POLLUTER PAYS PRINCIPLE

Guided By: Dr. Manjula Batra

SUBMITTED BY:
1|Page
MD. ABID HUSSAIN ANSARI
B.A. LL.B. (HONS.) 6TH SEMESTER
 Acknowledgement
Firstly, I would like to express my profound sense of gratitude towards the almighty ALLAH
for providing me with the authentic circumstances which were mandatory for the completion of
my project.

Secondly, I am highly indebted to Prof. Dr. Manjula Batra at Faculty of Law, Jamia Millia
Islamia University, New Delhi for providing me with constant encouragement and guidance
throughout the preparation of this project.

Thirdly, I thank the Law library staff who liaised with us in searching material relating to the
project.

My cardinal thanks are also for my parents, friends and all teachers of law department in our
college who have always been the source of my inspiration and motivation without which I
would have never been able to unabridged my project.

My father, a lawyer with large access to books of value has been of great help to me.

Without the contribution of the above said people I could have never completed this project.

Mohd. Abid Hussain Ansari

B.A.LL.B (Hons) 6th Semester

3rd Year

2|Page
 Table of Contents

1. Introduction to Environment Law4

2. Defining Pollution6

3. Environment Protection Legislations in India.6

4. Internal Law and the Distribution of Legislative Power..8

5. International Law and Constitutional Duty..9

6. Statutes Enacted In India Pursuant to The International Environmental Law...10

7. The Polluter Pays Principle11

8. Early History..11

9. Naming the Principle.....12

10. Adoption of the PPP by the OECD13

11. OECDs Recommendation Revisited14

12. Liability Regimes To Implement The Polluter Pays Principle..18

13. Flaws in the PPP20

14. The Problem with Indian Environment Law and the Polluter Pays Principle...22

15. The Evolution of PPP in India...25

16. Indian Judiciary and PPP...26

17. The Principle as A Feature of Customary International Law38

18. The Role of Market Based Instruments.40

19. Conclusion.43

20. Bibliography..45

3|Page
 Introduction to Environment law

It is interesting to note that natural resources had been stored virtually untouched in the Earth for
millions of years. But since the start of the industrial revolution vast amounts of these resources
had been exploited within a period of just a couple of hundreds of years at unimaginable rates,
with all the waste from this exploitation going straight in the environment (air, water, land) and
seriously damaging its natural processes. Although pollution had been known to exist for a very
long time (at least since people started using fire thousands of years ago), it had seen the growth
of truly global proportions only since the onset of the industrial revolution during the 19th
century.

Environmental degradation in India has been caused by a variety of social, economic,

institutional and technological factors. Rapidly growing population, urbanization and industrial
activities have all resulted in considerable deterioration in the quality and sustainability of the
environment. Environmental ethics have also formed an inherent part of Indian religious precepts
and philosophy. Worship of nature - Sun, Moon, Earth, Air and Water - was not merely a
primitive man's response to the fear of the unknown, but it arose from the deep reverence shown
to the forces of nature which sustained and preserved human life on earth. The basic tenet that
underlies this deep reverence for nature is the belief that life is a singular, continuous and
uniform phenomenon and even a small change in one part of the eco-system is likely to
reverberate throughout. Guru Nanak1, said Pawan Guru, Pani Pita Mata Dhart Mahat, Divis
Raat Doi Daia, Khele Sagal Jagat' (Air is like God, Water is father and Earth is the other. It is
through the harmonious interaction of all these three vital ingredients that the whole universe is
being sustained). The ancient Greeks, on the same reasoning, revered the Earth as Gaia, the
Earth Goddess.

The importance of Judiciary in a democratic setup for protection of life and personal rights can
hardly be overestimated. India has a highly developed judicial system with the Supreme Court
having plenary powers to make any order for doing complete justice in any cause or matter and a
mandate in the Constitution, to all authorities, Civil and Judicial, in the territory of India to act in
aide of the Supreme Court. The scope of Writ Jurisdiction of the High Courts is wiser than

1
(Founder of the Sikh Religion, 1469-1539)

4|Page
traditionally understood and the judiciary is separate and independent of the executive to ensure
impartiality in administration of justice. The judiciary has a central role to play in this thriving
democracy and shuns arbitrary executive action. The higher judiciary has been empowered to
pronounce upon the legislative competence of the law making bodies and the validity of a legal
provision. The range of judicial review recognized in the higher judiciary in India is the widest
and most extensive known to any democratic set up in the world. Liberty and Equality have well
survived and thrived in India due to the pro-active role played by the Indian judiciary.

In considering the role of the judiciary in environmental governance, there are two issues that
need to be considered. The first is the role the judiciary in the interpretation of environmental
law and in law making and the second is the capability of jurists to effectively interpret the
increasingly cross-linked issues brought to their attention. For the judiciary, probably the burden
of implementation is greater, as they must not only interpret laws that incorporate the Rio
Principles of sustainable development, including the polluter pays principle, the precautionary
principle, and the principle of continuous mandamus in the corpus of international and national
law; inter- and intra-generational equity; importance of traditional values and ideas;
interpretation of constitutional rights including the right to life and the right to a healthy
environment, etc., but also have to weigh these against economic and political principles.

Environmental Law is a developing branch of law in India and has not yet established its roots
firmly in the soil of the Indian judicial system though we can definitely say that such roots have
struck water. This growth is conspicuous by the remarkable activism on part of the judiciary and
the legislature in the latter part of the 20th century. A large number of socio-economic problems
faced in the nation were discussed by the courts in various cases over a broad range of issues
which cropped up from time to time, with the eventuality that old laws were sharpened to meet
the changing societal needs. New laws were framed to meet the emerging challengesthe
Environment Protection Act of 1986 being a watershed.

The legislative and executive efforts have been notable over the past two decades towards
including the Principles of Environmental Protection in the Legal Jurisprudence in Indiamost
notably the 46th Amendment to the Constitution of India in 1976 which explicitly laid down
Environmental Protection as a part of the Constitutional Mandate and the enactment of the
Environment Protection Act of 1986. Though there have been initiatives taken by the Legislature

5|Page
and the Executive, the Judiciary has taken a lead in this race through careful judicial thinking of
the Supreme Court which has been providing more tools both qualitative and quantitative to deal
with issues related to Environmental Protection. Due to the non-compliance of its own laws by
the State machinery, the Judiciary invented a new method of Judiciary-driven implementation of
the regulations in India. The courts have also done their share by liberally interpreting the
various provisions of the Constitution and other statutes towards ensuring social justice.

DEFINING POLLUTION

There are legislative definitions of what constitutes a pollutant in the Water (Prevention and
Control) Act, 1974, the Air (Prevention and Control of Pollution) Act, 1981 and the
Environmental Protection Act, 1986. The Water Act defines pollution as "such contamination of
water....likely to create a nuisance or liable to render such water harmful and injurious to
health" and the definitions in the subsequent legislations are similar. It is evident from these
definitions that the emphasis is on the fact that pollution must have a tendency to cause harm, or
must actually cause harm. Emissions per se are not pollution. Properly understood, pollution is
the coercive imposition of a harmful waste product or emission onto another person or their
property; it is a "trespass" under the principles of common law. If the trespass is so minor that it
creates no harm or inconvenience to the property owner, it will normally be tolerated. Today's
pollution dilemma is often the result of what is essentially a universal "easement" granted by the
State to polluters, even to producers of significant and damaging pollution.2 Hence, as the
definition of pollution is commonly understood, for the pollutant to result in or cause pollution
there must be some consequent harm or threat of harm.

Environment Protection Legislations in India

With a view to protecting and improving the environment, different legislations have been made
and different regulations, rules have been issued. The Government of India, through its Ministry
of Environment and Forests is administering has enacted nation-wide comprehensive laws. One
of the major environmental enactments came just two years after the Stockholm Conference in
1974. The Water (Prevention and Control of Pollution) Act was passed for the purpose of
prevention and control of water pollution and for maintaining and restoring the wholesomeness

2
Making the Polluter Pay, http://www.cei.org/ebb/polluterlhtml.

6|Page
of water. The Water Act represented India's first attempt to deal with an environmental issue
from a legal perspective.

From this period onwards, the Central Government has been considered as highly
environmentally active. In 1976, the Constitution of India was amended to insert a separate
fundamental duties chapter. The 1980s witnessed the creation of many eco-specific
organizations. In the year 1980, the Forest (Conservation) Act was passed for the conservation of
forests and to check on further deforestation. The Air (Prevention and Control of Pollution) Act
of 1981 was enacted by invoking the Central Government's power under Art253. The Air Act
contained several distinguishing features. The preamble of the Air Act explicitly reveals that the
Act represents an implementation of the decisions made at the Stockholm Conference. Also, a
notification relating to Noise Pollution (Regulation & Control) Rules was made in the year 2000
with the objective of maintaining Ambient Air Quality Standards in respect of noise.

In the wake of the Bhopal gas tragedy, the Government of India enacted the Environment
(Protection) Act, 1986. The laws that existed prior to the enactment of EPA essentially focused
on specific pollution (such as air and water). The need for a single authority which could assume
the lead role for environmental protection was answered through the enactment of EPA. It is in
the form of an umbrella legislation designed to provide a framework for Central Government to
coordinate the activities of various central and state authorities established under previous laws.
It is also in the form of an enabling law, which delegates wide powers to the executive to enable
bureaucrats to frame necessary rules and regulations.

Apart from this, several notifications and rules have also been made, some of which include the
Hazardous Wastes (Management and Handling) Rules in 1989, the Biomedical Wastes
(Management and Handling) Rules in 1998, Recycled Plastics (Manufacture and Usage) Rules
1999, Environment (Silting for Industrial Projects) Rules 1999 and the Municipal Solid
Wastes(Management and Handling) Rules in 2000.In addition to these eco-specific legislations,
realizing that there is no comprehensive legislation dealing with biodiversity in India, and to
fulfil its international obligation under the Convention on Bio-Diversity, the Government of
India has enacted the Biological Diversity Act, 2002.

7|Page
It is a paradox that despite the presence of such diverse laws, the pollution rate has crossed the
dead line. This is probably because of the reason that the law is so complicated and vague that
even the experts may not know the intricacies of it.

The Judiciary in India has been taking steps for directing state agencies, to strictly adhere to the
legislations in protecting the environment and totally arresting the various manmade disasters.
The Judiciary has taken such steps especially, because of the various public interest litigations
arisen out of manmade disasters such as Bhopal Gas tragedy etc. It was held in MC Mehta v.
Union of India and others, that one of the principles underlying environmental law is
sustainable development. This principle requires development to take place which ecologically
sustainable. It was further held that there are two essential features of sustainable development
such as precautionary principle and polluter pays principle. The precautionary principle was
elucidated by the Supreme Court in Vellore Citizens' Welfare Forum v. Union of India and
other states that the state government and its agencies much anticipate, prevent, and attack the
causes of environmental degradation. States should not take up any activity and measure which
is not environmentally benign. It seems that lack of sufficient funds allocation to the Ministry of
Environment and Forests, lack of sufficient number of qualified and trained staff such as
academicians, legal professionals, medical experts and technologists in the Ministry and its
subordinate offices all over the country, lack of commitment of the people and awareness about
the environment protection and improvement, complicated procedures for approvals and
authorizations of the Pollution Control Boards, are the main reasons for ineffective
implementation of environments laws. If proper reforms are made in this area, probably the
environmental laws will be implemented effectively thereby ensuring problem free environment.

Internal Law and the Distribution of Legislative Power

Article 245 of the Constitution of India deals territorial Jurisdiction of the legislative
power, confers the power to the parliament to make laws for the whole or any part of the territory
of India. Article 246 deals with the subject matter of laws, empowers the parliament to have
'exclusive' power to make laws with respect to the Union list. The parliament has exclusive
power to legislate on all conceivable international matters which have been enumerated under
the Union List. Under this list main entries relating to international matters are: foreign affairs
(entry 10), United Nations Organization (entry 12), participation in international conferences,

8|Page
associations and other bodies and implanting of decisions made thereat (entry 13), and entering
into treaties and agreements with foreign countries and implementing of treaties, agreements and
conventions with foreign countries (entry 14) etc. Under Article 253 the parliament has exclusive
power to make any law for implementing any treaty, agreement or convention with any other
country or countries or any decision made at any international conference, association or other
body. These provisions suggest that the parliament has sweeping power to legislate on
international matters. However, this power of the parliament, according to the Supreme Court,
cannot override the fundamental rights enumerated under Part III of the constitution. Under the
constitutional scheme the union government's executive power is co-extensive to the legislative
power of the parliament (Article 73). According to the Supreme Court treaty making is regarded
as an executive power rather than legislative activity.

International Law and Constitutional Duty

Though Part IV (Article 37 to 51) of the Indian Constitution, known as the Directive
Principles of State Policy, is not enforceable by any court but principles contained therein are
fundamental in the governance of the country and it "shall" be the duty of the State to apply these
principles in making laws (Article 37). Article 51 specifically deals with international law and
international relation, inter alia, provides that the state shall endeavour to foster respect for
international law and treaty obligations.' In Telephone Tapping Case3, the Supreme Court by
invoking Article 51 developed right to privacy as a fundamental right under Article 21. Here, the
court took inspiration from the privacy provision of the Covenant on Civil and Political Rights.
However, in environmental matters, it appears, no such use of Article 51 has been done by the
courts. Here, it may be recalled that the courts have invoked Article 48-A (duty of the state to
protect environment) to develop a fundamental right to environment as part of the right to life
under Article 21.4

3
People's Union for Civil Liberties, v. U.O.I. (1997) 1 SCC 301
4
In several leading cases the Indian courts have been guided and inspired by Article 48-A and developed a general
fundamental right to environment under Article 21. See, M.C. Mehta v. Union of India (Kanpur Tanneries Matter)
AIR 1988 SC 1037 at 1038; Rural Litigation and Entitlement Kendra v. State of U.P. AIR 1988 SC 2187 at 2199:
Kinkari Devi v. State of H.P. AIR 1988 4 at 8; Bichhri Village Case AIR 1996 SC 1446 at 1459, Sachindanda Pandey, v.
State of W.B. AIR 1987 SC 1109 at 1114-1115; T. Damodar Rao v. Municipal Corp., Hyderabad, AIR 1987 A.P. 171 at
181 etc.

9|Page
Statutes Enacted in India Pursuant to the International Environmental Law

In India many important environmental statutes have been enacted to ratify or to fulfill
national obligations under the international environmental treaties, conventions and protocols
etc. Hereinafter, an effort has been made to present a table which contains a list of international
environmental laws and relevant Indian environmental statutes showing close linkages between
the same.

S. No. International Environmental Laws Relevant Indian Environmental Statutes

1. The Stockholm Conference, 1972 The Air Act, 1981

2. The Stockholm Conference, 1972 The Environmental Protection Act, 1986

3. The Rio Conference, 1992 The Public Liability Insurance Act, 1991

4. The Rio Conference, 1992 The National Environmental Tribunal Act,

1995

5. Convention of Biological Diversity, The Biological Diversity Act, 2002

1992.

6. Convention of International Trade in The Wild Life Protection (Amendment) Act,

Endangered Species of Wild Fauna and 2002
Flora, 1973.

Although the detailed discussion on executive ratification or legislative exercise in India, in

pursuant to the international environmental obligations, is outside the main objective of this
article. Yet, it would be relevant to briefly point out, with approval, the stand taken by Prof M.K.
Ramesh that in India such ratification or enactment has often been done either without necessary
national preparation or under compulsion to conform to the conditionalities of international
financial institutions like World Bank.5 The ratification or enactment of environmental statues in
India, without real commitment to implement the same by the executive, has resulted into
judicial interventions and activism in the field of environmental law.

5
M.K. Ramesh, 'Environmental Justice Delivery in India: In Context', 2 (2) Indian Journal of Environmental Law,
December 2002, 9 at 12.

10 | P a g e
 The Polluter Pays Principle

"The polluter pays principle states that whoever is responsible for damage to the
environment should bear the costs associated with it."6

"If anyone intentionally spoils the water of another ... let him not only pay damages, but
purify the stream or cistern which contains the water..."7
- Plato

EARLY HISTORY

Pollution is as old as our planet itself if one considers even the commonly accepted definition of
pollution:

the introductions by man, directly or indirectly, of substances or energy into the

environment resulting in deleterious effects of such a nature as to endanger human health, harm
living resources and ecosystems, and impair or interfere with amenities and other legitimate uses
of the environment.8

However, in the early days pollution was not a concern. The discharge of gases or wastes into the
air and water was considered totally legitimate. Water and air were used as sinks9 and it was
believed that neither air nor water was a scarce resource and therefore, their use was free to all.10
At the time of the industrial revolution in Europe there were no safety regulations. Workers lived
and died in squalid and dangerous conditions. Cities disappeared for months on end in
impenetrable fog created by the coal-fired furnaces. However, when the side effects of pollution
were felt the concern for damage to the environment, human health, and property started.

Pollution became a common concern and economists were in the forefront of those who were
looking for solutions. In economic terms the emission of gases from a factory that causes damage
to the environment is a social damage and the cost of such damage is a social cost. This cost

6
Taking Action, Chapter 2, p. 3. Published by the United Nations Environmental Programme [sic], found at
www.rona.unep.org.action.02.htm.
7
The Dialogues of Plato: The Laws, vol. 4, book 8, section 485(e), translated by Jowett B, Oxford: Clarendon Press
(4th ed.), 1953.
8
OECD Council Rec. C (74) 224 of 14 November, 1974.
9
Unfortunately it is still the same in the developing countries.
10
WOODROOF, M. G, Pollution Control: Why not Cost Allocation? 21 Drake Law Review, 1971, pp. 133, 146.

11 | P a g e
is not paid by the polluter but by the society as a whole11 which pays a price in terms of damage
to aquatic environment, human health, property, loss of species, etc. Such a cost is external to the
private cost of the polluter and is therefore, an external cost. The effect of this external cost is
known as externalities in economic literature.12 The resultant inequality of social costs and
private costs indicates that economic resources are being improperly allocated in society. The
misallocation of such resources is because of their improper cost allocation. Pollution in
economic terms means the improper cost allocation. Thus the cost of these resources is not
reflected in the product price. The producer instead of processing the waste discharges it into the
air because processing will cost him extra money. This tends to induce overproduction and
overconsumption of the items produced cheaply. For decades economists have been struggling to
identify and measure externalities. Different economists proposed different solutions to the
problems of externality. They have generally adopted the position that complete efficiency could
be attained only if all external costs were somehow internalized to the firms that produced them.
Economists suggested different economic incentives to force the polluter to internalize the
external costs so that the complete production costs of the goods are reflected in the prices. In
economic literature it is known as the internalization of external costs. Thus, the potential
solution to the problems of externality is the basis of the PPP.

NAMING THE PRINCIPLE

The various economic instruments for cost allocation of pollution abatement discussed by the
economists for decades were leading to the conclusion that the polluter should pay for pollution
abatement and should add this cost to the production cost of the goods. In this way it should be
passed on to the consumer.

Incentives were required to motivate the polluter to internalize the external cost so that the
complete production cost should be reflected in the price of the goods. The different economic
incentives which are the potential solutions to the problems of externality were given a single

11
THOMPSON, DONALD N, the Economics of Environmental Protection, Cambridge, Massachusetts, 1973, p. 8.
(Hereinafter Thompson, 1973)
12
It is also called as spill over effects, spill over costs, third party effects, side effects, or external
diseconomies. KNEESE, A. V, The Economics of Regional Water Quality Management, The John Hopkin Press,
Baltimore, 1964, p. 40, DAVIS & WHINSTON, Externalities, Welfare and the Theory of Games, Journal of Political
Economy, No.70, June, 1962, pp. 241-262, and THOMPSON, 1973, p. 8.

12 | P a g e
name the Polluter Pays Principle by the economists. Thus the means and economic
instruments of pollution reduction advocated by environmental economists got the status of a
principle. Because there existed almost a consensus among the economists that polluter should
pay to abate pollution and should internalize the external costs of pollution. This was the birth of
a new economic principle which got wide acceptance very quickly. Thus, there was almost a
general agreement among the environmental economists about this phenomenon and they
therefore, accepted it as the basis or fundamental ground for other doctrines to be deduced from
it. In other words, the doctrine was qualified to be called a Principle and this is the reason
why it is referred to as an economic principle.13 This was the birth of a new economic
principle but to lawyers it gave the perception of civil liability for getting compensation for the
victims of pollution.

To the economists the PPP is still the internalization of external costs of continuous pollution and
to the lawyers it is the internalization of damage costs that the PPP applies to both. In the 1990
International Convention on Oil Pollution Preparedness, Response and Cooperation the PPP was
called the general principle of international environmental law,14 but since it is not
sufficiently grounded in State practice,15 therefore, it is better to call it a principle of
environmental policy and not environmental law.

ADOPTION OF THE PPP BY THE OECD

The OECD seminar held in summer 1971 about the Problems of Environmental Economics
paved the way for the formal adoption of the PPP by this organization. The Council of the
Organization for Economic Cooperation and Development formally recommended on 26 May
1972 the PPP to be the Guiding Principle Concerning the International Economic Aspects of
Environmental Policies.16 Thus after almost 50 years later Pigous ideas were put into practice

13
Forward to the OECD Monograph, The Polluter Pays Principle, OCDE / GD ( 92) 81, p. 5, and SMETS, HENRY,
Le principe pollueur payer, un principe economique erige en principe de droit de l' environment?, R.G.D.I.P., Avril-
June 3, no. 2, p. 340. (Hereinafter Smets, 1993). Today the PPP is regarded as a legal principle.
14
Preamble of the Convention
15
BOYLE, A. E, Making the Polluter Pay? Alternatives to State Responsibility in the Allocation of Transboundary
Environmental Costs, in International Responsibility for Environmental Harm, Graham & Trotman, 1991, p. 376.
For details; Munir, The Polluter Pays Principle, chapter 5.
16
OECD, Guiding Principles Concerning International Economic Aspects of Environmental Policies, C (72) 128.
(hereinafter OECD, 1972, C (72) 128)

13 | P a g e
by applying them to environmental policies. The most important paragraph of the OECDs
recommendation goes thus:

The principle to be used for allocating costs of pollution prevention and control measures
to encourage rationale use of scarce environmental resources and to avoid distortions in
international trade and investment is the so-called Polluter Pays Principle. This principle
means that the polluter should bear the expenses of the abovementioned measures (that is;
pollution prevention and control measures) decided by the public authorities to ensure that the
environment is in an acceptable state. In other words, the cost of these measures should be
reflected in the cost of goods and services which causes pollution in production and/or
consumption. Such measures should not be accompanied by subsidies that would create
significant distortions in international trade and investment.17

OECDS RECOMMENDATION REVISITED

The OECDs interpretation of the PPP seems to have influenced reference to it in other
international contexts; therefore, the OECDs concept of the PPP needs more elaboration. The
OECDs guiding principles seem to be based on trade and economic efficiency considerations
rather than the improvement of the protection of the environment.18 Despite the shortcomings the
recommendation does recognize the justifiability of member states taking far-reaching actions to
protect their environments. Unfortunately, it was only a recommendation without having any
binding effect. Moreover, its meanings were not clarified.

The Polluter Pays Principle is an international guideline for environmental policy formulation
and environmental liability. It simply implies that the person who damages the environment must
bear the cost of such damage. Since pollution is often an externality and imposes a social cost, it
does not get reflected in its entirety in the private cost of the polluters, leading to more pollution

17
Ibid
18
KGESON, The Polluter Pays Principle, On the General Principles of Environment Protection, Stockholm, SOU
1994:69, p. 73. (hereinafter Kgeson, 1994).

14 | P a g e
than is economically optimal. The Polluter Pays Principle is an attempt to make polluters bear
the real social cost, thereby bringing pollution to the optimal level.19

Polluter Pays Principle has become a popular catchphrase in recent times. 'If you make a mess,
it's your duty to clean it up'- this is the main basis of this slogan. It should be mentioned that in
environmental law, the 'polluter pays principle' does not refer to "fault." Instead, it favors a
curative approach which is concerned with repairing ecological damage. It's a principle in
international environmental law where the polluting party pays for the damage done to the
natural environment. It is regarded as a regional custom because of the strong support it has
received in most Organization for Economic Co-operation and Development (OECD) and
European Community (EC) countries. International environmental law itself mentions little
about the principle.

In recent days, the polluter pays principle is seen as a way of internalizing pollution-related costs
within the context of the economic rationality of the enterprise. There is a close relationship
between a country's environmental policy and its overall socioeconomic policy.20 Furthermore,
under this principle it is not the responsibility of government to meet the costs involved in either
prevention of environmental damage, or in carrying out remedial action, because the effect of
this would be to shift the financial burden of the pollution incident to the taxpayer. But State
practice does not support the view that all depollution costs should be borne by the polluter,
particularly where transnational dispute is involved.21

Most of the industrial factory owners do not perceive an improvement in environmental

conditions to be in their interest. If that interest is to be promoted it is not enough to merely
remind them of their social responsibilities. Towards this purpose the Supreme Court in 1996

19
Frsund R. Finn., The Polluter Pays Principle and Transitional Period Measures in a Dynamic Setting; The
Swedish Journal of Economics, Vol. 77, No. 1, Public Finance: Allocation and Distribution, (March 1975), pp. 56-68;
downloaded from JStore at http://www.jstor.org/stable/3439327 on June 5 2008.
20
This is a part of the International Environmental Agreements Compendium, compiled 1995 by the Pollution
Prevention and Pesticide Management Branch, Ministry of Environment, Lands and Parks, British Columbia,
Canada.
21
http://www.thedailystar.net/law/2007/january/04/depth.htm

15 | P a g e
and 1997 delivered five landmark judgements22 adopting the polluter pays principle in India as
an improvement over the absolute liability principle.

The assignment focuses on the above mentioned cases together and much more with
developments in international treaty law that have contributed towards the evolution of the
polluter pays principle. An improvement in environmental quality should be made in the interest
of industrialists.

The polluter pays principle is an extension of the principle of absolute liability. The principle of
absolute liability is invoked regardless of whether or not the person took reasonable care and it
makes him liable to compensate those who suffered on account of his inherently dangerous
activity.23 The polluter pays principle extends the liability of the polluter to the costs of repairing
the damage to the environment. The polluter pays principle broadens the ambit of the principle of
absolute liability. The importance of this principle is that the damage to the environment may be
remedied and this is extremely essential to sustainable development. The polluter is liable to pay
the cost to the individual sufferers as well as the cost of reversing the damaged ecology.24

Few people could disagree with what seems at first glance to be such a straightforward
proposition. Indeed, properly construed, this is not only a sound principle for dealing with those
who pollute but is an extension of one of the most basic principles of fairness and justice: people
should be held responsible for their actions. Those who cause damage or harm to other people
should "pay" for that damage. This appeal to our sense of justice is why the "polluter pays
principle" (PPP) has come to resonate so strongly with both policy makers and the public.

As a general rule, sound economic analysis of pollution and environmental problems

must also be based on the principle of responsibility. Forcing polluters to bear the costs of their
activities is good economics too; it not only advances fairness and justice, but also enhances
economic efficiency. In other words, with appropriate policies based on a PPP, we should not
have to give up the economic efficiency of a free market system based on private property in
order to obtain environmental protection, nor vice versa.
22
Indian Council for Enviro-Legal Action and others v. Union of India, (1996) 3 see 212 , Vellore Citizens' Welfare
Forum v. Union of India, (1996) 5 see 647, M.C. Mehta v. Union of India (1997) 2 see 353, M.C. Mehta v. Union of
India, (1997) 2 see 411 and M.C. Mehta v. Kamal Nath, (1997) 1 see 388.
23
M.C. Mehta v. Union of India, (1987) 1 see 395
24
Indian Council for Enviro-Legal Action v. Union of India. (1996) 3 see 212 at 215.

16 | P a g e
But as with most such general principles, the devil is in the details. In this case, the details relate
to three basic questions that any application of the PPP must answer. First, how do we define
pollution and therefore a polluter? Second, how much should the polluter pay, once he is
identified? Third, to whom should the payment be made? The answers to these questions are at
the heart of whether any application of the PPP will be either just or economically efficient.

A correctly construed polluter pays principle would penalize those who injure other people by
harming their persons, or by degrading their property. Too often, however, the PPP is misdefined
and misused to suppress private economic activity that benefits the parties directly involved and
does no specific damage to other people, but which offends those who oppose human impact on
the environment and prefer to leave resources undeveloped. The objective is to restrain the
resource use at the expense of the property owners and consumers without cost to those who
wish to see the resources remain idle.

Under such a misapplication of the PPP, very often "a polluter" is not someone who is harming
others, but is someone who is simply using his own property and resources in a way that is not
approved of by government officials or environmentalists. In such cases there is no harm to be
measured and no real victims to compensate. Consequently, the amount to be paid is not
determined by the extent of any actual damage done. Rather, it is set at a level that curbs the
politically disfavoured activity to the degree desired by its opponents. And finally, the payment
(whether there are real victims or not) typically goes to the government in the form of a tax. In
other words, in most cases, the PPP is used as cover to promote a political or ideological agenda
rather than to ensure that real polluters pay compensation to real victims of their activities.

The economic rationale of the Polluter Pays Principle is that prices of goods (depending on the
quality and/or quantity of environmental resources) reflect, more closely, their relative scarcity
and that economic agents concerned react accordingly25.

The principle had been recommended by many European academics and the OECD since the
1970s and was formally adopted in Europe in the 1987 Act.26 The OECD was also responsible
for metamorphosing this economic principle into an established legal principle27.

25
OECD: On guiding principles concerning international economic aspects of environmental policies, C (72) 128,
1972, Paris, France. Also see, OECD: The polluter pays principle. Note on the implementation of polluter pays
principle, 1974, Paris, France.

17 | P a g e
The Polluter Pays Principle originally applied only to those actually polluting the
environment with emissions etc, in the strict sense of the word. However, the principle has now
been applied to any activity, which contributes to deterioration of the environment, rather than
being strictly limited to polluting activities. On some occasions, this is also referred to as
Extended Polluter Pays Principle.

The Polluter Pays Principle is typically enforced by direct regulation or economic incentives,
which leads to the polluter bearing the cost for abatement of pollution. There are command and
control measures wherein the government may specifically allow or disallow certain products,
methods, or scientific techniques to polluters. The second method used to make polluters face the
true social cost of pollution is taxation. This usually involves a direct tax on every unit of
pollution or on every unit produced by the polluting production activity. Both involve some kind
of direct government interference directly or indirectly via taxes. A third method of internalizing
pollution is through market based instruments by specifying property rights between the polluter
and the victim.

Liability regimes to implement the Polluter Pays Principle

Liability for damage caused to the environment by the polluter is another method of using the
Polluter Pays Principle in environmental and legal policy. I will try to focus more on the liability
principle, as opposed to direct regulation and economic incentives, while discussing the Polluter
Pays Principle.

The two forms of liability typically seen in environmental pollution and degradation is strict
liability, or no fault liability, and negligence28. Under strict liability, the injurer is liable
irrespective of the presence or absence of fault or negligence (i.e only harm must be
demonstrated). On the other hand, under the negligence rule, both harm and fault must be
established attributable to the injurer.

26
Single European Act, 17 Feb. 1986, 1987 OJ (L 169) 1
27
OECD: The Polluter-Pays Principle: OECD Analyses and Recommendations, Doc. OCDE/GD(92)81, 1992, Paris,
France, at 9
28
There may be other charges faced according to the civil and criminal laws of the particular jurisdiction, but these
are the dominant rules of liability.

18 | P a g e
I understand from the economic analysis of strict liability and negligence that strict liability is
efficient because, under this rule, the injurer fully internalizes the harm ensuring that the due
level of care is taken. Negligence is efficient because the injurer can be induced to take exactly
the specified amount of care and this amount can be set efficiently29. However, we note that
negligence is the dominant rule in tortuous liability as opposed to strict liability, which is
reserved usually for cases involving hazardous activity.

In the context of environmental liability, in the last few decades, international and national
environmental liability laws are invariably based on strict liability30. The proponents of the strict
liability rule also focus on "cost internalization, which requires that the social cost of an
activity is charged to the polluter. This goes hand in hand with the Polluter Pays Principle, which
mandates the cost internalization principle31.

The economic rationale for this is that strict liability is better for harm which is unilateral and
where only the injurer can take the due care to prevent such harm. This is typically what is seen
in environmental pollution and degradation, and consequently, we are now seeing a convergence
towards using strict liability in cases of environmental pollution and degradation.

While both strict liability and negligence rules induce the injurer to take the optimal amount of
care, the advantage of strict liability in environmental cases is that only the harm must be
observable. The level of care is irrelevant and therefore need not be established in a court of law,
thereby reducing evidentiary requirements.

The other reason for the increasing use of strict liability in environment protection, especially in
an age where all governments are trying to curb industrial pollution, is that in a market setting,
negligence may prove inefficient compared to strict liability.

29
Shavell Steven, Liability for Accidents, National Bureau of Economic Research Working Paper No. 11781,
November 2005, Cambridge, MA USA, downloaded from NBER at http://www.nber.org/papers/w11781 on July 18
2008.
30
Commission of the European Communities. Communication from the Commission to the Council and Parliament:
Green Paper on Remedying Environmental Damage, COM(93)47 final. Brussels, 14 May 1993.
31
Bergkamp Lucas, Liability and Environment Private and Public Law Aspects of Civil liability for Environmental
Harm in an International Context, Draft 10, April 2001, downloaded from
http://papers.ssrn.com/paper.taf?abstract_id=266365 on July 5 2008

19 | P a g e
If strict liability is not imposed for the residual damages caused by partially controlled
polluting activity, these damages will not be reflected in the price of commodities produced by
such activity. As a result, commodities with whose production pollution is associated will be
under-priced relative to commodities whose production causes no pollution, resulting in
resource misallocation.32

Polinsky shows that in a market setting, in the long run, under the negligence rule, there will be
excessive entry in the market by parties or firms prone to inflicting injury, thereby increasing the
probability of pollution and/or environmental damage. On the other hand, under the strict
liability regime, there would be an excessive entry of victims.33 Since most countries have their
goal as reducing and penalizing pollution (as opposed to an optimal number of victims and
lawsuits), strict liability seems to be the better choice as a liability rule.

Therefore, economists, lawyers and policy-makers in the last few decades have converged
towards implementing the Polluter Pays Principle and using the strict liability regime for the
same. This is a distinct shift from the fault-based liability system and has in place a better
incentive system for both injurers and victims.

Flaws in the PPP

It is true that polluter pays principle has a positive effect to reduce pollution. The principle seems
quite relevant for pollution that occurs during industrial activity, although it remains inefficient
in the case of historical pollution. Most developing countries, however, have not yet subscribed
to the PPP as a main environmental policy guideline. As Rege (1994) points out, this is due to
adverse economic conditions. Legal theorists discovered few loopholes of this rule. The flaws
are as follows:

Firstly, ambiguity still exists in determining 'who is a polluter'. In legal terminology, a

'polluter' is someone who directly or indirectly damages the environment or who creates

32
Krier James E. and Stewart Richard B., Environmental Law and Policy: Readings, Materials and Notes, 1978, 2d
ed., Indianapolis, USA.
33
0 Polinsky A.Mitchell, Strict Liability vs. Negligence in a Market Setting, Journal of American Economic
Association, May 1980 on page 363.

20 | P a g e
 conditions relating to such damage. Clearly, this definition is so broad as to be
unsupportive in many situations.34
Second, a large number of poor households, informal sector firms, and subsistence
farmers cannot bear any additional charges for energy or for waste disposal.
Third, small and medium-size firms from the formal sector, which mainly serve the home
market, find it difficult to pass on higher costs to the domestic end-users of their
products.
Fourth, exporters in developing countries usually cannot shift the burden of cost
internalisation to foreign customers due to elastic demand.
Lastly, many environmental problems in developing countries are caused by an
overexploitation of common pool resources. Access to these common pool resources (in
line with the PPP) could be limited in some cases through assigning private property
rights, however, this solution could lead to severe distributional conflicts.

All of these problems make it difficult to implement the PPP as a guideline for environmental
policy in developing countries. Despite the fact that Polluter Pay Principle was publicized by
early conservationists as a means to reduce ecological pollution, still many consider it as a 'vague
idea'.35 Some put forward their argument that under this principle a polluter fulfils his obligations
when he pays at least some of administrative expenses of the agencies who regulate pollution
activities. Exxon Valdez' case is the best example of this criterion of Polluter Pays Principle.36
Others argue that it can only be satisfied by polluters when they will pay the total depollution
cost. And the rest support the view that tax (like 'Carbon Taxes') should be legitimised on the
users of the natural resources that cause atmospheric hazards.37

34
For example, Mr.Aryaan owns a BMW .If his BMW emits harmful gas in the atmosphere, he will be directly liable
for the emission .Furthermore, the manufacturer of the vehicle will be indirectly liable for committing ecological
damage too and so the retailer of the vehicle and the fuel supplier, and the government who created 'conditions
relating to the damage' by building roads and neglecting public transport regulations.
35
http://www.unece.org/ie/intersol/documents/s.8e.pdf (Who can pay for depollution ? an economic approach)
36
In 1989, an oil tanker owned by Exxon spilled out over 300,000 barrels of crude oil into the sea and caused
significant environmental hazard. Exxon was forced to pay $125 million in fines to the federal government and the
state of Alaska and $900 million into a fund for environmental projects controlled by government, habitat
protection, and scientific research, among other things
37
Barrister Abu Hena Mostofa Kamal, "Polluter pays principle and its limitations"

21 | P a g e
The Problem with Indian Environment Law and the Polluter Pays Principle
A problem that is very specific to India is that legal redressal through private law may not be
an option for most of the poor, illiterate, uneducated and rural masses because often they are
unaware of their rights and of legal procedures38. There is also certain disillusionment
prevalent because courts in India are unable to provide relief and redressal to citizens due to legal
delays, higher litigation costs, complicated legal procedures, and a general apathy towards
smaller, less urgent, cases.39

While the Polluter Pays Principle using the absolute liability regime has designed a better
incentive and cost internalisation structure; it is not perfect and has its own set of drawbacks.

The first problem faced by all liability regimes is that like the harms of degradation on the
environment are externalised, so are the benefits of environmental litigation. Therefore, often the
damage borne by an individual is very small and the compensation he shall receive from the
courts shall also be small, whereas the cost of environmental litigation is usually high. Thus,
there is the problem of rational disinterest as the expected compensation may not be enough
to induce any individual victim to sue the injurer40. This problem of rational disinterest is further
exacerbated in the case of health problems, when the victims are insured. This problem is
particularly heightened in India, where the common man already suffers much disillusionment
towards the Indian judiciary and the criminal justice system. This problem has been partly
mitigated by allowing class-action tort or PIL. It is however seen in practice that most legal
systems have very little exposure to such litigation41.

Second, the outcome of civil liability would be inefficient if the tortfeasor has the opportunity
of settling with the a few potential litigants in return for continuing his polluting activity. This
small portion of the victims could become a credible threat and appropriate due compensation
out-of-court from the tortfeasor leaving the majority to their fate. Here only a part of the social
38
6 Prasad P.M., Environmental Protection: The Role of Liability System in India, Economic and Political Weekly,
January 17th 2004, on page 257
39
Ibid
40
Ott Claus and Schfer Hans-Bernd, Special Problems in Civil Liability, The Economic Analysis of Civil Law, 2004,
Edwar Elgar Publishing Ltd, UK; Ott Claus and Schfer Hans-Bernd , Widening the Scope of Environmental
Liability, Erling Ide and Roger van den Bergh, Eds, Law and Economics of the Environment 1996, (J & F), page 109-
114
41
9 Schfer Hans-Bernd, The Bundling of Similar Interests in Litigation. The Incentives for Class Action and Legal
Actions Taken by Associations, European Journal of Law and Economics, 2000, page 183

22 | P a g e
cost is internalized by the tortfeasor by means of paying compensation to group A. This leaves
the economy still in a sub-optimal equilibrium where the socially damaging activity is over-
supplied.42

Thirdly, even in strict liability regimes where one does not need to prove fault; causation must be
proved and attributed to the injurer. To begin with, there may be many given sources or causes
for a particular pollutant and it may not be possible to impute the source to the injurer. And more
often than not, environmental damage is cumulative and it is difficult to attribute the share of
damage. The problem is exacerbated further in those cases where there is a latency period
between the event of pollution and the time when the harm manifests itself on the victim. It is
also difficult or impossible to determine harm in cases where the environment increases the
probability of a certain disease, but may not be the only manifest cause.43

A fourth, more crucial problem often faced by courts is that the injury suffered by an individual
due to the pollution must be protected by a legal right. In the case of environment, it becomes
difficult to delineate clear property rights especially when it concerns an injury like
deforestation, as opposed to something more explicit such as chemical poisoning.

The fifth problem is that in many cases where the damage is large with many victims suing for
compensation, the injurer might be judgment proof. This implies that he may be insolvent or may
not have the required solvency to pay for the full damage caused by his actions. This problem
may be mitigated by using insurance for environmental liability.
Finally, there is the problem of assessment of damages, which is often faced by courts. This
partly follows from the inability to delineate property rights and partly from the problem of
cumulative pollution over many years by many polluters. In many cases, the effects of certain
environmental harms are still unknown and therefore it becomes more difficult to estimate
damages.

42
0 Raja, A.V and Rathinam, Francis, Economic Efficiency of Public Interest Litigations (PIL): Lessons from India
Munich Personal RePEc Archive, MPRA Paper No. 3870, June 2005, Munich Germany, downloaded from MPRA at
http://mpra.ub.uni-muenchen.de/3870/ on July 17 2008.
43
OECD: Recommendation of the Council concerning the Application of the Polluter-Pays Principle to Accidental
Pollution C(89)88., 1989, Paris, France.

23 | P a g e
The extended Polluter Pays Principle demands that the polluter not only ceases to pollute or
reduce his activity; but also pays for the reversal of the environmental degradation in the past.
The Principle is an important economic tool as it reduces pollution by cost internalisation. This
principle is particularly effective for current pollution or the current polluting activities of a firm.
However, in a situation where the firms are liable to clean the environment, the Principle looks
less efficient. The problem of causation, which exists in the Polluter Pays Principle, is
magnified in the extended Polluter Pays Principle especially in matters of historical pollution.44
Even if causation is determined, in a country like India, a large number of poor households,
informal sector firms, and subsistence farmers cannot bear any additional charges for energy or
for waste disposal.

Even where firms and farmers are able to bear the costs, an additional problem arises because for
exporters, their competitiveness in foreign markets is compromised or they have to bear the
entire cost of ecological restoration and this drives them out of the market.45

44
Guelton Sonia, Who can pay for depollution ? an economic approach, Laboratoire d'Observation de l'conomie
et des Institutions Locales, TRADE/WP.8/AC.1/SEM.7/2002/4/S.8, 2002, downloaded from
www.unece.org/ie/intersol/documents/s.8e.pdf on July 28 2008.
45
Interpretation of Polluter Pays Principle (PPP) In India, October 9 2007, available at
http://www.legalserviceindia.com/article/l54-Interpretation-of-Polluter-Pays-Principle.html accessed on 21 July
2008.

24 | P a g e
 The Evolution of PPP in India

Despite the potential that the polluter pays principle holds to protect the environment, it was not
a part of the law in India till it was invoked in the Enviro-Legal Action case46 as late as 1996. In
this case the court affirmed the principle of absolute liability as stated in the Oleum Gas Leak47
case and extended it. The court lay down, "The polluter pays principle demands that the
financial costs of preventing or remedying the damage caused by pollution should lie in the
undertakings which cause the pollution or produce the goods that cause the pollution." The
judgement of the above case on the polluter pays principle and the justification for invoking it
was re-affined by another Bench in 1996, in the case of Vellore Citizens Welfare Forum v.
Union of India.48 In these cases the use of the polluter pays principle has been justified via the
constitutional mandate,49 statutory provisions50 and international customary law.51

The Indian judiciary has both acknowledged and implemented the Polluter Pays Principle in
many decisions on environmental pollution. On the other hand, it has also made the state pay for
damages and asked it to recover the same from the polluter. Indian environmental policy and
judicial decision making differs significantly from the rest of the common law legal system. This
section gives an insight into the legislative and judicial standards and principles for environment
law in India and discusses the Indian Supreme Court [Hereinafter SC] interpretation and
enforcement of the Polluter Pays Principle and no-fault liability. This will enable us to analyse
the efficiency of a system requiring the state to pay damages to the victim and allowing it to
recover the same from the polluter.

46
Ibid 3
47
(1987) 1 see 395
48
Supra 3, hereinafter referred to as the Oleum Gas Leak Case, (1996) 5 see 647. In this case tanneries and other
industries in the state of Tamil Nadu were discharging untreated effluents into the agricultural fields, roadsides,
waterways and open lands. The untreated effluents were finally discharged into the river Palam, which was the
main source of water supply to the resident of that area.
49
Under Article 21 and Article 47: The most relevant provision invoked was Article 48-A, which states that the
State will endeavour to protects and improves the environment and Article 51-A (g) which ensures the protection
of the natural environment.
50
The Water Act, 1974; the Air Act, 1981 and the Environmental Protection Act, 1986
51
Infra

25 | P a g e
Indian Judiciary and PPP

"We are interested not only in the development but also in the enforcement of law"52
- Justice Christopher G. Weeramantry [Vice President of the ICJ]

In India, the rule followed on strict liability was first laid down in Ryland v. Fletcher53. In this
case, the rule laid down was that if a person employs non-natural use of land, then he is strictly
liable for the damage caused by any escape of matter from that land. The law already provides
exceptions to this rule.54

However, in the wake of the Bhopal Gas Tragedy, the SC felt the need to evolve new
jurisprudence to keep up with a developing and highly industrialised economy. In 1985, during
the situation involving an industrial oleum gas leak in New Delhi, the SC evolved a new
principle called the principle of Absolute Liability. Where an enterprise is engaged in a
hazardous or inherently dangerous activity resulting, for example, in the escape of toxic gas, the
enterprise is strictly and absolutely liable to compensate all those who are affected by the
accident and such liability is not subject to any of the exceptions which operate vis--vis the
tortuous principle of strict liability.55 Therefore, it is clear that the SC has removed all
exceptions and given a very strict meaning to no-fault liability.

In 1995, the courts used this rule in case of workers working in asbestos mines exposed to
extreme health hazards. The SC used the absolute liability principle and held that even if the
mine owners were not at fault, by bringing their workers in contact with hazardous substances,
they were vulnerable to liability. The SC ordered many asbestos mines and industries to pay
compensation to workers who had contracted asbestosis.56

52
www.e-wasteproject.org/docs/del_usha.pdf
53
Rylands v Fletcher L.R 3 H.L. 330 (1868)
54
The five exceptions to strict liability are - If the victim consented to the harmful substance present or contributed
to the escape of the substance on the land; If the injurer employed non-natural use of land for the common
benefit of the injurer and the victim and the injurer was non negligent; If the escape and damage is caused by the
act of a third party; If the escape is caused due to an Act of God or by natural circumstances without human
interference where no foresight or prudence could avoid damage; The rule of strict liability may be excluded by a
statute or a statutory authority
55
MC Mehta v Union of India AIR 1987 SC 1086 at 1099
56
Consumer Education and Research Center v Union of India AIR 1995 SC 992

26 | P a g e
In the above cases, the SC has also recognized and implemented the Polluter Pays Principle in
environmental cases and allowed for no fault liability. In the Bichchri village case57, the SC held
that the question of damages must be determined by the now universally accepted Polluter Pays
Principle. The Polluters Pays Principle demands that the financial costs of remedying damage
caused by pollution should lie with the undertakings which cause the pollution, or produce the
goods which cause the pollution58

In many cases in the 1990s, the SC has categorically blessed the marriage of absolute liability
and the Polluter Pays Principle; this is now followed as established environmental jurisprudence.
The polluter pays principle as interpreted by this court means that the absolute liability for
harm to the environment extends not only to compensate the victims of pollution but also the cost
of restoring the environmental degradation.59 Under this principle, it is not the role of the
government to meet the costs involved in either the prevention of such damage, or in carrying
out remedial action, because of effect of this would be to shift the financial burden of pollution
incidence to the taxpayer.

In the following years, in the southern Indian states of Tamil Nadu60 and Andhra Pradesh61,
many villagers were victims of pollution by tanneries and other industries producing toxins such
as sulphur dioxide. A PIL was filed in both situations and the SC held that principles that were
part of international environmental law were now part of the domestic law through treaties and
the interpretation of the SC. It upheld the Polluter Pays Principle and the precautionary
principle as important features of sustainable development in India and also held the polluting
firms absolutely liable for their actions.

Another important principle evolved by the SC of India in this regard is the Deep Pocket
Theory62. Justice Bhagwati, one of the pioneers or judicial activism in India and the author of
the principle of absolute liability, felt that the amount of damages payable an enterprise should
be correlated to the magnitude and capacity of the enterprise because such compensation must
have deterrent effect. The larger and more prosperous the enterprise greater must be the amount
57
Indian Council for Enviro-Legal Action v Union of India AIR 1996 SC 1446
58
Ibid.
59
MC Mehta v Union of India AIR 1997 SC 761
60
Vellore Citizens Welfare Forum v. Union of India (1996) 5 SCC 647
61
Andhra Pradesh Pollution Control Board v Prof MV Nayadu (1999) 2 SCC 718
62
MC Mehta v Union of India AIR 1987 SC 1086

27 | P a g e
of compensation payable by it for the harm caused on account of an accident in the carrying on
of the hazardous or inherently dangerous activity by the enterprise. However the Deep Pocket
Theory was rejected in the Union Carbide Settlement and has since then not been used very
often.

However, even though the Deep Pocket Theory has not been used, it has become a common
practice to award exemplary damages in case of rogue industries or in cases, where there is
extreme violation of law. There have also been cases, where imprisonment was ordered under the
penalty provisions of the Environment Protection Act, 1986.

While discussing the cases where the SC shaped the environment law for the country, it is
pertinent to mention some very important substantive and procedural issues. The above
mentioned procedure has been followed in many cases involving the environment.

The first reasons is that under the Indian Constitution, a writ petition can only be filed for
infringement of fundamental rights under Article 32 and such Fundamental Rights are
enforceable only against the State63. Therefore if these environmental cases had to be filed
without a class action suit, they had to fulfil the basic grounds for a PIL, which meant that the
petition must be filed against the State.

However, most of the polluting industries were private enterprises and therefore no writ petition
could lie against them. In this regard, the SC has included the appropriate government authority
in the matter and a writ petition may be filed against it. The SC has held that if it finds that the
government or the authorities concerned have not taken the action required of them, and their
inaction has affected the right to life of citizens, it is the duty of the Court to intervene and the
Court can issue the necessary directions.

For instance, in the case of Bichchri village, the pollution was caused by private industries.
However, the PIL was not filed against these units but against the Union of India, the State
Government of Rajasthan and the State Pollution Control Board of Rajasthan. This was on the
ground that they failed to carry on their duties as the pollution control authority to keep private

63
Under Article 12 of the Indian Constitution as "the State" includes the Governmental and Parliament of India
and the Government and the Legislature of each of the States and all local or other authorities within the territory
of India or under the control of the Government of India.

28 | P a g e
industries in check and therefore violated the right to life of citizens under Article 21. This is an
excellent example of judicial activism and creativity employed by the SC to ensure that a forum
under PIL is available even against private industries.

The Environmental Protection Act, 1986 gives the government plenary powers to take all steps
necessary for protecting and improving the environment. It also allows for the appointment of
several general and expert authorities for implementing the environmental policy of the
government64. The Act also gives the government or governmental authority the power to issue
directions to any person with regard to compliance with the Act.

Therefore, the various Pollution Control Boards and environmental authorities are free to take
action including closure of industries and criminal action against persons65 violating any
provision of environment laws.

The judiciary in India recognizes the Polluter Pays Principle as is seen from the judgment
delivered by the Supreme Court of India in writ petition no 657 of 1995.66 In its order dated
Feb.4, 2005, The Supreme Court held that " The Polluter Pays Principle means that absolute
liability of harm to the environment extends not only to compensate the victims of pollution, but
also to the cost of restoring environmental degradation. Remediation of damaged environment is
part of the process of sustainable development.

In order to link law and sustainable development I have divided sustainable development into
two components:-

1. Environmental Justice
Social Justice
2. The two principles of justice are
Polluter Pays Principle (PPP)
Precautionary Principle (PP)

During the two decades from Stockholm to Rio "Sustainable Development" has come to be
accepted as a viable concept to eradicate poverty and improve the quality of human life while

64
5 Section 3, 4 and 5 of the Environment Protection Act, 1986
65
Suo Moto v Vatva Industries AIR 2000 Guj 33
66
AIR 1996 SC 1446, Indian Council for Enviro-Legal Action v. UOI & Ors.

29 | P a g e
living within the carrying capacity of the supporting eco-systems. "Sustainable Development"
as defined by the Brundtland Report means "development that meets the needs of the present
without compromising the ability of the future generations to meet their own needs". We have no
hesitation in holding that "Sustainable Development' as a balancing concept between ecology
and development has been accepted as a part of the Customary International Law though its
salient features have yet to be finalised by the International Law jurists.

Some of the salient principles of "Sustainable Development", as culled-out from Brundtland

Report and other international documents, are Inter-Generational Equity, Use and Conservation
of Natural Resources, Environmental Protection, the Precautionary Principle, Polluter Pays
principle, Obligation to assist and cooperate, Eradication of Poverty and Financial Assistance to
the developing countries. I am, however, of the view that "The Precautionary Principle" and
"The Polluter Pays" principle are essential features of "Sustainable Development".

"The Polluter Pays" principle has been held to be a sound principle by this Court in Indian
Council for Enviro - Legal Action v. Union of India,67 The Court observed, "We are of the
opinion that any principle evolved in this behalf should be simple, practical and suited to the
conditions obtaining in this country". In this case the number of private companies operated as
chemical companies were creating hazardous wastes in the soil, henceforth, polluting the village
area situated nearby, and they were also running without licenses, so an environmental NGO,
filed writ petition under article 32 of the COI, which sought from the court to compel SPCB and
CPCB to recover costs of the remedial measures from the companies.

The Court ruled that "Once the activity carried on is hazardous or inherently dangerous, the
person carrying on such activity is liable to make good the loss caused to any other person by his
activity irrespective of the fact whether he took reasonable care while carrying on his activity.
The rule is premised upon the very nature of the activity carried on".

Consequently the polluting industries are "absolutely liable to compensate for the harm caused
by them to villagers in the affected area, to the soil and to the underground water and hence,
they are bound to take all necessary measures to remove sludge and other pollutants lying in the
affected areas".

67
J.T. (1996) 2 196

30 | P a g e
The "Polluter Pays" principle as interpreted by the Court means that the absolute liability for
harm to the environment extends not only to compensate the victims of pollution but also the
cost of restoring the environmental degradation. Remediation of the damaged environment is
part of the process of "Sustainable Development" and as such polluter is liable to pay the cost to
the individual sufferers as well as the cost of reversing the damaged ecology.

The court further stated that:

"According to this principle, the responsibility for repairing the damage is that of the offending
industry. Sections 3 and 5 empower the Central Government to give directions and take
measures for giving effect to this principle. In all the circumstances of the case, we think it
appropriate that the task of determining the amount required for carrying out the remedial
measures, its recovery/realisation and the task of undertaking the remedial measures is placed
upon the Central Government in the light of the provisions of the Environment [Protection] Act,
1986. It is of course, open to the Central Government to take the help and assistance of State
Government, R.P.C.B. or such other agency or authority, as they think fit."

In M.C.Mehta v. Union of India68, SC referred the case of Enviro-Legal Action and Vellore
Citizens case and ordered the Calcutta tanneries to relocate and pay compensation for the loss of
ecology/environment of the affected areas and the suffering of the residents.

In Vellore Citizen's case69, court held that:

The precautionary principle and the polluter pays principle have been accepted as part of the law
of the land. Article 21 of the Constitution of India guarantees protection of life and personal
liberty. Article 47, 48A and 51 A (g) of the Constitutional are as under:

Article 47: Duty of the State to raise the level of nutrition and the standard of living and
to improve public health. - The State shall regard the raising of the level of nutrition and
the standard of living of its people and the improvement of public health as among its
primary duties and in particular, the State shall endeavour to bring about prohibition of

68
WP 3727/1985 (19 December, 1996)
69
AIR 1996 SC 2715

31 | P a g e
 the consumption except from medicinal purposes of intoxicating drinks and of drugs
which are injurious to health.
Article 48 A: Protection and improvement of environment and safeguarding of forests
and wild life. The State shall endeavour to protect and improve the environment and to
safeguard the forests and wild life of the country.
Article 51 A (g): To protect and improve the natural environment including forests, lakes,
rivers and wild life, and to have compassion for living creatures.

In this case only, the court considered a public interest litigation highlighting discharge of toxic
waste and polluted water from the large number of tanneries in the State of Tamil Nadu. A three
judges bench led by Justice Kuldip Singh adopted a very strict stand against the polluting
tanneries. In this case the court reviewed the history of the concept of sustainable development
under international law. In this connection the court briefly referred important legal
developments such as the Stockholm Conference 1972, Burndtland Commission Report, 1987,
Caring of the Earth Report, 1991, Rio Conference, 1992, Convention on Climate Change, 1992,
Convention on Biological Diversity, 1992 and Agenda -21 (A programme of Action for Twenty-
first Century) etc. The important legal findings of the Vellore case, relevant for this article, are
summarized below.

The court held that "Sustainable Development" as a balancing concept between ecology
and development has been accepted as a part of customary international law though its
salient features are yet to be finalized by the international law jurists.70
The court was of the view that "The precautionary Principle" and "The Polluter Pays
Principle" are essential features of "Sustainable Development."71
The Precautionary Principle and the Polluter Pays Principle have been accepted as part of
the law of the land.72
According to the court, once these principles are accepted as part of the customary
International law there would be no difficulty in accepting them as part of the domestic
law. It is almost an accepted proposition of law that the rules of Customary International

70
( p. 658, Para 10, supra note 25)
71
( ibid., p. 658, Para 11).
72
(ibid., pp. 659-660, Paras 13 & 14).

32 | P a g e
 Law which are not contrary to the municipal law shall be deemed to have been
incorporated in the domestic law and shall be followed by the courts of law.73

In Samatha case74, only meaning and importance of the term sustainable development as
well as "the polluter pays principle as a facet thereof" have been briefly mentioned and
affirmed by the Supreme Court. In Nuyudu case75, citing Vellore case the Supreme Court felt
it necessary to further elaborate the meaning of precautionary principle in more detail. 76 In
Sardar Sarovar Dam77, majority judgment (Kirpal, J. for himself and Anand, CJI.) referred
the Nayudu & Vellore Cases and approved the construction of a mega dam and found it
compatible with the concept of sustainable development which requires that mitigative steps
should be taken. The court refused to apply the precautionary principle in this matter by
distinguishing the dam with the hazardous industries.

Apart from the constitutional mandate to protect and improve the environment there are plenty of
post-independence legislations on the subject but more relevant enactments for our purpose are:

The Water (Prevention and Control of Pollution) Act, 1974 (the Water Act),
The Air (Prevention and Control of Pollution) Act, 1981 (the Air Act) and
The Environment Protection Act 1986 (the Environment Act).

The Water Act provides for the Constitution of the Central Pollution Control Board by the
Central Government and the Constitution of the State Pollution Control Boards by various State
Governments in the country. The Boards function under the control of the Governments
concerned. The Water Act prohibits the use of streams and wells for disposal of polluting
matters. Also provides for restrictions on outlets and discharge of effluents without obtaining
consent from the Board. Prosecution and penalties have been provided which include sentence of
imprisonment. The Air Act provides that the Central Pollution Control Board and the State
Pollution Control Boards constituted under the Water Act shall also perform the powers and

73
(ibid.,p. 660, Para 15).
74
Samatha, v. State of A.P. & others (1997) 8 SCC 191, 274. (Para 123) (Decided on July 11, 1997 by three judges
bench)
75
A.P. Pollution Control Board v. Prof. M.V. Nayudu (1999) 2 SCC 718, 732-34 (Para 30, 31 & 36)
76
(Para 32, p. 733)
77
Narmada Bachao Andolan v. Union of India 2000 (7) SCALE 34, 91-92. (pares 119-121) (AIR 2000 SC 3751)

33 | P a g e
functions under the Air Act. The main function of the Boards, under the Air Act, is to improve
the quality of the air and to prevent, control and abate air pollution in the country.

In view of the above mentioned constitutional and statutory provisions i have no hesitation in
holding that the precautionary principle and the polluter pays principle are part of the
environmental law of the country.

Even otherwise once these principles are accepted as part of the Customary International Law
there would be no difficulty in accepting them as part of the domestic law. It is almost accepted
proposition of law that the rule of Customary International Law which is not contrary to the
municipal law shall be deemed to have been incorporated in the domestic law and shall be
followed by the Courts of Law. To support i am relying to Justice H.R. Khanna's opinion in
Addl. Distt. Magistrate Jabalpur v. Shivakant Shukla78, Jolly George Varghese's case79 and
Gramophone Company's case.80

In the Kamalnath's case81, court by considering the PPP as the law of the land, ordered that:

"It is thus settled by this Court that one who pollutes the environment must pay to reverse the
damage caused by his acts." Court disposed this matter by giving a show cause notice to the
span motels, that, why Pollution-fine and damages be not imposed as directed by us. This case
subsequently came up in front of the court in the year 200082 and court directed to the span
motels that: "The powers of this Court under Article 32 are not restricted and it can award
damages in a PIL or a Writ Petition as has been held in a series of decisions".

Henceforth, court directed a fresh notice to be issued to M/s. Span Motel to show cause why in
addition to damages, exemplary damage is not awarded for having committed the acts set out and
detailed in the main judgment. Finally in 200283, while granting exemplary damages court held
that:

78
MANU/SC/0062/1976
79
MANU/SC/0014/1980
80
MANU/SC/0187/1984
81
(1997) 1 SCC 388
82
2000 AIR SCW 1854
83
AIR 2002 SC 1515

34 | P a g e
"Liability to pay damages on the principle of 'polluter pays' in addition to damages, exemplary
damages for having committed the acts set out and detailed in the main judgment. Considering
the object underlying the award of exemplary damages to be to serve a deterrent for others not
to cause pollution in any manner. So the quantum at Rs. 10 lakhs is fixed for the span motels."

While applying the principle of Polluter Pays, the Supreme Court later expressed the view84 that
compensation to be awarded must have some correlation not only with the magnitude and
capacity of the enterprise but also the harm caused by it. The applicability of the principle of
Polluter Pays should be practical, simple and easy in application. In Deepak Nitrite, while
remanding the matter to the High Court for reconsideration, the Supreme Court expressed the
view that the possibility of 1% of the turnover of the enterprise may be adequate compensation.

In Research Foundation for Science Technology National Resource Policy v. Union of India
& Anr.85, while examining the precautionary principle and polluter pays principle, the legal
principles noticed in brief were: - "The legal position regarding applicability of the precautionary
principle and polluter pays principle which are part of the concept of sustainable development in
our country is now well settled.

In Karnataka Industrial Areas v. Sri C. Kenchappa & Ors86, it was held by the court that In the
Rio Conference of 1992 great concern has been shown about sustainable development.
"Sustainable development" means `a development which can be sustained by nature with or
without mitigation'. In other words; it is to maintain delicate balance between industrialization
and ecology. While development of industry is essential for the growth of economy, at the same
time, the environment and the ecosystem are required to be protected. The pollution created as a
consequence of development must not exceed the carrying capacity of ecosystem. The Courts in
various judgments have developed the basic and essential features of sustainable development. In
order to protect sustainable development, it is necessary to implement and enforce some of its
main components and ingredients such as - Precautionary Principle, Polluter Pays and Public
Trust Doctrine. We can trace foundation of these ingredients in number of judgments delivered
by this Court and the High Courts after the Rio Conference, 1992.

84
8 Deepak Nitrite v. State of Gujarat & ors, (2004) 6 SCC 402
85
[2003 (9) SCALE 303]; decided on 2005
86
on 12 May, 2006; Appeal (civil) 7405 of 2000

35 | P a g e
The importance and awareness of environment and ecology is becoming so vital and important
that we, in our judgment, want the appellant to insist on the conditions emanating from the
principle of `Sustainable Development'.

1. We direct that, in future, before acquisition of lands for development, the consequence and
adverse impact of development on environment must be properly comprehended and the
lands be acquired for development that they do not gravely impair the ecology and
environment.
2. We also direct the appellant to incorporate the condition of allotment to obtain clearance
from the Karnataka State Pollution Control Board before the land is allotted for development.
The said directory condition of allotment of lands is converted into a mandatory condition for
all the projects to be sanctioned in future.

In Thilakan v. Circle Inspector Of Police And others87, the principle of sustainable

development and the doctrines of 'polluter pays' and 'precautionary principle' is part of our
environmental law, which is built around Article 21 of Constitution of India. The conditions
impugned in this Writ Petition are necessary to protect the environment. If every land owner,
driven by profit motive, is to dig his land to win sand, no land except pits will be left for the
future generations. So, the petitioners should stop mining, when it reaches the ground water level
and immediately all the pits should be filled up, as provided in condition No. 16, which reads as
follows: All excavations have to be immediately filled and reclaimed.

In Soman v. Geologist88, it was held that all the grantees of mining permits have executed
agreements in stamp-papers worth Rs. 50/-, agreeing to fill the pits, after the mining of sand is
over. The learned Government Pleader has pointed out that many of the licensees have
abandoned the pits, after the mining is over. Not only, going by the principle "Polluter Pays";
they are bound by the conditions of the permits and also by the agreements executed by them to
fill the land. But, if any of the licensees, including the petitioners does not fill the land once the
mining is stopped, the Geologist shall prepare estimates or cause to prepare estimates, regarding
the amount required for filling the pits. The said amount, including cost escalation, if any, shall

87
on 23 October, 2007; AIR 2008 Ker 48, 2007 (3) KLJ 509
88
on 24 August, 2004; 2004 (3) KLT 577

36 | P a g e
be recovered from him, invoking the provisions of the Kerala Revenue Recovery Act and the pits
shall be filled, using the said amount.

In Hindustan Coco-Cola Beverages v. Member Secretary, West Bengal Pcb89, it was held that
before applying the principle of "polluter should pay", an authority has to first ascertain and
determine the damage caused by the polluter and the amount which is necessary to rectify the
damage. Even otherwise the amount so realized is required to be utilized for the purpose of
restoring the environment and not otherwise. On the absence of such assessment, it would not be
justified to arbitrarily direct a person to deposit a lump sum amount. The aforesaid facts and
position of law were not kept in mind while passing the impugned order and as such the same
cannot be sustained in the eye of law. Before parting we feel it proper to express our concern
with regard to presence of heavy metals such as lead (Pb) and cadmium (Cd.) in the discharged
effluent. Presence of said substances in the effluent would finally contaminate the environment,
and shall cause hazards to human life. It appears, no steps, howsoever has been taken by the
WBPCB or by the Appellant to trace out the source of such heavy metals found in the effluent. It
is quite possible that heavy metals / (Pb, Cd etc.) may also be present in the products. We,
therefore, direct the WBPCB as well as the Appellant to conduct analysis of the water and raw
materials used for the purpose, and not only detect the source but also take appropriate steps for
eradicating the same so as to avoid any adverse health impacts. we allow the Appeal and set
aside the direction dated 2nd May, 2011 issued by the WBPCB and call upon the said
Respondent to proceed in accordance with law. We also direct the Central Pollution Control
Board, New Delhi / Zonal office at Kolkata, West Bengal to collect the effluent discharged from
the Appellant's plant following the paraphernalia laid down under law, analyze the same in all
aspects, particularly with regard to presence of heavy metals (Pb, Cd etc.) and prepare a report. It
is needless to be said that the expenses for the said purpose shall be borne by the Appellant
Company. The cost shall be assessed by the CPCB within two weeks from the date of
service/production of certified copies of this judgment and same shall be deposited by the
Appellant with the CPCB within two weeks, therefrom. The renewal of the consent to operate
the plant would be dependent on the report of the Central Pollution Control Board.

89
on 19 March, 2012; APPEAL No. 10 of 2011

37 | P a g e
In Court On Its Own Motion v. State Of Himachal Pradesh and Ors90 we were informed by the
State Government that it had created 'Green Tax Fund' in order to ensure proper development for
protecting the environment in all its spheres. The persons who are travelling by public or private
vehicles to the glacier of Rohtang Pass must pay a very reasonable sum of money as contribution
on the principle of 'Polluter Pays'. Thus, we direct that every truck, bus and vehicle of any kind
which passes through the route ahead of Vashishta and Rohtang Pass shall be liable to pay a sum
of Rs.100/- for heavy vehicles and Rs.50/- for light vehicles. The passengers travelling through
the CNG or electric buses to Rohtang Pass as tourists shall be liable to pay a sum of Rs.20/- per
head, which shall form part of the ticket for the bus.

THE PRINCIPLE AS A FEATURE OF CUSTOMARY INTERNATIONAL LAW

The polluter pays principle was promoted by the Organisation for Economic Cooperation and
Development (OECD) during the 1970s91 when there was a great deal of public interest in
environmental issues which resulted in demands on the Governments and other institutions to
introduce policies and mechanisms for the protection of the environment92. The modern day
principle of polluter pays was first incorporated in Principles 2193 and 2294 of the Stockholm
Declaration, 1973.95 Thereafter, the European Charter on the Environmental and Health, 198996
and the Single European Act, 198697 made provisions for applying the polluter pays principle.

90
on 6 February, 2014; APPLICATION NO. 237 (THC)/2013(CWPIL No.15 of 2010)
91
OECD: Principles On the Environment Ministerial Meeting of the OECD, adopted on May 24-26, 1972. cf II ILM
1172-73 (1972)
92
States have, in accordance with the Charter of the United Nations and the principles of international law, the
sovereign right to exploit their own resources pursuant to their own environmental policies and the responsibility
to ensure that the activities within their jurisdiction or control do not cause damage to the environment of other
states or to areas beyond the limits of national jurisdiction.
93
States shall cooperate to develop further the international law regarding liability and compensation for victims
of pollution and environmental damage caused by activities within the jurisdiction or control of such stat.es to
areas beyond their jurisdiction.
94
The Charter provides that environmental standards should be constantly revised in light of new knowledge and
new economic conditions applying the polluter pays principle whereby any public or private entity causing or likely
to cause damage to the environment is financially responsible for restorative or preventive measures. cf Alexander
Kiss and Dinnah Shelton, International Environmental Law 66 (1991).
95
11 ILM 1416 (1972)
96
The Rio Declaration on Environment and Development cf. 31 ILM 876 (1992)
97
States shall develop national laws regarding liability and compensation for Ihe victims of pollution and other
environmental damage. States shall also cooperate in a more determined manner to develop further international
law regarding liability and compensation for adverse effects of environmental; damage caused by activities within
their jurisdiction or control to areas beyond their jurisdiction.

38 | P a g e
The United Nations Conference on Environment and Development, 199298 in Principle 15
incorporates the polluter pays principle. More recently the member states of the Council of
Europe and the European Economic Community adopted the Convention on Civil Liability for
Damage Resulting from Activities Dangerous to the Environment,99 which specifically deals
with Trans boundary pollution. It must be remembered that every breach of international law
gives rise to an obligation to make reparations.100 Although traditional norms of state
responsibility concern the treatment of aliens and their property, the Trail Smelter101 arbitration
recognised that the principle of state responsibility is applicable in a field of transfrontier
pollution and consequently states may be held liable to private parties or other states for
pollution that causes demonstrable damage to persons or property.

The question that gains importance is whether the mere presence of a principle in a few
instruments can have the effect of giving it the status of customary international law?

The International Court of Justice in the North Sea Continental Shelf Case102, delivered a
landmark judgement determining whether a particular provision in a treaty had acquired the
status of customary international law, thereby making it binding on those nations who are not
signatories to the treaty concerned.

According to the decision, state practice and opinio juris can enable a treaty to acquire the status
of customary international law. The former requires that there be widespread acceptance by
nations of the new norm and the latter signifies that the practice must have been rendered
obligatory by the existence of the rule of law requiring it.103

98
31 ILM (1992)
99
Object statement: "considering that emissions released in one country may cause damage in another country
and that therefore the problems of adequate compensation for such damage are also of an international nature ...
having regard to the desirability of providing for strict liability in this field and taking into account the polluter pays
principle."
100
Chorzow Factory (Indemnity) Case, (1928) pcn Ser. A.No.17, p.29. "Reparation must in so far as possible wipe
out all the consequences of the illegal act and re-establish the situation which would in all probability have existed
if that act had not been committed. Restitution in kind or if that is not possible, payment of a sum corresponding to
the value which a restitution in kind would bear, the award, if need be, of damages for loss sustained which would
not be covered by restitution in kind or payment in place of it."
101
1969 ICJ 3
102
The North Sea Case was followed by subsequent decisions of the World Court: Advisory Opinion on the Legality
of the threat of Nuclear Weapons. ICJ Communique No. 96/23 (July 3, 1996)
103
Geoffrey Palmer, New Waysto Make International Environmental Law, Am J Int'l L 259, 265 (1992)

39 | P a g e
The fact that 153 states were signatories of the Rio Declaration does not make the principle in
the declaration one of international customary law. What is required is a demonstrable
willingness to adhere to it and the practice of nations must alter according to the prescriptions of
the new norm for it to attain the status of international customary law.104 In the absence of any
clear intent among nations, incorporating the above two requirements of customary international
law, one wonders how the principle of polluter pays has been incorporated into municipal law.

Therefore the principle of polluter pays stands on a weak legal foundation, mainly because its
salient features have yet to be finalised by international law jurists.105

THE ROLE OF MARKET BASED INSTRUMENTS

The developments of the polluter pays principle must also include mechanisms to safeguard
against its potentially harmful effects while at the same time reduce uncertainties about its
economic impact.

Economists have expressed reservations about the economic viability of the polluter pays
principle. Noted economist Kirit Parikh106 cites four reasons:

1. The application of the principle in urban areas where the industrial sector is dominated by
medium, small and tiny enterprises operating in a highly competitive market is risky as
any higher costs from emission or other effluent clean up charge might adversely affect
their competitiveness in relation to large firms that are capable of affording the
installation of necessary equipment.
2. Even though the polluter pays principle does not prohibit the polluter from passing on the
additional costs that he might incur in terms of increased costs, thereby increasing price
of his product, the reality in developing nations may not always be this way. These
nations which rely heavily on exports of primary commodities for which demand in the
international market is elastic may find that the costs are entirely borne by the producers
in the form of damage to human health, property and ecosystems.
104
Vellore Citizens Case, (1196) 5 SCC 47 at para 10
105
Both the relevant judgements fail to lay down a standard by which the damages in the case of environmental
restoration are to be estimated
106
Kirit Parikh, The Polluter Pays Principle for Developing Countries: Merits, Drawbacks and Feasibility c.! Villod
Rege, GATT Law and Environment Related Issues Affecting the Trade of Developing Countries, 26 J World Trade 95
at 150 (1994)

40 | P a g e
 3. Representing a larger objection to the inclusion of Polluter Pays in Indian law is the
consequences it will have in the realm of the common property resource. The application
of the principle will lead to the appropriation of rights by wealthy landlords to the
disadvantage of the small land owners, if curbs are imposed on the manner in which a
resource can be used, in this instance land.
4. The Court has not dealt with the fact that the level of charges to be imposed on the
polluter are extremely difficult to estimate and therefore will give rise to difficulties.

The implementation of the Polluter Pays principle has significant economic consequences,
especially in the Third World where trade is carried out in commodities that are the products of
pollution intensive industries.107 To offset the potential economic harm, the principle must be
implemented via Market Based Instruments.108 The main aim of this is to induce efficiency in
environmental management through the use of market mechanisms.

One of the suggested mechanisms to achieve the above mentioned goal is an environmental
assurance bond.109 This is a bond that would provide a contractual guarantee that the principal
would perform in an environmentally benign manner, but would be levied for the current best
estimate of the largest potential future environmental damages. Funds in the bond would be
invested and would produce interest that would be returned to the principal. The bond would be
held till the uncertainty or some part of it was removed.110 This would provide a strong incentive
for the principal to reduce the uncertainty of the environmental impact of their activities as
quickly as possible, by changing technology to being more environments friendly. The bonds
could be administered by an independent regulatory authority, similar to that of the Pollution
Control Board.

A potential argument against such bonds is that it would favour relatively large firms that could
afford to handle the financial responsibilities of activities potentially hazardous to the

107
Gupta, Opt for Market Based Instruments, The Economic Times 6 (September 8, 1997), Bangalore
108
Hereinafter referred to as MBIs.
109
Attilio Bissio and Sharon Boots (Ed.),The Wiley Encyclopedia of Energy and the E1lvironment, 685 (1997)
110
A similar legislation has been enacted in India, in 1991. The Public Liability Insurance Act, 1991. According to
S.4(1) ofthe Act every owner shall take out, before he starts handling any hazardous substance, one or more
insurance policies providing for contracts of insurance whereby he is insured against liability to give relief under
S.3(1). Where death or injury to any person (other than a workman) or damage to any property has resulted from
an accident, the owner shall be liable to give such relief as is specified in the Schedule for such death, injury or
damage.

41 | P a g e
environment. But this will prevent firms that cannot handle the financial imposition from passing
on the cost of the environmental damage to the public.111 This does not however exclude small
firms from the ambit of this principle. It is desired that these firms bond together to handle
financial responsibility for environmental damage. They may also feel it is more profitable to
switch to less risky activities or technology that does not require such high assurance bonds.112

111
Robert Costaza,General Policies To Achieve Sustainability, http://csf.colorado.edu/authorslhanson/p.8
112
Environmental costs are referred to as negative externalities because they are external to the decision making
process. As per the polluter pays principle a particular standard is issued which must be complied with. The
compliance results in costs, which in the case of absolute liability are calculated only when the damage occurs,
unlike the polluter pays principle, where the cost is a continuous calculation.

42 | P a g e
 CONCLUSION

Its good that India that imbibed the Polluter Pays Principle (PPP) in their Law of land. And, it
also had actually helped in imposing damages on the polluter but still the problem with this
principle is that it hasn't been implemented properly. If we look at the exemplary damages
granted to span motels doesn't serve the purpose of the exemplary damages. Ten lakhs rupees is
nothing for the big corporations like span motels. For them at least Rs. 10 cores exemplary
damages should be given. And again if we look at the penalty imposed in the Vellore Citizens
case, then it just shocks me that how 10,000 rupees can justify the pollution spreaded by the
tanneries in the nearby areas. The Author personally feels that this is not an effective way of fund
raising. We should reconsider the criteria's laid to decide the compensation amount. At least it
should deter the polluters from spreading pollution. This principle needs a strict interpretation
from our judiciary with immediate effect and we just can't afford any sort of delay in its proper
implementation in developing country, like India.

The judgements of the Supreme Court undoubtedly go a long way in reaffirming the
commitment of the judiciary in protecting the environment and remedying the ill-effects of
pollution. However, the court has erred in the manner in which it has adopted the polluter pays
principle, as one of international customary law without demonstrating how the principle
actually fits into the ambit of international law.

The drawbacks of the polluter pays principle as laid down by the Supreme Court are that there is
no gradation system prescribed so that the Polluter Pays Principle can also have a deterrent effect
on the industries. It is important for it to be financially unviable to violate environmental
protection laws. Thus in addition to evaluating the cost of reparation of the damage, the size of
the industry must also be considered so that the penalty can be graded accordingly. This is the
only way to ensure that the polluter pays principle will have a deterrent effect on large industries,
as often the damage to the environment is irreparable.

Nevertheless, the polluter pays principle has set the stage for efficiency based environmental
management, through the use of market mechanisms. The authors have identified three
challenges that need to be countered to make the polluter pays principle effective, that the
Supreme Court did not address-

43 | P a g e
 1. To develop scientific methods to determine the potential costs of uncertainty vis-a-vis
environmental damage.
2. To adjust incentives so that the appropriate parties pay the cost of this uncertainty.
3. To offer appropriate incentives to reduce the detrimental effects of the high risk activity.

As strict liability for environmental damages becomes the norm, clairvoyant firms must take
measures to protect themselves. The polluter pays principle is an improvement on strict liability
because it explicitly moves the costs to the present where they will have a great deal of impact on
decision making.

In lieu of the logic, fairness and efficiency of the polluter pays principle, it promises to be both
practical and feasible in helping us ward off the impending, Environmental crisis.

44 | P a g e
 Bibliography

1. Environmental Law In India 3rd Edition, P. Leelakrishnan

2. ENVIRONMENTAL LAW, 1st Edition (9788120330597) by Dharmendra S
3. Handbook Of Environmental Law, 2nd Edition by P. B. Sahasranaman
4. Handbook of Environmental Decision Making in India: An EIA Model by O. V.
NANDIMATH
5. www.Indiankanoon.org
6. www.legalcrystal.com
7. http://www.elaw.org/taxonomy/term/475?page=1
8. http://www.lawisgreek.com/how-to-understand-the-polluter-pays-principle
9. http://www.legalserviceindia.com/article/l54-Interpretation-of-Polluter-Pays-
Principle.html

45 | P a g e