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What the Supreme Court held on Environmental Clearance for marginal expansions of projects

What the Supreme Court held on Environmental Clearance for marginal expansions of projects

Meera Emmanuel

The Supreme Court on Tuesday held that any form of expansion necessarily puts a strain on the environment and needs to be carefully evaluated. It also observed that it was not for the Court to lay down a test as to what constitutes a “marginal” increase, warranting the procedure for grant of a fresh Environmental Clearance.

The Division Bench of Justices DY Chandrachud and Ajay Rastogi however noted that if such expansion is not made conditional on the grant of an Environmental Clearance, “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 the environmental impact resulting from the expansion.”  The Court further observed,

“Such an outcome would defeat the entire scheme of the EIA Notification (2006) which is to ensure that any new or additional environmental impact is assessed and certified by the relevant regulatory authorities.”

The case at hand concerned an appeal filed by Keystone Realtors against a 2018 order of the National Green Tribunal (NGT), Pune. The NGT had pulled up Keystone for having carried out an residential complex redevelopment project in East Bandra, Mumbai without complying with the regulatory procedure for obtaining an Environmental Clearance as mandated by the Environmental Impact Assessment (EIA) Notification, 2006.

As penalty, the NGT had directed Keystone to deposit Rs 1 crore with the Central Pollution Control Board. Further, a five-member committee had also been appointed to study the environmental impact of the expanded project and to suggest remedial measures. An appeal was filed by Keystone challenging this NGT order before the Supreme Court.

Factual Background

The project in question had commenced in 2010 with a total construction area of 8,720.32 square metres. The ambit of the project was expanded to 32,895.17 square meters thereafter.

Pertinently, under the EIA Notification, an Environmental Clearance is necessary if the total construction area exceeds 20,000 square metres. Environmental Clearance is granted by the EIA authority on the recommendation of the Expert Appraisal Committee.

To expand the scope of its project to cover 32,895.17 square meters, Keystone applied for and was granted an Environmental Clearance on May 2, 2013.

However, in September 2013, Keystone informed the Maharashtra Environment Department that the construction area for the project was being further increased by 8,085.71 square metres, following which the total project area would stand at an enhanced 40,480.88 square meters.

This time round, however, Keystone did not apply for the grant of a fresh Environmental Clearance, given that the latest proposed expansion by itself did not exceed 20,000 square metres. Instead, they sought an “amendment” of the Environmental Clearance granted in May 2013 to reflect the increase in construction area. This “amendment” was granted as well by the EIA authority, on the ground that there was only a “marginal increase in built up and construction area”. In other words, Keystone was allowed to increase its project size to 40,480.88 square meters without an additional EIA being conducted.

A resident of Mumbai challenged the grant of this amended Environmental Clearance before the Pune Bench of the NGT, eventually leading to the NGT passing the order under challenge.

Attorney General Mukul Rohatgi
Attorney General Mukul Rohatgi

Relevant Law and Issue before the Court

As noted by the Supreme Court, the dispute involved the interpretation of clauses found in two paragraphs in the EIA Notification of 2006, i.e.

  • Paragraph 2, wherein it has been laid down, inter alia, that a prior Environmental Clearance is mandatory before expansion and modernisation of existing projectsClause (ii) provides that fresh clearance is required for “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.
  • Paragraph 7, which details the procedure to be followed in obtaining Environmental Clearance, including when it comes to expansion and modernisation of existing projects.

It was Keystone’s case that since Environmental Clearance had already been obtained for an expansion in May 2013, and since the further expansion of 8,085 square metres was “marginal”, it did not constitute an “expansion” warranting the need for a fresh clearance.  Senior Advocate Mukul Rohatgi appeared for Keystone, and further submitted that the “marginal” increase in appellant’s project would not have any adverse impact on the environment.

On the other hand, Advocate Aditya Pratap argued for the opposing respondent that once a project crosses the 20,000 square meters lower limit prescribed to make an Environmental Clearance mandatory, any further expansion in the project – regardless of how marginal it is – would require the grant of fresh clearance, after studying its likely environmental impact.

What the Supreme Court held on Environmental Clearance for marginal expansions of projects

What the Supreme Court held

The Bench eventually ruled against Keystone on a combined reading of Paragraphs 2 and 7 of the EIA Notification. It was noted that Clause (ii) of Paragraph 7 makes no distinction between initial expansion of a project beyond the 20,000 square metre threshold and further expansion of the project.

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.”

The Bench proceeded to explain that an expansion occurring after the grant of an Environmental Clearance (when the project first crossed the threshold limit) would also be subject to the procedure in Paragraph 7, even if the later expansion does not, by itself, cross the limit.

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.”

The Bench also concurred with the Advocate Pratap that an alternate interpretation would run counter to the purpose behind introducing the EIA Notification, i.e. to restrict development projects until their environmental impact is evaluated.

“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 … 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).

A contradictory consequence would follow if Keystone’s stance on the issue was accepted, the Court held.

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 appellant’s 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.” 

Therefore, the Court proceeded to dismiss Keystone’s appeal and uphold the NGT order. It also directed that the committee continues to evaluate Keystone’s project so as to bring its as close as possible to EC granted in 2013.

[Read the Judgment]