India Palm Oil
Supreme Court upholds order to dismantle illegal tanks in coastal zone
Feb 12, 2023
A company partially owned by the Adani Group has been ordered to dismantle and remove tanks illegally erected in a coastal zone near Chennai.

The apex court of India has dealt a blow to the Adani Group by refusing to annul an order that an Adani company dismantle illegal structures in an ecologically sensitive coastal zone in the south-eastern state of Tamil Nadu. On 1 February 2023, when the Adani Group was witnessing a meltdown of its stock prices, the Supreme Court of India’s decision came as a double whammy for the corporate conglomerate. The tanks have been the subject of legal dispute for years.

The Supreme Court ordered that five huge oil tanks owned by an Adani-backed firm on the outskirts of Tamil Nadu’s capital city, Chennai, be demolished within a period of six months on account of not confirming to regulations governing the country’s coastal areas.

The tanks, for storage of edible oils, were illegally constructed in a coastal zone near Chennai.

The firm, KTV Health Food Private Limited, partly owned by the Adani Group, was planning to use the tanks for storage of edible oil, which it imports through the Ennore seaport in Chennai, before transporting it to other parts of the country. It is a 50:50 joint venture between Adani Wilmar Limited and the Chennai-based KTV Health Foods Private Limited India. Adani Wilmar itself is a joint venture between the Adani Group and the Singapore-based palm-oil giant Wilmar International.

Apart from demolishing the tanks, the firm will also have to shell out a penalty of approximately US $30,000 in accordance with directions issued around three years ago by India’s premier environmental court, the National Green Tribunal (NGT).

In September 2020, the NGT ordered the dismantling of the tanks after arriving at its decision that post facto approval granted to the tanks by the Union Ministry of Environment, Forests & Climate Change India violated the country’s law.

Adani Wilmar is one of the biggest, if not the biggest, importer of palm oil from south-east Asia into India.

A major aspect of the firm’s case, when it appealed against the NGT’s order in the Supreme Court, was over the usage of the words ‘within’ and ‘in’ where they appear in India’s coastal-zone regulations. The NGT had ruled that the ministry’s approval for the tanks under Coastal Regulation Zone (CRZ) Notification, 2011 was illegal as they are located in an area classified as ‘CRZ II’, a zone in which such development is prohibited. The notification classifies areas along India’s 7500-km coastline into four zones depending on proximity to the high-tide line, permitting or prohibiting activities accordingly.

More stories See all
The harsh life at the coal face of Adani’s Talabira mine
‘We are from Dharavi’ has become a battle cry
Defiance: how tribal forest people have taken on the might of Adani's coal juggernaut
Were India’s stocks manipulated before election results?
‘They should not believe in the promised land that the Adani company tempts them with.’

The firm, KTV Health Foods, argued in the Supreme Court that storage of edible oil is permitted ‘within’ the notified ports in areas designated as CRZ-I. It further argued that storage of non-hazardous cargo such as edible oil, fertilizers and foodgrain is permitted ‘in’ notified ports in CRZ-II areas. On the basis of the choice of the word ‘in’, the firm sought to drive home the point that the storage tanks were located ‘in’ the port area. However, the three-judge bench of the court was not convinced by this line of argument.

‘We again reiterate that the words “within” and “in” cannot include what is outside the port. The maker of the notification has not even contemplated the activities in question in a “port area”. We must here elucidate and observe that if the contention is to be upheld that a storage tank can be permitted outside the port limits, it will introduce chaos. The question would arise as to up to what distance from the port area it would be considered as the “in the port area”. The 2011 Notification cannot receive an interpretation which would leave matters of moment to be afflicted with the vice of uncertainty. This is apart from the importance of avoiding an interpretation which seemingly allows free play in the joints to the Administrator but, at the same time, vest an arbitrary power in him,’ said the bench in its judgement.

The company, partially owned by the Adani Group, was given six months to remove the tanks.

The contentions of the Adani-backed KTV Health Foods were supported in the Supreme Court by another firm, KTV Oil Mills, which claimed to be a sister-concern of the former. KTV Oil Mills, which filed a separate appeal in the Supreme Court, has also constructed a storage facility for imported edible oil at a distance of roughly 600 metres from the tanks of KTV Health Foods.

The debate over the usage of words ‘in’ and ‘within’ for different classified zones along the seacoast had also been raised when the case was being adjudicated in the southern zone bench of the NGT. However, this dichotomy in the respective meanings of the two words did not cut ice with the tribunal that had also referred to the Oxford English Dictionary while arriving at its decision to have the illegal structures dismantled. A Chennai-based organization engaged in protecting the coastal zone and the welfare of the local fishing community had filed the petition in the NGT against the project.

Interestingly, in the Supreme Court, the Tamil Nadu government, which is ruled by the Dravida Munnetra Khazagam (DMK) party, which is politically opposed to the BJP that is in power at the centre in India, did not oppose the Adani-backed project. The Tamil Nadu government, as well as the Tamil Nadu State Zone Management Authority, extended support to the illegal project during the course of hearings in the Supreme Court.

‘Shri Anand Tiwari, learned counsel appearing on behalf of respondent 2 [Tamil Nadu government] and 3 [Tamil Nadu State Zone Management Authority] would also support the appellants,’ stated the Supreme Court (See paragraph 18 of judgement).

Further, it was also the contention of the firm in the Supreme Court that the facility could not be set up within the Ennore Port, in accordance with rules governing zones classified as CRZ I, because the number of cargo-loaded vehicles moving in and out of it has increased manifold over recent years. In order to reduce road traffic and congestion, the port has been encouraging alternate modes of cargo evacuation via railways and pipelines, it was argued by the firm in the Supreme Court. The firm produced a certificate that had been granted to it by the Chennai Port Trust in August 2016 in order to lay the underground pipelines.

‘This [pipeline] will in turn result in better turnaround of the vessels thereby enabling the port to handle more and more volume of edible oil cargo and vessels thus increasing the port efficiency,’ the port trust stated in the certificate (See paragraph 34 of judgement).

The firm further justified the decision to locate the storage tanks outside of the port area by arguing that allowing edible oil to be transferred through pipes would relieve congested traffic and reduce pollution. Counsel appearing on behalf of the fishermen’s organization, however, argued that even if the contention about reduced pollution is significant, the storage tanks can be established anywhere outside the port area but not in an area categorized as CRZ II. The Supreme Court itself deemed these arguments pertaining to traffic and pollution as not relevant.

‘The contention of the appellants that by decongesting the traffic and allowing the edible oil to be transferred through pipelines for onward transmission to the factories of the appellant, the baneful impact flowing from tanker lorry traffic by way of pollution is reduced, overlooks the true purport of the 2011 notification [CRZ Notification, 2011]. We must demystify the object of the law as contained in the coastal regulation notification. As far as pollution is concerned, it is the subject matter of laws specifically relating to regulation and prohibition of activities on the said score,’ said the bench in its order (See paragraph 36 of judgement)

In October 2020, AdaniWatch carried a detailed account on how the central government of India under Prime Minister Narendra Modi had allegedly tweaked the country’s environmental laws to grant a post facto approval for the edible-oil tanks. The project comprised a pipeline and a transit-storage terminal. The pipeline is over 4.5 kilometers in length – from the Ennore Port of Chennai to the storage terminal in Tondiarpet village – and has a diameter of 25 cm. Five storage tanks with capacities of 1720 KL, 1442 KL, 1281KL, 855 KL and 7527 KL were installed for handling and transit of edible oil at the transit terminal.

On 7 February 2023, Rahul Gandhi – leader of India’s principal Opposition party, the Congress – delivered an impassioned speech in the Parliament during which he accused the central government headed by Modi of the BJP of pulling strings in favor of the Adani Group. Parts of Rahul Gandhi’s speech were expunged from the records of the Parliament a day later. However, in response to the speech, BJP leaders accused Gandhi of making ‘baseless’ allegations and demanded documentary proof from him to authenticate his claims. The article carried by AdaniWatch in October 2020, is one of the instances where it was clearly highlighted as to how the central government had bent the rules to favour a project belonging to an Adani joint venture.

The environment ministry under the Modi government had not only amended rules to regularize post facto approvals under CRZ Notification, 2011, but had also subsequently written to the Adani-backed firm to apply for the approval within the moratorium period.

In an amendment to the CRZ Notification, 2011, on 6 March 2018, post facto approval for permissible activities was made available to: ‘… such cases where the construction has been commenced before the date of this notification without the requisite CRZ approval, shall be considered only by the Ministry of Environment, Forest and Climate Change, provided that the request for such regulation is received in the said Ministry by 30th June, 2018.’

On 23 March 2018, the ministry, which at that time was headed by senior BJP leader Prakash Javadekar, issued a letter to KTV Health Foods to apply for the clearance within the moratorium period. The letter states: “Sir, may please refer to the amendment to the CRZ Notification, 2011, issued by this ministry vide S.O. 1002 (E), dated 06.03.2018 enclosed herein. In conformity with para no. 4.3 inserted in the CRZ Notification, 2011, related to Post facto clearance for permissible activities, vide the aforesaid amendment issued on 06.03.2018, you are requested to submit recommendation of the Tamil Nadu Coastal Management Authority for regularization of your above-mentioned proposal, to enable the Ministry in taking further course of action.’

Despite this official encouragement, KTV Health Foods did not file the application within the moratorium period but did so only in September 2018 well past the due date! Nonetheless, the ministry left no stone unturned in order to ensure that the project was provided with a post facto approval. The ministry wrote to the Tamil Nadu Coastal Zone Management Authority – a federal body from which approval is required for final clearance from the central government – asking it to issue specific recommendations pertaining to the edible-oil project ‘at an early date to enable the Ministry to take further course of action’. The letter was issued on 12 October 2018. The ministry did not fail to issue a reminder when it got no response. In a subsequent letter issued on 10 January 2019, the ministry again asked the Tamil Nadu Coastal Zone Management Authority for expeditious action in issuing specific recommendations so that the application by KTV Health Foods could be cleared.

The NGT said in its judgment on 30 September 2020 that amendments to CRZ Notification, 2011 were made with an ‘intention to regularize the CRZ activities started in the CRZ Zone without getting prior Environmental Clearance’.

The three-judge bench of the Supreme Court comprising Justices KM Joseph, BV Nagarathna and JB Pardiwala has allowed the Adani-backed firm to continue using the storage facility for a period of six months ‘in the interest of justice’.

The bench has stated in its order: ‘in view of the request made by the appellants that they may be permitted to continue to use the pipeline along with the storage facility for a period of one year, we would think that the interest of justice do require grant of some time. The appellants are accordingly given a period of six months from today to comply with the impugned order of the NGT. This is in regard to the direction to demolish the storage tanks. The appellant in the first appeal is given a month’s time to pay the compensation ordered, if not already paid.’

The apex court also asked the firm to move an application with the district-level Coastal Management Zone Authority which will make a call on whether to allow it to continue using the storage tank’s pipeline which falls in CRZ I area.

The firm had informed the Supreme Court that it had purchased the storage tanks through a public auction in November 2014. In order to build a 4.5-kilometre-long underground pipeline to the storage facility, the firm sought clearances from various authorities. The Fishing Harbor Management Committee had granted permission for the underground pipeline on payment of approximately US $62,000. Thereafter, India’s premier road-building agency, the National Highways Authority of India, also granted it permission to lay the pipeline. The Chennai Port Trust permitted it to lay the underground pipeline in March 2015, reportedly after an inspection of the premises of the storage facility. The District Coastal Zone Management Authority of Chennai had also recommended the proposal later in the same year.