Bombay High Court Rules 5% Allotment Cap in Housing Schemes Is Prospective, Not Retrospective

Mumbai, July 29 — In a significant ruling, a Full Bench of the Bombay High Court has clarified that the Supreme Court's 1990 judgment in the Shantistar Builders case, which capped government allotment in private housing schemes at 5%, will only apply prospectively. The ruling means that housing projects sanctioned before January 31, 1990 are not entitled to the benefit of the 5% cap, and must comply with the earlier terms of allotment.

The verdict came in response to a plea by Dattatray Laxman Desai, a Kolhapur-based builder, who had challenged the government’s demand to surrender 30% of the flats in his 1989 housing project for allocation to weaker sections.

Builder Challenged 30% Allotment Demand

Desai's housing scheme, sanctioned in 1989, was subject to an existing requirement to hand over 30% of flats to the government. In his petition, Desai relied on the Supreme Court’s ruling in the Shantistar Builders case (1990) and a subsequent Government Resolution (GR) from 1997, both of which laid down a cap of 5% on such allotments.

Desai argued that the principles of equality and non-discrimination under the Constitution demanded that his project, which was similar in nature to the one involved in Shantistar, should receive the same treatment. He also sought to quash penalty orders issued against him in 2007 for failure to comply with the 30% allocation requirement and delays in project execution.

However, the three-judge bench, comprising Justices Ravindra Ghuge, Sandeep Marne, and Milind Sathaye, disagreed with Desai's argument, holding that the Shantistar ruling does not have retrospective effect.

Court: 5% Cap Applies Only After January 31, 1990

The High Court clearly stated that the 5% cap introduced by the Supreme Court in Shantistar was intended only for housing schemes sanctioned after the date of the judgment — January 31, 1990. Since Desai’s scheme was cleared prior to that date, the court found that he cannot retrospectively claim the 5% limit.

The judgment reads:

“The Shantistar ruling was not intended to undo existing obligations under schemes already sanctioned. To apply the 5% allotment cap to past projects would defeat the principle of prospective application unless specifically stated otherwise.”

The Court backed its stance by citing past precedents, including rulings in Karmarahi Kanji Chandan and Sardar Dalip Singh, both delivered by the Bombay High Court, and the Shridhar Shetty (2020) ruling by the Supreme Court. All of these judgments consistently held that the 5% government allotment cap in housing schemes is prospective.
 

Penalties and Proceedings Against Desai to Continue
 

Desai's troubles are not limited to the allotment issue. The builder had also sought relief from penalties imposed for non-compliance. The court noted that the state government had granted time extensions for Desai to fulfill his obligations under the 1989 scheme. Despite this, the builder failed to meet the necessary conditions, leading to penalty orders amounting to ₹20.65 lakh, and criminal proceedings being initiated.

Given the clarity in legal position regarding allotment limits, the court has now disposed of the constitutional challenge and directed that the matter be placed before a Division Bench for further proceedings regarding penalties and implementation.

 

Impact of the Ruling

This verdict is expected to have a wider impact on builders and developers across Maharashtra and possibly other states. It reaffirms that policy changes in law or government resolutions, unless explicitly made retrospective, cannot be invoked by developers in older housing schemes to avoid their previously agreed-upon obligations.

Legal experts believe the ruling will bring certainty to the application of housing laws, especially concerning affordable housing and public allocation components in private schemes.

According to senior legal analyst Anjali Mehta,

“This judgment strengthens the principle of prospective application and protects the government’s interest in ensuring housing availability for economically weaker sections in older schemes.”
 

Next Steps in the Case
 

The Full Bench’s ruling resolves the constitutional and interpretative questions regarding the scope and applicability of the Shantistar judgment. However, the matter related to Desai’s penalties, compliance failure, and possible criminal liability will now be heard by a Division Bench for further legal and factual analysis.

The court has instructed the High Court Registry to list the matter for continuation before an appropriate bench, marking the end of one phase in a prolonged legal battle but signalling more courtroom deliberations to come.