NGT pioneers PMLA linkage for environmental violations and sets a scalable, deterrent compensation regime for Tarapur MIDC

Introduction

This commentary analyses the judgment of the National Green Tribunal, Principal Bench, New Delhi, in Akhil Bhartiya Mangela Samaj Parishad v. Maharashtra Pollution Control Board & Ors. (OA No. 64/2016 (WZ), final order dated 24 January 2022). The case involved a community-led challenge by traditional fishing communities to systemic water pollution emanating from Tarapur Industrial Area (MIDC Tarapur), especially from the Common Effluent Treatment Plant (CETP) operated by Tarapur Environment Protection Society (TEPS), and from individual industries, resulting in contamination of drains, creeks (Navapur–Dandi, Kharekuran–Murbe), groundwater, and the Arabian Sea.

The Tribunal confronted decades-long evidence of untreated or partially treated discharges, overloading and chronic underperformance of the CETP, and institutional failures by regulators and infrastructure providers. The proceedings consolidated extensive pleadings, multiple joint committee reports (CPCB, NEERI, IIT, IIM, MPCB), and a large corpus of Supreme Court environmental jurisprudence. Central legal issues were:

• Whether industries and the CETP were violating environmental norms, causing pollution and ecological damage;
• How to determine an appropriate, deterrent Environmental Compensation (EC) and who should bear it;
• How to remedy environmental harm and fund restoration; and
• Whether wider accountability, including under the Prevention of Money Laundering Act, 2002 (PMLA), can and should be invoked for environmental crimes.

Summary of the Judgment

The NGT conclusively found severe, continuing pollution of water bodies and groundwater emanating from MIDC Tarapur due to:

• Industry-wide breaches in consent conditions and standards (BOD, COD, TSS, TDS, phenols, ammonia), with repetitive exceedances documented from 2011–2019; and
• TEPS’s CETP operating beyond its consented 25 MLD capacity, chronically failing to meet outlet standards, with systemic O&M deficiencies and sludge mismanagement.

Rejecting methodological objections, the NGT substantially accepted the Committee’s identification of 103 defaulting industries and the CETP but held that the EC methodology must be deterrent, restoration-focused, and dynamic. The Tribunal:

• Enhanced the EC recommended by the Committee using a scalable deterrence rule:
  • Double (x2) for one violation;
  • Triple (x3) for two violations; and
  • Quadruple (x4) for more than two violations (TEPS left at the Committee’s revised figure).
• Directed MIDC to pay Rs. 2 crore for infrastructure lapses (leaking pipelines, sludge accumulation, overflows) that facilitated pollution.
• Ordered that all EC collected be earmarked for environmental restoration, remediation, and community health (with a restoration plan due in 3 months and execution in 12 months) under a multi-agency committee comprising CPCB, MPCB, a senior medical expert, the National Institute of Oceanography, and the District Collector, Palghar.
• Invited the Enforcement Directorate to examine environmental offences in the case under PMLA, 2002—a first-of-its-kind, consequential link—given environmental offences are now scheduled offences under Part A of the PMLA Schedule.
• Criticised State regulators for chronic inaction and directed consideration of criminal prosecution for statutory offences under the Water Act, 1974 and the Environment (Protection) Act, 1986.

Analysis

1. Precedents Cited and their Influence

The NGT anchored its reasoning in a deep survey of Supreme Court environmental jurisprudence, applying the following core doctrines:

• Polluter Pays & Absolute Liability: Vellore Citizens’ Welfare Forum, M.C. Mehta line of cases, and Indian Council for Enviro-Legal Action mandate that violators bear the cost of environmental harm, including restoration, beyond compensation to immediate victims; when hazardous activities harm the environment, liability is absolute.
• Precautionary Principle & Sustainable Development: Decisions from Narmada Bachao Andolan to Essar Oil require anticipatory action even amid scientific uncertainty, with balancing development and ecology.
• Public Trust Doctrine: M.C. Mehta v Kamal Nath, Fomento Resorts and others hold natural resources are held in trust by the State; inaction or abdication invites judicial correction.
• Deterrent EC & Methodology: The Court referenced line-items where EC has been fixed as a percentage of turnover or project cost (e.g., 5–10% in Goel Ganga, Mantri Techzone), and rejection of ex post facto EC (Common Cause (Odisha mining); Goa Foundation), to stress that EC must be restorative and economically dissuasive, not nominal.

The Tribunal also relied on its own earlier directions accepting CPCB’s EC regime as an interim measure while emphasising that State PCBs may use higher scales. But it found CPCB’s formulae inadequate in Tarapur’s conditions, requiring augmentation to capture restoration needs and deterrence.

2. Legal Reasoning

The NGT’s reasoning unfolds across four axes:

• Proof of Pollution and Accountability: A multi-agency record proved persistent industry and CETP noncompliance. The Tribunal rejected post facto attacks on sampling and inspection as “afterthought”, noting industry representatives signed inspection memos and no contemporaneous objections were raised.
• Compensation Methodology—Beyond CPCB’s Baseline: The Tribunal held CPCB’s rate-card (e.g., R = 250; daily minimums) is too lenient and not calibrated to:
  • Severity and spatial extent of environmental harm;
  • Cost of restoration and remediation;
  • Deterrence against repeated and profitable violations; and
  • Criminality of statutory breaches (consents, ECs, ZLD, bypasses).
  While accepting the Committee’s identification and underlying data, the NGT concluded that the Committee’s application of a Spanish valuation paper (Hernández‑Sancho et al.) and CPCB averages undervalued Tarapur’s damage profile and failed to internalize deterrence and restoration headroom. It therefore imposed a scalable multiplier (x2/x3/x4) on the Committee’s revised ECs (TEPS unchanged).
• Regulatory and Infrastructure Failures: MIDC’s effluent network performance (leaks, overflows, sludge stockpiles), and delayed CETP outfall augmentation, contributed materially to pollution; hence MIDC was saddled with Rs. 2 crore EC. The Tribunal admonished MPCB for chronic non-enforcement, underuse of criminal provisions (Water Act ss. 41–45A; EP Act s.15), and called for accountability.
• PMLA Trigger: A striking feature: the NGT explicitly invited the Enforcement Directorate to examine the case under PMLA. It noted that:
  • Environmental crimes (EP Act s.15 r/w ss.7 & 8; Water Act ss.41(2), 43; Air Act s.37; Biological Diversity Act s.55 r/w s.6) are Part A scheduled offences post the 2012 PMLA amendment;
  • Proceeds of crime include profits from activities constituting scheduled offences; and
  • Projecting such profits as untainted property triggers money laundering (PMLA s.3).
  This is a watershed in using PMLA as a compliance stick against environmentally harmful profit-making.

  3. The Tribunal’s Framework on Compensation

  The NGT synthesised a principled approach to calculating EC:

  • Not a fee or symbolic fine; must fund restoration, community health, and deter future violations;
  • Factors include: damage to environment; cost of remediation/restoration; deterrence for repeat offences; punishment for statutory breaches; and community health impacts;
  • Limitations under NGT Act s.15(3): default period considered from 28 April 2011 (five years prior to OA) to 26 September 2019 (date of order accepting the Committee framework);
  • While turnover-based EC can be appropriate (as in various Supreme Court matters), lack of data (industries withheld turnover despite the Tribunal’s invitation) precluded its application here; hence the scalable multipliers.

  On “Super Fund” style remediation finance, the Tribunal agreed in principle: funds must be available ex ante to undertake Phase-I (detailed investigation, risk assessment, DPR) and Phase-II (execution) remediation. It rejected “fiscal discounting” arguments premised on “self-cleansing” of water bodies, holding that such theories ignore continuous pollutant inputs and established contamination (drains, creeks, groundwater, seashores).

  4. Impact

  This judgment materially shifts Indian environmental enforcement:

  • Scalable Deterrence: The x2/x3/x4 multiplier system provides a template for making EC genuinely dissuasive against repeat or multi-violation offenders, moving beyond CPCB’s baseline.
  • PMLA as a Compliance Lever: By signalling PMLA scrutiny for environmental crimes, the NGT places substantial financial and personal exposure on promoters and officers. This can reshape compliance incentives across polluting sectors.
  • Accountability of CETPs and Estate Managers: CETPs cannot be mere pass-throughs; their operators will be held to outlet standards with restoration liability. Industrial estate providers (like MIDC) will not be insulated when infrastructural neglect contributes to pollution.
  • Health and Restoration Centricity: EC proceeds are mandated for restoration and community health, guided by a time-bound plan and multi-disciplinary oversight—bridging the historical gap between penalty collection and on-ground remediation.
  • Regulatory Culture Change: The Tribunal’s censure of MPCB’s enforcement lacunae (including failure to prosecute) pressures State PCBs to adopt robust, routine prosecutions alongside EC recovery. The decision underlines that EC is not a substitute for criminal action.

  Complex Concepts Simplified

  • CETP (Common Effluent Treatment Plant): A shared facility treating effluent from multiple industries to meet prescribed standards before discharge. Operators must meet outlet standards, irrespective of upstream quality variability; chronic overloading and poor O&M shifts liability onto CETP operators as well as member industries.
  • BOD/COD: Biochemical Oxygen Demand (BOD) and Chemical Oxygen Demand (COD) measure organic pollutant loads. Elevated BOD/COD in CETP outlets signifies insufficient treatment and oxygen depletion risks in receiving waters.
  • ZLD (Zero Liquid Discharge): A wastewater management regime under which no liquid effluent is discharged; requires advanced segregation, MEE/RO, and meticulous O&M. Breach invites liability even if individual industry claims are otherwise compliant.
  • Environmental Compensation (EC): A financial liability imposed on polluters based on Polluter Pays and restoration principles. EC should reflect environmental harm, restoration costs, and deterrence—not nominal rates.
  • PMLA & Environmental Offences: Following the 2012 amendment, certain environmental offences are scheduled under PMLA. Profits from such crimes are “proceeds of crime”; laundering or claiming them as clean assets can trigger attachment, prosecution, and confiscation.
  • NGT Act s.15(3) Limitation: Applications for compensation/redress must be made within five years of the cause of action; the NGT therefore limited assessment to 28 April 2011–26 September 2019.

  Key Directions and Operative Outcomes

  • EC payable by 103 defaulting industries (with the scalable multiplier) and by TEPS (per revised Committee figure); MIDC to pay Rs. 2 crore.
  • All EC to be deposited with MPCB within three months; previously deposited sums to be adjusted/transferred.
  • Use of EC for environmental restoration and healthcare under a Committee comprising CPCB, MPCB, a senior medical expert, NIO, and District Collector, Palghar; plan in 3 months, execution within 12 months.
  • Committee to continue for one year to monitor compliance, with quarterly reports.
  • Enforcement Directorate invited to examine appropriate PMLA action.
  • MPCB to consider prosecutions under the Water/EP Acts for repeated or egregious violations.
  • Narrow corrections: recalculation of EC for a few industries on scale/identity errors; liberty to approach the Committee where the revised EC increased based on corrected data.

  Why the Tribunal found CPCB’s EC formula inadequate here

  While CPCB’s EC guidelines offer an important baseline, the NGT identified multiple deficiencies for a complex, chronic case like Tarapur:

  • Fixed “R” values and minimum daily rates were disconnected from actual restoration costs and the need for deterrence;
  • Formulas inadequately captured the costs of damaged ecosystems (drains, creeks, sea, groundwater) and long-term health externalities;
  • Over-reliance on a single academic valuation (Hernández‑Sancho et al.) without contextual calibration (e.g., India’s higher pollution baselines compared to Spain);
  • No systematic way to factor repeated violations and profitable non-compliance.

  Accordingly, the Tribunal adopted the Committee’s factual scaffolding but corrected the remedy with scalable multipliers and a stronger restoration-health orientation.

  Conclusion

  This order is a watershed for environmental governance in India. It validates a rigorous, evidence-based finding of chronic industrial and CETP noncompliance in Tarapur and insists that environmental compensation be more than arithmetic—it must repair ecological damage, protect community health, and dissuade future violations. By explicitly signalling PMLA scrutiny, the NGT extends the enforcement frontier, aligning environmental law with financial-crime accountability. It equally communicates that infrastructure providers (MIDC) and regulators (MPCB) cannot be bystanders; they are duty-bound to prevent harm and, failing that, to pay and prosecute.

  Going forward, the scalable EC approach, the restoration-health earmarking, and the PMLA trigger will influence compliance calculus far beyond Tarapur MIDC. The judgment reinforces that environmental rights are not abstract—they are enforceable obligations under Article 21, sustained by the Polluter Pays, Precautionary, and Public Trust doctrines. Courts will not hesitate to act when regulators falter, and violators will face not only civil restitution but also criminal and money-laundering exposure.