# T.N. GODAV ARMAN THIRUMULPAD v. UNION OF !NOIA AND ORS

- **Citation:** [2005] Supp. 3 S.C.R. 552
- **Court:** Supreme Court of India
- **Decided:** 2005-09-26
- **Bench:** Y.K. Sabharwal, Arijitpasayat Ands.H. Kapadia
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/t-n-godav-arman-thirumulpad-v-union-of-noia-and-ors-20905
- **Pages:** 51

## Headnote

Environment & Ecology:
Fores/ (Conservation) Act, 1980: Section 2.
Forest and ecology-Conservation, preservation and protection ofUse of forest land for non-forest purposes-Measures to compensate for loss
of forest land and to compensate effect on ecology-Benefits lost by diversion
of forest land-Payment of Net Present Value (NPV) of such diverted land/or
getting back in the long run the benefits lost by such diversion--Guidelines
D for determination of NPV-Uniform application of guidelines to all-Method
~
of calculation of NP V-Constitution, management and funding of
Compensatory Afforestation Fund Management and Planning Authority
(CAMPA)-Value of environment-Estimation of-Contingency Value Method,
Opportunity Cost Method, Travel Cost Method and Social Benefits Cost
E Analysis-Held: Conclusions given and direction issued-Environment
Protection Act, 1986, Ss. 3 and 5-Constitution of India, 1950-Arts. 110,
199, 266, 283 & 284, 7th Sch., Entry 47 rlw 20 of list Ill-Notification dated
23.4.2004 issued by Ministry of Environment and Forests.
The following questions arose before the Court:-
F
Whether before diversion of forest land for non-forest purposes and
consequential loss of benefits accruing from the forests should not the user
agency of such land be required to compensate for the diversion? If so, should
not the user Agency be required to make payment of Net Present Value (NPV)
of such diverted land so as to utilize the amounts received for getting back in
G the long r~n the benefits which are lost by such diversion? What guidelines
should be issued for determination of NPV? Should guidelines apply
uniformly to all? How to calculate NPV? Should some projects be exempted
from payment of NPV?
H
Disposing of the petition, the Court
552
T.N. GOO AV ARMAN THIRUMULPAD v. U.0.1.
553
HELD: 1. The Executive Body of the Compensatory Afforestation Fund A
Management and Planning Authority (CAMPA) shall include two more
environmentalists, one of whom may be an expert in the field of forest and the
other in the field of forest economy development. These members shall be
included in the Executive Body in consultation with the Chairperson of the
Central Empowered Committee. 1569-G; 570-B]
2. Regarding Clause 6.3 (iv) of the Notification dated 23.4.2004 issued
by the Ministry of Environment and Forests, it is directed that corporate
accounting based on double entry system and auditing should be conducted
by the Comptroller and Auditor-General (CAG). (570-C]
3. Clause 6.4 (Y) of the Notification provides that the monies received in
B
c
CAMPA shall be used only in that particular State or Union Territory. The
clause seems to be too rigid. Many a time, the effect of degradation of
environment or depletion of forest can be felt more in the adjoining area which
may be in a different State or Union Territory. The effect of environmental
degradation cannot be restricted to a particular area. The impact cannot be D
limited to the place of origin. Therefore, it is directed that a suitable
modification of the clause shall be made so as to provide that ordinarily
expenditure shall be incurred in the particular State or Union Territory but
leaving it to the discretion of the CAMPA to also incur expenditure in the
State or Union Territory other than the one mentioned in clause 6.4 (v), if it
is necessary. (570-D-E]
E
4. Clause 6.6 of the Notification which by use of the word 'may' leaves
it to the discretion of the CAMPA to establish Special Performance Vehicle
(SPV) for undertaking compensatory afforestation deserves to be amended
so as to substitute the word 'may' by the word 'shall' so that the regeneration F
is done by some SPV in specified areas. (570-F]
5.1. The NPV is the present value (PV) of net cash flow from a project,
discounted by the cost of capital. 1571-El
5.2. Forestry is a public project. It is important to bear in mind that a G
benefit received today is worth more than that received later. The benefit
received today is in fact 'cost

## Text

_Characters 0–39,352 of 124,211. This is a partial read: ask again with offset=39352 for what follows._

A
B
c
T.N. GODAV ARMAN THIRUMULPAD
v.
UNION OF !NOIA AND ORS.
SEPTEMBER 26, 2005
[Y.K. SABHARWAL,ARIJITPASAYAT ANDS.H. KAPADIA,JJ.]
Environment & Ecology:
Fores/ (Conservation) Act, 1980: Section 2.
Forest and ecology-Conservation, preservation and protection ofUse of forest land for non-forest purposes-Measures to compensate for loss
of forest land and to compensate effect on ecology-Benefits lost by diversion
of forest land-Payment of Net Present Value (NPV) of such diverted land/or
getting back in the long run the benefits lost by such diversion--Guidelines
D for determination of NPV-Uniform application of guidelines to all-Method
~
of calculation of NP V-Constitution, management and funding of
Compensatory Afforestation Fund Management and Planning Authority
(CAMPA)-Value of environment-Estimation of-Contingency Value Method,
Opportunity Cost Method, Travel Cost Method and Social Benefits Cost
E Analysis-Held: Conclusions given and direction issued-Environment
Protection Act, 1986, Ss. 3 and 5-Constitution of India, 1950-Arts. 110,
199, 266, 283 & 284, 7th Sch., Entry 47 rlw 20 of list Ill-Notification dated
23.4.2004 issued by Ministry of Environment and Forests.
The following questions arose before the Court:-
F
Whether before diversion of forest land for non-forest purposes and
consequential loss of benefits accruing from the forests should not the user
agency of such land be required to compensate for the diversion? If so, should
not the user Agency be required to make payment of Net Present Value (NPV)
of such diverted land so as to utilize the amounts received for getting back in
G the long r~n the benefits which are lost by such diversion? What guidelines
should be issued for determination of NPV? Should guidelines apply
uniformly to all? How to calculate NPV? Should some projects be exempted
from payment of NPV?
H
Disposing of the petition, the Court
552
T.N. GOO AV ARMAN THIRUMULPAD v. U.0.1.
553
HELD: 1. The Executive Body of the Compensatory Afforestation Fund A
Management and Planning Authority (CAMPA) shall include two more
environmentalists, one of whom may be an expert in the field of forest and the
other in the field of forest economy development. These members shall be
included in the Executive Body in consultation with the Chairperson of the
Central Empowered Committee. 1569-G; 570-B]
2. Regarding Clause 6.3 (iv) of the Notification dated 23.4.2004 issued
by the Ministry of Environment and Forests, it is directed that corporate
accounting based on double entry system and auditing should be conducted
by the Comptroller and Auditor-General (CAG). (570-C]
3. Clause 6.4 (Y) of the Notification provides that the monies received in
B
c
CAMPA shall be used only in that particular State or Union Territory. The
clause seems to be too rigid. Many a time, the effect of degradation of
environment or depletion of forest can be felt more in the adjoining area which
may be in a different State or Union Territory. The effect of environmental
degradation cannot be restricted to a particular area. The impact cannot be D
limited to the place of origin. Therefore, it is directed that a suitable
modification of the clause shall be made so as to provide that ordinarily
expenditure shall be incurred in the particular State or Union Territory but
leaving it to the discretion of the CAMPA to also incur expenditure in the
State or Union Territory other than the one mentioned in clause 6.4 (v), if it
is necessary. (570-D-E]
E
4. Clause 6.6 of the Notification which by use of the word 'may' leaves
it to the discretion of the CAMPA to establish Special Performance Vehicle
(SPV) for undertaking compensatory afforestation deserves to be amended
so as to substitute the word 'may' by the word 'shall' so that the regeneration F
is done by some SPV in specified areas. (570-F]
5.1. The NPV is the present value (PV) of net cash flow from a project,
discounted by the cost of capital. 1571-El
5.2. Forestry is a public project. It is important to bear in mind that a G
benefit received today is worth more than that received later. The benefit
received today is in fact 'cost incurred' today. Time value of the cash inflow/
outflow is important in investment appraisal. NPV is a method by which future
expenditure (cost) benefit is levelised in order to account for the time value of
money. The object behind NPV is to Ievelise costs. What is the value of Rupee
today would not be the value of Rupee say 50 years later. For example, let us H
554
SUPREME COURT REPORTS [2005) SUPP. 3 S.C.R.
A have the starting point of Rupee in India in the year 2005 and analyse it with
the value of Rupee that may be in the year 2050. Cost incurred or to be
incurred in 2005 has to be discounted by using appropriate parameters like
rate of discount, gestation period and ratio of dellators to GDP. Therefore,
expenses incurred in each year between say 2005 and 2050 will have to be
B brought down to their present values by using appropriate discount rate in
the NPV. [571-F-G-H)
5.3. The project like forestry has a long gestation period of 40-50 years.
It goes through cost cycles each year depending upon inflation, rate of interest,
internal rate of return etc. Therefore, cost for the year 2005 will differ from
C the cost of 2006 and cost of 2006 will differ from that of the year 2007 arid so
on and so forth. However, this constitutes what is called as conventional method
of accounting cost which does not take into account social and economic cost
of diversion of forest. [572-A, BJ
6.1. The question then is why charge NPV. In the case of a conventional
D project like Hydro-electric Project, the accounting procedure is normally
based on Return On Investment (ROI) in which the unit cost of energy includes
return on capital, investment, depreciation of capital, annual fuel cost and
operational and maintenance costs. However, ROI excludes the time value of
money. It also excludes the gestation period of the project Therefore, one has
E
the NPV method which discounts future costs and future benefits by use of
appropriate discount rate and brings down such costs and benefits to the
reference date which in the present case has been assumed to be the year
2005. [572-D, E]
6.2. The value of any asset is discounted by present value of the economic
F benefits it will generate in future years. For example, timber asset value is
the discounted future stumpage price for mature timber after deducting costs
of bringing the timber to maturity. NPV is one of the methods for valuation of
standing timber. The general expression V for the value of an asset, in the
base year 0, is simply the sum of the net economic benefits it yields in each
year over the life time, T, of the Asset, discounted to the present value by the
G discounted rate.1572-F, GI
7.1. Social Cost Benefit Analysis (SCBA) can be applied to the evaluation
of environmental impacts of forestry projects. Here, one must appreciate that
the environmeptal outputs from forests appear as public goods for which there
is no market. Various environmental outputs can be classified into this
H category, namely, Flood Control Benefits, Water Production, Soil
T.N. GODAVARMAN THIRUMULPAD v. U.0.1.
555
Conservation, Outdoor Recreation; Biodiversity & Conservation, Habitat and A
Air Purification. (573-B, C, DJ
7.2. The problem in valuation of the above outputs is: allocation offixed
costs according to the contribution of each product in total revenue. This is
because except contribution of timber product, contribution of the other abovenoted outputs is not known, especially intangible outputs. However, under B
SBCA, benefits from each of the above environmental outputs are identifiable.
For example, flood control benefits arise because of the role of forests as
stream regulator. Similarly, valuation method for each of the above outputs
differs. In valuing biodiversity, Contingency Value Method (CVM} is useful.
SBCA is helpful in placing monetary value on carbon storage on air C
purification. (573-E, F)
7.3. For each of the above functions of the forests, different methods of
valuation have to be applied. Various methods have been used to estimate the
value of environment like CVM, Opportunity Cost Method, Travel Cost Method,
SBCA etc. It would be appropriate if a body of experts examine the aspect and D
report to this Court suggesting the best method depending on factors like
gestation period, rate of discount (interest), density of the forest, social
benefits of the project undertaken by PSU etc. They will take into account
economic values associated with forests, viz., direct use values, indirect use
values such as value of environmental benefits from the forest, option values
and existence value. (573-G, H; 574-A)
E
8.1. Thus, NPV helps levelising the costs of public projects like forestry.
It is an important tool ofSBCA. Under SBCA, benefits from each of the above
environmental outputs are identifrable. Hence, applying NPV, one can allocate
levelised costs according to the contribution of each product in the total F
revenue. It is important to bear in mind that a benefit or cost received or
incurred now is worth more than that received or incurred later. Therefore,
using the appropriate discount rate helps to aggregate marginal benefits and
costs. The choice of interest rate depends upon time preference. For public
projects, such as forestry, a social discount rate, which indicates time
preference of the society, should be used. (574- B, CJ
G
8.2. Ultimately, it would be for the experts to examine and assist this
Court as to the Model to be adopted for valuation, namely, Total Economic Value,
CVM, SBCA etc. It is for the experts to tell this Court as to what NPV should
be applied in case of mines and different types of forests. It is to be noted that
the basis of these valuations is the theory of sustainable development, i.e. H
556
SUPREME COURT REPORTS (2005] SUPP. 3 S.C.R.
A development that meets the needs of the present without compromising with
the ability of future generations to meet its own needs. Despite various
elaborations, the definition of sustainable development though very old, still
is widely accepted world over and has been reiterated by this Court in catena
of cases. [ 577-E, Fl
B
Gopal K. Kadekodi: "Environmental Economics in Practice", referred
to.
9. Noticing fast depletion of forests, the Fund dealt with by CMP A was
ordered to be utilized for protection of forests and environments. The
environments are not the State property and are national asset. It is the
C obligation of all to conserve the environments and for its utilization, it is
necessary to have regard to the principles of sustainable development and
inter-generational equity. [583-EJ
10.1. Reverting now specifically to forests, ifit becomes necessary for
economic development to use the same for non-forest purpose, then before
D grant of permission for diversion of forest land, there should be some scheme
whereunder loss occurring due to such diversion can be made up by adopting
both short term measures as well as long term measures one of it being a
regeneration programme. Natural regeneration is a long process. It requires
huge amounts. It requires a policy and direction. It requires proper use of
E funds for regeneration of depleted forest and ecology. The natural resources
like forests are in trust with the present generation. The body set up or fund
generated to protect ecology and provide for regeneration cannot in
constitutional scheme of things be considered and treated as a fund under
Article 266 or Article 283 or Article 284 of the Constitution of India. When
seen in this light, neither Article II 0 nor Article 199 and/or Article 294 or
F 195 would have any application. [583-F, G, H; 584-A, BJ
10.2. Thus, reading Entry 47 with Entry 20 of List III, the imposition of
NPV is a charge or a fee which falls within Entry 47 read with Entry 20 of
List III of the Seventh Schedule to the Constitution. The Fund set up is a part
"of economic and social planning" which comes within Entry 20 of List III
G and the charge which is levied for that purpose would come under entry 47 of
List III and, therefore, Article 110 is not attracted. [585-C]
Ratilal Panachand Gandhi v. State of Bombay, [1954] SCR 1055,
referred to.
H
'I I. The natural resources are not the ownership of any one State or
-I
T.N. GODAVARMAN THIRUMULPAD v. U.0.1.
557
individual; public at large is its beneficiary and, therefore, the contention that A
the amount of NPV shall be made over to the State Government cannot be
accepted. 1588-CI
M.C. Mehta v. Kamal Nath, 11997] l SCC 388, referred to.
Lawrence S. Davis, K. Norman Johnson and Theodore E. Howard: B
"Forest Management" 4th Edn., referred to.
12. The question as to which class of projects deserves to be exempted
can first be examined by experts having regard to the principles laid down in
this judgment and on receipt of the report from them, this Court would further
examine the matter and issue appropriate directions. However, revenue C
earning projects do not deserve similar treatment as non-revenue earning
public welfare projects.1600-B, q
Hindustan Motors Ltd. v. N. Siva Kumar, 12000110 SCC 664, referred
to.
Columbia Journal of Environmental Law (28 Colum.J.Envtl.l.185), D
referred to.
13. Conclusions by the Court:
I. Except for government projects like hospitals, dispensaries and
schools referred to in the body of the judgment, all other projects shall be E
required to pay NPV though final decision on this matter will be taken after
receipt of the Expert Committee Report.1600-FI
2. The payment to CAMPA under notification dated 23.4.2004 is
constitutional and valid.1600-G]
3. The amounts are required to be used for achieving ecological plans F
and for protecting the environment and for the regeneration of forest and
maintenance of ecological balance and ecosystems. The payment of NPV is
for protection of environment and not in relation to any propriety rights.
1600-H; 601-AI
4. Fund has been created having regard to the principles of G
intergenerational justice and to undertake short term and long term measures.
1601-B]
5. The NPV has to be worked out on economic principles. 1601-B]
14. Directions of the Court:
H
A
B
558
SUPREME COURT REPORTS [2005] SUPP. 3 S.C.R.
A. An expert committee comprising of three experts including Ms.
Kanchan to be appointed within a period of one month by the Institution of
Economic Growth (North Campus). 1601-Cj
B. The committee of experts would examine the following issues:-
[601-C]
(i) To identify and define parameters (scientific, bio-metric and social)
on the basis of which each of the categories of values of forest land should be
estimated.
(ii) To formulate a practical methodology applicable to different bioC geographical zones of India for estimation of the values in monetary terms in
respect of each of the above categories of forest values. [601-DI
(iii) To illustratively apply this methodology to obtain actual numerical
values for different values for different forest types for each of bioD geographical zone in the country. 1601-E[
E
F
G
(iv) To determine on the basis of established principles of public finance,
who should pay the costs of restoration and/or compensation with respect to
each category of values offorests. (601-F[
(v) Which projects deserve to be exempted from Payment of NPV.
(601-Fl
C. The user agencies shall give an undertaking for the further payment,
if any, as may be determined on receipt of the report from the expert body.
(601-GI
D. The Special Purpose Vehicle shall be established with the permission
of the Court. [601-Hl
E. The Institute shall send the report of the Committee of Experts within
a period of four months. [601-H; 602-A[
F. The various clauses of CAMPA shall be suitably modified in terms of
this judgment within a period of one month. (602-Al
CIVIL ORIGINAL JURISDICTION: I.A. No. 826 in I.A. No. 566, LA. No.
932 in 819-821, 955, 958, 985, 1001-IOOlA, 1013-1014, 1016-1018, 1019, 1046,
H 1047, 1135-1136, 1137, 1164, 1180-1181, 1182-1183, 1196, 1208-1209, 1222-1223,
T.N. GODAVARMAN THIRUMULPAD v. U.0.1.
559
1224-1225, 1229, 1233, 1248-1249, 1253, 1301-1302, 1303-1304; 1312, 1313, 1314, A
1315-1316, 1318, 1319.
IN
Writ Petition (C) No. 202 of 1995.
B
(Under Article 32 of the Constitution of India.)
G.E Vahanvati, Solicitor General, A. Sharan and B. Datta, Additional
Solicitor Generals, Harish N. Salve, U.U. Lalit, (A.C.), K.K. Venugopal, Dr.
Rajiv Dhavan, V.A. Mohta, Altaf Ahmad, Dr. A.M. Singhvi, Jayant Bhushan,
Vivek Tankha, K. Parasaran, Shekhar Naphade, Dr. R.G. Padia, Ms. Shobha C
Dikshit, Anoop G. Chaudhari, Ravi Shankar Prasad, A.T.M. Rangaramanujam,
Sidhartha Choudhary, (AC), C. Mukhopadhyay, Ms. Lavleen, Ms Binu Tamta,
Aruneshwar Gupta, Addi. Advocate General for State of Rajasthan, Naveen
Kumar Singh, Ms. Shivangi, Shivasubramaniam, S. Sukumaran, A. Deb Kumar,
M.P. Singh, Ramesh Babu M.R., A.D.N. Rao, B.V. Bairam Das, Mukesh K. Giri, D
S.C. Patodia, Ms. Rachna Srivastava, Addi. Advocate General for Uttaranchal
Ms. Sangeet Kumar, Vijay Kumar, Ashwani Garg, S.K. Kulkarni, M. Gireesh
Kumar, Prashant Kumar, J.T. Gilda, Manish Pitale, C.S. Ashri, Gurukrishna
Kumar, K. Rajeev, Ms. Tasneem Ahmadi, Rajesh Rai, Ajay Shanna, Ajay
Majithia, Manish Jain, Dr. Kailash Chand, Bharat Sangal, B. Parthasarathi,
John C. Rose, Sanjiv Sen, Manish Pratap Singh Chauhan, Ms. Sarla Chnadra, E
Sanjeev Kumar, Prateek Jalan, .Paras Kuhad, Ms. Sushmita Banerjee, Ms.
Minakshi Shanna, Tarun Johri, Sunil Dogra, Ms. Bina Madhavan, S. U.K.
Sagar, S. Ravi Shankar, V. Balachandran, Rajiv Patil, Shivaji M. Jadhav,
Himanshu Gupta, Brij Kishor Sah, Raj Kumar Mehta, M. Sarada, Ajit Kumar
Sinha, J.P. Dabral-in-person, Ms. Rekha Pandey, D.S. Mabra, Himinder Lal,
Ajit Pudussery, K. Vijayan, Badr; Prasad Singh, Ms. Suchitra A. Chitale, Ms. F
Hemantika Wahi, Ms. Sadhna Sandhu, Ejaz Maqbool, P.V. Yogeshwaran, Rakesh
K. Shanna, Himanshu Shekhar, Naresh K. Shanna, A.P. Mayee, P.K. Manohar,
Sewa Ram, K.R. Sasiprabhu, M.K.S. Menon, Ms.G. Indira, Maninder Singh,
Ms. Pratibha M. Singh, Angad Mirdha, Kirtiman Singh, Saurabh Mishra,
S. W.A. Qadri, Kamlendra Misra, Rajeev Kumar Dubey, Ms. Vimla Sinha, Pradeep G
Misra, Mohd. Saud, J.K. Bhatia, Ajay Siwach, Manjit Singh, Ms. Vivekta
Singh, Harikesh Singh, T.V. George, Ms. Krishna Sanna, V.K. Sidharthan, Riku
Sanna, Ms. Supama Srivastava, Rahul Srivastava, Rajesh Srivastava for Prakash
Shrivastava, B.K. Prasad, S.N. Terdal, T.L.V. Iyer, Ramesh Babu M.R., R.K.
Rathore, Addi. Advocate General for State of Punjab, S. Krishnaraj, Arun
Kumar Sinha, Bimal Roy Jad, Anil Kumar Sangal, Nalin Sangal, D.P. Mohanty, G
560
SUPREME COURT REPORTS [2005] SUPP. 3 S.C.R.
A J.S. Attri, Addi.· Advocate General for State of Himachal Pradesh, Ms.A.
Subhashini, B.S. Banthia, for S.K. Agnihotri, Bharat Sangal, Ms. Sangeeta
Panicker, R.R. Kumar, Samyadip Chatterji, Ms. Aruna Gupta, Naveen Kumar
Singh, Ms. Shivangi, Rakesh Shukla, Ms. Sumita Hazarika, K.B. Rohatgi,
Ms. Aparna Rohatgi Jain, Mahesh Kasana, Manoj Saxena, Amit Meharia, S.K.
Mitra, Debojit Borkakati, M.P. Meharia, Bhavanishankar V.Gadnis, Ms. B.
B Sunita Rao, Nitin Popli, Gopal Singh, Rituraj Biswas, Ms. Sunita R. Singh, B.B.
Singh, Kh. Nobin Singh, David Rao, Ms. Kamini Jaiswal, Ms. Shomila Bakshi,
Devavrat, Jos Chiramal, S.B. Upadhyay, A. Mariarputham, Ms. Aruna Mathur,
S.C. Patodia, Sunil Dogra, S.U.K. Sagar, Mukesh K.Giri, Sanjay R.Hegde,
Ranjan Mukherjee, Tara Chandra Sharma, Ms. Neelam Sharma, Tarun Sharma,
C Anis Subrawardy, M.N. Shroff, J.T. Gilda, Manish Pitale, C.S. Ashri, Prashant
Kumar, Suresh A. Shroff, Vishwajit Singh, Ms. Ruby Singh Ahuja, Ramesh N ..
Keshwani, Ms. Manjula Gupta, Naveen R. Nath, S.N. Bhat, C.N. Sreekumar,
Shashi Bhushan, Prashant Bhushan, Shakil Ahmad Syed and Sunil Kumar for
the appearing parties.
D
The Judgment of the Court was delivered by
Y.K. SABHARWAL, J. Natural resources are the assets of entire nation.
It is the obligation of all concerned including Union Government and State
Governments to conserve and not waste these resources. Article 48A of the
Constitution of India requires the State shall endeavour to protect and improve
E the environment and to safeguard the forest and wild life of the country.
Under Article 51A, it is the duty of every citizen to protect and improve the
natural environment including forest, lakes, rivers and wild-life and to have
compassion for living creatures.
F
In the present case, the question is about conservation, preservation
and protection of forests and the ecology. When forest land is used for nonforest purposes, what measures are required to be taken to compensate for
loss of forest land and to compensate effect on the ecology, is the main
question under consideration.
G
Forests are a vital component to sustain the life support system on the
earth. Forests in India have been dwindling over the years for a number of
reasons, one of it being the need to use forest area for development activities
including economic development. Undoubtedly, in any nation development is
also necessary but it has to be consistent with protection of environments
and not at the cost of degradation of environments. Any programme, policy
H or vision for overall development has to evolve a systemic approach so as
T.N. GODA YARMAN THIRUMULPADv. U.0.1. [SABHARWAL, .I.)
561
to balance economic development and environmental protection. Both have A
to go hand in hand. In ultimate analysis, economic development at the cost
of degradation of environments and depletion of forest cover would not be
long lasting. Such development would be counter productive. Therefore,
there is an absolute need to take all precautionary measures when forest lands
are sought to be directed for non forest use.
The point in issue is whether before diversion of forest land for nonforest purposes and consequential loss of benefits accruing from the forests
should not the user agency of such land be required to compensate for the
diversion. If so, should not the user Agency be required to make payment
B
of Net Present Value (NPV) of such diverted land so as to utilize the amounts C
so received for getting back in long run the benefits which are lost by such
diversion? What guidelines should be issued for determination of NPV?
Should guidelines apply uniformly to all? How to calculate NPV? Should some
projects be exempted from payment of NPV? These are the main aspects
which require examination and determination in the backdrop of various
legislations which we would presently notice.
D
The legislature to provide for conservation of forest and for matters
connected therewith or ancillary or incidental thereto enacted the Forest
(Conservation) Act, 1980 (for short, the 'FC Act'). It postulates that no State
Government or other authority shall make, except with the prior approval of
the Central Government, any order directing that any forest land or any E
portion thereof may be used for any non-forest purpose. The Central
Government under the FC Act has been empowered to constitute a Committee
to advice it with regard to grant of approval. Under Section 2 of the Act the
question of use of any forest land for non-forest purposes and any other
matter connected with the conservation of forest may be referred to such a F
committee by the Central Government under the FC Act. The contravention
of any of the provisions of Section 2 has been made an offence.
Noticing the decline in environment quality due to increasing pollution,
loss of vegetal cover and biological diversity, excessive concentrations of
harmful chemicals in the ambient atmosphere and in food chains, growing G
risks of environmental accidents and threats to life support system, the
Environment (Protection) Act, 1986 (for short, the 'EP Act') has been enacted.
It has been noted in the Statement of Objects and Reasons that although
there are existing laws dealing directly or indirectly with several environmental
matters, it is necessary to have a general le~islation for environmental H
562
SUPREME COURT REPORTS [2005] SUPP. 3 S.C.R.
A protection. Existing laws generally focus on specific types of pollution or on
specific categories of hazardous substances. Some major areas of environmental
hazards are not covered. There also exist uncovered gaps in areas of major
environmental hazards. There are inadequate linkages in handling matters of
industrial and environmental safety. Control mechanisms to guard against
slow, insidious build up of hazardous substances, especially new chemicals,
B in the environment are weak. Because of a multiplicity of regulatory agencies,
there is need for an authority which can assume the lead role for studying,
planning and implementing long-term requirements of environmental safety
and to give direction to, and co-ordinate a system of speedy and adequate
response to emergency situations threatening the environment. The EP Act
C was, therefore, enacted to provide for protection and improvement of
environment and for matters connected therewith. The Central Government
has been given wide powers to take measures to protect and improve the
environment as provided under Section 3 including the power to constitute
an authority or authorities for the purpose of exercising and performing such
of the powers and functions, including the power to issue directions under
D Section 5, of the Central Government under the Act and for taking measures
with respect to such of the matters referred to in sub-section (2) of Section
3 as may be mentioned in the order and subject to the prejudice and control
of the Central Government. Section 5 of the EP Act empowers the Central
Government, in exercise of its powers and performance of its function under
E the Act, to issue directions in writing to any person, officer or any authority
and such person, officer or authority shall be bound to comply with such
directions. The Central Government has the power to direct the closure,
prohibition or regulation of any industry, operation or process or stoppage
of regulation of the supply of electricity or water or any other service.
F
Parliament has also enacted enactments to prevent and control water
pollution and air pollution [The Water (Prevention and Control of Pollution)
Act, 1974 and the Air (Prevention and Control of Pollution) Act, 1981 ].
A statement was placed before this Court by the Central Government
showing the position as on 20th March, 2000 of the cases approved for
G diverting forest lands, stipulation for compensatory afforestation under the
FC Act and the compensatory -afforestation done, funds to be utilized and
actually utilized. The Court noted the dismal situation as there was a shortfall
to the extent of 36% of total afforestation compensatory or otherwise
afforestation. It further noted that though funds had been realized by all the
H States in connection with s,uch afforestation, a very large number of States
T.N.GODAVARMANTHIRUMULPADv. U.0.1.(SABHARWAL,J.]
563
had spent 50% or less amount on afforestation. In this background, taking A
suo moto action, notices were directed to be issued to the States mentioned
in the Order dated 17th April, 2000 to explain as to why moneys realized have
not been spent on carrying out afforestation.
On 23rd November, 200 I, after considering the affidavits that had been
filed, it was noted that large sums of money had been realized by various B
States from the user-agency to whom permits were granted to use forest land
for non-forest purposes. The moneys were paid by user agencies to the State
Governments for compensatory afforestation but the utilization was only
ab_out 83% of the funds actually realized by the State Governments, the
shortfall being of nearly Rs.200 crores.
C
The Ministry of Environment and Forests (MOEF) was directed to
formulate a scheme providing that whenever any permission is granted for
change of use of forest land for non-forest purposes and one of the conditions
of the permission is that there should be compensatory afforestation, then the
responsibility of the same should be that of user-agency and it should be D
required to set apart a sum of money for doing the needful. In such a case
the State Government will have to provide or make available land on which
reforestation can take place and this land may have to be made available
either at the expense of the user-agency or of the State Government, as the
Stat~ Government may decide. It was decided that the scheme shall ensure
that afforestation takes place as per the permissions which are granted and E
there should be no shortfall.
The scheme was submitted by MOEF alongwith an affidavit dated 22nd
March, 2002.
The Central Empowered Committee (CEC) on consideration of relevant F
material including the scheme submitted by MOEF made its report (IA 826)
containing recommendations dated 9th August, 2002. The report, taking note
of the present system of compensatory afforestation as per guidelines issued
by MOEF from time to time under the FC Act, the procedure for receipt and
utilization of funds for compensatory afforestation, activities permissible under G
compensatory afforestation, adequate compensation for loss of forest land -
recovery of Net Present Value, funds for catchment area, treatment plant and
involvement of user-agency for compensatory afforestation, made the following
recommendations.:
(a)
in addition to the funds realized for compensatory afforestation, H
564
A
SUPREME COURT REPORTS [2005] SUPP. 3 S.C.R.
net present value of the forest land diverted for non-forestry
purposes shall also be recovered from the user agencies, while
according approval under the Forest (Conservation) Act, 1980;
(b) · a 'Compensatory Afforestation Fund' shall be created in which
all the monies received from the user-agencies towards
B
compensatory afforestation, additional compensatory
afforestation, penal compensatory afforestation, net present value
of forest land, Catchment Area Treatment Plan funds, etc., shall
be deposited. The rules, procedure and composition of the body
for management of the Compensatory Afforestation Fund shall
c
D
E
F
G
H
be finalized by the Ministry of Environment & Forests with the
concurrence of Central Empowered Committee within one month;
(c)
the funds received from the user-agencies in cases where forest
land diverted falls within Protected Areas i.e. area notified under
Section 18, 26A or 35 of the Wild Life (Protection) Act; 1972, for
undertaking activities related to protection ofbio-diversity, wildlife,
etc., shall also be deposited in this Fund. Such monies shall be
used exclusively for undertaking protection and conservation
activities in protected areas of the respective State/UT;
(d) the amount received on account of compensatory afforestation
but not spent or any balance amount lying with the State/UT or
any amount that is yet to be recovered from the user agency shall
also be deposited in this Fund;
(e)
besides artificial regeneration (plantations), the funds shall also
be utilized for undertaking assisted natural regeneration, protection
of forests and other related activities. For this purpose, site
specific plans should be prepared and implemented in a time
bound manner;
(t)
the user agencies especially the large public sector undertakings
such as Power Grid Corporation, NTPC, etc., which frequently
require forest land for their projects should also be involved in
undertaking compensatory afforestation by establishing Special
Purpose Vehicle. Whereas the private sector user-agencies may
be involved in monitoring and most importantly, in protection of
compensatory afforestation. Necessary procedure for this purpose
would be laid down by the MOEF with the concurrence of the
Central Empowered Committee.
T.N. GODAVARMAN THIRUMULPAD v. U.0.l. [SABHARWAL, J.)
565
(g) Plantations must use local and indigenous species since exotics A
have long term negative impacts on the environment; and
(h)
an independent system of concurrent monitoring and evaluation
shall be evolved and implemented through the Compensatory
Afforestation Fund to ensure effective and proper utilization of
~~.
B
The aforesaid report, inter alia, notes that there was general consensus
amongst the States/Union Territories that the present practice of concentrating
only on artificial regeneration through plantations should be dispensed with
as it does not adequately compensates the loss of natural forest and that a
part of the fund should also be used for assisted natural regeneration wherein C
the natural forests are allowed to regenerate and grow by undertaking
silvicultural and cultural operations such as fire tracing, sjngalling of seedlings,
protection, etc. These activities help in regenerating the rootstock which may
exists in the degraded forests. Besides, this helps in restoring the natural
forests, which is not possible through plantations. It also noted that to
compensate for the loss of tangible as well as intangible benefits flowing from D
the forest lands which has been diverted for non-forest use, the NPV of such
land is being recovered from the user agency in the States of Madhya
Pradesh, Chhattisgarh and Bihar. In the states of Madhya Pradesh and
Chhattisgarh, the NPV is being recovered at the rate of Rs.5.80 lac per hectare
to Rs.9.20 lac per hectare of the forest land depending upon the quality and E
density of the forest land diverted for non-forestry use. The underlying
principle for recovery of NPV was that the plantations raised under the
compensatory afforestation scheme could never adequately compensate for
the loss of natural forests as the plantations require more time to mature and
even then they are a poor substitute to natural forest. It noted that States/
Union Territories as well as MOEF are of the view that in addition to the funds F
realized for compensatory afforestation, the NPV of the forest land being
directed for non-forestry purposes should also be recovered from the useragencies.
The MOEF, in principle, accepted the aforesaid recommendations of G
CEC. The order dated 29th October, 2002 notices this fact. Further noticing
that no other State had filed any response to the report of CEC, the Court
presumed that the State Governments were also not opposed to the said
report and have accepted the same in the same manner as Union of India. On
detailed examination of the report, the recommendations of CEC were accepted
and Union of India was directed to frame comprehensive rules with regard to H
566
SUPREME COURT REPORTS [2005] SUPP. 3 S.C.R.
A the constitution of a body and management of the compensatory afforestation
funds in concurrence with the CEC. It was directed that the compensatory
afforestation funds which had not yet been realized by the States shall be
transferred to -the aforesaid body by respective States and the user agencies
within six months of its constitution. In addition, while according approval
under the FC Act for change in user, the user-agency shall also pay into the
B said fund, the NPV of forest land diverted for non-forest purposes at the rate
of Rs.5.80 lac per hectare to Rs.9.20 lac per hectare of forest land depending
upon the quality and density of the land in question converted for non-forest
use. The amount was subject to upward revision by the MOEF in consultation
with CEC as and when necessary. The aforesaid recommendations of CEC
C were accepted.
An application (I.A.No. I 046) was filed by the MOEF, inter alia, seeking
directions that the NPV calculation shall be part of the detailed project report
submitted to it for a forestry clearance under the FC Act. During the course
of hearing, learned Solicitor General informed this Court that the Government
D was agreeable to the suggestions of CEC that money received from useragencies for compensatory afforestation fund should be kept in an interest
bearing account, though initially it had some reservations about it. Reference
has also been made in the application about exemption being granted to some
projects from payment of NPV, an aspect which we would consider later at
E an appropriate stage so also the basis of the calculation of the NPV. We may,
however, note that although in the application it was stated that the format
issued by the World Bank for calculation for NPV for the projects shall be
the basis of its calculation, the learned Solicitor General stated that he was
not relying upon the said format. Regarding the mining projects, the application
mentions that there has to be difference in approach for mineral of high
F volume and low volume and low value and minerals of high value and low
volume. It is stated that levying of flat rates of NPV per hectare basis will,
therefore, not be rational. The application states that in case of mining, NPV
should be calculated at the rate of I 0% for the major minerals and 5% for the
minor minerals to be levied on the annual royalty. An application (IA I 047)
has also been filed by the Ministry of Mines, Government of India taking
G similar pleas as are taken in IA I 046 seeking directions that in mining NPV
may be calculated at the rate of 10% and 5% as above noted.
Now, we may refer to Notification dated 23rd April, 2004 issued by
MOEF in exercise of the powers conferred by sub-section (3) of Section 3 of
H the EP Act constituting an authority known as Compensatory Afforestation
T.N. GODAVARMAN THIRUMULPADv. U.0.1. [SABHARWAL, J.]
567
Fund management and Planning Authority (hereinafter referred to as 'CAMPA') A
for the purpose of management of money towards compensatory afforestation,
NPV and any other money recoverable in pursuance of this Court's order and
in compliance of the conditions stipulated by the Central Government while
according approval under the FC Act for non-forestry uses of the forest land.
The Executive Body of the Authority comprises of the following:
B
"(i) Director General of Forests and
- Chairperson
Special Secretary, Ministry of
Environment and Forests,
Government of India
(ii)
Addi. Director General of Forests
-Member
c
(Forests) Ministry of Environment and
Forests, Government of India
(iii) Addi. Director General of Forests
- Member
(Wildlife)
(iv) Inspector General of Forests (Forest
-Member
D
Conservation), Ministry of Environment and
Forests, Government of India
(v) Joint Secretary and Financial Advisor,
-Member
Ministry of Environment and Forests,
Government of India
E
(vi) Chief Executive Officer (CEO)
-Member
(vii) A professional ecologist, not being from
-Member
The Central and State Government, for A
period of two years at a time, for up Two
consecutive terms."
F
The powers and functions of the Executive Body are:
"(a) deployment of staff on contractual basis or on deputation;
(b) financial procedure;
(c)
delegation of financial or administrative powers;
G
( d) other day-to-day working in respect of receipts of funds;
(e)
investment of funds;
(f)
expenditure on establishment and other overheads including office
H
A
B
c
D
E
F
G
H
568
SUPREME COURT REPORTS [2005] SUPP. 3 S.C.R.
accommodation subject to the approval of the annual budget by
the Governing Body."
The management of the fund is provided in clause 6.3 and the
disbursement of the fund in clause 6.4 of the Notification. These clauses read
as under:
"6.3.