Supreme Court Sets Aside NGT Closure Orders Against Formaldehyde Units, Says Industries Acted on PCB Permissions

News Citation : 2026 LN (SC) 455

May 7, 2026 : The Supreme Court has set aside orders of the National Green Tribunal directing closure of several formaldehyde manufacturing units in Rajasthan and Haryana for operating without prior Environmental Clearance (EC), holding that the industries had established and operated their units on the basis of valid statutory permissions granted by Pollution Control Boards (PCBs).

A Bench of Justice J.K. Maheshwari and Justice Atul S. Chandurkar observed that the case did not involve industries deliberately violating environmental law, but rather a situation where even the concerned Pollution Control Boards were themselves unaware at the relevant time that prior EC was required under the Environment Impact Assessment (EIA) Notification, 2006 for formaldehyde manufacturing units.

The Bench observed:

“the case in hand is not a one where the appellants established the units of formaldehyde and started operation due to lack of bona fide, ignoring any requirement of law. On the contrary, it is a case where the PCBs were not aware that prior EC to establish and operate such units is required in terms of EIA 2006 notification.”

The Court further held that the units had applied for Environmental Clearance pursuant to directions issued by the respective PCBs and most applications were already at the final appraisal stage.

Background

The appeals arose from orders passed by the National Green Tribunal on 03.06.2021 in three original applications alleging that formaldehyde manufacturing units were operating without obtaining prior Environmental Clearance under the EIA Notification, 2006. The NGT had directed closure of such units while relying on its principal judgment in Dastak NGO v. Synochem Organics Pvt. Ltd.

The appellants are industries engaged in manufacture of formaldehyde and related resins including melamine formaldehyde, urea formaldehyde and phenol formaldehyde in Rajasthan and Haryana.

Before the Supreme Court, the appellants argued that they had established their units after obtaining Consent to Establish (CTE) and Consent to Operate (CTO) from the concerned Pollution Control Boards. They contended that at the relevant time, even the PCBs were uncertain about applicability of prior EC requirements to formaldehyde units.

The Court noted that the Rajasthan Pollution Control Board later issued an office order dated 19.08.2019 directing operational formaldehyde units to apply for EC within sixty days, while the Haryana Pollution Control Board issued a similar order on 10.11.2020. The appellant-units complied with these directions and filed EC applications within the prescribed period.

Reliance on Pahwa Plastics Judgment

The Supreme Court extensively relied on its earlier decision in Pahwa Plastics Pvt. Ltd. v. Dastak NGO, where it had already set aside the principal NGT judgment relied upon against the present appellants.

In Pahwa Plastics, the Court had held that industrial units established pursuant to valid CTE and CTO permissions could not be shut down merely because prior EC had not been obtained, particularly where the Pollution Control Boards themselves were under the misconception that EC was unnecessary for such units.

The Bench reproduced the following observations from Pahwa Plastics:

“The question in this case is, whether a unit contributing to the economy of the country and providing livelihood to hundreds of people, which has been set up pursuant to requisite approvals from the statutory authorities concerned, and has applied for ex post facto EC, should be closed down for the technical irregularity of want of prior environmental clearance…”

The Court also reiterated:

“Ex post facto EC should not ordinarily be granted, and certainly not for the asking. At the same time, ex post facto clearances and/or approvals cannot be declined with pedantic rigidity, regardless of the consequences of stopping the operations.”

Court’s Findings

The Supreme Court examined the status of Environmental Clearance applications filed by each appellant-unit and found that in most cases:

• Screening and Scoping stages had already been completed;
• Terms of Reference (TOR) had been granted;
• Public consultation was exempted as the units were located in industrial areas; and
• In some cases, even public hearings had been completed, leaving only the appraisal stage pending.

The Court observed that the appellant-units stood on the same footing as the industries considered in Pahwa Plastics. It emphasised that these were already operational units established pursuant to permissions granted by statutory authorities and not industries that had knowingly commenced operations in conscious violation of environmental law.

Rejecting the respondents’ argument that Pahwa Plastics was confined only to units employing approximately 8000 workers, the Bench clarified that the earlier judgment referred collectively to workers employed across all formaldehyde manufacturing units, including the present appellants.

The Court further rejected arguments based on distinctions between deemed consent provisions under the Water Act and Air Act, holding that once Consent to Operate had in fact been granted by the competent Pollution Control Boards, such objections were not germane to the controversy.

Directions Issued

Allowing the appeals, the Supreme Court set aside the NGT’s closure directions and permitted the appellant-units to continue operations on the basis of existing CTE and CTO permissions.

The Court directed authorities to decide pending Environmental Clearance applications within one month and ordered that operations of the units should not be interfered with in the meantime. It also directed restoration of electricity supply wherever disconnected, subject to payment of dues.

However, the Bench clarified that if EC applications were ultimately rejected due to violations attributable to the units, authorities would remain free to disconnect electricity supply and proceed in accordance with law.

Case Reference: Neetu Solvents v. Vineet Nagar & Ors. and connected matters