The Supreme Court has ruled that the Maharashtra authorities cannot retain premium collected for additional Floor Space Index (FSI) when the benefit was never used by the landowners. Holding the State's action to be arbitrary and unfair, the Court directed refund of the amount after deducting 10% as administrative charges and also awarded 7% annual interest from the date of deposit.
Background of the Case
The appeal was filed by Prasad Pandurang Tapkir and another after the Bombay High Court refused to direct refund of a premium paid for additional FSI. The High Court had held that the applicable statutory framework contained no provision permitting such a refund.
The appellants owned agricultural land in Pune district and, in 2012, sought permission to develop it as a group housing project. To obtain additional FSI beyond the permissible limit, they deposited ₹30,46,290 as premium with the authorities. Permission for the project was granted.
However, the housing project was later abandoned. Instead, the owners chose to develop the land through plotting, which the authorities approved in 2014. Since the additional FSI was never used, the appellants applied in 2015 for refund of the premium. Their request was eventually rejected on the ground that the Development Control Regulations did not provide for such a refund.
What the Supreme Court Examined
The Supreme Court first rejected the finding that the claim suffered from delay. It noted that the landowners had sought refund within three years of making the payment and had continuously pursued the matter before the authorities and the High Court. The delay, the Court observed, resulted from administrative inaction rather than any lapse on the appellants' part.
The Bench also examined the State's stand that refunds were permitted only in limited cases, such as additional FSI obtained for educational institutions, medical institutions, institutional buildings and star-category hotels.
Court's Observations
The Bench found no rational basis for denying a similar benefit to residential or group housing projects when the additional FSI had remained completely unutilized.
Observing that fairness is an essential part of Article 14 of the Constitution, the Court said,
"When it is not in dispute that the appellants did not utilize the additional FSI... it was not just and fair on the part of the authorities to retain the premium paid by them."
The Court further noted that the distinction drawn by the authorities between different categories of construction lacked any logical justification.
In another significant observation, the Bench said the policy of granting refunds for some categories while refusing the same relief for residential projects "defies comprehension" and was "clearly whimsical." It held that such differentiation was arbitrary and violated the constitutional guarantee of equality under Article 14.
The Court also rejected the State's attempt to distinguish between Mumbai and other parts of Maharashtra regarding refund policies, observing that such a distinction was inconsistent with the broader policy governing levy and sharing of FSI premiums across the State.
Decision
Allowing the appeal, the Supreme Court set aside both the Bombay High Court's judgment dated 17 November 2022
The Court directed the authorities to refund the premium after deducting 10% towards administrative charges. Out of the total premium of ₹30,46,290, a sum of ₹27,41,661 is to be refunded.
The Bench further ordered payment of simple interest at 7% per annum from the date of deposit until the actual payment, noting that the authorities had retained the money for more than a decade without conferring any corresponding benefit on the appellants. The refund has been directed to be made within two months, while each party will bear its own costs.
Case Details:
Case Title: Prasad Pandurang Tapkir and another vs. The Assistant Director of Town Planning, Pune District, Pune and others
Case Number: Civil Appeal No. … of 2026 (arising out of SLP (Civil) No. 9666 of 2023)
Judge: Justice Sanjay Kumar and Justice K. Vinod Chandran
Decision Date: 13 July 2026
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