The National Green Tribunal has reaffirmed that statutory liability for environmental damage cannot be contracted away through private agreements, reinforcing the absolute obligation of project proponents under the Polluter Pays Principle. This judgment clarifies that even when operational responsibilities are transferred to a resident welfare body, the original developer remains legally accountable for pollution caused during the period of control.
Background & Facts
The Dispute
The appellant, M/s Landmark Ventures, developed the Prospera Multi-Storied Building, a residential complex in Bhopal. During a joint inspection on 20.12.2023, the National Green Tribunal’s committee found the Sewage Treatment Plant (STP) non-operational, with untreated sewage flowing onto adjacent land. This constituted a clear violation of Section 24 of the Water (Prevention and Control of Pollution) Act, 1974. The Madhya Pradesh Pollution Control Board (MPPCB) issued a demand notice for environmental compensation of Rs. 8,94,000, calculated under CPCB guidelines for 96 days of violation.
Procedural History
- 20.12.2023: Joint committee inspected the site and documented STP failure and untreated sewage discharge.
- 03.01.2024: Action Taken Report submitted to NGT.
- 04.01.2024: NGT directed finalization of environmental compensation.
- 23.05.2025: Appellant appeared before MPPCB’s expert committee and submitted representations.
- 06.06.2025: MPPCB issued formal demand notice for compensation.
- 08.01.2024: Appellant belatedly applied for Consent to Operate under the Air and Water Acts - after the violation period.
The Parties' Positions
- Appellant’s Claim: Liability shifted to Prospera Rahwasi Rakhrakhaw Sahkari Sanstha under a tripartite agreement dated 23.08.2023, which allegedly transferred O&M responsibility.
- Respondent’s Counter: Statutory liability under the Water Act cannot be transferred by private contract; appellant was the project proponent and occupier during the violation period.
Relief Sought
The appellant sought quashing of the compensation notice, arguing lack of hearing, non-joinder of the housing society, and improper calculation. The MPPCB sought enforcement of the compensation order and restoration of environmental damage.
The Legal Issue
The central question was whether statutory liability under Section 24 of the Water Act, 1974 for environmental damage can be extinguished by a tripartite agreement transferring operational control to a housing society, or whether the original project proponent remains absolutely liable as the polluter.
Arguments Presented
For the Appellant
The appellant relied on the tripartite agreement dated 23.08.2023, asserting that responsibility for STP operation and maintenance had been lawfully transferred to the housing society under Rule 19 of the Madhya Pradesh Nagar Palika Rules, 2021. It argued that the inspection occurred after the handover, and therefore, the society - not the developer - should bear liability. It further contended that the MPPCB failed to provide adequate opportunity of hearing and that the BMC, as the issuer of the Completion Certificate, was a necessary party.
For the Respondent
The MPPCB countered that statutory obligations under Section 24 and Section 25 of the Water Act are non-transferable and attach to the person who established the activity causing pollution. The tripartite agreement, while binding between private parties, cannot override statutory duties. The Board emphasized that the appellant was the occupier during the violation period (22.09.2023 to 27.12.2023), had not obtained Consent to Operate, and had failed to prove lawful handover under Rule 19, as the Completion Certificate was issued only on 09.08.2024 - after the violation period.
The Court's Analysis
The Tribunal conducted a rigorous analysis of statutory liability, contractual arrangements, and environmental jurisprudence. It held that Section 24 of the Water Act, 1974 imposes a strict, non-delegable duty on any person who causes or permits polluting matter to enter water bodies or land. The Court emphasized that such liability is not contingent on ownership or operational control at the time of inspection, but on who was responsible for the activity that caused the pollution.
"The tripartite agreement is binding between the parties and the compensation can be contributed or distributed or claimed from the person concerned and that tripartite agreement is binding on themselves not on law."
The Court rejected the appellant’s argument that Rule 19 of the Nagar Palika Rules effected a legal transfer of liability. It noted that Rule 19 governs physical handover of infrastructure to a Resident Welfare Association for maintenance, not the transfer of statutory obligations under environmental law. The Completion Certificate was issued on 09.08.2024 - months after the pollution occurred - confirming that the appellant remained in control during the violation period.
The Tribunal further affirmed the Polluter Pays Principle as a constitutional imperative under Article 21, citing M.C. Mehta v. Kamal Nath and Indian Council for Enviro-Legal Action v. Union of India. It held that the principle imposes absolute liability for environmental degradation, extending beyond compensation to include remediation costs. The Court dismissed the appellant’s claim of procedural irregularity, noting that a hearing was granted on 23.05.2025 and the committee’s deliberations were documented.
The Court also rejected the non-joinder argument, holding that the BMC’s role in issuing a Completion Certificate did not make it a polluter or a necessary party to the environmental compensation proceeding. The focus remained squarely on the entity that caused the pollution - the project proponent.
The Verdict
The appellant lost. The National Green Tribunal held that statutory liability under Section 24 of the Water Act, 1974 cannot be contracted away and that the original project proponent remains absolutely liable for environmental damage caused during its period of control. The compensation of Rs. 8,94,000 was upheld, and the appellant was directed to deposit the amount within 30 days into the environmental fund for remediation.
What This Means For Similar Cases
Statutory Liability Is Non-Transferable
- Practitioners must advise clients that private agreements transferring operational control do not absolve developers of liability under environmental statutes.
- The polluter remains liable even if the property is handed over to a housing society, RWA, or third-party operator.
- Any defense based on contractual allocation of responsibility must be rejected unless the transfer occurred before the violation and was legally recognized under the relevant statute.
Completion Certificates Do Not Erase Past Violations
- A Completion Certificate issued under municipal rules does not retroactively validate prior environmental violations.
- The date of issuance of the certificate is irrelevant if pollution occurred before it was granted.
- Practitioners must audit the timeline of construction, handover, and pollution to determine the liable party.
Polluter Pays Principle Applies to Ongoing Harm
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Environmental liability continues until remediation is complete.
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Compensation calculations based on duration of violation are valid even if the polluter claims to have ceased operations.
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The Tribunal’s use of CPCB guidelines for calculation is binding unless challenged on technical grounds.
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Practitioners must now argue that statutory liability under the Water Act and Air Act is absolute and personal to the polluter, regardless of subsequent transfers.
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Always verify the timeline of construction, operational commencement, and handover to determine liability windows.
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Do not rely on municipal completion certificates to negate environmental violations - focus on the actual period of control and discharge.
