The Supreme Court in this significant environmental law case examined whether State Pollution Control Boards (SPCBs), such as the Delhi Pollution Control Committee (DPCC), have the power to impose compensatory environmental damages under Section 33A of the Water (Prevention and Control of Pollution) Act, 1974 and Section 31A of the Air (Prevention and Control of Pollution) Act, 1981. The Court upheld the powers of the Boards to impose such measures, provided they are exercised fairly, transparently, and through proper procedures.
Case Title: Delhi Pollution Control Committee v. Lodhi Property Co. Ltd. Etc.
Court: Supreme Court of India
Citation: Civil Appeal No(s): 757–760 of 2013
Bench: Justice Pamidighantam Sri Narasimha and Justice Manoj Misra
Date of Judgment: 4th August 2025
Background and Facts
The DPCC, acting on directives from the Ministry of Environment, Forest and Climate Change (MoEFCC), issued show cause notices to various real estate and commercial entities (including Lodhi Property Co. Ltd.) for operating without the mandatory “consent to establish” and “consent to operate” under Section 25 of the Water Act and Section 21 of the Air Act.
These entities were accused of violating pollution norms during construction and operation. In response, the DPCC demanded either payment of environmental damages or submission of bank guarantees as a precondition for granting consent.
A total of 38 writ petitions were filed challenging the legality of such demands.
Proceedings in the High Court
Single Judge Decisions:
In the leading case Splendour Landbase Ltd. v. DPCC, the Delhi High Court (Single Judge) ruled:
- Yes – Entities over 20,000 sq. m. must obtain separate consents under Water and Air Acts, regardless of Environmental Impact Assessment (EIA) clearance.
- No – Pollution Boards cannot impose penalties or environmental damages unless expressly authorised by statute. Sections 33A and 31A do not confer power to levy penalties or demand bank guarantees.
Other related judgments (Bharti Realty Ltd. and Anush Finlease and Construction Ltd.) followed this line of reasoning and ordered refunds of amounts collected by DPCC.
Division Bench Ruling:
The appeals by DPCC were dismissed. The Division Bench:
- Upheld that Sections 33A and 31A do not permit levy of penalties or damages.
- Held that only courts, not Boards, can impose penalties as per Chapters VI (Air Act) and VII (Water Act).
- Declared DPCC’s actions as ultra vires, ordering refund of amounts collected.
Supreme Court Proceedings
DPCC approached the Supreme Court, challenging the High Court’s interpretation. The central issue was:
Whether SPCBs can impose and collect environmental damages or demand bank guarantees under Sections 33A (Water Act) and 31A (Air Act), as a preventive or restitutionary measure?
Submissions by Parties
DPCC (Appellant)
- Argued that environmental damages are not penalties, but compensatory and preventive measures under the Polluter Pays Principle.
- Invoked the Board’s obligation to restore environmental harm, not merely penalise.
Respondents (Real Estate Entities)
- Contended that there is no statutory basis for such demands.
- Emphasised that Section 33A/31A only provides direction powers—not to levy monetary liabilities.
- Cited MC Mehta v. Kamal Nath and argued that only courts can impose penalties after trial.
- Pointed out recent 2024 amendments, introducing Adjudicating Officers for such penalties.
Legal Framework and Interpretation
Power under Sections 33A & 31A
The Court emphasised:
These sections allow Boards to issue directions, including:
- Closure or regulation of industries.
- Stoppage of utilities like water and electricity.
- The language is broad, meant to ensure environmental protection through flexible regulatory responses.
Remedial v. Penal Action
- Remedial (Compensatory): For restoring or preventing environmental damage.
- Penal: For punishing legal violations—requires court trial and due process.
The Court distinguished restitutionary directions (to secure compliance or prevent harm) from penalties, which are imposed after adjudication.
Polluter Pays Principle
The Court strongly reaffirmed the Polluter Pays Principle, citing key judgments:
- Indian Council for Enviro-Legal Action v. Union of India (1996) – Liability includes remediation and cost recovery.
- Vellore Citizens Welfare Forum v. Union of India (1996) – Environmental harm includes compensatory and restorative responsibilities.
- Research Foundation v. Union of India (2005) – Liability arises not just from actual harm, but also potential environmental risk.
- State PCB v. Swastik Ispat (NGT) – Bank guarantees demanded as compliance assurance were held compensatory, not punitive.
Findings and Holding
The Supreme Court held:
1. Sections 33A and 31A empower Pollution Boards to:
- Impose restitutionary or compensatory damages.
- Demand bank guarantees as ex-ante measures to ensure compliance.
2. These are not penalties, hence:
- Do not require prior judicial process.
- Are distinct from punitive action under Chapters VI/VII of the Acts.
3. The DPCC’s power is comparable to the Central Government’s power under Section 5 of the Environment (Protection) Act, 1986, which includes the authority to issue directions and impose environmental liabilities.
4. Recent Amendments (2024):
- Introduce Adjudicating Officers for imposing penalties.
- However, this does not bar the Boards’ power to impose restorative compensation or take preventive actions under 33A/31A.
Conditions for Valid Use of Power
The Court emphasised that such powers must be:
- Exercised fairly.
- Based on objective criteria.
- Non-arbitrary and transparent.
- Codified through subordinate legislation.
Direction: Central Pollution Control Board’s 2022 Guidelines on “Environmental Damage Compensation” must be reviewed and formalised through Rules/Regulations, ensuring:
- Natural justice
- Quantification methods
- Public access and participation
Final Directions and Conclusion
- Appeals allowed – Division Bench judgment on law is set aside.
- DPCC can impose restitutionary damages and require bank guarantees under Sections 33A/31A.
- No revival of the 2006 show cause notices as the High Court had already quashed them, and considerable time has lapsed.
- Any amount already collected under those notices must be refunded within 6 weeks.
- Such powers should only be exercised after laying down a detailed procedure in subordinate legislation, ensuring due process and transparency.
Key Highlights of the Decision
“We direct that the Pollution Control Boards can 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 in exercise of powers under Sections 33A and 31A of the Water and Air Acts.
It is further directed that the power to impose or collect restitutionary or compensatory damages or the requirement to furnish bank guarantees as an ex-ante measure under Sections 33A and 31A of the Water and Air Acts shall be enforced only after detailing the principle and procedure incorporating basic principles of natural justice in the subordinate legislation.”
Significance of the Judgment
- Restores and clarifies the regulatory powers of Pollution Control Boards.
- Distinguishes punitive actions from remedial environmental measures.
- Reiterates the Polluter Pays Principle as central to Indian environmental law.
- Calls for rule-based governance, reducing arbitrariness in environmental enforcement.
- Promotes citizen participation and access to environmental justice.