2026 INSC 683 Non-reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

Civil Appeal No. ……….. of 2026

(@ Special Leave Petition (Civil) No.9666 of 2023)

Prasad Pandurang Tapkir and another …Appellants

versus

The Assistant Director of Town Planning,

Pune District, Pune and others …Respondents

J U D G M E N T

SANJAY KUMAR, J

1. Leave granted.

2. Denial of a refund to the appellants, Prasad Pandurang Tapkir and

Shakuntala Pandurang Tapkir, is in issue.

3. By judgment dated 17.11.2022, a Division Bench of the Bombay

High Court dismissed their writ petition on the ground that there was no

provision for such refund in the statutory scheme. Hence, this appeal.

4. The appellants owned an extent of agricultural land in S urvey No.

103/2/2 of Alandi Taluka in Pune District. They wanted to develop this land

under the scheme for homogenous development in areas adjoining

municipal corporation limits, formulated by the Government of

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Maharashtra, which enabled modification of the regional plan. On

25.05.2012, they sought conversion of the use of their land so as to

undertake group housing construction thereon. In terms of the regulations

framed, premium was payable for construction over and above what was

permissible under the Floor Space Index (FSI) Regulations. On

18.06.2012, premium rates were notified by the District Collector, Pune

District. On 30.08.2012, upon the appellants’ request for extra FSI, the

premium payable was determined and the appellants paid ₹30,46,290/- to

the authorities. On 08.10.2012, the Sub -Divisional Officer, Khed, Pune,

granted permission for such conversion and construction. However, the

appellants abandoned their group housing construction plan and wanted

to make plots instead. Their application dated 16.12.2013 in this regard

was accepted and permission was granted to take up the plotting, vide

order dated 19.04.2014, making it clear that the terms and conditions of

the order dated 08.10.2012 would remain in force.

5. On 13.08.2015, the appellants applied for refund of the premium of

₹30,46,290/- paid by them, as they had not utilized the extra FSI. Their

plea in this regard ultimately came to be rejected by the Assistant Director,

Town Planning, Pune Branch, Pune, vide order dated 15.02.2020, on the

ground that there was no provision in the Development Control

Regulations permitting such refund. This order was challenged by the

appellants before the High Court, by way of Writ Petition No. 9040 of 2021.

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The writ petition came to be dismissed by way of the impugned order.

Therein, the Division Bench observed that wherever refund was

permissible, the same was expressly provided for in the regulations and

the appellants could not seek return of the premium paid by them, as

refund thereof was not contemplated. The Bench noted that the State was

not to blame for the failure of the ir project and it was the appellants

themselves who had abandoned it. Pointing out that the regulation of FSI

is in public interest but a privilege had been granted to the appellants upon

payment of premium, the Bench held that it was for them to use the same

as the process ended upon payment of such premium. The Bench opined

that the decision not to utilize the privilege was entirely that of the

appellants and, having relinquished the privilege granted, it was not open

to them to seek refund of the premium from the public exchequer. The writ

petition was accordingly dismissed.

6. At this stage, we may note that the High Court also held against the

appellants on the ground of delay, as they had filed their first writ petition

only in the year 2018. However, we find that the appellants sought refund

of the premium paid by them on 13.08.2015 itself. This claim on their part

was within three years of making the payment on 30.08.2012 and the

inaction of the authorities upon their request cannot be attributed to them

as delay on their part. In this regard, we may note that the Sub-Divisional

Officer, Khed, Pune, addressed letter dated 19.11.2015 to the Assistant

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Director, Town Planning, Pune District, recommending the case of the

appellants. Therein, he stated that as the appellants had not undertaken

construction as proposed by them, it would be appropriate to refund the

amount paid by them. Despite such recommendation, no action was taken

by the authorities, constraining the appellants to approach the High Court

by way of Writ Petition No. 8586 of 2018. The said w rit petition was

disposed of on 15.01.2020, directing the authorities to take a decision on

the appellants’ request for refund of the premium paid by them .

7. Pursuant thereto, the Assistant Director, Town Planning, Pune

Branch, passed the order dated 15.02.2020. Therein, he referred to the

letter dated 13.02.2020 of the Director, Urban/Town Planning,

Maharashtra State, Pune, stating that GR No.TPS-1815/2647/CR-13/

15/UD-13 dated 14.03.2016 permitted refund of premium paid for

additional FSI for educational, medical institutions and star hotels but, as

the present case involved premium for residential construction, those

directions were not applicable. Reiterating this view, the Assistant Director

rejected the appellants’ plea for return of the premium, stating that there

was no provision in the Development Control Regulations for such refund.

8. In this context, we may note that the Government of Maharashtra

issued directives under Section 154 of the Maharashtra Regional and

Town Planning Act, 1966

1

, vide GR No. TPS-1815/2647/CR-13/UD-13

1

For short, ‘the MRTP Act’

5

dated 14.03.2016, regarding levy and sharing of the premium between the

Government and local authorities for granting additional FSI to

educational, medical institutions, institutional buildings and star category

hotels. The directives were applicable to the Pune Metropolitan Regional

Development Authority also. Notably, reference was made therein to the

earlier directives issued on 14.12.1998 and 26.06.2006, but the same

have not been placed on record. Thereafter, in exercise of power under

Section 37 of the MRTP Act, the Government modified the Development

Control Regulations of Greater Mumbai, 1991, vide Notice dated

08.08.2019. It was stated therein that provision was there for refund of the

premium for additional FSI that was not utilized within four years for

construction of educational, medical institutions, institutional buildings and

star category hotels, by deducting 10% administration charges, but due to

oversight the same was not incorporated in the regulations. Accordingly,

exercising power under Section 37(1AA) of the MRTP Act, the

Government proposed modification of the regulations, which was to come

into effect forthwith, to enable refund of such premium.

9. Strangely, the Assistant Director of Town Planning, Pune District,

Pune, filed a counter affidavit before us taking a stand contrary to what

was stated in the rejection order dated 15.02.2020. He claimed that the

premium paid for exemption of certain components from FSI computation

was different from the premium paid to purchase additional FSI. According

6

to him, the former is a charge while the latter is amenable to refund, if not

utilized. He asserted that the appellants’ reliance upon the GRs dated

14.03.2016 and 08.08.2019 was misconceived, as those GRs pertained

to the Municipal Corporation of Greater Mumbai area and had no

application to Pune District. He further stated that the premium paid by the

appellants was credited to the consolidated fund of the State and, in the

absence of a regulation permitting refund thereof, return of the premium

could not be claimed by the appellants, even if the privilege granted to

them in relation thereto was not utilized.

10. As matters stand, the admitted position is that the appellants never

undertook construction on their land as proposed by them. Further, the

payment of ₹30,46,290/- made by them was for additional FSI for the

group housing construction that they proposed to take up on their land.

The verbal jugglery in the counter affidavit, so as to make out a difference

between additional FSI and ‘exemption of certain components from FSI

computation’ is ludicrous, as the effect of both is one and the same, i.e.,

extra FSI. In any event, the construction plan was given up and the

appellants proposed to plot their land, which was permitted by the

authorities on 19.04.2014. Surprisingly, the terms and conditions of the

earlier order dated 08.10.2012 were stated to be binding upon the

appellants in relation to the proposed plotting. However, we find that there

was no mention in the order dated 08.10.2012 about the premium paid by

7

the appellants for additional FSI. The appellants sought refund of the said

premium on 13.08.2015. The first writ petition filed by them, viz., WP No.

8586 of 2018 was within three years therefrom and, consequent upon the

order dated 15.01.2020 passed therein, the rejection order dated

15.02.2020 came to be passed, which was challenged by way of the

subject writ petition filed in the year 2021. There was, thus, no delay on

their part, so to speak of.

11. When it is not in dispute that the appellants did not utilize the

additional FSI granted to them upon payment of premium of ₹30,46,290/-

it was not just and fair on the part of the authorities to retain the premium

paid by them, while permitting the change from construction to plotting,

when no tangible benefit accrued to them therefrom. The ostensible

justification offered by the State for doing so is that no specific provision

is available in the statutory scheme for refund of such premium. On one

hand, the order dated 15.02.2020 stated that the refund could not be

considered as the premium paid by the appellants was for additional FSI

for residential construction whereas the regulations permit such refund for

unutilized FSI relatable to educational and medical institutions,

institutional buildings and star category hotels. On the other hand, the

stand taken in the counter affidavit filed before us is that the regulations

that permit such refund are applicable only to the Municipal Corporation

of Greater Mumbai area and have no application in Pune District. Further,

8

it is stated that the Government Notification dated 28.08.2009 , under

which the appellants paid the premium for exclusion of specific areas from

FSI calculation had no provision for refund. In the documents placed

before us, we find reference to the Development Control Regulations for

peripheral areas falling within 10 Kms. range from the boundaries of Pune

and Pimpri Chinchwad Municipal Corporation, approved by the

Government of Maharashtra, vide Letter No. TPS-1809/650/Pra.No.-

1654/09/NaVi-13 dated 28.08.2009, but the same have not been

produced. The claim in the counter affidavit, therefore, cannot even be put

to test.

12. In any event, when the Government made provision for refund of the

premium paid for un utilized additional FSI in relation to educational and

medical institutions, institutional buildings and star category hotels in

Mumbai, the same logic should apply to premium paid for unutilized FSI

for residential constructions, be it in Mumbai or elsewhere in the State of

Maharashtra. The effect of both is one and the same and by mere

wordplay, the authorities cannot seek to distinguish between the two.

Further, the distinction sought to be drawn between areas coming under

the jurisdiction of the Municipal Corporation of Greater Mumbai and other

areas in the State of Maharashtra, including Pune District, is at variance

with the policy underlying the directives issued by the Government of

Maharashtra under GR dated 14.03.2016 with regard to levy and sharing

9

of premium collected for additional FSI, not only in Mumbai, but in other

parts of Maharashtra, including Pune District. As noted earlier, the

Development Control Regulations dated 28.08.2009, which are stated to

have application in Pune District, have not been placed on record and,

similarly, the earlier directives issued on 14.12.1998 and 26.06.2006,

which find mention in the GR dated 14.03.2016, have also not been

produced. Those directives were also issued in the context of the levy and

sharing of premium collected for additional FSI. When such premium was

being collected across the State and was being shared by the

Government with the local authorities in different parts of the State, it is

patently arbitrary and discriminatory on the part of the authorities to seek

to distinguish between Mumbai and the rest of the State, when it comes

to refund of premium for unutilized additional FSI.

13. The further distinction that has been drawn between additional FSI

for educational and medical institutions, institutional buildings and star

category hotels as opposed to additional FSI for any other constructions ,

including residential, equally defies logic. The authorities’ decision in this

regard does not manifest any reason as to why such benefit should be

limited only to those identified buildings and to no other. Their action,

therefore, suffers from sheer arbitrariness. That apart, discrimination is

writ large on the face of it. Further, the refusal by the authorities to refund

the premium paid by the appellants is also contrary to the principle of

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fairness, a facet of non-arbitrariness, intrinsic to and inherent in Article 14

of the Constitution.

14. In this regard, useful reference may be made to E.P. Royappa vs.

State of Tamil Nadu and another

2

, wherein a Constitution Bench held

to the effect that equality is antithetical to arbitrariness as equality and

arbitrariness are sworn enemies; one belonging to the rule of law in a

republic, while the other, to the whims and caprice of an absolute

monarch. The Bench observed that, where an act is arbitrary, it is implicit

in it that it is unequal, according to political logic as well as constitutional

law, and would, therefore, be violative of Article 14. It was held that Articles

14 and 16 strike at arbitrariness in State action, so as to ensure fairness

and equality of treatment by requiring that State action must be based on

valid relevant principles applicable alike to all similarly situated and it must

not be guided by any extraneous or irrelevant considerations, because

that would be denial of equality. Though, the above observations were

made in the context of public employment, they would be equally

applicable to any arbitrary action on the part of the State.

15. Again, in Kumari Shrilekha Vidyarthi and others vs. State of U.P.

and others

3

, this Court observed that the philosophy of the Constitution

does not contemplate exclusion of Article 14 - non-arbitrariness which is

2

(1974) 4 SCC 3

3

(1991) 1 SCC 212

11

basic to rule of law - from State actions in the contractual field also, as all

actions of the State are meant for public good and are expected to be fair

and just. It was further observed that the Constitution does not envisage

or permit unfairness or unreasonableness in State actions in any sphere

of its activity, contrary to the professed ideals in the Preamble. It was held

that the requirement of Article 14, being the duty to act fairly, justly and

reasonably, there is nothing which militates against the concept of

requiring the State always to so act, even in contractual matters. It was

pointed out that there is a basic difference between the acts of the State

which must invariably be in public interest and those of a private individual,

engaged in similar activities, being primarily for personal gain, which may

or may not promote public interest.

16. Earlier, in Ajay Hasia and others vs. Khalid Mujib Sehravardi and

others

4

, another Constitution Bench observed that, wherever there is

arbitrariness in State action, whether it be of the legislature or of the

executive or of an ‘authority’ under Article 12, Article 14 immediately

springs into action and strikes down such State action. It was further

observed that the concept of reasonableness and non-arbitrariness

pervades the entire constitutional scheme and is a golden thread which

runs through the whole of the fabric of the Constitution. Affirming this

principle in Dwarkadas Marfatia and Sons vs. Board of Trustees of the

4

(1981) 1 SCC 722

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Port of Bombay

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, a 3-Judge Bench of this Court held that, where there is

arbitrariness in State action, Article 14 springs in and judicial review strikes

down such an action, as every action of the executive authority must be

subject to the rule of law and must be informed by reason. It was

concluded that whatever be the activity of a public authority, it should meet

the test of Article 14. More recently, in Securities and Exchange Board

of India vs. Sunil Krishna Khaitan and others

6

, this Court observed that

the mandate of Article 14 of the Constitution requires fairness in every

action by the State and non- arbitrariness in essence and substance.

17. Viewed in the backdrop of the above principles, the distinction

sought to be drawn by the authorities between a case of unutilized

additional FSI for educational institutions, medical institutions, institutional

buildings and star category hotels as opposed to unutilized additional FSI

for residential/group housing projects is bereft of rationale. There is no

reason as to why unutilized additional FSI in the former case should be

placed on a higher pedestal when compared to unutilized additional FSI

in the latter one, in the context of refund of the premium paid for such

unutilized additional FSI. In fact, logic and fairness demand that premium

paid for unutilized additional FSI for a residential/group housing project,

which would eventually impact either an individual homebuyer or a

5

(1989) 3 SCC 293

6

(2023) 2 SCC 643

13

developer, who would invariably pass it on to his homebuyer, should stand

on a higher footing when compared to premium paid for unutilized

additional FSI for commercial/semi-commercial buildings, wherein

educational or medical institutions or any other institution or a star

category hotel will be operated.

18. The policy of the authorities in permitting refund of the premium paid

for unutilized additional FSI in the case of the aforestated identified

constructions while denying such relief to the appellants on the ground

that they proposed to put up a group housing project on their land,

therefore, defies comprehension and is, thus, clearly whimsical. The

distinction drawn in that regard smacks of arbitrariness on the part of the

authorities. The appellants would, therefore, be entitled to refund of the

premium paid by them for the unutilized additional FSI, subject to

deduction of 10% thereof towards administration charges, as was made

applicable to the identified buildings under the extant policy.

19. The next issue is whether the appellants would be entitled to interest

on the amount withheld from them for all these years. In th at regard, we

may refer to Chapter VI-A of the MRTP Act, which deals with development

charges. Section 124H therein deals with the procedure for filing an

appeal under Section 124G in relation to assessment and recovery of

development charges under Section 124E. Section 124H(b) provides that

an appellant who seeks to assail a notice of assessment, by way of an

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appeal under Section 124G, has to deposit the amount claimed in the

notice of assessment together with the amount of interest, if any due

thereon, for entertainment of such appeal. Section 124I is titled ‘Interest

on amount of enhanced assessment or of refund’ and states that, on the

amount of difference payable on enhancement of assessment, pursuant

to an order passed in an appeal under Section 124G, or any amount from

out of the amount paid under Section 124H(b) that is required to be

refunded to an appellant, as a result of the order passed in an appeal

under Section 124G, interest @ 18% per annum shall be payable.

Therefore, refund of the amount paid in the context of an appeal carries

interest. However, as the issue presently hinges on a different foundation

altogether, adopting the same rate of interest may not be justified.

20. On the above analysis, the appeal is allowed and the impugned

judgment dated 17.11.2022 passed by the Bombay High Court as well as

the rejection order dated 15.02.2020 passed by the Assistant Director,

Town Planning, Pune Branch, Pune, are set aside . The appellants are

held entitled to refund of the premium paid by them towards additional

FSI, which was never utilized by them. However, in terms of the norms

applicable to other similar refunds, 10% out of the sum of ₹ 30,46,290/-,

i.e., ₹3,04,629/-, shall be deductible towards administration charges.

Interest shall also be payable to the appellants upon the amount that is

refundable to them, which was retained by the a uthorities for more than a

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decade and a half. The sum of ₹27,41,661/- shall, accordingly, be

refunded to the appellants with simple interest thereon @ 7% per annum,

from the date of deposit till the date of actual payment, within two months

from today.

Pending application(s), if any, shall stand disposed of.

Parties shall bear their own costs.

……………………... ,J.

[SANJAY KUMAR]

.……………………... ,J.

[K. VINOD CHANDRAN]

New Delhi;

July 13, 2026.