Law of Contract: Doctrine of Legitimate Expectation

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In the relationship between an individual and an administrative public authority, it is expected by the individual to be treated with fairness, and in case of a grievance, to be provided with an opportunity to be heard. The curtailment of any arbitrariness of power, that is discretionary in nature, and may violate such principles, can be exercised by the public via the Doctrine of Legitimate Expectations.

The doctrine pertains to the field of Public Law. However, it does not provide a legal right to the individual. It imposes a duty on the administrative authority, the violation of which can hold the authority accountable, ringing true to words of Lord Denning, “A man should keep his words. All the more so when promise is not a bare promise but is made with the intention that the other party should act upon it.”

An expectation becomes legitimate when the decision of an administrative authority deprives an individual of some benefit or advantage that he had in the past. There is a legitimate expectation of the continuance of this permission unless there is a rational basis for its withdrawal by the authority. Or, if the authority had assured its citizen, that the principle of audi alteram partem will be adhered to where the individual will be given the opportunity of contending with advanced reasoning as to why the benefit or advantage should not be withdrawn by the administrative authority. The principle, therefore, concerns the degree to which the public’s expectations may be safeguarded, in the light of a changed policy that tends to undermine them.

Evolution of the Doctrine of Legitimate Expectations

The Doctrine of Legitimate Expectations was first adapted into the Common Law jurisdiction through an obiter dictum of Lord Denning, in the case of Sehmidt v. Secretary of Home Affairs. In this case, he emphasised on the necessity of an administrative body allowing an individual affected by their decision with an opportunity of representation. He said it depends on whether the individual has a right or interest or even a legitimate expectation, which he was deprived of. Since then, the doctrine has proven to be a ground of Judicial Review in administrative law, to prevent an abuse of discretionary power.

In India, the genesis of this doctrine can be found in Administrative Law. The Rule of Law has been a guiding principle to a democracy, establishing that it is the people of the society who truly have the power to implement its laws and functioning. As the Rule of Law allows the public to prevent arbitrariness of administrative authority, framing the essence of the doctrine, it cannot be read in isolation to the Doctrine of Natural Justice, that prohibits biasness and ensures, in the eyes of the law, that each party gets a fair hearing (audi alteram partem).

The Doctrine of Legitimate Expectations was first implemented in India in the case of, State of Kerala v K.G. Madhavan Pillai. The government issued a sanction to the respondents to open a new unaided school and to upgrade the older, existing ones. However, a direction was soon issued, to keep the sanction in abeyance. This order was challenged on the grounds of violation of natural justice. The court held that the sanction order created a legitimate expectation on the respondents, which was violated by the issuance of the second order.

Salient features

The Doctrine of Legitimate Expectations is not based on statutory rights; rather, there are certain aspects that are required to be present in order to claim violation. The salient features of the doctrine can be established with the help of numerous court judgements, as follows:

  • Violation of a Contract is not a Necessity

Private law dictates that a person can approach the court only on the violation of his statutory right or a contract. However, the locus standi for public law is much more relaxed, allowing him to stand before the court even if the violation is not statutory, but an expectation based on legitimate grounds. Hence, such a plea falls between a legal claim and the absence of a legal claim, calling for administrative accountability not only on legal factors, but factors that are simply humane in nature.

  • It is not Statutory, however, it is not Extra-Judiciary in Nature

The inception of the doctrine is from Article 14 of the Constitution of India, that insists on the implementation of fairness in all administrative functioning. The case of Food Corporation of India v. Kamdhenu Cattle Feed Industries established that the protection of Article 14 must be available on not only 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 liberty.

  • The Expectation must be Legitimate

The Court, in Union of India v. Hindustan Development Corp held, 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. A pious hope 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 a natural and regular sequence.

  • There must be a Public Interest

The doctrine challenges administrative authority. However, as stated in the case of PTR Exports v. Union of India, the Court will not act upon any claims of denial of Legitimate Expectations, unless the administrative action has been in violation of public interest and is unreasonable and arbitrary in nature, adhering to the concept of Natural Justice. Therefore, there must have been a public interest that has been overridden and the change of policy that is mala fide, with proof of an abuse of power.

  • Rule of Law

The Rule of Law states that the governance of a State is not by a ruler, but that of the people of State. Thus, it emphasises the fact that laws are framed in order to provide a better functioning of a State, prioritising on its people and their welfare. Thus the Doctrine of Legitimate Expectations is a safeguard to prevent any abuse of administrative power.

Landmark judgements

The Doctrine of Legitimate Expectations does not have any statutory laws, therefore, its evolution and development in India has heavily depended on precedents. The following are the landmark judgements that have shaped the implementation of the doctrine in the Indian legal scenario:

  • Schedule Caste and Weaker Section Welfare Association v. State of Kerala, (1991) 2 SCC 604

Facts of the case: The government issued a notice about the introduction of a slum clearing scheme. Subsequently, the notice was amended and certain areas that were previously notified were left out.

It was held by the court that the former notice had created a legitimate expectation of the people living in the area that has now been left out. This expectation must not be denied a fair hearing.

  • Navjyoti Co-op Group Housing Society v. Union of India, (1992) 4 SCC 477

Facts of the case: Allotment of land by the developers of a cooperative society, was done on the basis of seniority of such societies. The seniority was determined on the basis of the date of registration. Subsequently, a new criteria was laid down, where determination was made with reference to the date of approval of the members of the society, by the registrar. It was contested that the policy of the government should be without discretion.

The Supreme Court held that the Doctrine of Legitimate Expectations imposes a duty on the administrative authority to act in a fair manner and to take into consideration the factors that fall within the conspectus of fairness, such as a reasonable opportunity to make representation by the parties affected by a change in policy.

  • Bannari Amman Sugars Ltd v. CTO, (2005) 1 SCC 625

Facts of the case: The State had granted certain tax benefits, which were withdrawn. Therefore, an action was challenged.

The Apex Court upheld the State in its judgement stating that where public policy is overriding public interest, the decision making authority must justify such denial of legitimate expectation.

  • Food Corporation of India v. Kamdhenu Cattle, AIR 1993 SC 1601

Facts of the case: The Food Corporation of India attempted an auction of damaged food grains, and was unsatisfied with the bids it received. After entering into negotiations with each of its bidders, it eventually chose to award the tender to somebody other than the highest bidder. The highest bidder contended that it has a legitimate expectation of being awarded the tender.

The Court recognised the legitimate expectation of the highest bidder. However, it held that the more important aspect of this case is to cater to a larger public interest that may outweigh the legitimate expectation of the claimant.

Critical analysis

The absence of statutory provisions has led to a widely asked question – whether the Doctrine of Legitimate Expectations is illusionary or fictitious in nature? The basis of this question comes from the precedents, where courts have time and again emphasised on the doctrine being rather subjective in nature. The Court, in the Hindustan Development Corporation case has stated that it is not possible to have an exhaustive list wherein legitimate expectation may arise, and the relief granted is also very limited.

Speaking of a limited ground for relief, the Court, in the Bannari Amman Sugars case has very candidly expressed that the doctrine of legitimate expectations is a very ‘weak’ ground for judicial review. Ordinarily, it will only entitle the claimant of this doctrine to only a procedural protection, that is, the opportunity to be heard.

This is especially evident in the case of the Food Corporation of India. Despite the fact that the claimant truly had a legitimate expectation, and that being the highest bidder, the tender must have been awarded to him. The Court’s verdict was on the contrary, dislodging the claim as only the “claimant’s perception”. Thereby illuminating the fact that any claim of a legitimate expectation, is more than often rather subjective, than objective in nature. If a Court is truly unbiased, it will have to dislodge the legitimate expectation of an individual in favour of a larger public interest.

Conclusion

Everything that is man-made, is, and must be subject to some sort of scrutiny. Our laws are no exception. After all, humanity created a society and this society created an administrative body with the sole aim of providing a better life for the present and future generations. Therefore, true to the Rule of Law, it is the ordinary citizen that has the power to dictate how the society is to function. Anything that does not adhere to the same will be arbitrary in nature.

With numerous laws in place, the Doctrine of Legitimate Expectation caters to the human side of the judiciary. The fact that there does not exist an exhaustive list of such expectations is not a deficiency in the judiciary, but it is meant to correlate to the list of human expectations, and desires, that is also inexhaustible in nature.

With numerous laws in place, the Doctrine of Legitimate Expectation caters to the human side of the judiciary. The fact that there does not exist an exhaustive list of such expectations is not a deficiency in the judiciary, but it is meant to correlate to the list of human expectations, and desires, that is also inexhaustible in nature.

Author: Anjali Roy from Alliance School of Law, Alliance University, Bengaluru.

Editor: Avani Laad from Symbiosis Law School, Pune.

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