Can a Landowner Claim Refund of Premium Paid for Unused Additional FSI? Supreme Court Answers
Case Name: Prasad Pandurang Tapkir & Another v. The Assistant Director of Town Planning, Pune District, Pune & Others
Date of Judgment: 13 July 2026
Citation: 2026 INSC 683 | Civil Appeal arising out of SLP (Civil) No. 9666 of 2023
Bench: Justice Sanjay Kumar and Justice K. Vinod Chandran
Held: The Supreme Court held that the State cannot arbitrarily retain premium paid for additional Floor Space Index (FSI) when the additional FSI was never utilized. The Court ruled that denying refund for unutilized FSI in residential projects, while permitting such refunds for educational, medical and certain commercial projects, is arbitrary, discriminatory and violative of Article 14 of the Constitution.
Summary: The appellants had paid over ₹30.46 lakh as premium for obtaining additional FSI for a proposed group housing project in Pune. However, they later abandoned the construction project and instead obtained permission to develop the land by plotting. Since the additional FSI was never utilized, they sought refund of the premium, but the authorities rejected their request on the ground that the Development Control Regulations did not provide for such refund in residential projects.
The Bombay High Court upheld the rejection, observing that the statutory scheme contained no provision for refund. Before the Supreme Court, the appellants contended that the State itself permitted refund of premium for unutilized additional FSI in respect of educational, medical and certain other institutional projects and that denying the same benefit to residential projects was arbitrary.
Allowing the appeal, the Supreme Court held that there was no rational basis for such classification. It observed that fairness and non-arbitrariness are integral to Article 14 and the State cannot unjustly retain money where no benefit accrued to the landowners from the additional FSI. The Court further held that the distinction drawn by the authorities between residential projects and other categories of construction was wholly unreasonable.
Decision: The Supreme Court allowed the appeal, set aside the Bombay High Court’s judgment and the rejection order passed by the planning authority, and directed refund of the premium after deducting 10% towards administrative charges. It further directed payment of simple interest at 7% per annum on the refundable amount from the date of deposit until actual payment