New Delhi, Jul 19 (PTI) Prior executive decisions do not bar the State from enacting even a contrary law or taking fresh policy decisions in larger public interest, the Supreme Court said on Friday.
A bench of Justices Vikram Nath and Ahsanuddin Amanullah upheld a 2010 decision of the Madhya Pradesh High Court in a dispute over charging stamp duty to private firm M/S Rewa Tollway Ltd, which was entrusted with widening a section of the Satna-Maihar-Parasimod-Umaria road on Build-Operate-Transfer (BOT) basis.
The firm challenged the high court order upholding charging of Rs 1.08 crore as stamp duty by the state government. It contended that the state government had earlier said no stamp duty will charged under the agreement with Madhya Pradesh Rajya Setu Nirman Nigam Ltd (MPRSNN), a company incorporated by the state for the project.
It said the state government later amended the Indian Stamp Act and provided for levy of stamp duty at two per cent on the amount likely to be spent on the project.
The firm said it was its legitimate expectation that no stamp duty will be charged, and that the state was precluded from amending the law and demanding two per cent stamp duty by treating the concession agreement between it and MPRSNN as a lease agreement.
The bench said, “It is an evident position of law that a prior executive decision does not bar the State legislature from enacting a law or framing any policy contrary to or in conflict with the previous executive decision in furtherance of larger public interest.” It said it cannot be canvassed that the law laid down by the legislature would be hit by principle of promissory estoppel or legitimate expectation because earlier the executive had expressed its view differently.
The bench said the doctrine of legitimate expectation does not constrain the government from altering its policies, provided the changes are made in public interest and not by an abuse of power.
It said the judiciary affords considerable leeway to the executive and the legislature in matters of economic policy, recognising their prerogative to prioritise different economic factors.
“Consequently, previous policies do not bind the government indefinitely; new policies can be adopted, if deemed necessary, for the public good. This underscores the principle that while legitimate expectation warrants fair treatment, it does not preclude the government’s flexibility in policy-making,” the bench ruled.
Justice Nath, who penned the verdict on behalf of the bench, said legitimate expectation primarily grants an applicant the right to a fair hearing before a decision that negates a promise or withdraws an undertaking from which an expectation of certain outcome or treatment arises.
It does not, however, create an absolute right to the expected outcome, he said. Dealing with the doctrine of promissory estoppel, the bench said it is an equitable doctrine and only comes into play when equity requires a party be estopped from withdrawing its promise.
“It has been well settled by this Court in several judgments that the principle of promissory estoppel cannot be invoked against the exercise of legislative power,” the bench said.
The doctrine of promissory estoppel applies when the promisor has made a promise to the promisee. The promisee must have relied on the promise and suffered a loss due to non-performance of the contract. The doctrine prevents the promisor or enterprise from going back on their word or promise.
The apex court said if the previous executive decision is withdrawn, modified or amended in any manner in exercise of legislative power in larger public interest, then the earlier promise upon which the party acts, cannot be enforced as a right and neither can the authorities be estopped from withdrawing the promise, as such an expectation does not give any enforceable right to the party.
“Applying the above discussion to the present facts, it is evident that the principles of legitimate expectation and promissory estoppel would not apply here, as the appellants cannot be said to have any enforceable legal right in light of the previous law or policy and executive action, which was subsequently changed by the state legislature in light of larger public interest,” the bench ruled. PTI MNL MNL SK SK
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