Real Estate Sector and Environmental Clearance Conundrum: Should Form Overrule the Substance?

-Prof. (Dr.) Sairam Bhat* & Haridev Varma**

The underlying lynchpin of the doctrine separation of powers is the Rule of law, which encompasses transparency and accountability. Recent developments to the Environment Impact Assessment (EIA) Notification, 2006, and its subsequent amendments have highlighted an intricate relationship between rulemaking, Constitutional adherence, and judicial oversight in India’s environmental governance.

Now, the Environmental Rule of Law in India stands today as being inconsistent, uncertain, irregular, and erratic, partially due to executive inaction and Judicial overreach. This is further expounded through a recent ruling of the Kerala High Court which held an Environmental Clearance [EC] notification of 2014 void, leading further to the confusion to the ongoing Supreme Court scrutiny of Ex-post Facto environmental clearance in Vanashakhti v. Union of India.[1] The Environment (Protection) Act, 1986, (EPA) empowers the Central Government to enforce the EIA Notification, 2006. This notification is a standard regulatory tool that requires Environmental Clearance (EC) before a wide range of projects can commence, including building and construction projects with a built-up area exceeding 20,000 square meters.[2] Numerous aspects of the originally published notification lack substance, including the definition of a built-up area and the unclear and ambiguous delineation of project categories, which ultimately causes regulatory friction.

Thus, the Ministry of Environment, Forests, and Climate Change (MoEFCC) issued ‘Draft’ Notification No. 2319(E) on September 11, 2014, which initially appeared to be an effort to clarify these ambiguities. The notification outlined what “built-up area” referred to and listed the types of buildings and construction projects that required EC. The ‘Draft’ Notification was open to public comment in line with the ideas of participatory environmental governance. The Final Notification No. 3252(E) dated 22 December 2014 (Final 2014 Notification) was an extensive modification from the ‘draft’. Instead of listing projects that required an EC, it listed categories that did not require one, such as industrial sheds. Additionally, some sustainable management practices needed to be incorporated by the project developers.[3]

Further, Civil Society Organisations immediately began to question the procedural legitimacy of the 2014 Final Notification. As laid down by the Supreme Court from time to time, the ‘form’ of environmental law rule making requires adequate public consultation before it may be issued. The MoEFCC’s contention that no objections or suggestions were presented during the public consultation phase was contradicted by documentary evidence, rendering the process vulnerable to challenge for departing from the audi alteram partem rule and the broader constitutional principle of procedural fairness.[4] This procedural flaw was exacerbated because the Final Notification’s content was significantly different from the ‘Draft’, thereby compromising the integrity of the consultative process that Section 23 of the General Clauses Act, 1897,[5] enshrines.

Real estate sector and environmental clearance

The Environmental Protection Act, specifically Sections 3(1) and 3(2)(v), provides the Central Government the authority to take all necessary actions to protect the environment, including limiting the operations of businesses and development projects. This is the statutory basis of the Environment Impact Assessment (EIA) Notification, 2006. In the exercise of these extensive delegation, the MoEFCC published the EIA Notification on September 14, 2006,[6] creating a framework that requires ‘prior’ Environmental Clearance (EC) for projects, including the real estate sector. The Real Estate EC notification emphasises building and construction projects larger than 20,000 square meters but smaller than 1,50,000 square meters of built-up area within its regulatory framework.

The final notification lacked clarity on several key issues, including what constitutes a built-up area and which elements of building and construction projects are to be included or excluded. However, on September 11, 2014, the MoEFCC published Draft Notification No. 2319(E) to resolve these ambiguities. In addition, specifically listing residential buildings, commercial complexes, hotels, hospitals, hostels, office buildings, and IT/software parks as projects requiring prior EC, the draft attempted to define the term “built-up area.”[7] Notably, the draft was released for public review, reflecting the principles of transparency and public participation in the political process. Significant stakeholder concerns and objections were voiced during this process, though, highlighting the need for consultative, transparent, and consistent environmental regulation as well as the delicate balance between developmental needs and environmental protection.

The Kerala High Court received Writ Petition (Civil) No. 3097 of 2016 from One Earth One Life, an environmental non-governmental organisation registered under the Travancore-Cochin Scientific, Literary and Charitable Societies Registration Act, 1955, which challenged this Real Estate Sector EC Final Notification.[8] In addition to violating statutory mandates and constitutional environmental rights, the Petitioner argued that the Final Notification was ultra  vires, procedurally flawed, and substantively arbitrary. The primary issues surround mainly over three aspects, firstly, whether the notification by the MoEFCC has violated the principles of Natural justice as they ignored the stakeholders objections and grievances; secondly, whether the exemptions granted to the construction projects under the Final notification assessed the environmental risks associated with unregulated buildings and thirdly whether the Final notification is void ab initio due to the fragrant violation of procedural and substantive rules of law.

The Court’s reasoning was based on the principle of procedural fairness, which the Supreme Court has repeatedly upheld as a sine qua non in administrative decision-making, particularly when those decisions have significant social and environmental implications.[9] The Court emphasised that the principles of natural justice, particularly audi alteram partem, necessitate a genuine and meaningful consideration of stakeholder inputs during public consultation processes, citing the principles outlined in cases such as Maneka Gandhi v. Union of India,[10] and A.K. Kraipak v. Union of India.[11] The Court determined that the MoEFCC’s assertion that no objections were raised during the public consultation phase was inaccurate, as it tainted the entire amendment process and rendered it unconstitutional due to its lack of procedural legitimacy.[12]

Furthermore, despite significant stakeholder objections, the Final 2014 Notification’s significant and inexplicable departure from the Draft was determined to be an instance of administrative arbitrariness, which is against the principles of Article 14,[13] restriction on arbitrary state action.

Therefore, the Court reiterated that administrative discretion must be exercised within reasonable bounds and cannot be corrupted by whim or malice, citing the Supreme Court’s reasoning in State of Punjab v. Gurdev Singh[14] and Union of India v. G. Ganayutham.[15] Additionally, since Vellore Citizens’ Welfare Forum v. Union of India[16] and Narmada Bachao Andolan v. Union of India,[17] the High Court has acknowledged the precautionary principle and the sustainable development doctrine as fundamental principles of Indian environmental jurisprudence. Without any justification for legislative or environmental impact, the Court determined that the broad exemptions provided by the Final 2014 Notification diluted the ecological protections guaranteed by the EIA Notification 2006.

In this context, the Court emphasised that any effort to relax or exempt projects from environmental clearance requirements must be firmly grounded in legislative discourse and scientific evaluation, rather than an administrative decree.

The Kerala High Court’s quashing of the Notification has left several legal questions unanswered, primarily because the judgement emphasised form over substance. The balance between procedural form and substantive environmental protection is a crucial tension in Indian environmental jurisprudence. As the notification was quashed from its inception in 2014, this judicial approach leaves open the fate of projects that had already obtained Environmental Clearance (EC) under the contested regime or had started operations relying on the exemption in uncertainty.[18]

Thus, in essence, the judgment’s focus on procedural errors by MoEFCC raises concerns regarding the legal standing of previously granted ECs as well as the status of ongoing or completed projects. The question remains: should the focus on environmental governance be on ‘substance’, specifically the substance of the purpose of the EC in the Real Estate sector and why EIA should be mandated for such large-scale projects? Although the High Court’s ruling restores the original EIA 2006 Notification’s applicability, it makes no clear recommendations regarding whether ECs awarded under the now-quashed notification are null and void or whether the doctrine of prospective overruling prevails.  This gap is especially noticeable considering the Supreme Court’s recent cases, where the Court has occasionally permitted regularisation or remediation to balance environmental preservation and practical considerations.

Therefore, even though the Kerala High Court’s decision is doctrinally sound, it raises important questions about the ruling’s retroactive application and the remedial options for impacted projects, highlighting the need for additional judicial or legislative clarification regarding this developing field of law. Judgements must go beyond just emphasising that the Rule of Law must be adhered to at all times, but must also clarify the factual matrix on projects. Lastly, the accountability and clarity of the proposed application of EC to Real Estate projects now stand at an erratic crossroads.

***

*Prof. (Dr.) Sairam Bhat, Professor of Law & Co-Director, CEERA, National Law School of India University and **Haridev Varma, Intern CEERA, NLSIU, Student, School of Legal Studies, Cochin University.

[1] Jayshree Navin Chandra & Divij Poddar, The Legal Battle Over EIA Amendments: Kerala High Court’s Landmark Ruling, LiveLaw (Mar. 6, 2024), https://www.livelaw.in/law-firms/law-firm-articles-/eia-amendments-kerala-high-court-ministry-of-environment-forests-and-climate-change-one-earth-one-life-zeus-law-associates-264384.

[2] The Environment (Protection) Act, 1986, No. 29 of 1986, § 3, 5, 23 (India).

[3] Kerala HC quashes Centre’s EIA notification exempting educational institutions from environmental clearance, EdexLive (Mar. 15, 2024), available at https://www.edexlive.com/campus/2024/Mar/15/kerala-hc-quashes-centres-eia-notification-exempting-educational-institutions-from-environmental-clearance

[4] One Earth One Life v. Ministry of Environment, Forests and Climate Change, W.P.(C) No. 3097 of 2016, Kerala High Court, March 6, 2024, para 7

[5] General Clauses Act, 1897, § 23 (India).

[6] Ministry of Environment and Forests, Environmental Impact Assessment Notification, S.O. 1533(E), Sept. 14, 2006 (India).

[7] Ministry of Environment, Forest and Climate Change, Draft Environmental Impact Assessment Notification, S.O. 2319(E), Sept. 11, 2014 (India).

[8] One Earth One Life v. Ministry of Environment, Forests and Climate Change, W.P.(C) No. 3097 of 2016, Kerala H.C. (Mar. 6, 2024) (India).

[9] Daily Court Digest: Major Environment Orders (February 28, 2024), Down To Earth (Mar. 19, 2024), https://www.downtoearth.org.in/governance/daily-court-digest-major-environment-orders-february-28-2024–94718.

[10] Maneka Gandhi v. Union of India, AIR 1978 SC 597 (India).

[11] A.K. Kraipak v. Union of India, (1969) 2 SCC 262

[12] One Earth One Life v. Ministry of Environment, Forests and Climate Change, W.P.(C) No. 3097 of 2016, Kerala H.C., ¶ 7 (Mar. 6, 2024)

[13] Article 14, Constitution of India

[14] State of Punjab v. Gurdev Singh, (1991) 4 SCC 1.

[15] Union of India & Another v. G. Ganayutham, (1997) 7 SCC 463 (India).

[16] Vellore Citizens’ Welfare Forum v. Union of India, (1996) 5 SCC 647

[17] Narmada Bachao Andolan v. Union of India, Writ Petition (Civil) No. 328 of 2002, Supreme Court of India, Judgment dated March 15, 2005

[18] A notable reference point in the discourse on procedural compliance is the Supreme Court’s judgment in M/s Sweta Estate Pvt Ltd Gurgaon v. Haryana State Pollution Control Board & Anr,[18] where the Court categorically held that statutory benefits or exemptions cannot be availed without strict adherence to the prescribed procedural and documentary requirements. The Court emphasized that regulatory entitlements, particularly those affecting public interest, demand rigorous compliance with both the letter and spirit of the law, and any lapse in fulfilling such prerequisites renders the claim legally untenable.

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