If firm profits more from its scale, it has to bear more responsibility for environmental costs: Supreme Court

If a company earns more profits than its scale, it must bear more responsibility for environmental costs, the Supreme Court said on Friday (January 30, 2026) and upheld the National Green Tribunal’s (NGT) order imposing environmental damages of ₹5 crore on a builder for violating green norms.

A bench of justices Dipankar Datta and Vijay Bishnoi said that in cases related to environmental protection, linking a company’s scale of operations (such as turnover, production volume or revenue generation) to damage to the environment can be a strong factor in determining compensation.

Observing that larger operations mean a larger footprint, the Court said a larger scale generally means more resource use, more emissions and more waste, leading to greater environmental stress.

“If a company profits more from its scale, it makes sense for it to take more responsibility for environmental costs. Linking scale to impact sends the message that larger players should play by greener rules,” Bench said.

“If a company has a high turnover, this reflects the magnitude of its operations. If such a company is found to have contributed generously to environmental damage, its turnover may have a direct relationship to the extent of damage caused. It is therefore misleading, in our view, to argue that turnover can never be a relevant factor in determining the amount of compensation to match the magnitude of damage,” the Bench said.

NGT in 2022 ruled that Rhythm County violated environmental norms and carried out construction at Autade Handewadi in Pune without obtaining environmental clearance, for which it was liable to pay compensation of ₹ 5 crore.

In its order dated August 22, 2022, the NGT held that Rhythm County was carrying out construction activities in violation of environmental norms and without obtaining mandatory permissions under the Air and Water Acts.

The NGT rejected Rhythm County’s argument that such permits were not required; It stated that legal compliance cannot be diluted on the basis of interpretable convenience and that the firm continued its construction activities even after the Maharashtra Pollution Control Board ordered a halt to work.