(MENAFN- Live Mint)

New Delhi: In a move expected to unlock stalled investments and accelerate infrastructure growth, the ministry of environment, forest and climate change (MoEFCC) has decided that the time lost by projects in legal or insolvency proceedings will no longer count against their environmental clearance (EC) period.

By treating such litigation delays as a 'zero period', the government aims to prevent developers from having to reapply for clearances, an exercise that has slowed or stranded several large projects across sectors.

Announced through a notification on 30 October, the reform rationalizes the validity of environmental clearances granted under the Environment Impact Assessment (EIA) Notification, 2006. Officials said the move will help revive projects stalled in cases before the National Company Law Tribunal (NCLT) or courts, improve ease of doing business, and reduce regulatory uncertainty for developers and lenders alike.

Environmental clearances for projects are initially given for 10 years and the period can be extended to by one year.

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"The matter has been examined in the ministry, and it has been decided that EC validity laid down under EIA notification 2006 as amended needs to be rationalized with regard to the time lost in view of the proceedings before NCLT or courts," the notification by MoEFCC said. "In this regard, the ministry hereby clarifies that the following time period during which the project proponent was unable to implement the EC granted for the related project shall be treated as zero period for calculating the validity of the EC."

An environment ministry official, on the condition of anonymity, said development is sector-agnostic and the ministry expects that several projects that are stuck in litigation will see the light of the day with this move.

Several infrastructure and industrial projects that have secured environmental clearances are facing unexpected delays as they were entangled in proceedings before the NCLT or other courts. Officials and industry experts said valuable time was being lost in litigation, even for projects that met all statutory environmental norms.

Projects in sectors such as real estate, manufacturing, real estate are among the worst hit, as insolvency and restructuring cases often bring construction and investment activity to a standstill.

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Of the total of 8,492 admitted cases (as on 30 June) since the inception of the Insolvency and Bankruptcy Code in 2016, 37% pertain to manufacturing businesses, real estate and construction businesses comprise 22% and 12%, respectively. In the 1,258 cases, wherein resolution plans are underway, the manufacturing sector comprises 45% and real estate and construction make for 17% and 12% respectively, data from the Insolvency and Bankruptcy Board of India (IBBI) showed.

Experts said the government's latest move would make several stuck projects viable for restructuring. "The present concession will now benefit all relevant stakeholders, not only in terms of saving time and resources but also making the underlying projects financially viable for restructuring through applicable legal mechanisms," said Radhika M. Dudhat, partner at Shardul Amarchand Mangaldas & Co. Earlier, such projects faced uncertainty and deployment of additional costs and resources, hurting their viability, Dudhat added.

While NCLT's primary mandate is to resolve insolvency disputes, the jurisdiction overlap with environmental approvals has created procedural bottlenecks.

The ministry's notification also said that if a project remained stuck in litigation or NCLT proceedings for over three years, the State Pollution Control Board (SPCB) or Pollution Control Committee (PCC) must include additional environmental safeguards while granting the consent to operate (CTO), which legally permits an industry or project to commence operations. These safeguards should reflect any changes in site conditions and ensure that proper pollution control and prevention measures are in place, it said.

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"By increasing EC validity for litigation delays up to three years and targeted conditions beyond that, it shields genuine developers from judicial bottlenecks. It recognizes the practical difficulty faced by a project proponent when a legal challenge, even if later dismissed, has effectively frozen all activity," said Rajnish Gupta, partner, tax and economic policy at EY India.

With project timelines decoupled from court delays, the government has enhanced regulatory certainty, a key driver of ease of doing business, Gupta said. This would help industries save on time and cost, and the reform is seen benefiting sectors where large-scale projects often face litigation-linked delays, and strengthen investor confidence and project momentum, he added.

"India has a robust and rigorous process for the grant of environment clearance by the government and subsequent independent scrutiny by the NGT (National Green Tribunal) and the courts if the clearance is challenged," said Ajay Shankar, distinguished fellow at The Energy and Resources Institute (TERI), a former secretary of the erstwhile department of industrial policy and promotion.

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