179

CHAPTER-IV

SCOPE OF LEGITIMATE EXPECTATIONS IN

INDIA: SOME LIMITATIONS

4.1 INTRODUCTION
The doctrine of legitimate expectation plays an important role in
various fields of law. But it is not possible to draw a line about its scope
and importance. Governments and its functionaries may craft
expectations concerning the manner in which administrative powers will
be exercised. Expectations of this nature can be generated in many
different ways, such as, by the issue of policies or procedures to funnel
the exercise of discretionary powers. Expectations regarding the potential
exercise of administrative powers may also be generated by public
statements or representations, conceivable by the subjects through
promises or by adoption and regular application of a certain practice. But
just as expectations about the exercise of administrative powers may be
created and conceived by an individual or party, they may also be
disappointed and they may be disillusioned when a governmental agency
has acted in breach of a promise or undertaking made to a particular
person or to a class of persons. They may also be disappointed when a
government agency has not applied current policy or guidelines in
determining a particular case and without good reason. In such a case, the
complaint may be that the policy has been applied inconsistently, perhaps
in a way which reflects improper discrimination. In other words, an
existing policy may be changed and a new one applied to the
disadvantage of people who stood to benefit from the earlier policy and
who may even have conducted their affairs in reliance upon it. Courts in
England and some other jurisdictions have recently accepted that there
180

can be circumstances in which government agencies should be required

to accomplish the legitimate expectations of their subjects conceived by
them. This approach endows an expectation with a substantive excellence
because it enables the expectation to determine or strongly influence the
outcome of, rather than simply the procedures for, administrative
decision-making. Australian courts, in disparity, have by and large taken
the view that expectations about the exercise of administrative powers
may only give rise to procedural rights. On this view, an expectation
about the exercise of an administrative power might, at best, obligate a
decision-maker who intends to act contrary to that expectation to notify
pretentious people and provide them with an opportunity to argue against
that course. But the law in Australia imposes no restraints upon a
decision-maker beyond these procedural requirements1.
In Amalgamated Engineering and Foundry Workers' Union v. The
Management2 the doctrine of legitimate expectation found its legitimate
place. In this case the District Committee of a trade union had refused to
endorse a member's election as shop steward. The Court held that if a
person claims a privilege he can be turned away without hearing but here
a person has something more than a mere privilege i.e. a legitimate
expectation that his election would be approved unless there are relevant
reasons for not doing so, therefore, the natural justice principles are
attracted to the case in order to ensure fairness.
In the same manner in the case of Melnnes v. Onslow Fane3, also
the doctrine of legitimate expectation found fine exposition. In the case of
the British Boxing Board of Control, a Domestic Tribunal had rejected an

1 Ian Holloway, Natural Justice and the High Court of Australia: A Study in common law
Constitutionalism (2002) 154
2 (1971) 1 All ER 1148 (CA)
3 (1978) 3 All ER 211 (ChD).
 181

application for entrance licence without hearing. The court made a

distinction between application, forfeiture and legitimate expectation
situations in licence cases. On the one extreme are application cases
where person has no right to the grant of his application. On the other
extreme are forfeiture cases in which a person's existing right is violated
and, therefore, he is clearly entitled to the benefit of principles of natural
justice. In between these extreme situations lies a third situation of
legitimate expectation cases. This situation may cover cases of renewal of
licence. In this situation, a person can legitimately expect that his licence
will be renewed and if his licence is not renewed he has a right to know
what makes him unsuitable now when he was suitable as per the
principles of natural justice.
The Privy Council in A.G. of Hong Kong v. Ng. Yiien Shiu4 while
quashing the removal order passed by the Hongkong Immigration
Authority without notice and hearing the court held that there is a
violation of the legitimate expectation of the immigrant based on
announcement of the authority that while examining the cases of illegal
immigration each case would be decided on its own merit and, therefore,
removal cannot be passed without fair hearing.
Invoking the doctrine of legitimate expectation the House of Lords
in Council of Civil Services Union v. Minister of Civil Services5 held that
legitimate expectations may arise from an expression or promise made by
the authority or from an established past practice which cannot be
violated without good reasons. In this case the administrative authority
had withdrawn a long-standing practice by a mere oral instruction.

4 (1982) 2 AI I ER 346 PC
5 (1984) 3 All ER 935 HL
182

In a sense the doctrine of legitimate expectation imposes a duty on

the authority to act fairly and is not restricted to situations where
expectation is to be consulted or be given an opportunity to make
representation. It was held by the court in R. v. Secretary of State for
Home Department ex parte Ruddock6. In this case violating the
established criteria for the issuance of interception order the Home
Department had issued warrant for the interception of telephone calls of
the applicant. Though the court did not grant relief as nothing unfair or
improper was found yet the duty to act fairly where legitimate
expectations are involved was firmly established.
In the same manner in R. v. Secretary of State for Home
Department ex parte Khan7, the court held that if the authority had made
a statement that a certain criterion or procedure would be followed the
people can legitimately expect that it would be followed in the decision-
making process of the authority, therefore, the authority is under an
obligation to follow that criterion or procedure. In this case, in violation
of the provisions of the circular regarding entry of adopted children in
England, the authority had refused entry to the adopted child of Mr.
Khan. The court quashed the order of the authority as it was on
considerations of policies which were not in existence when the circular
had been issued.
In R. v. Secretary of State for Transport ex parte Greater London
Council8, the doctrine was applied in tax cases. The court held that a
taxpayer had legitimate expectations to make representation that he
should not pay tax at the maximum rate.

6 (1987)2 All ER 518 QBD.

7 (1985) 1 AII ER 40 CA.
8 (1985) 3 All E R3 0 0 QBD.
 183

Though the doctrine as evolved in England is still in an evolutionary

stage yet one thing in certain that it is an equity doctrine and therefore the
benefit of the doctrine cannot be claimed as a matter of course. It is a
flexible doctrine which can be moulded to suit the requirements of each
individual case. The court did not apply the doctrine where applicant's
own conduct was unlawful or claim was unworthy. In Cinnanaond v.
British Airporrts Authority9 the court upheld the decision of the authority
to prohibit thee entry of taxi drivers into the airport because of their own
past conduct which invited fines. In Lloyd v. Mahon10, the House of Lords
held that the doctrine does not include within its ambit a right to oral
hearing. Courts have also not protected expectations by judicial review
when nothing unfair was found on the part of the authority or legitimate
public interest demanded otherwise. The doctrine, however, has been
applied to statutory as well as non-statutory authorities.
In Schmidt v. Secretary of State for Home Affairs11, the facts of the
case are that the plaintiffs were Scientology students who had applied for
an extension to their leave to remain in the UK. Their application was
rejected. They sought a declaration that the refusal was ultra vires, on the
grounds that they had not been given an opportunity to be heard. The
court held that the question whether a hearing was required depended on
whether the applicants had some right, interest or legitimate expectation
of which it would not be fair to deprive them without hearing what they
had to say. In respect of their entitlement to remain for the period
originally limited, they had; in respect of an extension to that period, they
had not.

9 (1980) 2 All E R3 6 8 CA.

10 (1987) 1 AII ER 1118 (HL).
11 (1969) CA
184

4.2 SCOPE OF LEGITIMATE EXPECTATION UNDER INDIAN

CONSTITUTION
Once discretionary powers are vested with Executive/
Administration, abuse or misuse of these powers are to be guarded in
order to save the individual from the resultant damage for which State is
vicariously liable. In order to eliminate factors of discrimination, the
Constitution has to guarantee fundamental right to equal treatment
irrespective of caste, creed and sex enforceable by the State through
administrative laws. In certain cases, legitimate expectation of the
subjects from the State may require a public body to confer substantive
benefit to its subjects rather than procedural one and failure of the public
body to consider the legitimate expectations of its subjects amounts to
abuse of power12, attracting the role of Court. Failure of the government
to exercise its discretion on the expected lines invokes the plea of
legitimate expectation which though itself is not a right but certainly is a
test of arbitrariness and this plea of legitimate expectation cannot be
involved against higher public interests of the State of causing higher
revenue. In India, this doctrine of legitimate expectation has been
founded on Article 14 enshrined in Constitution of India, which imposes
a duty upon the state and its functionaries to act fairly on all public
authorities and therefore, people can have legitimate expectation that they
will be treated fairly by state. Article 14 of the Indian Constitution
provides that the State shall not deny to any person equality before the
law or the equal protection of the laws within the territory of India.
Legitimate expectation flows from principle of non-arbitrariness under

12 HALSBURY`S laws of England, Administrative Law, 4th Ed. p. 92

 185

Art.14 of Constitution of India and it becomes an enforceable right in

case where state or its functionaries fail to give due weight to it. As
observed by Supreme Court in Food Corporation of India v. Kamadhenu
Cattle Feed Industries Ltd13. The court held that the doctrine of legitimate
expectation falls within the purview of the rule of non-arbitrariness
integrated in Article 14 of the Constitution. Undoubtedly the public
authority has an 'unfettered discretion' but the same has to be used for
public good. In M.P.Oil Extraction Co. Ltd. v. State of MP14, the court
held that in a constitutionally governed society when reasonableness of an
action of the State is called in question, the rule of law is to be determined
not according to the claimant's perception but in the large public interests
and the public interest shall have to be more central consideration and
may overshadow the legitimate expectation of an individual/claimant and
bona fide decision of the public authority reached in this style would
gratify the requirement of non-arbitrariness and shall stand the test of
judicial scrutiny. The doctrine of legitimate expectation operates in the
domain of public law and in certain cases, constitutes a substantive and
enforceable right. In Chanchal Gayal v. State of Rajasthan15, the court
held that the basic idea behind doctrine of legitimate expectation is "Rule
of Law" which requires promptness, predictability and certainty in the
actions of government while dealing with the public.
A person can derive legitimate expectation for being treated in a
certain way by an administrative authority even though he has no legal
right but for representation or promise made by the authority, impliedly

13 AIR 1993 SC 1601

14 (1997) 7 SCC 592
15 AIR 2003 SC 1713
186

or from consistent past practice. Certainly legitimate expectation of a

person based on some promise or undertaking by an authority will get
satisfied if the person claiming is given a fair hearing by the authority
before a decision is taken to alter his position, consequent upon
withdrawing an undertaking earlier given. The core point thus is that
though legitimate expectation derived by a person from the promise or
undertaking given by an authority but denial to act upon in consonance
with such promise or undertaking has to be justified by the authority by
showing some overriding public interest16. However, the doctrine of
legitimate expectation does not give scope to claim straightaway from the
administrative authorities as no crystallized right as such is involved. The
protection of legitimate expectation does not require the fulfillment of the
expectation where an overriding public interest requires otherwise. In
Bannari Amman Sugars Ltd. v. CTO17, the court held that though the
doctrine of legitimate expectation is based on the mandate enshrined in
the provisions of Constitution of India but whether an expectation is
legitimate or otherwise has to be inferred from the concept as to whether
an expectation is founded on the sanction of law and the concept itself is
not the key which unlocks the treasure of natural justice that too when the
elements of speculation and uncertainty are inherent in that concept.
Undoubtedly the doctrine of legitimate expectation is a source of
procedural as well as substantive rights and the government/state and its
departments responsible for administering the affairs of the country are
expected to honour their promises or undertaking through their statements
of policy or intention and are bound to treat all the citizens by affording
full personal consideration without any iota of abuse of discretion. The

16 D.D.Basu, Commentary on the Constitution of India, Vol.1 8th Edn. 2008, p.1262
17 (2005) 1 SCC 625
 187

policy statements given by the representatives of the State cannot be

disregarded unfairly or applied selectively because unfairness in the form
of unreasonableness is akin to violation of natural justice. Claims based
on legitimate expectation have been held to require reliance on
representations and resultant detriment to the claimant in the same way as
claims based upon promissory estoppels. Unfairness in the purported
exercise of power can amount to an abuse or excess of power18.
In Union of India v. Pardasone19, the court held that where a non-
statutory memorandum is followed in certain cases and refused in other
similar cases, the action would amount to violation of Article 14 of
Constitution of India. Increasing the age of retirement has been followed
in some cases; refusing to extend the same in some other cases would be
violative of Article14. The defense taken by the government increasing
the age of retirement is a mere executive instruction is not valid.
In New Horizons Ltd. v. Union of India20, The Court held that a
decision would be regarded unreasonable if it is partial and unequal in its
operation as between different classes.
In State of W.B v. Niranjan Singha21, the Court observed that the
doctrine of legitimate expectation" is only an aspect of Article 14 of the
Constitution requiring to deal the citizen in non-arbitrary manner but by
itself does not give rise to an enforceable right. Whether an action of the
government or the authority or functionary of the state is arbitrary or not,
the principle of legitimate expectation would be relevant despite the fact
that earlier in M.P. Oil Extraction Mill v. State of M.P.22, the Court was

18 Ibid p. 1263
19 (1972) 3 SCC 273
20 AIR 1994 Delhi 126
21 (1995) 1 SCC 478
22 (1997) 7 SCC 592
188

of the opinion that in appropriate cases legitimate expectation which

operates in the domain of public law, constitute a substantive and
enforceable right. The Supreme Court of India in number of cases upheld
the fortitude of equality enshrined in the Constitution of India while
dealing with the application of doctrine of legitimate expectation and
thereby made the doctrine as a device to enforce a fundamental right. In
Tamil Nadu Tamil & English Medium Schools Association v. State of
TN23, facts show that schools upto matriculation in the state have been
teaching in English Medium for over fifty years and recognition was
given to them by the government without any condition. Suddenly, there
was a change in the policy introducing Tamil as medium of instruction
and this policy was sought to be introduced without affording opportunity
of hearing to the affected schools. The Court held that the management of
such affected schools is reasonable in claiming that they expected that
English medium will be allowed to continue on the basis of legitimate
expectation and that it is not necessary that there should have been a
representation by the government and that the schools were opened by
the management only believing on those representations.
In Balaji v. State of Mysore24, the court held that matter of settling
a government lease or contract which otherwise is governed by statute, if
the government adopts an ad hoc procedure which discriminates against a
particular person, it offends Article14 of the Indian Constitution.

In Purushottam Lal Dhingra v. Union of India25, while

implementing recommendations of Pay Commission by the government

23 (2000) 2 SCC 344

24 (1963) Supp.1 SCR 439
25 (1973) 1 SCC 651
 189

to one set of employees only thereby making discrimination as against

other set of employees though governed by the said recommendations,
the court held that the government has exercised discretion arbitrarily in
violation of Article14 and the affected person or aggrieved person can
challenge such act of the Government. Similarly, in State of Haryana v.
Piara26 the Court held that in case where employees are denied equal pay
for equal work, it will be treated to amount to their exploitation by taking
advantage of their poverty and helplessness and will amount to
infringement of right of equal treatment as guaranteed under Article 14.
In a case where a large number of persons were recruited temporarily
though being fully qualified to hold the post are thrown out of
employment after long years of service, the action was found to be
against the spirit of constitution being in violation of legitimate
expectation and they were directed to be regularized. The Supreme Court
extended this principle of protecting the legitimate expectation under
Article 14 to several instances viz., to the matter of granting a lease or a
privilege like government contract unfettered by any statutory condition
as laid down in Ramana v. IAAI27, if a passport is issued at the discretion
of the executive, not governed by any statute in Satwant v. Asst. Passport
Officer28 if a Pension scheme is declared by an office Memorandum; in
D.S. Nakara v. Union of India29, or the conditions of service are
unreasonable e.g., an Air Hostess will lose her job on marriage or first
pregnancy whichever occurs earlier, even though such conditions of
service are embodied in the award of Industrial Tribunal or in an
agreement between the employer and employees union; in Air India v.

26 (1992) 4 SCC 118

27 AIR 1979 Sc 1628
28 AIR 1967 SC 1836
29 AIR 1983 SC 130
190

Nargesh30 in relation to land matters the Supreme Court dealt with a

situation where the government has taken a policy decision, though it did
not create any right, to restore the land acquired by the state as per
standing orders and has also implemented the same in favour of some
persons, refusing to restore the land to similarly placed person, In State of
Haryana v. Gurucharan Singh31 it has been held that such action is
arbitrary and discriminatory. In Kailash Chand Sharma v. State of
Rajasthan32 the court reiterated that the policy decisions of the state
should be free from the vice of arbitrariness and must conform to the
well-settled norms, both positive and negative, underlying Articles 14 and
16 together with Article 15 which form part of constitutional goal of
equality. In Rameshwar Prasad v. Managing Director U.P. Rajkiya
Nirman Nigam Ltd. 33, the court held that where certain rules have been
framed for absorption of the employees on deputation, but denying the
benefit of the rule to others without justifiable reasons was held to be
arbitrary. In Vellore Educational Trust v. State of Andhra Pradesh34, the
court held that where arbitrariness is demonstrated in giving permission
to incorporate engineering college in private domain, in spite of policy
making to that effect, the same was struck down on the ground of
arbitrariness and in violation of legitimate expectation.
4.3 SCOPE OF LEGITIMATE EXPECTATION UNDER
STATUTORY PROVISIONS
Under statutory provisions, legitimate expectations may arise in the
following situations:

30 AIR 1983 SC 1829

31 (2004) 12 SCC 540
32 (2002) 6 SCC 562
33 AIR 1999 SC 3443
34 AIR 1988 SC 130
 191

In Bharat Wools, Ludhiana v. State of Punjab35, the court held that

if there is an express promise given by a public authority or because of
the existence of a regular practice which the claimant can reasonably
expect to continue. The Punjab State Knitwear Development Corporation,
a body controlled by the State Government, invited applications for
allotment of industrial plots to knit wear manufacturers. The appellants
applied and deposited the earnest money. The Managing Director of the
Corporation allotted plots to the applicants without consulting the
Allotment Committee and they deposited the balance of the price of the
plot. In the meantime, the Minister concerned called for the record and
after hearing the parties cancelled the allotment in their favour. The
applicants who were favoured with allotment orders challenged the
cancellation of the allotment on the ground that they were deprived of
their legitimate expectation by the Minister. The contention failed
because the power to allot industrial plots was vested in the Allotment
Committee. Instead, the power of allotment was usurped by the Chairman
of the committee who himself made the allotment without reference to
the Committee thereby converting himself into sole repository of power
and made offers of allotment whimsically and arbitrarily. During the
course of adjudication of the matter by the court, it was also argued that
no fresh applications be invited and the plots be allotted to the applicants
who had earlier made the applications for the purpose. The argument was
sought to be justified on the basis of the legitimate expectation. The plea
of promissory estoppel was also raised. By inviting applications, the
government simply invited the individuals to come in a queue for
competition and no promise was made by the government. The plea of

35 (1997) ILR 1 P&H, 121

192

promissory estoppel cannot bar the government from taking a decision in

larger public interest. The court pointed out that more than one and half
year had elapsed since the applications were invited for allotment of plots
and in the meantime prices of land had shot up substantially. It would be
against public interest to allot the land amongst original applicants only at
the price advertised then. Public interest warrants that the government
and the corporation get maximum price and the most competent
entrepreneur is given opportunity. Element of speculation did not help the
aggrieved person. It was held that the courts themselves must respect the
legal limitations and ruled against review of administrative decisions36.
In Madras City Wine Merchants’ Association v. State of Tamil
Nadu37, the court held that where there is a change in policy or in public
interest, the position is altered by a rule or legislation no question of
legitimate expectation may arise. In the present case, under the Tamil
Nadu Prohibition Act (i) 1937, two sets of rules were promulgated, viz.
the Tamil Nadu Liquor (Retail Vending )Rules 1989 and the Tamil Nadu
Liquor (Retail Vending in Bar) Rules 1992. Both the set of rules
introduced licensing systems-one for retail liquor vending and the other
for operating a bar. The latter license could be had only by one who had a
license under the former rules. The validity of the bar license was one
year. In 1993, the Bar Rules 1992 were rescinded. The question arose
whether the holders of the bar licenses had a legitimate expectation that
their licenses would be renewed after one year, the period for which the
licenses were initially issued. Refusing to apply the doctrine of legitimate
expectation in the given facts, the court pointed out that there was
absolutely no promise of renewal of bar licenses. The bar rules were

36 Ibid
37 (1994) 5 SCC 509
 193

subordinate legislation and no fetter could be imposed on repeal of

subordinate legislation needed in public interest. The decision not to
renew these licenses had been taken much before the time-limit for
renewing the licenses. It became necessary to repeal the bar order in
public interest.
In S.B. International Ltd. v. Assistant Director General of Foreign
Trade38, the court held that the doctrine of legitimate expectation is not
applicable in relation to a dispute arising out of a contract qua contract. In
the present case, the government announced a scheme of advance
licensing for import of raw materials subject to export of finished goods
being made within a specified time and value added was 1000 per cent.
The petitioner entered into an export contract and thereupon made
application for grant of advance import license. Pending his application,
the scheme was modified and now the value added was to be 1900 per
cent. The petitioner argued that since he had made application before the
date of modification of the policy it ought not to apply to him. The
Supreme Court rejected his contention arguing that mere making of an
application does not create any right that the license would be granted to
him. The court also rejected the plea of 'promissory estoppel' as the
necessary conditions for the same as laid down in the case were not
fulfilled.
In Indian Aluminum Co. Ltd. v. Karnataka Electricity Board39, the
court held that the doctrine of legitimate expectation cannot be invoked to
modify or vary the express terms of a contract, more so when they are
statutory in nature. The contracts are entered into voluntarily pursuant to
public action, i.e., floating of tenders or by negotiation and hence there is

38 AIR 1996 SC 2921

39 AIR 1992 SC 2169
194

no compulsion on anyone to enter into these contracts. In the instant case,

the agreement between the company, the Electricity Board and the State
fixing concessional rate for supply of electricity to the company, a
manufacturer of aluminum was superseded by an Act of the state
legislature. The Act empowered the Electricity Board to increase tariff
rates notwithstanding any agreement with the consumers. The increase in
electricity rates was challenged by the company on the ground of
legitimate expectation. The Supreme Court refused to apply the
legitimate expectation principle to the situation on the ground that when
relationship between the parties is contractual, there is no scope for
application of legitimate expectation. The agreement was not the outcome
of any unilateral promise or assurance held out by the State or the Board
to the Company. The agreement was the result of negotiations between
the parties. Hence, the foundation for application of legitimate
expectation was absent. It was held further that a tenderer has a right to
have his tender considered and he cannot conceive legitimate expectation
that his tender will be accepted.

The Supreme court in M/S Sethi Auto Service Station v. Delhi

Development Authority & Ors.40 has examined the concept of 'legitimate
expectation'. While dealing with the question of allotment of a plot by the
DDA, the Supreme court has enumerated various decisions of the concept
of legitimate expectation and examined the law relating thereto. The court
held that the protection of legitimate expectations is at the root of the
constitutional principle of the rule of law, which requires regularity,
predictability, and certainty in government's dealings with the public41.

40 AIR 2009 SC 904

41 Ibid at p. 908
 195

The doctrine of legitimate expectation and its impact in the administrative

law has been considered by Supreme court in a catena of decisions42
Nevertheless, in order to appreciate the concept, a few decisions are to be
discussed at this juncture. It necessary to refer to a decision the House of
Lords in Council of Civil Service Unions & Ors. v. Minister for the Civil
Service43, a locus classics on the subject, wherein for the first time an
attempt was made to give a comprehensive definition to the doctrine of
legitimate expectation. Enunciating the basic principles relating to
legitimate expectation, the court observed that for a legitimate
expectation to arise, the decision of the administrative authority must
affect such person either by altering rights or obligations of that person
which are enforceable by or against him in private law or; by depriving
him of some benefit or advantage which either: (i) he has 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 some rational ground
for withdrawing it has been communicated to him and he has been given
an opportunity to comment thereon or (ii) he has received assurance from
the decision-maker that they will not be withdrawn without first giving
him an opportunity of advancing reasons for contending that they should
be withdrawn.

In Attorney General of Hong Kong v. Ng Yuen Shiu44, a leading

case on the subject, the door said that when a public authority has
promised to follow a certain procedure, it is in the interest of good

42 De Smith’s Judicial review 6th Ed. Parl 2001

43 (1985) AC 374
44 PC (1983) 2 AC 629
196

administration that it should act fairly and should implement its promise,
so long as the implementation does not interfere with its statutory duty.

Explaining the nature and scope of the doctrine of legitimate

expectation, in Food Corporation of India v. M/s Kamdhenu Cattle Feed
Industries, 45a three-Judge Bench of the Supreme court had observed that
the mere reasonable or legitimate expectation of a citizen, in such a
situation, may not by itself be a distinct enforceable right, but failure to
consider and give due weight to it may render the decision arbitrary, and
this is how the requirement of due consideration of a legitimate
expectation forms part of the principle of non-arbitrariness, a necessary
concomitant of the rule of law. Every legitimate expectation is a relevant
factor requiring due consideration in a fair decision-making process.
Whether the expectation of the claimant is reasonable or legitimate in the
context is a question of fact in each case. Whenever the question arises, it
is to be determined not according to the claimant's perception but in
larger public interest wherein other more important considerations may
outweigh what would otherwise have been the legitimate expectation of
the claimant. A bona fide decision of the public authority reached in this
manner would satisfy the requirement of non-arbitrariness and withstand
judicial scrutiny. The doctrine of legitimate expectation gets assimilated
in the rule of law and operates in our legal system in this manner and to
this extent.
The concept of legitimate expectation again came up for
consideration in Union of India & Ors. v. Hindustan Development
Corporation & Ors.46 Referring to a large number of foreign and Indian
decisions, including in council of Civil Service Unions v. Minister for

45 AIR 1985 SC 458

46 AIR 1999 SC 1493
 197

Civil Service47 and Food Corporation of India v. Kamdhenu Cattle Feed

Industries48 and elaborately explaining the concept of legitimate
expectation, it was observed that, 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 Article 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 treasury of natural justice
and it ought not unlock the gate which shuts the court out of review on
the merits, particularly when the element of speculation and uncertainty is
inherent in that very concept.

Taking note of the observations of the Australian High court in

Attorney General for New South Wales v. Quinn49 that to strike down the
exercise of administrative power solely on the ground of avoiding the
disappointment of the legitimate expectations of an individual would be

47 (1985) AC 374
48 AIR 1985 SC 488
49 (2011) NSWC 1436
198

to set the Courts adrift on a featureless sea of pragmatism. The court

further said that there are stronger reasons as to why the legitimate
expectation should not be substantively protected than the reasons as to
why it should be protected. The caution sounded in the said Australian
case that the Courts should restrain themselves and restrict such claims
duly to the legal limitations was also endorsed.
Then in National Buildings Construction Corporation v. S.
Raghunathan & Ors.,50 a three-Judge Bench of the Supreme court
observed that, the doctrine of legitimate expectation has its genesis in the
field of administrative law. The Government and its departments,
in administering the affairs of the country, are expected to honour their
statements of policy or intention and treat the citizens with full personal
consideration without any iota of abuse of discretion. The policy
statements cannot be disregarded unfairly or applied selectively.
Unfairness in the form of unreasonableness is akin to violation of natural
justice. It was in this context that the doctrine of legitimate expectation
was evolved which today has become a source of substantive as well as
procedural rights. But claims based on legitimate expectation have been
held to require reliance on representations and resulting detriment to the
claimant in the same way as claims based on promissory estoppel.
The Supreme court in Punjab Communications Ltd. v. Union of
India & Ors.,51 referring to a large number of authorities on the question,
observed that a 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. Therefore, the choice of the policy is for

50 (1998) 1 NSC 434

51 (2002) 128 STCV 306 P&H
 199

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. The view
was upheld by the Supreme Court in Bannari Amman Sugars Ltd. v.
Commercial Tax Officer & Ors.52
Later on in Jitendra Kumar & Ors. v. State of Haryana & Anr.,53 it
has been reiterated that a legitimate expectation is not the same thing as
an anticipation. It is distinct and different from a desire and hope. It is
based on a right. It is grounded in the rule of law as requiring regularity,
predictability and certainty in the government's dealings with the public
and the doctrine of legitimate expectation operates both in procedural and
substantive matters.
An examination of the above mentioned few decisions shows that
the golden thread running through all these decisions is that a case for
applicability of the doctrine of legitimate expectation has been now
accepted in the subjective sense as part of our legal jurisprudence. It
arises when an administrative body by reason of a representation or by
past practice or conduct aroused an expectation which it would be within
its powers to fulfill unless some overriding public interest comes in the
way. However, a person who bases his claim on the doctrine of legitimate
expectation, in the first instance, has to satisfy that he has relied on the
said representation and the denial of that expectation has worked to his
detriment. The court could interfere only if the decision taken by the
authority was found to be arbitrary, unreasonable or in gross abuse of
power or in violation of principles of natural justice and not taken in

52 (2004) 192 CTR SC 492

53 (2012) 6 SCC 204
200

public interest. But a claim based on mere legitimate expectation without

anything more cannot ipso facto give a right to invoke these principles. It
is well settled that the concept of legitimate expectation has no role to
play where the State action is as a public policy or in the public interest
unless the action taken amounts to an abuse of power. The court must not
usurp the discretion of the public authority which is empowered to take
the decisions under law and the court is expected to apply an objective
standard which leaves to the deciding authority the full range of choice
which the legislature is presumed to have intended. Even in a case where
the decision is left entirely to the discretion of the deciding authority
without any such legal bounds and if the decision is taken fairly and
objectively, the court will not interfere on the ground of procedural
fairness to a person whose interest based on legitimate expectation might
be affected. Therefore, a legitimate expectation can at the most be one of
the grounds which may give rise to judicial review but the granting of
relief is very much limited.
In Ram Pravesh Singh & Other v. State of Bihar54 in which
appellants who were the employees of Futwah Phulwarisharif Gramya
Vidyut Sahakari Samiti Ltd., a co-operative society under liquidation,
have challenged the order dated 30.9.2002 passed by the Patna High
Court, dismissing their appeal against the order dated 24.2.2002 passed
by a Single Judge rejecting their writ petitions.
Prior to 1976, Bihar State Electricity Board was supplying
electricity to the rural areas surrounding Patna. In the year 1976, the
Bihar Government, the Board and Rural Electrification Corporation
brought into existence a society registered under the Bihar Co-operative

54 .(2006) 8 SCJ 721

 201

Societies Act, known as the 'Futwah - Phulwarisharif Gramya Vidyut

Sahakari Samiti Ltd to implement a REC Scheme for better distribution
of electricity to rural areas. The state government granted a licence dated
24.8.1976 to the society, under section 3 of the Indian Electricity Act,
1910 to supply electricity to the Futwah and Phulwari Sharif Blocks, for a
period of 20 years, with options to the licencee to extend the period of
licence.
By letter dated 23.4.1993, the Board recommended to the State
Government, to revoke the licence granted to the Society and merge the
Society with the Board, assigning three reasons i.e. the purpose for which
the Society was created no longer existed. (ii) The Society was drawing
electricity from multiple points in the Board's distribution network,
making it difficult to ascertain the actual quantity of electricity drawn by
the Society. (iii) The financial position and management of the Society
was in a very bad shape and huge arrears were due from the Society to
the Board, in spite of Board supplying it to the Society at 7 paise per unit
as against the Board's cost price of 90 to 115 paise per unit.
The State Government, after considering the matter, issued a
notification dated 25.4.1995, in exercise of its power under sections 4 and
5 of the Act revoking the licence dated 24.8.1976 granted to the Society.
The State Government also constituted a Committee to evaluate the assets
of the society which had to be transferred to the Board. The Committee
was also required to consider whether it would be useful for the Board to
absorb some of the employees of the Society. At a Meeting held on
18.9.1995, the said Committee made the following suggestions:
(a) The Society should be liquidated in view of the cancellation of the
licence;
(b) The Liquidator of the Society should realize the amounts due to the
202

Society and also invite claims from creditors of the Society for
settlement of claims;
(c) The amounts due in regard to the electricity supplied up to the date
of cancellation i.e. 25.4.1995 should be credited to the Society, and
the amounts due for electricity supplied thereafter should be
received by the Board;
(d) The accounts relating to the income and expenditure of the Society
and the Board be maintained separately, from the date of
cancellation of licence, so that they could settle the accounts
between them; and
(e) The Board should consider taking work from the employees of the
society and pay salary to them. The Board may also consider
absorbing the eligible employees of the Society after examining
whether they were qualified for the posts and were duly appointed
and whether their pay-fixation has been properly done.
The State Government by letter dated 2.1.1996 requested the Board
to implement the suggestion of the Committee relating to the employees
of the society that the Board should take work from the employees of the
society and pay their salaries, and also consider the absorption of eligible
employees. Some assurance was also made out in 1996 on the floor of the
Legislature that the Board will be persuaded to take over the undertaking
of the society with its employees. However, thereafter, the State
Government took a decision that the assets and liabilities of the society
should be transferred to the Board, but not the services of the employees
of the Society. The said decision was communicated by the Secretary,
Energy department to the Secretary, Cooperative department and the
Board, by letter dated 24.2.1997.
 203

In view of the rejection of the proposal for absorption of services of

employees of the Society by the Board, several representations were sent
by the Administrator of the Society to the State government to absorb the
services of the employees of the society. The Administrator of the Society
also furnished a list of employees of the Society with particulars of
designations and educational and technical qualifications to the State
Government. The number of employees is 225 ranging from Engineers to
Class IV employees. The said list was forwarded by the State
Government to the Board on 14.7.1999 with a request to ascertain the
existing vacancies in the Board. There were some more correspondence
relating to the suggestions from various quarters, for absorption of the
suitable and fit employees of the Society by the Board.
But the Board did not absorb the services of the employees of the
Society. Therefore, the employees of the society i.e. appellants filed
CWJC Nos.1503 of 2000 and 14394 of 2001 seeking a direction to the
Board to absorb them in equivalent posts with continuity of service and
also pay their arrears of salaries, allowances and other dues. They
contended that they had a right, both in law and in equity, as also a
'legitimate expectation' to be absorbed into the services of the Board, for
the following reasons :
a) The Committee constituted by the State Government had
recommended that the Board should take work from the employees
of the society and ultimately absorb them;
b) The employees of the society have a 'legitimate expectation' that
they should be absorbed by the Board for the following reasons :
i. Initially several private companies were generating and
distributing electricity in the State. When the Board was
constituted, the undertakings of all those private companies were
204

taken over and their employees were all absorbed in the services
of the Board.
ii. Whenever the undertaking of any company or institution was
taken over by any statutory body or corporation, the services of
employees of such undertaking are also normally taken over.
iii. When an 'undertaking' is purchased, in the absence of an intention
to the contrary, all the assets and liabilities, as also the services of
all employees are transferred to the purchaser and therefore the
Board cannot refuse to absorb them.
iv. When certain departments were abolished by the State of Bihar,
the Supreme Court and the Patna High court had passed several
orders directing absorption of the retrenched employees in other
departments of the state government.
v. The society was constituted by the Board and the state
government to discharge the functions which were earlier being
carried on by the Board. The licence granted to the society to
distribute electricity was subsequently revoked on the
recommendation of the Board. The Board has expressed its
readiness to take over the undertaking of the Society. The Board
has in fact taken over the assets of the Society and discharging
the functions of the society without any interruption, on
revocation of the Society's licence on 25.4.1995.
vi. The Board had extracted some work from the employees of the
society from 25.4.1995 till May, 1996.
c) There are large number of vacancies in the Board in various
categories of posts and there would be no difficulty for absorption
of their services by the Board.
 205

d) All the employees of the society have crossed the maximum age
limit for seeking fresh employment and if they were not absorbed
by the Board, they will be deprived of their livelihood.
e) The society was an instrumentality of the State Government and
the Board, and falls within the definition of 'State' within the
meaning of that expression in Article 12 of the Constitution of
India. When the undertakings of such instrumentality of the state
was taken over by another instrumentality of the State, 'fairness in
action' which is one of the hallmarks of a 'State' require that the
rights of the employees are protected by providing for their
absorption in an appropriate manner.
The State Government, in its counter, while denying the claim of
the writ petitioners, however, admitted that in August, 2001, it had taken
a decision that when the prohibition against recruitment in the Board is
lifted and appointments are made in future, preference should be given to
the eligible employees of the society if necessary by granting relaxation
of the age limit.
A learned single Judge of the High court rejected the said
contentions and consequently, dismissed the writ petitions by order dated
24.2.2002. The court held that :
(i) The state government had not given any specific direction to the
Board to absorb the services of the employees of the society. Any
decision taken by the state government that as and when
prohibition against recruitment was lifted and appointments were
to be made, the Board should give preference to the eligible
employees of the society, was not by itself a direction to the Board.
At all events, having regard to section 78A of the Electricity
(Supply) Act, 1948, the State Government can issue direction only
206

in regard to matters of policy, but could not issue a direction to

appoint or absorb any employee of the society in its service as that
would amount to encroachment of Board's power under section 15
of the Act. The view was expressed by Supreme court in Rakesh
Ranjan Verma v. State of Bihar55.
(ii) Even if the society was to be considered as an instrumentality of
the State, that would not assist the appellants to contend that the
society was an extension of the Board, nor cast any obligation on
the Board to absorb the employees of the society. When the licence
granted under section 3 of the Act was revoked and the undertaking
of the Society (licencee) was agreed to be purchased by Board, the
provisions of the Act governed the matter and those provisions did
not enable the appellants to claim any right of being absorbed in
the services of the Board.
(iii) The fact that the Board took over the undertakings of the private
companies which were generating and distributing electrical power
till then, along with the services of the employees of such private
undertakings, did not have any relevance to the appellants' claim
for absorption. The undertakings and services of employees of the
erstwhile licencees were taken over several decades ago when the
Board was constituted and when the Board was financially and
administratively in a completely different position. As the financial
position of the Board was presently precarious due to various
circumstances, in particular, setting up of Jharkhand State
Electricity Board following the reorganization of the state of Bihar
and as the Board itself was considering retrenchment of large

55 (1992) Suppl. (2) SCC 343

 207

number of its existing employees, it cannot be compelled to take

over the services of the employees of the society in the absence of
any legal right in the appellants.
(iv) It could not direct absorption on equitable grounds. Any equitable
consideration of the claim of the appellants cannot ignore the
financial position of the Board, howsoever sympathetically the
court may view the plight of the appellants. The state government,
being interested in the welfare of the employees of the society had
considered several alternatives to rehabilitate the employees of the
Society. In the course of exploring the various alternatives,
information was sought by the Government, views were expressed
and assurances were made on the floor of the House, to explore the
possibility of the Board absorbing the services of the employees of
the society. But that did not create any right in the employees of the
society to seek employment from the Board. In the absence of any
specific decision by the Board or assurance by the Board to absorb
the services of the appellants, the principle of 'legitimate
expectation' was not attracted.
(v) Having regard to Section 7 and 7A of the Act, when the
undertaking of a licensee was purchased by the Board, there was no
obligation on the part of the Board to absorb the employees of the
erstwhile licensee.
The Letters Patent Appeal filed by the appellants against the said
decision of the learned single Judge was dismissed by a Division Bench
by a brief order dated 30.9.2002, both on the ground of limitation and on
merits, thereby affirming the decision of the learned single court . The
said order was challenged in the appeal before Supreme Court. On the
208

contentions urged, the following question arose for the Consideration of

the Supreme Court.
Whether there is any obligation on the part of the Board - either
contractual or statutory, or on equitable considerations-to absorb the
services of the appellants?
4.3.1 Contractual Obligation
The licence granted to the society under section 3 of the Indian
Electricity Act, 1910 was revoked by the State Government on 25.4.1995.
It is no doubt true that on such revocation, the Board took over the entire
activities of the society relating to distribution of power to the licensed
areas. The Board also gave its concurrence to purchase the undertaking of
the society. But the Board neither entered into any contract with the
society, nor gave any assurance to the Society or its employees to absorb
the employees of the society into its service. Therefore, obviously, there
is no contractual obligation on the part of the Board to absorb the services
of the appellants.
4.3.2 Statutory Obligation
None of the provisions of the Act required the purchaser of the
undertaking to take over the services of the employees of the Society. The
appellants have not been able to show any other statutory provision which
entitles them to seek absorption by the Board. Hence, there is no statutory
obligation to absorb them into Board's service.
4.3.3 Equitable considerations
Realising that the appellants had no contractual or statutory right,
learned counsel for the appellants sought to derive support for the claim
on equitable considerations, by placing reliance on an amalgam of the
principles relating to legitimate expectation, fairness in action and natural
justice, reiterating the contentions urged before the High Court.
 209

It may be true that when the Board took over the undertakings of
the erstwhile private licencees several decades ago, it also took over the
services of the employees of such private licensees. It is also possible that
this court in exercise of its jurisdiction under Article 142, on the facts of a
given case, might have directed that the persons, whose services had been
terminated on account of closure of an instrumentality of the State, be
continued in the service of Government Departments or other
Government Corporations. It may also be true that certain enactments
providing for transfer of undertakings in pursuance of nationalization or
otherwise, had also provided for continuation/transfer of the services of
the employees of the undertakings to the transferee. But these do not
attract the principle of 'legitimate expectation'. The court explained the
legitimate expectation and said that 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
210

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. In Union of India v. Hindustan
Development Corporation56 this Supreme court explained the nature and
scope of the doctrine of 'legitimate expectation' and held that 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

56 (1993) 3 SCC 499

 211

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.
The court also explained the remedies flowing by applying the
principle of legitimate expectation and said that 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 negativating 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
212

would be within its powers to fulfill. The protection is limited to that

extent and a judicial review can be within those limits. But as discussed
earlier, 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.
In Punjab Communication Ltd. v. Union of India57 the Supreme
court observed that 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

57 (1999) 4 SCC 727

 213

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 short, 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 substantive legitimate 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:
A Constitution Bench of Supreme court in Secretary, State of
Karnataka v. Umadevi58 referred to the circumstances in which the
doctrine of legitimate expectation can be invoked and held that 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 of legitimate
expectation, observed thus in Confederation of Ex-servicemen
Associations v. Union of India.59 and said that no doubt, the doctrine has
an important place in the development of Administrative Law and

58 (2006) 4 SCC I
59 JT (2006) 8 SC 547
214

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.
The Supreme Court then examined whether the principles of
legitimate expectation can have any application in the instant case. What
transpired several decades ago when the Board commenced its operations
and when its finances were sound, cannot have any bearing on its action
in the year 1995. The position of the Board vis-à-vis the Society in 1995
was completely different from the position of the Board vis-à-vis the
several ex-licensees when the Board took over their undertakings several
decades back. Further, the assumption that whenever an undertaking is
taken over, transferred or purchased, the transferee or purchaser should
continue the services of the employees of the erstwhile owner of the
undertaking, is not sound. In fact, statutory provisions seem to indicate
otherwise. Section 25-FF of the Industrial Disputes Act, 1947 provides
 215

that where the ownership or management of an undertaking is transferred,

whether by agreement or by operation of law, from the employer in
relation to that undertaking to a new employer, every workman who has
been in continuous service for not less than one year in that undertaking
immediately before such transfer shall be entitled to notice and
compensation in accordance with the provisions of Section 25-F, as if the
workman had been retrenched, except in the cases mentioned in the
proviso thereto. Therefore, the natural consequence of a transfer of an
undertaking, unless there is a specific provision for continuation of the
service of the workmen, is termination of employment of its employees,
and the employer's liability to pay compensation in accordance with
Section 25F. In Anakapalle Co-operative Agricultural and Industrial
Society Ltd. v. Workmen60, a Constitution Bench of Supreme court
rejected the contention of the employees that, on transfer of the
undertaking, the employees of the undertaking should be absorbed by the
purchaser/transferee of the undertaking. This court held that, "This double
benefit in the form of payment of compensation and immediate re-
employment cannot be said to be based on any considerations of fair play
or justice. Fair play and justice obviously mean fair play and social
justice to both the parties. It would, not be fair that the vendor should pay
compensation to his employees on the ground that the transfer brings
about the termination of their services, and the vendee should be asked to
take them back on the ground that the principles of social justice require
him to do so and in that sense, the said compensation is distinguishable
from gratuity. Therefore, if the transferor is by statute required to pay
retrenchment compensation to his workmen, it would be anomalous to

60 AIR 1963 SC 1489

216

suggest that the workmen who received compensation are entitled to

claim immediate reemployment in the concern at the hands of the
transferee.
The Board had never agreed nor decided to take services of any of
the employees of the Society. In fact, it is not even the case of the
appellants that the Board had at any point of time held out any promise or
assurance to absorb their services. When the licence of the Society was
revoked, the State Government appointed a Committee to examine the
question whether the Board can take over the services of the employees
of the Society. The Committee no doubt recommended that the services
of eligible and qualified employees should be taken over. But thereafter
the State Government considered the recommendation and rejected the
same, apparently due to the precarious condition of the Board which itself
was in dire financial straits, and was contemplating retrenchment of its
own employees. At all events, any decision by the State Government
either to recommend or direct the absorption of the Society's employees
was not binding on the Board, as it was a matter where it could
independently take a decision. It is also not in dispute that for more than
two decades or more, before 1995, the Board had not taken over the
employees of any private licencee. There was no occasion for
consideration of such a course. Hence, it cannot be said that there was
any regularity or predictability or certainty in action which can lead to a
legitimate expectation.
The appellant next submitted that Supreme Court, in some cases,
has directed absorption in similar circumstances. Reliance is placed on
the decision in G. Govinda Rajulu v. Andhra Pradesh State Construction
 217

Corporation Ltd.61 in which the Supreme court directed that the

employees of the Andhra Pradesh State Construction Corporation Limited
whose services were sought to be terminated on account of the closure of
the Corporation shall be continued in service on the same terms and
conditions either in the government departments or in the government
corporations.
The court further said that the tenor of the said order, which is not
preceded by any reasons or consideration of any principle, demonstrates
that it was an order made under Article 142 of the Constitution on the
peculiar facts of that case. Law declared by this court is binding under
Article 141. Any direction given on special facts, in exercise of
jurisdiction under Article 142, is not a binding precedent. Therefore, the
decision in the instant case cannot be the basis for claiming relief similar
to what was granted in that case. Hence the fact that in certain cases, the
court directed regularization of the employees involved in those cases
cannot be made use of to found a claim based on legitimate expectation.
The Supreme Court then considered the contention that the
appellants are entitled to relief based on the principle of fairness in action,
on equitable considerations. Learned counsel for the appellants relied on
two decisions of Supreme court in support of his contention i.e. Gurmail
Singh v. State of Punjab62 and Kapila Hingorani v. State of Bihar.63
The observations made by Supreme court in the former case on
which reliance is placed are such as:
"This is where, as here, the transferor and/or transferee is a State or
a State instrumentality, which is required to act fairly and not arbitrarily
and the court has a say as to whether the terms and conditions on which it

61 AIR 1963 SC 1489

62 (1991) 1 SCC 189
63 (2003) 6 SCC 1
218

proposes to hand over or take over an industrial undertaking embody the

requisite of "fairness in action" and could be upheld. Certainly, in such
circumstances it will be open to the court to review the arrangement
between the State Government and the Corporation and issue appropriate
directions. Indeed, such directions could be issued even if the elements of
the transfer in the present case fall short of a complete succession to the
business or undertaking of the State by the Corporation, as the principle
sought to be applied is a constitutional principle flowing from the
contours of Article 14 of the Constitution which the State and
Corporation are obliged to adhere to."
The court further said that it was very fair on the part of the State
Government to decide that, as the tubewells would be operated by the
Corporation, it would be prudent to run them with the help of the
appellants rather than recruit new staff therefore and that the government
should bear the burden of any losses which the Corporation might incur
as a result of running the tubewells. But having gone thus far, the court is
unable to see why the government stopped short of giving the appellants
the benefit of their past services with the government when thus absorbed
by the Corporation. Such a step would have preserved to the appellants
their rightful dues and retirement benefits. The conduct of the
government in depriving the appellants of substantial benefits which have
accrued to them as a result of their long service with the government,
although the tubewells continue to be run at its cost by a Corporation
wholly owned by it, is something which is grossly unfair and inequitable.
This type of attitude designed to achieve nothing more than to deprive the
employees of some benefits which they had earned, can be understood in
the case of a private employer but comes ill will from a State Government
and smacks of arbitrariness. Acting as a model employer, which the State
 219

ought to be, and having regard to the long length of service of most of the
appellants, the State, should have agreed to bear the burden of giving the
appellants credit for their past service with the government. That would
not have affected the Corporation or its employees in any way except to a
limited extent and, at the same time, it would have done justice to the
appellants. This is something which the State ought to be directed to do.
"But in a case where one or both of the parties is a State
instrumentality, having obligations under the Constitution, the court has
the power of judicial review over all aspects of transfer of the
undertaking. It is open to a court, in such a situation, to give appropriate
directions to ensure that no injustice results from the changeover.
These observations have to be understood in the background of the
facts of the particular case. The appellants therein were tubewell
operators in the Public Works department (PWD) of the State
Government. The State took a decision to transfer all tubewells to a
Corporation wholly owned and managed by the State and as a
consequence all the permanent posts with reference to the Tubewell
Circle in the PWD were abolished. Notices were served in terms of
Section 25F of the Industrial Disputes Act, 1947. When those notices
were challenged, they were set aside on the ground that they were not in
consonance with clause [c] of Section 25F. The State Government issued
fresh notices of termination and they were also set aside by the High
court on the ground that they did not conform to clause [b] of Section
25F. Thereafter, the State Government served fresh notices terminating
the services in accordance with Section 25F for the third time. The third
round notices were also challenged. But the High court upheld the notices
of retrenchment. The order of the High court was challenged before
Supreme Court. During the pendency of the long drawn litigation, the
220

newly formed Corporation decided to take over their services by

extending them the same scale of Pay, which they were getting when they
were in the employment of the State Government. Therefore, the only
grievance that survived for consideration before this court related to
appellants therein being treated as fresh appointees on the dates of their
respective appointment by the corporation, thereby denying them the
benefit of their past service and seniority. It is in the context of examining
the said grievance, the court made the observations and said that the
retrenchment under Section 25-FF is valid. The Corporation had
voluntarily taken over the services of the retrenched employees. The
question whether the transferee or the purchaser of the undertaking
should absorb the services of the employees of the previous employer
was not in issue and therefore, the said decision is of no assistance. On
the other hand, what may be relevant are the observations of the
Constitution Bench in Secretary, State of Karnataka v. Uma Devi 64 when
it said that obviously, the State is also controlled by economic
considerations and financial implications of any public employment. The
viability of the department or the instrumentality of the project is also of
equal concern for the State. The State works out the scheme taking into
consideration the financial implications and the economic aspects. Can
the court impose on the State a financial burden of this nature by insisting
on regularization or permanence in employment, when those employed
temporarily are not needed permanently or regularly? For example, if the
court gives a direction to provide permanent employment to all those who
are being temporarily or casually employed in a public sector
undertaking. The burden may become so heavy by such a direction that

64 (2006) 4 SCC I
 221

the undertaking itself may collapse under its own weight. It is not as if
this had not happened. So, the court ought not to impose a financial
burden on the State by such directions, as such directions may turn
counterproductive."
The decision of Supreme Court in Kapila Hingorani v. State of
Bihar65 is an interim order in a public interest litigation. In the State of
Bihar, various government companies and public sector undertakings had
not paid salaries to their workmen and other employees for a long time,
resulting in deaths and suicides of several employees. The petitioner
therein wanted the State to bear the responsibility for payment of salaries.
The State resisted the petition on the contention that the liabilities of the
company cannot be passed on to the State by taking recourse to the
doctrine of lifting the veil or otherwise. The Supreme court issued certain
interim directions for disposal of all liquidation proceedings in regard to
the government companies in question and appointment of a Committee
to scrutinize and ascertain the assets and liabilities of the company. The
Supreme Court also directed the State Government to deposit a sum of
Rs.50 crores before the High court for disbursement of salaries to the
employees. During the course of the said interim order, the Supreme
court observed that the government companies/public sector undertakings
being "States" would be constitutionally liable to respect life and liberty
of all persons in terms of Article 21 of the Constitution of India. They,
therefore, must do so in cases of their own employees. The Government
of the State of Bihar for all intent and purport is the sole shareholder.
Although in law, its liability towards the debtors of the company may be

65 (2003) 6 SCC I
222

confined to the shares held by it but having regard to the deep and
pervasive control it exercises over the government companies; in the
matter of enforcement of human rights and/or rights of the citizen to life
and liberty, the State has also an additional duty to see that the rights of
employees of such corporations are not infringed.
The right to exercise deep and pervasive control would in its turn
make the Government of Bihar liable to see that the life and liberty clause
in respect of the employees is fully safeguarded. The Government of the
State of Bihar, thus, had a constitutional obligation to protect the life and
liberty of the employees of the government-owned companies/
corporations who are the citizens of India. It had an additional liability
having regard to its right of extensive supervision over the affairs of the
company.
The observations made in an interim order with reference to the
State's obligations will not be of any avail to seek employment under the
Board. The Supreme said that it is not concerned in these appeals about
the rights of the employees of the Society vis-a-vis the Society or the
State Government. The court is concerned with a specific question as to
whether they can seek absorption under the Board on the ground of
legitimate expectation. The Supreme Court referred to the decision made
in Bhola Nath Mukherjee v. Government of West Bengal66 relating to
transfer of a licensee's undertaking to a State Electricity Board, as a
consequence of revocation of the licence. In that case, the Board initially
allowed the employees of the erstwhile licensee to continue in its service
but subsequently introduced terms which rendered them fresh appointees
from the date of take over of the undertaking. The question that arose for

66 (1997), Sec. 562

 223

consideration was whether the employees were entitled to compensation

under Section 25FF of the Industrial Dispute Act; and whether the
liability for payment of such compensation under Section 25FF of the Act
was on the transferor or the Board. The court held that employees had no
right to claim any retrenchment compensation from the Board, nor did
they have any right to claim to be in continuous employment on the same
terms and conditions, after the purchase of the undertaking by the Board.
The said decision clearly recognizes that the Board has no obligation
towards the employees of the previous owner of the undertaking.
A person may have a 'legitimate expectation' of being treated in a
certain way by an authority even though he has no 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.
4.4 LIMITATIONS OF THE DOCTRINE OF LETITIMATE
EXPECTATIONS
4.4.1 Exceptions to Doctrine of Legitimate Expectations
Although legitimate expectation has assumed the position of a
significant doctrine of public law in almost all jurisdictions, yet there are
some exceptions to this principle of fair procedure.
In Ved Gupta v. Apsara67, the court held that there cannot be a
legitimate expectation to a thing which would involve the violation of a
statute, e.g., to run a cinema house without licence; or interference with a
public duty of the authority. In State of H.P. v. Kailash68, the court held
that where a person other than a licensee was operating a cinema show,

67 (1996) 5 CLJ, 286

68 (1992) 1 SCC 351
224

no hearing of such outsider would be required before making an order

suspending such show. For the same reason, legitimate expectation
cannot preclude legislation.
In Govt of A.P v. The Nizam69, the court held that no legitimate
expectation can be founded on an application which has been rejected for
failure to comply with the conditions imposed for its consideration.
In Union Territory Chandigarh v. Dilbagh70, the court held that in
the matter of appointment to Government service since a candidate
doesn't acquire any right to be appointed merely because his name
appears in Selection List made by a Selection Board. In the absence of
any specific rule entitling him to such appointment, the Court or Tribunal
cannot fetter the discretion of the appointing authority by the doctrine of
legitimate expectation, in the absence of arbitrariness or maladies. Even
the doctrine of natural justice cannot be invoked if he is not heard before
canceling such Selection List for bona fide reasons. The court also said
that the legitimate expectation of an individual is subject to the larger
consideration of public interest. Whenever such question arises, it is to be
determined not according to the claimant's perception but in larger public
interests wherein other important considerations may outweigh e.g., in the
matter of non-acceptance of the highest bid at a public auction or a tender
relating to a government contract or license.

In Union of India v. Hindustan Development Corporation71, the

court held that legitimate expectation doesn't give rise to any substantive
right straight away. It gives a locus standi to a person to seek judicial

69 AIR 1993 SC 76
70 AIR 1993 SC 431
71 (1993) 3 SCC 499
 225

review by challenging an administrative action and to have it quashed

only if the decision is arbitrary, unreasonable or not taken in public
interest and a failure to give a hearing to such affected person has resulted
in failure of justice.
4.4.2 Overriding Considerations
4.4.2.1 National security
In Council of Civil Service Unions v. Minister for the Civil
Service72, The Government Communications Headquarters (GCHQ) was
responsible for the provision of intelligence to the government, and for
the security of military and official communications. Since the
establishment of GCHQ in 1947, its staff had been permitted to belong to
civil service trade unions, and GCHQ management had regularly
consulted with the unions following industrial action at GCHQ, the Prime
Minister in her capacity as Minister for the Civil Service sought to curtail
staff rights of trade union membership by an instruction issued under
prerogative powers for controlling the Civil Service. The CCSU (1955)
HL sought a declaration that the Minister had acted unfairly in removing
staff rights of trade union membership without consultation. The Minister
argued that consultation would have provoked the very disruption and
endangering of national security which her instruction was intended to
terminate.
The court held that the proceeding on the basis that the exercise of
delegated prerogative powers was justifiable, that, although the staff had
no legal right to prior consultation, they had a legitimate expectation to it.
Such expectation might arise either from an express promise given by a
public authority or, from a regular practice of consultation which the

72 (1985) AC 374
226

applicant could reasonably expect to continue. In the absence of evidence

that an issue of national security was involved, it would have been proper
to grant the declaration sought.
4.4.2.2 Preserve action freedom of administrative action.
In R v. Secretary of State for Health73, Where the facts of the case
such as the applicant manufactured oral snuff. In 1985, when the
government was already aware of a link between oral snuff and cancer,
the applicant received a government grant. At the same time, the
government obtained the applicant's agreement to place a health warning
on its product, and not to market it to those aged less than 18 years. In
1988, the Department of Health announced that it intended to ban the
manufacture of oral snuff. The applicant sought judicial review on two
grounds: first, the Secretary of State was in breach of a statutory duty to
consult it as an affected party, and, secondly, that it had a legitimate
expectation that it would be permitted to continue to manufacture snuff as
long as it kept to its agreement regarding marketing and the health
warning.
The court held that the applicant would succeed on the first ground
and fail on the second. The applicant had no legitimate expectation. The
court also held that the Secretary of State's discretion to change his policy
could not be fettered by moral obligations to the applicant deriving from
the earlier favourable treatment of them'. The court further said that the
applicant 'must have been aware that their expectations could never fetter
the Secretary of State's public duty to promote and safeguard the health of
the public'.

73 [2003] 2 WLR 692

 227

In R v. Ministry of Agriculture, Fisheries and Food74, the

applicant's arguments based on legitimate expectation cannot succeed
because legitimacy, in the sense in which it applied to expectations under
public law, was not absolute. Its presence was to be gauged by balancing
the expectations induced by government and the policy considerations
which militated against their fulfillment. Sedley J said that the balance
must in the first instance be for the policy maker to strike; but if the
outcome is challenged by way of judicial review or do not consider that
the court's criterion is the bare rationality of the policy maker's
conclusion. While policy is for the policy maker alone, the fairness of his
or her decision not to accommodate reasonable expectations which the
policy will thwart remains the court's concern. To postulate this is not to
place the judge in the seat of the Minister, it is the court's task to
recognise the constitutional importance of ministerial freedom to
formulate and to reformulate policy. But it is equally the court's duty to
protect the interests of those individuals whose expectation of different
treatment has a legitimacy which in fairness outtops the policy choice
which threatens to frustrate it. Legitimate expectation is now in effect a
term of art, reserved for expectations which are not only reasonable but
which will be sustained by the court in the face of changes of policy.
Whether this point has been reached is determined by the court, whether
on the grounds of rationality, of legality or of fairness, of all of which the
court, not the decision maker is the arbiter.
In R v. Secretary of State for the Home Department75 where the
facts of the case such as the applicants were three prisoners serving
sentences at HMP Risley. Pursuant to rules made by the Secretary of

74 (1995) CA
75 (1996) CA 94
228

State and in force at the beginning of their sentences, they would have
been eligible to apply for periods of home leave after serving one-third of
their terms of imprisonment. These rules were communicated to prisoners
in the form of a notice and 'compact', setting out responsibilities
undertaken by the prison, and requiring signed commitments to norms of
good behaviour by the prisoners. In response to perceived public concern,
the Secretary of State amended the rules by statutory instrument in 1995
with the result that eligibility to home leave accrued only on the
completion of half the sentence to be served by a prisoner. The applicants
claimed that the change denied them a legitimate expectation on the terms
of the original rules. The Divisional Court dismissed the applications on
the grounds that (a) no clear and unambiguous representations had been
established, and (b) that the correct test by which to judge the Secretary
of State's change of policy was not the balance of fairness and
proportionality, but the public law test of irrationality.
The court by upholding the judgment of the Divisional Court held
that the principle for granting home leave and other privileges upon the
regime currently in force, those documents nevertheless suggested that
this was the position, and certainly contained no contrary indications.
Where procedural irregularity was alleged against a Minister, it was
appropriate to inquire into the fairness of the procedure adopted by him,
but where, as in the present case, a substantive defect was alleged, it fell
to be judged by the far stricter irrationality test.
4.4.3 Other Limitations upon the Doctrine of Legitimate Expectation
The doctrine of 'legitimate expectation' has its own limitations. The
concept of legitimate expectation is only procedural and has no
 229

substantive impact. In Attorney General for New South Wales v. Qaiin76

One Q was a stipendiary Magistrate in charge of Court of Petty Sessions.
By an Act of Legislature that court was replaced by local court.
Though applied, Q was not appointed under the new system. That
action was challenged. The court dismissed the claim observing that if
substantive protection is to be accorded to legitimate expectations, it
would result in interference with administrative decisions on merits
which is not permissible. Moreover, the doctrine does not apply to
legislative activities. Thus, In R. v. Ministry of Agriculture77 conditions
were imposed on fishing licences. The said action was challenged
contending that the new policy was against legitimate expectations'.
Rejecting the argument and dismissing the action, the court held that the
doctrine of' legitimate expectations' cannot preclude legislation.
Likewise, in Sri Srinivasa Theatre v. Govt, of TN3n. by amending
the provisions of the Tamil Nadu Entertainments Tax Act, 1939, the
method of taxation was changed. The validity of the amendment was
challenged inter alia on the ground that it was against legitimate
expectation of the law in force prior to amendment. Rejecting the
argument and following the judgment passed in Council of Civil Service
Unions v. Minister for Civil Service78, the Supreme Court held that
legislation cannot be invalidated on the basis that it offends the legitimate
expectations of the persons affected thereby.
Again, doctrine of 'legitimate expectations' does not apply if it is
contrary to public policy or against the security of State. Thus, in Council
of Civil Service Unions v. Minister for Civil Service79 the staff of

76 (1990) 3 ALR I.
77 (1991) 1 All ER41.
78 (1985) AC 374
79 Ibid
230

Government Communications Head Quarters (GCUQ) had the right to

unionization. By an order of the government, the employees of GCHGQ
were deprived of this right. The union challenged the said action
contending that the employees of GCHQ had legitimate expectations of
being consulted before the Minister took action. Though in theory, the
House of Lords agreed with the argument of the Union about legitimate
expectations, it held that the Security considerations put forward by the
government-override the right of the Union to prior consultation.
Similarly, in State of M.P. v. Kailash Chand80, an Act was
amended by providing age of superannuation. It was contended that when
an appointment was made by fixing tenure, there was right to continue
and the doctrine of legitimate expectation would apply. The claim was,
however, negative observing that "legitimate expectation cannot preclude
legislation"
In Union of India v. Hindustan Development Corpn81 in
government contract, dual pricing policy was fixed by the State
Authorities i.e. lower price for big suppliers and higher price for small
suppliers. That action was taken in larger public interest and with a view
to break "cartel" it was held that adoption of dual pricing policy by
government did not amount to denial of legitimate expectation.
4.5 CRITICAL APPRAISAL
Like the bulk of the administrative law the doctrine of legitimate
expectation is also a fine example of judicial creativity. Nevertheless it is
not extra legal and extra-constitutional. A natural habitat for this doctrine
can be found in Article 14 of the Constitution which abhors arbitrariness
and insists on fairness in all administrative dealings. It is now firmly

80 AIR 1992 SC 1277.

81 AIR 1994 SC 980.
 231

established that the protection of Article 14 is available not only in case

of arbitrary "class legislation" but also in case of arbitrary 'State action'.
Thus the doctrine is being hailed as a fine principle of administrative
jurisprudence for reconciling power with liberty82.
The doctrine has both negative and positive contents. If applied
negatively an administrative authority can be prohibited from violating
the legitimate expectations of the people and if applied in a positive
manner an administrative authority can be compelled to fulfill the
legitimate expectations of the people. This is based on the principle that
public power is a trust which must be exercised in the best interest of its
beneficiaries i.e. the people.
The doctrine of legitimate expectations in essence imposes a duty
to act fairly. Legitimate expectation may come in various forms and owe
its existence to different kinds of circumstances. It is not possible to give
an exhaustive list in the context, the doctrine to be applied due to the vast
and fast expansion of government activities. They shift and change so fast
that the start of our list would be obsolete before we reach the middle.
One thing, however, is clear, that court cannot assume jurisdiction
to review administrative act or decision, which is unfair in the opinion of
the court. If that be allowed, the court would be exercising jurisdiction to
do the very thing which is to be done by the repository of an
administrative power, i.e. choosing among the courses of action upon
which reasonable minds might differ.
But the Court must stop short of compelling fulfillment of the
promise or practice unless the statute so requires or the statute permits the
repository of the power to bind itself as to the manner of the future

82 Food Corporation of India v. kamdhenu Cattle Feed Industries, AIR 1993 SC 1601
232

exercise of the power. It follows that the notion of legitimate expectation

is not the key which unlocks the treasury of natural justice and it ought
not to unlock the gate which shuts the court out of review on the merits. It
is true that the emergence of doctrine of legitimate expectation has put a
tremendous impact in Indian Law specifically an administrative law. The
real impact of the legitimate expectation in India Law has been discussed
in next chapter.