I. Legal Framework

1. Source of Power:

• NGT Act Sec 15(1)(a): NGT can provide relief and compensation for environmental damage.
• Sec 20: NGT shall apply polluter pays principle, precautionary principle, sustainable development.
• Environment (Protection) Act Sec 3,5: CPCB/SPCB can issue directions to deposit EC.

2. CPCB Methodology for Environmental Compensation (2019):
CPCB Report In-house Committee Report on Methodology for Assessing Environmental Compensation dated 2019 lays formula:

EC = PI x N x R x S x LF

Where:

• PI = Pollution Index (average of water, air, hazardous waste score 0-100)
• N = Number of days of violation
• R = Factor in Rupees (250 to 500 per day for industrial, higher for others)
• S = Scale factor (0.5 small, 1 medium, 1.5 large industry based on turnover/capacity)
• LF = Location factor (1-2 based on proximity to sensitive area)

For EC violation (Construction without EC): Different - based on % of project cost.

CPCB methodology is facilitative, not exhaustive - Supreme Court held NGT can go beyond it.

Deposit Mechanism: NGT orders deposit in 30 days with SPCB/CPCB. If not deposited, Sec 25 NGT Act - execution as civil court decree + Sec 26 - penalty + Sec 28 - imprisonment. Money kept in separate escrow account for remediation of that stretch/river.

II. Landmark Case Laws - Supreme Court Settled Law in 2025-26

CASE 1: M/s C.L. Gupta Export Ltd. v. Adil Ansari - 2025 INSC 1035 - TURNOVER-BASED PENALTY STRUCK DOWN

SC Division Bench CJI B.R. Gavai & K. Vinod Chandran, Sept 2025

Facts: NGT imposed EC of Rs 50 crore calculated as percentage of company's turnover for groundwater extraction and pollution in UP. Also NGT directed ED to investigate under PMLA.

SC held - 2 major ratios:

1. Turnover-based EC is irrational and legally unsustainable unless demonstrable nexus shown between amount and environmental harm. Penalties calculated solely on basis of polluter's turnover are arbitrary, violate Article 14. Must use CPCB methodology or reasoned quantification linked to damage.
2. NGT cannot trigger PMLA investigation. NGT is not predicate agency under PMLA. Direction to ED set aside.

This case restricts NGT's unlimited power.

CASE 2: M/s Rhythm County v. Satish Sanjay Hegde & M/s Key Stone Properties v. Shashikant Vithalkamble - 2026 INSC 102 - LANDMARK - PROJECT COST AS VALID YARDSTICK

SC Bench Justice Dipankar Datta & Vijay Bishnoi, 30 Jan 2026 - Civil Appeal No. 7187 of 2022

Facts: Two Pune real estate developers built large projects without obtaining Environmental Clearance (EC) under EIA Notification 2006. NGT Western Zone, Pune imposed Rs 5 crore each based on Joint Committee assessment using project cost/turnover.

Developers argued: CPCB formula does not provide for turnover/project cost, NGT cannot invent formula, only CPCB methodology binding.

SC Ratio - Affirms wide powers of NGT:

1. NGT competent under Sec 15, 17, 20 to adopt turnover or project cost as relevant yardstick for EC. CPCB methodology is facilitative, not exhaustive. NGT not divested of authority to determine EC beyond CPCB formula.
2. Project cost or turnover could constitute relevant and permissible yardstick, provided determination is reasoned, proportionate and bears rational nexus to scale of violation.
3. Relied on Goel Ganga Developers India Pvt Ltd v. Union of India (2018) where SC approved 5-10% of project cost as EC for flagrant EC violations.
4. Upheld NGT orders - Rs 5 crore justified as 1-2% of project cost for building without EC.

Conflict with C.L. Gupta? SC reconciled: In C.L. Gupta, EC was solely on turnover with no link to damage. In Rhythm County, turnover/project cost used as scale factor + CPCB assessment + Joint Committee report, so valid.

CASE 3: Goel Ganga Developers India Pvt Ltd v. Union of India (2018) 18 SCC 257

First case where SC approved project cost % method. Builder constructed without EC. NGT imposed Rs 195 crore as 10% project cost. SC reduced but upheld principle: 5-10% project cost valid for EC violation cases.

CASE 4: DPCC v. Lodhi Property Co. Ltd. 2025 SCC OnLine SC

SC held Environmental Compensation can be levied even without proving actual quantified damage if violation of EC conditions is established. Precautionary principle.

CASE 5: Legacy - Almitra Patel & Vellore Citizen Cases

Basis for polluter pays - EC deposit used to create fund for remediation.

III. Current Position after 2026 Judgments

When turnover/project cost can be used:

• Valid when violation is EC violation / illegal construction / large scale where damage hard to quantify daily. Must be proportionate and reasoned.
• Invalid when industrial pollution - must use CPCB formula PI x N x R x S x LF, with S based on turnover as scale factor, not turnover as sole base.

Deposit Enforcement:

• If polluter does not deposit, CPCB/SPCB can file execution under Sec 25 NGT Act in civil court, attach bank accounts.
• NGT in multiple orders 2023-24 ordered EC deposits from city governments, water utilities for failure to treat sewage - e.g. NGT ordered Rs 100 crore EC deposit from municipal corporations for rivers.

Practical:
For industry, EC calculation now:

• Show pollution index low, violation days less, location factor low.
• Argue against turnover as sole metric citing C.L. Gupta 2025.
• For builder without EC, expect 1-5% project cost as per Rhythm County 2026.