New Delhi, Aug 25 (PTI) The Supreme Court has set aside an order of the National Green Tribunal imposing a Rs 50-crore fine on Moradabad-based handicraft exporter found in violation of environmental norms and said the rule of law does not permit the state or its agencies to extract a "pound of flesh" even in environmental cases.

In its August 22 verdict, a bench comprising Chief Justice B R Gavai and Justice K Vinod Chandran said while the company committed violations, the penalty -- based purely on its turnover -- lacked legal foundation.

The top court was also critical of a lengthy NGT judgement imposing the fine on CL Gupta Export Ltd, a Moradabad-based handicraft exporter, for the alleged violations of environmental norms.

The court expressed anguish and said the "application of mind" was not proportionate to the number of pages.

The verdict further noted judicious consideration was the "sum and substance" of adjudication and courts and tribunals, saying they ought to refrain from engaging in mere rhetoric by stating the law in general without a reference to the facts.

"We say nothing more and allow the appeal setting aside the order of the NGT to the extent noticed above,” it held.

The bench referred to a ruling discussing the question of imposition of penalties based on annual turnover. The NGT, in that case, was stated to have noticed company's revenue between Rs 100-500 crore and imposed a penalty of Rs 500 crore.

“The methodology adopted by the NGT for imposition of penalty was held to be totally unknown to any principle of law. We fully agree with the observation and add that rule of law does not permit state or its agencies to extract a ‘pound of flesh’, even in environmental matters,” the verdict said.

Referring to the present case, the verdict noted the NGT recorded the admitted turnover of the polluter firm to be Rs 550 crore.

“We still notice the absence of nexus between the turnover and the pollution alleged. In fact the penalty imposed on the appellant, by the statutory body was on the basis of a methodology framed by the CPCB, on the directions of the NGT. If at all the NGT was of the opinion that the EC imposed was minimal or low, it could have referred to the methodology framed by the CPCB and not merely looked at the revenue generation of the alleged polluter,” it said.

While striking down the penalty, the bench, however, said, "We make it clear that we have not considered the maintainability of the EC (environmental compensation) imposed by the PCBs and the statement regarding the penalty paid by the appellant, has not been verified. If the appellant has avenues to challenge the same, they would be left liberty, subject to the laws of limitation. The PCB would also be entitled to recover any shortfall or impose any further EC on non-compliance being detected.” The bench said it was not disputing non-compliance of any of the statutory conditions or those imposed by the pollution control boards (PCB) in mitigation of the unit specific pollution.

“We are also convinced that there could be constant monitoring of the unit especially looking at the past violations. But, we are not convinced that having accepted the report of compliance, there was any warrant for a sweeping direction to close such of the divisions of the appellant which are falling short of the compliance," it added.

Reserving the right of the jurisdictional PCBs to proceed against any violation of statutory or other conditions imposed, the top court held the NGT direction deserved to be set aside.

The bench also set aside another direction of the NGT asking the Enforcement Directorate to launch a money laundering probe against the polluting firm, saying the green body should "act within the contours of the powers" under Section 15 of the NGT Act of 2010.

The bench clarified of not observing whether or not an offence was applicable for it was not "within its ken".

“We have to necessarily set aside the directions issued other than that which permits a continuous monitoring and audit of the pollution control measures to ensure a pollution free, compliance regime,” it said. PTI SJK SJK AMK AMK