DR. RAM MANOHAR LOHIYA NATIONAL LAW UNIVERSITY LUCKNOW
SEMESTER VI (2015-16) P ROJEC T
ADMINISTRATIVE LAW
THE R EASONABLENESS EASONABLENESS OF THE D OCTRINE OF L EGITIMATE E!ECTATION IN R ELATION ELATION TO C OR!ORATE ALLOCATIONS
(F OR THE
!ARTIAL FULFILLMENT OF THE DEGREE OF B.A.
LLB (HON ))
SUBMITTED B Y -
S UBMITTED TO "
GARIMA ! ARAKH SHEKHAR
M R . S HASHANK
OLL N O. 5# R OLL
A SST . ! ROF (L AW)
ACKNOWLEDGEMENT
I would like to extend my sincere thanks to My teacher and my mentor Prof. Shashank Shekar for giving me this opportunity to work on this project and for his able guidance and advice, ice !hancellor, "r. #urdeep Singh Sir and "ean $%cademics&, Prof. !.M. 'ariwala for their encouragement and (nthusiasm) My seniors for sharing their valuable tips) %nd my classmates for their constant support.
INTRODUCTION
*he doctrine belongs to the domain of public law and provides relief in those cases where a civil conse+uence has been suffered due to governmental action but the claim cannot be justified solely on the basis of law. *he concept of legitimate expectation is being used by the courts for judicial review and it applies the ethics of fairness and reasonableness to the situation where a person has an expectation or interest in a public body retaining a longstanding practice or keeping a promise. *he courts have emphasi-ed that legitimate expectation as such is not an enforceable right. owever, nonconsideration of legitimate expectation of a person adversely affected by a decision may invalidate the decision on the ground of arbitrariness. *he doctrine of legitimate expectation is not applicable in relation to a dispute arising out of a contract +ua contract. /urthermore, this doctrine cannot be invoked to modify or vary the express terms of a contract, more so when they are statutory in nature. %n expectation can be said to be legitimate in case where the decision of the administrative authority affects the person by depriving him of some benefit or advantage which either 0 $i&
he had in the past been permitted by the decision maker to enjoy and which he can legitimately expect to be permitted to continue until some rational grounds for withdrawing it are communicated to such an individual or party and the affected person1party has been given an opportunity of hearing, or
(ii)
the affected person has received assurance from the concerned administrative authority that it will not be withdrawn without giving him first an opportunity of advancing reason for contending that they should not be withdrawn by the administrative authority.
% legitimate expectation is +uite different from anticipation. *he Supreme !ourt in Jitendra Kumar v. State of Haryana1 reiterated that 0 Expectation is distinct and different from a desire and hope. It is based on a right. It is grounded in the rule of law as reuiring regularity! predictability and certainty in the "overnment#s dealings with the public and the doctrine of legitimate expectation operates both in procedural and substantive matters.
1 $2334& 2 S!! 565.
% person, who bases his claim on the doctrine of legitimate expectation, in the first instance, has to satisfy that he has relied on the said representation and the denial of that expectation has worked to his detriment. *he !ourt can interfere only if the decision taken by the authority was found to be arbitrary, unreasonable or in gross abuse of power or in violation of principles of natural justice and not taken in public interest. 7ut a claim based on mere legitimate expectation without anything more cannot ipso facto give a right to invoke these principles. %t the heart of the doctrine of legitimate expectation lies a tension between the protection of administrative autonomy and the pursuit of often conflicting policy goa ls . *he principle means that expectations which are raised as a result of administrative conduct of a public body may have legal conse+uences. (ither the administration must respect those expectations or provide reasons as to why the public interest must take priority over legitimate expectation. / or sy th h as s ta te d t ha t t he j ud ic ia l motiv ation for seek ing to prote ct legitimate expectations is, if the executive undertakes, expressly or by past practice, to behave in a particular way the subject expects that undertaking to be complied with. *hat is surely fundamental to good government and it would b e monstrous if the executive could freely renege on its undertakings public trust in the government should not be left unprotected. *he modern origins of the term phrase 8legitimate expectations9 stems from the use of that phrase by lord "enning in Schmidt v. Secretary of State for Home $ffairs%. % foreign student sought to review the decision of the ome Secretary which refused the extension of his temporary permit to stay in the :.;. In rejecting the student9s contention that he ought to have been afforded a hearing,
all depends on whether he has some right or interest, or, I would add, some legitimate expectation, of which it would not be fair to deprive him without hearing what he has to say?. Schmidt and the cases which followed it referred to the legitimate expectation without analysing its scope or basis, and in particular without distinguishing it from the right to a hearing arising from the existence of a protectable interest.
2 $5@6@& 5 %ll (= @3A $!%&
ORIGIN AND SCO!E OF THE DOCTRINE DEVELO!MENT UNDER E NGLISH LAW Bne of the earliest cases where the expression Clegitimate expectationC occurred was Schmidt v.
Secretary of State for Home $ffairs&. In that case, two scientology students were refused an extension of their permission to remain in the :nited ;ingdom when their right to be there had expired. *hey complained that the extension of the right to stay had been denied to them without a hearing being granted.
Hong/ong v. 0g uen Shiu2 held that there is a violation of the legitimate expectation of the immigrant based on announcement of the authority that while examining the cases of illegal immigration, each case would be decided on its own merit and therefore, a removal order cannot be passed without a fair hearing. In 3ouncil of 3ivil Services v. *inister of 3ivil Services 4 the ouse of
DIRECTION O F E!ANSION U NDER I NDIAN L AW
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%rticle 5A of the Indian !onstitution provides that 0 56he State shall not deny to any person euality before the law or the eual protection of the laws within the territory of India7.
judicial scrutiny.
*he expectations that individuals may have are various. owever, expectations may broadly be divided in two types 0 1. !$%&'$*+ L',/*' E'&*%3 It denotes the existence of some previous right the
applicant claims to possess as a result of actions by the public body that generates the expectation. *he !ourts have accepted that procedural protection should be given where an individual has a legitimate expectation of procedural protection such as a hearing or of a consultation before a decision is made. /airness means that the expectation of a hearing or other procedural protection be fulfilled. It is also accepted that where an individual has a legitimate expectation that a benefit of a substantive nature will be granted, or if already in 10 " " 7asu, 3ommentary on the 3onstitution of India , vol 5 $4th edn, Jadhwa 2334& 5262. 11 $2335& 2 S!! E26.
receipt of the benefit, that it will be continued, then fairness too dictates that expectation of the benefit should give the individual the entitlement to be permitted to argue for its fulfillment. In this situation the decision maker merely has to hear what the individual has to say but does not have to give substantive benefit. Jhat has been the subject of some controversy is whether or not a legitimate expectation can give rise to substantives protection.52 2. S4*' L',/*' E'&*%3 It refers to the situation in which the applicant seeks a picky benefit or product. *he claim to such a benefit will be founded upon governmental action which is said to validate the existence of the relevant expectation. Many legal luminaries believe that the substantive legitimate expectations would not only generate sprite in public administration but reliance and trust of the citi-ens in government in so far as principle of e+uality is concerned and will also uphold rule of law. Procedural expectations are protected simply by re+uiring that the promised procedure be followed.5E Substantive expectations are often protected procedurally, i.e. by extending an opportunity to make representation to the person affected before the expectation is dashed. *hus where recommended the applications of the applicants for hospital posts were rejected in breach of a long established practice because they had complained about bad conditions, they were held entitled to a hearing before rejection. *he person affected is not entitled to a favorable decision but the trust which he has reposed in the decision maker9s undertaking should be protected. 7ut there are other cases in which procedural expectation cannot ade+uately be protected from the unfairness occasioned by the decisionmaker9s breach of his promise or established practice. *hus in case of a boy seeking admission with a view to adoption, the !ourt of %ppeal found that refusing admission on an altogether different ground amounted to 8grossly unfair administration9 and in the absence of an 8overriding public interest9 justifying the change from the old criteria should apply. %lthough such substantive protection has been recogni-ed several times in decided cases, it sits awkwardly with the need not to fetter the exercise of discretion, moreover, decision maker9s must not, by substantive protection of expectations, be prevented from changing their policies. *wo !ourt of %ppeal decisions hold that substantive protection of expectations will only be
12 ! ; *akwani, 8ectures on $dministrative 8aw $th edn, (7! 2352& 224. 13 ibid.
possible where the change in policy is irrational. *he !ourt of %ppeal in rejecting rationality as the appropriate standard of review held that it was for the court to judge 8whether there was a sufficient overriding interest to justify a departure from what has previously been promised or what has been previous practice. *his approach is consistent with the (uropean law which balances the protection of the general public interest against the individual9s legitimate expectation. TRACING THE REVOLUTION OF THE DOCTRINE
WEDNESBURY R EASONABLENESS
'udicial review of administrative action is concerned with the lawfulness of administrative action and not with the merits of the decision. :nreasonableness of decisions of administrative bodies has been held to be a ground for judicial review since a considerable period of time as highlighted in $ssociated ;rovincial ;icture Houses 8td. v. 9ednesbury 3orporation1). In this case, a !inema !ompany, %ssociated Provincial Picture ouses, was granted a license by the Jednesbury !orporation, to operate a !inema *heatre on condition that >Fo children under the age of fifteen years shall be admitted to any entertainment, whether accompanied by an adult or not.? *his condition was imposed under Section 5, subSection 5 of the Sunday (ntertainments %ct of 5@E2. *he Picture ouses sought a declaration that such a condition was unacceptable and outside the power of the !orporation. *he !ourt held that it could not intervene and turn down the decision of the !orporation simply because the !ourt disagreed with it. *he !ourt observed that discretion must be exercised 8reasonably9. Jhere discretion is exercised in disregard of these guidelines one is said to be >acting unreasonably?. (ven judges are bound by these and other stringent rules in exercising discretion. It is so unreasonable that it might almost be described as being done in bad faith) and, in fact, all these things run into one another.? *he following conditions were laid down in the case as to when interference is warranted 0
14 K5@A4L 5 ;7 22E.
i&
Jhether the Jednesbury !orporation, in making that decision, took into account
ii&
factors that ought not to have been taken into account, or *he !orporation failed to take into account factors that ought to have been taken into
iii&
account, or *he decision was so unreasonable that no reasonable authority would ever consider imposing it.
*he !ourt felt that that none of the conditions imposed by the !orporation fell into any of these categories and rejected the claim of the appellants. *hese principles of Jednesbury unreasonableness underwent some modification by the decision of illegality?, the second >irrationality? and the third 8procedural impropriety9. e also mentioned that by further development on a case to case basis, in due course, there may be other grounds for challenge. e particularly emphasi-ed the principles of proportionality. *hus, In a way,
OF ! RO!ORTIONALITY
*he doctrine of proportionality is understood in the legal fraternity in two different perspectives. /irst, under the municipal law, it refers to a doctrine which suggests that a punishment afforded to a guilty should match the offence. *he second one is under International umanitarian
*he means which is applied by public authorities should be available to achieve the
$II &
aims and should be effective or in other words, suitable. *he means should be necessary to realise the aims and should not be more than what is
$iii&
necessary to fulfill the aim as showed in the laws. *he means which causes a burden for individuals should be proportionate to the aim.
*he restriction by an administrative action and fundamental right of an individual should be balanced and should include a clear proportionality between the parties. In short, the gain or loss to the community which is necessary for public interest and the loss or gains to individuals should be balanced. VIEWS
OF THE S U!REME C OURT
It is worth mentioning that even before the decision in (xP. "aly $5E May 2335&, the Supreme !ourt had firmly acknowledged this tool of judicial interpretation in +m Kumar v. (nion of India1= decided on 5D Fovember 2333. In this case, inter alia, the Supreme !ourt noted that while dealing with the validity of legislation infringing fundamental freedoms enumerated in %rticle 5@ $5& of the !onstitution of India, the issue of whether restrictions imposed by the legislation were disproportionate to the situation and not the least restrictive of choices has been repeatedly examined by the superior courts in numerous judgements. *hus in the Bm ;umar case proportionality was held to mean whether while regulating the exercise of fundamental rights, the appropriate or least restrictive choice of measures have been adopted by the legislature or the administrator so as to achieve the object of the legislation or administrative order. %nd that it was for the superior !ourts to decide whether the choice made by the legislature or the administrative
15 !hief 'ustice of India,8(fficacy of Jednesbury9s Principles and !ontemporary "evelopment of eview of -acts, 24 'uly, 233D.
16 %I= 2333 S! E64@.
authorities infringed the rights excessively. *his to my mind is the essence of the doctrine of proportionality. In State of (.;. v. Sheo Shan/er 8al Srivastava and +rs.12 , the Supreme !ourt while holding that the igh !ourt erred in interfering with the +uantum of punishment dwelt upon the +uestion of applicability of doctrine of proportionality. %nd while holding the view that the doctrine of proportionality could be invoked only under certain situations, the !ourt however acknowledged that the doctrine of unreasonableness was giving way to the doctrine of proportionality. In >eliance $irport ?evelopers v. $irports $uthority of India14 *he !ourt while adjudicating upon a challenge to the exercise of discretion by #overnment in altering the terms of the original tender documents inter alia held that though the test of proportionality was very much relevant in the light of exparte "aly, the facts of the case in =eliance %irport "evelopers did not necessitate its application. In the case of Indian $irlines 8td. v. ;rabha ?. Kannan1@, it was held that where no appeal is provided for against an administrative order, judicial review of such an order would be maintainable. /urther, that the igh !ourt in exercise of its jurisdiction under %rticle 226 of the !onstitution while undertaking such review need not confine itself to the traditional tests of review vi- illegality, irrationality, and procedural impropriety. *he 'udges who adjudicated upon this matter also held the view that in such cases of judicial review the !ourt has to necessarily delve deeper into the matter and subject such orders to deeper scrutiny going beyond the above three tests. 7ased on the facts and the issues in this case, the Supreme !ourt inter alia had to go into the validity of certain regulations and the power of 'udicial =eview of administrative acts. Jhile going into this +uestion, the Supreme !ourt acknowledged that keeping in view the situational changes particularly, the outsourcing of sovereign activities by the State) the Supreme !ourt had been expanding the scope of judicial review. In its judgment it has held that >the doctrine of unreasonableness has now given way to the doctrine of proportionality?.
17 $2336& E S!! 2D6. 18 $2336& 53 S!! 5. 19 %I= 233D S! A4.
COR!ORATE ALLOCATIONS
In 2352 public interest litigations were filed against the central government for alleged illegal and unconstitutional allocations of coal blocks between 5@@E and 2353. *he petitioners challenged the governmentHs power to allocate coal blocks, as well as the procedure for allocating the same. 7y a judgment dated %ugust 2 235A, the Supreme !ourt declared the allocation of coal blocks between 5@@E and 2353 arbitrary and illegal. % further judgment on September 2A 235A cancelled the allocation of such coal blocks. *he judgments and their ramifications are discussed below. *he central government prepared a booklet of available coal blocks and invited applications for mining leases. % screening committee processed the applications and the government then issued letters of allocation based on the committeeHs recommendations. Mining licences were also granted to state government utilities through government dispensation by virtue of Section E$E&$a&$i& of the !oal Mines %ct. *his process continued from 5@@E to 2353, when the Mines and Minerals %ct was amended to insert Section 55%, which provided for allocation of coal blocks by competitive bidding. Briginally, coal mines could be allocated only to entities found eligible under Section E$E& $a& of the !oal Mines %ct. %ny mining lease that allowed commercial exploitation of coal was in violation of Section E. %lthough the central government has a preeminent role under the Mines and Minerals %ct, insofar as it can grant a reconnaissance permit, prospecting licence or mining lease, it cannot violate the Mines and Minerals %ct. /urther, neither the !oal Mines %ct nor any rules framed under the act provide for allocation of coal blocks by the central government or consideration by the state government of applications made by allottees to receive prospecting licences or mining leases. In addition, except for defining the entities that can carry out coal mining operations, no procedure for coal mining is provided in the !oal Mines %ct or the 5@63 Mineral !oncession =ules. (ven with regard to matters falling under the !oal Mines %ct $eg, the prescriptive direction that no entity other than those provided in Section E can carry on mining operations in coal mines&, the legal regime under the Mines and Minerals %ct $subject to the prescription under Section E& ap plies in full. Feither the !oal Mines %ct nor the Mines and Minerals %ct provides a procedure for the allocation of coal blocks by the central government. In addition, the issuance of an allocation letter is not merely an identification exercise 0 it grants a valuable right to the allottee. /urther, although the Mines and Minerals %ct imposes a statutory obligation on the state government to recommend
grant of prospecting licences or mining leases for coal mines to the central government, once the central government issues a letter allocating the coal block, the statutory role of the state government is reduced to completion of procedural formalities only. *he central governmentHs method for selecting beneficiaries and allocating coal was not found within the Mines and Minerals %ct or the !oal Mines %ct. *hus, the governmentHs practice and procedure for allocating coal blocks through an administrative route were clearly inconsistent with law. /inally, the central governmentHs allocation of coal blocks resulted in the selection of allottees, which in turn entitled the allottees to receive prospecting licences and mining leases from the state government) this amounted to grant of largesse, which re+uired judicial review in light of the test of non arbitrariness. 7UDGMENT
OF AUGUST 2018
*he Supreme !ourt held that the allocation of coal blocks based on the recommendations of the screening committee were beyond the scope of the Mines and Minerals %ct and violated the !oal Mines %ct because it did not adhere to the end use re+uirements. % court analysis of the E6 meetings held by the screening committee between 5@@E and 2334 demonstrated that the allocation process was arbitrary. *he court held that no visible objective criteria were followed in determining who was selected. *he court found the process discriminatory and opa+ue, and held that it did not evaluate or compare the merits of the applicants. %ccording to the court, this made the selection process invalid. *he court also found that the end use condition under Section E$E&$a& $iii& of the !oal Mines %ct was not adhered to on a large scale. %dditionally, the court held that the allocation of coal blocks under the government dispensation route to public sector undertakings $which ultimately enabled them to mine coal commercially& was in breach of the !oal Mines %ct. *he court concluded that the allocation of coal blocks 0 under both the screening committee and through government dispensation 0 was arbitrary and illegal. *he court considered it necessary to hear the parties further before it issued any penalties.
7UDGMENT
OF S E!TEMBER 2018
*he court held that in light of its decision that the coal block allocations 0 under both government dispensation and selection by the screening co mmittee 0 were arbitrary and illegal, the licences had to be cancelled. *he court clarified that its judgment would take effect in six months $ie, from March E5 235&, in order to allow all stakeholders 0 including the central government and allottees 0 time to manage their affairs on the basis of the emerging situation. %dditionally, giving credence to the assessment made by the comptroller and auditor general of India, the court directed the allottees to pay an additional levy of =s2@ per metric ton of coal extracted from the date of extraction as compensation.
COMMENT
ON THE I SSUE
*he Mines and Minerals %ct sets out the procedure for obtaining a mining lease, the !oal Mines %ct under Section E$E&$a& specifies the entities that are eligible to carry out coal mining operations. *here can be no disagreement with the courtHs finding that there is no known procedure for allocating coal blocks other than that found within the Mines and Minerals %ct. owever, the cancellation of licences en masse creates concern. *he state governmentHs role is to recommend entities for central government approval. *his is necessary before a licence can be granted. *he central governmentHs role is preeminent without central government approval, a licence cannot be granted. *here is no doubt that the central government had given its approval in these cases. *herefore, to cancel the allocation of licences on the principle that where a statute re+uires something to be done in a certain manner, it must be done as specified in the statute or not at all is discordant 0 even more so when, through various decisions, the Supreme !ourt has held that procedure is subservient to justice. *he Supreme !ourt instead should have considered whether the central government had done anything illegal by granting the licences, allowing each allocation to be individually considered by a courtappointed committee. 7arring six instances where the !entral 7ureau of Investigation has initiated en+uiries against the beneficiaries of the coal block allocation, no infringement or violation of law has been alleged. (ven the Supreme !ourt orders are bereft of any such finding against the allottees. *he cancellation of the licences of allottees 0 including those that were not party to any illegality 0 is a severe step. #iven that the court found no elements of fraud on the part of the allottees, the interest of justice would have been better served had the court, in exercising its powers under %rticle 5A2 of the !onstitution, protected the licences allotted to private citi-ens. *his is even more relevant because
the licences had been allotted over 56year period, from 5@@E to 2334, by successive governments.23 *he allottees have a legitimate expectation that their licences will remain operative if they have not committed a misdemeanour. *he imposition of an additional levy is nothing short of a penalty, one which presupposes a misdemeanour on the part of the allottees. %s stated above, the court found no fault with the allottees) thus, the additional levy by the comptroller and auditor general 0 the auditor of the government 0 is harsh. *he individual allottees were not allowed to go before the Supreme !ourt and therefore did not have the opportunity to present their respective positions. In these circumstances, a re+uest for a courtappointed committee to consider individual cases was legitimate and merited reflection.
CONCLUSION
*he doctrine of legitimate expectation is therefore an ancillary ground for redressal and making it the sole ground would an unfair exercise of judicial power. *he said doctrine originated from the Jednesbury principle and has now been adapted to the various exigencies and now is applied with the principle of proportionality as has been seen by the various (nglish and Indian judgments. *he application of the principle though usually observed in cases of individual rights being injured, it now has application in cases of corporate right infringement also, as has been observed from the recent coal block allocations case. *he implications of this judgment are huge as it has reignited the debate of undue judicial interference in administrative matters. It remains to be seen how the jurisprudence will develop.
20 *hacker F and 7anerjee = M, 8Supreme !ourt "elivers ;nockout Punch in !oal Mining "ecision9 $55 Fov 235A&.
BIBLIOGRA!HY •
arghese =, 8*he =elevance of Jednesbury :nreasonableness in the
•
$vol 63, 'anMar 235A& !hief 'ustice of India,8(fficacy of Jednesbury9s Principles and
•
"evelopment of eview of -acts, 24 'uly, 233D *hacker F and 7anerjee = M, 8Supreme !ourt "elivers ;nockout Punch in !oal Mining
• • •
!ontemporary
"ecision9 $55 Fov 235A& Massey I P, $dministrative 8aw $4th edn, (7! 2352& *akwani ! ;, 8ectures on $dministrative 8aw $th edn, (7! 2352& 7asu " ", 3ommentary on the 3onstitution of India, vol 5 $4th edn, Jadhwa 2334&
