The Supreme Court of India has set aside the National Green Tribunal’s (NGT) order imposing a ₹50 crore penalty on C.L. Gupta Export Ltd., a handicraft export company, for alleged environmental violations. The Court ruled that the compensation was not based on any legal principle and directed that only continuous monitoring and compliance audits should continue.
Background of the Case
The case began when Adil Ansari, an applicant before the NGT, alleged that C.L. Gupta Export Ltd. was causing environmental degradation, including groundwater extraction and discharge of untreated effluents into a tributary of the Ganga. Reports from the Pollution Control Boards highlighted lapses such as ineffective effluent treatment and unauthorized operation of some units.
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The company was earlier asked to pay environmental compensation (EC) of around ₹2.49 crore, out of which more than ₹1.16 crore was deposited. Later, a 2021 report confirmed full compliance with environmental norms. Despite this, the NGT imposed an additional ₹50 crore penalty based on the company’s turnover.
The Supreme Court disagreed with the NGT’s approach of linking compensation to company turnover.
“Generation of revenue has no nexus with the penalty for environmental damages. Rule of law does not permit extracting a ‘pound of flesh’, even in environmental matters,” the Bench observed.
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The Court referred to earlier judgments, including Benzo Chem Industrial Pvt. Ltd. v. Arvind Mahajan and Waris Chemicals Pvt. Ltd. v. UPPCB, holding that penalties must be calculated based on scientific methodology, not revenue figures.
- ₹50 crore penalty set aside – The Court found no legal basis for the NGT’s turnover-based calculation.
- Continuous monitoring to continue – Freshwater audits, compliance checks, and restoration measures ordered by NGT were upheld.
- Closure order struck down – The sweeping direction to close units despite compliance was quashed.
- PMLA directions removed – The Court ruled that NGT has no jurisdiction to direct prosecution under the Prevention of Money Laundering Act (PMLA).
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Reports submitted after inspections in 2022 confirmed:
- No crop damage or rise in airborne diseases near the plant.
- Negligible variance (0.39%) between water extraction and usage.
- Installation of advanced treatment systems for effluents and sewage.
The Court emphasized that future violations can still invite strict action, including closure, if ordered by the Pollution Control Boards.
Allowing the appeal of C.L. Gupta Export Ltd., the Supreme Court made it clear that penalties must follow established environmental compensation guidelines and not arbitrary calculations. The judgment underlines the importance of balancing industrial growth with environmental safeguards through lawful, science-based methods.
Case: C.L. Gupta Export Ltd. vs. Adil Ansari & Ors.
Case No.: Civil Appeal No. 2864 of 2022
Judgment Date: 22 August 2025
Parties:
Appellant: M/s C.L. Gupta Export Ltd. (handicraft export company, employing ~7,000 workers)
Respondents: Adil Ansari & Others (including Pollution Control Boards & Authorities)
