R6-Bhullar - Polluter Pays Principle 1

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2
Making the Polluter Pay in India:
Scope and Limitations of Environmental Law
LOVLEEN BHULLAR
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I.
INTRODUCTION
The polluter pays principle forms an integral component of environmental law jurisprudence,
at the international, regional and domestic levels. The widely accepted formulation of the
principle requires that the polluter, rather than the government or members of the public,
should bear the cost of pollution.1 While the principle is widely recognized, its content and
scope forms the subject matter of considerable debate and discussion. The application of the
polluter pays principle depends upon the identification of the polluter, the circumstances in
which the polluters responsibility to pay is triggered, the determination of what is to be paid
- pollution prevention and control measures determined by public authorities and/or costs of
environmental restoration including clean-up costs as well, and the identification of the
recipients of the payment - individuals or the government, etc. As a result, different meanings
have been attributed to the principle in different contexts. 2 The intended function of the
principle in a given context, whether redistributive, preventive or curative, also influences its
meaning.3
The polluter pays principle has formed part of the domestic environmental jurisprudence in
India - explicitly or implicitly for several years but neither its conceptual basis nor its
interpretation by the legislature and the judiciary has been examined in sufficient detail. This
paper attempts to fill this gap while focusing particularly on the role of the judiciary. Section
II will briefly describe the development of the polluter pays principle, as a principle of
environmental economics and as a legal principle. Section III will examine and analyze the
forms in which the polluter pays principle has been incorporated into domestic environmental
jurisprudence in India explicitly as well as by implication and implemented through the
principle of strict liability and absolute liability - in legislation as well as judicial decisions.
This section will highlight the legal basis for the incorporation of the principle into domestic
environmental law by the Supreme Court of India and the implementation of the principle
through the application of the absolute liability principle in particular. Section IV will focus
on the different issues that arise in the context of operationalizing the principle as a part of
judicial decisions. This will be followed by the conclusion highlighting the contribution of
the domestic environmental jurisprudence in India to the understanding of the polluter pays
principle and its limits.
II.
POLLUTER PAYS PRINCIPLE: FROM ECONOMICS TO LAW
The origin of the polluter pays principle can be traced to the economic theory of
1 Patricia Birnie, Alan Boyle & Catherine Redgewell, INTERNATIONAL LAW & THE ENVIRONMENT 322 (3rd edn,
Clarendon Press/Oxford University Press 2009) [hereafter Birnie, Boyle & Redgewell].
2 Hans Christian Bugge, The Principles of Polluter Pays in Economics and Law, in E Eide & R Van der Bergh
(eds), LAW AND ECONOMICS OF THE ENVIRONMENT 53 (Juridisk Forlag 1996).
3 Nicolas de Sadeleer, ENVIRONMENTAL PRINCIPLES: FROM POLITICAL SLOGANS TO LEGAL
RULES 35-37 (Oxford University Press 2002) [hereafter de Sadeleer]; Hans Christian
Bugge, The polluter pays principle: dilemmas of justice in national and international
contexts, in Jones Ebbesson & Phoebe Okowa (eds), ENVIRONMENTAL LAW AND JUSTICE IN
CONTEXT 411 (Cambridge University Press 2009).
externalities.4 It is based on the idea that the production and/or consumption of goods or
services may result in pollution or environmental harm or damage (externalities) but often
these costs are not reflected in the market price of the goods or services in question. This
distorts price signals and results in inefficient economic choices. Further, instead of the
polluter, public authorities or members of the public have to bear the (social) costs of
pollution. The polluter pays principle is based on the idea of cost allocation and cost
internalization, that is, the external costs of production and/or consumption of goods or
services should be allocated to the polluter who is responsible for the pollution rather than to
the government or to members of the public. 5 This is expected to reduce the consumption of
pollution-intensive products.6
The shift of the polluter pays principle from economic theory to practice initially took place
in the context of the introduction of strict environmental measures on chronic pollution in
member countries of the Organization for Economic Cooperation and Development (hereafter
OECD).7 The OECD first identified the features of the so-called Polluter-Pays Principle in
1972.8
The principle to be used for allocating costs of pollution prevention and control
measures to encourage rational use of scarce natural resources and to avoid distortions
in international trade and investment is the so-called Polluter-Pays Principle. This
principle means that the polluter should bear the expenses of carrying out the above
mentioned measures decided by public authorities to ensure that the environment is in
an acceptable state. In other words, the cost of these measures should be reflected in
the cost of goods and services which cause pollution in production and/or
consumption. Such measures should not be accompanied by subsidies that would
create significant distortions in international trade and investment.
Two years later, the OECD Council reaffirmed the principle as a fundamental principle. 9
4 AC Pigou, THE ECONOMICS OF WELFARE (2nd edn, Macmillan 1924).
5 Philippe Sands & Jacqueline Peel, PRINCIPLES OF INTERNATIONAL ENVIRONMENTAL LAW
228 (Cambridge University Press 2012) [hereafter Sands & Peel]; de Sadeleer (n 3)
21.above
6 S Pearson, Testing the system: GATT + PPP = ?, 27(3) CORNELL INTERNATIONAL LAW
JOURNAL 553, 555 (1994).
7 This led to complaints from industries about high costs of compliance and negative effects on competitiveness
and forced governments to either help them cover costs of compliance or impose similar costs on imports
through tariffs. This led to widespread concern about proliferation of environmental subsidies and tariffs and
severe distortion of competition. See Candice Stevens, Interpreting the Polluter Pays Principle in the Trade and
Environment Context, 27 CORNELL INTERNATIONAL LAW JOURNAL 577, 580 (1994) [hereafter Stevens].
8 Recommendation of the Council on Guiding Principles Concerning International Economic Aspects of
Environmental Policies, Organization for Economic Cooperation and Development, OECD Doc. C(72)128
(May 26, 1972) 11 ILM 1172 (1972) [hereafter 1972 OECD Recommendation] para 4. Commentators credit
this Recommendation with the first appearance of the polluter pays principle in a legal context. See Stevens (n
7) 580; de Sadeleer (n 3) 26; Jonathan Remy Nash, Too Much Market? Conflict Between Tradable Pollution
Allowances and the Polluter Pays Principle, 24(2) HARVARD ENVIRONMENTAL LAW REVIEW 468 (2000)
[hereafter Nash].
9 Recommendation of the Council on the Implementation of the Polluter-Pays Principle, OECD Doc. C(74)223
(Nov. 14, 1974), 14 ILM 234 (1975) [hereafter 1974 OECD Recommendation] para I(1). See also
According to de Sadeleer, the principle was not intended to eliminate all forms of pollution
or to oblige polluters to assume the full consequences of their acts. 10 The reduction of
pollution beyond a certain level was considered neither practical nor necessary in view of the
costs involved.11 Further, the polluter was not required to pay anything to anyone. 12 This
formulation is described as partial internalization of environmental costs by the polluter.13
Subsequently, the scope of the principle was extended so that the potential polluter (operator)
bears the cost of reasonable measures, which are introduced by the public authority, to
prevent and control accidental pollution from hazardous installations. 14 The OECD also
recommended the internalization of cost of damage arising from pollution, thus marking a
shift towards full cost internalization.15 This trend is also reflected in the initial development
of the polluter pays principle in the European Community (EC) (later European Union
(EU)).16
At the international level, one of the earliest references to the polluter pays principle, albeit
implicit, can be traced to the Brundtland Report of 1987, which suggested that the
environmental costs of economic activity can be internalized-paid by the enterprises. 17
This reflects the formulation of the polluter pays principle in the OECD recommendations.
However, the polluter pays principle secured international support as an environmental
policy18 for the first time during the United Nations Conference on Environment and
Development (UNCED) (or Rio Conference) held in 1992. 19 Principle 16 of the Rio
Declaration, which has been described as the most important and far-reaching international
Recommendation of the OECD Council on the Use of Economic Instruments in Environmental Policy, OECD
Doc. C(90)177/Final (Jan. 31, 1991) [hereafter 1991 OECD Recommendation].
10 de Sadeleer (n 3) 27.
11 1972 OECD Recommendation (n 8) para 3.
12 Stevens (n 7) 579.
14 Recommendation of the OECD Council on the Application of the Polluter-Pays Principle to Accidental
Pollution, OECD Doc. C(89)88/Final (July 7, 1989), 28 ILM 1320 (1989).
15 1991 OECD Recommendation (n 9).

16 For soft law instruments, see, for example, Council and Governments of the Member States Declaration, of
22 November 1973, on the programme of action of the European Communities on the environment (OJ C 112,
20. 12. 1973) 1. For binding legal instruments, see Single European Act (OJ L 169, 17. 02. 1986) 1, art 25;
Consolidated version of the Treaty Establishing the European Community (OJ C 325, 24. 11. 2002)33, 107-08,
art 174(2); Consolidated version of the Treaty on the Functioning of the European Union, 13 December
2007, 2008/C 115/01, art 191(2). For ex-ante measures, see, for example, Directive of the European Parliament
and of the Council 2008/98/EC of 19 November 2008 on waste and repealing certain Directives (OJ L 312, 22.
11. 2008) 3. For ex-post measures to address unavoidable pollution in case of accidents and other environmental
disasters, see Directive of the European Parliament and of the Council 2004/35/EC of 21 April 2004 on
environmental liability with regard to the prevention and remedying of environmental damage (OJ L 143, 30. 4.
2004) 357.
17 Report of the World Commission on Environment and Development, Our Common

Future para 53 (1987).
18 Birnie, Boyle & Redgewell (n 1) 322.
19 Rio Declaration on Environment and Development, United Nations Conference on Environment and
Development, U.N. Doc. A/CONF.151/5 (1992), reprinted in 31 ILM 874 (1992). For a commentary on the
negotiating history of the Rio Declaration, see Chee Yoke Ling, The Rio Declaration on Environment and
Development: An Assessment 50 (Third World Network 2012).
statement of the fundamental principles of environmental law,20 reads as follows:

National authorities should endeavor to promote the internalization of environmental
costs and the use of economic instruments, taking into account the approach that the
polluter should, in principle, bear the cost of pollution, with due regard to the public
interest and without distorting international trade and investment.
This formulation of the polluter pays principle is neither absolute nor does it impose legally
binding obligations on national authorities.21 The principle is expressed in qualified and
aspirational terms; it lacks the normative character of a rule of law. 22 However, it does state
that the polluter should bear the cost of pollution, which is wider in scope than pollution
prevention and control measures introduced by public authorities. This reflects a shift towards
full internationalization of environmental costs.23 In addition to the Rio Declaration, the
polluter pays principle is also mentioned in the preamble or operative provisions of several
international (and regional) agreements.24 However, the foundation of the above legal
formulations of the polluter pays principle is still based on economic theory. Further, the
overwhelming focus on the polluter in the dominant discourse concerning the polluter pays
principle often overlooks its justice dimensions.
III.DEVELOPMENT OF THE POLLUTER PAYS PRINCIPLE IN INDIA

The idea of holding a polluter liable to pay damages for causing pollution/environmental
harm is not new in India. Courts have invoked the polluter pays principle to grant relief in a
number of cases of pollution. In some cases, strict and absolute liability has been imposed on
the polluter while applying the principle and in other cases, ordinary and/or exemplary
damages/compensation have been awarded against the polluter. It has also been mentioned,
explicitly or implicitly, in legislation. However, the first point of entry of the principle into
domestic environmental jurisprudence has not received much attention. This section first
examines two important judicial decisions of the Supreme Court of India that serve as the
starting point to understand the source of the polluter pays principle. This is followed by a
brief overview of legislation that refer to the principle. While some laws apply the polluter
pays principle implicitly by requiring the polluter to pay for the damage resulting from
pollution or environmental harm, the principle is explicitly referred to in some other laws.
20 Nash (n 8) 471.
21 de Sadeleer (n 3) 43. See also Alan Boyle & David Freestone (eds), INTERNATIONAL LAW
AND SUSTAINABLE DEVELOPMENT 4 (Oxford University Press 1999) [hereafter Boyle &
Freestone].
22 See Vaughan Lowe, Sustainable Development and Unsustainable Arguments, in Boyle &
Freestone (n 21) 19. See also North Sea Continental Shelf Case, ICJ Reports (1969) 3, para
72. Cf Rhines Chlorides Convention Arbitral Award (France/Netherlands) PCA (2004) para
103.
24 Ibid 23-24.
1. Explicit references
The Supreme Court of India has expressly invoked the polluter pays principle by relying on
the understanding of the principle in other jurisdictions and/or in international environmental
law. The activism of the Court has been attributed, among other factors, to Indias role in the
international environmental law policymaking processes,25 to the Courts desire to do
justice,26 or to fill gaps in the domestic environmental law regime. 27 In addition, although
the polluter pays principle was expressly referred to in the domestic environmental policy
framework for sometime, it is only recently that it is being mentioned in legislation as well.
1.1
Locating the source of the principle in judicial decisions
The polluter pays principle was explicitly relied on for the first time in domestic
environmental law by the Supreme Court of India in Indian Council for Enviro-Legal Action
v Union of India and Others (hereafter the Bicchri case).28 The case concerned the adverse
environmental and health impacts of water and soil pollution in Bichhri village and
surrounding villages in Udaipur District, Rajasthan as a result of dumping of untreated
wastewater and highly toxic sludge, particularly iron-based and gypsum-based, resulting from
the past production of H acid by chemical industries. Although the application of the polluter
pays principle by the Court in the Bicchri case has been referred to in a number of subsequent
decisions,29 its legal basis has not been examined.
Relying solely on an article published in an academic journal, which discussed the
development of the polluter pays principle in the OECD and the EC, 30, the Court observed
25 Michael R Anderson, International Environmental Law in Indian Courts, 7(1) REVIEW OF
EUROPEAN COMMUNITY AND INTERNATIONAL ENVIRONMENTAL LAW 21, 26 (1998)
[hereafter Anderson].
26 Geetanjoy Sahu, Implications of Indian Supreme Courts Innovations for Environmental Jurisprudence, 4(1)
LAW, ENVIRONMENT AND DEVELOPMENT JOURNAL 375 (2008).
27 Saptarishi Bandopadhyay, Because the Cart Situates the Horse: Unrecognized

Movements Underlying the Indian Supreme Courts Internalization of International
Environmental Law, 5(2) JOURNAL OF INTERNATIONAL LAW 1, 7 (2010) [hereafter
Bandopadhyay].
28 (1996) 3 SCC 212 [hereafter Bicchri case].
29 See, for example, Research Foundation for Science v Union of India and Another, (2005) 13 SCC 186, 203
(para 33) [hereafter Research Foundation II].
30 Carolyn Shelbourn, Historic Pollution Does the Polluter Pay?_(1974) JOURNAL OF PLANNING AND
ENVIRONMENTAL LAW 703. The Court quotes certain passages of the article. Ibid 247-248 (para 67). Some
portions of this excerpt from an article in an academic journal have been subsequently attributed to the Court
itself. See, for example, Karnataka Industrial Areas Development Board v C Kenchappa, (2006) 6 SCC 371,
387 (para 81) [hereafter Kenchappa]. In this case, the Court also attributed the observations of the Court on the
polluter pays principle in the Bicchri case to the author of the journal article. Ibid 389 (para 80). See also
Shubhankar Dam and Vivek Tewary, Polluting Environment, Polluting Constitution: Is A Polluted Constitution
Worse Than A Polluted Environment, 17(3) JOURNAL OF ENVIRONMENTAL LAW 383, 387 (2005) [hereafter
Dam & Tewary].
that the principle has now come to be accepted universally as a sound principle, 31 and it has
gained almost universal recognition32. In other words, in this case, the Court appears to have
incorporated the polluter pays principle into domestic law as a general principle of law
prevalent in other systems,33 rather than as a principle of international environmental law. It
has also been observed that the polluter pays principle, as stated in the Bicchri case, is much
closer to the ordinary, common-sense meaning of the term polluter pays.34
The Supreme Court explicitly invoked the polluter pays principle for the second time in
Vellore Citizens Welfare Forum v Union of India and Others (hereafter Vellore).35 The case
concerned pollution caused by the discharge of untreated effluent by tanneries and other
industries in the State of Tamil Nadu into river Palar and on land, which contaminated surface
water and groundwater, the main sources of water supply to the residents of the area. The
Court considered two sources of the polluter pays principle: domestic law (the Constitution
and environmental statutes) and international law (custom).
First, unlike the Bicchri case,36 the Court relied on the constitutional mandate to protect and
improve the environment to hold that the polluter pays principle is part of domestic
environmental law.37 This is in line with the Courts history of broad interpretation of
constitutional provisions. Subsequently, in MC Mehta v Kamal Nath and Others, the Court
observed that Articles 48-A and 51-A(g) of the Constitution have to be considered in the
light of Article 21 of the Constitution.38
There is no direct reference to the polluter pays principle in the Water (Prevention and
Control of Pollution) Act, 1974 and the Environment (Protection) Act of 1986, which were
enacted by the Government of India in order to implement the decisions of the United
31 Bicchri case (n 28) 247 (para 67).
32 Ibid 250 (para 69(V)).
33 Anderson (n 25) 26. See also Daniel Bodansky and Jutta Brunne, The Role of National
Courts in the Field of International Environmental Law, 7(1) REVIEW OF EUROPEAN
COMMUNITY AND INTERNATIONAL ENVIRONMENTAL LAW 11, 16 (1998) [hereafter Bodansky
& Brunne].
34 D Shanmuganathan and LM Warren, Status of Sustainable Development as a Principle of
National and International Law: The Indian Approach, 9(2) JOURNAL OF ENVIRONMENTAL
LAW 387, 399 (1997) [hereafter Shanmuganthan & Warren].
35 (1996) 5 SCC 647 [hereafter Vellore].
36 In the Bicchri case ((n 28) 236 (para 49)), the Court referred to Article 48-A and Article 51-A(g) of the
Constitution as well as to environmental statutes, but there was no attempt to read the polluter pays principle
into them.
37 Vellore (n 35) 659 (para 13). This finding of the Court was reiterated in Kenchappa (n 30)
387 (para 82); Research Foundation for Science Technology Natural Resource Policy v
Union of India and Another, (2005) 10 SCC 510, 518 (para 16) [hereafter Research
Foundation I]; Tirupur Dyeing Factory Owners Association v Noyyal River Ayacutdars
Protection Association, (2009) 9 SCC 737, 747 (para 23) [hereafter Tirupur]. See also
Hindustan Coca-Cola Beverages Pvt Ltd v West Bengal Pollution Control Board and Others,
Appeal No 10 of 2011, Decided on 19.03.2012, National Green Tribunal (Principal Bench)
[hereafter Hindustan Coca-Cola Beverages].
38 (2000) 6 SCC 213, 219 (para 8) [hereafter Kamal Nath II].
Nations Conference on the Human Environment of 1972 (where the polluter pays principle
was not mentioned) and in response to the Bhopal Gas tragedy of 1984 respectively.
However, in Vellore, the Court added that in fact the polluter pays principle/concept is
already implied in domestic environmental laws.39 This approach of the Court has raised
some concerns.40 For example, the penalty provisions in the Environment (Protection) Act do
not support the implementation of the polluter pays principle in its broad sense because they
prescribe payment of fines and imprisonment rather than compensation for restitution of the
damaged environment.41
On the other hand, the Courts reading of the polluter pays principle into the provisions of the
Water (Prevention and Control of Pollution) Act and the Environment (Protection) Act may
be justified on the ground that these laws lay down pollution prevention and control measures
and the polluter is required to bear the cost of compliance. In this respect, the domestic
environmental laws in India partly mirror the polluter pays principle in its narrow sense, as
envisaged in the early OECD recommendations. However, the objective of these laws in
India is limited to environmental protection; they are not concerned with the prevention of
distortions in international trade and investment (the other objective of the OECD
recommendations).
Second, while there was no reference to customary international law in the Bicchri case, the
Court in Vellore considered the international law dimension of the polluter pays principle. It
held that sustainable development has been accepted as a part of the customary international
law though its salient features have yet to be finalized by the international law jurists. 42 The
Court then identified the polluter pays principle as one of the salient principles and
essential features of sustainable development. Some commentators have taken these
observations of the Court to mean that it considered the polluter pays principle to be part of
customary international law.43 But the next observation of the Court is significant.
39 Vellore (n 35) 659-660 (paras 13 & 14).

40 Shanmuganathan & Warren (n 34) 399 [not entirely convincing]; Dam & Tewary (n 30)
391 [The judiciarys use of law to import legal principles with little or no legal history in
India into domestic environmental jurisprudence (read environmental statutes) without any
precedent does not augur well for the stated objective of legal stability.] See also
Bandopadhyay (n 27) 23 & 27.
41 Sheila Jasanoff, Managing Indias Environment, 28(8) ENVIRONMENT 12, 14 (1986).
42 Vellore (n 35) 657-58 (para 10). According to Article 38(1) of the Statute of the
International Court of Justice, international custom should constitute evidence of a general
practice accepted as law. The creation of customary international law must be supported by
evidence of the fulfillment of any of the characteristic authorities, such as instances of state
practice, decisions by international tribunals, treaties or other forms of opinio juris,
commentary, etc. For an exposition of the classic understanding of customary international
law, see Ian Brownlie, PRINCIPLES OF PUBLIC INTERNATIONAL LAW 4-7 (Clarendon Press
1998); Malcolm N Shaw, INTERNATIONAL LAW 68-88 (Cambridge University Press 2003).
43 See Anderson (n 25) 25. According to Bodansky & Brunne ((n 33) 15-16), in Vellore, the
Court considered the polluter pays principle to be customary international law, although it is
still soft law, and incorporated it into domestic environmental law.
Even otherwise once these principles are accepted as part of Customary International
Law there would be no difficulty in accepting them as part of the domestic law. It is
almost an accepted proposition of law that the rules of Customary International Law
which are not contrary to the municipal law shall be deemed to have been
incorporated in the domestic law and shall be followed by the courts of law...44
It is argued that the use of the phrases once these principles are accepted and there would
be no difficulty suggest that the Court did not hold that the polluter pays principle is a part of
customary international law and therefore it is incorporated in domestic law; instead, it
envisaged its incorporation in domestic law in the future once the principle is accepted as
customary international law. In this context, it is pertinent to mention that the polluter pays
principle has still not achieved the status of a generally applicable rule of customary
international law.45
In Vellore, the Court also observed that the polluter pays principle has been held to be a
sound principle in the Bicchri case,46 whereas in the latter case, the Court had actually stated
that the polluter pays principle has now come to be accepted universally as a sound
principle based on a journal article, which refers to the adoption of the principle by the
OECD and its incorporation by the European Community (two regional systems). 47 In any
case, the Courts observation does not necessarily mean that it is fully accepted in law. 48
Nevertheless, this decision has been relied upon in a number of subsequent decisions.49
In the Bicchri case, there was no reference to the polluter pays principle in the context of
international environmental law. In Vellore, although the Court referred to the conventions
and non-binding documents signed during the United Nations Conference on Environment
and Development held in Rio de Janeiro in 1992, it did not refer to any of its outputs,
including Principle 16 of the Rio Declaration (which explicitly relates to the polluter pays
principle) or the relevant provisions of Agenda 21. On the other hand, in Research
Foundation for Science v Union of India and Another, the Court specifically relied on
44 Vellore (n 35) 660 (para 15). In support of the accepted proposition of law, the Court
referred to some of its previous decisions.
45 Sands & Peel (n 5) 228; Birnie, Boyle & Redgewell (n 1) 38; Alan Boyle, Making the
Polluter Pay? Alternatives to State Responsibility in the Allocation of Transboundary
Environmental Cost, in Fr. Franzioni and T. Scovazzi (eds.), INTERNATIONAL RESPONSIBILITY
FOR ENVIRONMENTAL HARM 363 (Graham & Trotman 1991).
46 Vellore (n 35) 658 (para 12). But Kenchappa (n 30) observed that the Court held the
polluter pays principle to be a sound principle in Vellore. Ibid 387 (para 82).
48 Shanmuganathan & Warren (n 34) 399.
49 See MC Mehta v Union of India (Badkhal and Surajkund Lakes Case), (1997) 3 SCC 715, _ (para 8); S
Jagannath v Union of India, (1997) 2 SCC 87, 143-146 (para 49) [hereafter Jagannath]; MC Mehta v Union of
India (Calcutta Tanneries Case), (1997) 2 SCC 411, 429 (para 18) [hereafter Mehta-Calcutta Tanneries]; MC
Mehta v Union of India (Taj Trapezium Case), (1997) 2 SCC 353, 382 (para 32); MC Mehta v Kamal Nath,
(1997) 1 SCC 388, 413-414 (para 37) [hereafter Kamal Nath I]; Tirupur (n 37) 747 (para 23); Bittu Sehgal and
Another v Union of India and Others, (2001) 9 SCC 181, 193-195 (para 15) [hereafter Bittu Sehgal]; Research
Foundation I (n 37) 518 (para 16); Research Foundation II (n 29) 200 (para 26), 203 (para 34) & 203-204 (para
35).
Principle 16 of the Rio Declaration for support [a]part from polluter pays principle,50 thus
suggesting that there is a difference between the polluter pays principle and Principle 16 of
the Rio Declaration but there is no substantive discussion of this observation in the decision.
However, in Karnataka Industrial Areas Development Board v C Kenchappa, the Court
traced the foundation of the polluter pays principle to several judgments delivered after the
Rio conference of 1992.51 The Courts specific reference to the timing of the judgments
suggests that the latter were influenced by the outcome of the conference.
1.2
Legislation
In addition to judicial decisions, the polluter pays principle is explicitly mentioned in

legislation. For example, the application of the polluter pays principle has been made a
mandatory requirement under the National Green Tribunal Act, 2010 (hereafter the NGT
Act) while the National Green Tribunal (hereafter Tribunal or NGT) is passing an order,
decision or award.52 However, there is no guidance regarding the content and scope of the
principle. Similarly, although the NGT is empowered to award relief and compensation to the
victims of pollution and other environmental damage, restitution of property damaged and
restitution of the environment,53 and the NGT Act specifies the grounds on which
compensation may be claimed (Schedule II), it does not specify the basis on which
compensation is to be awarded. Some of the proposed state laws concerning the environment
also include explicit references to the polluter pays principle.54
2. Implicit references in Legislation

Although there is no explicit reference to the polluter pays principle in most environmental
statutes, provisions imposing strict or no-fault liability and responsibility for prevention and
control of damage are included in domestic liability laws and waste management and
handling rules respectively. The former are discussed in section 3.3.3 below. Insofar as the
latter are concerned, under the Hazardous Wastes (Management, Handling and
Transboundary Movement) Rules, 2008, the producer is responsible for safe and
50 Research Foundation II (n 29Error! Bookmark not defined.) 201 (para 30).
51 Kenchappa (n 30) 391 (para 99).
52 The National Green Tribunal Act, 2010, s 20. A similar provision is included in the Plachimada Coca-Cola
Victims Relief and Compensation Claims Special Tribunal Bill, 2011. Earlier, the discussions around setting up
of a National Environment Protection Authority delved on institutionalizing the polluter pays principle into an
environmental legislation. See Ministry of Environment and Forests, Towards Effective Environmental
Governance: Proposal for a National Environment Protection Authority Discussion Paper For Comments, 17
September 2009, http://www.envfor.nic.in/mef/NEPA%20-%20Discussion%20Paper.pdf.
53 Ibid s 15.
54 See, for example, the Rajasthan Water Resources Regulatory Bill, 2012 [The Authority
shall support and aid the enhancement and preservation of water quality within the State in
close coordination with the relevant State agencies and in doing so the principle of polluter
pays shall be followed.].
environmentally sound handling of hazardous waste (rule 4(1)), while the operator of the
treatment, storage and disposal facility is responsible for its safe and environmentally sound
operation, closure and post closure phase (rule 18(4)). The Rules hold the occupier, importer,
transporter and operator of a facility liable for all damages caused to the environment or third
party due to improper handling or disposal of the hazardous wastes (rule 25(1)). Similarly,
under the E-Waste (Management and Handling) Rules, 2011, collection centres and
dismantlers are responsible for ensuring that no damage is caused to the environment during
storage and transportation of e-waste (rules 5(3) and 7(3)).
Both of these legislation, which implicitly apply the polluter pays principle, are either silent
about the recipient of the amount of damage or compensation that may be awarded against
the polluter or the actual victim does not directly receive the amount of damage or
compensation awarded. Under the Hazardous Waste Rules, the polluter (occupier and/or
operator of the facility) does not pay directly to the victim of pollution or environmental
harm; instead, the State Pollution Control Board (hereafter SPCB) is authorized to levy
financial penalties, with prior approval of the Central Pollution Control Board, in case of
violation of the provisions of these Rules (rule 25(2). Although the E-Waste Rules do not
specify the nature of action that can be initiated against the polluter in case of resulting
damage, s 15 of the Environment (Protection) Act, which provides the penalty for
contravention of the provisions of the Act, the rules made or orders and directions issued
thereunder, is relevant. In such a case, however, the SPCB rather than the actual victim of
pollution receives the financial penalty imposed on the polluter.
3. Implementation of the Polluter Pays Principle

There are different instruments to implement the polluter pays principle including ex ante
measures such as regulation and economic instruments, and ex post measures such as liability
rules.
3.1
Regulation
The domestic environmental law framework in India is based on the command-and-control

approach. The Water (Prevention and Control of Pollution) Act, 1974, the Air (Prevention and
Control of Pollution) Act, 1981 and the Environment (Protection) Act, 1986, the rules framed
under these laws, as well as other environmental laws, appear to reflect the partial cost
internalization approach. Public authorities determine discharge or quality standards,
emission limit values, best available technology, licensing procedures, etc. to ensure that the
environment is in an acceptable state. The polluting industries/local authorities are required to
internalize the costs of pollution prevention and control, failing which they will penalized in
accordance with the provisions of these laws.
3.2
Economic/market-based or incentive-based instruments
Economic instruments, such as tradable permits, charges, eco-taxes, feed-in tariffs and
certificates, have formed an integral element of the toolkit to implement the polluter pays
principle.55 They provide an incentive for potential polluters to adopt pollution prevention and
control measures to reduce the adverse environmental impact of their activities. They also
generate revenue for the adoption of environmental measures by the government.
Such instruments can be found in a number of legislation. Under the Water (Prevention and
Control of Pollution) Cess Act, 1977, for example, every person carrying on any specified
industry and every local authority is liable to pay cess on their water consumption (including
supply of water) with a view to augment the water pollution prevention and control resources
of the CPCB and the SPCBs. In order to induce behavioral change and to generate additional
revenue to address the results of environmental pollution, some states have introduced
legislation providing for the levy and collection of cess on certain polluting substances and
activities.56 In addition, incentives such as rebate in, or exemption from, taxes, excise and
customs duty or depreciation allowance are also offered for installation of pollution control
equipment and for shifting polluting industries from congested areas.57
The appeal for the polluters lies in the flexibility of these instruments. However, their ability
to implement the polluter pays principle is contingent upon the rate of the levy if the rate is
not high enough, it is unlikely to influence behavioral changes. Such instruments also
undermine developments in domestic environmental law, which impose strict or absolute
liability on the polluter to compensate the victims of pollution as well as to restore the
environment. Instead of performing the redistributive function for the affected individuals,
they procure financial resources for environmental protection for the State, which may or
may not be used for the specified purposes.
3.3
Liability rules
55 See, for example, Theodore Panayotou, Economic Instruments for Environmental

Management and Sustainable Development, Environment Economic Series Paper No. 16,
Environment and Economics Unit, United Nations Environment Programme (UNEP 1994);
Aparna Sawhney, A Review of Market Based Instruments for Pollution Control: Implications
for India, Background Paper for Taskforce Report of the Ministry of Environment and Forests
(National Institute of Public Finance and Policy 1997).
56 See Clean Energy Cess Rules, 2010 [gross quantity of raw coal, lignite or peat raised and dispatched from a
coal mine]; Goa Cess on Products and Substances Causing Pollution (Green Cess) Act, 2013 [products and
substances including hazardous substances; the Act expressly refers to the polluter pays principle]; Gujarat
Green Cess Act, 2011 [electricity other than renewable energy] [The Act was set aside in March 2013 but the
Supreme Court stayed the High Courts order in July 2013]; Goa Rural Improvement and Welfare Cess Act,
2000 [carrier transporting certain material].
57 See Environmental Regulations and Policies, in Waste Minimisation Circle, National

Productivity Council of India, TRAINING CONTENTS ON WASTE MINIMISATION &
WASTE MINIMISATION CIRCLE, http://wmc.nic.in/chapter1-Initiatives-prevention.asp.
The introduction of, and compliance with, ex ante measures does not rule out the possibility
of occurrence of environmental damage. In such situations, as well as where ex ante measures
are either absent or are not being implemented, the polluter pays principle may be
implemented through curative measures, such as liability rules, which hold the polluter
responsible for environmental damage and for payment of compensation to victims. 58
Liability rules can also perform a preventive function. The anticipation of liability for
damages that might occur as a result of an activity may provide the incentive to increase the
amount of care taken in conducting the activity.59
The polluter pays principle can be traced back to some of the earliest instruments establishing
minimum rules on civil liability for damage resulting from hazardous activities. 60 The
principle has also been referred to in a number of international and regional agreements
dealing with environmental liability.61 The relationship between the polluter pays principle
and liability has also been explored in domestic legislation and judicial decisions.
The nature of liability may be fault-based or no-fault liability. In the former case, harm results
from non-compliance with regulatory requirements or the breach of a general duty of care
(also known as negligence). However, the affected party is required to prove the fault of the
polluter, which is a heavy burden to discharge. Further, the polluter is not liable to pay
damages for environmental harm, which is neither reasonably foreseeable nor avoidable. 62 As
a result, fault-based liability is of limited use in implementing the polluter pays principle.
Instead, no-fault liability or strict liability is preferred in such situations. It is based on the
rule laid down in Rylands v Fletcher.63 There is no requirement to prove the polluters fault.
However, the application of the rule is subject to a number of exceptions. 64 Further, the
liability may be limited in amount and the definition of damage tends to be narrow.65
59 Kathleen Segerson, Liability for environmental damages, in Henk Folmer & Gabel H
Landis (eds), PRINCIPLES OF ENVIRONMENTAL AND RESOURCE ECONOMICS: A GUIDE FOR
STUDENTS AND DECISION-MAKERS 420, 421 (Edward Elgar Publishing 2000).
60 Philippe Sands, PRINCIPLES OF INTERNATIONAL ENVIRONMENTAL LAW 282 (2nd edn,
Cambridge University Press 2003).
61 de Sadeleer (n 3) 24 & 30.
62 Ibid 50. See also, Lucas Bergkamp, LIABILITY AND ENVIRONMENT (Kluwer Law
International 2001).
63 (1868) LR 3 HL 330. Blackburn, J. enunciated the principle thus:We think that the true rule of the
law is that the person who for his own purposes brings on his lands and collects and keeps there
anything likely to do mischief if it escapes, must keep it at his peril, and if he does not do so, is prima
facie answerable for all the damages which is the natural consequence of its escape.
64 The exceptions are an act of God, an act of a third party, plaintiffs own fault, plaintiffs
consent, natural use of land and exclusion of rule by statute or statutory authority.
65 See, for example, 1969 Convention on Civil Liability for Oil Pollution Damage and 1971
Convention on the Establishment of an International Fund for Compensation for Oil Pollution
Damage.
(i)Legislating for strict liability of polluters

The polluter pays principle is implicit in a number of domestic legislation in India that
impose strict and no-fault liability. In other words, the claimant is not required to plead and
establish that the death, injury or damage was a result of any wrongful act, neglect or fault of
any person. These legislation include the Public Liability Insurance Act, 1991 (hereafter
PLIA), the National Environment Tribunal Act, 1995 (hereafter NETA),66 and the Civil
Liability for Nuclear Damage Act, 2010 (hereafter CLNDA). In these statutes, the owner or
the person controlling the handling of hazardous substances at the time of the accident is
liable in case of death or injury to any person, or damage to property, resulting from the
accident (s 3 of PLIA and NETA), while the operator of a nuclear installation is liable for
nuclear damage resulting from a nuclear accident (s 4 of CLNDA). Under s 4 of PLIA and s 8
of CLNDA respectively, hazardous enterprises and nuclear installations are required to obtain
sufficient insurance cover or financial security to ensure prompt payment of
compensation/cover their liability. These two laws limit the maximum amount of the
operators liability for every accident/incident (s 4 of PLIA and s 6 of CLNDA) although the
victims right to claim larger damages under any other law is expressly reserved under s 8(1)
of PLIA.
In a shift towards full internalization of environmental costs, the heads under which
compensation could be claimed under the Schedule to NETA included expenses incurred by
the government to cope with any harm or damage, including compensation for environmental
degradation and restoration of environmental quality. Similarly, s 2(g) of CLNDA includes
costs of measures of reinstatement of significantly impaired environment as well as loss of
income derived from an economic interest in any use or enjoyment of the (now significantly
impaired) environment. Schedule II of the NGT Act also includes several such heads under
which compensation or relief for damage may be claimed.
(ii)Polluter pays principle and absolute liability principle in judicial decisions

Traditionally, the courts in India have followed the rule of strict liability. However, following
the Bhopal gas tragedy of 1984, questions were raised about the extent of liability of
corporations in the event that any injurious liquid or gas escapes, on account of negligence or
otherwise, and the remedies to secure payment of damages to the affected persons. In this
context, a Constitution Bench of the Supreme Court developed the principle of absolute
liability in MC Mehta and Another v Union of India and Others (hereafter the Oleum gas
leak case).67 The Court held:
66 NETA was enacted to implement Principle 13 of the Rio conference, which called upon States to develop
national laws regarding liability and compensation for the victims of pollution and other environmental
damages. It has been repealed after the enactment of the NGT Act, which refers to the no fault liability principle.
67 (1987) 1 SCC 395. The case concerned leakage of oleum gas from one of the units of
Shriram Foods and Fertiliser Industries on 4 and 6 December 1985, which affected several
persons and killed one person.
...where an enterprise is engaged in a hazardous or inherently dangerous activity and

harm results to anyone on account of an accident in the operation of such hazardous
or inherently dangerous activity resulting, for example, in the escape of toxic gas the
enterprise is strictly and absolutely liable to compensate all those who are affected by
the accident.
The liability is absolute because it is not subject to any exceptions as is the case with the strict
liability principle. The Court further observed:
...the measure of compensation...must be correlated to the magnitude and capacity of
the enterprise because such compensation must have a deterrent effect. The larger and
more prosperous the enterprise, the greater must be the amount of compensation
payable by it for the harm caused on account of an accident in the carrying on of the
hazardous or inherently dangerous activity by the enterprise.68
In the Bicchri case, the Supreme Court opined that any principle evolved in this behalf
should be simple, practical and suited to the conditions obtaining in this country. 69 The Court
then relied on the absolute liability principle as laid down in the Oleum gas leak case to
determine the liability of the polluters.70 The Court held that the polluting industries are:
absolutely liable to compensate for the harm caused by them to the villagers in the
affected area, to the soil and to the underground water and...they are bound to take all
necessary measures to remove the sludge and other pollutants lying in the affected
area...and also to defray the cost of the remedial measures required to restore the
damaged environment, that is, the soil and the underground water sources.71
The Court concluded that the polluter pays principle is stated in absolute terms in the Oleum
gas leak case.72 This suggests that the Court recognized the distinction between the absolute
liability principle or no-fault liability, which applies to inherently dangerous or hazardous
activities, and the polluter pays principle, which applies more broadly to different cases of
68 Ibid 420-421 (paras 31-32).

70 Ibid. The Court disagreed with the concurring opinion of Ranganath Misra, C.J. in Union
Carbide Corpn v Union of India, (1991) 4 SCC 584, 607-608 (paras 14-15), that held the law
declared in the Oleum gas leak case to be obiter. Ibid 242 (paras 59-60).
71 Ibid 240-241 (para 57) & 246-248 (paras 66-67). However, the implementation of the decision left
a lot to be desired. In Indian Council for Enviro-Legal Action v Union of India and Others, (2011) 8
SCC 161,177 (para 4), the Court observed:...This case is a classic illustration where even after a
decade-and-a-half of the pronouncement of the judgment by this Court based on the principle of
polluter pays, till date the polluters (industries concerned in this case) have taken no steps to
ecologically restore the entire village and its surrounding areas or complied with the directions of this
Court at all. The orders of this Court were not implemented by keeping the litigation alive by filing
interlocutory and interim applications even after dismissal of the writ petition, the review petition and
the curative petition by this Court.
72 Ibid 250 (para 69(V)). See also Anderson (n 25) 27.
pollution.73 However, in Vellore, after referring to its previous opinion expressed in the
Bicchri case that any principle evolved in this behalf should be simple, practical and suited
to the conditions obtaining in this country,74 the Court went on to hold:
...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 polluter is liable to pay the cost to the individual sufferers as well as the cost of
reversing the damaged ecology.75
Vellore appears to have blurred the distinction between different types of polluting activities
and endorsed the absolute liability principle laid down in the Bicchri case as an integral
component of the polluter pays principle so long as the polluting activity results in harm or
damage.76 The understanding of the polluter pays principle in Vellore also goes beyond the
formulation in international environmental law, which generally limits the polluters
liability.77 Nevertheless, a number of subsequent decisions have applied the principle of
absolute liability to make the polluter pay for pollution without determining whether or not
the polluting substance or industry is hazardous in nature. On the other hand, in Research
Foundation II, although the Court observed that in India the liability to pay compensation to
affected persons is strict and absolute,78 it was a case concerning the import of hazardous
waste oil. Therefore, it is possible that the Court did not intend the rule of absolute liability to
apply to all cases of pollution or environmental harm.
IV.OPERATIONALIZING THE POLLUTER PAYS PRINCIPLE

In order to operationalize the polluter pays principle, it is essential to identify the polluter, the
situations in which the principle will be triggered, the authority that will be responsible for
undertaking the assessment of environmental harm and determination of damages payable by
the polluter and the extent of, or the manner in which, damages will be paid by the polluter.
This section addresses each of these issues.
73 Shyam Divan & Armin Rosencranz, ENVIRONMENTAL LAW AND POLICY IN INDIA 590
(2nd edn, Oxford University Press 2002) [hereafter Divan & Rosencranz].
74 Vellore (n 35) 658 (para 12) referring to the Bicchri case (n 28) 246 (para 65).
75 Ibid 659 (para 12).
76 See also The All India Skin and Hide Tanners and Merchants Association v The Loss of
Ecology (Prevention and Payment of Compensation) Authority and Others,
MANU/TN/4196/2010, 9; Anderson (n 25) 27; Divan & Rosencranz (n 73) 590.
77 See PW Birnie & AE Boyle, INTERNATIONAL LAW & THE ENVIRONMENT 109 (Oxford University Press
1992).
78 Research Foundation II (n 29) 201 (para 31).
1.
Who is the Polluter?
The polluter is normally understood as the person or entity that is responsible for the
polluting activity. Even in India, the courts have defined the polluter as the producer of goods
in a number of cases.79 However, in a significant departure from the practice in other
jurisdictions as well as international environmental law, the courts in India, especially the
National Green Tribunal, have played an important role in expanding the traditional
definition of the polluter to include other persons/entities within its scope. For example, in a
case concerning disposal of debris and construction waste on the banks of the river Yamuna,
the polluter included the contractor and the truck owner who were responsible for dumping,
as well as the person whose property created the waste.80
In some cases, the NGT has held government departments and officials directly responsible
for pollution. In Invertis University and Others v Union of India and Others, for example, the
municipal body was directed to pay compensation for restitution of its solid waste site to its
original condition and to prevent further damage to the environment. 81 In Dr Karan Singh v
State of Himachal Pradesh and Others,82 a case concerning open burning of municipal
wastes, a compensatory cost was imposed on the Municipal Council, which was subsequently
recoverable from all the concerned officers and the contractor. The NGT has also included
municipal authorities whose inaction led to environmental degradation and/or pollution
within the definition of polluter. In Rohit Choudhary v Union of India and Others, the MoEF
and the Government of Assam were considered as polluters for permitting unregulated
quarrying and mining activities in and around the area of Kaziranga National Park. 83 In Cox
India, the Regional Officer of the SPCB was treated as a polluter because of his failure to
furnish correct information about the condition of the distillery unit for rectified spirit, which
prevented the Tribunal from taking appropriate action to prevent pollution. The SPCB was
also held equally responsible.84
The public has also been considered as the polluter in some cases. In Gaurav Jain v State of
79 See, for example, Research Foundation II (n 29) 200 (para 29).
80 Manoj Mishra v Union of India and Others, OA No 6 of 2012, Order dated 22.07.2013,
National Green Tribunal (Principal Bench). See also M/s Jaiprakash Power Ltd v State of
Himachal Pradesh and Others, CWP No 843 of 2011, Order dated 29.07.2013, National
Green Tribunal (Principal Bench); Abhishek Rai v State of Himachal Pradesh and Others,
Application No 256 of 2013 in CWPIL No 28 of 2011, Order dated 17.09.2013, National
Green Tribunal (Circuit Bench at Shimla) [hereafter Abhishek Rai].
81 Application No 185 of 2013, Order dated 24.10.2013, National Green Tribunal (Principal
Bench), 45(iv).
82 CWP No 6114 of 2012, Order dated 30.07.2013, National Green Tribunal (Circuit Bench
at Shimla).
83 Application No 38 of 2011, Decided on 07.12.2012, National Green Tribunal (Principal
Bench), 35.
84 M/s Cox India Ltd v MP Pollution Control Board and Another, Application No 10 of 2013, Decided on
09.05.2013, National Green Tribunal (Central Zone Bench, Bhopal) [hereafter Cox India], 27. See also
Abhishek Rai (n 80).
Punjab and Others,85 for example, the NGT indicated that the authorities will be at liberty to
ask for payment of money from the entire population generating municipal solid waste in
order to generate funds for effective execution of municipal solid waste disposal works. In
Subhas Datta v Union of India and Others,86 a committee was set up inter alia to determine
whether it would be appropriate for the authorities to collect fee for environmental pollution
caused by the residents of, and visitors to, Puri. The polluter pays principle has also been
applied to identify the poor as the polluter and to justify making them pay. In Wazirpur
Bartan Nirman Sangh v Union of India and Others,87 for example, the pollution and
ecological problems resulting from the unhygienic conditions created by the encroachers or
squatters on public land was the reason for directing their displacement.
In some cases, the government pays instead of the polluter where the polluter fails to pay or is
unable to pay and it is necessary to compensate the victims immediately. 88 The government
can subsequently recover the amount from the polluter. In Indian Council II, for example, the
Supreme Court directed the State Government to pay the portion of the total amount of
compensatory damages that the polluting industries were directed to pay to the villagers for
loss suffered as a result of damage to crops. 89 In another case, the Supreme Court had
imposed a liability on the polluters (importers of hazardous waste oil in the garb of
lubricating oil) towards the cost of incineration. 90 However, on account of non-payment of
this cost by the polluters, the Court ordered the Customs Department to pay the cost and
recover it from the importers later.91 Such substitution may be necessary in some cases to
ensure timely payment of compensation to victims and/or environmental restoration.
Environmental harm or damage is not confined to polluting activities: the unbridled
consumption of natural resources is also a problem.92 This includes mining activities, use of
biological resources, etc. In such situations, the polluter pays principle may be renamed as the
user pays principle. Courts in India have accommodated this variation of the polluter pays
principle. In Nature Lovers Movement v State of Kerala and Others,93 for example, the High
Court applied the polluter pays principle and directed the State Government to determine the
quantum of injury and compensation payable by occupants/encroachers in respect of forest
lands sought to be regularized.
85 OA No 106 of 2013, Order dated 03.09.2013, National Green Tribunal (Principal Bench).
86 OA No 110 of 2013, Order dated 22.10.2013, National Green Tribunal (Principal Bench).
87 103 (2003) DLT 654.
88 Barbara Luppi, Francesco Parisi & Shruti Rajagopalan, The Rise and Fall of the PolluterPays Principle in Developing Countries, 32 INTERNATIONAL REVIEW OF LAW AND
ECONOMICS 135, 136 (2012).
89 In Indian Council for Enviro-Legal Action and Others v Union of India and Others,
(1995) 3 SCC 77 [hereafter Indian Council II], the discharge of untreated industrial
effluents into the Nakkavagu by the polluting industries resulted in pollution of subsoil water.
91 Research Foundation for Science v Union of India, (2005) 13 SCC 671.
93 AIR 2000 Kerala 131.
2.
Triggering the Polluter Pays Principle
Generally, the application of the polluter pays principle is contingent upon a polluting activity
(or emission). The principle may be invoked in different situations: (i) when an established
threshold in the form of prescribed standards for the receiving environment is exceeded but
does not result in damage; (ii) when an emission exceeds the prescribed standards and results
in damage; (iii) when an emission does not exceed the prescribed standards but nevertheless
results in damage; or (iv) when there is a risk of potential negative environmental impact
irrespective of compliance with prescribed standards, etc.
The occurrence of harm or the existence of damage has been identified as a pre-condition for
the application of the polluter pays principle in some cases. In Deepak Nitrite v State of
Gujarat,94 for example, the Supreme Court clarified that compensation to be awarded must
have some broad correlation not only with the magnitude and capacity of the enterprise but
also with the harm caused by it. After restating the legal position that if there is a finding
that there has been degradation of environment or any damage caused to any of the victims
by the activities of the industrial units certainly damages have to be paid, the Court held that
it would not be correct to say that mere violation of the law in not observing the norms
would result in degradation of environment. 95 Similarly, in Hindustan Coca-Cola Beverages,
the NGT observed that the assessment of damage and the amount required to rectify the
damage were pre-conditions before imposing a liability on the polluter.96
However, the requirement of existence of damage as a pre-condition to trigger the polluter
pays principle fails to take into account situations where the risk of environmental
degradation necessitates the application of the precautionary principle, 97 and/or the principle
of prevention. This represents a significant step backward as it does not encourage the
(potential) polluter to adopt preventive or precautionary measures before the pollution occurs.
However, in some cases, the polluter pays principle and the precautionary principle has been
applied in tandem. In Research Foundation II, for example, the Supreme Court observed:
the producer of goods or other items should be responsible for the cost of preventing
or dealing with any pollution that the process causes. This...covers cost incurred in
avoiding pollution and not just those related to remedying any damage.98
The Court then limited and distinguished its observation in Deepak Nitrite, that to say that
mere violation of the law in not observing the norms would result in degradation of
environment would not be correct. It observed that Deepak Nitrite did not lay down a
proposition that the application of the polluter pays principle requires actual environmental
degradation. The Court distinguished the case before it on the ground that the offending
activities (that is, import of hazardous waste oil in the garb of lubricating oil) had the
94 (2004) 6 SCC 402 [hereafter Deepak Nitrite].
95 Ibid 407-08 (para 6).
96 Hindustan Coca-Cola (n 37) 27.
97 de Sadeleer (n 3) 40-41.
potential to degrade the environment.99

Courts have also issued directions to the potential polluter to pay the amount of damages in
advance, that is, before environmental degradation takes place. In MC Mehta and Another v
Union of India and Others,100 for instance, the Court allowed the petitioners caustic chlorine
plant to be restarted subject to fulfillment of certain directions. Similarly, in Rudresh Naik v
Goa Coastal Zone Management Authority,101 a case concerning permission to construct a
marine slipway for a dry dock, the NGT directed the appellant to deposit an amount in
advance in order to remedy any future damage to the ecology or the environment around the
site.
Even among the cases under review where the occurrence of harm or the existence of damage
is a pre-condition, the court does not discuss the threshold of harm that will result in the
application of the polluter pays principle. However, it is clear that the principle has not been
invoked in the case of any or every instance of environmental harm or damage resulting
from the pollution. In most cases, the application of the principle by the courts has been
pursuant to a finding of some environmental harm or damage. This suggests that the courts
are applying an implicit threshold of harm. The nature of the activity and the public interest
involved in its continuation also influences the determination of acceptable risk and therefore
the threshold of harm, which becomes unacceptable.
3.
Assessment of loss and determination of compensation
The courts invoke the polluter pays principle to hold a polluter responsible for environmental
damage. This has to be followed by the onerous task of assessing, determining, imposing and
recovering the compensation amount from the polluter. In a number of cases, the Supreme
Court has not itself undertaken the task of assessment of the loss resulting from the situation
created by the polluting activity and determination of the amount payable by the polluter for
reversing the environmental/ecological damage and the compensation payable by the polluter
to the victims (individuals and families). In the Bicchri case, in a footnote, the Court briefly
raised the question of its own competence to impose and recover cost of all measures
including remedial measures (or award damages against private parties) in order to ensure
observance of law and its orders as a part of enforcement of fundamental rights but it did not
express any final opinion.102 The Court does not appear to have ruled out the possibility that it
99 Ibid 201 (para 30) [The observations...is evidently confined to the facts of that case].
100 (1986) 2 SCC 176. The conditions included an undertaking from the owner and from the
officer(s) in actual management of the plant that they will be personally responsible for
payment of compensation; deposit of security for payment of compensation; and a bank
guarantee which shall be encashed, wholly or in part, and utilized for payment of
compensation, in case escape of chlorine gas within a three-year period results in death or
injury to any workman or to any person(s) living in the vicinity.
101 Appeal No 20 of 2013, Decided on 16.05.2013, National Green Tribunal (Principal
Bench).
102 Bicchri case (n 28) 243 [footnote].
can award damages.103

Nevertheless, it directed the Central Government (through the Ministry of Environment and
Forests) to undertake this function in exercise of its powers under s 3(3) of the Environment
(Protection) Act.104 Insofar as the task of awarding damages for loss suffered by the villagers
in the affected area is concerned, the Court left it open to the villagers or any organization on
their behalf to institute civil suits for this purpose.105 Subsequently, however, courts have
awarded damages in writ petitions.106 The same approach has been followed in other
decisions where the Court has directed the Central Government to establish an authority,
which is required to implement the polluter pays principle.107 In some cases, courts have
directed the State Government to appoint an authority or Commissioner for this purpose.108
In most cases, the authority prepares the statement showing the total amount to be recovered,
the names of the polluters from whom the amount is to be recovered, the amount to be
recovered from each polluter, the persons to whom the compensation is to be paid and the
amount payable to each of them. Then the Collector/District Magistrate of the concerned area
is responsible for recovering the amount from the polluters, if necessary as arrears of land
revenue, and its disbursement to the affected individuals and families.109
The process of assessment of loss and determination of compensation is subject to a number
of difficulties.110 One is the difficulty associated with identification of the polluters and the
victims where their number is large. The methodology applied for valuation, exclusion of
certain types of damages and the adequacy of compensation are also thorny issues. The equity
dimension is also often overlooked where the determination of compensation is linked with
land ownership.
Some cases have relied on alternative mechanisms for determination of loss and
compensation. For example, in a recent decision, a SPCB directed the polluting industry to
103 The Court observed: Be that as it may we are of the considered opinion that even if it is
assumed (for the sake of argument) that this Court cannot award damages against the
respondents... Ibid 243 (para 60).
104 Ibid 250 (para 70). The Court derived its authority to issue the necessary directions to the Central
Government from its earlier decision in Indian Council II (n 88). Ibid 243 (para 60).
105 Ibid 251 (para 70(3)).

106 See, for example, Kamal Nath II (n 38) 219-220 (para 9) & 224 (para 24); Vijay Singh
Puniya v State of Rajasthan, AIR 2004 Raj 1, 11-12 (para 31) [hereafter Puniya].
107 For example, the Courts directions led to the constitution of the Loss of Ecology (Prevention and
Payment of Compensation) Authority for the State of Tamil Nadu vide Notification No. S.O.671 (E), dated
30.9.1996 (Vellore (n 35) 195-196 (para 15, 17 & 18)); the Aquaculture Authority vide Notification No. S.O.
88(E) dated 6.02.1997 (Jagannath (n 49) 147 (para 52)); and the Dahanu Taluka Environment Protection
Authority vide Notification No. S.O. 884(E) dated 19.12.1996 to control pollution (Bittu Sehgal (n 49) 195 (para
17)).
108 See, for example, Mehta-Calcutta Tanneries (n 49) 432 (para 20(14)); Ishwar Singh v State of Haryana
and Others, AIR 1996 P&H 30, 49 (para 46(5)).
109 See cases referred to in n 107 above.

110 Asha Krishnakumar, An award and despair, 19(16) FRONTLINE (August 3-16, 2002); L Venkatachalam,
Damage Assessment and Compensation to Farmers: Lessons from Verdict of Loss of Ecology Authority in Tamil
Nadu, 40(15) ECONOMIC AND POLITICAL WEEKLY 1556 (2005).
form an expert committee to resolve the matter of damage compensation by mutual

understanding with affected farmers instead of referring the matter to a district level
compensation committee set up for such purposes pursuant to an order of the High Court.111
The NGT held this direction to be bad in law. However, instead of questioning the formula
derived by the polluting industrys Expert Committee for this purpose or directing that an
independent enquiry should be conducted, the NGT directed the Collector and the District
Magistrate to verify whether all the victims had been duly compensated as per this formula.
4.
What does the polluter pay?
The polluter pays principle is based on the premise of making the polluter pay for pollution.
As previously mentioned, what he/she is actually asked to pay depends on the meaning
attributed to the principle and its intended function. For example, the non-curative or
redistributive function of the polluter pays principle requires the polluter to internalize the
social cost borne by the public authorities for prevention and control of pollution. 112
Accordingly, in Research Foundation II, the importer of hazardous waste was held liable to
pay the amounts to be spent by the government for destroying the goods.113 Akin to the partial
cost internalization approach towards the polluter pays principle, courts have also directed the
polluting industry to adopt pollution prevention and control technologies.114
The curative function of the polluter pays principle involves payment of damages or
compensation to victims of pollution as well as for environmental damages. The rest of this
sub-section will deal with this function of the principle in the Indian context.
4.1
Damage or compensation to victims of pollution and environmental restoration
In a number of cases, courts have adopted the full internalization of costs approach, which
requires the polluter to pay damages or compensation to the victims of pollution and to meet
the expenses of restoring the environment. 115 It is now settled law in India that the one who
pollutes the environment must pay to reverse the damage caused by his acts. 116 In Research
111 Vajubhai Arsibhai Dodiya and Others v Gujarat Pollution Control Board and Others, Application No 64
of 2012, Judgment dated 31.10.2013, National Green Tribunal (Western Zone Bench).

113 Research Foundation II (n 29) 200.
114 Mehta-Calcutta Tanneries (n 49).
115 In some cases, the two terms damage and compensation - are used interchangeably,
while in others, damages are payable for environmental degradation while compensation is
payable to the victims of pollution (individuals or families).
116 See Vellore (n 35); Kamal Nath I (n 49) 414 (para 38) & 415 (para 39(3)); Kamal Nath
II (n 38) 224 (para 24); Mehta-Calcutta Tanneries (n 49) 430 (para 19). In Rajendra Kumar
Razdan v Mr T. Srinivasan and Others, DB Civil Misc Contempt Petition No 90 of 2010,
Decided on 27.09.2012 (Rajasthan High Court), the court directed the polluter to pay Rs one
crore as compensation for restoration of the environment and ecology. Ibid 68(16).
Foundation II, the Supreme Court held that this includes direct cost to the people or property
as well as full environmental cost (tangible and intangible). 117 However, the determination of
the full environmental cost of pollution involves calculation of the market value of natural
resources and valuation of environmental damages, which is a very difficult task. As a result,
in practice, the scope of liability of the polluter is often limited to some tangible
environmental costs. Further, although decisions refer to reversing the damage and restoration
of the environment, this is not possible in the case of irreversible damages. In the latter case,
a preventive and anticipatory approach or a precautionary approach may be more appropriate.
In some cases, courts have applied the percentage of gross turnover formula to determine
the quantum of compensation payable by the polluter.118 The Supreme Court has
acknowledged that this formula may be a proper measure in a given case because the
method to be adopted in awarding damages on the basis of polluter-to-pay principle has got
to be practical, simple and easy in application. 119 However, the application of this formula
may result in polluters with different annual turnovers paying the same amount where they
are all included within the same band for the purpose of determination of liability.120 The
formula may also fail to have the requisite deterrent effect on polluters if the percentage of
gross turnover awarded as is not high enough. In some cases, it may be difficult to access
information about the annual turnover of the polluting industry.121
It appears, however, that in a number of cases, the curative dimension of the polluter pays
principle is completely sidelined and it is applied in a manner to avoid addressing the
question of liability altogether. For example, in some cases, courts have directed the polluter
to pay lump sum compensation (normally Rs one lac or Rs five lac) while in other cases, a
daily penalty amount is imposed. This is a regressive approach because leave alone absolute
liability for environmental harm, it fails to even hold the polluter strictly liable for causing
environmental damage.
117 Research Foundation II (n 29) 200-201 (para 29).

118 Pravinbhai Jashbhai Patel and Another v State of Gujarat and Others, (1995) 2 GLR
1210 [hereafter Pravinbhai]. See also Deepak Nitrite Ltd v Ajit B Padiwal, (1997) 1 Guj LR
1062. The Supreme Court allowed an appeal against this order but for different reasons. See
Deepak Nitrite (n 94).
119 Deepak Nitrite (n 94) 407-08 (para 6). The language reflects the earlier observation of
the Court in Indian Council where it applied the absolute liability principle to implement the
polluter pays principle.
120 In Puniya (n 106), all the printing and dyeing units with different gross annual turnover
but within the same band determined by the Single Judge of the High Court had been directed
to pay the same pollution fine. The Division Bench of the High Court varied the formula for
determining the amount payable by the industrial units and ordered each of the units to pay
15 percent of their turnover.
121 In Rajiv Narayan v. Union of India and Others, MA No 44 of 2013 in OA No 36 of 2012, Order dated
12.09.2013, the Principal Bench of the NGT directed the alleged polluting industry responsible for groundwater
pollution in Noida to show its annual turnover for the last ten years with profit and loss statement. On
20.09.2013, the Supreme Court stayed this order for a period of 10 weeks on the ground that the NGT does not
have the right to issue such a direction. The NGT is hearing the case again now.
4.2
Punitive or exemplary damages
Punitive or exemplary damages are different from compensation to victims of pollution

and/or damages for restoration of the damaged ecology. The primary objective of punitive or
exemplary damages is to punish the polluter as well as to deter the polluter as well as others
from causing pollution in the future. But a polluter can be held liable to pay both types of
damages.122 In MC Mehta v Kamal Nath and Others, the Court considered the aim and
purpose of exemplary damages to be almost similar to the purpose of punishment (in the
nature of fine or imprisonment or both) under domestic environmental laws. 123 Finally, the
Court imposed exemplary damages on the polluter, which were to be used by the State
Government for flood protection works in the area affected by pollution.124
The Supreme Court has identified the nature and extent of the offending activity, the nature of
the offending party, and the intention behind such activity as the basis of the levy of
exemplary and/or penal damages.125 More recently, in Sterlite Industries (India) Ltd v Union
of India and Others,126 the Court referred to its earlier decision in the Oleum gas leak case,
and after considering the magnitude, capacity and prosperity of the appellant-company, held
it liable to pay a compensation of Rs 100 crores for polluting the environment in the vicinity
of its copper smelter plant and for operating the plant without a renewal of the consents by
the SPCB for a long period. The Court also emphasized the deterrent effect on the appellantcompany.127 Similarly, in Him Parivesh,128 the factors considered by the High Court of
Himachal Pradesh while assessing damages included deterrent effect on the polluter as well
as other companies, that the polluter should feel the pinch of the damages and the net worth
of the polluter. The court imposed damages/penalty of Rs 100 crores as a proportion of the
total cost of the project (approximately 25 percent) on the polluter. In both Sterlite and Him
Parivesh, the courts considered the blatant falsehoods of the polluter as a factor in the
assessment of damages.
4.3
Pollution fine
There is a distinction between a fine or penalty, which can be imposed after the commission
of an offence punishable under a statute is established, and damages or compensation payable
122 In Kamal Nath II (n 38), the polluter was directed to show cause as to why exemplary
damages should not be awarded in addition to damages/compensation for restoration of the
damaged ecology. Ibid 224 (para 24).
123 (2002) 3 SCC 653, 660-661 (para 9).
124 Ibid 660 (para 8).
125 Research Foundation II (n 29) 201 (para 31). However, in this case, the Court did not
consider it necessary to examine this aspect in depth in the absence of a clear finding.
126 (2013) 4 SCC 575 [hereafter Sterlite].
127 Ibid * (para 39).
128 Him Parivesh Environment Protection Society and Another v State of Himachal
Pradesh and Others, CWP No 586 of 2012 and CWPIL No 15 of 2009, Judgment dated
04.05.2012 (High Court of Himachal Pradesh) [hereafter Him Parivesh].
in accordance with the polluter pays principle. Although the Supreme Court directed the
polluter to show cause why pollution fine should not be imposed in Kamal Nath I,129 it was
subsequently held that a pollution fine cannot be imposed under writ jurisdiction; it can be
imposed only if it is prescribed in a statute, the polluter is guilty of contravention of its
provisions and he/she is found guilty after fair trial in a competent court. 130 In Calcutta
Tanneries, the Court imposed a pollution fine on the polluters in addition to compensation.131
However, in some cases, courts have applied the polluter pays principle and directed the
polluter to pay a pollution fine to compensate affected persons and to cover the cost of
restoring the damaged ecology for its period of operation. 132In Noyyal River Ayacutdars
Protection Association v Government of Tamil Nadu,133 the Madras High Court directed the
polluting industries to pay a fine on pro rata basis until they stopped pollution (by achieving
zero liquid discharge by a specified date) without reference to any victims of the pollution. In
these cases, courts may not be applying the term pollution fine stricto sensu as understood
in statutory enactments.
5.
Limits of the polluter pays principle
The polluter pays principle imposes, on the polluter, the cost of pollution prevention and
control as well as the cost of remedying the damage resulting from pollution. However, the
application of the polluter pays principle in India is heavily influenced by the manner in
which the judiciary manages the trade-off between environmental protection and
development. In the 1990s, during the period immediately following the Rio conference,
while the Supreme Court acknowledged the importance of the polluting industries to the
generation of foreign exchange and employment (directly and in ancillary industries), it
finally gave precedence to environmental considerations.134 The Supreme Court has also
clarified that the principle does not mean that the polluter can pollute and pay. 135 In
Pravinbhai Jashbhai Patel and Another v State of Gujarat and Others, the High Court of
Gujarat observed that this would legalise the violation, which is impermissible.136
129 Kamal Nath I (n 49) 415 (para 39(4)).
130 Kamal Nath II (n 38) 222-223 (paras 17-19) & 224 (para 22). See also M/s DVC Emta
Coal Mines Limited v Pollution Control Appellate Authority (WB) and Others, Appeal No 43
of 2012, Decided on 15.03.2013, National Green Tribunal (Principal Bench).
131 Mehta-Calcutta Tanneries (n 49) 432 (para 20(14)).
132 See Vellore (n 35) 665 (para 21). See also Puniya (n 106); Indian Asthama Care Society
and Another v State of Rajasthan and Others, RLW 2008 (1) Raj 472.
133 2007 (1) LW 275.
134 In the Bicchri case, the pollutant (H acid) was manufactured for export exclusively,
while in Vellore and in Tirupur, the polluting industry (leather & garments respectively)
generated considerable foreign exchange and employment.
135 Research Foundation II (n 29) 200-201 (para 29).
136 Pravinbhai (n 118) * (para 108). BN Kirpal, CJ later rendered the decision in the
Bicchri case.
However, in a large number of cases, courts have invoked the polluter pays principle to
impose a fine on the polluter or to ask him/her to pay damage or compensation for
environmental degradation but then allowed the polluting industry to continue its operations.
For instance, in Sterlite, even after accepting that the appellant/polluter had misrepresented
and suppressed material facts in its petition, the Court observed that the closure of its plant
would be against public interest.137 Similarly, in Him Parivesh, the court noted that the
damages should not bring the polluter to a halt. 138 The manner in which the polluter pays
principle is interpreted in such decisions is likely to set a precedent, which may lead to
further pollution or environmental harm in the future.
Moreover, compensation to victims does not always take the form of disbursement of monies
directly to them. Instead the amount collected from the polluter may be utilized for works of
socio-economic upliftment of the villages and for the betterment of their educational, medical
and veterinary facilities and agriculture and livestock, 139 or the creation of common facilities
such as schools, hospitals, community halls, tube wells etc. and improvement of the ecology
and the environment140. Instead of payment of monetary compensation, courts may also
impose other pollution prevention and control measures. For example, the NGT has ordered
the polluter to plant trees in some cases.141
V.CONCLUSION
The polluter pays principle is recognized as a principle of international environmental law as
well as regional and domestic environmental laws. The Supreme Court of India has read the
principle into the existing domestic legal framework (including constitutional provisions and
environmental laws). In this context, the judiciary has been influenced by the developments
within the OECD/EC as well as the urgent need to achieve sustainable development, one of
the guiding principles of international environmental law, in the aftermath of the Rio
Conference of 1992. Explicit references to the principle are included in some legislation,
while others apply the principle by implication.
However, the manner in which the polluter pays principle has evolved and been adapted to
the Indian context represents a departure from the practice in other jurisdictions. Courts,
137 Sterlite (n 126) * (para 40). The considerations of public interest identified by the
Court included: substantial contribution to copper production in India, which is used in
defence, electricity, automobile, construction and infrastructure etc.; employment to large
number of people, directly as well as through contractors; support to ancillary industries;
generation of revenue for Central and State Governments; and contribution to 10 percent of
the total cargo volume of Tuticorin port.
138 Him Parivesh (n 128) 106.
139 Pravinbhai (n 118) 135B(xii).
140 Him Parivesh (n 128) 104-106.
141 See, for example, Devendra Kumar v Union of India and Others, Application No 91 of
2012, Order dated 14.03.2013, National Green Tribunal (Principal Bench) 12(4); Cox India
(n 84) 34(4).
particularly the National Green Tribunal, have expanded the definition of the polluter. In
many cases, courts have adopted the full internalization of costs approach and held the
polluter liable to pay compensation to victims of pollution and damages for restoration of the
environment. They have also not hesitated to impose absolute liability on the polluters
(instead of strict liability). Courts have also imposed liability for past pollution on the
polluter, where the polluting activity has ceased, or directed a potential polluter to pay for
preventative measures to be undertaken by the government. In case of evasion or refusal to
pay damages or compensation, the polluting industry has been closed. In some other cases,
courts have directed the closure/relocation of polluting industries without imposing any
financial liability on the polluter. This may be described as another way to make the polluter
pay. It is important to note, however, that the decision in most of the cases under review was
not based solely on the polluter pays principle.
The polluter pays principle can serve as an important mechanism to address the problems of
environmental pollution and resultant public health issues in India. However, like Principle
16 of the Rio Declaration, the polluter pays principle, as incorporated into domestic law by
the Court, is extremely general in its formulation, and uncertain in the precise scope of the
legal obligations involved. This does not lend the principle to direct application or
enforcement in domestic laws; its relevance and impact on domestic environmental law
requires interpretation and implementation by the judiciary. The effectiveness of the principle
also depends on the severity of the penalty, strict regulatory measures and its ability to ensure
long-term deterrence and not just to compensate for the immediate damage caused, in other
words, the cost of compliance should be higher than the cost of non-compliance.
However, the principle, as applied by the courts in India, does not often result in the
imposition of severe penalty and its deterrent effect is limited. This limits the ability of the
principle to provide justice to the victims of pollution, including the environment. In some
situations, the application of the principle may actually cause injustice to certain sections of
the population, for example, where the slum dwellers or the poor polluters are removed
from their homes or where the closure of polluting industries results in loss of livelihood
without redress. Therefore, the justice/(in)justice dimensions of the principle in the Indian
context require further scrutiny.

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POLLUTER PAYS PRINCIPLE: FROM ECONOMICS TO LAW

15 1991 OECD Recommendation (n 9).

17 Report of the World Commission on Environment and Development, Our Common

statement of the fundamental principles of environmental law,20 reads as follows:

III.DEVELOPMENT OF THE POLLUTER PAYS PRINCIPLE IN INDIA

Locating the source of the principle in judicial decisions

27 Saptarishi Bandopadhyay, Because the Cart Situates the Horse: Unrecognized

39 Vellore (n 35) 659-660 (paras 13 & 14).

In addition to judicial decisions, the polluter pays principle is explicitly mentioned in

2. Implicit references in Legislation

3. Implementation of the Polluter Pays Principle

The domestic environmental law framework in India is based on the command-and-control

Economic/market-based or incentive-based instruments

55 See, for example, Theodore Panayotou, Economic Instruments for Environmental

57 See Environmental Regulations and Policies, in Waste Minimisation Circle, National

(i)Legislating for strict liability of polluters

(ii)Polluter pays principle and absolute liability principle in judicial decisions

...where an enterprise is engaged in a hazardous or inherently dangerous activity and

68 Ibid 420-421 (paras 31-32).

72 Ibid 250 (para 69(V)). See also Anderson (n 25) 27.

IV.OPERATIONALIZING THE POLLUTER PAYS PRINCIPLE

78 Research Foundation II (n 29) 201 (para 31).

Who is the Polluter?

Triggering the Polluter Pays Principle

potential to degrade the environment.99

Assessment of loss and determination of compensation

can award damages.103

105 Ibid 251 (para 70(3)).

109 See cases referred to in n 107 above.

form an expert committee to resolve the matter of damage compensation by mutual

What does the polluter pay?

Damage or compensation to victims of pollution and environmental restoration

112 de Sadeleer (n 3) 35.

117 Research Foundation II (n 29) 200-201 (para 29).

Punitive or exemplary damages

Punitive or exemplary damages are different from compensation to victims of pollution

Limits of the polluter pays principle

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