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Keystone Realtors Pvt. Ltd. Vs. Shri Anil V. Tharthare [03/12/19]

Section

Keystone Realtors Pvt. Ltd. Vs. Shri Anil V. Tharthare Ors.

[Civil Appeal No. 2435 of 2019]

Dr. Dhananjaya Y Chandrachud, J

1.
The present Civil Appeal arises from an order dated 11 February 2019 of the
Principal Bench of the National Green Tribunal1. In its order, the NGT held that the
increase in the total construction area of the appellants project was an
“expansion” under a notification (bearing number S.O. 1533) dated 14 September
20062 of the Ministry of Environment and Forests. The NGT found that the appellant had undertaken an
“expansion” as set out in Paragraph 2 of the EIA Notification without complying
with the regulatory procedure prescribed. The appellant was directed to deposit
an amount of Rupees one crore with the Central Pollution Control Board. Noting
that the construction at the project site had been completed, the NGT appointed
a five-member expert committee to study the impact of the appellants expanded project
and to suggest remedial measures. The facts

2.
The appellant is the project proponent of a residential redevelopment, called Oriana Residential Project
situated at CTS no 646, 646 (Pt) Gandhinagar, Bandra (East), Mumbai 400050. On
8 June 2010 the appellant received a Commencement Certificate to carry out the
development and erect a building situated at the project property. The
appellant began construction. When the construction commenced, the total
construction area was 8,720.32 square metres. The ambit of the project was
expanded, and the constructed area was increased to 32,395.17 square metres.
Under the EIA Notification, an Environmental Clearance was necessary if the
total construction area exceeded 20,000 square metres. Hence, the appellant
applied for an EC under the EIA Notification.

3.
The fourth respondent, the State Level Expert Appraisal Committee for
Maharashtra recommended the grant of an EC for the project. On 2 May 2013 the third respondent, the
State Level Environment Impact Assessment Authority for Maharashtra6, based on the
recommendations of the SEAC granted an EC. It is not in dispute that at the
time when the EC dated 2 May 2013 was granted, the total construction area of
the project was 32,395.17 square metres. The grant of the EC was conditional on
the appellant obtaining a “consent for tablishmentfrom the Maharashtra
Pollution Control Board under the Air (Prevention and Control of Pollution) Act
1981 and the Water (Prevention and Control of Pollution) Act 1974.

4.
By a letter dated 24 September 2013, the appellant informed the Environment
Department of the Government of Maharashtra, the second respondent, that the
construction area was being further increased by 8,085.71 square metres, as a
result of which the total construction area of the project would stand enhanced
to 40,480.88 square metres. In its letter, the appellant sought an “amendment to the EC dated 2
May 2013 by the third respondent to reflect the increase in the total
construction area. On 13 March 2014, the third respondent granted an “amendment to the EC dated 2
May 2013 on the ground that there was only a “marginal increase in built up and
construction area”. The third respondent noted the changes in the specification
of the project as follows:

5.
The first respondent, claiming to be a resident of MIG Colony, Gandhinagar,
Bandra East, Mumbai, challenged the grant of the amended EC dated 13 March 2014
before the Pune Bench of the NGT. In response, the appellant filed two
applications, challenging the standing of the first respondent and contending
that the challenge was barred by limitation. By an order dated 4 May 2016, the
Pune Bench of the NGT rejected the applications questioning the maintainability
of the proceedings and setting up the bar of limitation. The appellant filed a
writ petition before the High Court of Judicature at Bombay to challenge the
decision of the Pune Bench of the NGT. The Bombay High Court, allowing the writ
petition held by an order dated 12 August 2016, that the appeal was not maintainable
at the behest of the first respondent, and the challenge against the grant of
the amended EC dated 13 March 2014 was barred by limitation. By an
administrative order dated 31 July 2018, the dispute was transferred from the
Pune Bench of the NGT to the Principal Bench which heard the parties and
delivered the impugned order.Relevant clauses of the EIA Notification

6.
The present dispute raises important questions regarding the interpretation the
EIA Notification. The EIA Notification seeks to ensure the protection and reservation
of the environment during the execution of new projects and the expansion or
modernisation of existing projects. It imposes restrictions on the execution of
new projects and on the expansion of existing projects, until their potential
environmental impact has been assessed and approved by the grant of an EC.
Paragraph 2 of the EIA Notification reads thus:

“2.
Requirement for prior Environmental Clearance (EC):- The following
projects or activities shall require prior environmental clearance from the
concerned regulatory authority, which shall hereinafter be referred to as the
Central Government in the Ministry of Environment and Forests for matters
falling under Category “A in the Schedule and at State level the State Environment Impact Assessment Authority (SEIAA) for
matters falling under Category “B in the said Schedule, before any
construction work, or preparation of land by the project management except for
securing the land, is started on the project or activity:

(i) All new projects or activities listed in the Schedule to this notification;

(ii)
Expansion and modernisation of existing projects or activities listed in the
Schedule to this notification with addition of capacity beyond the limits
specified for the concerned sector, that is, projects or activities which cross
the threshold limits given in the Schedule after expansion or modernisation;

(iii)
Any change in product- mix in an existing manufacturing unit included in
Schedule beyond the specified range.”

The Schedule to the
EIA Notification classifies potential projects into Category “A and Category “B based on their size
and potential environmental impact. Category “A projects require project proponents to
secure an EC from the Ministry of Environment, Forests and Climate Change.
Category “B projectsrequire project proponents to secure an EC from the SEIAA, based on the recommendations
of the SEAC. Where a project falls within the parameters stipulated in the
Schedule, paragraph 2 of the EIA Notification provides that no construction
work shall begin unless an EC is granted in regard to three types of activity:

(Emphasis supplied).

(i)
new projects or activities provided in the Schedule, (ii) expansion or odernisation
of existing projects or activities provided in the Schedule, and (iii) changes
in the product mix in existing manufacturing units provided in the Schedule
beyond the specified range. The present dispute raises questions as to how the
second type of activity, the “expansion” of existing projects, should be construed
under the EIA Notification.

7.
In order to secure an EC, the project proponent must submit an application

in the manner set out in Form 1 and Supplementary Form 1A (if applicable) of the

EIA
Notification. Under paragraph 7(i) of the EIA Notification, the project proponent
must also submit a pre-feasibility report. However, in the case of projects
under item 8 of the Schedule, only a conceptual plan is required to be submitted.
Paragraph 7(ii) of the EIA Notification states that: “7(ii) Prior
Environmental Clearance (EC) process for Expansion or Modernisation of Change
of product mix in existing projects:

All
applications seeking prior environmental clearance for expansion with increase
in the production capacity beyond the capacity for which prior environmental clearance
has been granted under this notification or with increase in either lease area or production
capacity in the case of mining projects or for the modernisation of an existing
unit with increase in the total production capacity beyond the threshold limit
prescribed in the Schedule to this notification through change in process and
or technology or involving a change in the product mix shall be made in Form
1 and they shall be considered by the concerned Expert Appraisal Committee or
State Level Expert Appraisal Committee within sixty days, who will decide on
the due diligence necessary including preparation of EIA and public
consultation and the application shall be appraised accordingly for grant
of environmental clearance.”

(Emphasis supplied).

Clause (ii) of paragraph 2 of the EIA Notification requires the project proponent to secure an EC from the relevant regulatory authority prior to undertaking any “expansion”
of an existing project. Paragraph 7(ii) further stipulates that all applications
for an EC in cases of “expansion” resulting in the increase of production
capacity or lease area beyond the capacity/area stipulated in the previous EC
shall be made in the manner set out in Form 1 or 1A (as applicable).

8.
The appellants application in Form 1 acknowledges that the project fell under entry 8(a) of Schedule 1 of the EIA
Notification. Entry 8 deals with “Building and Construction projects having a
built-up area of or greater than 20,000 square metres but less than 1,50,000
square metres. Entry 8 of the
Schedule to the EIA Notification is as follows:

Issue

In applying for the original EC, the appellant submitted an application in Form 1 as required under the provisions of the EIA Notification. The total construction
area identified in the appellants Form 1 was 32,395.17 square metres.
However, in September 2013 the appellant informed the second respondent of an
increase by 8,085.71 square metres as a result of which the total construction
area of the project would be 40,480.88 square metres. In seeking an “amendment to the EC dated 2
May 2013 the appellant did not submit an updated Form 1. Further, the
“amendment to the EC was granted by the SEIAA without the recommendations of the SEAC. The issue before
this Court is whether the “amended EC dated 13 March 2014 granted by the SEIAA
without following the procedure stipulated in paragraph 7(ii) of the EIA
Notification is valid.

Submissions

10.
Mr Mukul Rohatgi, learned Senior Counsel appearing on behalf of the appellant
submitted that: (i) When construction began, the total construction area of
theappellants project was 8,720.32 square metres. As the EIA Notification requires projects with a total
built up area of or more than 20,000 square metres to procure an EC prior to
the start of construction, no EC was required before construction of the appellants project commenced;

(ii)
Pursuant to the first increase, when the appellants project crossed the
20,000 square metre threshold provided for in the EIA Notification, the
appellant submitted a Form 1 and was granted a valid EC dated 2 May 2013 by the
third respondent;

(iii)
Pursuant to the second increase, the built up area of the appellants project only
marginally increased by 8,085.71 square metres to a total construction area of
40,480.88 square metres, which is within the upper limit of 1,50,000 square
metres prescribed by entry 8(a) of the Schedule to the EIA Notification.
Therefore, the second increase was not an “expansion” within the meaning of
clause (ii) of paragraph 2 of the EIA Notification and no fresh Form 1 or EC
was required at the time of the second increase;

(iv)
Clause (ii) of paragraph 2 only applies to situations where the project crosses
the lower or upper threshold limits stipulated in the Schedule. Any increase in
production capacity or construction area within the limits set out in the
Schedule would not constitute an “expansion” within the meaning of Clause (ii)
of paragraph 2 and does not require compliance with the procedure under
paragraph 7(ii) of the EIA Notification;

(v) The increase in the appellants project is only marginal and does not have an adverse impact on the
environment;

(vi) The SEIAA applied its mind to the appellants request for an “amendment; noted that the
increase in construction area was only marginal and issued an amendment to the
original EC dated 2 May 2013; and

(vii) The NGT had no basis to impose the fine of Rupees one crore on the appellant.

11. Joining issue with the above submissions, Mr Aditya Pratap, learned counsel appearing on behalf of the first respondent submitted that:

(i) Under clause (ii) of paragraph 2 read with paragraph 7(ii) of the EIA Notification, any expansion beyond the “threshold limit” requires a fresh EC. The appellants project had crossed
the threshold limit of 20,000 square metres and the second increase of 8,085.71
square metres constituted an “expansion beyond the threshold limit and hence required a
fresh EC;

(ii) Once a project
breaches the lower threshold limit set out in the Schedule to the EIA
Notification, any expansion or modernisation, even within the upper threshold
set out in the Schedule, will require the submission of a fresh Form 1 and the
matter to be placed before the Expert Appraisal Committee or the SEAC, as
applicable in accordance
with paragraph 7(ii) of the EIA Notification;

(iii)
Adopting the appellants interpretation of
clause (ii) of paragraph 2 would defeat the object and purpose of the EIA
Notification as a whole. It would allow project roponents to incrementally
increase the construction area and over time significantly impinge on the environmental
impact of the project without seeking a fresh EC;

(iv)
If the law prescribes an act to be done in a particular manner, it must be done
only in that manner and no other. Under paragraph 7(ii) of the EIA
Notification, it was incumbent on the SEIAA to place the matter before the SEAC
for appraisal and recommendations; and

(v)
The EIA Notification is an operationalisation of the precautionary principle,
which forms a part of the environmental law of India. The EIA Notification must
be read in a manner which gives effect to the precautionary principle. Interpreting
paragraphs 2 and 7

12.
The central controversy between the parties to the present dispute is the manner
in which paragraphs 2 and 7 of the EIA Notification should be interpreted. Clause
(ii) of paragraph 2 of the EIA Notification stipulates that a project proponent
shall require an EC prior to the start of construction in the case of an “expansion”.
Clause (ii) uses the phrase “expansion…beyond the limits specified for the
concerned sector”. The first respondent sought to lay emphasis on this construction
to argue that any expansion beyond the lower limit stipulated in the Schedule
would attract the requirement of a prior EC under paragraph 2.However, the
above language in clause (ii) is further qualified by the phrase “that is,
projects or activities which cross the threshold limits given in the Schedule after
expansion or modernisation.” A plain reading of the second half of clause (ii) would
indicate that it applies to cases where a project was initially below the threshold
limits stipulated in the Schedule but after the proposed expansion, would
breach the threshold limits. Clause (ii) of paragraph 2 of the EIA Notification
therefore would not appear to cover a case where a project had already crossed
the lower threshold limit set out in the Schedule and the expansion does not
cross the upper limit stipulated by the Schedule.

13.
However, clause (ii) of paragraph 2 must be read with paragraph 7(ii) of the
EIA Notification. Paragraph 7(ii) lays down the exact procedure to be followed by
a project proponent in the case of an expansion. Two crucial points must be noted
with respect to paragraph 7(ii). First, it uses the phrase, “expansion with increase
in production capacity beyond the capacity for which prior environment clearance
has been granted”. Second, the qualifying language referring to breaching the
threshold limits “after expansion” is absent. An “expansion” can occur even
after the grant of an EC when the project first crossed the lower limit stipulated
in the threshold and it is not necessary for the project to breach the upper
limit after the expansion. Therefore, a close reading of paragraph 7(ii) would
support the interpretation put forth by the first respondent-that even after obtaining
an EC if the project is expanded beyond the limits for which the prior EC was
obtained, a fresh application would need to be made even if the expansion is
within upper the limit prescribed in the Schedule.

14.
The dangers effectively articulated by the learned counsel for the first respondent
are real. If clause (ii) of paragraph 2 does not cover a case where the expansion
is within the limits stipulated by the Schedule, a project proponent may incrementally
keep increasing the size of the project area over time resulting in a significant
increase in the project size without an assessment of theenvironmental impact
resulting from the expansion. Such an outcome would defeat the entire scheme of
the EIA Notification which is to ensure that any new or additional
environmental impact is assessed and certified by the relevant regulatory uthorities.

In
the present case, the lower limit of Entry 8(a) of the Schedule is a built up
area of 20,000 square metres and the upper limit is 1,50,000 square metres. It
cannot be doubted that the environmental impact of a construction of 1,50,000
square metres is drastically more than construction of 20,000 square metres. If
the appellants argument is accepted in totality, a project proponent could potentially secure an EC for
constructing 20,000 square metres and by “amendment steadily increase
the area of construction up to 1,50,000 square metres without submitting an
updated Form 1 or any substantive review by the SEAC.

15.
We note that subsequent to the EIA Notification being published in 2006, a draft
notification was issued on 19 January 2009.7 The draft notification proposed the following
amendment: “in para 2 [of the EIA Notification], after sub-para (iii), the following shall be
inserted; namely:- However modernisation or expansion proposals without any increase in pollution load,
and, or without any additional water and or land requirement are exempted from the provisions of this Notification: Provided that, a self certification, stating that the proposals shall not involve any additional pollution load, waste generation or water requirement, be submitted to the regulatory authority by the project proponent.”

Prior
to adopting the draft notification, hearings were conducted and written comments
were solicited from various stakeholders including: (i) Central Ministries and
Departments, (ii) State Governments and their Agencies, (ii) Industries and
their Associations and (iv) Civil Society including NGOs. A committee was
constituted by the Ministry of Environment and Forests, Government of India
which published a report in October 2009. The committee specifically
recommended against the adoption of the above amendment, noting:

“The
amendments propose to exempt modernisation and expansion of projects based on a
self certification by project authorities that there is no increase in
pollution load. It is totally unacceptable that the modernisation and expansion
of projects be removed from the environmental
clearance regime, with or without the requirement of self certification. There are several industries
operating in critically polluted areas or are in violation of their
environmental clearance conditions, which need to be considered before the
expansion of a project is considered. What is to be considered is not just
whether there is an increase in pollution load but also the current impact of the
project and its compliance with environmental clearance conditions. We can
provide clear examples wherein the noncompliance of the clearance conditions
has not been considered while granting clearance for expansion which includes
adding new components to the existing industrial operations etc.

This
has allowed several projects to continue their activities and expand despite
blatant non compliance. Finally, it is only with industrial, thermal power and
other such related operations that one can decide on parameters of pollution. Development
projects like highways, airports and other infrastructure projects which seek
to expand might have a detrimental impact due to factors such as change in
land use (i.e. construction over a wetland, grassland or agricultural land
etc). Despite this, the project proponent can certify that there is no
change in pollution load and hence expansion is to be allowed. The current
process seeks
a detailed EIA report to determine whether impacts can be mitigated. If the
amendment is brought into force, it will simply do away with this critical and
necessary step in the environmental clearance process. Therefore, this
amendment should not be allowed.

The
draft notification takes a myopic view of environmental and social impact of
modernisation and expansion. Any modernisation/expansion projects will
necessarily entail increase in production, increase in transportation, increase
in pressure on the local infrastructure and local natural resources and
increase in the pollution load during the construction phase. So, even if a
modernisation/expansion does not lead to an increase in the pollution load or
water or land requirement within the factory premises during the operation
phase, it will lead to an increase in environmental and social impact outside
the premise.”

(Emphasis supplied).

The
draft amendment was not adopted in subsequent amendments to the EIA Notification.
We find considerable merit in the observations of the committee that the
requirement of an EC at the time of expansion forms a critical step in the environmental
clearance regime. According to the committee, it assists officials not
just in evaluating and mitigating any adverse impact caused by the expansion but
also in assessing whether the project proponent is in compliance with their existing
obligations. Crucially, any form of expansion necessarily puts a strain on the
local environment and infrastructure and needs to be carefully evaluated in a holistic
manner.

16.
In a case where the text of the provisions requires interpretation, this Court must
adopt an interpretation which is in consonance with the object and purpose of
the legislation or delegated legislation as a whole. The EIA Notification was adopted
with the intention of restricting new projects and the expansion of new projects
until their environmental impact could be evaluated and understood. It cannot
be disputed that as the size of the project increases, so does the magnitude of
the projects environmental
impact. This Court cannot adopt an interpretation of the EIA Notification which
would permit, incrementally or otherwise, project proponents to increase the
construction area of a project without any oversight from the Expert Appraisal
Committee or the SEAC, as applicable. It is true that there may exist certain
situations where the expansion sought by a project proponent is truly marginal
or the environmental impact of such expansion is non-existent.

However,
it is not for this Court to lay down a bright-line test as to what constitutes
a “marginal increase and what
constitutes a material increase warranting a fresh Form 1 and scrutiny by the
Expert Appraisal Committee. If the government in its wisdom were to prescribe
that a one-time “marginal increase (e.g. 5% or
10%) in project size, within the threshold limit stipulated in the Schedule,
could be subject to a lower standard of scrutiny without diluting the urgent
need for environmental protection, conceivably this Court may give effect to
such a provision. This would be subject to any challenge on the ground of their
being a violation of the precautionary principle. However, as the EIA
Notification currently stands, an expansion within the limits prescribed by the
Schedules would be subject to the procedure set out in paragraph 7(ii).

17.
At the time of the second increase, the total construction area of the appellants project was
enlarged from 32,395.17 square metres to 40,480.88 square metres. As a result
of the expansion, the appellant constructed sixteen additional flats which were
sold at the prevailing market rate. The appellant did not comply with the
procedure set out under paragraph 7(ii) of the EIA Notification but rather
sought an “amendment to the EC. The third
respondent did not require the appellant to submit an updated Form 1 nor was
the proposal processed and evaluated by the fourth respondent.

The
“amendment to the EC dated 13
March 2014 does not discuss the potential environmental impact of the increase
in construction area, but merely records that the construction area now stands
at 40,480.88 square metres. The procedure set out under paragraph 7(ii) of the
EIA Notification exists to ensure that where a project is expanded in size, the
environmental impact on the surrounding area is evaluated holistically considering
all the relevant factors including air and water availability and pollution,
management of solid and wet waste and the urban carrying capacity of the area.
This was not done in the case of the appellants project. It was not open to the third
respondent to grant an “amendment to the EC without following the procedure
set out in paragraph 7(ii) of the EIA Notification.

18.
We further note that as on the date of the impugned order construction at the
project site had already been completed. A core tenet underlying the entire scheme
of the EIA Notification is that construction should not be executed until ample
scientific evidence has been compiled so as to understand the true environmental
impact of a project. By completing the construction of the project, the
appellant denied the third and fourth respondents the ability to evaluate the environmental
impact and suggest methods to mitigate any environmental damage. At this stage,
only remedial measures may be taken. The NGT has already directed the appellant
to deposit Rupees one crore and has set up an expert committee to evaluate the
impact of the appellants project and suggest
remedial measures. In view of these circumstances, we uphold the directions of the
NGT and direct that the committee continue its evaluation of the appellants project so as to
bring its environmental impact as close as possible to that contemplated in the
EC dated 2 May 2013 and also suggest the compensatory exaction to be imposed on
the appellant.

19.
The appeal is dismissed. There shall be no order as to costs.

20.
Pending application(s), if any, shall stands disposed of.

……………………J. [Dr Dhananjaya Y Chandrachud]

……………………J. [Ajay Rastogi]

New Delhi;

December 3, 2019.

1
NGT

2
EIA Notification

3
CPCB

4
EC

5
SEAC 3

6
SEIAA

7
Notification S.O. 195 (E) dated 19 January 2009.

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