2014 (1) TMI 1913 - Tri - Indian Laws

Tribunal affirms Pollution Control Board's bank guarantee requirement under Water and Air Acts, emphasizing environmental compliance

The Tribunal upheld the State Pollution Control Board's jurisdiction to require industrial units to furnish a bank guarantee under the Water Act and Air ... Jurisdiction - power of Board requiring industrial units to furnish bank guarantee - invocation of the bank guarantee by the State Board on the alleged breach is penal and thus impermissible under the provisions of the Air Act and the Water Act or not - whether the order of the appellate authority suffers from the infirmity of taking into consideration irrelevant matters and grounds - invocation of the bank guarantee is or not in terms of the bank guarantee - HELD THAT:- It is clear that the Board has preventive, punitive and curative powers. While reading the object and reasons in conjunction with Sections 16 to 18 and Section 31A of the Air Act, it is clear that the powers of the Board to issue directions are to be exercised with the primary object of prevention, control and abatement of air pollution. The most fundamental aspect of environmental law is prevention and control of pollution and to provide clean and healthy environment and wholesome water to the society at large. As already noticed, the provisions of Section 17(1)(a) casts upon the Board an obligation to do things and perform such acts as may be necessary for the proper discharge of its functions and generally for the purpose of carrying out the purposes of the Air Act. Upon analysis of the language of these provisions, it is evident that besides performing the specific acts and functions, the Board is entitled to do things or perform acts which may be in aid thereto and for carrying out effectively the purposes of the Air Act. Once it prepares a comprehensive programme for prevention, control and abatement of air pollution, and emission standards are prescribed, the Board then is required to issue the order of consent to various applicant-units to establish and operate their activities. Keeping in view the legislative scheme and the object of the Air Act, it is evident that the Board is not incapacitated to issue a direction which may not be prohibitory or of closure in substance and application, but may be regulatory with an object to ensure that anti-pollution devices and anti-pollution measures are adopted to prevent and control pollution. For this purpose, the Board may require an industry to furnish a bank guarantee which would serve dual purposes - the intention of the Legislature to ensure implementation of these facets is further elucidated by the language of Section 31A of the Air Act where the Board can issue directions as afore-mentioned in exercise of its powers and performance of its functions under the Act. Thus, there has to be a direct nexus between the directions contemplated under Section 31A of the Air Act and the powers and functions of the Board as contemplated under Sections 16, 17 and other relevant provisions of the Air Act. Once these Sections are read co-jointly, then it becomes clear that a direction which would ensure compliance of the conditions of the consent order and further the cause of prevention and control of pollution would be a direction permissible under law. Asking for the bank guarantee, as an interim measure, during which the industrial unit is called upon to comply with the conditions of the consent order, does not fall outside the ambit of statutory powers vested in the Board. Condition requiring a unit to furnish a Bank Guarantee - is it penal? - HELD THAT:- It is clear that a fine but unambiguous distinction between penalty and compensation has been accepted by courts and tribunals. Distinct and definite consequences flow from these actions. Their distinctions are procedural as well as consequential. A penal action cannot be permitted to take in its orbit, by process of overlapping, an action which is patently compensatory in nature. Striking a balance between environmental interest and sustainable development would require the expert bodies like the Boards to follow a path which would permit industrial growth and still protect the environment without allowing any irretrievable injury to the environment - In the case in hand, the regulatory regime under the Air Act permits taking of harsher steps in the nature of closure and prohibitory directions. Therefore, permitting a unit to operate for a limited period upon furnishing a Bank Guarantee for compliance of the conditions/directions imposed in the consent order, being an order of lesser gravity and consequences, would be permissible. It is in the interest of sustainable development and is even beneficial to the industry itself. The Bank Guarantee asked for is for compliance, compensation for environmental restoration, if required, and is not punitive in nature. There are no hesitation in holding that the invocation of the bank guarantee by the Board, in its satisfaction, is justifiable and is in accordance with law - appeal allowed in part. Issues Involved:1. Jurisdiction of the Board to require industrial units to furnish a bank guarantee.2. Nature of the invocation of the bank guarantee by the State Board.3. Validity of the order of the appellate authority.4. Compliance with the terms of the bank guarantee.5. Relief entitlement of the appellant.Detailed Analysis:Issue 1: Jurisdiction of the Board to require industrial units to furnish a bank guaranteeThe Tribunal examined whether the decision of the State Pollution Control Board (Board) to require industrial units to furnish a bank guarantee was within its jurisdiction. The Tribunal held that the Board's resolution requiring a bank guarantee was within its statutory powers under the Water (Prevention and Control of Pollution) Act, 1974 (Water Act) and the Air (Prevention and Control of Pollution) Act, 1981 (Air Act). The Board's power to issue directions under Section 31A of the Air Act includes regulatory measures to ensure compliance with environmental standards. The Tribunal emphasized that the requirement for a bank guarantee was not penal but compensatory and regulatory, aimed at ensuring compliance and addressing environmental damage. The Tribunal concluded that the Board's resolution was lawful and within its jurisdiction.Issue 2: Nature of the invocation of the bank guarantee by the State BoardThe Tribunal analyzed whether the invocation of the bank guarantee by the Board was penal and thus impermissible under the Air Act and the Water Act. It was determined that the invocation of the bank guarantee was not penal but compensatory. The Board's action was aimed at ensuring compliance with environmental standards and addressing environmental damage caused by non-compliance. The Tribunal distinguished between penal actions, which are punitive, and compensatory actions, which are remedial and aimed at restoring environmental harm. The invocation of the bank guarantee was found to be in accordance with the terms of the guarantee and the statutory powers of the Board.Issue 3: Validity of the order of the appellate authorityThe Tribunal examined the order of the appellate authority, which had set aside the Board's decision to forfeit the bank guarantee. The Tribunal found that the appellate authority's order suffered from errors of fact and law. The appellate authority had taken into consideration irrelevant matters and ignored relevant ones. The Tribunal noted that the appellate authority failed to consider the cumulative effect of multiple inspections and reports indicating non-compliance by the industrial unit. The appellate authority's reliance on the affidavit filed by the industry, which mentioned 'deliberate' violation, was misplaced. The Tribunal held that the order of the appellate authority was liable to be set aside.Issue 4: Compliance with the terms of the bank guaranteeThe Tribunal assessed whether the invocation of the bank guarantee was in accordance with its terms. The bank guarantee required the industry to operate pollution control systems effectively and meet prescribed standards to the satisfaction of the Board. The Tribunal found that the Board had objectively assessed the industry's compliance through multiple inspections and reports. The Board's decision to invoke the bank guarantee was based on persistent non-compliance and environmental violations by the industry. The invocation was found to be proper and justified, as it was in line with the terms of the bank guarantee.Issue 5: Relief entitlement of the appellantThe Tribunal partially allowed the appeal, setting aside the order of the appellate authority. The Tribunal directed that the amounts received by the Board from the encashment of the bank guarantee should be utilized for compensatory purposes, including environmental restoration and installation of pollution control devices. The Board was instructed not to use the forfeited amount for any other purposes. The Tribunal emphasized the need for a clear inspection policy by the Boards and the importance of granting consent to operate for substantial periods to ensure compliance with environmental standards.General Discussion:The Tribunal highlighted the necessity for Pollution Control Boards to have a transparent inspection policy and grant consents for longer periods to ensure compliance with environmental standards. The Tribunal directed that consents should be granted only to units that have installed required pollution control devices and are compliant with environmental norms. The Board should adopt a time-targeted action plan for compliance and invoke bank guarantees for environmental compensation and restoration in case of non-compliance.Conclusion:The Tribunal concluded that the Board's requirement for a bank guarantee was lawful and within its jurisdiction. The invocation of the bank guarantee was compensatory and justified. The appellate authority's order was set aside, and the Board was directed to use the forfeited amount for environmental restoration. The Tribunal emphasized the need for a clear inspection policy and longer consent periods to ensure compliance with environmental standards.