HSA | Corporate & Commercial Monthly Newsletter | February 2026

Supreme Court Upholds Economic Stability over Judicial Rigidity Amid Precedent Conflict and Economic Losses Over Ex Post Facto Clearance

Introduction

In a seminal 2:1 verdict delivered on November 18, 2025, the Supreme Court of India allowed the Review Petition filed by the Confederation of Real Estate Developers of India (CREDAI) and recalled the its previous judgment dated May 16, 2025, in the case of Vanashakti v. Union of India, which had previously struck down the mechanisms allowing for the grant of ex post facto Environmental Clearance for projects that had commenced construction or expansion without prior statutory approval. This review decision essentially reopens the debate on the legality of ex post facto Environmental Clearance (EC) and grants a temporary lifeline to developers and public sector units (PSUs) seeking regularization for projects started without the requisite prior EC. The original Vanashakti judgment had deemed the concept of ex post facto EC “illegal” and struck down both the 2017 Notification and the 2021 Office Memorandum (OM) that facilitated it. By recalling the Judgment Under Review (“JUR”), the Supreme Court has now restored all the original writ petitions and the connected appeal to the file for fresh consideration.

Background

• The Challenge to Ex Post Facto

— The requirement for prior EC is rooted in the Environment Impact Assessment (EIA) Notification of 2006, issued under the Environment (Protection) Act, 1986 (EP Act). However, recognizing ground realities and outstanding violations, the Ministry of Environment, Forest and Climate Change (MoEF & CC) issued the 2017 Notification and the subsequent 2021 OM (Standard Operating Procedure) to provide a mechanism for granting EC to projects that had commenced construction or operation without prior approval.

— The original Vanashakti judgment (JUR) held that the concept of ex post facto or retrospective EC is “completely alien to environmental jurisprudence” and violative of fundamental rights under Article 21, relying on precedents like Common Cause and Alembic Pharmaceuticals Limited.

Key Legal Issue

• Judicial Discipline and Public Interest

— The core issue in the Review Petition was whether the original Vanashakti judgment (JUR) was flawed by failing to consider or correctly apply binding judicial precedents and whether its implementation would cause disproportionate harm to the public interest.

— The review petitioners, including CREDAI, argued that the JUR overlooked crucial aspects of earlier judgments like Common Cause, Alembic Pharmaceuticals Limited, and Electrosteel Steels Limited which, while deprecating ex post facto EC generally had ultimately adopted a “balanced approach” allowing offending industries to continue operations subject to heavy penalties and environmental safeguards. Further, they contended that the JUR was per incuriam as it failed to notice the coordinate bench rulings in D. Swamy v. Karnataka State Pollution Control Board and Pahwa Plastics Private Limited v. Dastak NGO, which had expressly upheld the validity of the 2017 Notification and 2021 OM.

— Furthermore, the review petitioners also highlighted the grave public and economic implications of enforcing the JUR, which had suggested that projects lacking EC must be stopped and demolished, even after penalties had been imposed. They argued that such an outcome would cause irreversible public loss and environmental harm, thereby undermining the very objectives of environmental regulation.

Supreme Court Review Judgment and Reasoning

The majority opinion, delivered by CJI B.R. Gavai and concurred with by Justice K. Vinod Chandran, held that recalling the JUR was “imperative and expedient”. The Court found that the JUR was flawed on several grounds and largely agreed with the submissions of the review petitioners. It emphasized two principal justifications for recalling the JUR: first, that it failed to follow binding precedents; and second, that its enforcement would result in immense public waste and create an “environmental paradox”.

•  Precedent Conflict (Per Incuriam)

— The Court observed that JUR was per incuraim primarily because it was passed in ignorance of and was contrary to binding judgments precedents like D. Swamy v. Karnataka State Pollution Control Board and Pahwa Plastics Private Limited v. Dastak NGO which had, in unequivocal terms, upheld the validity of the 2017 Notification and the 2021 OM as being within the Central Government's statutory powers under the EP Act. Further the Court reiterated the findings from Electrosteel Steels Limited and D. Swamy that the EP Act does not prohibit ex post facto EC and that such approvals could be granted in “exceptional circumstances”.

— Furthermore, the court held that the JUR failed to consider subsequent paragraphs in Common Cause, Alembic Pharmaceuticals Limited, and Electrosteel Steels Limited where the Court had ultimately permitted the regularization or continuation of non-compliant projects upon payment of compensation and compliance with statutory requirements. The majority noted that even these key environmental rulings, though deprecating ex post facto clearance in principle, had ultimately adopted a balanced approach, permitting continued operation subject to payment of compensation and statutory compliance, rather than mandating unconditional closure.

•   Devastating Public Consequences and Misreading of Section 15 of EP Act

— The majority opinion stressed that upholding the original judgment (JUR) would yield “serious consequences” and be “counter-productive” to the public interest. This was primarily because it would necessitate the demolition of various completed or nearly completed projects constructed from public funds, valued at nearly Rs. 20,000 crore.

— The specific public projects facing demolition included the construction of a 962-bed AIIMS Medical College and Hospital in Odisha, a greenfield airport in Vijayanagar, Karnataka, and several common effluent treatment plants.

— The Court observed that forcing the demolition of these structures, which were “otherwise permissible in law,” merely so that proponents could obtain a fresh Environmental Clearance (EC) under the 2017 Notification and 2021 OM and then reconstruct the identical project, would be a “counterproductive remedial intervention”. This process would, ironically, cause further environmental degradation from the demolition debris, creating an “environmental paradox”. Given these factors, the majority concluded that imposing penalties on the builders based on the Polluter Pays Principle while allowing completion was a more balanced and rational approach than mandating demolition and reconstruction.

— Furthermore, the majority also rejected the JUR's interpretation of Section 15 of the EP Act, and held that Section 15 deals only with penalties and neither permits nor prohibits the regularization of the underlying project, refuting the observation that demolition is mandatory after penalty payment.

The Dissenting View on Non - Regression

Justice Ujjal Bhuyan issued a strong dissenting opinion, arguing the review petition should be dismissed as the grounds advanced were untenable. He maintained that the JUR correctly followed the binding ratio of the earlier environmental judgments, namely Common Cause and Alembic Pharmaceuticals, which established that ex post facto EC is “completely alien” to and an “anathema” and “in derogation” of environmental jurisprudence.

Justice Bhuyan asserted that the later decisions in the case of Electrosteel, Pahwa, and D. Swamy were, in fact, the judgments that were truly per incuriam because they deviated from the ratio of the foundational cases, particularly the declaration that no concept of ex post facto EC exists. He distinguished the concessions granted in Alembic and Common Cause as either being based on peculiar facts or issued under Article 142 of the Constitution, which do not constitute binding ratio decidendi.

The dissent vehemently rejected the reliance on economic and pollution-related arguments, stating that “it does not lie in the mouth of law violators to advance such a kind of justification to sustain the illegality”. He argued that recalling the judgment would violate the principle of non-regression, which requires the State including the Judiciary not to reverse or weaken existing environmental protection standards, labeling the recall a “step in retrogression” that overlooks the fundamentals of environmental jurisprudence.

 Analysis and Opinion

The Supreme Court's decision in the review petition of Credai v. Vanshakti demonstrates a judicious exercise of its powers within the permissible boundaries of precedent and established legal doctrines. By revisiting its earlier judgment, which was held to be per incuriam, the Court has reaffirmed its commitment to the principles of legal certainty and the rule of law.

A key aspect of the Court's approach lies in its adherence to the doctrine of public interest or public good. The Court recognised that the earlier decision, if left uncorrected, would have resulted in significant economic implications, potentially disrupting ongoing and future development projects. In doing so, the Court balanced environmental concerns with the broader economic and social interests of the public, thereby aligning its judgment with the doctrine that judicial decisions must serve the greater public good.

The Court's reliance on the doctrine of per incuriam is particularly significant. By acknowledging that the previous judgment was rendered in ignorance of relevant law or precedent, the Court has ensured that errors do not perpetuate within the legal system. This is further complemented by the doctrine of judicial review, which empowers the Supreme Court to revisit and rectify its own decisions, thereby maintaining the integrity and credibility of the judicial process.

Additionally, the Court's approach reflects the doctrine of proportionality, as it carefully weighed the environmental impact against the economic consequences, ensuring that its decision was balanced and not excessive in relation to the objectives sought to be achieved.

In conclusion, the Supreme Court's judgment in this case is not only in harmony with established legal doctrines but also reflects a pragmatic and principled approach to adjudication. By acting within the scope of its powers and established boundaries, the Court has reinforced public confidence in the judiciary's ability to adapt and uphold justice in the face of evolving challenges.

Conclusion

The Supreme Court decision to allow the review petition in the case of Confederation of Real Estate Developers of India (CREDAI) v. Vanashakti and Another signals that the absolute bar on ex post facto EC is once again subject to rigorous judicial scrutiny. This provides immediate relief to project proponents, including members of CREDAI, who had applications pending or were operating based on the relaxation measures.

However, the ultimate outcome will ultimately hinge on how the Court reconciles the clear principle of “prior EC” enshrined in environmental jurisprudence with the practical necessity of proportionality and safeguarding public economic investments.

By recalling the JUR in the present review petition, the Supreme Court has reinforced its clear preference for a balanced proportionality based remedial approach over a rigid application of penal demolition, particularly in cases involving large-scale economic and social consequences.

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