penalties or demand bank guarantees under Sections 33A (Water Act) / 31A (Air Act).
While the first question was answered in the affirmative, the second was answered in the negative, saying that a penalty requires explicit statutory authority, which sections 33A/31A did not provide. The judge held that DPCC’s monetary demands had no legal backing and ordered refunds of amounts collected. Two other single-judge benches reached the same conclusion in Bharti Realty Ltd. And again directing refunds.
On appeal, a Division Bench of the Delhi High Court (2012) agreed. It held that Sections 33A/31A empower Boards only to give directions, not to impose penalties. It noted that Chapters VI and VII of the Water and Air Acts set up a detailed criminal-procedure scheme: only courts can take cognizance of offences and levy fines or imprisonment, after trial. In short, the High Court said DPCC had no power to demand money or guarantees; any “penalty” must be imposed only through the statutory process by a court. The High Court thus set aside DPCC’s monetary demands and ordered refunds of the collected sums.
Issue
The core question in these appeals is – whether the regulatory boards can, in exercise of powers under Section 33A of the Water Act and Section 31A of the Air Act, impose and collect as restitutionary and compensatory damages fixed sums of monies or require furnishing bank guarantees as an ex-ante measure towards potential environmental damage?
The DPCC argued that it was not imposing a “fine” but asking builders to pay for the environmental damage they caused, under the Polluter Pays principle. It claimed that its wide powers under Sections 33A/31A included ordering compensation, just like Section 5 of the Environment Protection Act. It stressed that environmental laws must be read broadly to safeguard clean air and water as part of the right to life (Article 21) and constitutional duties.
On the other hand, the builders said the law does not allow Boards to impose money penalties directly. They argued that the Acts already have a complete process for punishment only courts can order fines or jail, not the Boards. Relying on past cases, they said DPCC’s demands were like an illegal tax or penalty, since Boards are only meant to complain to courts, not act as judges.
Court Analysis
The two-judge Bench (Justice P.S. Narasimha and Justice M. Misra) allowed DPCC’s appeal in principle. The Court held that pollution control boards do have the power to impose and collect environmental compensation (fixed sums) or require bank guarantees under Sec.33A/31A, but only as restitutionary measures, not as penalties. In effect, such demands are akin to an order to clean up or prevent harm – a remedial direction, rather than a punishment.
not a “penalty” in the criminal sense. It is remedial: Citing M.C. Mehta v. Kamal Nath, the Court emphasised that pollution is treated as a civil wrong for which a polluter must pay damages to restore the environment. It stressed the distinction between
a. compensatory directions for environmental restoration or prevention and,
b. punitive fines for legal violations. The former are issued as part of regulatory duties, while the latter require the procedure in the penal chapters. As the Court put it, a Board’s directive under Sections 33A/31A to pay for damage is not a “penalty” in the criminal sense. It is remedial.
Polluter Pays Principle: The judgment underscored that the polluter pays principle is a keystone of Indian environmental law. Under this principle, the “offending industry” must bear the costs of repairing damage, empowering Boards to take such ex-ante (preventive) and ex-post remedial measures when there is actual or potential pollution.
The Court interpreted Sec.33A (Water Act) and Sec.31A (Air Act) broadly. legislative design, Boards were meant to have potent powers to prevent pollution, if a Board determines that an entity has caused or is likely to cause environmental harm, it can impose a fixed compensation or demand a bank guarantee to ensure funds for remediation.
However, this power is to be used judiciously, only when warranted by actual or imminent damage, not as a routine license fee. The court directed that any demand for damages or guarantees under Sec.33A/31A must be implemented through clear rules or regulations (subordinate legislation) that lay down the procedure and criteria. Those rules must incorporate principles of natural justice, transparency and certainty.
The Supreme Court allowed DPCC’s appeal but gave no relief on the old cases.
The Court’s ruling thus strengthens regulators’ tools to protect the environment, while keeping a check on arbitrary use. As Justice Narasimha observed, environmental regulation must combine robust action with fairness and accountability.