C&M E-ALERT: SUPREME COURT REINSTATES EX POST FACTO ENVIRONMENTAL CLEARANCES

On 18 November 2025, a three judge bench of the Supreme Court of India (“Court”) delivered an important judgement in the case of Confederation of Real Estate Developers of India (CREDAI) v. Vanashakti & Ors., 2025 INSC 1326 (“Judgment”) recalling an earlier judgement of a two judge bench passed in Vanashakti v. Union of India, 2025 SCC OnLine SC 1139, that barred ex post facto environmental clearances. By way of a 2:1 majority, the Court held that retrospective environmental clearances could be granted subject to payment of penalties and for certain projects that can be carried out sustainably in accordance with environmental norms.

FACTUAL BACKGROUND

On 14 September 2006, the Central Government issued a Notification (“2006 Notification”) providing for grant of environmental clearances (“EC”) by the designated regulatory authorities of government for certain projects. The EC had to be obtained prior to commencement of the project.

On 14 March 2017, the Central Government  by way of a Notification (“2017 Notification”) provided for the grant of EC in respect of projects that had already commenced work on-site, increased the production beyond the scope of the EC or altered the product mix without securing an EC permit under the 2006 Notification i.e. retrospective or ex post facto EC. The 2017 Notification provided that in case of projects in violation, no consent to operate the project would be provided until the assessment under the 2017 Notification was completed. State Level Expert Appraisal Committees (“SEAC”) would analyse, subject to payment of penalties, if the project would be able to run sustainably in compliance with environmental regulations and if the findings of the SEAC are positive then the project would be permitted subject to appropriate  Environmental Impact Assessment and the formulation of an Environmental Management Plan. In case the findings of the SEAC are negative, then the closure of the project would be recommended.

The Central Government also issued an Office Memorandum on 7 July 2021 (“2021 OM”) by way of which a Standard Operating Procedure (“SOP”) was formulated outlining the procedure for operationalising the 2017 Notification.

In a challenge to the 2017 Notification and the 2021 OM, the Court in the case of Vanashakti v. Union of India, 2025 SCC OnLine SC 1139, (“Impugned Decision”) held that the 2017 Notification and 2021 OM were bad in law and set aside the same. The Court relied on certain previous decisions which had observed that the concept of ex post facto EC is alien to environmental law and violations of environmental norms could not be regularised at a later stage.

Aggrieved by the Impugned Decision, the petitioners filed a Review Petition and applications seeking modification and/or clarification of the Impugned Decision.

The petitioners argued that the Impugned Decision did not properly take cognizance of the judgements passed by benches of equal strength (i.e. coordinate benches) in the case of Common Cause v. Union of India (“Common Cause”), Alembic Pharmaceuticals Limited v. Rohit Prajapati and Others (“Alembic”), Electrosteel Steels Limited v. Union of India and Others (“Electrosteel”), D. Swamy v. Karnataka State Pollution Control Board (“D. Swamy”) and Pahwa Plastics Private Limited v. Dastak NGO (“Pahwa Plastics”). The petitioners further argued that in case the bench disagreed with the law laid down in D. Swamy and Pahwa Plastics which dealt with similar issues, the only option left for the coordinate bench was to refer the matter to a larger bench. The respondents argued that the review petition was not maintainable as it was in the nature of an appeal and that if the project proponents know that an EC would be required and actively decided to not take it, they should suffer for their consequences.

The questions, thus, before the Court were whether the 2017 Notification and 2021 OM were valid and whether one coordinate bench could overrule another coordinate bench. 

THE JUDGEMENT

The Court noted that the Impugned Decision correctly relied on certain paragraphs of the judgments in Common Cause, Alembic and Electrosteel which held that the concept of ex post facto EC is alien to environmental law. However, the Court found that the entirety of the findings in these cases would show that projects in these cases were allowed to function without EC and were allowed to obtain ex post facto EC subject to payment of penalties and/or taking remedial measures were not brought to the attention of the bench which passed the Impugned Decision. Similarly, the Court noted that the decisions in D Swamy and Pahwa Plastics which held that ex post facto EC can be granted in certain limited circumstances and subject to certain terms and conditions were not brought to the attention of the bench which passed the Impugned Decision. The Court observed that if the bench which passed the Impugned Decision wanted to disagree with the earlier decisions of the coordinate benches the only option available to it was to refer the matter to a larger bench of judges.

The Court noted that the 2017 Notification and the 2021 OM adopted a balanced approach by permitting ex post facto EC only for those projects where remedial measures were found to be feasible.

The Court also referred to Section 15 of the Environmental Protection Act, 1986 (“EP Act”) to hold that the payment of penalties under the EP Act would not prohibit the regularisation of the project.

Further, the Court considered the effects of the Impugned Decision and held that it would have devastating consequences on projects that are almost complete, including several government projects which would benefit the public such as the AIIMS Medical College and Hospital in Odisha comprising of 962 beds, a greenfield airport in Vijaynagar, Karnataka and an effluent treatment plant which would, in fact benefit the environment. The Court also held that it would not be in public interest to dismantle and demolish projects that are in violation, and let the funds of the public exchequer go to waste.

The Court also considered that there would be certain projects wherein initially an EC was not required, however, with subsequent developments, an EC permit is necessitated on account of changes in municipal regulations, unforeseen circumstances etc.

The Court also held that the Impugned Decision may cause more environmental pollution given that several projects may now need to be demolished and subsequently reconstructed. Merely for the purpose of having to secure a prior EC, to start the construction of the project afresh would cause undue hardship and degradation of the environment. Therefore, the Court found that a balanced approach needs to be adopted in the larger public interest which the 2017 Notification and 2021 OM appear to achieve.

C&M COMMENT

While the Judgement’s directions are only to recall the Impugned Decision and place the matter for hearing afresh, the judgment makes several observations in favour of the 2017 Notification and 2021 OM. With the recall of the Impugned Decision, the 2017 Notification and 2021 OM stand revived for the time being. However, once the matter is listed before an appropriate bench for a fresh hearing, the operation of the 2017 Notification and 2021 OM could be subject to interim directions passed by such bench. Therefore, we recommend that stakeholders watch this space and keep abreast of the latest developments in this matter before taking any action on this issue.

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