By now, it is pretty obvious that India has a booming economy, which has helped numerous individuals and families have a far better quality of life than could have been previously imagined. However, is it fair to say that poverty is close to eradication in India? 

The clear answer is no. By most estimates, for more than 600 million people in India, the quality of life is still below what would be considered reasonable in the western world. In spite of numerous investments and aid agencies that are working to eliminate poverty, the number of people impacted is still small compared with the total number of individuals who need to be touched.

A New Class of Investor

Enter a group of investors who are referred to as impact investors. These investors and funds believe they get more for their money by investing in enterprises that have social and environmental benefits. However, these investors are not just seeking to make charitable contributions, they are also seeking sustainable businesses that have a positive cash flow over a defined period of time (see Figure 1). These businesses may have lower rates of profit and return on investment, but they should still make money.

In this way, impact investors want to be seen as being somewhere between a commercial investor who is purely interested in high returns and a philanthropic individual or organization that donates money for the general good.

Figure 1: Financial Model for Impact Investors

Despite the absence of a concise environmental regulatory framework with respect to soil and groundwater contamination in India, progress in protecting the environment has been made through application and expansion of existing environmental laws, use of proactive concepts including the polluter pays principle and the precautionary principle, and aggressive use of public interest litigation (PIL). This article summarizes our current understanding of environmental liability and contamination regulations in India.

Public Interest Litigation

Public Interest Litigation has had a profound effect on the development of environmental law in India. PIL allows any bona fide person to take a matter of public interest to the higher judiciary, even when the person who is supporting the cause is not personally or directly affected by the interest that is being brought to the courts. These PILs have given the judiciary enormous scope for intervening in environmental matters. Indian courts have been categorical in their adoption of the values of sustainable development and the “precautionary principle,” which asserts that a lack of scientific certainty should not be used as a reason for postponing measures to prevent environmental degradation where there are threats of serious and irreversible damage if the action is not taken.

The kinds of environmental issues that have been brought to the courts under PILs in the past include

• Riverine pollution by tanneries, industrial effluents, and untreated sewage;
• Soil and groundwater pollution;
• Indiscriminate mining;
• Protection of forests;
• Fencing of parks and sanctuaries;
• Preservation of monuments of archaeological and historical significance and their protection from vandalism and industrial pollutants; and
• Automobile pollution.

The judicial prescriptions have included

• Remedial measures offered by cleanup technologies;
• Liability measures based on application of the “polluter pays principle”;
• Monetary penalties; and
• Revised environmental standards.

The following sections provide further insight into the actual legislation prevailing under the various Indian acts and rules, the way the Indian judiciary has adjudicated some of the cases, and some case examples.

Legal Status of Contamination-Related Liability

Although India does not have specific soil or groundwater contamination standards, there have been many instances where companies have been penalized and held liable for soil and groundwater contamination. Contamination is identified and evaluated subjectively based on actual impact, potential impact, or risk to natural resources (soil quality and productivity, surface water, groundwater, etc.) and human health.

Applicable environmental laws concerning the cleanup of contaminated property follow the polluter pays principle and impose liability on property owners and operators. The penalties imposed have included site closure and recovery of the cost of remediation from the responsible companies.

Liability typically extends to individuals who have operational control, executive powers, or individual or joint ownership of assets. Since a board of directors has executive powers, statutory liability extends to all board members who are declared as Directors of the Company with the Registrar of Companies. Liability may also extend to senior officials who are not board members if they fulfill the above criteria.

Relevant Soil and Groundwater Laws

Under the provisions of the Water (Prevention and Control of Pollution) Act, 1974 and the Environmental (Protection) Act, 1986, it is a criminal offence to cause or knowingly permit any poisonous, noxious, or polluting matter to enter into the rivers, streams, groundwater, and coastal waters. The occupier of a facility has “strict liability” in this regard and the regulators (in this case the state or central pollution control board) need only prove that the pollutants originated from the concerned facility for the liability to be imposed.

Seepage of contaminants into a neighboring property causing damage to that property may also result in legal liability through modes of judicial activism. The remedy sought may lead to injunction through the Public Interest Litigation Act, 1991. The claim for cost of correction may be combined with a claim for direct and indirect damages.

A significant legal reference to contamination-related liability is in the Hazardous Wastes (Management and Handling) Rules, 1989, as amended in 2003. Section 16 of these rules mentions that the occupier of a facility shall be liable for damages to the environment resulting from the improper handling and disposal of hazardous waste listed in Schedules 1, 2, and 3.  The liability extends to remedial costs (costs to “reinstate or restore damaged or destroyed elements of the environment”), which are payable in advance to the SPCBs, and also any fine that may be levied by relevant authorities.

Rule 25 of these rules states that

The occupier . . .  of the facility shall be liable for all damages caused to the environment or third party due to improper handling of the hazardous waste or disposal of the hazardous wastes. The occupier . . .  of the facility shall be liable to pay financial penalties as levied for any violation of the provisions under these rules by the State Pollution Control Board with the prior approval of the Central Pollution Control Board.

Public grievances, community complaints, and environmental activism by nongovernmental organizations most often take the form of PILs filed in courts by those who perceive themselves to be directly or indirectly impacted by contamination caused by industry. The liability in such cases may extend to remedial costs (costs to “reinstate or restore damaged or destroyed elements of the environment”), which are payable in advance to the SPCBs. Compensation for direct and indirect damages and punitive fines levied by the authorities may also be required.

Case laws refer to imposition of “strict and absolute liability” in contamination cases. A significant judgment may result in imposition of severe liability irrespective of the financial capacity of the polluter. In another litigation, it was ruled that the environmental liability is not limited by the asset value of the polluting facility and extends to the owners and top executives of the polluting facilities, unless “the person(s) concerned was able to prove that the offence was committed without his/her knowledge or that he/she exercised all diligence to prevent the offence.”

Disclosure of Environmental Contamination

Disclosure in the event of environmental contamination may be a regulatory requirement in India. The Water (Prevention and Control of Pollution) Act, 1974, states that “forthwith information” is to be given to the pollution control board in cases of discharge (or apprehension of discharge) of any poisonous, noxious, or polluting matter into a stream, well, sewer, or land. The duty to disclose is the responsibility of the person who is in charge of the facility that caused the pollution.      

Soil and Ground Water Monitoring

Annual soil and groundwater monitoring reports are required to be submitted to the state pollution control boards (SPCBs) if a facility falls within the purview of the Hazardous Wastes (Management & Handling) Amendment Rules, 2003.

Although the courts in India follow the polluter pays principle, the precise scope of this principle and its implications for those involved in past polluting or potentially polluting activities remains to be settled. In any case, applicable case laws clearly indicate that the onus of proof regarding the origin of contamination lies with the property occupier.

Environmental Case Law Examples

The “right to a healthy environment” as a fundamental right of Indian citizens has emerged from PIL-based judicial action. Some of the salient principles and norms evolved by the judiciary to assess environmental liability situations include

• Absolute liability of hazardous industries;
• Polluter pays principle;
• Precautionary principle; and
• Constitutional “Right to Safe Environment.”

Absolute Liability for Hazardous Industry

The right to compensation in environmental cases has been traditionally linked to strict liability as enunciated in Rylands v Fletcher.  A portion of the ruling provides that

A person who for his own purposes, brings onto his land and collects and keeps there anything likely to mischief if it escapes, must keep it at his peril and, if he fails to do so, is prima facie liable for the damage which is the natural consequence of its escape.

Following the Bhopal gas leak tragedy, the Indian Supreme Court found this rule inadequate to deal with situations where the masses do not have the resources to enter into litigation against a powerful industrial company. In the Delhi gas leak case, therefore, the Supreme Court laid down a new judicial norm of “absolute liability” for a hazardous and inherently dangerous industry to pay compensation.

The new rule of absolute liability developed by the court was enunciated as follows:

The enterprise must be held to be under an obligation to provide that the hazardous or inherently dangerous activity in which it is engaged must be conducted with the highest standards of safety and if any harm results on account of such activity, the enterprise must be absolutely liable to compensate for such harm, and it should be no answer to the enterprise to say that it had taken all reasonable care and that the harm occurred without any negligence on its part . . .

If the enterprise is permitted to carry on an hazardous or inherently dangerous activity for its profit, the law must presume that such permission is conditional on the enterprise absorbing the cost of any accident arising on account of such hazardous or inherently dangerous activity as an appropriate item of its overheads. Such hazardous or inherently dangerous activity for private profit can be tolerated only on condition that the enterprise engaged in such hazardous or inherently dangerous activity indemnifies all those who suffer on account of the carrying on of such hazardous or inherently dangerous activity regardless of whether it is carried on carefully or not. This principle is also sustainable on the ground that the enterprise alone has the resource to discover and guard against hazards or dangers and to provide warning against potential hazards.

Polluter Pays Principle

The principle of absolute liability in cases of environmental injury has further found judicial validation in the polluter pays principle, which has become the law of the land through Supreme Court judgments.

In the Bicchri case, while imposing the cost of remediation on the polluter, the Supreme Court held

Where an enterprise is engaged in a hazardous or inherently dangerous activity and causes  harm to any one on account of an accident, the enterprise is strictly and absolutely liable to compensate all those who are effected by the accident and such liability is not subject to any of the exceptions as laid down in tortuous principles of strict liability under the rule laid down in Rylands Versus Flecher.

The Supreme Court further held

The ‘Polluter Pays’ principle demands that the financial costs of preventing or remedying damage caused by pollution should lie with the undertakings which cause the pollution, or produce the goods which cause the pollution, Under the principle it is not the role of Government, to meet the costs involved in either prevention of such damage, or in carrying out remedial action, because the effect of this would be to shift the financial burden of the pollution incident to the taxpayer.

Further, in the Vellore tanneries pollution case, the Supreme Court has elaborated on the polluter pays principle as follows:

The ‘Polluter Pays Principle’ as interpreted by this Court means that the absolute liability for harm to the environment extends not only to compensate the victims of pollution but also the cost of restoring the environmental degradation. Remediation of the damaged environment is part of the process of ‘Sustainable Development’ and as such the polluter is liable to pay the cost to the individual sufferers as well as the cost reversing the damaged ecology.

Precautionary Principle

In the Vellore tanneries pollution case, the court has deemed the international norm of the precautionary principle as part of Indian law and considered its application mandatory in the interest of sustainable development.

As held by the Supreme Court in the Vellore tanneries pollution case:

We are however, of the view that “The Precautionary Principle” and “The Polluter Pays Principle” are essential features of “Sustainable Development.” The “Precautionary Principle” – in the context of the law – means:

• Where there are threats of serious and irreversible damage, lack of scientific certainty should not be used as a reason for postponing measures to prevent environmental degradation.
• The “onus of proof” is on the actor or the developer/industrialist to show that his action is/was environmentally benign.
• We have no hesitation in holding that the precautionary principle and the Polluter Pays Principle are part of the Environmental Law of the Country.

Right to Life in Article 21 Includes Right to Safe Environment

Article 21 of the Indian Constitution guarantees: “No person shall be deprived of his life or personal liberty except according to procedure established by law.”  This article has proved a fertile source of judicial innovation and interpretation to expand the scope of meaning of substantive constitutional rights and invest them with the force of justiciability. The right to live in a healthy environment has emerged as an inherent and implied right to life enshrined in Article 21 of the Constitution through judicial interpretation.

Therefore, under Article 32 of the Indian Constitution (Protection of Fundamental Rights), any citizen or concerned group can initiate a PIL with the Supreme Court of India in case a threat of (or occurrence of) environmental degradation or contamination is perceived.  In such cases, the “onus of proof” may still lie with the actor or with the developer or industrialist to show that the action is or was environmentally benign or that the entity exercised all diligence to prevent the degradation or contamination.

Fines and Closure Notices

The following examples illustrate the application of financial penalties and closure notices on industrial facilities in India.

Manufacturer of potassium and sodium bichromate (Gujarat)

Numerous government and nongovernmental agencies had alleged that a manufacturer of potassium and sodium bichromate in the state of Gujarat dumped thousands of tons of toxic waste in and around its facility. Since 1999, a Gujarat-based environment and health group and the People’s Union of Civil Liberties have continued to highlight the grave risks to workers and the public at large through letters and phone calls to the SPCB, the Ministry of Environment and Forests, the Central Pollution Control Board, and the Central Vigilance Commission.

On account of the public activism and PILs, in 2004 the Supreme Court’s Monitoring Committee (SCMC) directed the company to inspect the site where it had illegally dumped more than 45,000 tonnes of extremely hazardous waste. The order directed the company to have the waste removed by an expert body. It instructed the National Institute of Occupational Health (NIOH) to conduct a medical study to evaluate the impact of unattended waste on the health of people living at the site, with a view to awarding damages. The court also ordered the company to deposit US$ 3.7 million towards the initial remediation work.

Dyeing units located in Tirupur, Tamil Nadu

The Tamil Nadu Pollution Control Board (TNPCB) ordered closure of 10 dyeing units in the Tirupur knitwear cluster that failed to comply with the Supreme Court order pertaining to pollution caused by the dyeing units on the Noyyal River. The power and water supply to these units was also disconnected. Closure orders have been issued under the Water (Prevention and Control of Pollution) Act, 1974.

A large number of dyeing units are located upstream in and around Tirupur. They discharge their chemical and toxic effluents either directly

or indirectly into the Noyyal River. As a result, all the irrigation wells along the river and in the downstream villages have been polluted, and the ecosystem has been adversely affected by the seepage and percolation of water stored in the Orathapalayam Dam.

The local communities, through various organizations, filed a PIL against the polluters in the Supreme Court to direct TNPCB to regulate against the dyeing and bleaching units causing pollution in the Tirupur area. The Supreme Court based its ruling on the precautionary principle and the polluter pays principle to extend its statement to the dyeing units to compensate the victims of the pollution along the Noyyal River and also to bear the cost of restoring the environmental degradation. The Supreme Court directed the dyeing units to deposit US$ 11.6 million to clean up the Orathapalayam Dam.

Steel manufacturing facility, Kalmeshwar, Maharastra

The Maharashtra Pollution Control Board (MPCB) recently served a notice on a steel manufacturing facility. The MPCB charged the facility with dumping untreated chemicals and waste in the open, leading to contamination of groundwater and soil. The MPCB has also asked the facility to suspend production and warned that essential services like power and water may be cut if appropriate actions are not undertaken with immediate effect.

Manufacturing facility located in Aurangabad

Acting on the Hazardous Wastes (Management and Handling) Rules, 1989 (amended), the local pollution control board issued a notice to the company for removing waste and disposing of the same within 24 hours. The board also cut off the power and water supply to the factory and directed the company to stop manufacturing activities forthwith. The pollution control board also fined the company and ordered it to bear the cost of evaluating its environmental management system and preparing a comprehensive eco-management plan through an expert agency appointed by the board.

Conclusion

Despite the absence of a concise regulatory framework to deal with polluted sites in India, PILs have given the judiciary enormous scope for intervening in environmental matters and passing severe penalties against companies that have been found guilty. However, much still needs to be done by the government in this arena.  As a result, the government has recently launched special courts for environmental issues, such as the National Green Tribunal, and is soliciting comments for setting up a National Environmental Assessment and Monitoring Authority (NEAMA).

These developments have also generated interest among insurance companies in India, who are offering coverage to industries that include damages due to environmental pollution.  Many more changes appear to be on the horizon in India regarding the way that pollution sources are regulated, liability is assigned, and companies achieve and verify environmental compliance.  

About the Authors

This article was prepared by members of the Mumbai and Delhi, India offices of Environmental Resources Management (ERM).

Ravi Costa is a principal consultant in ERM’s Mumbai office, where he is the head of ERM’s Contaminated Site Management group. He also worked for seven years as a contractor to the United States Environmental Protection Agency Groundwater and Ecosystem Research Division in Ada, Oklahoma and has worked on various sites where new technologies were being tested. He has also been involved in laboratory work setting up new methods for analysis of various contaminants.

Sanjay Sampath is a principal consultant in the Mumbai, India office of ERM.  He was previously in Houston, Texas, U.S.A. for nine years, most recently in the role of a senior project manager in the field of air quality compliance with Sage Environmental Consulting, where he also served as the head of Indian operations.

Masood Mallick is currently the Managing Director and Head of ERM in India and is based in New Delhi. Masood works closely with industries, venture capital groups, and their legal counsel to evaluate and manage the environmental, health, and safety risks of transactions over the investment life cycle. His achievements include development of an internationally patented system for hazardous material destruction and vitrification and three proprietary remediation techniques. Masood has a Masters degree in Environmental Science and Technology and a Diploma in Environmental Law.

Samrat Basak is a senior consultant with the Contaminated Site Management group in ERM’s Delhi office.  Samrat has more than 7 years of work experience in undertaking hydrogeological investigation and groundwater assessments, groundwater fate and contaminant transport modeling, and site investigation and remediation for green field and brown field sites across India, Sri Lanka, and Bangladesh. His present responsibilities include execution and management of contaminated site investigations and remediation for a range of clients at brown field sites in India.

Photograph: Abstract by Asif Akbar, Mumbai, India.

References

1. The Water Act (Prevention and Control of Pollution) 1974
2. Hazardous Wastes (Management & Handling) Amendment Rules, 2003
3. “India turns into a green pasture for pollution insurers”

Related Information

Read the EHS Journal article, India: Environmental Management and Environmental Regulation, by Sanjay Sampath and Rakhee Kulkarni.

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This article is the first in a series of articles about environmental management in India. In this installment, authors Sanjay Sampath and Raakhee Kulkarni provide an overview of the social and environmental challenges facing India now and in the next 20 years. Subsequent articles will focus on India’s environmental laws and regulations.

Overview

India is the seventh largest country in the world by geographical area. It has a population of over 1.1 billion people, up to 65% of which are under the age of 30.  Over the next five to ten years, India is expected to experience aggressive growth in its Gross Domestic Product (GDP) — 8 to 10% by some estimates. While this growth seems high compared to many countries, India will require a high growth rate to ensure the livelihood of its population.

The huge population burden also brings with it a whole spectrum of social issues that have environmental implications. A review of the following statistics from the McKinsey Global Institute published in 2010 illuminates some of India’s challenges and opportunities in the next 20 years.

Table 1 – Urbanization of India

Challenges of India’s Economic Growth

While the recent growth in India’s economy was spurred by the superhot software sector, infrastructure and manufacturing seem to be the key growth areas now. India is also seeing huge amounts of foreign investment in the chemical, manufacturing and real estate sectors. Increased foreign investment has affected the environmental agenda in India. Many multinational companies that are setting up shop in India are creating a sort of precedent by taking environmental issues seriously, probably from the lessons learned in the West, where environmental issues that were initially ignored later required significant cost and time commitments to resolve.

The debate over growth versus environment that was observed in the middle and latter half of the 20^th century in the United States seems to be cropping up more frequently in India.  There is an uptick in the activism of Non Governmental Organizations (NGOs). In some cases, NGOs have taken up major causes on behalf of poorer stakeholders, putting some large infrastructure and manufacturing projects on hold. Furthermore, environmental regulations are being enforced more stringently than earlier, and an overall “environmental awareness” has begun. These factors combined with increasing globalization have caused managers of Indian companies to take both environmental requirements and best practices seriously.

Trends in Environmental Management

The authors have noted several trends in environmental management in India.

1. Impact Assessment and Planning (IAP)

Assessing environmental and social impacts prior to setting up operations and obtaining environmental approval from the authorities is almost mandatory in most project categories. IAP assessments may be required not only for newly constructed facilities, but also for new operations that will be housed in an existing building.

2. Environmental Liability and Clean-up

Foreign investment has resulted in heightened scrutiny of current and historic environmental liabilities associated with property transactions in India. For a comprehensive discussion of environmental liability in India, please see the EHS Journal article, India: Environmental Liability and Contamination Regulations.

3. Sustainability and Regulatory Compliance

The increasing desire of Indian companies to meet world class standards has caused established companies in India to take on sustainability initiatives as a means of improving their global brand and reputation.  In addition, the presence of a highly popular and visible Environmental Minister, Mr. Jairam Ramesh, has ensured that environmental compliance is given greater importance now than it has received been in the past. Mr. Ramesh also advocates principles such as “green accounting,” which furthers the drive to sustainability.

4. Climate Change

While India still lags the West in coming up with concrete regulations based on the development versus environment debate, there is an increasing awareness in India that climate change is not about scoring points but about the existence of entire communities inside and outside of India. In fact, reports from the Centre for Science and Environment (CSE) and the Ministry of Environment and Forests (MOEF) predict that India will be one of the countries that is worst affected by the global shift in weather patterns. India has carried out many Clean Development Mechanism projects under the Kyoto protocol, but it is unclear what kind of a framework will exist after 2012.

Summary

While progress on the environmental front is being made, India still faces some major challenges.  Despite highly evolved environmental laws and regulations in some areas, many environmental practices such as regulation of air pollutants using a model seen in western countries are still at a very rudimentary stage in India. Increased environmental regulations will likely become a key area of concern in the near future as an increasingly wealthy citizenry demands more advanced environmental controls and a reduction in exposure to industrial pollutants.

Increasing urbanization will further strain the country’s urban infrastructure.  Per the McKinsey Global Institute, the infrastructure equivalent of a “new Chicago” or two “new Mumbais” will have to be built every year in India for the next 20 years to meet the country’s demands.  Another way of looking at the need for expanded infrastructure — India will need to add 20-times the capacity of paved roads, metros and subways that were added in the past decade to meet the anticipated urban population rise by 2030.

The environmental sector is expected to be at the forefront of India’s evolving story in the coming years.

Further Information

Future articles in this series will explain the evolution and breadth of environmental laws and regulations in India.

Read the EHS Journal article, India: Environmental Liability and Contamination Regulations, by Ravi Costa, Sanjay Sampath, Masood Mallick and Samrat Basak.

About the Authors

Sanjay Sampath is a principal consultant in the Mumbai, India, office of Environmental Resources Management (ERM).  He was previously in Houston, Texas, U.S.A. for nine years, most recently in the role of a senior project manager in the field of air quality compliance with Sage Environmental Consulting, where he also served as the head of Indian operations.  He was also previously with RMT, Inc. in their Houston office.

Raakhee Kulkarni is a senior consultant in ERM’s Mumbai office, where she is the head of ERM’s Transaction Services (TS) group.  She has developed significant experience in environmental liability assessments, environmental due diligence, compliance audits, environmental impact assessment, policy and regulatory framework, institutional strengthening and capacity building and studies on solid waste management and low cost sanitation.

Photograph: Indian Flag Pattern on Wall by Asif Akbar, Mumbai, India.

References

1. McKinsey Global Institute:  India’s Urban Awakening:  Building Inclusive Cities, Sustaining Economic Growth
2. “The Two Cultures Revisited: The Environment-Development Debate in India”, Economic and Political Weekly – Vol. No 42 dated Oct 16^th
3. www.erm.com

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