New Delhi: The Supreme Court on Tuesday ruled that public interest would be better served by imposing stringent financial penalties rather than demolishing a fully functional commercial complex employing thousands of people, as it directed developer K Raheja Corp Pvt Ltd to pay more than ₹318 crore for a Navi Mumbai plot wrongfully allotted to it in 2003.
A bench of justices Pamidighantam Sri Narasimha and Alok Aradhe set aside a 2014 Bombay High Court order directing the land to be restored to its original condition, which would have entailed demolition of a shopping mall and hotel complex operational since 2009.
The apex court said that demolishing the commercial complex after 17 years of operation, involving an investment of ₹450 crore, employment for 8,000 people and annual tax revenue of nearly ₹100 crore, “would not vindicate the public interest”. Instead, it said, the loss caused to the City and Industrial Development Corporation (Cidco) could be adequately remedied through a “rigorous financial recovery mechanism”.
“The doctrine of proportionality…demands that the severity of a remedial measure must bear a rational and proportionate relationship to the nature and magnitude of the wrong sought to be remedied,” said the bench. Public law must distinguish between remedies that restore public welfare and those that merely punish at the expense of the very public the law seeks to protect, it added.
The dispute concerned the allotment of a 30,582-square-metre plot in Sector 30A, Vashi, originally earmarked for Information Technology use. In 2003, Cidco had allotted the land to K Raheja Corp at ₹10,250 per sq m without a competitive bidding process. The Inorbit Mall, owned and operated by K Raheja Corp, and the Four Points by Sheraton Navi Mumbai hotel were later built on the plot.
A subsequent inquiry by the DK Sankaran Committee, constituted by the Maharashtra government in 2005, found that the land should have been disposed of through competitive tendering and that the allotment resulted in an estimated loss of ₹50 crore to Cidco due to undervaluation.
While the Bombay High Court in 2014 termed the allotment “completely illegal and arbitrary” and ordered restoration of the land to its original condition, it nevertheless left open the possibility of regularisation.
However, the Supreme Court noted that “irreversible third-party rights” had crystallised over the years, with nearly 150 retailers operating in the mall and thousands of people dependent on it for their livelihoods. It emphasised that Cidco must be fully compensated, the developer penalised proportionately, and innocent third-party interests protected.
The bench relied heavily on the findings of the JK Banthia Committee, constituted by the Maharashtra government in 2015, which recommended that any regularisation must be based on the land’s full market value as of 2014, when the high court delivered its judgment.
Rejecting Cidco’s later proposal to recover around ₹262.87 crore based on the earlier Sankaran Committee methodology, the Supreme Court said the 2005 valuation could not account for the “dramatic appreciation” in land prices over the next decade.
The court held that once the original allotment was declared illegal, the concessional price paid in 2003 became irrelevant, and regularisation had to be treated as a “fresh grant of legal legitimacy,” for which the developer must pay the prevailing market value.
Taking the ready reckoner rate for 2014 at ₹54,400 per sq m, the bench computed the land’s market value at ₹166.36 crore. Along with 8% interest from December 2014 till April 2026, the court directed the developer to pay a total of ₹318.31 crore. It added that the amount already paid by the developer will be duly adjusted from the total amount to be paid.
The court also directed K Raheja Corp to pay an additional ₹1 crore towards its unfulfilled obligation to develop a garden on an adjoining plot. Subject to payment within four months, the allotment would stand regularised, the court ordered.
“A regularisation conditioned upon payment of full market value as of 2014 achieves all three objectives. Demolition achieves none,” said the bench. It emphasised that Cidco must be fully compensated, the developer penalised proportionately, and innocent third-party interests protected.
