The Supreme Court has set aside the Bombay High Court’s direction requiring restoration of a Navi Mumbai plot to its original condition.
Instead, the Court ordered regularisation of the allotment made to K. Raheja Corp. Private Limited. The developer must pay ₹318.31 crore along with an additional ₹1 crore for failing to develop the Japanese Garden.
The Court held that demolishing a fully operational shopping mall and hotel after nearly two decades would be disproportionate and contrary to public interest.
A Bench comprising Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe delivered the judgment on May 26, 2026, in K. Raheja Corp. Private Limited v. State of Maharashtra & Ors.
Background of the Dispute
The dispute involved a plot located in Sector 30A, Vashi, Navi Mumbai.
CIDCO had originally earmarked the land for Information Technology development under the International Infotech Park project.
However, the global slowdown in the IT sector affected demand for such projects.
Consequently, CIDCO’s Board of Directors resolved on April 30, 2003, to permit residential, commercial, and office development on part of the area.
Following an application submitted by K. Raheja Corp., CIDCO approved the allotment of approximately 29,000 square metres through a resolution dated September 17, 2003.
CIDCO subsequently issued an allotment letter on October 8, 2003, and executed a lease agreement on December 16, 2003.
Soon thereafter, parties challenged the allotment through public interest litigation before the Bombay High Court.
Sankaran Committee Raises Concerns
In 2005, the Sankaran Committee examined several CIDCO allotments.
The Committee concluded that CIDCO should have disposed of the plot through a competitive process.
It found that CIDCO allotted the land at ₹10,250 per square metre despite an estimated market value of ₹20,791 per square metre.
According to the Committee, the transaction caused a loss of nearly ₹50 crore to CIDCO.
Accordingly, it recommended cancellation of the allotment and disposal through public tender.
Despite the challenge, K. Raheja Corp. continued construction.
The company invested nearly ₹450 crore in developing a shopping mall and hotel with a built-up area of approximately 10.5 lakh square feet.
Authorities issued an occupancy certificate on September 16, 2008.
The project has remained operational since 2009.
Bombay High Court Orders Restoration of the Plot
In November 2014, the Bombay High Court declared the allotment illegal, arbitrary, and violative of Article 14 of the Constitution.
The High Court directed the developer to restore the land to its original condition and hand over vacant possession to CIDCO within six months.
At the same time, the Court allowed the developer to seek regularisation.
Following the filing of appeals before the Supreme Court, status quo orders protected the project.
During this period, the State Government constituted the Banthia Committee to examine possible regularisation.
The Committee recommended regularisation based on the fair market value of the land as of November 2014.
CIDCO Supports Regularisation
Later, CIDCO’s Board passed a resolution on February 4, 2026.
The Board approved regularisation subject to payment of ₹257.87 crore.
This amount included differential premium, compensation for the Japanese Garden obligation, and interest.
K. Raheja Corp. expressed its willingness to pay the amount.
Arguments Before the Supreme Court
Senior counsel for the developer relied on Regulation 4 of the New Bombay Disposal of Lands Regulations, 1975.
The developer argued that the regulation permitted land disposal through auctions, tenders, or individual applications.
It further submitted that earlier attempts to auction the plot had failed.
Therefore, allotment through an individual application could not automatically become illegal.
The developer also highlighted that neither CIDCO’s regularisation policy nor the High Court’s liberty to seek regularisation had been challenged.
On the other hand, the respondents argued that the developer had encroached upon Plot No. 39/16, which did not form part of the original allotment.
They also relied on the Sankaran Committee’s recommendation for cancellation.
Additionally, they contended that the developer failed to develop the Japanese Garden on Plot No. 40.
Alternatively, they argued that any regularisation should follow the Banthia Committee’s valuation model.
Supreme Court Applies Doctrine of Proportionality
The Supreme Court noted that the High Court had not actually cancelled the allotment.
Instead, it had left open the issue of regularisation.
The Court also observed that no party had challenged either the regularisation policy or the liberty granted by the High Court.
Importantly, the Bench held that Regulation 4 permitted allotments through individual applications.
According to the Court, the real defect lay in the pricing mechanism and the absence of a transparent competitive process.
The Court then examined the High Court’s demolition direction through the lens of proportionality.
The Bench stressed that every remedy must maintain a rational relationship with the wrong committed.
In the Court’s view, demolition would ignore the economic and social realities that had emerged over almost two decades.
The Bench noted that the developer had invested ₹450 crore in the project.
Further, around 150 retailers operated from the mall.
Nearly 8,000 people depended on the complex for their livelihood.
The Court also recognised that substantial third-party rights had crystallised over the years.
In a significant observation, the Court stated:
“A remedy that causes public harm disproportionate to the public benefit it achieves is not a remedy that law ought to countenance.”
Accordingly, the Bench held that financial restitution and penalisation would adequately address the irregularity in the allotment.
Court Rejects Claim for Parity
The developer sought parity with other allottees whose allotments CIDCO had regularised under its 2005 policy.
The Supreme Court rejected this argument.
The Bench held that a large commercial developer operating a major shopping mall could not be equated with individual allottees or housing societies.
Determination of Regularisation Charges
The Court preferred the Banthia Committee’s methodology over CIDCO’s 2026 valuation model.
According to the Bench, the original concessional allotment price lost relevance once the High Court declared the allotment illegal.
The Court treated regularisation as a fresh grant of legal legitimacy.
Therefore, it based the valuation on the market value prevailing when the High Court delivered its judgment in November 2014.
Relying on ready reckoner rates, the Court found that the applicable market value in Sector 30A, Vashi stood at ₹54,400 per square metre in 2014.
Applying this rate to the plot measuring 30,582 square metres, the Court calculated the market value at ₹166.36 crore.
The Court then added interest at 8% per annum from December 1, 2014 to April 30, 2026.
This component amounted to ₹151.94 crore.
As a result, the Court determined the total liability at ₹318.31 crore.
Final Directions
Allowing the appeals in part, the Supreme Court modified the Bombay High Court’s judgment.
The Court directed K. Raheja Corp. to:
• Pay ₹318.31 crore representing the market value of the land along with interest.
• Receive adjustment for amounts already paid towards the purchase price.
• Pay an additional ₹1 crore for failing to develop the Japanese Garden on Plot No. 40.
• Complete payment within four months.
Upon payment of the required amounts, the allotment shall stand regularised.
The Court also clarified that the dispute concerning Plot No. 39/16 remains pending before the Bombay High Court and must be decided independently on its own merits.
The Supreme Court disposed of the appeals without any order as to costs.
