The “Polluter Pays” Continuity
The environmental burden attaches to the undertaking, not to the identity of its shareholders or management. A change of ownership pursuant to an NCLT scheme does not extinguish statutory environmental obligations. The NGT has consistently held that the successor in interest is liable for the environmental violations committed by the transferor, because the liability runs with the undertaking.
The Scheme’s Silence Is Not an Exemption
A scheme that is silent on environmental liabilities does not exempt the transferee from them. The statutory liability is independent of the scheme’s terms, and the NCLT’s order cannot override the environmental law’s mandate. The transferee should assume that it inherits the transferor’s environmental liabilities unless the regulator has expressly released them.
The Tort Claims
Tort claims—for example, claims by residents affected by pollution—may also transfer to the transferee, depending on the nature of the claim and the scheme’s terms. A claim that has crystallised before the scheme may be a liability of the transferor; a continuing tort may be treated as a liability of the transferee. The scheme should address the treatment of contingent tort claims.
The Practical Due Diligence
The transferee should conduct an environmental due diligence of the transferor, including the status of environmental clearances, consent to operate, and pending NGT proceedings. The scheme’s valuation should reflect the environmental liabilities, and the NCLT should be informed of the material environmental risks. A scheme that conceals an environmental liability is vulnerable to being set aside.
Call to Action: For scheme environmental liability assessment, NGT proceeding review, or environmental due diligence, contact office@anujdesaiassociates.com or 9619456656. Website: https://anujdesaiassociates.com. LinkedIn: linkedin.com/in/ca-anuj-desai-122547230.