Illegal Land Allotment Need Not Always Be Demolished if Public Interest Is Better Served by Heavy Financial Regularisation

Held: The Supreme Court held that where an original public land allotment is irregular or illegal, demolition is not always the only lawful remedy if subsequent facts show that demolition would cause disproportionate public harm. The Court held that under the doctrine of proportionality, the remedy must match the nature of the wrong and must also account for irreversible economic and social consequences that have crystallised over time. Where a fully operational commercial complex has existed for many years, substantial investment has been made, third-party rights have arisen, thousands of livelihoods depend upon it, and the public authority’s financial loss can be fully recovered, a rigorously supervised regularisation on payment of fair market value may better serve public interest than demolition.

Summary: The dispute concerned allotment of a plot in Sector 30A, Vashi, Navi Mumbai by CIDCO to K. Raheja Corp. for development of a shopping mall and hotel. The Sankaran Committee found serious irregularities in the allotment, including absence of competitive tender and allotment at a lower rate causing financial loss to CIDCO. The Bombay High Court held the allotment illegal and arbitrary and directed the Developer to restore the plot to its original condition and hand over vacant possession to CIDCO, while leaving open the possibility of regularisation. During the pendency of the appeals, the Developer sought regularisation, and CIDCO approved it subject to payment based on the Sankaran Committee formula. The Supreme Court held that the illegality in the allotment could not be ignored, but demolition after nearly seventeen years of commercial operation, INR 450 crores of investment, around 150 retailers, approximately 8,000 livelihoods and substantial tax revenue would be contrary to public interest. The Court preferred the Banthia Committee approach and held that regularisation must be based on the 2014 ready reckoner market value, not the earlier 2005 loss figure.

Decision: The Supreme Court modified the Bombay High Court’s judgment and set aside the direction requiring restoration of the plot to its original condition and delivery of vacant possession to CIDCO. The Court directed the Developer to pay INR 3,18,31,37,664 for the subject plot based on the ready reckoner rate of INR 54,400 per sq. metre applicable to Sector 30A, Vashi, Navi Mumbai as of November 2014, with adjustment of the amount already paid at INR 10,250 per sq. metre. The Developer was also directed to pay INR 1 crore in lieu of its unfulfilled obligation to develop a garden on Plot No. 40. Subject to payment within four months, the allotment was directed to stand regularised. The dispute concerning Plot No. 39/16 was left to be decided by the High Court in the pending writ petition on its own merits, and the civil appeals were disposed of with no order as to costs.