2014 (1) TMI 1893 - Tri - Indian Laws

Jurisdiction of requiring industrial units to furnish bank guarantee - invocation of the bank guarantee by the State Board on the alleged breach - HELD THAT - Keeping in view the legislative scheme and the object of the Air Act, it is evident that the Board is not incapacitated to issue a direction which may not be prohibitory or of closure in substance and application, but may be regulatory with an object to ensure that anti-pollution devices and anti-pollution measures are adopted to prevent and control pollution. For this purpose, the Board may require an industry to furnish a bank guarantee which would serve dual purposes. On the one hand, it would provide incentive to an industry to install anti-pollution devices so as to ensure non-encashment of the bank guarantee, while on the other, in the event of default, resulting in pollution, the Board would be able to spend that money for remedial purposes to control environmental degradation or damage that has taken place as a result of such default. Both these purposes would squarely fall within the framework of law and the powers and functions of the Board. The purpose of requiring a Unit to furnish a bank guarantee is not penal per se. It is compensatory i.e. an amount which would be required to be spent upon rehabilitation and restoration of the environment due to the damage caused to it by default on the part of the Unit - The intention of the Legislature to ensure implementation of these facets is further elucidated by the language of Section 31A of the Air Act where the Board can issue directions as afore-mentioned in exercise of its powers and performance of its functions under the Act. Thus, there has to be a direct nexus between the directions contemplated under Section 31A of the Air Act and the powers and functions of the Board as contemplated under Sections 16, 17 and other relevant provisions of the Air Act. Once these Sections are read co-jointly, then it becomes clear that a direction which would ensure compliance of the conditions of the consent order and further the cause of prevention and control of pollution would be a direction permissible under law. The Board is a statutorily constituted expert body and is, therefore, competent to examine and even anticipate the likely damage to environment by such disobedience and thus to remedy the wrong in a timely manner. It has been stated, time and again, that the Board has not been constituted to perform empty formalities. In fact, it has to prevent, control and abate environmental pollution and for achieving the purposes and carrying out the purposes of the Act effectively, it frames guidelines for taking effective measures - thus, asking for the bank guarantee, as an interim measure, during which the industrial unit is called upon to comply with the conditions of the consent order, does not fall outside the ambit of statutory powers vested in the Board. Condition requiring a unit to furnish a Bank Guarantee - is it penal? - HELD THAT - It is clear that a fine but unambiguous distinction between penalty and compensation has been accepted by courts and tribunals. Distinct and definite consequences flow from these actions. Their distinctions are procedural as well as consequential. A penal action cannot be permitted to take in its orbit, by process of overlapping, an action which is patently compensatory in nature. Striking a balance between environmental interest and sustainable development would require the expert bodies like the Boards to follow a path which would permit industrial growth and still protect the environment without allowing any irretrievable injury to the environment. In view of that, it will certainly be permissible in law for an expert body to provide an opportunity to a unit to attain the prescribed standards of emission or effluent discharge before it is directed to be closed in exercise of the powers vested in the Board. Such approach would be in consonance with the scheme of the Air Act. More so, it will make a provision also to ensure restoration or rectification of the environmental damage done by the unit at its cost in the case of default - In the case in hand, the regulatory regime under the Air Act permits taking of harsher steps in the nature of closure and prohibitory directions. Therefore, permitting a unit to operate for a limited period upon furnishing a Bank Guarantee for compliance of the conditions/directions imposed in the consent order, being an order of lesser gravity and consequences, would be permissible. It is in the interest of sustainable development and is even beneficial to the industry itself. The Bank Guarantee asked for is for compliance, compensation for environmental restoration, if required, and is not punitive in nature. In the present case, the general Resolution governing industries, particularly the defaulting industries, was passed by the Board on 18th August, 2003, as has been noticed earlier, intended to invoke the 'polluter pays' principle and required the industry to furnish a bank guarantee for compliance with the terms and conditions of the consent order and installation of pollution control equipment clearly stipulating faithful utilisation of the amount for pollution control abatement scheme/programmes of the said industry - the bank guarantee asked for was not penal in nature but was clearly compensatory in its character and ensured prevention and control of pollution and restoration of environment. It is founded on the precautionary principle and is not beyond the statutory provisions of the Act concerned. Equity, waiver and its effect - HELD THAT - The industry has been a persistent defaulter and polluter. The parameters, particularly relating to air and ambient air quality, were found to be violative of the prescribed standards. The Board provided opportunity after opportunity and extended the time in favour of the industry to completely carry out its directions and provide antipollution devices. One of the letters afore noticed written by the industry to the Board further clearly showed that the former never disputed the allegations of the latter. For various reasons, the industry always prayed for extension of time which on most of the occasions was allowed by the Board in the interest of the industry and development. The bank guarantee was furnished by the industry without demur or protest. In fact, the language of the undertaking afore-reproduced clearly shows that the entire act of the industry was voluntary and it accepted the conditions without any protest either on facts or on law. It not only accepted such conditions but even implemented the directions by furnishing the bank guarantee and the undertaking - Estoppel is a rule of equity and evidence. It bars or prevents one from asserting the claim or right that contradicts what one has said or done before or what has been legally established as true. Similarly, 'waiver' is actual intent to abandon or surrender his right by a person i.e. a right or an objection may be available to a person in law but the person consciously not only waives that objection or right but in fact, acts to the contrary. Like in the present case, if the respondents actually believed that they could raise an objection with regard to the condition to furnishing of the Bank Guarantee, they ought to have raised it right at the very initial stage but they not only failed to raise such objection albeit acted to the contrary by submitting a Bank Guarantee without demur and protest. Whether or not invocation of Bank Guarantee is proper? - HELD THAT - The data furnished in the inspection reports of the Board leaves no doubt in our minds that the bank guarantee had been invoked when on repeated inspections, it was found that the industry is a persistent defaulter and thus, was causing air pollution, particularly in relation to ambient air quality and after issuing show cause notices to the industry from time to time. The Board, thus, was fully justified in invoking the bank guarantee. Ancillary but the most significant question that now arises for consideration is whether the bank guarantee had been invoked as per its terms. Clause 2 of the bank guarantee which we have reproduced above states that the industry had three obligations - (a) to operate and install the existing and the requisite pollution control system and/or other pollution control measures effectively within the stipulated time, and (b) this was to be to the satisfaction of the Board in terms of its letter dated 12th June, 2009, and (c) the industry was to meet the standards prescribed by the Board. The primary and paramount consideration was the satisfaction of the Board in relation to the upkeep and continued maintenance of the anti-pollution devices. Even as per the letter of the Board dated 7th May, 2008, the industry was to comply with the conditions of the letter as well as the other conditions which may be imposed by the Board from time to time, in default of which, the bank guarantee was to be invoked. In terms of this letter, the industry was required to take all steps for continuous and satisfactory environmental compliance, which the industry on its own showing had failed. To read mens rea or the term 'deliberate' into the bank guarantee would not be permissible. Mens rea, as understood in the criminal jurisprudence, strictly speaking, would hardly have any application to the environmental jurisprudence. It is governed by principles such as Polluter Pays Principle and doctrine of absolute liability. The word 'deliberate' used in the letter dated 7th May, 2008 has to be given its due and normal meaning in relation to the facts and circumstances of the case taken cumulatively and not in abstract. Various letters of the industry clearly show that for a long period of more than three years they were not able to maintain the environmental standards and were not able to install the required devices. Even in January 2013, inspection of the industry had been conducted by a team of technical experts who found that there were visible flue gas emissions, fugitive dust emissions which were impermissible and required an appropriate action to be taken against the industry. The condition requiring the respondents to furnish the bank guarantee is not penal and encashment thereof is neither unjustified - Appeal allowed in part.

Summary

Issues Involved:
1. Jurisdiction of the Board to require industrial units to furnish bank guarantees.
2. Nature of the invocation of the bank guarantee (penal or regulatory).
3. Validity of the appellate authority's order.
4. Compliance with the terms of the bank guarantee.
5. Relief entitled to the appellant.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Board to Require Industrial Units to Furnish Bank Guarantees:
The Board's decision to require industrial units to furnish bank guarantees is within its jurisdiction. The Tribunal held that the powers vested in the Board are broad and intended to ensure compliance with environmental standards. The Board's authority under Sections 16, 17, and 31A of the Air Act includes issuing directions necessary for the prevention, control, and abatement of air pollution. The requirement of a bank guarantee serves as a regulatory measure to ensure compliance with environmental norms and is not penal in nature.

2. Nature of the Invocation of the Bank Guarantee:
The invocation of the bank guarantee by the Board is regulatory and compensatory, not penal. The Tribunal emphasized that the bank guarantee is intended to ensure compliance with environmental standards and to provide funds for remedial measures in case of non-compliance. The requirement to furnish a bank guarantee is not a penalty but a measure to ensure that industries adhere to environmental norms and to compensate for any environmental damage caused by non-compliance.

3. Validity of the Appellate Authority's Order:
The order of the appellate authority was found to be flawed as it considered irrelevant matters and ignored significant facts. The appellate authority's decision to set aside the Board's order of invoking the bank guarantee was based on an incorrect interpretation of the facts and law. The Tribunal noted that the appellate authority failed to consider the cumulative effect of multiple inspections and the persistent non-compliance by the industry.

4. Compliance with the Terms of the Bank Guarantee:
The invocation of the bank guarantee was in accordance with its terms. The industry had undertaken to operate and install pollution control measures to the satisfaction of the Board. The Board's decision to invoke the bank guarantee was based on repeated non-compliance and failure to meet environmental standards. The Tribunal held that the invocation was justified and in line with the terms of the bank guarantee, which allowed the Board to forfeit the guarantee amount in case of non-compliance.

5. Relief Entitled to the Appellant:
The Tribunal partially allowed the appeal and set aside the order of the appellate authority. It directed that the amounts received from the encashment of the bank guarantee should be used for compensatory purposes or restoration of the degraded environment. The Board is not authorized to use this amount for any other purposes, including its own. The Tribunal also directed the Boards to formulate a clear inspection policy and grant consents for longer periods, ensuring compliance with environmental norms.

Conclusion:
The Tribunal upheld the Board's authority to require and invoke bank guarantees as a regulatory measure to ensure compliance with environmental standards. The appellate authority's order was set aside, and the Board was directed to use the forfeited bank guarantee amounts for environmental restoration. The Tribunal emphasized the need for a clear inspection policy and longer consent periods to better manage environmental compliance.