NGT May Use Project Cost or Turnover for Environmental Compensation, CPCB Formula Indicative: Supreme Court in Rhythm County v. Satish Sanjay Hegde [2026 INSC 102]

In M/s. Rhythm County v. Satish Sanjay Hegde & Ors. (2026 INSC 102), the Supreme Court held that Sections 15 and 20 of the National Green Tribunal Act, 2010 give the NGT wide discretion to mould relief under the polluter pays principle, so the argument that it cannot quantify compensation without a prescribed formula fails (paras 19–23, 25). Turnover or project cost cannot be applied as a blunt instrument, but cannot be excluded as a relevant factor where the facts warrant, and Benzo Chem and C.L. Gupta Export do not hold otherwise (paras 27, 38–39). A Bench of Justice Dipankar Datta and Justice Vijay Bishnoi held that the CPCB guidelines are facilitative and indicative, and dismissed both appeals (paras 41, 44–47).

Status: NGT (Western Zone Bench, Pune) orders dated 22.08.2022 in O.A. No. 14 of 2021 (WZ) and 01.09.2022 in O.A. No. 13 of 2021 upheld; both appeals dismissed; parties to bear own costs; time to pay extended by three months (paras 47–49).

Headnote: Environmental Compensation Based on Project Cost

National Green Tribunal Act, 2010 – Sections 15, 17, 20 – Environmental compensation – Quantification – Project cost and turnover as yardstick – Polluter pays principle – EIA Notification, 2006 – Water (Prevention and Control of Pollution) Act, 1974 – Air (Prevention and Control of Pollution) Act, 1981 – Construction without Consent-to-Establish and Consent to Operate – Stop-work direction – CPCB methodology – Joint Committee report – Independent application of mind by NGT.

Held: (i) The NGT's powers under Sections 15 and 20 are wide, flexible and principle-oriented; the argument that it lacks authority to quantify compensation without a prescribed or delegated formula fails against the plain statutory text (paras 19–23).

(ii) Neither the NGT Act nor precedent calls for a uniform formula; the NGT may mould relief having regard to the scale of the offending activity and the capacity of the violator, and turnover can be a relevant factor (paras 25–27).

(iii) Goel Ganga Developers treated 5% of project cost as a general guiding principle, not an inflexible ceiling; the Rs. 5 crore levy on Rhythm County was barely 1.49% of its project cost and was neither arbitrary nor disproportionate (paras 28–30, 45).

(iv) Deepak Nitrite treats turnover as a permissible indicium, not a universal metric; Research Foundation for Science (18) distinguished, and did not overrule, Deepak Nitrite (paras 31–34).

(v) Benzo Chem and C.L. Gupta Export do not lay down that compensation can never be based on project cost or turnover; environmental compensation must be rational, proportionate and reasoned (paras 35–39).

(vi) The CPCB framework is facilitative and indicative, not prescriptive; the NGT did not abdicate its function, and its use of the CPCB methodology for Key Stone Properties was not impermissible (paras 40–44).

(paras 19–47)

Case Details: Rhythm County v. Satish Sanjay Hegde (2026 INSC 102)

Final Outcome: Both civil appeals dismissed; environmental compensation of Rs. 5,00,00,000 (Rhythm County) and Rs. 4,47,42,188 (Key Stone Properties) upheld; time to pay extended by three months; parties to bear own costs.

Case: M/s. Rhythm County v. Satish Sanjay Hegde & Ors., with M/s Key Stone Properties v. Shashikant Vithalkamble & Ors.

Neutral Citation: 2026 INSC 102

Case No.: Civil Appeal No. 7187 of 2022 with Civil Appeal No. 7974 of 2022

Court: Supreme Court of India (Civil Appellate Jurisdiction) – Reportable

Date of Decision: 30 January 2026

Bench: Justice Dipankar Datta (author) and Justice Vijay Bishnoi

Relevant Acts & Sections: National Green Tribunal Act, 2010 – Sections 15, 17, 20; Environment Impact Assessment Notification, 2006; Water (Prevention and Control of Pollution) Act, 1974; Air (Prevention and Control of Pollution) Act, 1981; Environment (Protection) Act, 1986

Impugned Orders: Orders of the National Green Tribunal, Western Zone Bench, Pune dated 22.08.2022 in Original Application No. 14 of 2021 (WZ) and dated 01.09.2022 in Original Application No. 13 of 2021 (paras 1–3)

Counsel: Mr. Saurabh Mishra, Senior Counsel, for Rhythm County; Mr. Dhruv Mehta, Senior Counsel, for Key Stone Properties; Ms. Aishwarya Bhati, Additional Solicitor General, for the Union of India; none appeared for the original applicants (paras 12–14)

Source: Supreme Court of India

Key Holdings of the Supreme Court

• The NGT can quantify environmental compensation without a legislatively prescribed formula, under Sections 15 and 20 of the NGT Act (paras 19–23).
• Turnover or project cost is a relevant and permissible factor where the facts warrant, though it cannot be applied mechanically (paras 27, 39, 46.2).
• The 5% of project cost benchmark in Goel Ganga Developers is a general guide, not a ceiling (paras 28, 45).
• Benzo Chem and C.L. Gupta Export turned on conjectural figures, absence of notice and lack of nexus; they do not bar the use of turnover or project cost (paras 35–38).
• The CPCB methodology is facilitative and indicative, not a rigid or exhaustive code (paras 41, 46.4).
• Reliance on a Joint Committee report, with independent scrutiny of liability and quantum, is not abdication of the NGT's judicial function (para 42).

Brief Facts of the Case

Rhythm County, a partnership firm, undertook a residential and commercial project at Autade Handewadi, Pune, with environmental clearance granted on 27.11.2017. On 06.07.2020 the Maharashtra Pollution Control Board refused Consent-to-Establish, citing construction beyond the sanctioned area, and issued a stop-work direction. A local resident filed O.A. No. 14 of 2021 (WZ) before the NGT. A Joint Committee reported deviations, including a clubhouse of 431.91 sq. m. and continued construction despite the stop-work direction (para 4(a)–(d)).

Key Stone Properties built a residential project at Punawale, Pune before obtaining prior environmental clearance. It obtained post-facto clearance on 24.01.2020 under the violation window and furnished a bank guarantee of Rs. 1,76,00,000 towards remediation. A local resident filed O.A. No. 13 of 2021, and a Joint Committee recommended additional compensation using CPCB guidelines (para 4(e)–(j)).

The NGT held that Rhythm County violated environmental norms and, finding the Committee's figure of Rs. 2,39,53,125 inadequate against a project cost of about Rs. 335 crore, enhanced compensation to Rs. 5 crore. For Key Stone Properties, it found construction without Consent-to-Establish from 05.06.2013 to 17.08.2020, work despite a closure notice and handing over possession without Consent to Operate, and accepted compensation of Rs. 4,47,42,188 (paras 5–10).

Issues Before the Supreme Court

1. Whether, without a legislatively prescribed framework, the NGT could enhance environmental compensation on the basis of project cost (para 17(i)).
2. Whether the NGT, under Sections 15, 17 and 20 of the NGT Act, can adopt the turnover or project cost of a project proponent as a relevant yardstick for computing compensation (para 17(ii)).

Court's Findings and Reasoning

Statutory power (paras 19–23): Section 15 empowers the NGT to provide relief, compensation and restitution "as the Tribunal may think fit", and Section 20 requires it to apply sustainable development, the precautionary principle and the polluter pays principle. This reflects a conscious choice to give the NGT discretion to mould relief.

Scale of operations (paras 25–27): Bigger operations signify a bigger footprint. If a company profits more from its scale, it is logical that it bears more responsibility for environmental costs, so to contend that turnover can never be relevant is fallacious.

Rhythm County (paras 28–30): Applying Goel Ganga Developers, even 5% of the Rs. 335 crore project cost would far exceed the amount imposed; the Rs. 5 crore levy works out to barely 1.49% and is neither arbitrary nor disproportionate.

Reading the precedents (paras 31–39): Deepak Nitrite requires a broad correlation with both the capacity of the enterprise and the harm caused, and recognises that a percentage of turnover may be a proper measure. Research Foundation for Science (18) merely distinguished it. Benzo Chem rested on vague public-domain revenue figures and lack of notice, which was not the case here, as the NGT acted on Joint Committee reports and findings not shown to be perverse.

CPCB guidelines (paras 40–41): The formula EC = PI × N × R × S × LF is built around red, orange and green industrial categories. Clause 1.5.1 limits it to cases of CPCB directions under the Environment (Protection) Act, Clause 1.5.2 contemplates expert investigation in other cases, and Clause 1.5.4 says compensation is no substitute for statutory action.

No abdication; Key Stone Properties (paras 42–45): The NGT distinguished violations covered by the violation window and the bank guarantee from separate infractions, and did not accept the Committee's figure for Rhythm County at face value. Relying on Ankita Sinha, the Court declined to restrict the NGT's methodological tools; the Rs. 4,47,42,188 levy is about 5.88% of a Rs. 76 crore project cost and is not excessive.

Final Outcome and Directions

• No ground to interfere with the computation of environmental compensation in either appeal; both appeals dismissed (para 47).
• Parties to bear their own costs (para 48).
• Time to pay the compensation amounts extended by three months from the date of judgment (para 49).

Legal Principle Laid Down

Under Sections 15 and 20 of the National Green Tribunal Act, 2010, the NGT may quantify environmental compensation without a legislatively prescribed formula. Project cost or turnover may legitimately inform the quantum where the scale of operations bears on environmental stress and the violator's capacity, provided the NGT applies its mind and the compensation is rational, proportionate and reasoned. The CPCB methodology is an indicative tool, not a rigid code (paras 23, 32, 39, 41, 46.2, 46.4).

Precedents Relied Upon

• Goel Ganga Developers India Pvt. Ltd. v. Union of India, (2018) 18 SCC 257 – Applied – damages up to 5% of project cost as the general law in flagrant violations. Discussed at paras 28–30, 45.
• Deepak Nitrite Ltd. v. State of Gujarat, (2004) 6 SCC 402 – Explained – compensation must broadly correlate with the capacity of the enterprise and the harm caused. Discussed at paras 31–32, 34, 39.
• Research Foundation for Science (18) v. Union of India, (2005) 13 SCC 186 – Explained – distinguished, and did not overrule, Deepak Nitrite. Discussed at paras 33–34.
• Benzo Chem Industrial (P) Ltd. v. Arvind Manohar Mahajan, C.A. Nos. 9202-9203 of 2022 – Distinguished – conjectural revenue figures and absence of notice. Discussed at paras 35–36, 38.
• C.L. Gupta Export Ltd. v. Adil Ansari, 2025 SCC OnLine SC 1812 – Distinguished – no rational nexus with pollution alleged. Discussed at paras 37–38.
• Municipal Corporation of Greater Mumbai v. Ankita Sinha, (2022) 13 SCC 401 – Relied upon – NGT's powers not to be narrowly construed. Discussed at paras 43–44.

Important Paragraphs of the Judgment

Verbatim extracts from the judgment. For the full text, refer to the judgment PDF below.

Para 23: "In light of the above, the appellants’ arguments that the NGT is denuded of authority to quantify compensation in the absence of a legislatively prescribed or delegated formula, although attractively canvassed, falters when tested against the plain statutory text."

Para 27: "Thus, in our considered opinion, to contend that turnover can never form a relevant factor in quantifying compensation to match the magnitude of harm is fallacious."

Para 38: "In any event, neither Benzo Chem Industrial (P) Ltd. (supra) nor C.L. Gupta Export Ltd. (supra) is to be read as having laid down any law that environment compensation can never be worked out based on the project cost or the turnover of the defaulting unit."

Para 39: "While turnover cannot be a blunt instrument, at the same time, it cannot be excluded as a relevant factor where the facts so warrant."

Para 41: "The cumulative reading of these provisions leaves no manner of doubt that the CPCB framework is facilitative and indicative, not prescriptive or exhaustive."

Para 42: "That the NGT ultimately concurred with the Committee’s conclusions in part, or departed from them so far as quantum is concerned, does not imply surrender of judicial function; rather, it evidences an exercise of informed discretion, wherein expert findings were gauged, filtered, and integrated into a reasoned adjudicatory outcome."

Practical Impact of the Ruling

• For real estate developers: Construction without Consent-to-Establish or Consent to Operate, or despite a stop-work direction, can attract compensation linked to project cost (paras 29–30, 36).
• For the NGT: It may use project cost, turnover or the CPCB methodology, but must apply its mind and keep the amount rational and proportionate (paras 32, 39, 44).
• For project proponents challenging levies: Arguments that no compensation can be levied without statutory rules, or that the CPCB formula applies only to industries, will not by themselves succeed (paras 23, 41, 44).
• For expert committees: Their reports assist the NGT, which must still assess liability and quantum independently (para 42).

FAQs on Environmental Compensation Based on Project Cost

1. What did the Supreme Court decide in Rhythm County v. Satish Sanjay Hegde?

It upheld the NGT's environmental compensation orders against two Pune developers and dismissed both appeals, extending the time to pay by three months (paras 47, 49).

2. Can the NGT fix compensation without a statutory formula?

Yes. Sections 15 and 20 of the NGT Act give it discretion to mould relief guided by the polluter pays principle (paras 19–23, 25).

3. Can project cost or turnover be used to compute compensation?

Yes, as a relevant factor where the facts warrant, but not mechanically as a blunt instrument (paras 27, 32, 39).

4. Is the CPCB formula binding on the NGT?

No. It is facilitative and indicative, not prescriptive or exhaustive, though the NGT may use it (paras 41, 44).

5. Is 5% of project cost a cap on compensation?

No. Goel Ganga Developers treated 5% as a general guiding principle, not an inflexible ceiling (para 45).

Keywords: 2026 INSC 102, Rhythm County v. Satish Sanjay Hegde, Key Stone Properties, environmental compensation, National Green Tribunal, Section 15 NGT Act, Section 20 NGT Act, polluter pays principle, project cost, turnover, CPCB formula, Goel Ganga Developers, Deepak Nitrite, Benzo Chem, Consent to Establish, Consent to Operate, Justice Dipankar Datta, Justice Vijay Bishnoi, Supreme Court judgment

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Download Judgment PDF – Rhythm County v. Satish Sanjay Hegde

Judgment PDF: 2026 INSC 102 – M/s. Rhythm County v. Satish Sanjay Hegde & Ors. (Civil Appeal No. 7187 of 2022) – Download Judgment PDF

Source: Supreme Court of India (official website).