K. Raheja Corp. Private Limited v. The State of Maharashtra and Ors.
Background
In the early 2000s, CIDCO (Navi Mumbai's planning authority) allotted a plot in Sector 30A, Vashi, originally reserved for an IT Park, to the Developer for commercial/residential use at a concessional rate, after converting the land use amid an IT-sector downturn. The allotment was challenged through two PILs, and the Bombay High Court in 2014 found the allotment irregular and ordered restoration of the plot to its original condition with delivery of vacant possession back to CIDCO: effectively requiring demolition of the mall/hotel complex built on it by then. By the time the matter reached the Supreme Court, two decades had passed, two government-appointed committees (Sankaran and Banthia) had separately examined the irregularity and possible remedies, and thousands of employees and businesses were operating out of the completed structure.
Decision Breakdown
The Supreme Court held that although the original allotment was undoubtedly irregular, given the profound and irreversible economic and social consequences that had since crystallised, public interest was better served by a rigorously supervised regularisation with full financial restitution rather than demolition. It accepted the Banthia Committee's approach that once an allotment is declared illegal, its original concessional price becomes irrelevant: regularisation is a fresh, prospective grant of legality for which the Developer must pay the land's true market value as of the date of the High Court's 2014 judgment, not the price it paid in 2003. Using the government's own ready-reckoner rate for that period, the Court fixed the total amount payable (with 8% interest from December 2014 to April 2026) at approximately Rs. 318.31 crore, adjusted for what was already paid, plus a further Rs. 1 crore in lieu of an unfulfilled garden-development obligation. On payment within four months, the allotment stands regularised, and the High Court's demolition/restoration direction was set aside to that extent; a related dispute over an adjoining plot was left to the High Court to decide separately.
Lesson Learnt
Even where a government land allotment is found legally irregular, courts can choose supervised regularisation with full market-value restitution over demolition when the irregularity's remedy would otherwise cause disproportionate real-world harm, but the price of legalising an illegal grant is the land's current true value, not the original discounted price.