No Coercive Action Against Volkswagen Over 500 Crore Fine By NGT For Environmental Damage: Supreme Court

In a major relief to the German automobile major Volkswagen, the Supreme Court on Monday while staying the order of National Green Tribunal (NGT) which had imposed a fine of 500 Crore on it said that no coercive action as of now should be taken against it. National Green Tribunal had imposed a fine of Rs. 500 Crore on Volkswagen for damaging the environment through use of "cheat device" in its diesel cars in India.

A bench of Justice S A Bobde and Justice S Abdul Nazeer passed the order, saying that no coercive action should be taken against the Volkswagen over the fine by NGT.

On March 7 this year, NGT had imposed a penalty of Rs. 500 Crore on Volkswagen for damaging the environment whereby its Principal Bench had directed latter to deposit it with Central Pollution Control Board (CPCB) within two months from the passage of order.

In its submissions before the apex court, Volkswagen Group Companies advanced many arguments against the NGT order calling it unreasonable and arbitrary. It said that NGT imposed the exorbitant sum on Volkswagen despite its own appointed committee giving a clear finding that the vehicles of Volkswagen Group Companies are in compliance with the regulatory environmental norms in India.

It contended further that NGT has based its findings on the basis of "on road" tests which have no legal basis or validity under Indian law, and thus cannot be made a basis for imposition of penalty or any adverse finding against Volkswagen Group Companies. Terming the reliance upon the "on road" test by NGT as completely arbitrary and unjustified, Volkswagen pleaded that NGT erred in concluding that the Central Motor Vehicles (11th Amendment) Rules, 2016 ("CMVR Amendment Rules"), which prescribe real-worl driving cycle emission measurements from April 2023 can be applied retrospectively for a single manufacturer i.e. Volkswagen Group Companies.

"It is submitted that even a conformity factor for real-world driving cycle emission measurements has not been prescribed till date. Thus, the reliance upon "on road" test is completely arbitrary and unjustified," it said.

It submitted further before the top court that NGT has exceeded its jurisdiction and entered the domain of legislation. It noted that as per Section 110 of the Motor Vehicles Act, 1988, only the Central Government has the power to lay down standards for emission of air pollutants and NGT has arbitrarily applied the norms that are not in force to hold Volkswagen Group Companies liable.

Volkswagen also told the top court that NGT has in complete disregard of the Apex Court's Order dated 21 January 2019, not considered similarly situated automobile manufacturers. That despite CPCB Report itself noting higher emissions from other manufacturers when tested on road, the same has not been taken into account by the NGT.

It argued further that even the International Centre for Automotive Technology ("ICAT") Report clearly shows that emissions from Hyundai and Mahindra & Mahindra vehicles were 4 to 6 times the BS IV norms, which is substantially higher than the alleged higher emissions from vehicles of Volkswagen Group Companies when tested on road. It said that the said report has not been considered by the NGT and by this NGT has simply passed on the burden to the Central Pollution Control Board (CPCB). It reminded court that it had directed the NGT to look into the issue; however, the NGT has without application of mind transferred the burden on to a forum that admittedly has no regulatory role in the formulation of vehicle emission norms for vehicles and its implementation.

Volkswagen also in its submissions told the court that NGT has erred in placing reliance upon decisions or findings in other jurisdictions and the decision or findings in other countries cannot be relied upon as there is a substantial difference in the emission norms, technical specifications and configuration of the engines, quality of fuel etc. across jurisdictions. It also submitted that NGT has erred in placing reliance upon the newspaper reports which have no legal sanctity/validity whatsoever.

"Some of the newspaper reports even pertain to other manufacturers and not Volkswagen Group Companies at all. Further, some of the newspaper reports refer to countries for which they are not referred to within the Impugned Order. Some of the articles don't even mention any imposition of penalty upon Volkswagen Group Companies," it said.

Volkswagen had said earlier that it did not use any "cheat device" as alleged by the NGT order. A cheat device is a software that allows car manufacturers to manipulate emission tests by altering the performance of its engines.