Lafarge Decision- Light At The End Of The Tunnel ?

Ravi Singhania and Sunayna Jaimini

I Environment v. Development
Every once in a while, a developing country has to decide between two of its necessary and opposing obligations – economic development versus protection of the environment. This debate is further intensified in a country like India where the pressure to maintain the precarious balance between environment and development gets intensified due to its ever-increasing population coupled with the problem of its fast-depleting natural resources. Consequently, this debate is oft repeated in the courts of law, wherein the judiciary has to umpire between the question of development and the question of protecting the environment. In order to honor both commitments, the judiciary has finely balanced the two on the touchstone of “sustainable development.”

“Sustainable development” is defined as development that meets the needs of the present without compromising the ability of future generations to meet their own needs. This concept has been adopted by most countries as a principle to harmonize the needs of development and environment.

To ensure “sustainable development” in India, Indian environmental policy dictates obtaining prior environmental clearance for certain projects from the Ministry of Environment and Forests under various environmental legislations like the Environment Protection Act, 1986 and the Forest Conservation Act, 1980. The aim of obtaining such clearances is to ensure that sensitive flora and fauna are not sacrificed on the altars of development for the masses.

Recently, most infrastructure and mining related projects in India were plagued with controversies regarding environmental clearances. In most cases, due to lack of coordination between various governmental authorities governing the projects, the developers were given the nod by one authority only to be stalled by another, sometimes even after the developers had commenced with the projects. Not only were the environmental clearances unnecessarily delayed, clearances – once granted – were also retracted by the authority after the lapse of a considerable time period.

One such recent controversy was put to rest by the Hon’ble Supreme Court of India in the landmark case of Lafarge Umiam Mining Private Limited. v. Union of India (2011 (7) SCALE 242). In LaFarge, the Hon’ble Court not only settled the dispute about the legality of the environmental clearance obtained by the company, but also in a praiseworthy step of judicial activism, provided detailed guidelines for granting environmental clearances for future projects.

In the present matter, the Ministry of Environment and Forest (“MoEF”) alleged that Lafarge Umium Mining Private Ltd., an Indian company that had leased mining rights in Meghalaya, misrepresented “forest land” to be infertile barren land to obtain environmental clearances. This gave rise to two issues before the Court—firstly, a determination of the nature of land in question, and secondly, an examination of whether the company had misrepresented the nature of the land in order to dishonestly obtain clearances from the Ministry.

II. Lafarge v. The Ministry- Houston, we have a problem!

Lafarge Surma Cement Ltd (“LSCL”) is a Bangladeshi company that has a cross border cement manufacturing project in Chhatak, Bangladesh. LSCL has a 100 hectare captive limestone mine located in Khasi, Meghalaya. The mine is leased out to its wholly owned subsidiary in India namely Lafarge Umiam Mining Private Limited and the limestone quarried in the mine is transported via a 7km long conveyor belt to the cement factory in Bangladesh. The limestone quarried from the mine in Meghalaya is the only source of limestone for the cement factory.

In 1997, before commencing the project, LSCL through its subsidiary in India, namely Lum Mawshun Minerals Private Limited (“LMMPL”), began the process of obtaining the necessary environmental clearances from the MoEF. As a part of the application, LMMPL made representations that the limestone mines did not involve the diversion of “forest land.” The LMMPL’s representations were supported by two sources—firstly, the letters from the Khasi Hills Autonomous District Council (“KHADC”), the local authority with jurisdiction over the mines, and secondly, a certificate from the Divisional Forest Officer (“DFO”) of the Khasi Hills Division stating that the mining site was not in a forest area. After several rounds of queries from the MoEF and consequent responses from LMMPL, the MoEF finally gave environmental clearance for the mines in 2001, and subsequently LMMPL commenced its mining operations.

In 2007, six years after the MoEF had already granted the appropriate clearances, MoEF asked Lafarge to stop all mining activity in the area. This step was taken after the Chief Conservator of Forests (“CCF”) for Meghalaya informed the MoEF that Lafarge had misrepresented that the mining area was not a “forest land” and had diverted forest land for its mining activity without first obtaining the necessary forest clearance under section 2 of the Forest Conservation Act, 1980. The company vehemently denied such allegations and stated that it had proceeded with the developmental work on the basis of the certificate given by DFO, pursuant to which the DFO had certified that the project area was not “forest land” and did not fall in any of the notified, reserved, or protected forests. Therefore, according to the company, the requirement of obtaining a forest clearance did not arise.

Further, Shella Action Committee (“SAC”), which was spearheading the movement on behalf of tribals of the region, alleged that Lafarge was flagrantly violating Schedule VI of the Indian Constitution, which provides for protection of tribal land in the North Eastern region of India against acquisition by non-tribals. SAC argued that since Lafarge had misrepresented the nature of the project land, no forest clearance should be granted to the company.

Ultimately, the court allowed the company to resume its mining operations in the region after taking into consideration that the MoEF had granted the forest clearance in April 2010 and that the Company had complied with the preconditions to the environmental clearance. In its determination, the Court placed great emphasis on the rights of locals to decide on the value of conservation of the environment. In addition, the Court observed that the KHADC’s letters as well as the Court’s subsequent findings revealed that the Lafarge project resulted in significant gains for the local community.

III. The Lafarge judgment and its impact
The Lafarge judgment is hailed for providing clarity on two important issues—firstly, for its clarification about the extent of judicial review in situations where environmental clearances have been granted but are later challenged with respect to the validity of the said process, and secondly, for laying down comprehensive guidelines for future projects that involve both forest and environmental clearances.

The Court also opined that the protection of the environment is an ongoing process and therefore “across-the-board” principles cannot be applied to all cases. Courts would have to examine the facts of each case on whether the project should be allowed or not. The “margin of appreciation” doctrine would apply in matters where questions are raised regarding governmental errors in in granting environmental clearance.


i.Judicial Review

On the question of the extent of judicial review, the Court held that the constitutional “doctrine of proportionality” should apply to environmental clearances. Therefore, decisions relating to utilization should be judged on well-established principles of natural justice, such as whether all relevant factors were taken into account at the time of coming to the decision, whether the decision was influenced by extraneous circumstances, and whether the decision was in accordance with the legislative policy underlying the laws that governs the field. If these circumstances were satisfied, the decision of a government authority, would not be questioned by the Court.

The importance of this section of the judgment is that the Court lays down a clear principle that if a project developer complies with the specified procedure for obtaining environmental clearances and there is evidence on record that the entity granting the clearance had done so after due consideration, such clearances would not be reversed to the prejudice of the project developer. This provides some much needed stability to the environmental clearance process and both project developers and environmental activists would definitely benefit from this consistent approach.

ii.Directive for future projects
In Part II of the judgment, the Hon’ble Court laid down specific guidelines to be followed in future projects. The following are a few important directives of the Court:

National Forest Policy, 1988: The Court upheld that the far-reaching principles of the National Forest Policy, 1988 (which until now has been relegated to the back burners as a paper tiger policy) must govern the grant of forest clearances under the Forest Conservation Act, 1980 . The principal aim of National Forest Policy, 1988 is to ensure environmental stability and maintenance of ecological balance, it further mandates that the derivation of direct economic benefit must be subordinate to this principal aim.The Court noted that, to date, there has been no mechanism available to implement it. However, the Court has now made it mandatory for decision-making bodies to consider the provisions of the National Forest Policy, 1988 before granting project approvals.

Establishment of independent Regulator: Under Section 3(3) of the Environment (Protection) Act, 1986, the Central Government should appoint a National Regulator for appraising projects, enforcing environmental conditions for approvals, and to impose penalties on polluters. In a press release, the MoEF stated that it has already initiated the process of appointment of the independent National Environmental Appraisal and Monitoring Authority and that it has circulated proposals for inter-ministerial consultations. It is expected that the regulator and the newly established National Green Tribunal will be able to stabilize and expedite the process of obtaining clearances and that there shall be fewer conflicts relating to environmental clearances in the future.

Panel of Accredited Institutions: Further, the Court observed and opined that the government and the courts are often confronted by contradicting reports of various authorities submitted by the project developer. This often creates confusion and delays in the clearance granting process. To avoid such confusion, the Court’s view is that a regulatory mechanism should be put in place, in the mean time, the MoEF should prepare a Panel of Accredited Institutions from which alone the project proponent should obtain the environmental impact assessment report on the terms of reference formulated by the MoEF.

Prior Site Inspection by MoEF: To avoid future controversies regarding misrepresentation of the status of project land by the project developer, the Court held that if the project developer makes a claim that the land in question is not forest land, and if there is any doubt in the mind of the MoEF regarding the veracity of such claim, the site shall be inspected by the State Forest Department along with the Regional Office of MoEF to ascertain the status of the land. Upon inspection, if it is found that the “forest land” is involved, then the project developer will be required to apply for prior forest clearance. Further, there are several directions given to the MoEF to expand its internal infrastructure to better facilitate inspection, monitoring, and appraisal of proposals.

Conclusion
In conclusion, the Court has taken bold steps to remove the various bottlenecks that plague development projects, while ensuring that the environmental agencies follow established directives and principles of protection of environment in granting environmental clearances. MoEF has hailed the following specific guidelines of the Court, namely, the emphasis of the National Forest Policy, 1988, in determining whether to grant environmental clearances and the establishment of an independent regulator, amongst other things.

In a welcome step since the passing of the judgment, the MoEF recently further streamlined environmental clearance norms for projects requiring forest land. By an order dated September 9, 2011, projects will now be eligible to be considered for site clearance even as their application for forest diversion is under consideration. However, as a safeguard against misuse, the order requires the project developer to submit certain supporting documents from the forest authorities at the state or central level stating that an application for forest clearance in place. Once the environmental appraisal committee makes a recommendation and the ministry takes a final decision on the environmental clearance for the project, the project developers would be informed of the decision. This reverses the earlier decision of MoEF to tighten guidelines in an effort to reduce the diversion of forests by making it a last resort option.

The authors are affiliated with Singhania and Partners LLP, a full service national law firm with offices in Delhi, Mumbai, Bangalore and Hyderabad.Ravi Singhania is a Senior Partner and Sunayna Jaimini is an Associate at the firm and they specialize ininfrastructure and general corporate law. They can be reached at rs@singhania.in and s.jaimini@singhania.in.

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