Explainer : Doctrine Of Legitimate Expectation & Promissory Estoppel

The judgment delivered by the Supreme Court on December 1 in the case State of Jharkhand and others v Brahmaputra Metallics Ltd Ranchi and others is a good reference to understand the concepts of legitimate expectation and promissory estoppel.The judgment pronounced by a bench comprising Justices D Y Chandrachud and Indu Malhotra also illustrates how the doctrine of legitimate expectation can be used against arbitrary State action to claim relief.Factual backgroundThe factual background of the case is summarized here to help easy understanding of the legal principles. The respondent, Brahmaputra Metallics Ltd, was seeking to enforce a promise made by the Jharkhand Government in 2012 to grant exemption from the payment of 50 per cent of the electricity duty for a period of five years, for captive power plants.Though this announcement was made in the Industrial Policy of 2012, it was given statutory effect only in 2015, that too only prospectively. The company sought enforcement of this policy with retrospective effect from 2012. Relying on the doctrines of promissory estoppel and legitimate expectation, it approached the High Court. The High Court allowed the company's writ petition. Challenging that, the State approached the Supreme Court.Principles discussed in the judgmentSome major principles culled out from the judgment are mentioned below :The judgment first discussed the evolution of the principle of promissory estoppel in the English law and the development of the doctrine of legitimate expectation as its offshoot.Promissory estoppel developed as an equitable remedy to grant relief to a person who has acted on a promise even in the absence of a contractual relationship or consideration.It can be used as a "shield" in a legal proceeding and not as a "sword". In other words, promissory estoppel will not by itself constitute a cause of action and was allowed to be used as a defence in a legal proceeding.Doctrine of Legitimate ExpectationThis doctrine developed in parallel to the doctrine of promissory estoppel.The doctrine of legitimate expectations is founded on the principles of fairness in government dealings. It comes into play if a public body leads an individual to believe that they will be a recipient of a substantive benefit.Under English Law, the doctrine of legitimate expectation initially developed in the context of public law as an analogy to the doctrine of promissory estoppel found in private law. However, since then, English Law has distinguished between the doctrines of promissory estoppel and legitimate expectation as distinct remedies under private law and public law, respectively.Another difference between the doctrines of promissory estoppel and legitimate expectation under English Law is that the latter can constitute a cause of action. In other words, doctrine of legitimate expectation can be used as a 'sword'.Doctrine of Legitimate Expectation based on principles of fairness and non-arbitrariness by the StateWhile 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, explained the Court.The judgment notes that under Indian Law, there is often a conflation between the doctrines of promissory estoppel and legitimate expectation.The Court explained that the doctrine of legitimate expectation is linked to the protection of a citizen who acted after reposing trust in the State. This doctrine's aim is to hold the State to account.The observations in paragraph 37 of the judgment illuminates this point :"Representations by public authorities need to be held to scrupulous standards, since citizens continue to live their lives based on the trust they repose in the State. In the commercial world also, certainty and consistency are essential to planning the affairs of business. When public authorities fail to adhere to their representations without providing an adequate reason to the citizens for this failure, it violates the trust reposed by citizens in the State. The generation of a business friendly climate for investment and trade is conditioned by the faith which can be reposed in government to fulfil the expectations which it generates".Need to prove detriment?The judgment authored by Justice Chandrachud notes that in the 1989 decision in National Buildings Construction Corporation vs S. Raghunathan it was observed that claims based on legitimate expectation need to establish detriment caused to the claimant on account of acting on the representation by the State, as in the case of promissory estoppel.However, there has been a deviation from this position over the years to situate the doctrine of legitimate expectations on a broader footingThe judgment explains that in a concurring opinion in Monnet Ispat and Energy Ltd. vs...

Explainer : Doctrine Of Legitimate Expectation & Promissory Estoppel

Manu Sebastian

Denial of legitimate expectation can be a circumstance leading to arbitrariness and violation of Article 14 of the Constitution.

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