Between early 2025 and mid-July 2026, the Supreme Court settled a question that had kept real estate developers across India on edge: can a project that broke ground without environmental clearance (‘EC’) ever be regularised after the fact? Across a series of rulings culminating in Vanashakti II, the Court clarified the legal status of ex post facto EC’s and spelt out what they mean for projects already built, those still under construction and those yet to leave the drawing board.
Under the Environment Protection Act, 1986 and the Environment Impact Assessment Notification, 2006, (‘EIA Notification’), obtaining a prior EC is mandatory for specified projects including building and construction projects above a specified built-up area, before any construction work or preparation of land begins. Over time, the Ministry of Environment, Forest and Climate Change (‘MoEFCC’) introduced two mechanisms to deal with projects that had started without a valid EC: (i) The 2017 Notification (dated 14 March 2017) which allowed projects already in breach of the EIA notification on that date to apply for an ex-post facto EC within six months, i.e. by 13 September 2017, a window later extended on the orders of the Madras High Court until 13 April 2018); and (ii) The 2021 Office Memorandum (‘2021 OM’ dated 07 July 2021) which was issued after the National Green Tribunal in Tanaji B. Gambhire v. Chief Secretary, Government of Maharashtra, directed that a proper Standard Operating Procedure (SOP) be laid down for granting EC in such cases. Unlike the 2017 Notification, the 2021 OM had no cut-off date. Under it, a project that could never have been approved was to be demolished or closed, while a project that could have been approved had to stop work until cleared, pay compensation (1% of the project cost plus 0.25% of turnover during the period of violation, halved if the developer reported the violation itself), carry out a remediation plan and a community augmentation plan backed by a bank guarantee and face penalty. Any EC granted took effect only from the date of its issue.
In practice, both the 2017 Notification and the 2021 OM allowed EC’s to be granted after a project had already commenced operations, in spite of the Supreme Court’s earlier precedent in Common Cause, that a prior EC is mandatory and not a mere formality.1 On 16 May 2025, a two-judge bench of the Supreme Court delivered its judgment in Vanashakti v. Union of India (‘Vanashakti I’) and sharply criticised this practice. These instruments (i.e. the 2017 Notification and the 2021 OM) allowed project proponents who had ignored the EIA Notification to carry on after paying fines and carrying out impact studies after the event. In effect, they handed violators a way around the law and hollowed out the EIA process. The Court held that an EC granted after the event is completely foreign to environmental law. It relied on Common Cause v. Union of India, where it had held that the grant of an EC cannot be a mechanical exercise and can only follow due diligence and reasonable care, since damage to the environment can have a long term impact.
The Court also relied on Alembic Pharmaceuticals v. Rohit Prajapati, where a government circular dated 14 May 2002 allowed industrial units that started without an EC under the earlier EIA Notification of 27 January 1994 to cure the default with an EC obtained after the event. The Court struck the circular down holding that a mere administrative circular could not dilute the requirement of a prior EC. The 1994 Notification stated that a new project, or the expansion or modernisation of an existing one ‘shall not be undertaken’ anywhere in India ‘unless’ an EC has been granted. These words can only mean that the EC must come first. Paragraph 23 of this judgement states as follows:
“The concept of an ex post facto EC is in derogation of the fundamental principles of environmental jurisprudence and is an anathema to the EIA Notification dated 27-1-1994. It is, as the judgment in Common Cause v. Union of India, (2017) 9 SCC 499 holds, detrimental to the environment and could lead to irreparable degradation.”2
Applying these decisions, the bench held that ex post facto approvals defeat the precautionary principle and violate the right to equality and to a clean environment under Articles 14 and 21 of the Constitution of India. Both the 2017 Notification and the 2021 OM were therefore struck down as unconstitutional and illegal, and the Central government was barred from issuing any further orders or notifications granting ex-post facto EC’s. The Court also stated that paying a penalty does not by itself legalise a project built without an EC, so that such a project, whether under construction or already operating, would have to be stopped and demolished. However, to limit disruption, the Court clarified that EC’s already granted under either instrument prior to the judgement would remain unaffected, but pending applications would receive no such protection.
Facing the prospect of completed housing, infrastructure and commercial projects being pulled down, the Confederation of Real Estate Developers of India (‘CREDAI’) filed a review petition. On 18 November 2025, the Supreme Court in a 2:1 majority allowed the review and recalled Vanashakti I. Chief Justice Gavai provided four reasons for the recall. First, while relying on parts of Common Cause and Alembic, Vanashakti I had overlooked how relief was actually shaped in those very cases, where established units were allowed to continue operating upon paying penalties and remediation costs rather than facing demolition. For instance, in Common Cause, the mining operations carried on without EC were suspended, yet the leaseholders were permitted to apply for clearance and to resume upon its grant and full payment of compensation. Second, Vanashakti I had failed to consider the coordinate bench decisions in Pahwa Plastics and D. Swamy, which not only upheld the 2017 Notification and the 2021 OM but were never brought to the attention of the Court. If the bench disagreed with them, it should have referred the question to a larger bench. Third, the penalty provision in the 1986 Act only fixes the amount of the penalty and says nothing either way about whether a project can be regularised, so it could not be read as requiring demolition. Fourth, the review took into consideration the consequences of Vanashakti I. Public projects worth nearly Rs. 20,000 crore such as AIIMS, Odisha (a 962-bed medical college and hospital), Vijayanagar Greenfield Airport, Karnataka and Common effluent treatment plants (CETP) whose demolition would itself harm the environment, faced demolition even though they were otherwise permissible and were only awaiting the final grant of EC. Their demolition, followed by reconstruction upon a fresh EC would create more pollution than it prevented. The majority drew support from Bindu Kapurea v. Subhashish Panda, where the Court refused to undo completed approach roads to a hospital despite the illegal felling of trees ordering compensatory tree planting instead, because reversing the work was untenable.
Justice Chandran agreed only that the review should be allowed, and expressly left open whether the two instruments were valid. Justice Bhuyan, in his dissenting opinion, held that the precautionary principle cannot be sidelined by relying on the polluter pays principle and that the argument that demolition would cause more pollution could not be raised by those who had broken the law in the first place. The concern is that the majority’s approach would allow project proponents that had failed to obtain prior EC legal status upon payment of a fine. Such a view diminishes the value of the precautionary principle. It suggests that if project proponents have enough capital to pay the fine, then it is not mandatory to obtain an EC or stop an activity before it causes serious harm. Justice Bhuyan also noted that the concerns of individual projects with pending applications could have been met by clarifying the earlier judgement, without recalling it in full.
The restored proceedings were re-heard by a three-judge bench on 29 July 2026 (‘Vanashakti II’). The Court first clarified that the review had been allowed only because Vanashakti I overlooked earlier decisions; the review majority’s comments on whether the two instruments were valid did not bind it and it decided that question afresh. The Court reiterated that a prior EC requirement under the 2006 Notification remains mandatory and non-negotiable: the whole point of the assessment was so that project proponents look before they leap. Commencing a project without an EC does not merely attract a penalty unless the government has provided a valid exception. It can lead to closure, demolition, restoration of the site and recovery of clean-up costs. The penalty regime itself has undergone change. Before the Jan Vishwas (Amendment of Provisions) Act, 2023, the commencement of an activity without prior clearance was a criminal offence punishable with imprisonment of up to five years or with fine of up to Rs. 1 lakh, or with both. With effect from 01 April 2024, criminal prosecution was replaced with civil penalties: for a company, Rs. 1 lakh to Rs. 15 lakh, plus Rs. 1 lakh for every day the breach persists. Prosecution is now reserved for failure to pay the penalty within 90 days (punishable up to three years imprisonment), and the persons in charge of the company may also be proceeded against. Where a government department is the violator, the head of the department and the responsible officers can be personally penalised.
The Bench upheld the 2017 Notification as a valid, narrowly tailored and time bound delegated legislation. It survives the test of reasonable classification and does not place every violator on par with a law abiding proponent, for it subjects violation cases to a centralised appraisal, ecological damage assessment, remediation, resource augmentation and compensatory liability. The Court struck down the 2021 OM as invalid, holding that mere administrative instruction cannot override the EIA Notification or establish a perpetual open ended ‘pollute first, pay later’ regime available to any project that could have been approved; at a fixed and modest cost. Using its special powers under Article 142 of the Constitution to do complete justice, however, the Court quashed the 2021 OM prospectively, keeping in mind the prevailing confusion caused by the shifting rulings and the public interest in projects such as hospitals, medical colleges, an airport, slum rehabilitation and irrigation schemes that had progressed on the strength of it.
Significance of Vanashakti for project proponents/ developers:
- Any EC granted under the 2017 Notification or the 2021 OM remains valid, unless it is successfully challenged on its own merits. Developers holding such EC’s should keep their compliance records (penalty payments, remediation plans and bank guarantees) in order, as these will be their first line of defence in any challenge.
- Applications already filed under either instrument (i.e. the 2017 Notification or the 2021 OM) must be decided on their merits. If an application was rejected, returned or delisted only because of the Supreme Court’s interim stay of 2 January 2024 or Vanashakti I, the authority may reconsider it, so affected developers should approach the authority promptly.
- No fresh applications will be accepted under either instrument, and the Government cannot use administrative orders to clear projects that started without an EC. Any future amnesty can only come through a formal notification under the Environment Protection Act, and the Court has said that such a scheme must be exceptional, time-limited and justified by a genuine public interest, such as protecting homebuyers or workers or keeping an essential public facility running. A developer’s own commercial loss, or willingness to pay, will not be enough. The Supreme Court retains a residual power to grant relief in exceptional cases, but no project should be planned on that basis.
- A project that starts without an EC now faces daily penalties, possible closure or demolition, liability to restore the environment and bear the costs, and knock-on risks to financing and sales. Even where courts have spared completed buildings to protect homebuyers, the price has been steep.
- A project that did not need an EC when it began would require one later.For example, when changes to building rules allow additional built-up area and push the project over the threshold (in the review, CREDAI pointed to the 20,000 sq. m built-up area threshold for building projects). Every revision to plans or phasing should be checked against the EIA Notification before work proceeds.
- Buyers, joint development partners and lenders should check not only whether a project has an EC, but when it was obtained, whether it was granted after construction began under the 2017 Notification or the 2021 OM, and whether any challenge to it is pending.
- The EC position is now a RERA and disclosure issue, not just an environmental one. The existence, date and basis of a project’s EC are material facts for homebuyers; getting them wrong in the RERA registration or the sale agreement can create a separate exposure to allottees, quite apart from any challenge to the EC itself.
- Deal documents should factor in the risk. Development agreements, share or asset purchase agreements and financing documents should carry specific representations, warranties, indemnities and conditions precedent on EC status and ongoing compliance, so that the party that created the violation — not an incoming buyer or lender — bears the cost if a clearance is later challenged.
To conclude, Vanashakti II restores the basic rule that environmental clearance must come before construction, while protecting those who relied on the 2017 Notification and the 2021 OM before the law settled. For developers, the lesson is simple: obtain the EC first, and treat any project that has started without one as a serious legal and commercial risk.
Footnotes
1. Common Cause v. Union of India, 2017 (9) SCC 499.
2. Alembic Pharmaceuticals v. Rohit Prajapati, 2020 (17) SCC 157.
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