2026 INSC 683
Prasad Pandurang Tapkir & Anr. v. Assistant Director of Town Planning, Pune District & Ors.
HEAD NOTES
A. Constitution of India — Article 14 — State action — Arbitrariness — Refund of premium for unutilised additional FSI.
(Paras 11 to 18)
Held, where the State permits refund of premium paid for unutilised additional Floor Space Index (FSI) in respect of certain categories of buildings while denying the same benefit for residential projects without any rational basis, such distinction is arbitrary, discriminatory and violative of Article 14. Fairness and non-arbitrariness are inseparable facets of State action.
B. Maharashtra Regional and Town Planning Act, 1966 — Additional FSI — Premium — Refund — Absence of express statutory provision.
(Paras 11 to 18)
Held, mere absence of an express statutory provision providing for refund cannot justify retention of premium paid towards additional FSI where the additional FSI was never utilised and no corresponding benefit accrued to the landowner. The State cannot unjustly enrich itself by retaining consideration for a privilege that remained wholly unexercised.
C. Development Control Regulations — Additional FSI — Differential treatment — Residential projects vis-à-vis institutional buildings.
(Paras 12, 13 & 17)
Held, distinction between refund of premium for unutilised additional FSI relating to educational, medical and institutional buildings on the one hand and residential/group housing projects on the other is irrational and unsupported by any intelligible differentia. Such classification bears no reasonable nexus with the object sought to be achieved.
D. Writ Jurisdiction — Delay and laches — Refund claim.
(Paras 6 & 10)
Held, where the claimant sought refund within the prescribed period and continuously pursued the claim before the authorities and the High Court, delay on the part of the authorities cannot be attributed to the claimant so as to defeat the claim on the ground of laches.
E. State Action — Fairness — Public law obligations.
(Paras 13 to 18)
Held, every action of the State must conform to the constitutional mandate of fairness, reasonableness and equality. Even in matters arising out of statutory permissions and financial levies, the State cannot act arbitrarily or retain amounts without lawful justification.
F. Refund — Interest — Unjust retention of money by State.
(Paras 19 & 20)
Held, where the State wrongfully retains money paid by a citizen for a considerable period, refund must ordinarily carry reasonable interest so as to compensate for the unjust deprivation of the money, even where the statute does not specifically prescribe such interest for the particular transaction.
Analysis of Facts
The appellants obtained permission to undertake a group housing project and paid premium for grant of additional Floor Space Index (FSI). Subsequently, they abandoned the proposed construction and instead obtained permission to develop the property by plotting. Since the additional FSI was never utilised, they sought refund of the premium paid.
The planning authorities rejected the request on the ground that the Development Control Regulations contained no provision for refund of premium relating to residential construction, although refund was permissible in certain cases involving educational, medical and institutional buildings.
The High Court dismissed the writ petition, holding that once the privilege of additional FSI had been granted upon payment of premium, the appellants could not seek refund merely because they chose not to utilise it.
The Supreme Court found that the appellants had never derived any benefit from the additional FSI and that the authorities had permitted refund in comparable situations without any rational basis for excluding residential projects. The refusal to refund the premium was therefore held to be arbitrary and unconstitutional.
Analysis of Law
The Court laid down the following principles:
Article 14 prohibits arbitrary State action in every sphere of governmental activity.
The State cannot retain premium collected for an additional development benefit which was never utilised.
Absence of an express statutory provision for refund cannot legitimise unjust enrichment by the State.
Classification permitting refund for certain categories of buildings while denying the same benefit for residential developments must satisfy the test of reasonable classification under Article 14.
Administrative decisions must be guided by fairness, reasonableness and constitutional equality.
Where public authorities unjustifiably retain money belonging to citizens for prolonged periods, refund should ordinarily carry reasonable interest.
Ratio Decidendi
Premium collected by the State for grant of additional Floor Space Index (FSI) cannot be retained where the additional FSI was never utilised and no corresponding benefit accrued to the landowner. A policy permitting refund of such premium for certain categories of constructions while denying identical relief for residential projects, without any rational basis, is arbitrary, discriminatory and violative of Article 14 of the Constitution. The affected party is consequently entitled to refund of the premium, subject to reasonable administrative deductions, together with appropriate interest for the period of wrongful retention.
