Paragraph numbers below are the court’s original numbering, recovered from the source text.
13. On the basis of these two statements of the counsel for NBCC, the Writ Petition was disposed of on 21st July, 1993 by issuing a direction to NBCC to make payment to the respondents within eight weeks. NBCC, however, filed a review application before the High Court on the ground that the statements of the counsel made before it do not correctly reflect their stand but the High Court dismissed the review application on 12th October, 1993. It was against this order that NBCC filed Special Leave Petitions before this Court. Leave was granted and the two Civil Appeals No. 7113/95 and 7114/95 were disposed of by this Court on 4th August, 1995. The appeals were allowed and the order dated 21st July, 1992, passed . by the High Court, was set aside. The Writ Petitions were directed to be restored for being disposed of on merits.
14. The High Court by the impugned judgment dated September 13, 1996 and 25.7.97 disposed of both the petitions and it is its direction to NBCC to pay Foreign Allowance @ 125% on the revised basic pay with effect from 01.01.86 which is the only contentious issue between the parties in these appeals.
15. Shri Altaf Ahmad, Additional Solicitor General, appearing on behalf of NBCC has contended that the claim of the respondents could not have been legally allowed by the High Court merely on the basis of "Legitimate Expectation" particularly when it has been found, as a fact, by the High Court itself that l"oreign Allowance was not covered by the terms B of the contract which contemplated only a Deputation (Duty) Allowance. c It is also contended that NBCC had taken a policy decision that Foreign Allowance will be payable only on the basis of pre-revised basic pay and not on the basis of basic pay as revised in terms of the recommendations of the Fourth Pay Commission and, therefore, the doctrine of "Legitimate Expectation" stood excluded. Moreover, the High Power Committee had not, it is further contended, recommended any increase in the Foreign Allowance and had, on the contrary, followed the principle contained in FR 51(2) in respect of perquisites and, therefore, the residuary perks as also their quantum was left to the discretion of the Corporation and it was for the Corporation to allow or not to allow any of the residuary perks. It D is also pointed out that the doctrine of "Legitimate Expectation" was not pleaded in the Writ Petition and no foundation was laid for applying this doctrine to the facts of the present case and, therefore, it was not open to the High Court to entertain this plea at the stage of arguments and to decide the question on that basis.
16. Learned counsel for the respondents contended that NBCC was paying Foreign Allowance to the respondents @ 125% of their basic pay and since after the recommendations of the Fourth Pay Commission, NBCC itself had decided to increase certain allowances on the basis of revised pay, it could not deny such increase in respect of Foreign Al- lowance. Freezing of Foreign Allowances on pre-revised basic pay was arbitrary and consequently the High Court was justified in holding it to be illegal. It is pointed out that when the respondents were sent to Iraq, the Foreign Allowance, payable to them, was linked to their basic pay and, G therefore, it was not open t9 NBCC to freeze the Foreign Allowance on the pre-revised basic pay even after the implementation of the recommen- dations of the Fourth Pay Commission by which all other allowances stood payable, according to the own decision of NBCC, on the basis of revised basic pay. There was, therefore, no rationale or reasonable basis for H rejecting any such increase in respect of Foreign Allowance. f …… NATIONAL ijUILDING CONSTRUCTION CORPN. '· S. RAGHIJNATHAN JS.SAGHIRAHMAD, J.] 169
17. From the facts set out above and those pleaded before the High Court, it will be seen that Foreign Allowance was not part of the agreement between the respondents and NBCC. The respondents were inducted into NBCC on deputation and, therefore, NBCC had agreed to pay them the Deputation (Duty) Allowance. As pointed out earlier, with regard to this allowance or, for that matter, any other allowance, there is no dispute between the parties involved in this petition and the only question with which we are concerned in this petition is the payment of Foreign Al- lowance payable at the rate of 125% of the revised basic pay. The further question is whether the High Court merely on the basis of the doctrine of "Legitimate Expectation" was justified in allowing the claim of the respon- dents?
18. The doctrine of "Legitimate Expectation" has its genesis in the field of administrative law. The Government and its departments, in ad- ministering the affairs of the country are expected to honour their state- ments of policy or intention and treat the citizens with full personal consideration without any iota of abuse of discretion. The policy statements cannot be disregarded unfairly or applied selectively. Unfairness in the form of unreasonableness is akin to violation of natural justice. It was in this context that the doctrine of "Legitimate Expectation" was evolved which has today become a source of substantive as well as procedural rights. But claims based on "Legitimate ExpectaLion" have been held to require reliance on representations and resulting detriment to the claimant in the same way as claims based on promissory estoppel.
19. Lord Scarman in R. v. Inland Revenue Commissioners ex p. Preston, (1985) AC 835 laid down emphatically that unfairness in the pm:ported exercise' of power can amount to an abuse or excess of power. Thus the doctrine of "Legitimate Expectation" has been developed, both in the context of reasonableness and in the context of natural justice. c
20. Lord Diplock in Council of Civil Service Unions v. Minister for G the Civil Service, (1985) AC 374 laid down that doctrine of "Legitimate Expectation" can be invoked if the decision which is challenged in the Court has some person aggrieved either (a) by alteling 1ights or obligations of that person which are enforceable by or against him in plivate law; or (b) by depliving him of some benefit or advantage which either (i) he had in the H A past been permitted by the decision-maker to enjoy and which he can legitimately expect to be pennitted to continue to do until there has been. communicated to him some rational grounds for withdrawing it on w~1ich ile .. ~ has been given an opp01tunity to comment; or (ii) he has received assurance from the decision-maker that it will not be withdrawn without giving him first B an oppo1tunity of advancing reasons for contending that it should not be withdrawn. (Emphasis supplied). c
21. The Indian scenario in the field of "Legitimate Expectation" is not different. In fact, this Court, in several of its decisions, has explained the doctrine in no uncertain terms.
22. In Navjyoti Coop. Group Housing Society and Others v. Union of India and Others, (1992] 4 SCC 477, the decision of the House of Lords in Council of Civil Se1vice Unions v. Minister for the Civil Se1vice, (supra) was followed and that decision was summarised in the following words:- "It has been held in the said decision that an aggrieved person was entitled to judicial review if he could show that a decision of the public authority affected him of some benefit or advantage which in the past he had been permitted to enjoy and which he legitimate- ly expected to be permitted to continue to enjoy either until he was given reasons for withdrawal and the opportunity to comment on such reasons."
23. This Court further observed as under:- "The existence of 'legitimate expectation' may have a number of different consequences and one of such consequences is that the authority ought not to act to def~at the "legitimate expectation' without some overriding reason of public policy to justify its doing so. In a case of 'legitimate expectation' if the authority proposes to defeat a person's 'legitimate expectation' it should afford him an opportunity to make representations in the matter ……………………………………. . It may be indicated here that the doctrine of 'legitimate . . expectation' imposes in essence a duty on public authority to act fairly by taking into consideration all relevant factors relating to such 'legitimate expectation'. Within the conspectus of fair dealing NATIONAL BUILDING CON,'TRUCTION CORPN." S. RAGHUNATHAN {S.SAGHIRAHMAD, J.] 171 in case of 'legitimate expectation', the reasonable opportunities to A make representation by the parties likely to be affected by any change of consistent past policy, come in."
24. In Food C01poration of India v. Mis Kamdhenu Cattlefield In- dust1ies, [1993] 1 SCC 71, it was held that in all state actions, the State has to conform to Article 14 of the Con,stitution of which non-arbitrariness is a significant facet. It was further observed that there is no unfettered discretion in public law and a public authority possesses powers only to use them for public good. It was further observed as under:- "The mere reasonable or legitimate expectation of a citizen, in such a situation, may not by itself be a distinct enforceable right, but failure to consider and give due weight to it may render the decision arbitrary, and this is how the requirement of due con- sideration of a legitimate expectation forms part of the principle of non-arbitrariness, a necessary concomitant of the rule of law. Every legitimate expectation is a relevant factor requiring due consideration in a fair decision-making process. Whether the apec- tation of the claimant is reasonable or legitimate in the context is a questio11 off act in each case. Whenever the question an"ses, it is to be detennined not according to the claimant's perception but in larger public interest wherei11 other more imp01tant considerations may outweigh what would othe1Wise hav_e been the legitimate expectation of the claimant. A bona fide decision of the public authority reached in this manner would satisfy the requirement of non- arbitrariness and withstand judicial scrutiny. The doctrine of legitimate expectation gets assimilated in the rule of Jaw and operates in our legal system in this manner and to this extent." (Emphasis supplied)
25. In U11io11 of India and Others v. Hindustan Developme11t C01pora- c tion and Others, (1993) 3 SCC 499, the meaning cf word "Legitimate Expectation" was again considered. Quoting from the case of Attomey G Ge11eral for New South Wales v. Qui11, [1990] 64 Aust LJR 327, the following lines:- "To strike down the exercise of administrative power solely on the ground of avoiding the disappointment of the legitimate expecta- tions of an individual would be to set the Courts adrift on a H c . featureless sea of pragmatism. Moreover, the notion of a legitimate expectation (falling short of a legal right) is too nebulous to form a basis for invalidating the exercise of a power when its exercise otherwise accords with law." the Court observed as under:- "If a denial of legitimate expectation in a given case amounts to denial of right guaranteed or is arbitrary, discriminatory, unfair or biased, 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 based on mere legitimate expecta- tion without anything more cannot ipso facto gi1'e a light to invoke these p1i1Zciples. It can be one of the grounds to consider but the court must lift the veil and see whether the decision is violative of these principles warranting interference. It depends ve1y much 011 the facts and the recog1Zised general p1inciples of administrative law applicable to such facts and the concept of legitimate expectation which is the latest recmit to a long list of concepts fashioned by the cowts for the review of administrative actioll, must be resaicted to the general legal limitations applicable and bi1Zdi1Zg the manner of • the future exercise of administrative power in a pa1ticular case. It follows that the concept of legitimate expectation is "not the key which unlocks the treasury of natural justice and it ought not to unlock the gates which shuts the court out of review on the merits", particularly when the element of speculation and uncertainty is inherent in that very concept."
26. This doctrine was reiterated in M.P. Oil Extraction and Another V. State of M.P. and Others' (1997] 7 sec 592, in which it was also laid down that though the doctrine of "Legitimate Expectation" is essentially procedural in character and assures fair play in administrative action, it may, in a given situation, be enforced as a substantive right.
27. Applying the principles discussed above in the instant case, it will · be seen that Foreign Allowance was not one of the allowances which was promised to be paid to the respondents at thie time of their induction in the service of NBCC nor had NBCC, at any time, given any assurance to · any of the respondents that this allowance would be payable to them at the H revised rate. The agreement or the contract of service, executed between NATIONAL BUILDING CONSTRUCTION CORPN . .-. S. RAGHUNATHAN (S.SAGHIRAHMAD. J.] 173 the respondents and the NBCC, does not stipulate payment of Foreign A Allowance to them. Even the High Court has observed that Foreign Allowance was not one of the allowances mentioned in the terms of deputation. The exact observations of the High Court need to be reproduced here: "No doubt, foreign allowance is not one of the allowances men- tioned in terms of deputation, but the same is akin to the deputa- tion (duty) allowance referred to in clause (1) of the terms of deputation. When the sam_e was made intrinsically linked with the basic pay and in the past there has been correspondingly increase on every revision of pay on the same percentage basis, there is no reason forthcoming that why the same now stands frozen on the pre-revised basic pay and why it is not allowed at the same percentage on the revised basic pay. In the absence of any justifi- c able reasons this act of the respondents will have to be held to be illegal and arbitrary. Petitioners legitimately expected that on D revision of the basic pay, the foreign allowance would also cor- respondingly stand enhanced on percentage basis. Foreign al- lowance, which is akin to and deputation (duty) allowance has to be regulated as per the rates specified for the purpose, namely, on percentage basis of the basic pay and in case there has been a revision of basic pay, it would automatically stand revised. The deputation (duty) allowance is also an allowance payable on per- centage basis and on revision of pay, it is payable on percentage basis on the revised basic pay."
28. At another place, the High Court has observed as under: "Petitioners were to be governed by the terms and conditions contained in order of deputation, copy of which was also sent to the respondent. The respondent accepted the petitioners services on deputation on the terms and conditions, as attached to the said order. Since the n~spondent has not produced on record the alleged contract or its copy and nothing was alleged during the course of arguments on the alleged contract, we have no hesitation in holding that the office order similar to annexure P-1, issued in the case of each petitioner containing terms and conditions of deputation would govern their case and in so far as the foreign H c allowance is concerned, the same would be payable to the petitioners on the same percentage on the revised basic pay at which it was payable prior to revision on the pre-revised basic pay and the action of the respondent as regards this allowances is concerned, is bad inasmuch as the petitioners legitimately expected 'that this allowance would stand revised and become payable to them, as in the past, on percentage basis of the revised pay. In case the respondents wanted to effect any change in the same, it was reasonably expected that the respondents ought to have informed the petitioners and in case the .fresh proposed terms would not have been acceptable to the petitioners, the petitioners might have taken a decision to get themselves repatriated or got terminated their deputation."
29. The above extracts indicate the reasoning and the approach of the High Court. They indicate the precise ground on which the claim of the respondents was allowed. We are constrained to observe that the D approach of the High Court was wholly erroneous and the reasoning is equally fallacious.
30. As pointed out by this Court in Food Co1poration of India v. Kamdhenu Cattlefield Indust1ies, [1993] 1 SCC 71, which has already been E referred to above, the question whether the expectation and the claim is reasonable or legitimate, is a question of fact in each case. It was also observed that this question had to be determined not according to the claimants' perception but in larger public interest.
31. Incidentally, in this case, the question of "Legitimate Expectation" F was not raised in the petition and no foundation was laid in the pleadings for such a plea being advanced before the Court. Strangely, the High Court 'allowed this plea at the stage of argument and allowed the petitions only on the ground of "Legitimate Expectation" without least realising that there was hardly any legitimacy in the claim of the respondents. In the absence G of pleading and the affidavit of the respondents in support thereof,' the whole exercise done by the High Court cannot but be termed to be speculative.
32. That apart, the High Court suffered from a misconception that whenever there was a revision of the pay scales, Foreign Allowance as also H the other allowances were correspondingly raised on the basis of the NATIONAL BUILDING CONSTRUCTION CORPN. '· S. RAGHUNATHAN [S.SAGHIR AHMAD. J.j 175 : ' ' revised basic salary. Respondents had served on deputation with the NBCC A in their foreign projects at Iraq from 1982-83 to 1986-87 and during this ,, … period the pay structure was revised only once to implement the reeom- mendations of the Fourth Pay Commission. Was there any other revision in the pay structure of the respondents or any of them during their tenure with the NBCC; if so, when ? To whom was the benefit of such revision B available? Who are those other officers and employees serving on deputa- tion in a foreign country who were benefitted by any revision in the pay structure during the period 1982-83 to 1986-87? These are the few ques- lions which legitimately arise, and unless there is material on record to answer these questions, the observations of the High Court that whenever there was a revision in the pay scales, Foreign Allowance was correspond- c ingly increased and, therefore, the respondents had come to entertain "Legitimate Expectation" , are wholly speculative, besides being erroneous.
33. Foreign Allowance could also not be treated as a salary com- ponent or akin to Deputation (Duty) Allowance as it was in the nature of D a residuary perk regulated by the provisions of P.R. 51(2).
34. Fundamental Rule 51 provides as under:- "F.R. 51. (1) When a Government servant is, with proper sanction, temporarily deputed for duty out of India either in connection with the post held by him in India or in connection with any special duty on which he may temporarily be placed, he may be allowed by the President to draw during the period of deputation the same pay which he would have drawn had he remained on duty in India: Provided that a Government servant, who is placed on deputa- tion while already on leave out of India on average pay, may be required by the President to continue to be on leave, in which case he shall be given during that period, in addition to his leave salary, an honorarium of one-sixth of the pay which he would have drawn had he remained on duty in India; the cost of passages from and to India shall be borne by him. '! . (2) A Government servant on deputation may also be granted a compensatory allowance in a foreign country of such amount as the President may think fit. (3) The foreign exchange equivalent of the pay, honorarium or compensatory allowance admissible under sub-rule (1) Sub-rule (2) shall be calculated at such rate of exchange as the President may by order prescribe."
35. Sub-rule (2) of Rule 51, quoted above, gives a discretion to the Government to pay to the Government servant, on deputation in a foreign country, such compensatory allowance as may be thought fit by the Presi- dent. The payment of compensatory allowance as also the quantum of such allowance is left to the absolute discretion of the President. It was for this reason perhaps that the High Power Committee did not make any recom- C mendation in respect of Foreign Allowance and left it to the discretion of NBCC to decide whether it would be payable or not at all, and if payable, at what rate. The Ministry of External Affairs had already fixed Foreign Allowance under F.R. 51(2) for its officers and other staff working in its Missions abroad. The NBCC, therefore, issued the order dated 15th Oc- D tober, 1990 specifying the benefits which would be available to its employees and deputationists with effect from 1.1.1986. It was in this order that it was indicated that Foreign Allowance would continue to be payable at the rate of 125% of the basic pay (pre-revised) as on or upto 31.12.1985. There was thus no increase in the Foreign Allowance payable to the E respondents; nor was the amount reduced in any way.
36. NBCC had taken a policy decision on account of strange situa- tions and conditions prevailing in Iraq where respondents were deputed on foreign projects assigned to NBCC, that Foreign Allowance would be payable only on the original basic salary of the respondents and not on the salary as revised on account of the recommendations of the Fourth Pay Commission. In such a situation, the policy decision shall have the effect of displacing the doct~ine of "Legitimate Expectation", particularly as the decision was based on objective assessment of the prevailing circumstances including the financial stringency in which Iraq came to be placed. There is, therefore, no element of arbitrariness in that decision.
37. The respondents were the prisoners of hope. They attempted to water the leaves when the tree itself was found cut off at its root. This is the least that can be said of this case which had no pleadings and yet the H plea prevailed. NATIONAL BUILDING CONSJRUCTION CORPN. v. S. RAGHUNATHAN [S.sAGHJR AHMAD, J.) 177
38. For the reasons stated above, the appeals are allowed, the judg- ment and order dated 13.9.96 and 25.7.97 passed by the Delhi High Court are set aside and the wiit petitions relating to Foreign Allowance are dismissed, but without any order as to costs. v.s.s. Appeal allowed.