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TMI Blog2014 (1) TMI 1893X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose of preventing pollution from different sources for protection of the environment. Basing on these Acts, the Central Pollution Control Board, State Govt. the State Pollution Control Boards are empowered to file complaint cases resulting in the closing down of defaulting industries through disconnection of electricity water supply. There is hardly any other provision to pressurise defaulting industries to install required pollution control system or to impress upon them to upgrade their existing pollution control systems so as to comply with the prescribed norms. The Hon'ble Supreme Court of India, while dealing with different public interest litigations on environmental matter, has laid down different principles in order to pressurise the industries to control pollution or to restore the environmental degradation through Polluter to Pay principle. It has been experienced that the orders of closure and disconnection of electricity etc. served on the industries at times create social problems like non-payment of wages to its workers due to lack of adequate provisions in the Act. Under such prevailing circumstances, a new instrument namely Bank guarantee system ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for its safe custody. Photo copies of the said instrument will be tagged to the concerned industry file endorsing simultaneously to the Law Officer. A register will be maintained by the cashier reflecting the following entries. 1. Name of the industry: 2. Name of the Bank standing as guarantor: 3. Reference file No.: 4. Amount of Bank Guarantee: 5. Date of submission: 6. Date of expiry: 7. Orders for release or forfeiture: 8. Remarks 2. In Appeal 68 of 2012, the Board had granted consent to operate under the Air Act in respect of Respondent Unit's Sponge Iron plant on 24th July, 2007, valid till 31st March, 2011. This consent was issued after inspection of the premises. Thereafter, on 28th March, 2008, the Board issued a closure notice to the respondent-unit in terms of Section 33A of the Water Act and Section 31A of the Air Act. In its notice, it was stated that, on the basis of inspection conducted on 15th March, 2008, a number of deficiencies were noticed in the working of the unit and there was no compliance with the conditions of the consent. The deficiencies noticed were as under: Bag filters attached to Kiln-I II were not functioning pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion was found to be taking place from Product House, I-Bin, coal circuit, kiln feed chutes and cooler discharge building. Most of the tanks/pits (for dust handling purpose) connected to the hoppers of GCPs and bag filters were dry and not covered leading to emission of dust from the pits. There was minor leakage of flue gas from the emergency caps of both kilns though both the GCPs were in operation. Emission from the stack connected to GCPs was visibly high. 6. In its inspection report, various deficiencies were noticed and the Board issued a show cause notice dated 24th February, 2009, calling upon Respondent No. 1 to show cause as to why the consent to operate granted by the Board may not be revoked. This show cause notice was responded to vide letter dated 3rd March, 2009 and it was stated that they were taking appropriate steps to ensure compliance with the conditions imposed by the Board. Again on 23rd March, 2010, the inspecting team of the Board visited the unit of Respondent No. 1 for verification of the operational status of different pollution control equipment and for assessment of the overall environmental compliance by the industry. Certain deficiencies were point ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing direction of closing an industry, and therefore, is requiring the industry to furnish a bank guarantee as a condition for grant and continuation of the consent, and it being less rigorous, would be permissible in law. It is a financial tool to achieve sustained compliance with the prescribed environmental parameters. The decision of the Board is not penal but is regulatory and compensatory in nature. Both these aspects are essential requirements for a clean and decent environment and are in consonance with the preambles of the Air Act and the Water Act. The industry has committed persistent violation of the terms and conditions of the consent order and the prescribed parameters. It has caused a serious injury to the environment. Show cause notices on different dates were served upon the industry and even a number of inspections were conducted, including on 23rd March, 2010 and 3rd January, 2013, which showed that the industry had always been committing breach of the consent order. Resultantly, the bank guarantee had rightly been invoked and forfeited. It is further contended that the appellate authority has failed to appreciate the real controversy in issue and has taken into c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the State Board. This was primarily to achieve compliance of the prescribed environmental standards within a reasonable time frame. The CPCB approved the model prepared by West Bengal Pollution Control Board in that regard. 12. Now, we may notice the facts in Appeal No. 69 of 2012. The necessary facts, as noticed by the appellate authority, are that the respondent-industry, in this case, is engaged in the business of manufacture of sponge iron and billet as well as generation of power in its industrial plant at Purunapani under Joda sub-division of Keonjhar district. The consent to operate the unit was granted by the Board and it was extended from time to time. The Board, while intimating the appellant that the compliance position has been verified by its Regional Office, Sambalpur, directed the appellant vide its letter dated 12th June, 2009 to furnish a performance bank guarantee in favour of the Board to the tune of ₹ 17.50 lakhs, valid for three years, supported by an affidavit as per the proforma prescribed. The industry, vide letter dated 18th June, 2009, furnished the bank guarantee and also filed an undertaking. It was stated that in the event of deliberate vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugust, 2010, informed the Board that it had complied with all the recommendations of the team of IIT, Kharagpur, and that no further compliance was required. On 27th November, 2010, the Board granted consent to operate till 31st March, 2011. Thereafter, on 7th July, 2011, the Board issued a show cause notice under Section 31A of the Air Act, directing the appellant to fulfill the requirements, as laid down by the IIT, Kharagpur, failing which a direction for closure of the industry would be issued without giving any further opportunity. In reply, the industry, vide its letter dated 20th July, 2011, requested the Board to grant time till 31st December, 2011 to complete the remaining work. The relevant part of this letter reads as follows: ..... In our compliance report, it was clarified that existing bag filters in CD and PH area, not only satisfy all the norms suggested by IIT, Kharagpur, but are superior to their recommendations, except the fan capacity. It is also explained that the fan capacity was based on the main duct size which is related to number of suction points, number of bags used, air to cloth ratio and motor rating. Since all the existing parameters were superior ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... industry had not complied with the requirements and conditions stated in its earlier letter. It related to installation of pneumatic dust handling system at bag filter hoppers; up-gradation of the bag filter capacity; and monitoring of the ambient air quality result, which showed violation of the prescribed standards. 16. The industry was again inspected on 5th May, 2011 and, in its inspection report dated 27th May, 2011, the Board inter alia noticed the following deficiencies: i. That no action had been taken regarding installation of pneumatic dust handling system at bag filter hoppers by the industry. ii. That the unit had not complied with the recommendations of IIT, Kharagpur. iii. That the industry had been granted consent to establish (NOC) for installation of a dry coal washery of capacity 50 TPH. As per the conditions in the consent to establish (NOC), the industry was to seek Environmental Clearance from the Ministry of Environment and Forests, Govt. of India. However, the coal washery along with dust extraction system was installed inside the premises and was ready for operation without obtaining Environmental Clearance from the MoEF and consent to operate fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia to forfeit the bank guarantee, in furtherance to which the Bank, Respondent No. 2, remitted the amount of ₹ 17.50 lakhs to the Board. 20. Aggrieved by this action of the Board, the industry filed an appeal before the appellate authority, constituted under the Air Act. The appellate authority, vide its order dated 8th November, 2012, accepted the appeal of the industry and set aside the action of the Board in forfeiting the bank guarantee furnished by the industry. 21. Aggrieved by the order dated 8th November, 2012 of the appellate authority, the Board has filed the present appeal before this Tribunal. 22. In the backdrop of the factual matrix afore-noticed and the contentions raised by the learned counsel appearing for the respective parties, the following issues require determination by the Tribunal: (a) Whether the decision of the Board requiring industrial units to furnish bank guarantee is without jurisdiction? (b) Whether the invocation of the bank guarantee by the State Board on the alleged breach is penal and thus impermissible under the provisions of the Air Act and the Water Act? (c) Whether in the facts and circumstances of the case, the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the CPCB shall be to improve the quality of air and to prevent, control or abate air pollution in the country. (2) In particular and without prejudice to the generality of the foregoing functions, the CPCB may- (a) advise the Central Government on any matter concerning the improvement of the quality of air and the prevention, control or abatement of air pollution; (b) plan and cause to be executed a nation-wide programme for the prevention, control or abatement of air pollution; (c) co-ordinate the activities of the State and resolve disputes among them; (d) provide technical assistance and guidance to the State Boards, carry out and sponsor investigations and research relating to problems of air pollution and prevention, control or abatement of air pollution; (dd) perform such of the function of any State Board as may, be specified in and order made under sub-section (2) of section 18; (e) plan and organise the training of persons engaged or to be engaged in programmes for the prevention, control or abatement of air pollution on such terms and conditions as the CPCB may specify; (f) organise through mass media a comprehensive programme regarding the preve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the quality of air laid down by the CPCB, standards for emission of air pollutants into the atmosphere from industrial plants and automobiles or for the discharge of any air pollutant into the atmosphere from any other source whatsoever not being a ship or an aircraft: Provided that different standards for emission may be laid down under this clause for different idustrial plants having regard to the quantity and composition of emission of air pollutants into the atmosphere from such industrial plants; (h) to advise the State Government with respect to the suitability of any premises or location for carrying on any industry which is likely to cause air pollution; (i) to Perform such other functions as may be prescribed or as may, from time to time, be entrusted to it by the CPCB or the State Government; (j) to do such other things and to perform such other acts as it may think necessary for the proper discharge of its functions and generally for the purpose of carrying into effect the purposes of this Act. (2) A State Board may establish or recognise a laboratory or laboratories to enable the State Board to perform its functions under this section efficiently. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Air Act shall have over-riding effect over other legislations including the provisions of the Motor Vehicles Act, 1939. Section 21 of the Air Act makes it mandatory that no person shall, without previous consent of the Board, establish or operate any industrial plant in an air pollution control area. Section 21(1) of the Air Act is prospective while the proviso to this sub-section contemplates that even the existing units have to take permission/consent of the Board and make appropriate application for that purpose from the date of coming into force of this Act. The application for obtaining consent has to be dealt with expeditiously by the Board. Thus, this Act squarely applies to all industries, either existing or which are expected to be established in any air pollution control area. After following the prescribed procedure and making such inquiry as it may deem fit, the Board shall, by an order in writing and for reasons to be recorded in writing, grant the consent applied for subject to such conditions and for such period, as may be specified in the order or refuse such consent in terms of Section 21(4) of the Air Act. The State Board can cancel this consent or refu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that behalf. The power to issue directions under Section 31A is to be exercised in consonance with the principles of natural justice and is appealable to the National Green Tribunal in terms of Section 31B of the Air Act. Sections 37 to 39 of Chapter VI of the Air Act deal with certain penal actions which can be taken by the Board. If any person fails to comply with the provisions of Sections 21 and 22 or directions issued under Section 31A of the Air Act, he could be punished with imprisonment which may extend to a term not less than one year and six months but may extend to six years and with fine. Section 39 of the Air Act imposes a generic punishment of imprisonment up till three months or with fine which may extend to ₹ 10,000/- or with both wherever a person contravenes any of the provisions of the Air Act. No court, inferior to that of a Judicial Magistrate or a Metropolitan Magistrate of the first class shall take cognisance of any offence except on a complaint filed by the Board or any officer authorised in this behalf who has given notice of not less than sixty days of the alleged offence. 29. From the above analysis, it is clear that the Board has preventive, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 31A and clarified that the power to issue directions would include the power to direct closure, prohibition or regulation of any industry, operation or process and even stoppage or regulation of supply of electricity, water or any other service. This power is 'inclusive' and not exhaustive. An inclusive definition or explanation would take within its ambit the power to do things besides what has been spelt out. Such inclusion is specific and must not be restricted by undue limitations. In the case of State of Bombay v. Hospital Mazdoor Sabha (/AIR 1960 SC 610), the Supreme Court, while dealing with an inclusive definition under the Industrial Disputes Act, 1947 held that it was obvious that the words used in an inclusive definition denote extension and cannot be treated as restrictive in any sense. Where we are dealing with an inclusive definition, it would be inappropriate to put a restrictive interpretation upon terms of wider denotation. The legislature, in its wisdom, has used different expressions like closure, prohibition and regulation. While the first two are specific terms, regulation is a generic term. It would take within its ambit other regulatory factors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viso to Section 21(4) further empowers the Board to cancel the consent even before the expiry of the period for which it is granted, if the conditions subject to which the consent was granted, are not fulfilled. Besides preventing and controlling the pollution, the Board is commanded by the Legislature to ensure that the conditions of the consent order are satisfied and are enforced. These conditions would obviously relate to the twin objects of ensuring emissions as per prescribed standards and prevention of damage to the environment. This is the paramount duty of the Board. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the prevention and control of pollution. No person can carry on an industry or trade activity without obtaining the consent of a Board in a regulated area. The terms and conditions of consent so imposed by the Board do not attract the principles of contractual jurisprudence but are purely in the field of regulation by the Statute. With this clear dichotomy in mind, now we may proceed to examine if the condition in regard to the furnishing of the bank guarantee imposed by the Board is a penalty and therefore impermissible without aid of a specific law or without being backed by a specific provision of law. 36. Penalty law is a law that defines an offence and prescribes a corresponding fine, penalty or punishment. Such laws are construed strictly in favour of the person charged with the offences. Penalty is legal or official punishment such as a term of imprisonment. It may also mean recovery of an amount as a penalty measure in civil proceedings or an exaction which is not compensatory in character [Refer: Karnataka Rare Earth v. Senior Geologist (2004) 2 SCC 783; Dunny v. Swetman (1909) 1 KB 776; Khemka and Company v. State of Maharashtra (1975) SC 1549; N.K. Jain v. C.K. Shah ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1974 are para materia, except the specific number of Sections, for instance, functions of the Board, establishing or operating an industrial unit, inspection, analysis reports and power to give directions are identically worded. Thus, it is not necessary for us to deal with the provisions of the Water Act independently. It suffices to state that the directions have been passed by the Board in exercise of the powers vested under Sections 31A and 33A of the Air Act and the Water Act respectively. As part of discharge of its duties and functions, the Board must take such precautionary steps as may be necessary to prevent and control the pollution. It must also, where the pollution has resulted particularly from non-adherence to the conditions imposed under Section 21 of the Air Act, remedy such wrong and make the person pay for such pollution. This would be in the nature of compensation and not punishment or a penalty, as understood in law. The word compensation derived from Latin word 'compensare', meaning weighed together or balance; means anything given to make things equivalent of what the owner has been deprived of; a return or loss or a damage sustained, an act wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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. 40. With some emphasis, it was contended before us that furnishing of bank guarantee and its invocation would be a penal action and, therefore, a specific power needs to be vested in the Board enabling it to take such an action. In other words, the power requiring furnishing of a bank guarantee should be required by a specific legislative provision and cannot be implied from the language of Sections 16, 17, 21 and 31A of the Air Act. Reliance in this regard has been placed upon the judgment of the Supreme Court in Khemka Company v. State of Maharashtra supra where the Court was concerned with the provisions of the Central Sales Tax Act, 1956 and the State Sales Tax Act, 1953. The question was whether in the absence of a specific provision in the Central legislation, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f to remedy the damage to environment. A taxing statute is to be strictly construed. The subject is not to be taxed without clear words for that purpose and also that every Act of Parliament must be read according to the natural construction of its words. This is a settled principle. Reference in this regard can be made to the case of State of Chhattisgarh v. VTP Construction ( (2008) 2 SCC 578)). The Supreme Court had returned a finding that it was not a mere procedure or machinery for realisation of tax but even something more than that and such liability must be created by some specific language. 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amages was discussed in paragraphs 56 to 69 of the judgment and the Court took the view that imposition of a pecuniary liability which takes the form of penalty or fine for breach of a legal obligation could not be levied as there was no statutory basis for a direction issued by the CMC/DPCC. The power to levy a penalty on any party is in the nature of a penal power and there has to be a specific power in the statute enabling the authority to do so. With this reasoning, the Court concluded that levying penalty by requiring furnishing of a bank guarantee and making the grant of consent to establish under the Water and Air Act conditional upon payment of such penalties and furnishing of such bank guarantees was not sustainable. This reasoning of the learned Single Judge was concurred by the Division Bench of the Delhi High Court and the Court also said that as per the provisions of the Acts concerned, only the Courts can take cognizance of the offences under the Acts and levy penalties. 44. It is evident from the above facts and the reasoning that there was actual levy of penalty or damages by the DPCC and it was in consequence of such imposition of penalty/damages that the Units ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Regulation Act, 1947. In that case, the authorities were performing quasi judicial functions and did not act like courts but only as administrators and determined the liability of the contravener for the breach of the obligations imposed under the Act. Explaining the expression, it noticed, the expression 'penalty' is a word of wide significance. Sometimes, it means recovery of an amount as a penal measure even in civil proceedings. An exaction which is not compensatory in character is also termed as a 'penalty'. When penalty is imposed by an adjudicating officer, it is done so in 'adjudicator proceedings' and not by way of fine as a result of 'prosecution' of an 'accused' for commission of an 'offence' in a criminal Court... 46. This approach had also been applied by the Supreme Court in relation to environmental jurisprudence. The court distinguished between compensation for remedying damage caused to the environment on the one hand and penalty for causing pollution for non-compliance on the other. Reference in this regard can be made to the judgment of the Supreme Court in M.C. Mehta v. Kamal Nath (AIR 2000 SC 1997) wherein i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be a penalty. The term 'compensatory' would include something that is taken for compensating damage to environment or for remedying or abatement of environmental degradation. 49. 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. 50. An objective analysis of the said Resolution in the light of the principles aforestated would clearly demonstrate that 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. 51. Now, we may examine the judgment of another learned Sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case, the court cannot limit the options available to statutory authorities to meet emerging challenges, towards ensuring compliance with the provisions. In given cases, the Commissioner may not deem it appropriate to take the extreme step of closing down the unit; yet, to ensure that good practices are put in place, he may issue specific directions, and as a measure to ensure compliance, require furnishing of guarantee, valid for a period, or as to enable him to invoke it, to remedy the harm, which is sought to be addressed by the Act or Rules framed under it. In arriving at this conclusion, the overriding nature of Section 16, which begins with a non obstinate clause, cannot be lost sight of. 52. From the above referred conclusion, it is clear that the Court heavily relied upon the wide scope of the regulatory powers. This judgment of the learned Single Judge was distinguished by the Court in Splendor case (supra) holding that it was of no assistance to the petitioners before it as the provisions of the DCEPT Act were different and that the Water Act and the Air Act did not contain such provisions. 53. The power to issue directions under Section 16 of the DCEPT Act is ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turing sponge iron and billets as well as generation of power in its industrial plant established at Purunapani under Joda sub-division of Keonjhar district. On being satisfied, it was granted the consent by the Board to start its operations. From the records, it appears that the consent was granted and extended from time to time. The consent to operate the industry was granted till 31st March, 2009 subject to compliance with the conditions contained in the order of consent issued from time to time. During the inspection on 29th January, 2009, the Inspecting Officer found that the unit had started operating 7 MW FBC boiler without obtaining the consent to operate, had not installed bag filters at raw material stock house and iron ore screening section, had not yet started blacktopping/concreting of internal roads and had not complied with the conditions of the consent order dated 30th June, 2008. The team found other deficiencies which were pointed out. Based upon this inspection, the industry was issued a notice in terms of Sections 21 and 31A of the Air Act on 29th April, 2009 requiring the industry to show cause as to why the consent be not refused and closure direction be not i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 17,50,000/- as and when demanded by this Board within three years from the date of execution of Bank Guarantee. 3. We, State Bank of India, Commercial Branch, Bhubaneswar, hereby, undertake to pay this guarantee without any demur merely on a demand from the Board. However, our liability under this agreement shall be restricted to an amount not exceeding ₹ 17,50,000/- (Rupees seventeen lakh fifty thousand only). 4. We, State Bank of India, Commercial Branch, Bhubaneswar, lastly undertake not to revoke this guarantee during the currency except with the prior consent of the Board in writing. 57. It was upon compliance with these conditions and with a clear understanding and commitment on the part of the industry that it shall comply with all the requirements stated by the Board in a time bound manner that the industry was permitted to operate within the time extended from time to time. It was obvious that but for such furnishing of the bank guarantee and undertaking to comply with the conditions, the Board would have exercised its option to close the industry under Section 31A of the Air Act. 58. On 19th/24th September, 2009, the industry was inspected to verify th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as installation of pneumatic dust handling system. This show cause letter dated 7th July, 2011 was responded to in detail by the industry vide its letter dated 16th July, 2011 wherein the industry explained its various difficulties including those with the suppliers and stated that the work would be completed by 31st December, 2011, thus, finally praying for grant of time till 31st December, 2011 to complete the remaining work which was in progress. This request was reiterated by the industry vide its letter dated 30th July, 2011. On 23rd August, 2011, the premises of the industry were again inspected and certain deficiencies came to be noticed. In the inspection report, it was noticed that the unit had placed a purchase order for a pneumatic dust handling system, which was to be received shortly. Vide its letter dated 5th September, 2011, the industry informed the Board that certain modifications had been carried out by them and that CD Bag Filter ID Fan and the Product House Bag Filter ID Fan had been upgraded and requested that their consent be renewed. Vide its order dated 23rd September, 2011, the Board granted the consent to operate, valid up till 31st March, 2012 and this co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 30th March, 2012, the industry was allowed to operate till 31st March, 2013, subject to strict compliance with the conditions stipulated in the consent granted earlier by the Board and it was specifically stated that in case of failure of the working/installation of pollution control devices or non-compliance with the stipulated norms, steps shall be taken to stop the functioning of the process plant. It appears from the record before us that the I.I.T., Kharagpur, had made certain recommendations in regard to providing of anti-pollution devices by the industry, which had not been done by the industry within the stipulated time granted. Three senior officers of the Board prepared a cumulative report for the period starting from 24th September, 2009 to 24th/27th March, 2012 and after noticing various repeated defaults and non-compliances by the industry, it recommended as under: In view of failure to comply with environmental norms and comply with the recommendations of IIT, Kharagpur within scheduled time frame, the bank guarantee may be forfeited. 60. Taking a view on this recommendation, the Board directed the Branch Manager, State Bank of India, vide its letter dated 26t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions 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. This obviously means that to this entire process and the conditions therein, the industry had acquiesced itself. Furthermore, it took advantage of the situation and persuaded the Board to elect extension for compliance as opposed to closure of operations of the industry. The Board, having considered various factors and facets of the problem, permitted extension while it had the power to issue order of closure in terms of Section 31A of the Air Act. Having persuaded the Board and the Board having altered its action in a particular manner of which advantage accrued to the industry, the industry wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n from which he cannot resile. (2) That he will be regarded, in general at any rate, as having so elected unless he has taken a benefit under or arising out of the course of conduct, which he has first pursued and with which his subsequent conduct is inconsistent. In other words, if one knowingly accepts the benefits of an order, he is estopped from denying the validity or the binding effect thereof. WHETHER OR NOT INVOCATION OF BANK GUARANTEE IS PROPER: 63. We have already discussed above that it was as a result of persistent defaults on the part of the industry that the Board made an objective assessment on the basis of various inspection reports and then decided to invoke the Bank Guarantee rather than issuing directions for closure of the unit. The industry had failed to discharge its corporate social responsibility. It had done damage to the environment which it was liable to make good. As a persistent defaulter, it also raised no grievance against the encashment of the bank guarantee which, it had furnished of its own accord and without protest in furtherance to Board's letter dated 12th June, 2009. At no point of time during the period from 2009 to 2012, did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvoked as per its terms. The purpose is to ensure payment stated in the bank guarantee. There are only two exceptions to the general rule for encashment of the bank guarantee as per its terms - (i) a fraud in connection with such bank guarantee that would vitiate the very foundation of such a bank guarantee and (ii) where a special equity in favour of the applicant exists which will result in an irretrievable harm or injustice to one of the parties concerned when encashment of the bank guarantee can be withheld or can be said to be illegal or unjustifiable. Reference in this regard can be made to the judgment of the Supreme Court in Vinitec Electronics Pvt. Ltd. v. HCL Infosystems Ltd. ((2008) 1 SCC 544) and BSES Limited v. Fenner India Ltd. ((2006) 2 SCC 728) amongst others. The invocation of the bank guarantee, which act stands completed by payment made to the Board by the Bank, does not fall in any of the exceptions that have been carved out in the judgments afore-referred. 65. The present case, certainly, does not fall in either of the above categories. In fact, it is not the case put forward by the applicant. Thus, we have no hesitation in holding that the invocation of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antee could be forfeited. Thus, 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the larger public interest. GENERAL DISCUSSION: 68. Having answered the formulated questions and dealt with the specific pleas raised by the respective parties before the Tribunal, now we need to divert our self to questions of some significance which call for issue of appropriate directions. First is that from the facts on record, it is clear that the Board does not have appropriate policy of inspection of industrial units in place. Sometimes, inspections are being conducted after two months while on other occasions, inspections are not conducted for years together. The other matter relates to grant/renewal of consent at intervals which can hardly sustain the scrutiny of law. 69. We are not oblivious to the fact that it may not be quite appropriate to put any restrictions on the authority of the Board to inspect industrial units as none is contemplated under the provisions of the Air Act but still the Pollution Control Boards should have a clear and transparent 'inspection policy'. It would serve the purpose of prevention and control of industrial pollution better and would also facilitate inspection programme of the Boards. The Boards should spell out, when insp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is empowered to grant, refuse, renew and even cancel the consent. Wherever an industry to whom the consent has been granted conditionally, fails to satisfy or comply with the conditions imposed, the Board can withdraw the said consent in accordance with law. Thus, there is no purpose in law to grant consent for six months or three months, as has been done in the present case. This certainly appears to us to be an arbitrary exercise of powers. Greater obligation is placed upon the Board, particularly in view of the Constitutional mandate to prevent and control pollution and to ensure that a clean and decent environment is provided to the public at large. This is the statutory obligation upon the Board. The Board must formulate its policies in a manner which will be in consonance with the scheme of the Air Act and the Constitutional mandate and would better serve the public interest. 71. Thus, we direct that the Boards henceforth shall clearly formulate their inspection policy, which should be fair, transparent and objective. Further, we direct that all the Boards henceforth shall grant consent to operate only to those units which have satisfied the conditions imposed and have in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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