[Opinion] Doctrine of Legitimate Expectation: Meaning, Concept & its Application

CA Manoj Nahata – [2022] 145 taxmann.com 447 (Article)

Introduction

Doctrine of “Legitimate Expectation” as the name suggest is something which can be reasonably or legitimately expected by someone without having any legal rights attached thereto. There is no statutory definition prescribed for the term ‘Legitimate Expectation’ under any law. Legitimate expectation is the hope or the desire of a person to obtain a favorable order, inspired by past practice or promoted by representation. Legitimate expectation gives the applicant sufficient locus standi for judicial review.

This concept has emerged as an important doctrine in the taxation matters. The main reasons for gaining popularity of this doctrine perhaps might be the change in the Public Policy, change in the law and change in the behaviors and approach of the Executives by virtue of which someone is deprived of the express promise or representation made to him earlier. So, we can say that this doctrine not only takes care of the Promissory Estoppel but also the rules of natural justice, rule of law, non-arbitrariness, reasonableness, fairness, fiduciary duty and perhaps, to check the abuse of the exercise of administrative power. The doctrine of legitimate expectation in essence imposes a duty to act fairly.

Concept of Legitimate Expectation

Doctrine of ‘Legitimate Expectation’ is one amongst several tools incorporated by the Court to review administrative action. This doctrine pertains to the relationship between an individual and a public authority. According to this doctrine, the public authority can be made accountable in lieu of a ‘legitimate expectation’. The doctrine of legitimate expectation has an important place in developing law of judicial review.

The doctrine is that a person may have a legitimate expectation of being treated in a certain way by an administrative authority even though he has no legal right in private law to receive such treatment. Even in cases where he has no legal right, he may still have a legitimate expectation of receiving the benefit or privilege. Such expectation may arise from a promise or from the existence of a regular practice which the applicant can reasonably expect to continue and be adopted in his case also. If his expectations are belied, the Court or the Tribunal may intervene and protect him by applying principles that are analogous to the principles of natural justice and fair play in action. The principle underlying legitimate expectation is based on Article 14 of the Constitution and the rule of fairness.

The Legitimate Expectations can be of two types viz: Procedural Legitimate Expectations and Substantive Legitimate Expectations.

Evolution of this Doctrine in India

The development of the doctrine of legitimate expectation in India has been in line with the principles evolved in common law English courts. In fact, it was from these English cases itself that the doctrine first came to be recognized by the courts in India.

In India this doctrine was first applied in the case of State of Kerala v. K.G. Madhavan Pillai 9 [1988] 4 SCC 6690 wherein the Hon’ble Supreme Court held that a plaintiff had a right to sue for breach of contract. In this case, the respondents were given permission to open a new aided school and improve the current ones, but that permission was put on hold 15 days later by an order. The Respondents filed an appeal against this order on the grounds that it violated their rights to due process of law. The Supreme Court concluded that Respondents had a legitimate expectation of protection under the sanction, and that the second order was contrary to the natural justice.

This doctrine was applied by the Apex Court in several cases, inter-alia,

• Navjyoti Coop. Group Housing Society v. Union of India [1992] 4 SCC 477
• Union of India v. Hindustan Development Corpn. [1993] 3 SCC 499
• M.P. Oil Extraction v. State of M.P. [1997] 7 SCC 592
• National Buildings Construction Corpn. v. S. Raghunathan [1998] 7 SCC 66

In Madras City Wine Merchants v. State of Tamil Nadu [1994] 5 SCC 509 the Supreme Court postulated circumstances which may lead to the formation of legitimate expectations namely—

• If there was some explicit promise or representation made by the administrative body.
• That such a promise was clear and unambiguous.
• The existence of a consistent practice in the past which the person can reasonably expect to operate in the same way.
  The Hon’ble Supreme Court has Observed in the case of Food Corpn. of India v. Kamdhenu Cattle Feed Industries JT 1992 (6) SC 259 as under:

“There is no unfettered discretion in public law. A public authority possesses powers only to use them for public good. This imposes the duty to act fairly and to adopt a procedure which is ‘fair play in action’. Due observance of this obligation as part of good administration raises a reasonable or legitimate expectation in every citizen to be treated fairly in his interaction with the State and its instrumentalities with this element forming a necessary component of the decision-making process in all State actions. To satisfy this requirement of non-arbitrariness is a state action, it is therefore, necessary to consider and given due weight to the reasonable or legitimate expectations of the persons likely to be affected by the decision or else that unfairness in the exercise of the power may amount to an abuse or excess of power apart from affecting the bona fides of the decision in a given case. The decision so made would be exposed to challenge on the ground of arbitrariness. Rule of law does not completely eliminate discretion in the exercise of power, as it is unrealistic, but provides for control of its exercise by judicial review.”

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