Multi-million-pound plans for 'smart' gas-fired buses to criss-cross the city have been mooted since 1995 but the scheme's backers - Northampton Rapid Transit System Ltd - are accusing the borough council of withdrawing the support it needs to realise its plans.
And today at London's High Court, Mr Justice Forbes ruled the company's complaints 'sufficiently arguable' to justify a full judicial review of the council's stance.
Under attack is the council's decision in April to grant planning consent to English Partnerships - formerly the Commission for New Towns - for constructioin of between 600 and 1,000 new homes on land at Upton, to the west of the city.
The company says it has a 'legitimate expectation' that the council will use its planning powers to support the rapid transport concept and secure financial contributions from developers.
It claims the council has, since 1995, been unequivocal in its support for the scheme, and NRTS - which has already invested heavily in the project - is entitled to expect that the council would not withdraw its support without consultation.
Mr Justice Forbes said it was NRTS's case that the council's refusal to make property developers contribute to the cost of rapid transit would 'in effect mark an end' to the entire project.
He said he 'acknowledged the force' of the company's arguments that no developer was likely to contribute to the cost of rapid transit without being required to do so by the borough council.
The judge said NRTS - which is jointly owned by Rapid Transit International Plc and Stagecoach Holdings Plc - had 'established a sufficiently arguable case on the legitimate expectation issue for the grant of permission'.
No date has yet been set for the full hearing of the case, but the legal costs of the action may already run into six figures.
The council denies ever making any committment that it would continue to support the rapid transport plans or that it would secure funding for it from other developers.
The rapid transport network - if it ever becomes a reality - will serve five routes into the city.
The route directly involved in this case is 'Route 5' which runs due west from the city centre and is projected to cost almost£8m.
Gas-fired buses on the route will run partly on rails and partly on roads and will have 'smart' capabilities to detect traffic signals, the court heard.
The western edge of the city has been targeted for development of about 3,600 new homes. Land at the former St Crispin's Hospital will make way for about 900 homes,but English Partnerships' land has capacity for 2,700.
The borough council granted planning consent for a 40-hectare section of English Partnerships' land on April 17 this year and the site will have capacity for 600-1,000 new homes.
But the development will now have to be put on hold pending the outcome of NRTS's judicial review challenge.