In a major setback to Ajit Gulabchand's ambitious hill city project, the Union environment ministry has asked the Maharashtra government to initiate action against Lavasa Corporation for violation of green norms.

The notice came within hours of Gulabchand's statement that an environment ministry committee has recommended conditional clearances for the first phase of the project.

Gulabchand, chairman of Hindustan Construction Company (HCC), was talking to the media on the sidelines of the annual general meeting of his company this morning. By evening, the ministry stressed that part of the construction had been undertaken at the project site in Pune without obtaining a green nod.

The hill station township is being constructed by Lavasa Corporation, a subsidiary of HCC. The company has invested Rs 3,000 crore (Rs 30 billion) so far. But Lavasa has been caught up in the regulatory net for several months now.

The company has incurred losses of about Rs 300 crore (Rs 3 billion) so far due to the stop-work notice issued by environment minister Jairam Ramesh.

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The stop-work notice came late last year. The ministry is preparing to give its view on the phase-I of the controversial project on June 15, when the matter comes up in the Bombay high court for hearing.

On the fate of the project, Ramesh said whatever his ministry has to say will be presented in the court.

The Maharashtra government was quick to react to the Ministry of Environment and Forests' (MoEF) directive.

A senior state government official told Business Standard that "according to the MoEF directive, a case will be filed before the chief judicial magistrate against Lavasa Corporation under the Environment Protection Act, 1986".

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In a letter to the government, the MoEF said the state should take necessary action against the Lavasa project.

The ministry said during an appraisal of request for green clearance for the development of the 2,000-hectare Hill Station Township "it was found that constructions/developments in a 681 hectare area was in progress without obtaining prior environmental clearance".

Noting that it had issued showcause notices on November 25 last year and final directions on January 17 this year, the ministry said the constructions and developments in the 681- hectare are violations of the 1986 Act.

As many as 257 residential units on 681.3 hectares were under construction when Ramesh imposed a stop-work order.