The Supreme Court of India has held that the National Green Tribunal (NGT) should not direct the Enforcement Directorate (ED) to prosecute individuals under the Prevention of Money Laundering Act, 2002 (PMLA). A bench comprising CJI B. R. Gavai and Justice K. Vinod Chandran quashed such a direction while expressing “serious doubts about the jurisdiction of the NGT” in this regard.
The ruling came in an appeal filed by M/s C.L. Gupta Export Ltd. challenging an NGT order. In the same judgment, the Court also set aside a Rs. 50 crore environmental compensation imposed by the NGT on the firm, holding that a company’s revenue has no nexus with the penalty for environmental damages.
Background of the Case
The proceedings began when Adil Ansari filed an application before the NGT alleging that M/s C.L. Gupta Export Ltd. was causing environmental degradation, illegally extracting groundwater, and releasing untreated effluents into a tributary of the Ganga river.
In response, the NGT constituted a Joint Committee of the Central and Uttar Pradesh Pollution Control Boards (CPCB and UPPCB). Initial reports noted several violations and computed a total environmental compensation (EC) of Rs. 2,49,71,157/-. The judgment notes that the appellant company deposited Rs. 1,16,39,727/-. However, a final report submitted on July 30, 2021, confirmed the company’s “full compliance with all prior recommendations/suggestions.” Despite this, the NGT proceeded to impose a higher penalty and directed a PMLA probe.
Arguments of the Parties
Advocate Sh. Vikas Singh, for the appellant, argued that the NGT’s direction for a PMLA probe was improper, citing the Supreme Court’s decision in Waris Chemicals (P) Ltd. v. U.P. Pollution Control Board. He also contended that the Rs. 50 crore compensation, based on the company’s turnover, was arbitrary and lacked any rational nexus.
The Pollution Control Board’s counsel, Mr. Saurabh Mishra, submitted that the NGT was within its power to enhance the penalty as a deterrent, but requested that the directions for ongoing monitoring be upheld.
Court’s Analysis and Decision
The Supreme Court, in its judgment authored by Justice K. Vinod Chandran, set aside the key directions of the NGT.
On the PMLA Investigation:
The bench quashed the direction to the Enforcement Directorate, relying on its ruling in Waris Chemicals (P) Ltd. and Vijay Madanlal Choudhary v. Union of India. The Court explained that a case under Section 3 of the PMLA is dependent on an “illegal gain of property as a result of the criminal activity relating to a scheduled offence.” In the present case, there was no FIR or complaint filed for any scheduled environmental offence.
Expressing strong reservations about the NGT’s powers, the Court stated, “This Court had also raised serious doubts about the jurisdiction of the NGT to direct the prosecution of individuals under the PMLA; which we fully subscribe to. The NGT should act within the contours of the powers conferred on it which is Section 15 of the NGT Act of 2010.”
On the Rs. 50 Crore Compensation:
The Court found the NGT’s methodology for imposing the penalty unlawful. Relying on its decision in Benzo Chem Industrial (P) Ltd., the bench stated, “It was categorically held that generation of revenue, or its quantum, would have no nexus with the amount of penalty to be ascertained for environmental damages.” The judgment added that “rule of law does not permit State or its agencies to extract a ‘pound of flesh’, even in environmental matters.”
On Closure and Future Monitoring:
While setting aside the NGT’s “sweeping direction” for closure, the Court upheld the directions related to continuous audit and monitoring, deeming them a “continuing process.”
The appeal was allowed, and the NGT’s order was set aside to the extent detailed above.
