Institute of Legal and Management Studies

Observing that the 'rental compensation' in land acquisition proceedings is granted only when the owner is completely deprived of its property's use, the Supreme Court on Wednesday (October 15) denied a massive claim of ₹238 Crores in "rental compensation" made against the Nashik Municipal Corporation for its alleged unauthorized use of a plot of land over 45 years.

Rental compensation is awarded to the land owner when the acquiring authority uses the acquired property (before the acquisition) in an unauthorised manner, depriving the land owner of the benefit of possession.

A bench of Chief Justice BR Gavai and Justice AG Masih heard the case relating back to 1972, when the Nashik Municipal Corporation resolved to reserve the land for public purposes and took possession of a portion of it without initiating acquisition proceedings. While a part of the land was formally acquired in 1978, the disputed 3,700 sq. meters was left out, yet the Corporation continued to use it.

The original owner fought the Corporation for decades, with courts consistently upholding his title. Relying on these rulings, the Appellant purchased the land for ₹1.17 Crores in 2011. He was then forced to initiate fresh litigation, including contempt proceedings, to compel the Corporation to finally acquire the land in 2017.

After the acquisition, the Appellant challenged the compensation. A Reference Authority enhanced the land's market value to approximately ₹20.20 Crores and, strikingly, also awarded an additional ₹238 Crores as "rental compensation" for the Corporation's illegal use from 1972 to 2017. The High Court later set aside both enhancements, leading to the appeal in the Supreme Court.

Partly allowing the appeal, the judgment authored by Justice Masih restored the enhanced market value of ₹20.20 Crores, holding that the Authority had correctly followed the statutory method for valuation, however, refused to interfere with the High Court's decision regarding the setting aside of an additional ₹238 Crores as "rental compensation".

Citing its judgment in R.L. Jain v. DDA, (2004) 4 SCC 79, the Court held that rental compensation is only awarded where the owner is completely deprived of the property's use, which was not the case here.

"The documents clearly reveal... that the property had not been in exclusive possession of the Respondent - Corporation," the Court observed, pointing to evidence that the original owner had mortgaged the property, initiated tenancy proceedings, and otherwise exercised ownership rights.

“It is, therefore, established from the above documents that the Original Owner had not been deprived of the benefit of possession or usage of the property in question all through, which, as a matter of fact has been claimed by the Appellant. The documents clearly reveal, as has been referred to above, that the property had not been in exclusive possession of the Respondent - Corporation rather actual physical possession of the subject-property was with the Original Owner and utilisation thereof for all intent and purposes including taking benefit of ownership of the said property either in the form of loan or rent thereof stands admitted and established. The claim of rental compensation advanced by the Appellant, particularly for the period prior to the purchase date 29.07.2011, is untenable in light of the settled position in law which confines the grant of rental compensation to cases involving unlawful and unauthorized occupation.”, the court said.

“As regards the claim of rental compensation of the Appellant, the same is denied by upholding the impugned judgment of the High Court for the period 1972 onwards.”, the court held.

Cause Title: PRADYUMNA MUKUND KOKIL VERSUS NASHIK MUNICIPAL CORPORATION AND OTHERS

Citation : 2025 LiveLaw (SC) 1007

Click here to read/download the judgment

Appearance:

For Petitioner(s) : 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 Respondent(s) : 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.