Legitimate expectations, doctrine of

2001 (2) SCC 326

Para 4: We may notice that the distinction sough to be made by the High Court that this is not a case involving grant of a fresh agency but extension of the existing one does not make much sense. An extension of an agreement or renewal is granted on the expiry of the period of the existing agreement. Either the extension or the renewal of the existing agreement may be on the same terms or on different terms. If it is a case of extension of the existing agreement on the same terms and conditions and such consideration gives rise to a question of legitimate expectation being a part of the concerned agreement, economic consideration of getting higher bid for the same period would be a relevant consideration. If the Governmental authorities had found that it would be feasible to have the agency, as in the present case, on fresh terms by enhancing the amount payable to the Government, it would be a relevant factor and in such a case it cannot be said that the legitimate expectation of the respondent had been affected because the public interest would out-weigh the extension of the period of the agreement.

The doctrine of "legitimate expectation" is only an aspect of Art. 14 of the Constitution in dealing with the citizens in a non-arbitrary manner and thus, by itself, does not give rise to an enforceable right but in testing the action taken by the Government authority whether arbitrary or otherwise it would be relevant. The decision in Food Corporation of India V/s. M/s. Kamdhenu Cattle Feed Industries (supra) does not lay down any principle which detracts from what we have stated now. In a case where the agency is granted for collection of toll or taxes, as in the present case, it can "be easily discerned that the claim of the -respondent for extension of the period of the agency would not come in the way of the Government if it is economically more beneficial to have a fresh agreement by enhancing the consideration payable to the Government. In such an event, it cannot be said that the action of the Government inviting fresh bids is arbitrary. Moreover, the respondent can also participate in the tender process and get his bid considered. Hence, we do not think that the view taken by the High Court can be justified.

2005 (1) SCC 625

Para 2: In support of the appeals the primary stands raised by the appellants are:

The doctrines of promissory estoppel and legitimate expectation were applicable to the facts of the case. There was no material to show existence of any overriding public interest to rule out application of the aforesaid doctrines, there was no scope for retrospective withdrawal. In any event, before withdrawal of the benefits, no opportunity of hearing was granted. The High Court erroneously came to hold that the State Government had not filed any counter. The materials which were produced before the High Court and on the basis of which it was decided that the decision of the Government is in order were not even pleaded in the pleadings and during arguments. The appellants were taken by surprise by production of materials which were not even disclosed to the appellants. The contents of the files which were produced before the High Court and on which reliance was placed to hold against the appellants are not known to the appellants. In other words, there was clear violation of the principles of natural justice. The Government's letter dated 28.12.1988 refers to some decision, but in the absence of any authentication as required under Art. 166 of the Constitution the same is ineffective. In any event, the retrospective withdrawal of the benefit on the basis of an executive decision is impermissible.

Para 3: In response, learned counsel for the respondent State submitted that the appellants have failed to adduce any evidence or material to show that they were in any way induced by any governmental action to set up industries. In fact, the Government of Tamil Nadu vide GOMs No. 1294 dated 24.10.1975 granted exemption from purchase tax on sugarcane in favour of sugar mills established in "cooperative and public sectors" in the form of annual subsidy equivalent to purchase tax on sugarcane. There was no scope for any misunderstanding that it applied to any private sector participation in the sphere of sugar manufacturing. The commercial productions were started in the case of the appellants in Ponni Sugars (Erode) Ltd. V/s. Govt. of T.N. on 27.1.1984 and in Bannari Amman Sugars Ltd. V/s. CTO on 22.1.1986. The appellants only made representation to the Government subsequently claiming exemption on a par with the cooperative and public sector mills. As there was no inducement or assurance, the question of any promissory estoppel did not arise. So far as legitimate expectation aspect is concerned, it is too well known that the benefit extended can be withdrawn and with this knowledge if the units are set up, the principle of legitimate expectation does not apply. The High Court recorded the following findings on the factual aspects:

(1) The respondents have established their units prior to the government orders granting the subsidy and they have no vested right to claim exemption.

(2) No inducement was made in the government orders to establish the units.

(3) The respondents have not acted on the basis of the government orders for establishing the units.

(4) The grant of subsidy is a concession and the Government has got good reasons for modifying the scheme in public interest.

(5) No prejudice is caused to the respondents since the scheme was intended to make the units viable and the modified scheme provides for safeguards to that extent.

(6) The order granting subsidy can be withdrawn in public interest. The Government has exercised its right to modify the scheme in the interest of public revenue.

Para 4: The stand taken by the present appellants before the Tribunal and the High Court was rejected. With reference to the files produced, certain factual conclusions were arrived at, the correctness of those form the core challenge in these appeals.

Para 5: Estoppel is a rule of equity which has gained new dimensions in recent years. A new class of estoppel has come to be recognized by the courts in this country as well as in England. The doctrine of "promissory estoppel" has assumed importance in recent years though it was dimly noticed in some of the earlier cases. The leading case on the subject is Central London Property Trust Ltd. V/s. High Trees House Ltd. The rule laid down in High Trees case again came up for consideration before the King's Bench in Combe V/s. Combe. Therein the Court ruled that the principle stated in High Trees case is that, where one party has, by his words or conduct, made to the other a promise or assurance which was intended to affect the legal relations between them and to be acted on accordingly, then, once the other party has taken him at his word and acted on it, the party who gave the promise or assurance cannot afterwards be allowed to revert to the previous legal relationship as if no such promise or assurance had been made by him, but he must accept their legal relations subject to the qualification which he himself has so introduced, even though it is not supported in point of law by any consideration, but only by his word. But that principle does not create any cause of action, which did not exist before; so that, where a promise is made which is not supported by any consideration, the promise cannot bring an action on the basis of that promise. The principle enunciated in High Trees case was also recognized by the House of Lords in Tool Metal Mfg. Co. Ltd. V/s. Tungsten Electric Co. Ltd. That principle was adopted by this Court in Union of India V/s. Anglo Afghan agencies, and Turner Morrison and Co. Ltd. V/s. Hungerford Investment Trust Ltd. Doctrine of "promissory estoppel" has been evolved by the courts, on the principles of equity, to avoid injustice. "Promissory estoppel" is defined in Black's Law Dictionary as an estoppel "which arises when there is a promise which promisor should reasonably expect to induce action or forbearance of a definite and substantial character on part of promisee, and which does induce such action or forbearance, and such promise is binding if injustice can be avoided only by enforcement of promise". So far as this Court is concerned, it invoked the doctrine in Anglo Afghan Agencies case in which it was. inter alia, laid down that even though the case would not fall within the terms of Sec. 115 of the Indian Evidence Act, 1872 (in short "the Evidence Act") which enacts the rule of estoppel, it would still be open to a party who had acted on a representation made by the Government to claim that the Government should be bound to carry out the promise made by it even though the promise was not recorded in the form of a formal contract as required by Art. 299 of the Constitution of India.

Para 6: In the backdrop, let us travel a little distance into the past to understand the evolution of the doctrine of "promissory estoppel". Dixon, J., an Australian jurist, in Grundt V/s. Great Boulder Gold Mines Pty. Ltd. laid down as under:

"It is often said simply that the party asserting the estoppel must have been induced to act to his detriment. Although substantially such a statement is correct and leads to no misunderstanding, it does not bring out clearly the basal purpose of the doctrine. That purpose is to avoid or prevent a detriment to the party asserting the estoppel by compelling the opposite party to adhere to the assumption upon which the former acted or abstained from acting. This means that the real detriment or harm from which the law seeks to give protection is that which would flow from the change of position if the assumptions were deserted that led to it."

The principle, set out above, was reiterated by Lord Denning in High Trees case. This principle has been evolved by equity to avoid injustice. It is neither in the realm of contract nor in the realm of estoppel. Its object is to interpose equity shorn of its form to mitigate the rigour of strict law, as noted in Anglo Afghan Agencies case and Sharma Transport V/s. Govt. of Andhra Pradesh.

Para 7: No vested right as to tax-holding is acquired by a person who is granted concession. If any concession has been given it can be withdrawn at any time and no time-limit should be insisted upon before it was withdrawn. The rule of promissory estoppel can be invoked only if on the basis of representation made by the Government, the industry was established to avail benefit of exemption. In Kasinka Trading V/s. Union of India it was held that the doctrine of promissory estoppel represents a principle evolved by equity to avoid injustice.

Para 8: A person may have a "legitimate expectation" of being treated in a certain way by an administrative authority even though he has no legal right in private law to receive such treatment. The expectation may arise either from a representation or promise made by the authority, including an implied representation, or from consistent past practice. The doctrine of legitimate expectation has an important place in the developing law of judicial review. It is, however, not necessary to explore the doctrine in this case, it is enough merely to note that a legitimate expectation can provide a sufficient interest to enable one who cannot point to the existence of a substantive right to obtain the leave of the court to apply for judicial review. It is generally agreed that "legitimate expectation" gives the applicant sufficient locus standi for judicial review and that the doctrine of legitimate expectation to be confined mostly to right of a fair hearing before a decision which results in negativing a promise or withdrawing an undertaking is taken. The doctrine does not give scope to claim relief straightaway from the administrative authorities as no crystallised right as such is involved. The protection of such legitimate expectation does not require the fulfilment of the expectation where an overriding public interest requires otherwise. In other words, where a person's legitimate expectation is not fulfilled by taking a particular decision then the decision-maker should justify the denial of such expectation by showing some overriding public interest.

Para 9: While the discretion to change the policy in exercise of the executive power, when not trammelled by any statute or rule is wide enough, what is imperative and implicit in terms of Art. 14 is that a change in policy must be made fairly and should not give the impression that it was so done arbitrarily or by any ulterior criteria. The wide sweep of Art. 14 and the requirement of every State action qualifying for its validity on this touchstone irrespective of the field of activity of the State is an accepted tenet. The basic requirement of Art. 14 is fairness in action by the State, and non-arbitrariness in essence and substance is the heart beat of fair play. Actions are amenable, in the panorama of judicial review only to the extent that the State must act validly for discernible reasons, not whimsically for any ulterior purpose. The meaning and true import and concept of arbitrariness is more easily visualised than precisely defined. A question whether the impugned action is arbitrary or not is to be ultimately answered on the facts and circumstances of a given case. A basic and obvious test to apply in such cases is to see whether there is any discernible principle emerging from the impugned action and if so, does it really satisfy the test of reasonableness.

Para 10: Where a particular mode is prescribed for doing an act and there is no impediment in adopting the procedure, the deviation to act in different manner which does not disclose any discernible principle which is reasonable itself shall be labelled as arbitrary. Every State action must be informed by reason and it follows that an act uninformed by reason is per se arbitrary.

Para 11: This Court's observations in G.B. Mahajan V/s. Jalgaon Municipal Council are kept out of the lush field of administrative policy except where policy is inconsistent with the express or implied provision of a statute which creates the power to which the policy relates or where a decision made in purported exercise of power is such that a repository of the power acting reasonably and in good faith could not have made it. But there has to be a word of caution. Something overwhelming must appear before the Court will intervene. That is and ought to be a difficult onus for an applicant to discharge. The courts are not very good at formulating or evaluating policy. Sometimes when the courts have intervened on policy grounds the court's view of the range of policies open under the statute or of what is unreasonable policy has not got public acceptance. On the contrary, curial views of policy have been subjected to stringent criticism.

Para 12: As Professor Wade points out (in Administrative Law by H.W.R. Wade, 6th Edn.) there is ample room within the legal boundaries for radical differences of opinion in which neither side is unreasonable. The reasonableness in administrative law must, therefore, distinguish between proper course and improper abuse of power. Nor is the test the court's own standard of reasonableness as it might conceive it in a given situation. The point to note is that the thing is not unreasonable in the legal sense merely because the court thinks it to be unwise.

Para 14: As was observed in Punjab Communications Ltd. V/s. Union of India the change in policy can defeat a substantive legitimate expectation if it can be justified on "Wednesbury reasonableness". The decision-maker has the choice in the balancing of the pros and cons relevant to the change in policy. It is, therefore, clear that the choice of policy is for the decision-maker and not the court. The legitimate substantive expectation merely permits the court to find out if the change of policy which is the cause for defeating the legitimate expectation, is irrational or perverse or one which no reasonable person could have made. A claim based on merely legitimate expectation without anything more cannot ipso facto give a right. Its uniqueness lies in the fact that it covers the entire span of time; present, past and future. How significant is the statement that today is tomorrow's yesterday. The present is as we experience it, the past is a present memory and future is a present expectation. For legal purposes, expectation is not same as anticipation. Legitimacy of an expectation can be inferred only if it is founded on the sanction of law.

Para 15: As observed in Attorney General for New Southwales V/s. Quinn to strike the exercise of administrative power solely on the ground of avoiding the disappointment of the legitimate expectations of an individual would be to set the courts adrift on a featureless sea of pragmatism. Moreover, the negotiation of a legitimate expectation (falling short of a legal right) is too nebulous to form a basis for invalidating the exercise of a power when its exercise otherwise accords with law. If a denial of legitimate expectation in a given case amounts to denial of right guaranteed or is arbitrary, discriminatory, unfair or biased, gross abuse of power or violation of principles of natural justice, the same can be questioned on the well-known grounds attracting Art. 14 but a claim based on mere legitimate expectation without anything more cannot ipso facto give a right to invoke these principles. It can be one of the grounds to consider, but the court must lift the veil and see whether the decision is violative of these principles warranting interference. It depends very much on the facts and the recognised general principles of administrative law applicable to such facts and the concept of legitimate expectation which is the latest recruit to a long list of concepts fashioned by the courts for the review of administrative action must be restricted to the general legal limitations applicable and binding the manner of the future exercise of administrative power in a particular case. It follows that the concept of legitimate expectation is "not the key which unlocks the treasure of natural justice and it ought not to unlock the gates which shut the court out of review on the merits", particularly, when the elements of speculation and uncertainty are inherent in that very concept. As cautioned in Attorney General for New Southwales case the courts should restrain themselves and respect such claims duly to the legal limitations. It is a well-meant caution. Otherwise, a resourceful litigant having vested interest in contract, licences, etc. can successfully indulge in getting welfare activities mandated by directing principles thwarted to further his own interest. The caution, particularly in the changing scenario becomes all the more important.

Para 16: If the State acts within the bounds of reasonableness, it would be legitimate to take into consideration the national priorities and adopt trade policies. As noted above, the ultimate test is whether on the touchstone of reasonableness the policy decision comes out unscathed.

Para 17: Reasonableness of restriction is to be determined in an objective manner and from the standpoint of interests of the general public and not from the standpoint of the interests of persons upon whom the restrictions have been imposed or upon abstract consideration. A restriction cannot be said to be unreasonable merely because in a given case, it operates harshly. In determining whether there is any unfairness involved, the nature of the right alleged to have been infringed, the underlying purpose of the restriction imposed, the extent and urgency of the evil sought to be remedied thereby, the disproportion of the imposition, the prevailing condition at the relevant time enter into the judicial verdict, the reasonableness of the legitimate expectation has to be determined with respect to the circumstances relating to the trade or business in question. Canalisation of a particular business in favour of even a specified individual is reasonable where the interests of the country are concerned or where the business affects the economy of the country.

Para 19: In order to invoke the doctrine of promissory estoppel clear, sound and positive foundation must be laid in the petition itself by the party invoking the doctrine and bald expressions without any supporting material to the effect that the doctrine is attracted because the party invoking the doctrine has altered its position relying on the assurance of the Government would not be sufficient to press into aid the doctrine. The courts are bound to consider all aspects including the results sought to be achieved and the public good at large, because while considering the applicability of the doctrine, the courts have to do equity and the fundamental principles of equity must for ever be present in the mind of the court.

AIR 2004 SC 3648

Para 20: The learned senior counsel then made some attempts to rely on the doctrines of 'promissory estoppel' and 'legitimate expectation . Doctrine of 'legitimate expectation has developed as a principle of reasonableness and fairness and is used against statutory bodies and government authorities on whose representations or promises, parties or citizens act and some detrimental consequences ensue because of refusal of authorities to fulfil their promises or honour their commitments. The argument under the label of 'estoppel' and 'legitimate expectation' are substantially the same. The Administration herein no doubt is guilty of gross mistake in including in its development scheme, a portion of land covered by the forest and land with restrictions under the Aircrafts Act. A vital mistake has been committed by the Chandigarh Administration in overlooking the notification reserving land under the Forest Act and the restrictions imposed under the Aircrafts Act, but overriding public interest outweighs the obligation of a promise or representation made on behalf of the Administration. Where public interest is likely to be harmed, neither the doctrine of 'legitimate expectation' nor 'estoppel' can be allowed to be pressed into service by any citizen against the State Authorities. In M/s Jit Ram Shiv Kumar & Ors. vs. State of Hariana & Ors. [1981 (1) SCC 11], a two-Judge Bench of this Court by explaining and distinguishing Union of India vs. Indo-Afgan Agencies Ltd., [1968 (2) SCR 366] and Motilal Padampat Sugar Mills Co. (P) Ltd. vs. State of Uttar Pradesh [1979 (2) SCC 409], observed thus .- 'It is only in public interest that it is recognized that an authority acting on behalf of the government or by virtue of statutory powers cannot exceed his authority. Rule of ultra vires will become applicable when he exceeds his authority and the government would not be bound by such action. Any person who enters into an arrangement with the government has to ascertain and satisfy himself that the authority who purports to act for the government, acts within the scope of his authority and cannot urge that the government is in the position of any other litigant liable to be charged with liability.'

Para 21: In the aforesaid case of M/s Jit Ram Shiv Kumar (supra), the Municipal Committee of Bahadurgarh town to develop a Mandi promised that the traders who purchase plots in Mandi would be exempted from paying octroi duty on goods imported for trade to the Mandi. The State Government in exercise of powers under the Punjab Municipal Act directed the Municipal Committee to withdraw the exemption from payment of octroi duty. When the traders, who had set up their business in the Mandi on promise of getting exemption from octroi duty, challenged the action of the Municipality and the Punjab Government and raised on plea of 'estoppel' - it was rejected by this Court by relying on the decision of Constitution Bench of this Court in the case of M. Ramanatha Pillai vs. The State of Kerala & Anr. [1973 (2) SCC 650] and State of Kerala & Anr. vs. The Gwalior Rayon Silk Manufacturing (WVC.) Co. Ltd. Etc. [1973 (2) SCC 713].

This Court in M/s. Jit Ram Shiv Kumar (Supra), recorded the following conclusion which supports the view we propose to take in the circumstances of the present case : 'On a consideration of the decisions of this Court, it is clear that there can be no 'promissory estoppel' against the exercise of legislative power of the State. So also the doctrine cannot be invoked for preventing the government from acting in discharge of its duty under the law. The government would not be bound by the act of is officers and agents who act beyond the scope of their authority and a person dealing with the -agent of the government must be held to have notice of the limitations of his authority. The court can enforce compliance by a public authority of the obligation laid on him if he arbitrarily or on his mere whim ignores the promises made by him on behalf of the government. It would be open to the authority to plead and prove that there were special considerations which necessitated his not being able to comply with his obligations in public interest'.

Para 22: In public law in certain situations, relief to the parties aggrieved by action or promises of public authorities can be granted on the doctrine of 'legitimate expectation' but when grant of such relief is likely to harm larger public interest, the doctrine cannot be allowed to be pressed into service. We may usefully call in aid Legal Maxim : Solus populi est suprema lex: regard for the public welfare is the highest law. This principle is based on the implied agreement of every member of society that his own individual welfare shall in cases of necessity yield to that of community. His property, liberty and life shall under certain circumstances be placed in jeopardy or even sacrificed for the public good'.

Para 25: Surely, the doctrine of estoppel cannot be applied against public authorities when their mistaken advice or representation is found to be in breach of a Statute and therefore, against general public interest. The question, however, is whether the parties or individuals, who had suffered because of the mistake and negligence on the part of the statutory public authorities, would have any remedy of redressal for the loss they have suffered. The 'rules of fairness' by which every public authority is bound, requires them to compensate loss occasioned to private parties or citizens who were misled in acting on such mistaken or negligent advice of the public Authority. There are no allegations and material in these cases to come to a conclusion that the action of the authorities was mala fids. It may be held to be careless or negligent. In some of the English cases, the view taken is that the public authorities cannot be absolved of their liability to provide adequate monetary compensation to the parties who are adversely affected by their erroneous decisions and actions. But in these cases, any directions to the public authorities to pay monetary compensation or damages would also indirectly harm general public interest. The public authorities are entrusted with public fund raised from public money. The funds are in trust with them for utilisation in public interest and strictly for the purposes of the Statute under which they are created with specific statutory duties imposed on them. In such a situation when a party or citizen has relied, to his detriment, on an erroneous representation made by public authorities and suffered loss and where doctrine of 'estoppel' will not be invoked to his aid, directing administrative redressal would be a more appropriate remedy than payment of monetary compensation for the loss caused by non-delivery of the possession of the plots and consequent delay caused in setting up industries by the allottees.

AIR 2003 SC 1713

Para 12: What remains to be considered is the plea of legitimate expectation. The principle of 'legitimate expectation' is still at a stage of evolution as pointed out in De Smith Administrative Law (5th Edn. Para 8.038). The principle is at the root of the rule of law and requires regularity, predictability and certainty in governments dealings with the public. Adverting to the basis of legitimate expectation its procedural and substantive aspects. Lord Steyn in Pierson V/s. Secretary of State for the Home Department (1997 (3) All ER 577 at p. 606) (HL) goes back to Dicey's description of the rule of law in his "Introduction to the study of the Law of the Constitution" (10th Edn. 1968 P. 203) as containing principles of enduring value in the work of a great jurist. Dicey said that the constitutional rights have roots in the common law. He said:

"The 'rule of law', lastly, may be used as a formula for expressing the fact that with us, the law of constitution, the rules which in foreign countries naturally form part of a constitutional code, are not the source but the consequence of the rights of individuals, as defined and enforced by the courts; that, in short, the principles of private law have with us been by the action of the courts and Parliament so extended as to determine the position of the Crown and its servants, thus the constitution is the result of the ordinary law of the land"

This says Lord Steyn. is the pivot of Dlcey's discussion of rights to personal freedom and to freedom of association and of public meeting and that it is clear that Dicey regards the rule of law as having both procedural and substantive effects. "The rule of law enforces minimum standards of fairness, both substantive and procedural". On the facts in Pierson, the majority held that the Secretary of State could not have maintained a higher tariff of sentence that recommended by the judiciary when admittedly no aggravating circumstances existed. The State could not also increase the, tariff with retrospective effect.

Para 13: The basic principles in this branch relating to 'legitimate expectation' were enunciated by Lord Diplock in Council of Civil Service Unions and Ors u. Minister for the Civil Service (1985 AC 374 (408-409)) (Commonly known as CCSU case). It was observed in that case that for a legitimate expectation to arise, the decisions of the administrative authority must affect the person by depriving him of some benefit or advantage which either (i) he had in the past been permitted by the decision-maker to enjoy and which he can legitimately expect to be permitted to continue to do until there has been communicated to him some rational grounds for withdrawing it on which he has been given an opportunity to comment; or (ii) he has received assurance from the decision-maker that they will not be withdrawn without giving him first an opportunity of advancing reasons for contending that they should not be withdrawn.

The procedural part of it relates to a representation that a hearing or other appropriate procedure will be afforded before the decision is made. The substantive part of the principle is that if a representation is made that a benefit of a substantive nature will be granted or if the person is already in receipt of the benefit that it will be continued and not be substantially varied, then the same could be enforced.

In the above case. Lord Eraser accepted that the Civil servants had a legitimate expectation that they would be consulted before their trade union membership was withdrawn because prior consultation in the past was the standard practice whenever conditions of service were significantly altered. Lord Diplock went a little further, when he said that they had a legitimate expectation that they would continue to enjoy the benefits of the trade union membership, the interest in regard to which was protect able. An expectation could be based on an express promise or representation or by established past action or settled conduct. The representation must be clear and unambiguous. It could be a representation to the individual or generally to class of persons.

Para 14: The principle of a substantive legitimate expectation, that is, expectation of favorable decision of one kind or another, has been accepted as part of the English Law in several cases. (De Smith Administrative Law. 5th Ed.) (Para 13, 030), (See also Wade. Administrative Laws. 7th Ed.) (pp. 418-419). According to Wade, the doctrine of substantive legitimate expectation has been "rejected" by the High Court of Australia in Attorney General for N.S.W. V/s. Quin (1990) 93 All ER 1 (But see Teon's case referred to later) and that the principle was also rejected in Canada in Reference Re Canada Assistance Plan (1991) 83 DLR (4th 297), but favored in Treland : Canon v. Minister for the Marine 1991 (1) IR 82. The European Court goes further and permits the Court to apply proportionality and go into the balancing of legitimate expectation and the Public interest.

Para 15: Even so, it has been held under English law that the decision maker's freedom to change the policy in public interest, cannot be fettered by the application of the principle of substantive legitimate expectation. Observations in earlier cases project a more inflexible rule than is in vogue presently. In R. V/s. IRC. ex P. Preston (1985 AC 835) the House of Lords rejected the plea that the altered policy relating to parole for certain categories of prisoners required prior consultation with the prisoner. Lord Scarman observed :

"But what was their legitimate expectation. Given the substance and purpose of the legislative provisions governing parole, the most that a convicted prisoner can legitimately expect is that his case be examined individually in the light of whatever policy the Secretary of State sees fit to adopt provided always that the adopted policy is a lawful exercise of the discretion conferred upon him by the statute. Any other view would entail the conclusion that the unfettered discretion conferred by statute upon the minister can in some cases be restricted so as to hamper or even to prevent changes of policy."

Para 16: To a like effect are the observations of Lord Diplock in Hughes v. Department of Health and Social Security (HL) 1985 AC 776 (788):

"Administrative policies may change with changing circumstances, including changes in the political complexion of governments. The liberty to make such changes is something that is inherent in our constitutional form of government."

(See in this connection Mr. Detail's article "Why Administrators should be bound by their policies" (Vol. 17) 1997 Oxford Journal of Legal Studies P. 23). But today the rigidity of the above decisions appears to have been somewhat relaxed to the extent of application of Wednesbury rule, whenever there is a change in policy and we shall be referring to those aspects presently.

Para 17: Before we do so. we shall refer to some of the important decisions of this Court to find out the extent to which the principle of substantive legitimate expectation is accepted in our country.

In Naujoyoti Co-op. Group Housing Society V/s. Union of India (1992 (4) SCC 477), the principle of procedural fairness was applied. In that case the seniority as per the existence list of co-operative housing societies for allotment of land was altered by subsequent decision. The previous policy was that the seniority amongst housing societies in regard to allotment of land was to be based on the date of registration of the society with the Registrar. But on 20-1-1990, the policy was changed by reckoning seniority as based upon the date of approval of the final list by the Registrar. This altered the existing seniority of the societies for allotment of land. This court held that the societies were entitled to a 'legitimate expectation' that the past consistent practice in the matter of allotment will be followed even if there was no right in private law for such allotment. The authority was not. entitled to defeat the legitimate expectation of the societies as per the previous seniority list without some overriding reason of public policy as to justify change in the criterion. No such overriding public interest was shown. According to the principle of 'legitimate expectation', if the authority proposed to defeat a person's legitimate expectation, it should afford him an opportunity to make a representation in the matter. Reference was made to Halsbury's Laws of England (p. 151. Vol. 1(1) (4th Ed. Re-issue) and to the CCSU case. It was held that the doctrine imposed, in essence, a duty on public authority to act fairly by taking into consideration all relevant factors, relating to such legitimate expectation. Within the contours of fair dealing, the reasonable opportunity to make representation against change of policy came in.

Para 18: The next case in which the principle of 'legitimate expectation' was considered is the case in Food Corporation of India V/s. M/s Kamdhenu Cattle Feed Industries, (1993 (1) SCC 71). There the Food Corporation of India invited tenders for sale of stocks of damaged food grains and the respondent's bid was the highest. All tenderers were invited for negotiation, but the respondent did not raise his bide during negotiation while others did. The respondent filed a writ petition claiming that it had legitimate expectation of acceptance of its bid, which was the highest. The High Court allowed the writ petition. Reversing the judgment, this Court referred to CCSU case and to R. V/s. IRC ex P Preston (1985 AC 835). It was held that though the respondent's bid was the highest, still it had no right to have it accepted. No doubt, its tender could not be arbitrarily rejected, but if the Corporation reasonably felt that the amount offered by the respondent was inadequate as per the factors operating in the commercial field, the non acceptance of bid could not be faulted. The procedure of negotiation itself involved the giving due weight to the legitimate expectation of the highest bidder and this was sufficient.

Para 19: This Court considered the question elaborately in Union of India and ors V/s. Hindustan Development Corporation and ors. (1993 (3) SCC 499). There tenders were called for supply of cast-steel bogies to the railways. The three big manufacturers quoted less than the smaller manufacturers. The Railways then adopted a dual pricing policy giving counter offers at a lower rate to the bigger manufacturers who allegedly formed a cartel and a higher offer to others so as to enable a healthy competition. This was challenged by the three big manufacturers complaining that they were also entitled to a higher rate and a large number of bogies. This Court held that the change into a dual pricing policy was not vitiated and was based on 'rational and reasonable' grounds. In that context, reference was made to Halsbury's Laws of England (4th Ed.) (Vol. 1(I) P. 151). Schmidt V/s. Secretary to State for Home Affairs (1969 (2) Ch 149) which required an opportunity to be given to an alien if the leave given to him to stay in UK was being revoked before expiry of the time and to Attorney General of Hong Kong V/s. Ngyuen Shiu (1983 (2) AC 629) which required the Government of Hong Kong to honour its undertaking to treat each deportation case on its merits, and CCSU's case (supra)which related to alteration of conditions relating to membership of trade unions and the need to consult the unions in case of change of policy as was the practice in the past, and to Food Corporation of India's case (supra) and Navjyoti Co-op. Group Housing Society's case (supra). It was then observed that legitimate expectation was not the same thing as anticipation. It was also different from a mere wish to desire or hope: nor was It a claim or demand based on a right. A mere disappointment would not given rise to legal consequence. The position was indicated as follows :

"The legitimacy of an expectation can be inferred only if it is founded on the sanction of law or custom or an established procedure followed in regular and natural sequence. Such expectation should be justifiably legitimate and protectable."

After quoting Wade /Administrative Law (6th Ed.) (Pp. 424. 522) reference was also made to the Judgement of the Australian High Court in Attorney General for New South Wales V/s. Quin (1990) 64 Aust LJR 327 in which the principle itself, according to Wade did not find acceptance. In that case a Stipendiary Magistrate incharge of a Court of Petty Sessions under the old court system was refused appointment to the system of local courts which replaced the previous system of petty Sessions Courts. In 1987, the Attorney General who was hitherto recommending former magistrates on the ground of 'fitness' for appointment to the new local courts, deviated from that policy and decided to go by assessment of merit of the competing applicants. The Court of Appeal had directed that the case of Mr. Quin must be considered separately and not in competition with other applicants, but it was reversed by the majority of the High Court of Australia (Mason. CJ. Brennan & Dawson. JJ.) (Deans and Toobey, JJ. dissenting). Mason, CJ held that the Court could not fetter the executive discretion to adopt a different policy which was better calculated to serve the administration of justice and make it more effective. The grant of substantive relief in such a case would effectively prevent the executive from giving effect to the new policy which it wished to pursue in relation to the appointment of magistrates. Brennan, J. observed very clearly that the notion of legitimate expectation (falling short of a legal right) was too nebulous to form a basis for invalidating the exercise of power. He said that such a principle would "set the courts adrift on a featureless sea of pragmatism." Dawson, J. held that the contention of the respondent exceeded the bound of procedural fairness and intruded upon the freedom of the executive. In Hindustan Development Corporation's case (supra) R. V/s. Secretary of State for the Home Department ex parte Ruddock (1987 2 All ER 518) and Findlay V/s. Secretary of State for the Home Department (1984) 3 All ER 801) and Breen u. Amalgamated Engineering Union (1971) 1 All ER 1148 uoere considered. It was accepted that the principle of legitimate expectation gave the applicant sufficient locus standi to seek judicial review and that the doctrine was confined mostly to a right to fair hearing before a decision which resulted in negative a promise or withdrawing an undertaking, was taken. It did not involve any crystallized right. The protection of such legitimate expectation did not require the fulfillment of the expectation where an overriding public interest required otherwise. However. the burden lay on the decision maker to show such an overriding public interest. A case of substantive legitimate expectation would arise when a body by representation or by past practice aroused expectation which it would be within its powers to fulfill. The Court could interfere only if the decision taken by the authority was arbitrary, unreasonable or not taken in public interest. If it is established that a legitimate expectation has been improperly denied on the application of the above principles, the question of giving opportunity can arise if failure of justice is shown. The court must follow an objective method by which the decision making authority is given the full range of choice which the legislature is presumed to have intended. If the decision is reached fairly and objectively, it cannot be interfered with on the ground of procedural fairness. An example was given that if a renewal was given to an existing licence holder, a new applicant cannot claim an opportunity based on natural justice. On facts. it was held that legitimate expectation was denied on the basis of reasonable considerations.

Para 22: Lastly we come to the three Judge Judgement in National Building Construction Corporation v, S. Raghunathan & Others (7) SCC 66). This case has more relevance to the present case as it was also a service matter. The respondents were appointed in CPWD and they went on deputation to the NBCC in Iraq and they opted to draw, while on deputation. Their grade pay in CPWD plus deputation allowance. Besides that, the NBCC granted them Foreign Allowance at 125% of the basic pay. Mean-while their Basic Pay in CPWD was revised w.e.f. 1-1-1986 on the recommendation of the 4th Pay Commission. They contended that the abovesaid increase of 125% should be given by NBCC on their revised scales. This was not accepted by NBCC by orders dated 15-10-1990. The contention of the respondents based on legitimate expectation was rejected in view of the peculiar conditions under which NBCC was working in Iraq. It was observed that the doctrine of "legitimate expectation' had both substantive and procedural aspects. This court laid down a clear principle that claims on legitimate expectation required reliance on representation and resultant detriment in the same way as claims based on promissory estoppel. The principle was developed in the context of "reasonableness" and in the context of natural justice'. Reference was made to IRC ExP. Preston's case (supra): Food Corporation's case (supra): Hindustan Development Corporation's case (supra); the Australian Case in Quin (1990) 64 Aust IJR 327; M.P. Oil Extraction's case (supra). CCSU's case (supra), and Naujoyti's case (supra).

Para 23: On the facts of the case delineated above, the principle of legitimate expectation has no application. It has not been shown as to how any act was done by the authorities which created an impression that the conditions attached in the original appointment order were waived. Mere continuance does not imply such waiver. No legitimate expectation can be founded on such unfounded impressions. It was not even indicated as to who, if any and with what authority created such impression. No waiver which would be against requisite compliances can be countenanced. Whether an expectation exists is self-evidently, a question of fact. Clear statutory words override any expectation, however, founded. (See Regina V/s. Director of Public Prosecutions. Exparte Kebilene and ors. (1999) 3 WLR 972 (H.L.).

2006 (8) SCC 381

Para 14: What is legitimate expectation? Obviously, it is not a legal right. It is an expectation of a benefit, relief or remedy, that may ordinarily flow from a promise or established practice. The term 'established practice' refers to a regular, consistent predictable and certain conduct, process or activity of the decision-making authority. The expectation should be legitimate, that is, reasonable, logical and valid. Any expectation which is based on sporadic or casual or random acts, or which is unreasonable, illogical or invalid cannot be a legitimate expectation. Not being a right, it is not enforceable as such. It is a concept fashioned by courts, for judicial review of administrative action. It is procedural in character based on the requirement of a higher degree of fairness in administrative action, as a consequence of the promise made, or practice established. In short, a person can be said to have a 'legitimate expectation' of a particular treatment, if any representation or promise is made by an authority, either expressly or impliedly, or if the regular and consistent past practice of the authority gives room for such expectation in the normal course. As a ground for relief, the efficacy of the doctrine is rather weak as its slot is just above 'fairness in action' but far below 'promissory estoppel'.

It may only entitle an expectant: (a) to an opportunity to show cause before the expectation is dashed; or (b) to an explanation as to the cause for denial.

In appropriate cases, courts may grant a direction requiring the Authority to follow the promised procedure or established practice. A legitimate expectation, even when made out, does not always entitle the expectant to a relief. Public interest, change in policy, conduct of the expectant or any other valid or bonafide reason given by the decision-maker, may be sufficient to negative the 'legitimate expectation'.

The doctrine of legitimate expectation based on established practice (as contrasted from legitimate expectation based on a promise), can be invoked only by someone who has dealings or transactions or negotiations with an authority, on which such established practice has a bearing, or by someone who has a recognized legal relationship with the authority. A total stranger unconnected with the authority or a person who had no previous dealings with the authority and who has not entered into any transaction or negotiations with the authority, cannot invoke the doctrine of legitimate expectation, merely on the ground that the authority has a general obligation to act fairly.

Para 15: In Union of India V/s. Hindustan Development Corporation, this Court explained the nature and scope of the doctrine of 'legitimate expectation' thus :

"For legal purposes, the expectation cannot be the same as anticipation. It is different from a wish, a desire or a hope nor can it amount to a claim or demand on the ground of a right. However earnest and sincere a wish, a desire or a hope may be and however confidently one may look to them to be fulfilled, they by themselves cannot amount to an assertable expectation and a mere disappointment does not attract legal consequences. A pious hope even leading to a moral obligation cannot amount to a legitimate expectation. The legitimacy of an expectation can be inferred only if it is founded on the sanction of law or custom or an established procedure followed in regular and natural sequence. Again it is distinguishable from a genuine expectation. Such expectation should be justifiably legitimate and protectable. Every such legitimate expectation does not by itself fructify into a right and therefore it does not amount to a right in the conventional sense." [Emphasis supplied]

This Court also explained the remedies flowing by applying the principle of legitimate expectation : "_ it is generally agreed that legitimate expectation gives the applicant sufficient locus standi for judicial review and that the doctrine of legitimate expectation is to be confined mostly to right of a fair hearing before a decision which results in negativing a promise or withdrawing an undertaking is taken.

The doctrine does not give scope to claim relief straightaway from the administrative authorities as no crystallized right as such is involved. The protection of such legitimate expectation does not require the fulfillment of the expectation where an overriding public interest requires otherwise.

In other words where a person's legitimate expectation is not fulfilled by taking a particular decision then decision-maker should justify the denial of such expectation by showing some overriding public interest.

Therefore even if substantive protection of such expectation is contemplated that does not grant an absolute right to a particular person. It simply ensures the circumstances in which that expectation may be denied or restricted.

A case of legitimate expectation would arise when a body by representation or by past practice aroused expectation which it would be within its powers to fulfil. The protection is limited to that extent and a judicial review can be within those limits.

But as discussed above a person who bases his claim on the doctrine of legitimate expectation, in the first instance, must satisfy that there is a foundation and thus has locus standi to make such a claim. In considering the same several factors which give rise to such legitimate expectation must be present. The decision taken by the authority must be found to be arbitrary, unreasonable and not taken in public interest.

If it is a question of policy, even by way of change of old policy, the courts cannot interfere with a decision. In a given case whether there are such facts and circumstances giving rise to a legitimate expectation, it would primarily be a question of fact.

If these tests are satisfied and if the court is satisfied that a case of legitimate expectation is made out then the next question would be whether failure to give an opportunity of hearing before the decision affecting such legitimate expectation is taken, has resulted in failure of justice and whether on that ground the decision should be quashed. If that be so then what should be the relief is again a matter which depends on several factors." (emphasis supplied).

Para 16: In Punjab Communication Ltd. V/s. Union of India, this Court observed :

"The principle of legitimate expectation is still at a stage of evolution. The principle is at the root of the rule of law and requires regularity, predictability and certainty in the Governments dealings with the public. The procedural part of it relates to a representation that a hearing or other appropriate procedure will be afforded before the decision is made."

"However, the more important aspect is whether the decision maker can sustain the change in policy by resort to Wednesbury principles of rationality or whether the court can go into the question whether the decision-maker has properly balanced the legitimate expectation as against the need for a change... In sum, this means that the judgment whether public interest overrides the substantive legitimate expectation of individuals will be for the decision-maker who has made the change in the policy. The choice of the policy is for the decision-maker and not for the court. The legitimate substantive expectation merely permits the court to find out if the change in policy which is the cause for defeating the legitimate expectation is irrational or perverse or one which no reasonable person could have made."

Para 17: Recently, a Constitution Bench of this Court in Secretary, State of Karnataka V/s. Umadevi, referred to the circumstances in which the doctrine of legitimate expectation can be invoked thus :

"The doctrine can be invoked if the decisions of the administrative authority affect the person by depriving him of some benefit or advantage which either (i) he had in the past been permitted by the decision-maker to enjoy and which he can legitimately expect to be permitted to continue to do until there have been communicated to him some rational grounds for withdrawing it on which he has been given an opportunity to comment; or (ii) he has received assurance from the decision-maker that they will not be withdrawn without giving him first an opportunity of advancing reasons for contending that they should not be withdrawn."

Another Constitution Bench, referring to the doctrine, observed thus in Confederation of Ex-servicemen Associations V/s. Union of India :

"No doubt, the doctrine has an important place in the development of Administrative Law and particularly law relating to 'judicial review'. Under the said doctrine, a person may have reasonable or legitimate expectation of being treated in a certain way by an administrative authority even though he has no right in law to receive the benefit. In such situation, if a decision is taken by an administrative authority adversely affecting his interests, he may have justifiable grievance in the light of the fact of continuous receipt of the benefit, legitimate expectation to receive the benefit or privilege which he has enjoyed all throughout. Such expectation may arise either from the express promise or from consistent practice which the applicant may reasonably expect to continue."

"In such cases, therefore, the Court may not insist an administrative authority to act judicially but may still insist it to act fairly. The doctrine is based on the principle that good administration demands observance of reasonableness and where it has adopted a particular practice for a long time even in absence of a provision of law, it should adhere to such practice without depriving its citizens of the benefit enjoyed or privilege exercised."

Sandeep Jalan

Advocate

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