Supreme Court: In a batch of appeals concerning formaldehyde manufacturing units operating in the States of Rajasthan and Haryana without prior environmental clearance (EC) under the Environment Impact Assessment Notification, 2006 (EIA Notification, 2006), a Division Bench of J.K. Maheshwari* and Atul S. Chandurkar, JJ., set aside the closure directions issued by the National Green Tribunal (NGT) and permitted the industries to continue operations. The Court held that the appellant-units, having been established and operated pursuant to valid consent to establish (CTE) and consent to operate (CTO) granted by the respective State Pollution Control Boards (PCBs), could not be shut down merely because the requirement of prior EC had not been earlier appreciated even by the regulatory authorities themselves.
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Background
The present batch of appeals arose from orders passed by the NGT concerning formaldehyde manufacturing units operating in the States of Rajasthan and Haryana. The appellants were industries engaged in the manufacture of formaldehyde and its resins, including melamine formaldehyde, urea formaldehyde and phenol formaldehyde. The Rajasthan-based units were involved in Civil Appeal Nos. 2881 of 2021, 4431 of 2021, 4432 of 2021 and 4748 of 2021, whereas the Haryana-based units were parties in Civil Appeal Nos. 4654 of 2021 and 4902-4908 of 2021. The controversy centred on whether these units could continue operations without obtaining prior EC under the EIA Notification, 2006.
The dispute began with the filing of three original applications before the NGT, Principal Bench, New Delhi O.A. No. 840 of 2019 (Ayush Garg v. Union of India), O.A. No. 298 of 2020 (Vineet Nagar v. CGWA) and O.A. No. 287 of 2020 [Dastak N.G.O. v. Synochem Organics (P) Ltd.]. In these applications, it was alleged that several formaldehyde manufacturing units had been established and were operating without obtaining prior EC, despite the applicability of the EIA Notification, 2006. By separate orders dated 3 June 2021, the NGT allowed the applications. The principal order was passed in Dastak NGO, wherein the Tribunal held that formaldehyde manufacturing units could not be permitted to operate without prior EC. The same reasoning was subsequently applied in Vineet Nagar and the connected matters.
Aggrieved by the NGT’s directions, the industrial units approached the Supreme Court by way of the present civil appeals. On 30 July 2021, the Supreme Court issued notice and stayed the operation of the impugned NGT orders. Around the same time, similar issues had arisen in Civil Appeal No. 4795 of 2021, Pahwa Plastics (P) Ltd. v. Dastak NGO, (2023) 12 SCC 774, concerning two formaldehyde manufacturing units against the same NGT order dated 3 June 2021 in the case of Dastak NGO. Initially, the present appeals were tagged along with Pahwa Plastics. However, the Supreme Court decided Pahwa Plastics separately on 25 March 2022 and allowed the appeals filed by the industrial units.
Analysis
The Supreme Court observed that the principal issue requiring consideration was whether the NGT, while deciding the connected original applications on 3 June 2021, had independently examined the facts pertaining to each industrial unit or had merely relied upon its decision in Dastak NGO. The Court held that the answer was evident since the foundational judgment in the case of Dastak NGO had already been set aside by the Supreme Court in Pahwa Plastics. The Court noted that in Pahwa Plastics, the Haryana Pollution Control Board itself was uncertain about the requirement of prior EC for formaldehyde manufacturing units at the time when CTE and CTO had been granted. It was further observed that the units therein had subsequently applied for EC, terms of reference (TOR) had been granted after screening and scoping, and only the procedural requirement of appraisal and grant of EC remained pending. On comparing the factual matrix of the present appellant-units with Pahwa Plastics, the Court found complete similarity.
The Court thereafter undertook a detailed factual scrutiny of each appellant-unit. In respect of Neetu Solvents, Top Notch, D.C. Industries, Dee Bee Organics, Gayatri Industries, Sanwaria Polymers, Guruji Overseas and Chemwood Industries, the Court recorded that valid CTEs and CTOs had been granted by the respective State Pollution Control Boards and the units had been established within the validity period of such permissions. The Court also noted that the units had subsequently applied for EC pursuant to directions issued by the Rajasthan and Haryana Pollution Control Boards, TOR had already been granted after completion of screening and scoping, and in most cases public consultation stood exempted because the industries were situated in notified industrial areas. In the case of Guruji Overseas and Chemwood Industries, even the public hearing process had been completed and only appraisal remained pending due to the impact of the Vanashakti v. Union of India, 2025 SCC OnLine SC 1139.
Upon appraisal of these facts, the Court concluded that the present batch of appeals stood on identical footing with Pahwa Plastics. Since the impugned NGT orders in the connected matters were founded entirely upon Dastak NGO, which itself had been set aside, the Court held that the ratio of Pahwa Plastics necessarily had to be applied mutatis mutandis to the appellant-units.
The Supreme Court also rejected the contention advanced on behalf of the original applicants regarding the distinction between Section 25(7), Water (Prevention and Control of Pollution) Act, 1974 (Water Act) and Section 21(4), Air (Prevention and Control of Pollution) Act, 1981 (Air Act). It was argued that while the Water Act contemplated deemed approval for CTO, the Air Act did not contain any such provision, and therefore the CTOs relied upon by the appellants were legally untenable. Repelling the submission, the Court held that once the Pollution Control Boards concerned, themselves had granted CTOs and their validity was not disputed by the regulatory authorities, the issue of any alleged infraction under the Air Act was not germane for adjudication.
The Court further dealt with the argument that the decision in the case of Pahwa Plastics should not be treated as a precedent because paras 2 and 54 of the judgment referred to approximately 8000 workers being affected. Clarifying the intent behind those observations, the Bench explained that the figure of 8000 employees did not pertain only to the units involved in Pahwa Plastics, but referred collectively to all formaldehyde manufacturing units operating in industrial areas, including the appellant-units in the present batch of appeals. The Court therefore rejected the attempt to distinguish Pahwa Plastics on that basis.
The Bench emphasised that the appellant-units were not cases where industries had deliberately established units and commenced operations in blatant disregard of environmental law. Rather, the industries had commenced operations after obtaining valid CTEs and CTOs from the Pollution Control Boards concerned at a stage when even the regulatory authorities themselves were unaware that prior EC under the EIA Notification, 2006 was required for formaldehyde manufacturing units falling within the category of “synthetic organic chemicals” under Item 5(f) of Schedule I. Subsequently, after the Pollution Control Boards revisited the applicability of the EIA Notification, 2006, directions were issued to the operational units to apply for EC within a stipulated period. The Court noted that the appellant-units complied with those directions and pursued the EC process diligently.
The Court also observed that the process for grant of EC had substantially progressed in the case of the appellant-units. Screening and scoping had been completed, TOR had been granted, public consultation had either been exempted or completed, and only appraisal by the Ministry of Environment, Forest and Climate Change remained pending in several cases. Two units in the batch had already been granted EC and continued operations. In this backdrop, the Court held that the recourse to ex post facto EC had been undertaken only to rectify the regulatory mistake arising from the earlier understanding of the Pollution Control Boards, and not because of any mala fide conduct on the part of the industries.
Accordingly, the Supreme Court set aside the NGT’s closure directions and allowed the appeals. Applying the ratio of Pahwa Plastics mutatis mutandis, the Court directed that the appellant-units, having been established and operated pursuant to valid CTEs and CTOs, shall be permitted to continue functioning. The authorities were directed to take a decision on the pending EC applications within one month in accordance with law, and until such decision was taken, the operation of the units was not to be interfered with. The Court further directed restoration of electricity supply to any disconnected unit subject to payment of dues, while reserving liberty to the authorities to proceed afresh in accordance with law in the event of rejection of EC applications on grounds attributable to the appellant-units. Finally, the Union of India was directed to intimate the appellant-units within three working days regarding any further compliance required from them for processing of the EC applications.
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[Neetu Solvents v. Vineet Nagar, 2026 SCC OnLine SC 811, decided on 6-5-2026]
*Judgment authored by: Justice J.K. Maheshwari
Advocates who appeared in this case:
Nidhesh Gupta, Senior counsel
Ankit Jain, Senior counsel
Archana Pathak Dave, Additional Solicitor General
