BACKGROUND OF THE CASE

The Hon’ble Supreme Court in Pradyumna Mukund Kokil v. Nashik Municipal Corporation¹ interprets Section 26 and Section 28 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (“2013 Act”). This decision clarifies the statutory framework governing the determination of the “market value” of the acquired land is to be assessed and explains the circumstances under which rental or mesne-profit compensation may be awarded in cases of prolonged, unauthorized governmental occupation of private land prior to its formal acquisition.

FACTS OF THE CASE

• The present appeal arose out of a prolonged land dispute measuring 1 hectare and 38 Acres. The said land originally belonged to predecessor of Mr. Pradyumna Mukund Kokil (“the Appellant”).
• By Resolution dated 03.05.1972, the Nashik Municipal Corporation (“The Corporation”) decided to reserve the aforesaid land for the purpose of establishing a high school, a playground, and certain development plan roads under the Maharashtra Regional and Town Planning Act, 1966 (“MRTP Act”).
• Pursuant to the said resolution, the Corporation took possession of 37 Acres of land for public use. This possession, however, was taken without following the acquisition procedure prescribed under the Land Acquisition Act, 1894 (“LA Act”). Subsequently, a notification under Section 126(2) of the MRTP Act read with Section 6 of the LA Act was issued on 02.03.1978, whereby only 1 hectare and 1 Acre of land were formally acquired. The remaining 37 Acres of land, although not acquired, continued to remain under the use and possession of the Corporation for road purposes.
• After the award was passed, the “original owner” filed an application under Section 127 of the MRTP Act seeking development permission on the ground that the reservation had lapsed. When no response was received, the Appellant then filed a Writ Petition (Civil) before the Hon’ble Bombay High Court.
• The Hon’ble High Court accepted the plea of the Appellant and held that the reservation over the subject land had lapsed. The Corporation was directed to consider any development plans submitted thereafter without raising the issue of reservation. Despite this, the Corporation rejected the Appellant’s request for development permission, contending that the corporation was the owner and in possession of the land. [Para’4]
• An appeal preferred under Section 47 of the MRTP Act was dismissed by the State Government on the ground that, post the proposed acquisition of the land as per the reservation of the site, the possession had been taken by the Corporation, and the land in question, measuring 37 Acres, had gone into construction as a road. However, the appellate authority directed the Corporation to compensate the Appellant.
• The Appellant then challenged this order by a Writ Petition, before the Hon’ble Bombay High Court. The Hon’ble High Court set aside the order passed by the Appellate authority and directed the State Government to conduct a proper survey to demarcate the acquired and unacquired portions of land.
• The Appellant on 29.07.2011 purchased the unacquired portion of 37 Acres through a registered sale deed for a consideration of Rupees 1.17 crore. In compliance with the High Court’s directions, the Corporation prepared a site map on 15.09.2011, which showed that the said 37 Acres of land had been used for the construction of roads.
• As the matter remained unresolved, the Appellant once again approached the Hon’ble High Court by filing a Writ Petition, seeking directions for the formal acquisition of the land that had already been utilised by the Corporation. The Corporation, in its defence, claimed that it had acquired ownership of the land by adverse possession since 1972. The Hon’ble High Court decided in favour of the Corporation and held that the land was in possession of the Corporation and hence ought to be acquired. [Para’10]
• Aggrieved by the liberty granted to the Corporation, the Appellant filed a Special Leave Petition before the Supreme Court. The Hon’ble Supreme Court set aside the liberty granted to the Corporation and permitted the Corporation to raise a plea of adverse possession.
• Since the acquisition process remained incomplete, the Appellant filed a Contempt Petition (Civil) before the Supreme Court. The Hon’ble Supreme Court directed the State Government to complete the acquisition expeditiously and exempted the Corporation from compliance with Sections 4 to 16 of the 2013 Act.
• In January 2017, a notification under Section 11 of the 2013 Act was issued, followed by an award dated 29.04.2017 passed by the Special Land Acquisition Officer (SLAO). The SLAO awarded total compensation of Rupees 8.69 Crore, under Section 26 of the 2013 Act. The Appellant accepted the awarded amount and handed over possession of the land to the Corporation in May 2017.
• Being dissatisfied with the quantum of compensation, the Appellant preferred a reference under Section 64 of the 2013 Act. TheLand Acquisition, Rehabilitation and Resettlement Authority, Nagpur, allowed the reference and enhanced the compensation to Rupees 20 Crore.
• The Corporation then challenged this award in First Appeal before the Hon’ble Bombay High Court. By judgment dated 04.05.2023, the High Court set aside the enhanced award and restored the SLAO’s awarded compensation.
• The Appellant, thereafter challenging the High Court’s Decision judgement has approached the Supreme Court by Special Leave Petition.

ISSUES FRAMED

The Hon’ble Supreme Court framed two principal issues:

1. What is the correct method for determining the market value of the land under Section 26 of the 2013 Act?
2. Whether the Appellant is entitled to rental compensation for the Corporation’s unauthorized occupation from 1972 to 2017?

SUPREME COURT’s FINDINGS

Issue I: Determination of Market Value under Section 26 of the 2013 Act?

It was contended by the Appellant that the ready reckoner cannot, by itself, be treated as determinative of market value, since it merely reflects a general guideline and not the prevailing market price of similar lands. It was further argued that Section 26(1)(b) of the 2013 Act explicitly directs that the average sale price of similar lands situated in the nearest vicinity during the preceding three years shall be the governing benchmark.

The Hon’ble Apex Court acknowledged the Appellant’s contention and observed that Section 26(1)(b) read with Explanations 1 and 2 of the 2013 Act, prescribes a complete method for determining market value of the land by averaging the total number of sale deeds or the agreements to sell in which the highest sale price is considered and such sale deeds and agreements to sell has been registered in the preceding three years. The Hon’ble Supreme Court noted that the legislative intent was to bring objectivity and transparency to the process, reducing administrative discretion. [Para’ 25]

The Hon’ble Supreme Court further noted that the Reference Court had acted in accordance with the statute while considering six registered sale deeds produced by the Appellant of nearby lands, which identified the three highest-valued transactions. The Hon’ble Supreme Court rejected the High Court’s reliance on ready reckoner rates and held that the said amount, being in accordance with the Statutory provisions, could not have been interfered with by the High Court. [Para’27]

Accordingly, the Hon’ble Supreme Court restored the enhanced compensation of Rupees 20 crore as determined by the Reference Authority, holding that the High Court had erred in interfering with a well-reasoned and statutorily compliant award.

Issue II: Claim for Rental Compensation for Unauthorized Occupation?

The second issue concerned the Appellant’s claim for rental compensation for the Corporation’s long-standing use of the land without formal acquisition since 1972.

The Appellant argued that the Corporation had been in continuous and unauthorized occupation of the land for over four decades, depriving the owner and his successors of beneficial enjoyment. Further, the Appellant placed reliance on judicial precedents, R.L. Jain (D) v. DDA & Ors² and Udho Dass v. State of Haryana³, wherein the Hon’ble Supreme Court held, the owner’s right to compensation where the government has taken possession before completing acquisition. It was also argued that even though the 2013 Act does not expressly provide for “rental damages,” clause (vii) of Section 28 empowers the authority to grant compensation on equitable grounds “in the interest of justice and for the benefit of the affected families.” [Para’ 18]

The Corporation, however, disputed this claim, stating that the 2013 Act contains no provision for rental compensation and that Section 28(vii) of the 2013 Act cannot be expanded to create a new head of compensation. [Para’21]

The Hon’ble Supreme Court noted that the Appellant had remained in possession of the property and had continued to exercise ownership rights, including mortgaging the property and receiving rent from tenants. It was further observed that during 2008, the property was under the control of a Receiver appointed under the SARFAESI Act. Considering these facts, the Hon’ble Supreme Court held that the Corporation was in exclusive occupation of the land since 1972.

Further, the Hon’ble Supreme Court placed reliance upon the case of R.L. Jain, wherein the Hon’ble Apex Court held that the rental compensation shall be awarded only where the acquiring authority has taken possession without lawful authority and thereby deprived the owner of enjoyment before acquisition. [Para’ 33]

Consequently, the Hon’ble Supreme Court held that the Appellant could not claim rental compensation for any period prior to the purchase of the land, as the Appellant neither owned nor possessed the land before that date.

The Hon’ble Supreme Court also relied upon its earlier decision in Shankarrao Bhagwantrao Patil v. State of Maharashtra⁴, wherein it was held that to award pre-acquisition interest/mesne-profits where the possession of land is taken by the acquiring Authority, the Court can still grantequitable interest or compensation to prevent injustice.

Invoking the residuary clause of Section 28(vii) of the 2013 Act, the Hon’ble Supreme Court held that “equity” demands that the Appellant be compensated to a reasonable extent for the deprivation of his property during the period between purchase and actual acquisition. Accordingly, the Hon’ble Supreme Court awarded interest at 8% per annum on Rupees 1.17 crore (the Appellant’s purchase price) for the period 29 July 2011 to 8 May 2017, describing it as a form of equitable mesne profit rather than rental damages.

COURT’S DECISION

The Hon’ble Supreme Court decided to:

• restore the enhanced compensation of Rupees 20 crore as determined by the Reference Authority;
• upheld the High Court’s rejection of rental compensation for the period before 2011;
• grant the Appellant with 8% interest per annum on Rupees 1.17 crore as equitable mesne-profit compensation.

CONCLUSION

This Judgement clarifies that compensation for acquired land must be based on real market value determined through actual sale transactions as provided under Section 26 of the 2013 Act. The Hon’ble Supreme Court has struck a fair balance between law and fairness, ensuring that genuine landowners are properly compensated while preventing unjust or excessive claims.

Analysis done by: Shubhangi Dengre (Associate)