[Doctrine Of Legitimate Expectation] State Must Discard The Colonial Notion That It Is A Sovereign Handing Out Doles At Its Will: Supreme Court

The state must discard the colonial notion that it is a sovereign handing out doles at its will, remarked the Supreme Court in a judgment delivered on Tuesday.

The bench comprising Justices DY Chandrachud and Indu Malhotra observed that the doctrine of substantive legitimate expectation is one of the ways in which the guarantee of non-arbitrariness enshrined under Article 14 finds concrete expression. 

Brahmputra Metallics Ltd., Ranchi and others filed a writ petition before the High Court of Jharkhand claiming a rebate or deduction of 50 per cent of the amount assessed towards electricity duty for FYs 2011-12, 2012-13 and 2013-14.  While allowing the writ petition, the Jharkhand High Court held that a promise was made by the State government to give the benefit of an exemption of 50 per cent in electricity duty for a period of five years, for self consumption or captive use, to all new and existing industrial units setting up captive power plants in the State of Jharkhand.  

In its judgment disposing appeal, the Apex Court bench discusses the origins and evolution of the principle of Promissory estoppel.  The court also noted that the scope of the doctrine of legitimate expectation is wider than promissory estoppel because it not only takes into consideration a promise made by a public body but also official practice, as well. In this regard, the bench observed:

"Under the doctrine of promissory estoppel, there may be a requirement to show a detriment suffered by a party due to the reliance placed on the promise. Although typically it is sufficient to show that the promisee has altered its position by placing reliance on the promise, the fact that no prejudice has been caused to the promisee may be relevant to hold that it would not be "inequitable" for the promisor to go back on their promise. However, no such requirement is present under the doctrine of legitimate expectation."

"While the basis of the doctrine of promissory estoppel in private law is a promise made between two parties, the basis of the doctrine of legitimate expectation in public law is premised on the principles of fairness and non-arbitrariness surrounding the conduct of public authorities. This is not to suggest that the doctrine of promissory estoppel has no application in circumstances when a State entity has entered into a private contract with another private party. Rather, in English law, it is inapplicable in circumstances when the State has made representation to a private party, in furtherance of its public functions."

The bench observed that the doctrine of legitimate expectation cannot be claimed as a right in itself, but can be used only when the denial of a legitimate expectation leads to the violation of Article 14 of the Constitution. While confirming the order of the High Court for FYs 2012-13 and 2013-14, the bench further observed:

"It is clear that the State had made a representation to the respondent and similarly situated industrial units under the Industrial Policy 2012. This representation gave rise to a legitimate expectation on their behalf, that they would be offered a 50 per cent rebate/deduction in electricity duty for the next five years. However, due to the failure to issue a notification within the stipulated time and by the grant of the exemption only prospectively, the expectation and trust in the State stood violated. Since the State has offered no justification for the delay in issuance of the notification, or provided reasons for it being in public interest, we hold that such a course of action by the State is arbitrary and is violative of Article 14

"It is one thing for the State to assert that the writ petitioner had no vested right but quite another for the State to assert that it is not duty bound to disclose its reasons for not giving effect to the exemption notification within the period that was envisaged in the Industrial Policy 2012. Both the accountability of the State and the solemn obligation which it undertook in terms of the policy document militate against accepting such a notion of state power. The state must discard the colonial notion that it is a sovereign handing out doles at its will. Its policies give rise to legitimate expectations that the state will act according to what it puts forth in the public realm. In all its actions, the State is bound to act fairly, in a transparent manner. This is an elementary requirement of the guarantee against arbitrary state action which Article 14 of the Constitution adopts. A deprivation of the entitlement of private citizens and private business must be proportional to a requirement grounded in public interest. "

Case:  State of Jharkhand vs. Brahmputra Metallics Ltd., Ranchi [Civil Appeal Nos. 3860-3862 of 2020 ]

Coram: Justices DY Chandrachud and Indu Malhotra

Counsel: AAG Tapesh Kumar Singh, Adv Devashish Bharuka

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