Policies give rise to legitimate expectations that the state will act accordingly, Supreme Court

The SC on December 1, 2020 {The State of Jharkhand and Ors. vs. Brahmputra Metallics Ltd., Ranchi and Anr.} held that 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. 

It was held by the Bench, comprising of Justice Dr. Dhananjaya Y. Chandrachud  & Justice Indu Malhotra that the doctrine of promissory estoppel cannot be used as a ‘sword’, to give rise to a cause of action for the enforcement of a promise lacking any consideration. It was held that its use has been limited as a ‘shield’, where the promisor is estopped from claiming enforcement of its strict legal rights, when a representation by words or conduct has been made to suspend such rights.

It was further held that once the High Court has held the respondent’s writ petition to be legally sustainable on merits, the Court should not interfere on grounds on delays and laches alone.

It was held that the delay of the respondent in filing a writ petition by itself should not defeat the claim unless the position of the State has been so altered that it cannot be retracted on account of a lapse of time or the inaction of the writ petitioner. It was held that the State has not in the present case either pleaded or argued any hardship if the respondent were to be granted relief.

It was held that the doctrine of unjust enrichment could have been attracted if the respondent had passed on the electricity duty to its customers and then retained the refund occasioned by the 50 per cent rebate in its own pocket. It was held that this is not demonstrated to be the factual position and hence, the respondent cannot be denied relief on the application of the doctrine.

It was held that the state must discard the colonial notion that it is a sovereign handing out doles at its will. It was held that its policies give rise to legitimate expectations that the state will act according to what it puts forth in the public realm. It was held that in all its actions, the State is bound to act fairly, in a transparent manner. It was held that this is an elementary requirement of the guarantee against arbitrary state action which Article 14 of the Constitution adopts. It was further held that a deprivation of the entitlement of private citizens and private business must be proportional to a requirement grounded in public interest. It was held that this conception of state power has been recognized by the Court in a consistent line of decisions.

Thus, it was held 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.

Therefore, it was held that it is clear that the State had made a representation to the respondent and similarly situated industrial units under the Industrial Policy 2012. It was held that 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. It was held that 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. It was held that since the State has offered no justification for the delay in issuance of the notification, or provided reasons for it being in public interest, it holds that such a course of action by the State is arbitrary and is violative of Article 14.