Bank guarantee as an environmental compliance measure is compensatory, not penal, and may be invoked for proven non-compliance.

A pollution control authority may require an industrial unit to furnish a bank guarantee as a compliance condition where the measure is used to secure adherence to consent terms and environmental restoration. Such a guarantee is compensatory rather than penal when it serves prevention, control and abatement of pollution, and it may be invoked on objective material showing persistent non-compliance. Where the undertaking was given voluntarily and without protest, later challenge to the condition is weakened by acquiescence. On the stated facts, the guarantee was validly invoked according to its terms and the contrary appellate order was unsustainable.

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Issues: (i) whether the Pollution Control Board had jurisdiction to require industrial units to furnish a bank guarantee as a condition for compliance and continued consent, (ii) whether invocation of the bank guarantee was penal and impermissible, (iii) whether the appellate authority's order setting aside forfeiture suffered from error of law and fact, and (iv) whether the bank guarantee was invoked in accordance with its terms.

Analysis: The Board's powers under the Air Act are wide and include issuing directions to prevent, control and abate pollution, grant or refuse consent subject to conditions, and take measures necessary to secure compliance. A direction requiring a bank guarantee, when used as an interim regulatory measure to ensure compliance with consent conditions and to secure restoration or compensation for environmental harm, falls within that framework and is not outside jurisdiction. The statutory scheme separates penal consequences under Chapter VI from regulatory and compensatory measures under Sections 16, 17, 21 and 31A. A bank guarantee required to secure compliance and environmental restoration is compensatory in character, not punitive, and therefore does not require a separate penal provision. The industry had furnished the guarantee voluntarily, without protest, while repeatedly seeking and obtaining time to comply, and thus had acquiesced in the condition and was estopped from challenging it later. On the facts, repeated inspections showed persistent non-compliance, so the Board's satisfaction for invocation was based on objective material and the guarantee terms were breached.

Conclusion: The Board had jurisdiction to require the bank guarantee, the condition was not penal, and the guarantee was validly invoked. The appellate authority's contrary order was unsustainable.

Issues: (i) whether the Pollution Control Board had jurisdiction to require industrial units to furnish a bank guarantee as a condition for compliance and continued consent, (ii) whether invocation of the bank guarantee was penal and impermissible, (iii) whether the appellate authority's order setting aside forfeiture suffered from error of law and fact, and (iv) whether the bank guarantee was invoked in accordance with its terms.

Final Conclusion: The appeal was allowed in part, the appellate authority's order was set aside, and the amount recovered under the guarantee was confined to compensatory and restorative environmental purposes.

Ratio Decidendi: A pollution control authority may, in exercise of its regulatory powers under environmental statutes, require a bank guarantee as a compensatory compliance measure; such a guarantee is not penal if it is directed toward prevention, control, and restoration of environmental damage and is invoked according to its terms on objective material showing non-compliance.

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