Prior Executive Decision Doesn't Bar Legislature From Taking Contrary View : Supreme Court

In essence, the Court stated that neither a right to legitimate expectation nor promissory estoppel can be asserted based on executive actions that the legislature subsequently changes in the public interest.

“In situations like the one before us, if a previous executive decision is withdrawn, modified, or amended in any manner in exercise of legislative power in the larger public interest, the earlier promise upon which the party acts cannot be enforced as a right. Authorities cannot be estopped from withdrawing their promise, as such an expectation does not give any enforceable right to the party,” said the bench comprising Justices Vikram Nath and Ahsanuddin Amanullah.

The Court added that a prior executive decision does not prevent the state legislature from enacting a law or framing a policy that contradicts or conflicts with the previous executive decision in furtherance of the larger public interest.

In effect, the Court observed that a law enacted by the legislature would not be affected by the principles of promissory estoppel or legitimate expectation because the executive had previously expressed a different view.

“It is an evident position of law that a prior executive decision does not bar the state legislature from enacting a law or framing a policy contrary to or in conflict with the previous executive decision in furtherance of the larger public interest. Nor can it be argued that the law laid down by the legislature would be affected by the principles of promissory estoppel or legitimate expectation because the executive had previously expressed a different view,” the Court said.

The Court clarified that the doctrine of legitimate expectation or promissory estoppel applies to executive decisions when both the prior and subsequent decisions are made by the same or similarly placed authorities.

“When the executive makes a decision on which a party acts, and later withdraws that decision to the detriment of the party acting on the earlier decision, it can be said to be estopped from withdrawing its promise or depriving the party of its legitimate expectation of what had been promised,” noted the judgment authored by Justice Vikram Nath.

Background

In the present case, based on previous assurances by the executive authority that no stamp duty would be levied on the execution of a concession agreement, the appellant, who entered into a road construction project with the State on a BOT basis, challenged the requirement to pay stamp duty due to subsequent policy changes by the state legislature.

The appellant argued that the previous assurances by the executive authority regarding the non-levy of stamp duty created a legitimate expectation. However, the appellant had to pay stamp duty due to the subsequent change in policy/law by the legislature.

The Court ruled that the appellant cannot claim the benefit of the doctrine of legitimate expectation or promissory estoppel, as the state legislature's subsequent reversal of the executive decisions in the public interest does not prevent the State from levying stamp duty on the concession agreement.