Kiran Raj

The Supreme Court Division Bench of Chief Justice B.R. Gavai and Justice Augustine George Masih held that rental compensation in land acquisition cases is payable only when the landowner is completely deprived of the property’s use before acquisition. Denying a claim of ₹238 crore sought as rental compensation against the Nashik Municipal Corporation for alleged unauthorized occupation over four decades, the Court restored the enhanced compensation of ₹20.20 crore with statutory interest and allowed additional interest at 8% per annum for the pre-acquisition period, while setting aside the adverse observations and costs imposed by the Bombay High Court.

The dispute concerned a parcel of land measuring 3,700 square meters from Survey No. 8/1 in Deolali, Nashik, reserved in 1972 by the local municipal body for a school, playground, and development plan roads under the Maharashtra Regional and Town Planning Act, 1966. While only part of the land was formally acquired in 1978, the Nashik Municipal Corporation continued to use the remaining portion without completing acquisition proceedings.

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The original owner sought development permission in 1995, asserting that the reservation had lapsed. The Bombay High Court upheld the owner’s claim, directing consideration of a new development plan. Subsequent requests were denied by the Corporation on the ground that it already owned the land. Appeals before the State Government and later the High Court resulted in directions for the land to be properly acquired. The appellant purchased the disputed portion in 2011 and accepted compensation in 2017 under protest after acquisition proceedings were completed.

The appellant challenged the compensation determined by the Special Land Acquisition Officer, seeking enhancement and claiming rental compensation for unauthorized use since 1972. The Land Acquisition, Rehabilitation and Resettlement Authority enhanced the compensation to ₹20.20 crore and awarded rental compensation of ₹238 crore. The High Court later set aside this enhancement, restoring the original award. The appellant contended before the Supreme Court that the High Court erred in disregarding genuine sale instances and in denying compensation for illegal possession.

The Corporation opposed, asserting that the ready reckoner value was properly used, and that the claim for rent lacked statutory basis. The Court examined the provisions of Sections 26 and 28 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, and the evidentiary record concerning possession, sale transactions, and mortgage documents.

The Bench recorded that Section 26(1)(b) read with Explanations 1 and 2 prescribes a statutory method for arriving at the market value by reference to the average sale price of similar lands in the nearest vicinity. It noted that the Reference Court rightly relied on genuine sale transactions and computed an average market rate of ₹26,814 per square meter, which could not have been interfered with by the High Court.

Regarding the claim of rental compensation, the Court observed that such compensation can only be granted when the landowner is unlawfully deprived of possession. It stated that “the property had not been in exclusive possession of the Respondent - Corporation rather actual physical possession... was with the Original Owner.”

The Court further recorded that the claim of rental compensation for the period prior to purchase by the appellant cannot be accepted as the owner continued to enjoy the benefit of possession and use of the property.

The Bench referenced Section 28 of the 2013 Act, noting that the seventh parameter—‘any other ground which may be in the interest of equity, justice and beneficial to the affected families’—permits ancillary compensation in appropriate circumstances. However, it found that the factual record, including eviction orders and SARFAESI proceedings, established that the appellant’s predecessor retained possession, negating unauthorized occupation by the Corporation.

The Court stated that the appellant, having purchased the property in 2011 and funded the acquisition, was entitled to interest as mesne profits at 8% per annum for the period until payment of compensation in 2017. It held that adverse observations and costs imposed by the High Court were unwarranted since the appellant had pursued lawful remedies.

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The Court directed that “the present appeal is allowed to the extent of restoring the award as passed by the Reference Court dated 18.03.2021 granting enhanced compensation of ₹11,50,64,883/-, total compensation being ₹20,20,11,533/- with interest on the awarded amount at the rate of 9% per annum from the date of notification... for one year and thereafter at the rate of 15% per annum till realization.”

It clarified that the claim for rental compensation is denied by upholding the High Court’s decision for the period 1972 onwards. The appellant shall be entitled to “grant of interest at the rate of 8% per annum on ₹1,17,00,000/- as mesne profit/compensation with effect from 29.07.2011 till 08.05.2017.” Further, it expunged the personal observations made against the appellant by the High Court and waived the cost of ₹10,00,000/- imposed in the impugned judgment. The appeal was allowed to the extent indicated above with no order as to costs.

Advocates Representing the Parties:
For the Petitioner: Mr. A.N.S. Nadkarni, Sr. Adv. Mr. Mukul Rohatgi, Sr. Adv. Mr. Kamaldeep Dayal, Adv. Mr. Mahesh Agarwal, Adv. Mr. Ankur Saigal, Adv. Mr. Chirag Nayak, Adv. Ms. Kalyani Bhide, Adv. Mr. Prakash Ahuja, Adv. Mr. Vinit Prakash Ahuja, Adv. Mr. E.C. Agrawala, AOR

For the Respondents: Mr. C.A. Sundaram, Sr. Adv. Mr. Shivaji M. Jadhav, AOR Mr. M.l. Patil, Adv. Mr. Shivaji M. Jadhav, Adv. Mr. Brij Kishor Sah, Adv. Mr. Adarsh Kumar Pandey, Adv. Mr. Vignesh Singh, Adv. Mr. Aditya S. Jadhav, Adv. Ms. Rukhmini Bobde, Adv. Mr. Siddharth Dharmadhikari, Adv. Mr. Aaditya Aniruddha Pande, AOR Ms. Soumya Priyadarshinee, Adv. Mr. Vinayak Aren, Adv. Mr. Amlaan Kumar, Adv. Mr. Jatin Dhamija, Adv. Mr. Naveen Kumar Bhardwaj, Adv.

Case Title: Pradyumna Mukund Kokil v. Nashik Municipal Corporation and Others
Neutral Citation: 2025 INSC 1236
Case No.: Civil Appeal arising out of SLP (C) No. 18305 of 2023
Bench: Chief Justice B.R. Gavai, Justice Augustine George Masih