Industrial Units Operating With Valid PCB Consents Can't Be Closed Merely For Technical Want Of Prior Environmental Clearance: Supreme Court

"Unit cannot be closed merely on account of technical irregularity for want of prior EC, when the PCB itself was not aware of the applicability of EC for such units" Supreme Court, in a significant ruling dated May 6, 2026, held that industrial units established and operating with valid Consent to Establish (CTE) and Consent to Operate (CTO) cannot be shut down solely due to the technical want of prior Environmental Clearance (EC).

A bench of Justice J.K. Maheshwari and Justice Atul S. Chandurkar observed that such units should not be penalized when the State Pollution Control Boards (PCBs) themselves were unaware of the EC requirement at the time of granting consents. The Court emphasized that closure is not the solution for a "technical irregularity" where the project proponent acted with bona fide intent.

The appellants are various formaldehyde manufacturing units situated in Rajasthan and Haryana that were ordered to close by the National Green Tribunal (NGT) for lacking prior EC under the EIA 2006 Notification. These units had been established and were functioning based on valid CTE and CTO granted by their respective State Pollution Control Boards. The dispute arose when the PCBs later realized that formaldehyde units required EC under the "Synthetic Organic Chemical" category and directed the units to apply for ex-post facto clearance.

The primary question before the court was whether industrial units contributing to the economy and providing livelihood should be closed down for the technical irregularity of wanting prior EC when they possess other statutory consents. The court was also called upon to determine if the ratio of the precedent in Pahwa Plastics Private Limited v. Dastak NGO applied to the present batch of appeals.

Court Reaffirms Ratio Of Pahwa Plastics Judgment

The Court noted that the NGT’s closure orders were primarily based on its earlier decision in the Dastak N.G.O. case, which has already been set aside by the Supreme Court. The bench observed that the factual matrix of the current appellants is nearly identical to that in Pahwa Plastics Private Limited v. Dastak NGO (2023). In that case, the Court had held that a unit should not be closed for a technical irregularity if it is otherwise complying with environmental norms.

"The answer to the aforesaid question has to be in the negative, more so when the PCB was itself under the misconception that no environment clearance was required for the units in question," the bench noted, quoting the established precedent.

PCBs Unawareness Excuses Technical Irregularity

The bench highlighted that the Rajasthan and Haryana PCBs were themselves unaware that the EIA 2006 Notification applied to formaldehyde units at the time the units were established. It was only in 2019 and 2020 that the boards issued office orders directing the units to apply for EC within sixty days. The Court found that the appellants had complied with these directions and their applications were at advanced stages of screening and scoping.

Court Rejects Narrow Interpretation Of Workforce Impact

The respondents argued that the Pahwa Plastics ruling was intended to protect 8,000 workers and should not apply to smaller units employing only 10-15 people. The Court emphatically repelled this argument, clarifying that the figure of 8,000 employees referred to the cumulative workforce of the entire formaldehyde manufacturing sector. The bench stated that the protection of livelihood applies to all such units that started functioning after obtaining valid state consents.

"The number 8000 referred in those paragraphs is not only for Pahwa Plastics... it includes employees of all manufacturing units of formaldehyde running in the industrial area," the Court clarified.

Ex-Post Facto EC Permissible In Exceptional Circumstances

The Court discussed the impact of the Vanashakti litigation regarding ex-post facto clearances. While acknowledging that ex-post facto EC should not be granted "for the asking," the bench held that it cannot be declined with "pedantic rigidity" when the consequences of stopping operations are severe. The Court noted that the delay in the final appraisal of the appellants' EC applications was largely due to the pendency of various litigations in the Supreme Court.

"Ex post facto clearances and/or approvals cannot be declined with pedantic rigidity, regardless of the consequences of stopping the operations," the bench observed.

Final Directions And Restoration Of Operations

Setting aside the NGT's closure orders, the Court permitted the appellant-units to continue their operations. The bench directed the Union of India and the MoEF&CC to take a final decision on the pending EC applications within one month. The Court also ordered that if electricity had been disconnected pursuant to the NGT order, it must be restored immediately, subject to the payment of requisite charges.

The Supreme Court concluded that where a business has been set up pursuant to requisite approvals from statutory authorities and has applied for ex-post facto EC, it should not be closed pending the issuance of such clearance. The ruling provides significant relief to small and medium enterprises that faced closure due to evolving interpretations of environmental notifications by regulatory bodies.

Date of Decision: 06 May 2026