This article has been written by Nikhil Sikka.
In these times of advancement, we are living a life full of luxuries. We are running behind comfort, while at the same time corporations are pushing their limits to create and profit from anything they can sell. With all these technological advancements we keep adding more to these comforts.
Blinded by these luxuries, we fail to look at the flip side i.e. the harm inflicted by these corporations and industries upon the environment. Ever since the Environment (Protection) Act, 1986 (hereinafter referred to as the Act) was passed after the Bhopal Gas Tragedy, the legislature had been continuously amending and passing new laws and the Supreme Court had heard an abundance of related cases. In spite of this the legal system of our country, intentionally or unintentionally, is unable to take on the situation with full force. In this article, I will examine some of the issues with the effectiveness of the Supreme Court in environmental law matters and how the fixing of individual liability would help in tackling such situations in a better way rather than penalising the corporations.
Role Of judiciary
The Supreme Court was broadening the horizons of Article 21 of the Constitution and it was the case of Municipal Council, Ratlam v. Shri Vardhichand & Ors., where the Supreme Court interpreted the ‘Right to Life’ to include ‘Right to Wholesome Environment’. This could be construed as the first step towards preserving the environment, prior to the Act. And acknowledging the facts in Olga Tellis v. Bombay Municipal Corporation and relaxing the Locus Standi rule for the filing of Public Interest Litigation (PIL), the Supreme Court portrayed their concern towards environmental protection and establishing an effective legal system or at least litigation process to curb the existing problems.
Downward trend of the ability to regulate
The Judiciary, being considered as an independent body under the Constitution, has some overlaps in its functioning due to the asymmetric federal nature of the Constitution. From the enactment of the Act till the early 2000s, there were a plethora of cases and the Supreme Court dealt with them in an uncompromising manner. But ever since the Environmental Impact Assessment Policy of 2006, this effectiveness is experiencing a downtrend and the recent EIA notification 2020 is further tying the hand of the judiciary. The judiciary is dependent on the legislature to pass laws and on the executive for their enforcement after interpretation by them.
After the LPG policies of 1991, corporations from all around the world have seen the Indian market as an opportunity and these corporations employ huge lobbying efforts to make these regulations less stringent upon them as it increases their cost in the short run and reduces the profit.
It is possible that these lobbying efforts are the major reason that the EIA regulations have been diluted constantly. In the 2006 policy, two categories of projects were introduced and one of the subheads under these two didn’t require any governmental clearance, which was blatantly abused by the state governments to pass those projects that didn’t even classify under this category.
The circumstance got worse in the 2020 policy as it allowed for the Post-Facto approval of projects and bypassing the EIA easier with the government deeming it as a ‘strategic’ project. The Constitution has blessed the Supreme Court with the power to take suo moto cognisance of matters where they can see prima facie legal violations and no engagement from the government or the public.
The Court has over time developed into a ‘policy evolution forum’, a role it is ill-equipped to play. The active lobbying efforts by corporations and dependence of the judiciary on the executive for enforcement cost them their effectiveness as, “the executive fails to enforce judicial decisions either because it does have the resources to do so or because it believes that the political and economic costs of enforcement far outweigh the benefits”. This involvement of political cost analysis affects the real interests of the masses for the greed of a few. And the judiciary tactically balancing this situation decides for selective enforcement and compensatory regulations.
Application of established judicial principles and case laws
While deciding upon any of the environmental law cases, the court relies on the established principles and doctrines such as Inter-generational Equity, Polluter Pays Principle, Precautionary Principle and Public Trust Doctrine.
The decision of this court in AP Control Pollution Board v. Prof. M. V. Nayadu was exemplary. Based on the futuristic approach of the Precautionary principle, it was held that the precautions must be taken to preserve the environment irrespective of the availability of scientific evidence and not to wait for the negative impact to materialize and surface to initiate any precautionary measures in this aspect.
The same level of scrutiny was involved while implementing the Public Trust Doctrine in M. C. Mehta v. Kamal Nath, where the court barred the attempted diversion of the river flow to support commercial activities, causing detriment to the public and environment in the course of action.
All these principles are preventive principles somewhat based on the compensatory scheme of the Polluter Pay Principle. But the real question here is whether this principle adopted by the Supreme Court is enough to curb environmental degradation and restrict the corporations from repeating the same thing in future.
In Vellore Citizens’ Welfare Forum v. Union of India, the court adopted the 1972 Polluter Pays Principle to contend with the situation. Similar to the absolute liability in Torts law, an absolute liability was imposed on the polluter to compensate the affected people for the damage caused. They went a step ahead and extended the scope of this liability to bring within its ambit the cost of restoration of the environment for the harm inflicted by the polluter.
The same principle was upheld in the case of the Indian Council for Enviro Legal Action v. Union of India and a fine of INR 10 Lakh was imposed on HACL for prolongment of the proceedings. The noticeable point here is that the principle used by the courts to decide environmental law violation cases is almost 50 years old.
Though it was ahead of its time, the actual effects of environmental degradation can only be seen in the long term and have started surfacing recently. It would be abysmal for the environment if we ignore the recent globalisation trends and stay in denial regarding the influence of multinational corporations on the legal system of a country. One such example is Adani Power Limited, a huge corporation whose projects were approved by the government, is now fighting a class-action suit in the United States of America for its detrimental environmental practices in Gujarat, while the case is still pending in India. This calls for the alteration of the age-old principle that was being followed all around the world.
Any corporation is considered as a separate being from its owners and has its own legal existence as laid down in Salomon v. A. Salomon, but that does not imply that the management can’t be considered liable for its action. Though having a legal existence, the corporation works through the actions of its Board of Directors and Executive Management.
Relying on the observations from the above-mentioned cases, whenever a corporation is sued for environmental violations, they undergo years of litigation and if there is no out of court settlement and they are found guilty, they are finned to compensate the victims, environment and sometimes the future generations under the Inter-generational Equity rule.
Moreover, the court prohibits them from conducting any such activity in future. This might seem very progressive but, in such situations, seeing beyond the obvious is very crucial. This has not prevented the corporations from continuing their operations at the cost of the environment as the amount of profits they generate from such activities, keeping in mind the prolonged and arduous process of litigation and delayed surfacing of environmental degradation, outperforms the fees and the fines paid by these companies.
Another page to this is that the corporations are managed by the board along with executive management who get hefty salaries, fixed salaries, while the fees and fines paid by the corporations are actually paid out of the profits and reserves, which otherwise would have been distributed among the shareholders.
Though being in its infant stage of discussions under Good Corporate Practices, it is a violation of the duties of a director towards its shareholders under Section 166 of The Companies Act, 2013. And in a way, these individuals get away with their mischief using someone else’s money.
One of the most recent environment-related scandals is the Volkswagen Emission Scandal. It first came to light in August of 2015 in the USA, leading to the opening of floodgate for litigation all around the world.
This resulted in a freefall in the share prices and the company’s reputation was on the verge of collapsing. Due to this rising pressure, the CEO Martin Winterkorn resigned in September 2015. After investigations began, the same results were found around the world. Though there were emails exchanged between Winterkorn and the management agreeing to this, he denied having any knowledge in his deposition by US authorities.
There was nothing to point the liability over him and other directors as either there is no law in that regard and even if there is, then in that company and shareholders are put above the interest of the environment. Thus, the company was just charged with cheating on the emission results.
In the USA, Volkswagen was fined $4.7 billion for environmental violation and to give buyback options to all 475000 customers ranging from $12475-$44176, while when the car was launched its starting price was $38000 ranging all the way up to $76000. In Australia, it was $125 million, INR 500 crore in India, £90 million in the UK but all this was a small fraction of what they made.
The Securities and Exchange Commission of the USA indicted Winterkorn for fraud in 2019 following which Germany did the same and filed a case against him and four other executives, thus becoming the closest any country came to levy individual liability. If during the current situation of the pandemic, it is not feasible then at least the same individual liability must be fixed under the Companies Act and eventually the Supreme Court must broaden its ambit to include the same under environmental law violations.
Having a healthy environment is crucial for our survival on earth and the same is also a part of Article 21 i.e. Right to Life. Having a short-term perspective in mind, we chase comforts and take the environment for granted. I hope that the Supreme Court gets its autonomy back to deal with environmental law violations like they did post the Bhopal Gas Tragedy till the 2000s.
Moreover, it is not possible to rule out the existence and involvement of giant corporations in lawmaking via lobbying, establishing the individual liability of the executive management of such corporations, would drive them to scrutinize the projects with higher authority. Going hand in hand with this would be the implementation of property rule i.e. penal provisions rather than compensatory ones. This would be a tough journey for the Supreme Court Justices, given the current political-social-economic scenario. Apart from the individual efforts, the effective involvement of the Supreme Court is our only hope to secure a bright future with a healthy environment.
- The Environment (Protection) Act, 1986, No. 29, Acts of Parliament, 1986 (India).
- Municipal Council, Ratlam v. Shri Vardhichand & Ors, 1980 AIR 1622.
- Olga Tellis v. Bombay Municipal Corporation, 1986 AIR 180.
- Shibani Ghosh, Demystifying the Environmental Clearance Process in India, 6 NUJS L. Rev. 433, (2003).
- EIA Notification, S.O. 1533, September 14, 2006, http://www.moef.nic.in/ legis/eia/so1533.pdf.
- Lavanya Rajamani, Public Interest Environmental Litigation in India: Exploring Issues of Access,
- Participation, Equity, Effectiveness and Sustainability, 3 Environmental Law J. 293, 308 (2007).
- Shalini Iyengar, Nives Dolšak and Aseem Prakash, Selectively Assertive: Interventions of India’s Supreme
- Court to Enforce Environmental Laws, 11 SUSTAINABILITY J. 1, 1 (2019).
- AP Control Pollution Board v. Prof. M. V. Nayadu, (1994) 3 SCC 1.
- M. C. Mehta v. Kamal Nath, (1997) 1 SCC 388.
- Vellore Citizens’ Welfare Forum v. Union of India, (1996) 5 SCC 647.
- Indian Council for Enviro Legal Action v. Union of India, 1996 AIR 1446.
- Salomon v. A. Salomon,  UKHL 1.
- The Companies Act, 2013, No. 18, Acts of Parliament, 2013 (India).
- Alex Gibney, Dirty Money- Hard NOx, NETFLIX (January 28. 2018),
- This settlement includes $2.7 billion for environmental mitigation charges and $2 billion for development of
- clean-emissions infrastructure which is payable over the course of 4 years.
- Nathan Bomey, Judge approves $15 Billion Volkswagen Settlement, USA TODAY https://www.usatoday.com/story/money/cars/2016/10/25/volkswagen-settlement-approved/92719174/.
- Australian Competition and Consumer Commission v. Volkswagen Aktiengesellschaft (2019) FCA 2166.
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