Comparable Sales over Ready Reckoner and Equitable Mesne Profits on Purchase Price: Supreme Court clarifies Sections 26 and 28 of the RFCTLARR Act

Case Comment on Pradyumna Mukund Kokil v. Nashik Municipal Corporation, 2025 INSC 1236 (Supreme Court of India, 15 October 2025)

Introduction

This decision resolves a decades-long public–private contest over a 3,700 sq. m. strip of land in Survey No. 8/1 at Deolali, Nashik, which the municipal authority had used for development plan roads without formally acquiring it. The dispute sits at the intersection of urban planning under the Maharashtra Regional and Town Planning Act, 1966 (MRTP Act) and compensation under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (RFCTLARR Act or “2013 Act”).

Two core issues fell for determination:

• How should market value be determined under Section 26 of the 2013 Act—by comparable sale instances or by “ready reckoner” (annual statement of rates)?
• Whether and to what extent an owner is entitled to “rental compensation” or analogous relief for the period of the State’s occupation prior to formal acquisition, and what role is played by Section 28 (seventhly) of the 2013 Act.

The appellant purchased the unacquired 3,700 sq. m. in 2011 from the original owner after courts had held the planning reservation had lapsed. In 2017, following directions of the Supreme Court, the State issued a Section 11 notification under the 2013 Act and made an award. The Land Acquisition, Rehabilitation and Resettlement Authority (“LARR Authority”) later enhanced compensation dramatically and granted enormous “rental compensation” for decades of alleged illegal occupation. The High Court reversed this, restoring the original award and making adverse remarks against the appellant. The Supreme Court’s judgment recalibrates both valuation methodology and entitlement to pre-acquisition relief, while protecting litigants from unwarranted judicial censure.

Summary of the Judgment

• Market value under Section 26: The Court restores the LARR Authority’s enhanced market value, holding that Section 26(1)(b) read with Explanations 1 and 2 mandates reliance on comparable registered sale instances in the nearest vicinity during the preceding three years. Where such sales are available and reliable, resort to the ready reckoner is impermissible. Applying a 10% annual escalation to contemporaneous exemplars, the Authority’s assessment at Rs. 26,814 per sq. m. and the total compensation of Rs. 20,20,11,533 were upheld.
• Pre-acquisition occupation and “rental compensation”: The Court declines wholesale “rental compensation” for the period prior to the appellant’s purchase (1972–2011), finding that the original owner maintained and exercised possession and control (including mortgaging the property and obtaining an eviction order against tenants). Relying on R.L. Jain v. DDA, damages for use and occupation arise only where possession is unlawfully taken/retained by the acquiring authority. On the facts, that threshold was not met for the pre-2011 period.
• Equitable mesne profits on purchase price under Section 28 (seventhly): For the post-purchase period (29.07.2011 to 08.05.2017), the Court grants the appellant 8% per annum interest on the purchase price of Rs. 1.17 crore as equitable mesne profits/compensation, invoking the residuary ground “in the interest of equity and justice” in Section 28 (seventhly) and drawing support from Shankarrao Bhagwantrao Patil v. State of Maharashtra.
• Adverse remarks and costs: The Court expunges the High Court’s personal observations against the appellant and waives the punitive costs of Rs. 10 lakh, noting the appellant pursued statutory remedies bona fide.
• Final directions: The enhanced compensation of Rs. 20,20,11,533 is restored, with interest at 9% for one year from 09.01.2017 (Section 11 notification) and 15% thereafter till realization, subject to deduction of amounts already paid under the 2017 award. “Rental compensation” for the period 1972 onward is denied, save for the 8% interest on the Rs. 1.17 crore purchase price for 29.07.2011–08.05.2017.

Factual and Procedural Background

• 1972–1978: Municipal reservation placed for school/playground/DP roads. 3,700 sq. m. taken into use for roads without acquisition. In 1978, the State acquired 1.01 ha of the same survey plot, leaving 3,700 sq. m. unacquired but in civic use.
• 1995–1999: On Section 127 MRTP lapse, the High Court (1998) held the reservation had lapsed. Municipality refused development permission, claiming ownership and possession.
• 2007–2010: State’s appellate authority directed compensation via cash/TDR. On judicial review, the High Court remanded with directions to demarcate acquired/unacquired areas (2009). The State’s SLP was dismissed (2010).
• 2011: Appellant purchased the 3,700 sq. m. (Rs. 1.17 crore); official map recorded the area being used as roads.
• 2012–2017: On writ by the appellant, the High Court directed acquisition; the Supreme Court removed liberty to plead adverse possession and, in contempt, directed expeditious acquisition—exempting compliance with Sections 4–15 of the 2013 Act to avoid further delay. Section 11 notification issued (09.01.2017), award made (29.04.2017) at Rs. 8.69 crore; appellant accepted under protest and handed possession (08.05.2017).
• 2021–2023: LARR Authority enhanced compensation to Rs. 20.20 crore and awarded about Rs. 238.87 crore as “rental compensation” with additional interest. The High Court set aside the enhancement and restored the SLAO award with adverse observations and costs. The appellant appealed.

Analysis

Precedents Cited and How They Informed the Decision

• R.L. Jain (D) by LRs v. DDA, (2004) 4 SCC 79. The Supreme Court reiterated the principle that where the State or acquiring agency takes possession before lawful acquisition, the landowner is entitled to damages for use and occupation (mesne profits) for that interregnum; but interest under the acquisition statute runs from the statutorily relevant dates. This case anchored the Court’s refusal to award blanket “rental compensation” for periods when the owner was not shown to be dispossessed or when possession was not unlawfully detained by the State.
• Shankarrao Bhagwantrao Patil v. State of Maharashtra, (2022) 15 SCC 657. Cited to endorse the Court’s practice of granting equitable monetary relief—mesne profits/interest—for pre-acquisition occupation where the State’s possession precedes completion of acquisition. It supported invoking Section 28 (seventhly) to award 8% interest on the appellant’s purchase price for the period 2011–2017.
• Udho Dass v. State Of Haryana, (2010) 12 SCC 51. Cited by the appellant to buttress a claim for pre-acquisition damages when the State takes or continues possession without acquisition. While the principle is consistent with R.L. Jain, the Court found on facts that the threshold for such damages was not met for the pre-2011 period because the original owner retained effective possession and control.
• Dinkar Sandipan Gholve v. State of Maharashtra, 2008 SCC OnLine Bom 696; 2009 Supp Bom CR 891. Relied on by the appellant to argue for rental compensation in cases of unauthorized occupation. The Supreme Court distinguished the present case on facts, emphasizing the owner’s sustained possession/beneficial use till 2011.

Legal Reasoning

1) Market Value under Section 26—Primacy of Comparable Sales

Section 26(1)(b) of the 2013 Act, read with Explanations 1 and 2, creates a structured, statutory mechanism for market valuation by “the average sale price for similar type of land situated in the nearest village or nearest vicinity area,” computed from registered sale deeds/agreements of the preceding three years. Explanation 2 contains a specific selection rule: only the top half (by price) of the available sale deeds should be considered to prevent skewing by distress or low-value sales.

The LARR Authority:

• Relied on six uncontested sale instances in the same locality and time band;
• Selected the three highest-priced comparables as mandated by Explanation 2;
• Applied a standard 10% annual escalation to bridge the time-gap from the sale dates (2014–2016) to the Section 11 notification (09.01.2017);
• Arrived at an average of Rs. 26,814 per sq. m., reflecting the land’s high potential and its surroundings (schools, hospitals, malls, 1 km from Nashik Road Railway Station).

The Supreme Court holds that where such reliable sale data exists, resort to the ready reckoner/ASR (a fiscal instrument for stamp duty) is a departure from the statutorily preferred methodology. The High Court’s interference was unwarranted because the Authority adhered to the Act’s mandated approach and made reasonable adjustments for time and comparability.

2) Pre-acquisition Occupation—From “Rental Compensation” to Equitable Mesne Profits

The appellant sought massive “rental compensation” for the entire period from 1972 to 2017. The Supreme Court conducts a granular possession analysis:

• Original owner’s possession and control: The record showed the owner’s continuing control—eviction of tenants by Tehsildar’s order in 2000; mortgage and SARFAESI proceedings culminating in a Receiver in 2008; absence of evidence of exclusive civic possession.
• Legal threshold from R.L. Jain: Damages for use/occupation lie where possession is taken or retained unlawfully by the State before acquisition. That threshold was not met on the facts prior to the appellant’s purchase in 2011.

On the other hand, post-purchase, the appellant contemporaneously litigated to compel acquisition and did not enjoy beneficial use while the municipal body asserted possession. To do complete justice, the Court invokes Section 28 (seventhly)—a residuary head requiring the Collector to consider “any other ground which may be in the interest of equity, justice and beneficial to the affected families”—and grants:

• 8% per annum interest on the purchase price (Rs. 1.17 crore) for 29.07.2011–08.05.2017, treating it as compensatory mesne profits for the State’s occupation during the interregnum.

The Court thus rejects an expansive, unmoored claim to “rental compensation” while recognizing a measured, equitable monetary remedy tailored to the purchaser’s capital locked in the land during the period of delayed acquisition.

3) Judicial Restraint and Litigant Protection

Noting that the appellant pursued statutory remedies supported by evidence and prior court orders (including those leading to acquisition), the Supreme Court expunges personal remarks and cancels costs imposed by the High Court. This underscores a due process value: litigants asserting bona fide claims under the statute should not be stigmatized absent clear abuse.

Impact and Forward-Looking Significance

• Valuation discipline under Section 26: The judgment reinforces that comparable sale instances are the primary valuation tool. Ready reckoner rates are subsidiary and not a substitute where reliable transactions exist. Reference Courts and acquiring authorities across India—especially in urban and peri-urban acquisitions—must marshal and analyze neighbourhood sale deeds first, applying the Explanation 2 “highest-half” filter and reasonable time-gap adjustments.
• Measured approach to pre-acquisition claims: The Court cabins extravagant “rental compensation” theories, demanding proof of exclusive, unlawful State possession. It simultaneously opens a calibrated pathway under Section 28 (seventhly) to award equitable mesne profits—here, interest on the purchaser’s capital—for the precise period of deprivation, avoiding windfalls and aligning relief with actual prejudice.
• Guidance for purchasers of reserved/contested lands: Buyers who step into long-running planning disputes can expect compensation for capital lock-in if acquisition is delayed and possession is with the State, but not automatic rent-like damages retrospectively spanning decades absent evidence of earlier dispossession.
• Administrative practice: Municipal bodies should avoid reliance on ready reckoner rates to depress compensation when comparable sales are available, and should document possession carefully. Where they have put land to public use before acquisition, they face exposure to equitable mesne profits for defined periods—even if blanket rental claims are denied.
• Judicial economy and fairness: The expungement of adverse remarks signals caution to appellate courts against castigating parties who invoke statutory processes. It also encourages reasoned, statute-conforming valuation at the reference stage to minimize appellate correction.

Complex Concepts Simplified

• RFCTLARR Act, 2013: The central law governing land acquisition and compensation. Section 11 is the preliminary notification (akin to intent to acquire). Section 26 prescribes how to determine market value. Section 28 lists factors for computing total compensation, with “seventhly” allowing equitable considerations. Statutory entitlements include solatium (a percentage uplift recognizing compulsory nature) and additional compensation (often 12% per annum) from notification to award.
• Section 26 (comparable sales): The Collector must use sale deeds of similar land in the vicinity from the prior three years. Only the top half of prices by number are averaged (Explanation 2), which filters out outliers on the low side. Where sale instances exist and are genuine, they trump administrative “ready reckoner” rates.
• Ready reckoner (Annual Statement of Rates): Government-published benchmark values primarily for stamp duty. Helpful for guidance but not determinative of market value under Section 26 when actual comparable sales are available.
• Mesne profits vs. “rental compensation”: Mesne profits are damages for wrongful use and occupation by someone in possession without title. They are not automatic; the claimant must show unlawful possession. Courts may calibrate such relief—here, by granting interest on the purchaser’s locked-in capital during the period the State retained possession.
• MRTP Act and lapsing of reservation: Under Section 127 of the MRTP Act, planning reservations can lapse if not acted upon within specified time frames, enabling owners to seek development permissions. Lapse does not itself transfer title to the planning authority.
• TDR (Transferable Development Rights): A planning instrument allowing landowners to receive development credits in lieu of cash when their land is reserved for public purposes.
• SARFAESI proceedings: A lender’s remedy for enforcing security interests in case of default; appointment of a Receiver and taking possession indicates the borrower’s control and ability to deal with the property, evidencing possession.

Key Takeaways

• Comparable sale deeds are the statutory gold standard for valuation under Section 26; ready reckoner cannot supplant them.
• Courts may apply reasonable time-gap escalation (commonly 10% per annum) to align comparable sales with the notification date.
• Pre-acquisition “rental compensation” is not a matter of course; claimants must prove unlawful, exclusive State possession. Absent this, blanket rent claims fail.
• Section 28 (seventhly) is a flexible, equitable safety valve: it can justify mesne profits by awarding interest on a purchaser’s capital for periods when the State occupies the land before paying compensation.
• Punitive costs and adverse remarks against litigants should be sparingly made; bona fide invocation of statutory remedies warrants judicial restraint.

Conclusion

The Supreme Court’s judgment achieves a careful balance between fidelity to statutory valuation mechanics and equitable redress for pre-acquisition deprivation. By reasserting the primacy of comparable sales under Section 26, it curbs administrative tendencies to default to ready reckoner rates. By limiting rental compensation to circumstances of demonstrable unlawful possession, it checks disproportionate awards untethered to actual dispossession. And by innovatively awarding interest on the purchaser’s investment through Section 28 (seventhly), it provides a fair, fact-sensitive remedy for capital lock-in during delayed acquisition.

For acquisition stakeholders, the message is clear: build valuations on real market transactions; document possession meticulously; calibrate equitable relief to proven periods of deprivation; and avoid punitive rhetoric against bona fide litigants. The decision thus refines compensation jurisprudence under the 2013 Act and will guide Reference Courts, acquiring authorities, and High Courts in the years ahead.

Disposition

• Enhanced compensation of Rs. 20,20,11,533 restored, with interest at 9% from 09.01.2017 for one year and 15% thereafter till realization, subject to deduction of amounts already paid.
• “Rental compensation” denied for 1972–2011; equitable mesne profits granted as 8% p.a. on Rs. 1,17,00,000 for 29.07.2011–08.05.2017.
• Adverse observations against the appellant expunged; Rs. 10 lakh costs waived; no order as to costs otherwise.