Bar & Bench ( Item Nos. 01 & 02 Court No. 1 BEFORE THE NATIONAL GREEN TRIBUNAL PRINCIPAL BENCH, NEW DELHI

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1 Item Nos. 01 & 02 Court No. 1 BEFORE THE NATIONAL GREEN TRIBUNAL PRINCIPAL BENCH, NEW DELHI Original Application No. 509/2015 WITH Original Application No. 527/2015 (M.A. No. 1236/2018) Saloni Ailawadi Union of India & Ors. Versus WITH Applicant(s) Respondent(s) Satvinderjeet Singh Sodhi & Ors. Versus Volkswagen India Private Limited & Ors. Applicant(s) Respondent(s) Date of hearing: CORAM : HON BLE MR. JUSTICE ADARSH KUMAR GOEL, CHAIRPERSON HON BLE MR. JUSTICE S.P. WANGDI, JUDICIAL MEMBER HON BLE DR. NAGIN NANDA, EXPERT MEMBER Original Application No. 509/2015 For Applicant(s): Mr. Sanjeev Ailawadi, Advocate. For Respondent(s): Mr. Pinaki Misra, Sr. Advocate., Mr. Bishwajit Dubey, Mr. Surabhi Khattar, Mr. Aditya Marwah, Ms. Ruchi Choudhary, Advocates Mr. Raj Kumar, Advocate Mr. Kshitij Mudgal, Advocate Original Application No. 527/2015 For Applicant(s): Mr. Vipul Ganda and Ms. Preeti Nair, Advocates For Respondent(s): Mr. Ajay Singh, Mr. Ajay Jain and Mr. Pranay Jain, Advocates Mr. Bishwajit Dubey, Ms. Surabhi Khattar, Mr. Aditya Marwah, Ms. Ruchi Choudhary, Advocates Mr. Rajkumar, Advocate and Mr. Dinesh Jindal, LO Mr. Kshitij Mudgal, Advocate ORDER 1. In continuation of order dated , we have been further informed by the parties on various factual aspects and have also perused the additional documents filed by them. 1

2 2. The issue concerns allegation of pollution caused by Respondent No. 4 Volkswagen India Pvt. Ltd. Respondent No. 5 Skoda Auto India Private Limited, Respondent No. 6 Volkswagen Group Sales India Private Limited and Respondent No. 7 Volkswagen AG who are manufacturers of vehicles. 3. It is pointed out on behalf of the applicant that in respect of engines manufactured by the said manufacturers, violation of prescribed norms had been found in the USA and Europe in as much as the manufacturers were employing deceit devices in such a way that the results of testing may not truly reflect the actual state-of-affairs in terms of compliance to norms/standards. In support of his submission, learned counsel appearing for the applicants had referred to the following documents: i. Details of vehicles recalled by the manufacturers placed before the Lok Sabha in reply to an Unstarred Question on showing that about 2.75 lakhs vehicles including Volkswagen, Skoda Auto India Pvt. Ltd. and Audi were recalled inter-alia on the ground of software updation and repair. ii. Affidavit of the Automotive Research Association of India (ARAI) to the effect that 46 models of Volkswagen Pvt. Ltd. were tested and were authorized for carrying out recalling covering 2.18 lakhs vehicles. (According to Volkswagen number of vehicles to be recalled was 3.4 lakhs out of which 2.53 lakhs have been recalled.) iii. Letter dated from the US Environment Protection Agency addressed to Volkswagen giving notice of violation on the ground that deceit devices had been installed in certain models from 2009 to 2015 of diesel light duty vehicles. 2

3 iv. News Item dated in Business Standard under the heading Volkswagen fails emission test in India, gets notice to the effect that Volkswagen was emitting emission more than expected Nitrogen Oxide (NOX). As found after its testing by ARAI, NOX emitted was nine times the levels tested during approval stage. In US forty times higher emission was found. In India, it was five to nine times according to ARAI. The manufacturers were to recall 11 million cars globally after it was found that they were violating emission norms by a cheating device. v. News Item dated in the Economic Times under the heading Timeline of events in Volkswagen pollution cheating scandal to the effect that Volkswagen admitted to CARB and EPA that it had deliberately installed software in the cars and issued a statement that it was sorry for having broken the trust of the customers. In US 4,82,000 cars are equipped with deceit device. vi. As per the statement in the counter affidavit of the Ministry of Heavy Industries, in India, Euro-III and Euro-IV norms are applicable. The said affidavit further states that ARAI was directed to assess whether deceit devices are used in the engine control units by the Volkswagen. ARAI found that NOX emissions are five to nine times compared to laboratory test limits. In view of these results, the Ministry of Heavy Industries directed the Volkswagen to initiate vehicle recall. Accordingly, the Volkswagen informed that they would recall 3.2 lakhs vehicles and modify software and/or hardware after approval of the authorities. Letter dated annexed to the said affidavit addressed by the Ministry of Heavy Industries, Government of India to the Ministry of 3

4 Road and Transport, Government of India inter-alia as follows: Based on the findings of ARAI and after detail discussion, Volkswagen agreed to recall approximately 3.24 lakhs of vehicles of Audi, Volkswagen and Skoda brands. vii. Stand of the manufactures is that they had replied to the show cause notice with regard to diesel EA189 Engine to which no response has been received. They had also themselves conducted on-road test in the presence of ARAI and the emissions were found to be 1.1 times to 2.6 times of BS-IV norms. Action taken in other countries was thus not relevant as the standards prescribed were different. 4. The matter came up for hearing on when status of recall as on was considered and, it was noted that the recall was to the extent of 60-64%. Manufacturers were directed to file latest status reports about proceedings in other countries and reasons for not recalling the remaining vehicles and as to why penal action be not taken. 5. Accordingly, an affidavit has been filed on behalf of the manufactures claiming that the EA 189 diesel engines are compliant with the norms in India and the recall had been done to the extent of 80% as on Affidavit dated has also been filed by the applicant giving status of Annual Report of the Volkswagen Group for the year 2017 inter-alia stating that criminal proceedings had been initiated in Germany and contingent liabilities have been disclosed by the Volkswagen Group in cases where it could be assessed and for which the likelihood of sanction was not less than 10%. Proceedings are also pending in South Korea and Switzerland. In USA and Canada also, proceedings were pending and the company has agreed to pay USD 2.7 billion into an 4

5 environmental trust. It also pleaded guilty to three federal criminal felony counts and paid USD 2.8 billion criminal penalty. There was also a settlement by which cash payment up to USD 1,208 billion was agreed to be paid. Further, a settlement to pay USD 622 million was reached to resolve consumer protection and unfair trade practices claims. Assessment of the actual amount that the company was liable to pay could not be made by the management of the company. Total contingent liability on the diesel issue was 4.3 billion. European Commission had fined 0.88 billion against Scania. Class action suit was also pending against Volkswagen for excess Nitrogen Oxide (NOX) emissions against which the company agreed to pay USD 2.7 billion in the next three years and to invest USD 2.0 billion over ten years in zero emission vehicle infrastructures. It also entered into third partial consent decree with the US Department of Justice (DOJ) and Environmental Protection Agency (EPA) paying USD 1.45 billion to resolve civil penalty We may also record that a status report was sought from the Automotive Research Association of India (ARAI) and such report dated was filed to which a brief reference has already been made. 8. From the above material, it is difficult, prima-facie, to accept the stand of the manufacturer that it has not caused any damage to the environment in India. The manufacturers themselves have accepted the direction for recall. As noted in para 3(v), expression of regret was also publicly made. Though, they have chosen to describe the recall as voluntary, it is in pursuance of the direction of the Ministry of Heavy Industries, Government of India as per the stand of the Ministry, already noted. Moreover as shown by 1 Annual Report can be accessed at 5

6 the stand of the Ministry of Heavy Industries, ARAI found NOx emission to be five to nine times higher than the laboratory test limits. This being not acceptable, the said Ministry directed for recall of the vehicle which direction was never challenged and has been complied with partially. Even though the standards may be stricter in other countries, the very fact of deceit devices being installed by the manufacturers calls for an inference of prima-facie violation of environment. Even if there is 100% recall, for the past violation of norms, the manufacturer cannot avoid responsibility. 9. In Vellore Citizens Welfare Forum vs. Union of India (UOI) and Ors. 2, the Hon ble Supreme Court interpreted "Polluter Pays" principle by stating that the absolute liability for harm to the environment extends not only to compensate the victims of pollution but also the cost of restoring the environmental degradation. Remediation of the damaged environment is part of the process of "Sustainable Development" and as such polluter is liable to pay the cost to the individual sufferers as well as the cost of reversing the damaged ecology. 10. The Precautionary Principle and the Polluter Pays Principle have been accepted as part of the law of the land. As serious damage has been caused to the environment by Respondent No. 4 and Respondent No. 5, therefore, the Polluter Pays Principle needs to be invoked to compensate the damage caused, in terms of Section 20 of the NGT Act, This Tribunal in Court on its own motion vs. NCT, Delhi & Ors. 3, vide its order dated , following the principle in Sterlite Industries (India) Ltd. and Ors. vs. Union of India and Ors. 4, observed that measure of compensation must be correlated to the magnitude and capacity of the enterprise because such 2 (1996) 5 SCC Suo Moto Application No. 290of (2013) 4 SCC 575 6

7 compensation must have a deterrent effect. It was further observed on the basis of principle laid down in M.C.Mehta and Anr. vs. Union of India and Ors. 5 that a person undertaking an activity involving hazardous or risky exposure to human life is strictly liable for injury suffered by another person, irrespective of any negligence or carelessness on part of the managers of such undertaking and that where the activity of an enterprise is hazardous, highest degree of care is expected and breach of duty is inactionable. 12. Accordingly, we pass the following order: (i) We constitute a joint team of representatives of the Central Pollution Control Board (CPCB); Ministry of Heavy Industries, Government of India; ARAI and NEERI of the level of Member Secretary/Director to examine the report of ARAI and give its expert opinion on the subject whether the manufacturers have exceeded the prescribed environmental norms and fair estimate of the damage caused to the environment, after considering the reply of the manufacturer. (ii) We direct the manufacturers to deposit a sum of Rs. 100 Crores within one month with the CPCB. The deposit will abide by further directions. We are informed that the worth of the company is more than USD 75 billion. 6 The amount has been fixed having regard to the capacity of the enterprise and possible adverse impact on the environment and deposit is only an interim measure, awaiting expert opinion on the subject. Though at this stage we are not assessing the exact amount of liability, having regard to the amount of damages which are to be paid in the other 5 (1987)1 SCC Also see information in public domain at - 7

8 countries and the worth of the company, the liability does not appear to be less than 100 Crores by even a conservative estimate. The CPCB will be the nodal agency to comply with our directions. 13. The parties are given liberty to furnish documents considered relevant by them to the Central Pollution Control Board within one week from today. 14. A copy of this order may be sent to the CPCB by The report may be furnished to this Tribunal by at ngt.filing@gmail.com within one month from the date of receipt of a copy of this order. 16. List for further consideration on Adarsh Kumar Goel, CP S.P. Wangdi, JM November 16, 2018 DV&A&R Dr. Nagin Nanda, EM 8