Union of India v. Hindustan Development Corporation
Supreme Court of India · 15 April 1993 · 2 judges · 1994 AIR 988, 1993 SCR (3) 128, 1993 SCC (3) 499
Legitimate expectation is not a legal right; it mainly entitles a person to fair consideration or a hearing and yields to overriding public interest and policy. The Railways' bona fide dual pricing of cast steel bogies was upheld with modifications.
Facts
In a limited tender of 1991 for cast steel bogies, three large manufacturers, H.D.C., Mukand and Bharatiya, quoted an identical lowest price of Rs. 77,666 and then offered lower prices after the tenders were opened. Treating them as a cartel, the Railways counter-offered Rs. 65,000 to the three and Rs. 76,000 to the nine smaller manufacturers, and reduced the three firms' quotas. The Delhi High Court allowed the writ petitions of H.D.C. and Mukand, held the decision arbitrary and directed supply by all at Rs. 67,000. The Union of India and the smaller manufacturers appealed. The Supreme Court announced its conclusions on 14 January 1993 and gave reasons in this judgment.
Questions before the Court
- Whether the Railways' decision to treat the three big manufacturers as a cartel and adopt dual pricing was arbitrary or mala fide.
- What is the meaning and scope of the doctrine of legitimate expectation, and whether the manufacturers could claim relief on that basis.
What the Court held
- Government awarding contracts must not act arbitrarily or irrationally; restrictions must rest on reasonable policy. The authorities' suspicion of a cartel was bona fide, though not proved, so the reduction of the three firms' quotas was set aside.
- Dual pricing may be reasonable to prevent monopoly. The three big manufacturers, bound by their own offer, must supply at Rs. 67,000, and the Tender Committee must fix afresh a reasonable price for the smaller manufacturers.
- Legitimate expectation is less than a right. It arises from law, custom or an established procedure, operates in public law, and mainly secures a fair hearing before a promise or practice is withdrawn.
- Denial of a legitimate expectation can be challenged under Article 14 only if arbitrary, discriminatory, unfair or an abuse of power. A change of policy in public interest is not open to interference. The modifications here did not rest on legitimate expectation.
Why it matters
The judgment states that the Court had found no earlier pronouncement of its own explaining the doctrine of legitimate expectation, and sets out its meaning and limits: it is not a right, it does not by itself unlock natural justice or merits review, and it yields to overriding public interest and policy. It also recognises the State's power to adopt dual pricing in public contracts to prevent monopoly.
In the Court's words
Copied from the official judgment; each passage links to its page.
“A pious hope even leading to a moral obligation can not amount to a legitimate expectation. The legitimacy of an expectation can be inferred only if it is founded on the sanction of law or custom or an established procedure followed in regular and natural sequence. Again it is distinguishable from a genuine expectation. Such expectation should be justifiably legitimate and protectable. Every such legitimate expectation does not by itself fructify into a right and therefore it does not amount to a right in the conventional sense.”
“A case of legitimate expectation would arise when a body by representation or by past practice aroused expectation which it would be within its powers to fulfill. The protection is limited to that extent and a judicial review can be within those limits. But as discussed above a person who bases his claim on the doctrine of legitimate expectation, in the first instance, must satisfy that there is a foundation and thus has locus standi to make such a claim.”
“If a denial of legitimate expectation in a given case amounts to denial of right guaranteed or is arbitrary, discriminatory unfair or based, gross abuse of power or violation of principles of natural justice, the same can be questioned on the well-known grounds attracting Article 14 but a claim biased on mere legitimate expectation without anything more cannot ipso facto give a right to invoke these principles.”
“The Government while entering into contracts or issuing quotas is expected not to act like private individual but should act in conformity with certain healthy standards and norms. Such actions should not be-arbitrary, irrational or irrelevant. In the matter of awarding contracts inviting tenders is considered to be one of the fair ways.”
Provisions interpreted
Related judgments
- Follows Maneka Gandhi v. Union of India (1978)“Article 14 strikes at arbitrariness in State action. (vide Maneka Gandhi v. Union of India, [1978] 2 SCR 621” (page 15)
- Follows E.P. Royappa v. State of Tamil Nadu (1973)“Article 14 strikes at arbitrariness in State action. (vide Maneka Gandhi v. Union of India, [1978] 2 SCR 621 and E.P. Royappa v. State of Tamil Nadu” (page 15)
Case and bench
- Parties
- Union of India and Ors v. Hindustan Development Corpn. and Ors
- Case
- S.L.P. (C) Nos. 11897-98 of 1992 etc.
- Decided
- 15 April 1993
- Bench
- K. Jayachandra Reddy, G.N. Ray
- Opinions
- Unanimous. The judgment of the Court was delivered by K. Jayachandra Reddy, J., giving reasons for the conclusions announced in the Court's order of 14 January 1993.
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