M/S VINP DISTILLERIES AND SUGARS PVT LTD vs UNION OF INDIA
- Court
- Karnataka High Court
1
R
Reserved on : 27.04.2026
Pronounced on : 16.06.2026
IN THE HIGH COURT OF KARNATAKA DHARWAD BENCH
TH
DATED THIS THE 16 DAY OF JUNE, 2026
BEFORE
THE HON'BLE MR. JUSTICE M. NAGAPRASANNA
WRIT PETITION No.109133 OF 2025 ( GM - RES)
BETWEEN:
M/S.VINP DISTILLERIES AND SUGARS PVT. LTD.,
A COMPANY DULY INCORPORATED
UNDER THE PROVISIONS OF
THE COMPANIES ACT, 2013
HAVING ITS REGISTERED OFFICE AT,
SY. NO.42, 43 AND 53,
JAKKANAKATTI ROAD,
KONANAKERI VILLAGE, SHIGGAON TALUK,
HAVERI DISTRICT – 581 193
REPRESENTED BY ITS VICE PRESIDENT
SRI MANJUNATHA CB
... PETITIONER
(BY SRI PRABHULING K.NAVADGI, SR. ADVOCATE A/W
SRI AJAY KADKOL, ADVOCATE;
SRI SHASHANKK PADIYAR, ADVOCATE;
SRI SHARAN K., ADVOCATE
MS.PRIYANKA J.SREEDHARA, ADVOCATE)
AND:
1 . UNION OF INDIA
MINISTRY OF PETROLEUM AND NATURAL GAS
Digitally signed
by SANJEEVINI
J KARISHETTY
Location: High
Court of
Karnataka
2
GOVERNMENT OF INDIA
KARTAVYA BHAVAN - 03
JANPATH, NEW DELHI – 110 001
REPRESENTED BY ITS JOINT SECRETARY.
2 . BHARAT PETROLEUM CORPORATION LIMITED
BHARAT BHAVAN PETROLEUM CORPORATION LIMITED,
TH
12 FLOOR, E AND F MAKER TOWERS CUFFE PARADE,
MUMBAI 400 005
MAHARASHTRA
REPRESENTED BY ITS MANAGING DIRECTOR.
3 . HINDUSTAN PETROLEUM CORPORATION LIMITED
HAVING ITS REGISTERED OFFICE AT PETROLEUM
CORPORATION LTD.,
HINDUSTAN BHAWAN
S U MARG FORT, MUMBAI – 400 001.
MAHARASHTRA,
REPRESENTED BY ITS
MANAGING DIRECTOR.
4 . INDIAN OIL CORPORATION LIMITED
INDIAN OIL BHAVAN
G9, ALI YAVAR JUNG MARG
BANDRA EAST, MUMBAI
MAHARASHTRA – 400 051
REPRESENTED ITS
MANAGING DIRECTOR.
5. MSRIT INDUSTRIES PVT. LTD.
HAVING ITS REGISTERED OFFICE AND UNIT AT:
LAKHANAYAKANKOPPA VILLAGE,
TALUKA RAMDURG, DISTRICT BELAGAVI,
KARNATAKA, INDIA - 591127
THROUGH ITS AUTHORISED REPRESENTATIVE.
6. PRABHRITI ETHANOL PRIVATE LIMITED
HAVING ITS REGISTERED OFFICE AT:
3
D NO. 2/1, PROPERTY NO.15A,
RS NO. 246/1&2, VIDYANAGAR HAVERI,
HAVERI, KARNATAKA - 581110
HAVING ITS UNIT AT:
244/182, BELAVAGI ROAD,
NEGALUR, HAVERI, KARNATAKA - 581213
THROUGH ITS AUTHORISED REPRESENTATIVE.
7. SOORAJ AGRO DISTILLERIES LIMITED
HAVING ITS REGISTERED OFFICE AND UNIT AT:
RS NO. 479/5 & 479/8,
HAVANUR VILLAGE, GADAG BELAVAGI ROAD,
GUTTAL SUB POST OFFICE,
HAVERI, KARNATAKA - 581108
THROUGH ITS AUTHORISED REPRESENTATIVE.
8. KARTHIK AGRO INDUSTRIES PVT. LTD.
HAVING ITS REGISTERED OFFICE AND UNIT AT:
SY NO. 92, HOOLGERI VILLAGE,
BADAMI TALUK, BAGALKOT DISTRICT,
BAGALKOT, KARNATAKA - 587106
THROUGH ITS AUTHORISED REPRESENTATIVE.
9. MODI BIOTECH PVT. LTD. (MBPL)
MODI NATURALS LTD.
HAVING ITS REGISTERED OFFICE AT:
D-54, 2ND FLOOR,
OKHLA INDUSTRIAL AREA PHASE 1,
NEW DELHI-110020
HAVING ITS UNIT AT:
KHASRA NO. 1175, VILLAGE BHILAI, TAHSIL AARANG,
RAIPUR, CHHATTISGARH - 493441
THROUGH ITS AUTHORISED REPRESENTATIVE.
10. BCL INDUSTRIES LTD.
HAVING ITS REGISTERED OFFICE AND UNIT AT:
DABWALI ROAD,
SANGAT KALAN, BATHINDA,
4
PUNJAB 151401
THROUGH ITS AUTHORISED REPRESENTATIVE.
11. SVAKSHA DISTILLERY LTD.
HAVING ITS REGISTERED OFFICE AND UNIT AT:
DAKSHIN SIMLA, DAG NO. 1288 (P), JL-355,
B.O. CHANGUAL, P.S. KHARAGPUR (LOCAL),
KHARAGPUR, PASCHIM MEDINIPUR,
WEST BENGAL - 721301
THROUGH ITS AUTHORISED REPRESENTATIVE.
12. HARP CHEMICALS PVT. LTD.
HAVING ITS REGISTERED OFFICE AT:
PLOT NO. ITC-11, 2ND FLOOR, IT PARK,
SECTOR-67, S.A.S. NAGAR, MOHALI,
PUNJAB 160062
HAVING ITS UNIT AT:
VILLAGE JAHANGIR, TEHSIL DHURI,
DISTRICT SANGRUR, PUNJAB
THROUGH ITS AUTHORISED REPRESENTATIVE.
13. ORIENT ETHANOL INDUSTRIES PVT. LTD.
HAVING ITS REGISTERED OFFICE AT:
UNIT NO. 614, 6TH FLOOR,
P.P. CITY CENTRE, PLOT NO. 3, ROAD NO. 44,
PITAMPURA, DELHI - 110034
HAVING ITS UNIT AT:
MANERI INDUSTRIAL AREA,
DISTRICT MANDLA, MADHYA PRADESH
THROUGH ITS AUTHORISED REPRESENTATIVE.
14. OASIS DISTILLERIES LIMITED
HAVING ITS REGISTERED OFFICE AT:
H-102, METRO TOWERS,
SCHEME NO. 54, VIJAY NAGAR,
INDORE, MADHYA PRADESH 454660
HAVING ITS UNIT AT:
VILLAGE BORALI, TEHSIL BADNAWAR,
5
DISTRICT DHAR,
MADHYA PRADESH - 454660
THROUGH ITS AUTHORISED REPRESENTATIVE.
15. BAIDYANATH BIOFUELS PRIVATE LIMITED
HAVING ITS REGISTERED OFFICE AT:
C/704, PRAMUKH PLAZA,
CARDINAL GRACIOUS ROAD, CHAKALA,
ANDHERI EAST, MUMBAI 400069
HAVING ITS UNIT AT:
PLOT NO. B-48,
ADDITIONAL BUTIBORI INDUSTRIAL AREA,
VILLAGE BRAHMNI, NAGPUR,
MAHARASHTRA - 441122
THROUGH ITS AUTHORISED REPRESENTATIVE.
16. SHRI BAJRANG CHEMICAL DISTILLERY LLP
HAVING ITS OFFICE AT:
BORJHARA VILLAGE, URLA-GUMA ROAD,
URLA GROWTH CENTRE, RAIPUR CHHATTISGARH - 492003
HAVING ITS UNIT AT:
KHASRA NO - 1105/7,
NEAR NEW WAREHOUSE,
VILL-ARANG, ARANG KHARORA ROAD,
CHHATTISGARH - 493441
THROUGH ITS AUTHORISED REPRESENTATIVE.
17. INDIAN SUGAR AND BIO-ENERGY
MANUFACTURERS ASSOCIATION
A SOCIETY REGISTERED UNDER
THE SOCIETIES REGISTRATION ACT, 1860
HAVING ITS OFFICE AT:
C BLOCK, 2ND FLOOR, ANSAL PLAZA
ANDREWS GANJ, AUGUST KRANTI MARG,
NEW DELHI - 110049
REPRESENTED BY DIRECTOR GENERAL:
MR. DEEPAK BALLANI.
6
18. WHITEFIELD BIOFUELS PRIVATE LIMITED
HAVING ITS REGISTERED OFFICE AT
91, 9TH FLOOR, KUBER TOWER,
OFF NARIMAN ROAD, A V NAGWEKAR MARG,
PRABHADEVI, MUMBAI CITY, MUMBAI,
MAHARASHTRA, INDIA, 400025.
REPRESENTED BY MR. NARESH KUMAR.
19. JURALA ORGANIC FARMS AND AGRO INDUSTRIES LLP
HAVING ITS REGISTERED OFFICE AT:
Η.ΝΟ. 13-195/1, KISTAPUR ROAD MEDCHAL,
HYDERABAD, TELANGANA 501401.
REPRESENTED BY DR. KIRAN KUMAR T.
20. GRAINFUEL DISTILLERIES PRIVATE LIMITED
HAVING ITS REGISTERED OFFICE AT:
9TH FLOOR, 903, PINNACLE BUSINESS PARK,
CORPORATE RD, PRAHLAD NAGAR,
AHMEDABAD, GUJARAT 380015.
21 VIVEK BIO PRODUCTS PRIVATE LIMITED
HAVING ITS REGISTERED OFFICE AT:
PLOT NO: 108, TSFPZ KAMAREDDY,
LINGAMPALLI VILLAGE, SADASHIVANAGAR MANDAL,
KAMAREDDY DISTRICT-503145 TELANGANA.
22. GRAINSPAN NUTRIENTS PVT. LTD
HAVING ITS REGISTERED OFFICE AT:
GRAINSPAN NUTRIENTS PVT. LTD, 504-505,
SHAPATH V, SARKHEJ - GANDHINAGAR HWY,
OPP. KARNAVATI CLUB ROAD, PRAHLAD NAGAR,
AHMEDABAD, GUJARAT 380015.
23. VIDYA GREEN VENTURES PRIVATE LIMITED
HAVING ITS REGISTERED OFFICE AT:
VILLAGE JALODI, TEHSIL TALERA,
DISTRICT BUNDI - 323021, RAJASTHAN.
7
24. PINGAKSH BEVERAGES PRIVATE LIMITED
HAVING ITS REGISTERED OFFICE AT:
TEHSIL TALERA, POST BAJAD,
VILLAGE LADPURA,
RAJASTHAN 323021.
... RESPONDENTS
(BY SRI M.B.KANAVI, SR.CGC FOR R-1;
SRI R.VENKATARAMANI, ATTORNEY GENERAL OF INDIA A/W
SRI C.V.ANGADI, ADVOCATE
SRI AMIT DHINGRA, ADVOCATE
SRI KARTIKAY AGGARWAL, ADVOCATE
SRI ROHIT MAHAJAN, ADVOCATE
SRI SIDDHARTH AGARWAL, ADVOCATE
SRI KESANG DOMA, ADVOCATE FOR R-2 TO R-4;
SRI SAJAN POOVAYYA, SR. ADVOCATE A/W
SRI MANU S KULKARNI, ADV. FOR R-5 TO R-16,
SRI DHYAN CHINNAPPA, SR. ADVOCATE A/W
SRI AAKASH SHERWAL & MS. NIKITA GANESH,
ADVS. FOR R-17
SRI UDAYA HOLLA, SR.ADVOCATE A/W
SRI NAMAN JHABAKH, ADVOCATE FOR R-18 TO R-24)
THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF THE
CONSTITUTION OF INDIA PRAYING TO A. PASS AN APPROPRIATE
WRIT, DIRECTION OR ORDER DIRECTING THE RESPONDENTS NO.2
TO 4 TO TAKE NECESSARY STEPS IN ACCORDANCE WITH LAW, IN
RELATION TO THE REPRESENTATION DATED 27.10.2025 FILED BY
THE PETITIONER, SEEKING AN ENHANCEMENT OF THE
ALLOCATION IN SUPPLY OF ETHANOL TO THE RESPONDENTS NO.2
TO 4 HEREIN UNDER TENDER NO.22376 DATED 23.09.2025 FOR
THE ETHANOL SUPPLY YEAR 2025-26 WHICH IS PRODUCED AS
ANNEXURE-A.
8
THIS WRIT PETITION HAVING BEEN HEARD AND RESERVED
FOR ORDERS ON 27.04.2026, COMING ON FOR PRONOUNCEMENT
THIS DAY, THE COURT MADE THE FOLLOWING:-
CORAM: THE HON'BLE MR JUSTICE M.NAGAPRASANNA
CAV ORDER
The petitioner is before this Court seeking the following
prayer:
“ a. Pass an appropriate writ, direction or order directing the
Respondents No.2 to 4 to take necessary steps in
accordance with law, in relation to the Representation
dated 27.10.2025 filed by the Petitioner, seeking an
enhancement of the allocation in supply of ethanol to the
Respondents No. 2 to 4 herein under Tender No.22376
dated 23.09.2025 for the Ethanol Supply Year 2025-26
which is produced as ANNEXURE - “A“ ;
And/Or
b. pass such other order/s as this Hon’ble Court may deem
fit and proper in the ends of justice.”
2. Facts in brief, germane, are as follows: -
2.1. The petitioner is said to be a Dedicated Ethanol Plant
(‘the Plant’ for short) engaged in the business of manufacture and
supply of Denatured Anhydrous Ethanol among other allied
9
products. The unit of the petitioner is established exclusively for the
purpose of supplying ethanol to Oil Marketing Companies
(OMCs)/respondents 2 to 4. The OMCs notified a tender/Expression
of Interest (‘EOI’ for short) on 27-08-2021 for entering into Long-
Term Offtake Agreements (‘the Agreement/LTOA’ for short) with
Dedicated Ethanol Plants in Ethanol deficit states. The bids were
opened on 17-09-2021. Pursuant to the said tender/EOI, the
petitioner emerged successful among others and in furtherance
thereof, a Letter of Intent was issued to the petitioner, for entering
into a LTOA, on 13-11-2021. In terms of the EOI/tender, the
petitioner enters into a LTOA on 13-01-2022, with the
OMCs/respondents 2 to 4 for the establishment of Dedicated
Ethanol Plants for the production of ethanol. On 15-03-2023,
respondents 2 to 4 issued second EOI for signing the LTOAs in
some of the states. The issue does not relate to these agreements.
2.2. On 23-09-2025, a tender comes to be floated inviting
bids by respondents 2 to 4 for the supply of 1050 crore liters of
Denatured Anhydrous Ethanol for Ethanol Supply Year (‘ESY’ for
short) 2025-26. The petitioner participated in a pre-bid meeting
10
pursuant to the notification of the aforesaid tender and sought
clarification with regard to the status of preferential allocation for
the ESY 2025-26. Through an email dated 17-10-2025, it is
communicated, that the petitioner was allotted a quantity of only
3.92 crore liters supply of ethanol as against the allocation in the
bid of 9.26 crore liters. The deficit was 6.33 crore liters. The
petitioner immediately complained of the said short allotment to the
respondents. The respondents did not heed to the request of the
petitioner but operated only a part of the clause of the agreement
to permit further allocation sans complete allocation as obtaining
under certain clauses of the agreement. A representation was
submitted by the petitioner to the respondents 2 to 4, seeking
complete allotment, pursuant to the tender, to the tune of 9.26
crore liters, as against 3.92 crore liters that was allotted. This was
not acceded to. Therefore, alleging in-action on the part of the
respondents in not considering the representation of the petitioner
dated 27-10-2025, the petitioner files the subject writ petition
seeking a direction by issuance of a writ in the nature of mandamus
as extracted supra . This Court passed an interim order on 15-12-
2025. The order reads as follows:
11
“ The petitioner is before this Court seeking the following
prayer and the interim prayer:
PRAYER
A. Pass an appropriate writ, direction or order
directing the Respondents No.2 to 4 to take
necessary steps in accordance with law, in
relation to the Representation dated
27.10.2025 filed by the Petitioner, seeking
an enhancement of the allocation in supply
of ethanol to the Respondents No.2 to 4
herein under Tender NO.22376 dated
23.09.2025 for the Ethanol Supply Year
2025-26 which is produced as Annexure-A.
AND/OR
B. Pass such other Order/s as this Hon’ble may
deem fit and proper in the ends of justice.
INTERIM PRAYER
A. Issue a direction to the Respondents no.2 to
4 to revise the allotment made under Tender
bearing No.22376 dated 23.09.2025, in line
with the terms and conditions of the Long-
Term Offtake Agreement (LTOA) entered into
between the Petitioner and the said
respondents no.2 to 4 herein.
AND/OR
B. Pass such other order/s as this Hon’ble court
may deem fit and proper in the ends of
justice.
The rights of the parties are governed by a long term
offtake agreement with dedicated ethanol plant. The relevant
Clauses of the Agreement are 6.2 and 6.8 which reads as
follows:
12
6.2 Buyer/OMCs offer jointly an annual offtake
quantity of 1.44 Cr lit of Ethanol and the Seller/
Supplier commits to supply the same by
participating in the vendor registration process
and ethanol procurement process. Interstate
movements, if required, by Buyer/OMCs should
be honoured by the Seller/Supplier. The annual
offtake quantity offered is on best endeavor basis
to the extent of ethanol required, considering
prevalent ethanol blending percentage and MS.
sale of Buyer/ OMCs, and any other factor
impacting ethanol requirement, including, but not
limited to, demand issues arising out of the new
economic imperatives/ regulations, vehicle short
supply and such similar circumstances beyond
the control of Buyer/ OMCs. In case, the Seller/
Supplier intends to supply during the ongoing
ESY, offtake quantity will be limited to the
requirement of Buyer/ OMCs for the balance
period of that ESY.
6.8 In the above EOI floated for setting up of
dedicated ethanol units, in case a bidder is
being issued LOI for a quantity lesser than
the quantity for which they have bid. it is
clarified that in case they set up plants as
per their bids, Buyer/ OMCs may offer
additional annual offtake quantity, beyond
that offered under 6.2 above, with overall
annual offtake quantity limited to the design
capacity of the plant offered BY the bidder
under the EOI. This additional offtake
quantity by Buyer/OMCs will be given
through preferential allocation in the
ethanol procurement process followed by
Buyer/OMCs on best endeavor basis.
Reliance is placed on Clause 6.2 by the respondent and to
Clause 6.8 by the learned senior counsel Sri. Prabuling K.
Navadgi.
The Clause 6.8 unequivocally mandates that, if
beyond what is offered in Clause 6.2, the overall annual
offtake quantity of a plant is offered by the bidder under
the EOI, the additional offtake quantity will be through
13
the preferential allocation in the ethanol procurement
process followed by procedure.
The Clause 6.8 is what the learned senior counsel seeks
to press into service.
In that light, the matter would require consideration.
Therefore, there shall be an interim order as prayed
for, particularly in the teeth of Clause 6.8 quoted supra.
List the matter on 23.01.2026 for further hearing.
Objections, if any, then.”
(Emphasis supplied)
Clause 6.8 of the agreement was relied upon while passing the
interim order. This interim order so granted by this Bench was
challenged by respondents 2 to 4 before the Division Bench. The
Division Bench, in terms of its order dated 29-01-2026, rejected
Writ Appeal No.100001 of 2026. This was challenged by, one of the
appellants in the aforesaid writ appeal, before the Apex Court. The
Apex court, set aside both the orders passed by this Bench and that
of the Division Bench. The order dated 26-02-2026, of the Apex
Court in S.L.P.(C) No.7799 of 2026, reads as follows:
“…. …. ….
9. The respondent No. 2 went before the High Court by
filing a writ petition redressing the grievance that although the
petitioners had issued the indicative proposed allocations for the
(ESY) 2025-26 yet the respondent no. 2 was allotted only
14
39,269 KL (3.92 Crore Liters) as against its bid for 9.26 Crore
Liters.
10. A learned Single Judge of the High Court passed an
th
interim order in writ petition referred to above dated 15
December, 2025 which reads thus:
“The petitioner is before this Court seeking the
following prayer and the interim prayer:
PRAYER
A. Pass an appropriate writ, direction or order
directing the Respondents No.2 to 4 to take
necessary steps in accordance with law, in
relation to the Representation dated 27.10.2025
filed by the Petitioner, seeking an enhancement
of the allocation in supply of ethanol to the
Respondents No.2 to 4 herein under Tender
NO.22376 dated 23.09.2025 for the Ethanol
Supply Year 2025-26 which is produced as
Annexure-A.
AND/OR
B. Pass such other Order/s as this Hon’ble may
deem fit and proper in the ends of justice.
INTERIM PRAYER
A. Issue a direction to the Respondents no.2 to 4 to
revise the allotment made under Tender bearing
No.22376 dated 23.09.2025, in line with the
terms and conditions of the Long-Term Offtake
Agreement (LTOA) entered into between the
Petitioner and the said respondents no.2 to 4
herein.
AND/OR
B. Pass such other order/s as this Hon’ble court may
deem fit and proper in the ends of justice.
The rights of the parties are governed by an long
term offtake agreement with dedicated ethanol
plant. The relevant Clauses of the Agreement are
6.2 and 6.8 which reads as follows:
15
6.2 Buyer/OMCs offer jointly an annual offtake
quantity of 1.44 Cr lit of Ethanol and the Seller/
Supplier commits to supply the same by
participating in the vendor registration process
and ethanol procurement process. Interstate
movements, if required, by Buyer/OMCs should
be honoured by the Seller/Supplier. The annual
offtake quantity offered is on best endeavor basis
to the extent of ethanol required, considering
prevalent ethanol blending percentage and MS.
sale of Buyer/ OMCs, and any other factor
impacting ethanol requirement, including, but not
limited to, demand issues arising out of the new
economic imperatives/ regulations, vehicle short
supply and such similar circumstances beyond
the control of Buyer/ OMCs. In case, the Seller/
Supplier intends to supply during the ongoing
ESY, offtake quantity will be limited to the
requirement of Buyer/ OMCs for the balance
period of that ESY.
6.8 In the above EOI floated for setting up of
dedicated ethanol units, in case a bidder is being
issued LOI for a quantity lesser than the quantity
for which they have bid. it is clarified that in case
they set up plants as per their bids, Buyer/ OMCs
may offer additional annual offtake quantity,
beyond that offered under 6.2 above, with overall
annual offtake quantity limited to the design
capacity of the plant offered BY the bidder under
the EOI. This additional offtake quantity by
Buyer/OMCs will be given through preferential
allocation in the ethanol procurement process
followed by Buyer/OMCs on best endeavor basis.
Reliance is placed on Clause 6.2 by the
respondent and to Clause 6.8 by the learned
senior counsel Sri. Prabuling K. Navadgi.
The Clause 6.8 unequivocally mandates that, if
beyond what is offered in Clause 6.2, the overall
annual offtake quantity of a plant is offered by
the bidder under the EOI, the additional offtake
quantity will be through the preferential
allocation in the ethanol procurement process
followed by procedure.
16
The Clause 6.8 is what the learned senior counsel
seeks to press into service.
In that light, the matter would require
consideration.
Therefore, there shall be an interim order as
prayed for, particularly in the teeth of Clause 6.8
quoted supra.
List the matter on 23.01.2026 for further
hearing. Objections, if any, then.”
11. Thus, the plain reading of the interim order passed by
the learned Single Judge would indicate that strong reliance was
placed by the respondent no. 2 on Clause 6.8 of the LTOA.
According to the learned Single Judge, Clause 6.8 unequivocally
mandates that if beyond what is offered in Clause 6.2, the
overall annual off-take quantity of the plant is offered by the
bidder under the EOI, the additional off-take quantity should be
through the preferential allocation in the ethanol procurement
process.
12. In such circumstances, the learned Single Judge
granted interim relief to the respondent no. 2 as prayed for and
referred to earlier.
13. The petitioners before us being dissatisfied with the
grant of interim order passed by the learned Single Judge
preferred three writ appeals.
14. All the three writ appeals were taken up for hearing
together and by the impugned order all the three appeals came
to be dismissed, thereby affirming the interim order passed by
the learned Single Judge.
15. The Division Bench while dismissing the writ appeals
preferred by the petitioners, observed in paragraphs 15, 16, 17,
18 and 19 respectively as under:
“15. The question that arises for consideration in the
present appeal is how Clause 6.8 of the
agreement has to be interpreted and whether it
17
is advisable for the writ Court to interfere in
contractual matters entered into between the
State and private players.
16. Normally, Court should not interfere in
contractual matters, and the remedy for a person
like the petitioner would be to approach
arbitration as per the Long-Term Offtake
Agreement contains an arbitration clause.
However, when facts are not in dispute and it
requires only an interpretation of the contract
and the action of the State is found to be
arbitrary and unreasonable on the face of it, the
Court does interfere under these circumstances.
17. Admittedly, there is a promise made out by the
Union of India urging private players to establish
dedicated ethanol plants, which led to the
petitioner herein establishing a dedicated ethanol
plant and the Long-Term Offtake Agreement
being entered into with the respondents.
18. The respondents are bound by Clause 6 of the
Long-Term Offtake Agreement and Clause 6.8
pertains as to how respondents have to procure
the additional ethanol produced by the petitioner
over and above 1.44 crore litres per annum. They
have to give preferential allocation in ethanol
procurement process as per the agreed terms. It
means that the tender conditions floated every
year by the respondents (in this case the tender
document for the year Ethanol Procurement Year
2025-26), cannot be contrary to the condition
mentioned in Clause 6.8 of the Long-Term
Offtake Agreement.
19. The decision of the respondents to treat the
dedicated ethanol plants on par with other
ethanol producing units is in violation of Clause
6.8. Other ethanol producing units, which are not
dedicated for manufacturing of only ethanol, are
having the liberty to produce other products like
sugar cane, alcohol, denatured spirit and the like
and market it elsewhere. Whereas, dedicated
ethanol plants have been established at the
behest of the Union of India by private players by
taking huge financial risk and not giving them the
18
preferential treatment as agreed upon, may have
consequences disastrous to the very survival of
the said establishments.”
16. In such circumstances referred to above, the
petitioners are here before us with the present petitions.
17. We heard Mr. R. Venkataramani, the learned Attorney
General, Mr. Balbir Singh and Mr. Sajan Poovayya, the learned
senior counsel appearing for the petitioners in their respective
petitions and Mr. Gopal Subramanium and Dr. Abhishek Manu
Singhvi, the learned senior counsel appearing for respondent
no. 2.
18. The learned Attorney General submitted that the
interim relief granted by the High Court has led to reopening of
the entire tender process which has attained finality. He
submitted that additional allocation for supply of ethanol is not
possible at this stage. He also submitted that supply of allocated
quantity to various suppliers cannot be now changed at this
point of time.
19. The learned Attorney General argued that additional
supply would result in increase of allocations for some i.e., DEP-
decrease of supply for the non-DEPs. He also pointed out that if
Clause 6.8 of the LTOA is interpreted as mandatory as argued
on behalf of the respondent no. 2, the DEP-1 category suppliers
who have in total offered 585.3 crore Litres. would alone
account for approximately 56 per cent of the total published
requirement of 1,050 crore Litres which would necessitate
appropriate reduction from other categories thereby displacing
the non-LTOA suppliers extensively thereby affecting their
business viability. The same will have its own cascading effect.
20. The learned senior counsel appearing for the
petitioners would submit that the tender allocations stood
completed on 17.10.2025. The supply agreements were entered
into on 27.10.2025. The principal submission before us is that
the interim order passed by the High Court has disturbed the
allocation already undertaken way back on 17.10.2025 and may
have a cascading effect on the supply of ethanol being made
currently in terms of the allocation already made to other DEPs
and non-DEPs pursuant to the tender.
19
21. On the other hand, the learned Senior counsel
appearing for the respondent no. 2 seeks to heavily rely upon
Clause 6.8 of the LTOA. The sum and substance of their
argument is that the petitioners could not have ignored Clause
6.8. According to both the learned senior counsel, this is exactly
what the learned Single Judge of the High Court and the
Division Bench looked into and in their discretion, granted the
interim relief as prayed for. According to the learned Senior
counsel no interference is warranted in the present case.
22. Both the sides have manifold contentions to raise. We
do not propose to enter into the merits of each and every
argument canvassed on either side and return our own findings
on those. We are convinced that the interim order passed by the
learned Single Judge of the High Court as affirmed by the
Division Bench is not sustainable in law.
23. The materials on record prima facie indicate the
following:
1. Tender allocations stood completed on
17.10.2025 and accepted by signing
definitive agreements.
2. These supplies are only for ESY 2025-26. As
on 15.02.2026, 281 Crore Litres have been
supplied to the OMC’s under the tender.
3. ESY 2025-26 is for the period November
2025 to October 2026 only. Hence, Q1 of the
ESY 2025-26 stood completed and the
petitioners have entered Q2.
24. We are of the view that the High Court should have
kept the aforesaid circumstances in mind before passing the
interim order in the writ petition preferred by the respondent
no. 2. In matters relating to contracts/tenders writ courts should
remain circumspect and slow in passing interim orders which
may have the effect of seriously impeding the execution of the
tender etc. In other words, the High Court should be extremely
careful in exercise of its discretion while granting interim relief
in the matters of the present nature.
20
25. In such circumstances referred to above, we have
reached the conclusion that we should set aside the impugned
order and request the High Court to expeditiously take up Writ
Petition No. 109133/2025 preferred by the respondent no. 2 for
hearing. Expeditious hearing is required because of the nature
of the dispute between the parties and the adverse effect that
may be caused due to delay in the adjudication of this litigation.
26. We keep all contentions open for both the sides to be
canvassed before the High Court in the Writ Petition.
27. We also make it clear that any further allocation of
the ethanol by the petitioners shall be subject to the final
outcome of the writ petition.
28. It is needless to clarify that the writ petition
shall be decided on its own merits without being
influenced by the fact that we have thought fit to set
aside the interim order passed by the High Court.
29. At this stage, Mr. Balbir Singh, the learned senior
counsel appearing for the Indian Sugar and Bio-Energy
Manufacturers in SLP(C)..@Diary No. 12091/2026 submitted,
that he may be permitted to intervene in the writ petition
preferred by the respondent no.2. It shall be open for the clients
of Mr. Balbir Singh to make a request to the High Court.
Upon being mentioned, the SLP (C)Diary No.12141/2026
is also taken on board.
30. With the aforesaid, all the petitions stand disposed of
accordingly.
31. Pending application(s), if any, shall stand disposed
of.”
(Emphasis supplied)
21
The Apex Court while setting aside the interim order so granted by
this Bench as affirmed by the Division Bench directed this Court to
decide the issue on its own merit without being influenced by the
fact that, the Apex Court has thought it fit to set aside the interim
order passed by this Court. The matter is then heard on merits.
3. Heard Sri Prabhuling K. Navadgi, learned senior counsel
appearing for the petitioner; Sri M.B.Kanavi, learned senior Central
Government Counsel appearing for respondent No.1;
Sri R. Venkataramani, learned Attorney General of India appearing
for respondents 2 to 4; Sri Udaya Holla, learned senior counsel
appearing for the respondent Nos.18 to 24 ; Sri Sajan Poovayya
learned senior counsel appearing for the respondent Nos.5 to 16
and Sri Dhyan Chinnappa learned senior counsel appearing for the
respondent No.17.
SUBMISSIONS:
PETITIONER:
4.1. Learned senior counsel Sri Prabhuling K. Navadgi
appearing for the petitioner would submit that the treatment that is
22
meted out to the petitioner is completely contrary to what was
being done hitherto. It is not the first agreement that is entered
into between the parties of the kind that is now entered into. Since
2021 whenever respondents 2 to 4 had floated expression of
interest and consequent agreement was entered into, complete
capacity of the petitioner’s plant was allowed to be supplied. It is
only this time there is a change by respondents 2 to 4 by curtailing
the entire capacity of production of ethanol to be supplied in terms
of the subject agreement.
4.2. The learned senior counsel submits that the petitioner
has invested huge sum of money running into hundreds of crores
only for the purpose of production of ethanol and the petitioner can
offer it and remain only as a dedicated ethanol plant. He would
contend that respondents 2 to 4/OMCs exercise an absolute
monopoly over the procurement of ethanol and petitioner’s
production of ethanol cannot be supplied to any other private
entity. He would seek to place reliance on certain clauses of the
agreement to demonstrate that the action of respondents 2 to 4 in
not permitting complete supply of produced ethanol is arbitrary. He
23
would particularly place reliance upon Clause 6.8 of the agreement
to buttress his submission that the petitioner has legitimately
expected respondents 2 to 4 to act in terms of the contract and the
respondents being State under Article 12 of the Constitution of
India, could not and cannot act arbitrarily even in matters of
contract. The subject tender issued by respondents 2 to 4 has
grossly violated the contractual provision bringing it within the
ambit of non-preferential allocation. The obligation cast upon the
respondents to allow to supply the complete 9.90 crore liters of
ethanol springs from the clauses of the contract itself.
4.3. The learned senior counsel would submit that the phrase
“Best Endeavour” found in clause 6.8 of the agreement also
obligates the respondents to permit entire supply of ethanol that is
produced for the ethanol year. He would contend that there is
continued existence of sustained demand for ethanol in the light of
increased percentage of ethanol in petroleum products from 7 to 8
percent hitherto to 20% as on today. Therefore, Government needs
ethanol, but is not wanting to take it from the petitioner
notwithstanding the agreement. If ethanol is not allowed to be
24
supplied by the petitioner, it would run in to huge losses and would
be constrained to shut down the operations if the allocation is not
revived. He would, in all, submit that even the theory of legitimate
expectation has now been elevated to the status of violation of
Article 14 of the Constitution of India. He would seek to place
reliance upon plethora of judgments of the Apex Court and that of
this Court to buttress the aforesaid submissions, all of which would
bear consideration qua their relevance in the course of the order.
RESPONDENTS:
5.1. Contrariwise, the learned Attorney General of India
would vehemently refute the submissions to contend that the
petitioner is a beneficiary of a contract entered into between
respondents 2 to 4 and the petitioner. Therefore, the issue must be
assessed in the realm of contracts and not in the realm of public
law remedy, as is contended by the petitioner. He would, therefore,
contend that the writ petition is not entertainable, as it pertains to
interpretation of a contract between the parties. He would submit
that the petition involves seriously disputed questions of fact to be
adjudicated, as the allocation under the subject tender involves
25
complex factual questions relating to allocation methodology,
quarter-wise zone requirements, quantum of bids received and the
overall constraint of national blending targets. He would submit that
the representation submitted by the petitioner cannot be used as a
tool to completely change the allocation of ethanol which is driven
by commercial and contractual commitments of respondents 2 to 4,
as well as the policy of the Government and directions so issued by
st
the 1 respondent. He would contend that the petitioner can at
best seek for a writ of mandamus to consider and respond to the
said representation. Instead, the petitioner is seeking a mandamus,
which in effect would change the policy itself.
5.2. The learned Attorney General of India would submit that
there is misrepresentation of contractual terms by the petitioner
and relief is sought in terms of the subject programme. The
Ethanol Supply Tender captures the intention of increasing the
production of ethanol in deficit states. The State of Karnataka is not
a deficit State. Deficit would mean the deficit in ethanol supply.
Therefore, to balance it was necessary to short allot the ethanol to
the petitioner, notwithstanding clause 6.8. Clause 6.8 hinges upon
26
clause 6.2 of the agreement. Two factors are important to be
considered in the subject agreement is his submission. They are
preferential allocation on best endeavour basis. Therefore,
preferential allocation and best endeavour basis cannot become a
right to the petitioner to seek a mandamus to respondents 2 to 4 to
act in terms of the agreement so entered into between the parties.
Clauses of the agreement particularly 6.8 is only directory and
cannot be seen to be mandatory for the petitioner to seek writ in
the nature of mandamus.
5.3. The learned Attorney General of India would further
contend that the plea of legitimate expectation and promissory
estoppels, that is projected by the learned senior counsel for the
petitioner is inapplicable to the facts of the case, as the two
doctrines would not create any legally enforceable right, where
none exists in an underlying contractual framework. The best
endeavour basis that is found in clause 6.8 of the agreement, is
subject to multiple conditions. It cannot be demanded as a right by
the petitioner, particularly after entering into the contract. The
doctrine of promissory estoppel cannot be used to compel a public
27
authority or a State under Article 12 to act in a manner inconsistent
with the statutory duty, public obligation and public interest. The
OMCs are required to operate within the national ethanol
procurement framework governed by the guidelines issued by the
Ministry. Any judicial order that would be passed in the case at
hand should not override the deficit State, getting adequate ethanol
and sufficient State getting excess of ethanol. Therefore, the
representation if considered in favour of the petitioner would
amount to modification of the Government policy itself, which
cannot be permitted in law. The relief sought results in modification
of the allocation methodology provided under Annexure-III of the
tender.
5.4. The learned Attorney General would lay emphasis upon
the fact that the wisdom and advisability of economic policies are
ordinarily not amenable to judicial review, unless it is demonstrated
that the action of respondents 2 to 4 touches upon the traits of
arbitrariness. The classification made in the tender or in the
agreement and not agreeing to the agreement or non-consideration
of the representation is a rational act on the part of respondents 2
28
to 4 and would be still within the non-arbitrariness as obtaining in
Article 14 of the Constitution of India.
6. The learned senior counsel appearing for the petitioner
would refute the submissions of the learned Attorney General in
contending that, preferential allocation as found in Clause 6.8
cannot mean that the respondents can act arbitrarily by taking
recourse to best endeavour obligation or preferential allocation. He
would again lay emphasis upon legitimate expectation on the part
of respondents 2 to 4 being violated.
7. The intervenors who have been permitted to be impleaded
by this Court pursuant to the directions of the Apex Court have also
made their submissions. The learned senior counsels
Sri Udaya Holla, Sri Sajan Poovayya and Sri Dhyan Chinnappa
appearing for the respondent Nos.18 to 24, respondent Nos.5 to 16
and respondent No.17 respectively, would toe the lines of the
learned Attorney General in contending that, no right of the
petitioner is taken away for the petitioner to knock at the doors of
this Court, seeking a direction to interpret and implement the
29
clauses of the agreement according to the whim and fancy of the
petitioner. The learned Attorney General and the respondents who
have made their submissions now have again placed reliance upon
a plethora of judgments which would be considered qua their
relevance in the course of the order.
8. I have given my anxious consideration to the submissions
made by the respective learned senior counsel and have perused
the material on record.
ANALYSIS AND CONSIDERATION:
BACKDROP:
9. The genesis of the present controversy lies in the ‘Ethanol
Blended Petrol Programme’ conceived by the Government of India
in the year 2002, a policy initiative born not merely out of economic
necessity, but from a larger national vision of ushering India
towards energy security, environmental sustainability and a cleaner
ecological future. The programme, was introduced as a measure of
profound public importance, intended to progressively green fossil
30
fuels and reduce the nation’s dependence upon conventional
hydrocarbon energy sources.
10. What began as a policy experiment has, over the years,
evolved into one of the central pillars of India’s clean-energy
transition. The programme embodies multiple national objectives —
reduction in crude oil imports, conservation of valuable foreign
exchange, mitigation of environmental degradation and, equally
significantly, revitalisation of the agricultural economy by fostering
a sustainable biofuel ecosystem. The ‘National Policy on Biofuels,
2009’, incorporated this vision and envisaged an ambitious
roadmap for blending ethanol with petrol, initially targeting a blend
ratio of 20% while commencing from a modest 5% blending level
prevalent at the time.
11. The march towards that objective did not remain static.
Policies evolved, committees were constituted and successive
measures were undertaken to strengthen the ethanol economy of
the nation. In the year 2020, upon recommendations submitted
before the Expert Committee constituted for the purpose, the
31
Ministry of Petroleum and Natural Gas formulated the “Roadmap for
Ethanol Blending in India: 2020–2025”. The preambular philosophy
underlying the said roadmap eloquently encapsulates the national
imperative behind the blending programme, thus:
“ Achieving energy security and the transitioning to
a thriving low carbon economy is critical for a growing
nation like India. Blending locally produced ethanol with
petrol will help India strengthen its energy security,
enable local enterprises and farmers to participate in the
energy economy and reduce vehicular emissions ….”
(Emphasis supplied)
The aforesaid policy document, issued under the National Policy on
Biofuels – 2018, laid down an indicative target of achieving 20%
ethanol blending in petrol by the year 2030. The report also
undertook an exhaustive assessment of projected ethanol demand
and the corresponding augmentation of national production
capacities. Clause 7.1 thereof assumes significance and merits
reproduction, for it reflects the scale and seriousness of the national
endeavour. It reads as follows:
“7.1 ETHANOL PRODUCTION CAPACITIES
In the year 2017-18, installed capacity of molasses-based
distilleries was around 278 crore liters. With a view to enhance
ethanol production capacity in the country, the government in
32
July, 2018 & March, 2019 notified two interest subvention
schemes for molasses-based distilleries. Under the aforesaid
scheme of DFPD, interest subvention at the rate of 6% per
annum or 50% of rate of interest charged, whichever is lower on
the loan sanctioned was borne by the central government for a
period of 5 years. DFPD approved 368 projects for setting up of
new distilleries / expansion of existing distilleries.
… … …
With a view to achieve blending targets, DFPD is
making concerted efforts to enhance the ethanol
distillation capacity in the country. For this, the
government had invited applications from the
entrepreneurs under the ethanol interest subvention
schemes in September, 2020 during a window of 30 days.
Thus far, 238 projects for a capacity enhancement of 583
Cr liters with a loan amount of about Rs.16,000/- crore
have been approved by DFPD. It is expected that at least
400 Cr liters capacity would be added from these projects
by 2024 .”
(Emphasis supplied)
Clause 7.1 deals with ethanol production capacity. About 238
projects for a capacity of 583 crore liters, was sought to be
envisaged to be completed by March 2022. The recommendations
of the Committee, for augmentation of Ethanol production capacity
is found in Clauses 9.1 and 9.2. They read as follows:
“9.1 AUGMENTATION OF ETHANOL PRODUCTION
CAPACITY.
With liberalized feedstock policy, incentives and close
monitoring as listed in Chapter-7, sufficient capacity for
ethanol production is likely to be built in the country to
meet demand till 2025. For this, both the sugarcane-
based and grain-based ethanol production capacities
33
shall have to be augmented by 78% and 187% to 760
and 740 crore liters respectively. To enable a pan-Indian
roll-out, ethanol would need to be supplied from surplus
to deficit states as per requirements so as to ensure
uniform availability of ethanol blends in the country .
Over time, technology for production of ethanol from non-food
feedstock, called “Advanced Biofuels” including second
generation (2G) should be promoted so as to tap this
abundantly available resource without causing any tradeoff with
the food production system.
A close follow up is required of the planned steps for
enhancing ethanol production capacity across the country
to 1500 Cr. liters by ESY 2025-26 required for E20
blending. Special efforts are needed to attract investors
to the North East of the county to avail the Interest
Subvention Scheme of DFPD and build an adequate
distillation capacity and to avoid long distance transport
of ethanol.
9.2 ETHANOL BLENDING ROADMAP
1. MoP&NG should immediately notify the plan for pan-India
availability of E10 fuel by April, 2022 and its continued
availability thereafter until 2025 for older vehicles, and
launch of E20 in the country in phases from April, 2023
onwards so as to make E20 available by April, 2025.
MoPNG should notify that the blending program is
applicable to all oil marketing companies, including the
private companies. This will trigger action by all relevant
stakeholders. The roll out of higher ethanol blends may be
done in phases, starting with the states having surplus
ethanol production.
2. In view of the switch of dispensing of EBP fuels
between E10 and E20 (such as E12 or E15) as well in
manufacturing compatible vehicles, the Expert
Committee agrees that intermediate blends will give
flexibility to OMCs to manage supply and demand of
ethanol in the country. For this purpose, BIS may
formulate specifications for these intermediate E12
34
and E15 blends. Flex fuel vehicles should be
encouraged and popularized for moving to higher
blends.
3. A nation wide educational campaign should be launched
jointly by MoP&NG through its OMCs, MoRT&H and DHI in
partnership with the industry to educate the consumers of
the benefits of EBP, and to select the correct fuel for their
class of vehicles.”
(Emphasis supplied)
12. The report records that during the year 2017-18, the
installed capacity of molasses-based distilleries stood at
approximately 278 crore litres. Recognizing that such capacity was
grossly insufficient to meet the envisioned blending targets, the
Union Government introduced interest subvention schemes in the
years 2018 and 2019 to incentivise the establishment of new
distilleries and expansion of existing units. Under the aegis of the
Department of Food and Public Distribution, the Central
Government undertook to bear substantial portions of the interest
burden on sanctioned loans, thereby encouraging private
participation in the national biofuel mission. Consequently,
hundreds of projects involving colossal investments running into
thousands of crores came to be approved for augmentation of
ethanol production capacity across the country.
35
13. The roadmap further underscores that, in order to achieve
pan-India implementation of the blending programme, ethanol
would necessarily have to move from surplus States to deficit
States so as to ensure uniform availability of blended fuel
throughout the nation. It also emphasizes the urgent necessity of
increasing ethanol production capacity to nearly 1500 crore litres by
ESY 2025-26 to facilitate E20 blending.
14. Clause 9.2 of the roadmap thereafter delineates the
broader national strategy for phased implementation of E10 and
E20 fuel availability across the country. It contemplates not merely
infrastructural and industrial preparedness, but also consumer
education, technological adaptation and coordinated participation of
all stakeholders in the energy ecosystem. The programme was thus
envisioned not as an isolated commercial arrangement, but as a
transformative national policy, intended to recalibrate India’s
energy architecture itself.
15. The Government of India issued a notification dated
06-07-2021, directing Oil Marketing Companies, including
36
respondents 2 to 4, to market ethanol blended petrol with blending
percentages extending up to 20%, in conformity with Bureau of
Indian Standards specifications, throughout the territory of India
with effect from 01-04-2023. The impetus for such accelerated
implementation stemmed from India’s solemn international
commitment towards achieving net-zero carbon emissions by the
year 2070. Biofuels and natural gas were envisioned as transitional
bridge fuels capable of facilitating a gradual yet meaningful
movement towards a greener and environmentally sustainable
future.
THE GENESIS OF THE ISSUE IN THE SUBJECT LIS :
16. The genesis of the lis at hand must be understood in the
aforesaid backdrop of the national policy and economic
transformation. The petitioner is a Dedicated Ethanol Plant engaged
exclusively in the manufacture and supply of ethanol and its allied
products. Respondents 2 to 4 are the Oil Marketing Companies
authorized by the Government of India to procure ethanol for
implementation of the Ethanol Blending in Petrol Programme. In
37
furtherance of the national policy objectives noticed hereinabove,
respondents 2 to 4 floated EOIs inviting private participation for
establishment of dedicated ethanol plants in ethanol-deficit States
and for entering into LTOAs for assured procurement of ethanol.
17. The architecture of the EOIs contemplated, long-term
contractual assurances, being extended to successful bidders based
upon estimated State-wise ethanol requirements and ranking of
qualified participants. Insofar as the State of Karnataka was
concerned, the projected requirement of ethanol was also
specifically indicated in the EOI, thereby forming the foundational
premise upon which investments of enormous magnitude were
induced from private entrepreneurs such as the petitioner.
18. In furtherance of the avowed objectives afore-noted,
respondents 2 to 4/Oil Marketing Companies (OMCs) floated an
EOI/tender dated 27.08.2021 inviting participation for procurement
of ethanol. The said EOI emanated collectively from all the OMCs.
Certain clauses therein assume profound significance in the
38
adjudication of the present lis and therefore deserve particular
notice:
“EXPRESSION OF INTEREST (EOI) FOR SIGNING LONG TERM
BIPARTITE AGREEMENT WITH UPCOMING DEDICATED ETHANOL
PLANTS IN ETHANOL DEFICIT STATES FOR SUPPLY OF
DENATURED ANHYDROUS ETHANOL TO OIL MARKETING
COMPANIES (OMCS)
1) INDIAN OIL CORPORATION LIMITED (IOCL), BHARAT
PETROLEUM CORPORATION LIMITED (BPCL), HINDUSTAN
PETROLEUM CORPORATION LIMITED (HPCL), Public
Sector Enterprises, collectively known as OMCs Ethanol
Procurement Group (OEPG), intend to shortlist and enter
into long term bipartite agreement with upcoming
dedicated ethanol plants in ethanol deficit states to
procure Denatured Anhydrous Ethanol, meeting IS
15464:2004 specifications as detailed in Annexure-I , for
their requirement of blending ethanol with Petrol at
various Depots/ Terminals/Installations/Retail outlets/
any other destination of IOCL/BPCL/ HPCL in these states.
IOCL, BPCL & HPCL shall be referred as OMCs-Oil
Marketing Companies in this EOI document. Dedicated
Ethanol Plants (DEP) will only produce ethanol complying
with specifications as per IS 15464:2004 for blending
with Petrol and all of the quantity produced in this plant
would be supplied to OMCs/ group of Oil Marketing
Companies only for Ethanol Blended Petrol (EBP)
.
Programme
2) Those proponents, including PSUs (other than IOCL, BPCL
& HPCL), herein after referred to as “bidder”, who desire
to set up or are in the process of setting up dedicated
ethanol plants may apply through this EOI. Dedicated
ethanol plants which have commenced supplies prior to
the date of EOI are not eligible to apply through this EOI
.
3) Central Procurement Orginzation (marketing), Bharat
Petroleum Corporation Limited, on behalf of OMC, invites
expression of interest to short list bidders who are
39
desiring to set up pr are in the process of setting up
dedicated ethanol plants to manufacture Denatured
Anhydrous Ethanol conforming to specification IS
15464:2994. Ethanol is to be supplied through Tank Truck
on delivered basis to the OMC’s Company
Depots/Terminals/Retail Outlets/any other destination.
The estimated ethanol requirement of OMCs in the deficit
states for which OMCs intend to enter into Long Term
Bipartite Agreement are indicated in Table-1 below:
Table – 1
st th
*ESY=Ethanol Supply Year (from 1 December of a year to 30
November of the next year)
40
…. …. ….
5) Qualification and evaluation criteria
…. …. ….
Documents required:
…. …. ….
3. If a new dedicated ethanol plant is setup in the
same premises where an existing distillery is
operating (or is being set up as a new distillery) it
should be clearly identifiable as a separate unit. The
processing units and storage area of ethanol have to be
separate for the dedicated ethanol plant. The non-
production facilities, however, can be shared. Necessary
certification of such plants by any of the following
authorities i.e., factories department, PCB, IIP CSIR-
Dehradun, NSI Kanpur and VSI Pune is required to be
submitted.
4. Bidders who do not meet the mandatory requirements as
per clause 5.ii).1, 2 & 3 above will not be considered for
further evaluation. However, they can submit fresh
applications in subsequent EOI(s), if any.
… … …
9) Supply Condition:
Suppliers need to supply the complete production
quantity to OMCs only , however with written permission of
OMC, supplier can supply Ethanol to other private oil marketing
companies.
10) Procurement Process:
•
Supplier after successful commissioning of Ethanol plant
need to participate in prevailing ethanol procurement
process which is the process followed by OMCs for
procurement of ethanol. The process is guided by the
directions/advice issued by MOPNG/Govt. of India from
time to time. MOPNG/Govt. of India from time to time.
•
Supplier will register himself with OMCS/ BPCL
through a vendor registration process in order to
41
participate in quantity bids. After successful
registration, supplier will participate in quantity
bids floated by OMCs for their location-wise
requirement of ethanol.
•
Quantity bids for the full requirement of the Ethanol
Supply Year (ESY) shall be released at the beginning of
ESY.
•
The OMCs shall off-take and the Seller/ Supplier
shall provide the quantities of Ethanol as agreed in
the annual allocation plan.
•
The responsibility of execution of allocations made
as per Long term BPA in relation to procurement of
ethanol and related activities will lie with the
respective OMC to whom allocation has been made
as per procurement process and the parties will
keep each other indemnified in respect of any
dispute arising between them or with any third
party after the allocations have been done.
•
All allocation and subsequent reallocation will be carried
out at discretion of OMC.
•
LOI will be issued by individual OMCs for the
allocated quantity.
•
Supplier will sign an Annual Contract Agreement with
each OMC for the allocated quantity after submitting
Security Deposit.
•
Purchase Order (PO)/Indents will be placed by each OMC
location giving day-wise delivery schedule.
•
On receipt of ethanol at location as per specification &
terms and conditions of contract, location will make
Goods Receipt.
•
Purchase Order (PO) will be issued by the OMC only after
submission of signed purchase agreement along with
bank guarantee by the supplier.”
42
18.1. Clause 1, supra , unmistakably reveals the intent and
architecture of the OMCs to procure ethanol exclusively from
Dedicated Ethanol Plants. The chart appended thereto vividly
demonstrates that, as on the date of issuance of the EOI, namely
27-08-2021, the estimated ethanol requirement in the State of
Karnataka stood at 18 crore litres. Clause 5, in particular, which
discusses the qualification and evaluation criteria and also the
documents required for applying for the EOI, ordains that wherever
a new dedicated ethanol plant is established alongside an existing
distillery, such plant must remain distinctly identifiable as an
independent unit, with separate processing facilities and segregated
storage infrastructure for ethanol. The clause further proclaims that
bidders failing to satisfy the stipulations of the EOI would stand
excluded from further consideration. It also mandates disclosure to
the OMCs by bidders proposing establishment of dedicated ethanol
plants.
18.2. Clause 9, supra, is equally illuminating. It obligates the
supplier to channel the entirety of its ethanol production solely to
43
the OMCs and to none else, save and except with prior written
permission permitting supply to a private oil marketing company.
The clause, therefore, forges an exclusive bond between the
ethanol plant and respondents 2 to 4, who admittedly enjoy an
overwhelming monopoly over the procurement and distribution of
ethanol in the country.
18.3. Clause 10, supra, traverses the procurement process.
Certain sub-clauses thereof indicate that bids were invited for the
entire requirement of ethanol at the commencement of every
supply year and that allocations would rest within the discretion of
the OMCs.
19. Insofar as the State of Karnataka is concerned, certain
companies and distilleries were identified for execution of the LTOAs
for supply of ethanol to respondents 2 to 4. The bids received for
the aforesaid EOI dated 27-08-2021, were opened on 17-09-2021.
The petitioner was one amongst the shortlisted entities. The
relevant details of the shortlisted bidders are as follows:
“ EXPRESSION OF INTEREST (EOI) FOR SIGNING LONG
TERM BIPARTITE AGREEMENT WITH UPCOMING
44
DEDICATED ETHANOL PLANTS IN ETHANOL DEFICIT
STATES FOR SUPPLY OF DENATURED ANHYDROUS
ETHANOL TO OIL MARKETING COMPANIES (OMCS)
EOI No. 1000374174 ID 86996 opened on 17.09.2021
The shortlisted bidders may note the following :
1. The conversion of Annual Offtake Quantity Offered (in Cr
lit) mentioned above to KLPD has been done on the basis
of 330 days of operation or as submitted by the
shortlisted bidder through his application, whichever is
lower.
2. The annual off take quantity offered to shortlisted
bidders as above for signing Long Term Offtake
Agreement for supply of denatured anhydrous
ethanol to oil marketing companies (OMCs) may be
less than the annual design capacity offered by the
shortlisted bidder in his application under this EOI.
3. The shortlisted bidder is free to set up plant upto
the annual design capacity offered in his application
under this EOI. This additional capacity, over and
above the annual offtake quantity offered in point 2
above, also needs to remain dedicated ethanol plant
only.
45
4. Ethanol so produced from additional capacity stated in
point no. 3 above, may be procured through the
prevailing Ethanol procurement process followed by OMCs
and/or Pvt. OMCs on need basis.
5. The annual offtake quantity offered to shortlisted bidders
for signing long-term offtake agreement as per point no.
2, may be considered for amendment in future, to include
the additional capacity as stated in point no. 3, as per the
need of OMCs at that point of time and rules and
guidelines in force.
DATE: 01.11.2021”
(Emphasis added)
The shortlisted bidders were required to convert the Annual Offtake
Quantity offered in crore liters into KLPD on the basis of 330
operating days or such lesser duration, as furnished by the bidder.
The bidders were further informed that they were at liberty to
establish plants up to the annual design capacity disclosed in their
applications under the EOI. Such additional capacity, over and
above the Annual Offtake Quantity offered, was also required to
remain a Dedicated Ethanol Plant, thereby signifying that every
drop of ethanol manufactured therein would be supplied only to
respondents 2 to 4. Two incontrovertible features emerge from the
EOI dated 27-08-2021: first, that companies and distilleries were
required to establish ethanol plants solely for manufacture and
46
supply of ethanol to the OMCs/respondents 2 to 4; and secondly,
that the procurement mechanism was effectively monopolized by
the said respondents.
20. Pursuant to the aforesaid EOI, the petitioner submitted its
application on 17.09.2021. In the said response, the proposed unit
was described as a “300 KLPD Distillery”, denoting a dedicated
ethanol plant possessing a production capacity of 300 KLPD.
Computed on the basis of 330 days of operation, as contemplated
under the EOI, the annual production capacity would aggregate to
9.90 crore liters of ethanol per annum. Upon consideration of the
petitioner’s application, an agreement came to be executed
between the petitioner, the OMCs and certain cooperative societies
for supply and distribution of ethanol. It is this agreement that
constitutes the very fulcrum of the present lis . The agreement bears
the nomenclature “Long-Term Offtake Agreement with Dedicated
Ethanol Plant”. Certain clauses thereof are germane and therefore
require extraction. They read as follows:
47
“1. DEFINITIONS AND INTERPRETATION:
1.1. Definitions:
In this Long-term Offtake agreement, unless the subject or
context otherwise requires, the following words and expressions
shall have the following meanings:
1.1.1. Dedicated Ethanol Plant (DEP): These ethanol plants
will only produce ethanol (as per prevalent BIS
specifications) and all of the quantity produced in
this unit would be supplied to Buyer/ OMCs only. In
case a new dedicated ethanol plant is setup in the
same premises where the existing distillery is
operating (or is set up as a new distillery), the
ethanol plant should be clearly identifiable as a
separate unit. Processing units and storage area of
ethanol have to be separate for the dedicated
ethanol plant. The nonproduction facilities,
however, can be shared. Necessary certification of
such plants by appropriate authorities is required.
1.1.2. "Business" means sale and purchase of Ethanol by Seller/
Supplier and Buyer/ OMCs respectively through
DEP/PDEP/GD on mutually agreed terms and conditions.
1.1.3. The "Ethanol Procurement Process" is the process
followed by OMCs for procurement of ethanol. The
process is guided by the directions / advice issued
by MOPNG/Govt. of India from time to time.
1.1.4. ESY means Ethanol Supply Year i.e. from 1st Dec to 30th
November of following year.
1.1.5. "Purchase Agreement" means supply agreement made by
individual OMC with the supplier for the purchase of
ethanol as per allocation made in each ESY.
1.1.6. "Allocation" means OMC supply location-wise
quantity of ethanol to be supplied by the
Seller/Supplier as per prevalent Ethanol
procurement process
48
1.1.7. "Supply Price" means the price at which Ethanol shall be
purchased by Buyer/ OMCS from Seller/ Supplier as
explained in Clause 9.
1.1.8. "Taxes" means all forms of taxation and statutory,
governmental, state, principal, local governmental or
municipal impositions, duties, contributions and levies,
imposts, tariffs and rates and all penalties, charges, costs
and interest payable in connection with any failure to pay
or delay in paying them and any associated deductions or
withholdings of any sort, and as may revised from time to
time by statutory authorities.
1.1.9. "Standards" shall include applicable national or
international standards relevant to Ethanol business.
1.1.10. "EOI" means Expression of Interest for signing long
term offtake agreement with upcoming ethanol
plants (DEP/ PDEP/ GD) in ethanol deficit states for
supply of denatured anhydrous ethanol to oil
marketing companies (OMCs) floated by
Buyer/OMCs for inviting application from project
proponents
1.1.1. "Application" means the application submitted by the
Project promoter / proponent to participate in the EOI”
…. …. ….
1.2. INTERPRETATION:
…. …. ….
1.2.13. In the event of any conflict between any provisions of
main body of this Agreement and the provisions of the
Appendices, Schedules, Annexures and Attachments;
the provisions of the main body of this Agreement
shall prevail.
1.2.14. All terms and conditions mentioned in the Expression
of Interest (EOI) and Letter of Intent (LOI) issued by
OMCs/ Buyer in relation to signing of this agreement
49
shall be deemed to be included in this Agreement by
reference.
1.2.15. The clauses of EOI / LOI / this agreement are to be
read in cognizance & in totality. Similar clause
mentioned in this agreement shall supersede clause
mentioned in the EOI/LOI.
2. SCOPE OF AGREEMENT:
2.1. The Seller/ Supplier agrees to supply and the
Buyer/ OMCs agree to purchase Ethanol under the
terms of this Agreement in the quantities, and at
Supply Price determined in accordance with, and
subject to, the terms and conditions of this
Agreement.
2.2 The Ethanol Plant from which the Ethanol shall be
supplied under this Agreement is located at Sy. No 41,
42 & 53, Jakkanakatti Road, Konankeri Villge,
Shiggav Taluk, Haveri district, Karnataka, 581193,
Area 69 Acres (complete details/address of the plant)
and has a design capacity to produce 1.44 Cr lit per
annum of Ethanol by using Sugarcane Juice/ Syrup
and Maize/ Corn as feedstock.
2.3 The Seller/ Supplier shall deliver Ethanol at the
designated location(s) of Buyer/OMCS.
2.4 The Buyer/ OMCs are entitled to appoint other
suppliers for the supply of Ethanol at the
designated location(s). Seller/ Supplier agrees not
to dispute, object or challenge the appointment of
other sellers / suppliers of Ethanol for the
designated location(s) by the Buyer/ OMCs. The
Seller/ Supplier shall not be entitled to any
compensation, remuneration, commission or
allowance whatsoever for such
appointments/purchase by the Buyer / OMCs.”
… … …
50
6. QUANTITIES AND ALLOCATIONS:
6.1. Seller/ Supplier will register himself with OMCs/ BPCL
through a vendor registration process and participate in
ethanol procurement process mandatorily. After
successful registration, the Seller/ Supplier will
participate in ethanol procurement process followed by
OMCs for their location-wise requirement of ethanol.
6.2. Buyer/OMCs offer jointly an annual offtake
quantity of 1.44 Cr lit of Ethanol and the Seller/
Supplier commits to supply the same by
participating in the vendor registration process
and ethanol procurement process. Interstate
movements, if required, by Buyer/OMCs should be
honoured by the Seller/ Supplier. The annual
offtake quantity offered is on best endeavor basis
to the extent of ethanol required, considering
prevalent ethanol blending percentage and MS
sale of Buyer/ OMCs, and any other factor
impacting ethanol requirement, including, but not
limited to, demand issues arising out of the new
economic imperatives/ regulations, vehicle short
supply and such similar circumstances beyond the
control of Buyer/ OMCs. In case, the Seller/
Supplier intends to supply during the ongoing ESY,
offtake quantity will be limited to the requirement
of Buyer/OMCs for the balance period of that ESY.
6.3. Offtake quantity offered jointly by Buyer/ OMCs is
subject to the Seller/Supplier complying with the
condition under clause 6.1.
6.4. The annual off take quantity offered as above for
supply of denatured anhydrous ethanol to OMCs
may be less than the annual design capacity
offered by the shortlisted bidder in his application.
6.5. The shortlisted bidder is free to set up plant upto
the annual design capacity offered in his
application. This additional capacity, over and
above the annual offtake quantity offered in 6.2
51
above, also needs to remain dedicated ethanol
plant only.
6.6. Ethanol so produced from additional capacity
stated in 6.5 above, may be procured through the
prevailing Ethanol procurement process followed
by OMCs and/or Pvt. OMCs on need basis .
6.7. The annual offtake quantity offered as per 6.2 above,
may be considered for amendment in future, to include
the additional capacity as stated in 6.5 above, as per
the need of OMCs at that point of time and rules and
guidelines in force.
6.8. In the above EOI floated for setting up of
dedicated ethanol units, in case a bidder is being
issued LOI for a quantity lesser than the quantity
for which they have bid it is clarified that in case
they set up plants as per their bids, Buyer/
OMCs/may offer additional annual offtake
quantity, beyond that offered under 6.2 above,
with overall annual offtake quantity limited to the
design capacity of the plant offered by the bidder
under the EOI. This additional offtake quantity by
buyer/OMCs will be given through preferential
allocation in the ethanol procurement process
followed by Buyer/OMCs on best endeavor basis.
6.9 “EOI for Quantity Bids" for the full requirement of
the ESY shall be floated prior to the start of ESY to
the registered vendors only. There after EOI for
quantity bids shall be floated for the shortfall
quantity/ additional requirement, if any, purely
based on requirements of Buyer/ OMCs.
a. Location-wise, individual OMC-wise quantity to be
supplied in each ESY quarter shall be allocated to
the Seller/ Supplier as per prevalent allocation
criteria.
b. All allocations including any subsequent re-
allocation will be at the sole discretion of the
Buyer/ OMCs.
52
c. LOI will be issued by individual OMCs for the
allocated quantity to the Seller/ Supplier.
d. For the allocated quantity, Seller/ Supplier will
sign Purchase Agreement with each OMC after
submitting Security Deposit as per the terms and
conditions of the LOI. All terms and conditions of
the Purchase Agreement will be binding on the
Seller/Supplier.
6.10. The responsibility of execution of allocations/ re-
allocations made in relation to procurement of ethanol
and related activities will lie with the respective OMCs to
whom allocation has been made as per procurement
process and the parties will keep each other indemnified
in respect of any dispute arising between them or with
any third party after such allocations/re-allocations has
been done.”
… … …
17. REPRESENTATIONS AND WARRANTIES:
…. …. ….
17.1.9. The Seller/ Supplier shall not without the prior written
consent of Buyer/ OMCs, undertake or allow any
'Change in Constitution'. 'Change in Constitution' shall
mean; (a) change in sole proprietor of a sole
proprietorship, (b) change in partner(s) of partnership
firm or a limited liability partnership, (c) change in
member of a one person company, (d) change in
shareholder of a private limited company or unlisted
public limited company, (e) change in 'promoter' or
any member of the 'promoter group' of a listed public
limited company, (f) change in committee
representative (person identified as 'committee
representative' in case of a registered co-operative
society at the time of making an application for
appointment as CS) of registered cooperative society,
or (g) change in karta of a hindu undivided family, or
(h) change in legal status.”
53
…. …. ….
23.11. Exclusivity:
Subject to the terms and conditions of this
Agreement, during the Term of this Agreement, the
Seller/ Supplier shall not enter into any similar
agreement with any third party pertaining to supply
of Ethanol from the Ethanol Plant.”
(Emphasis added)
21.1. Clause 1.1.1, supra , defines a “Dedicated Ethanol Plant”
as a plant which would exclusively manufacture ethanol and whose
entire production would be supplied solely to the OMCs. It further
stipulates that where such dedicated ethanol plant is established
within the same premises as an existing distillery, it must
nevertheless remain separately identifiable. The petitioner being a
Dedicated Ethanol Plant admits of no dispute. On this admitted
position the petitioner established a new dedicated ethanol facility.
21.2. Clause 2.2, supra, delineating the scope of the
agreement, envisages that the ethanol plant contemplated
thereunder must possess the design capacity to produce 1.44 crore
litres of ethanol per annum by utilising sugar juice/syrup and
maize/corn as feedstock. Clause 6 forms the very soul and marrow
54
of the agreement, as it governs the quantities and allocations. The
ethanol procurement process undertaken by the OMCs was to cater
to their location-specific requirements.
21.3. Clause 6.2, supra, stipulates that the Annual Offtake
Quantity of 1.44 crore litres of ethanol shall be supplied to the
OMCs. The said Annual Offtake Quantity is contemplated on a best
endeavour basis, corresponding to the ethanol requirement arising
out of the blending percentage with petrol. Clause 6.5 further
permits the shortlisted bidder to establish a plant up to the Annual
Design Capacity disclosed in its application. Such additional
capacity, over and above the annual offtake quantity offered in
Clause 6.2, was also required to continue as a dedicated ethanol
plant.
21.4. Clause 6.8, supra, assumes commanding importance. It
clarifies that where a bidder, pursuant to the EOI floated for
establishment of dedicated ethanol units, is issued a Letter of Intent
for a quantity lesser than the quantity bid for, the OMC may offer
additional Annual Offtake Quantity beyond what is contemplated
under Clause 6.2, namely 1.44 crore litres, and the bidder would be
55
accorded preferential allocation in the ethanol procurement process
for the additional quantity, albeit again on a best endeavour basis.
21.5. What unmistakably emerges from Clause 6, supra, is
that the ethanol supplier must necessarily be a dedicated ethanol
plant; that the minimum annual offtake quantity is fixed at 1.44
crore litres; and that any additional production capacity is also
intended to be supplied only to the OMCs through preferential
allocation under the procurement process. Presently, the petitioner
stands allotted 1.44 crore litres of ethanol in terms of Clause 6.2.
Drawing sustenance from Clause 6.8, the petitioner now seeks a
direction that the entirety of its production capacity, namely 9.90
crore litres, be procured by the OMCs.
21.6. Clause 23.11, supra, further engrafts exclusivity into
the contractual framework. The supplier is interdicted from entering
into any agreement of a similar nature with any third party
concerning supply of ethanol from the dedicated ethanol plant.
Thus, the entirety of the ethanol produced by the dedicated plant
must inexorably find its way only to the OMCs.
56
22. The petitioner has placed on record the immense efforts
undertaken in establishing the dedicated ethanol plant and in
ensuring supply of its entire production capacity to the OMCs. For
over three years, all remained serene and undisturbed. The
proverbial fly in the ointment, however, emerged in the form of the
EOI/tender dated 23-09-2025 issued for procurement of 1050 crore
litres of ethanol to be supplied to the OMCs. One particular clause
therein has now become the nucleus of controversy. It reads thus:
“…. …. ….
For all DEPs under EOI-1 (CRFQ No. 1000374174, System ID
86996 dtd. 28-09-2021) and EOI-2 (CRFQ No. 1000403925,
System ID 11837 dtd. 15-05-2023), Additional Quantity
offered, if any, beyond long term offtake quantity (pro-
rated and calculated on a quarterly basis) shall not be
considered for preferential allocation. Allocation of this
additional quantity offered shall be done as per allocation
criteria applicable for non-DEPs. ”
(Emphasis added)
The aforesaid clause stipulates that any additional quantity offered
beyond the long-term offtake quantity would not be considered for
preferential allocation, and that allocation of such additional
quantity would instead be governed by the criteria applicable to
Non-dedicated Ethanol Plants. Thus, a palpable departure is
57
introduced from the terms of the Long-Term Offtake Agreement
executed between the petitioner and the OMCs. The petitioner
applies for the aforesaid EOI/tender and participates in the pre-bid
meetings where the petitioner raises concerns over the
afore-quoted clause of the tender. The petitioner also
communicates these objections through an e-mail dated
30-09-2025.
23. Thereafter, on 17-10-2025, the petitioner receives an
e-mail communication stating that, in the EOI for procurement of
ethanol, for ESY 2025–26, it has been allotted only 3.92 crore litres
(39,269 KL), despite having submitted a bid for allocation of 9.26
crore litres. Immediately thereafter, the petitioner communicates a
detailed representation through e-mail, seeking for an increase in
the allocation of quantity of supply of ethanol offered to the
petitioner for ESY 2025-26 from 3.92 crore Liters. The
representation dated 27-10-2025 reads as follows:
“ESY/25-26/OMC/02
th
27 October, 2025
To
58
Chairman & Managing Director
Indian Oil Corporation Limited
G-9, Ali Yuvar Jung Marg
Bandra (East), Mumbai
Maharashtra, PIN - 400 051
Chairman & Managing Director
Bharat Petroleum Corporation
th
Limited 12 Floor, E&F Maker
Towers, Cuffe Parade, Mumbai
Maharashtra, PIN-400 005
Chairman & Managing Director
Hindustan Petroleum
Corporation Ltd Hindustan
Bhawan, S V Marg, Fort,
Mumbai,
Maharashtra, PIN-400 001
Shri Rajesh Gehlot Bharat
Petroleum Corporation Limited
Procurement Manager CPO
Shri Vineet Buthani
Bharat Petroleum Corporation
Limited
GM Biofuels, H.Q
Email Communication &
Registered Post Acknowledgement Due
Subject: Request for immediate increase in allocation
of ethanol for supply to the Oil Marketing
Companies under Tender No. 22376 dated
23.09.2025 for the Ethanol Supply
Year 2025-26
1. We are a Dedicated Ethanol Plant ( DEP ) engaged in the
manufacture and supply of Denatured Anhydrous Ethanol.
Our unit was established exclusively for the purpose of
supplying ethanol to the Oil Marketing Companies
( OMCs ) pursuant to the Expression of Interest ( EOI )
bearing No. 1000374174, floated on 27.08.2021 and
opened on 17.09.2021 by the OMCs
2. Pursuant to the aforesaid EOI, we entered into a
Long Term Offtake Agreement (LTOA) dated
13.01.2022 with the OMCs for the supply of ethanol.
59
Under the terms of the said LTOA, the OMCs are
obligated to purchase from us, a minimum quantity
of 1.44 Crore (One Crore Forty Four Lakh) litres of
ethanol,
3. Being the annual offtake quantity, during each
Ethanol Supply Year (ESY). Further, we were
assured of an additional preferential offtake up to
our annual design capacity, which presently stands
at 10.95 Crore (Ten Crore Ninety Five Lakh) litres.
4. It is pertinent to state that we had applied for the
establishment of a 300 KLPD Plant under the
aforesaid EOI and, pursuant thereto, we have set
up the Dedicated Ethanol Plant of 300 KLPD
Capacity or 10.95 Crore (Ten Crore Ninety Five
Lakh) litres, as stated supra, as on this day.
5. The aforesaid plant set up was undertaken strictly in
accordance with Clause
6.5 of the LTOA, which reads thus -
"The shortlisted bidder is free to set up plant up
to the annual design capacity in his application .
This additional capacity over and above the annual
offtake quantity, offered in 6.2 above, also needs to
remain dedicated ethanol plant only"
6. This being the backdrop, bids were invited by the OMCs
for the supply of approximately 1,050 Crore (One
Thousand and Fifty Crore) litres of Denatured Anhydrous
Ethanol for the ESY 2025-26, vide Tender bearing No.
22376 dated 23.09.2025.
1. We submitted our bids pursuant to the aforesaid
Tender and emerged successful therein. However,
to our utter shock and disappointment, as per the
indicative proposed allocations communicated vide
email communication dated 17.10.2025, it appears
that we have been offered a quantity of only
39,269 (Thirty Nine Thousand Two Hundred
and Sixty Nine) KL, or 3.92 Crore (Three Crore
60
Ninety Two Lakh) litres, for the ESY 2025-26
against our bid of 9.26 crore Liters, which
constitutes a mere fraction of our annual
design capacity of 10.95 Crore (Ten Crore
Ninety Five Lakh) litres.
2. The said allocation is in clear violation of the
letter and spirit of the EOI and the
subsequent LTOA, both of which form the
foundational basis of our operations and the
obligations mutually agreed upon thereunder.
3. We have established 300 KLPD distillery with
annual design capacity to 10.95 Crore (Ten
Crore Ninety Five Lakh) litres, strictly in
adherence to our Application made pursuant
to the EOI floated by the OMCs and only after
signing the LTOA, which expressly recognizes
our right to set up such capacity in terms of
our Application.
4. Consequently, we have incurred substantial
capital expenditure running into several
hundred crores of rupees, for which we were
constrained to avail loans from various
financial institutions.
5. In fact, another crucial aspect of the LTOA,
preferential allotment appears to have been
given a complete go by while making the
aforesaid allotment for the first time.
6. In addition to Clause 6.5, which permits us to
establish the Plant up to the annual design capacity
offered in the EOI, as stated supra, Clause 6.8 of
the LTOA reads thus -
"In the above EOI floated for setting up
dedicated ethanol units, in case a bidder is being
issued LOI for a quantity lesser than the quantity for
which they have bid it is clarified that in case they
set up plants as per their bids, Buyer/OMCs may
offer an additional annual offtake quantity,
61
beyond that offered under 6.2 above, with
overall annual offtake quantity limited to the
design capacity of the Plant offered by the
bidder under the EOI. This additional offtake
quantity by Buyer/OMCs will be given through
preferential allocation in the ethanol
procurement process followed by Buyer/OMCs
on best endeavor basis ."
7. Despite an ethanol demand of 1050 crore litres for
Cycle 1, the Tender Document, by disregarding and
effectively overriding the contractual provisions
cited above, has erroneously included within the
scope of "preferential allocation" even the annual
offtake quantity that the OMCs are mandatorily
obligated to procure from us. This amounts to a
clear abdication of the OMCs' contractual
obligations under the LTOA
8. It is reiterated that the our 300KLPD plant
was set up to the annual design capacity as
specified in our Application pursuant to the
EOI was undertaken strictly in accordance
with the terms of the LTOA, particularly
Clause 6.5, which expressly confers upon us
the right to do so, subject to the condition
that the additional capacity shall continue to
remain a dedicated ethanol plant.
9. Such a condition, being a dedicated ethanol
plant coupled with the various restrictions
imposed on the sale of ethanol by LTOA and
bearing in mind that our Plant was
established exclusively for the purpose of
supplying ethanol to the OMCs pursuant to
the EOI floated, gives rise to a legitimate
expectation that the ethanol produced by us,
up to our annual design capacity, will be duly
considered for procurement to the true letter
and spirit of the EOI and the LTOA executed
pursuant thereto.
62
10. In furtherance of such expectation, we have
entered into Harvesting and Transportation (H&T)
Contracts for the procurement of sugarcane as raw
material and purchase arrangements of maze has
been done, and substantial advance payments
amounting to several crores of rupees have already
been paid to the farmers situated in the command
area.
However, the allotment made to us for the ESY 2025-26
is substantially lower than the quantity of ethanol that
will be produced solely from the raw materials purchase
plan already made pursuant to the aforesaid H&T
Contracts, without even taking into account our total
annual design capacity,
1. Which is considerably higher.
2. In fact, a perusal of the tender document reveals
that the annual production capacity of DEPs and
preferential allocation have not been accorded any
consideration whatsoever for the purpose of
determining or making the allotment.
3. Such a reduced allocation would leave our Plant
unoperational for nearly 235 days of the
forthcoming ESY, leaving it largely idle each quarter
starting from this November-2025 and pose grave
and far reaching consequences on our operations,
severe financial implications, jeopardizing the
overall viability of the Plant and long term
sustainability of the project.
4. We also play a pivotal role in sustaining the local agrarian
economy, with several thousands of farmers directly
dependent on our operations for their livelihood.
Therefore, any disruption in our operations would have a
cascading adverse impact on the farming community and
the rural economy at large.
We, therefore, request you to read and take note of
the aforenarrated facts and circumstances, and further,
63
take immediate steps as may be necessary to increase
the allocation made in our favour for the supply of
ethanol for the ESY 2025-26, pursuant to the Tender
bearing No. 22376 dated 23.09.2025
We remain optimistic that your good offices would
certainly consider the request made in this communication
favourably, for which acts of indulgence on your part, we shall
remain ever grateful.
Thanking you
Your faithfully
For M/s VINP Distilleries and Sugars Pvt. Ltd.,
Sd/-
Managing Director”
(Emphasis added)
The representation goes unheeded. Therefore, the petitioner is now
at the doors of this Court.
24. With all the aforesaid clauses of the contract and the
action of the respondent OMCs in the aftermath, it becomes
necessary to consider the submission of the learned Attorney
General with regard to maintainability of the petition. It is his
submission that the petition is neither maintainable nor
entertainable for the reason it revolves around the agreement
between the parties which is a matter of contract between them.
64
Therefore, contractual obligations or breach of any of the
contractual obligations cannot be projected before the
Constitutional Court under Article 226 of the Constitution of India.
The elucidation of law by the Apex Court is otherwise. I, therefore,
deem it appropriate to notice the judicial landscape with regard to
the entertainment of the petition in exercise of the jurisdiction of
this Court under Article 226 of the Constitution of India,
notwithstanding the issue being in the realm of contract.
MAINTAINABILITY AND ENTERTAINABILITY OF THE
PETITION UNDER SECTION 226 OF THE CONSTITUTION OF
INDIA:
JUDICIAL LANDSCAPE:
24.1. The Apex Court in GUJARAT STATE FINANCIAL
1
CORPORATION v. LOTUS HOTELS PRIVATE LIMITED has held
as follows:
“…. …. ….
7. Mr R.P. Bhatt, learned counsel who appeared for the
appellant urged that the sanctioning of the loan by the
Corporation in favour of the respondent was conditional upon the
IDBI undertaking to refinance the loan and as IDBI declined to
refinance the loan, the Corporation cannot be compelled by a
1
(1983) 3 SCC 379
65
mandamus to grant the loan. It was also incidentally urged
that the dispute raised between the parties is in the realm
of contract and at best the Corporation can be charged
with breach of contract for which the remedy is by way of
damages or any other remedy available to the respondent
for breach of contract; but, in any case, a writ of
mandamus cannot be issued compelling the Corporation to
perform its part of the contract. There is no merit in either
of the contentions.
8. The first contention of Mr Bhatt appearing for the
appellant is that the sanctioning of the loan by the Corporation in
favour of respondent was conditional upon IDBI agreeing to and
undertaking to refinance the loan and as IDBI has declined, for
the time being, to refinance the loan, the Corporation cannot be
compelled to undertake the onerous liability of financing a huge
loan to one undertaking and therefore the appellant was
discharged from performing its part of the contract. Both the
learned Single Judge and the Division Bench of the High Court
have concurrently held that the sanctioning of the loan by the
Corporation in favour of the respondent was not conditional upon
IDBI agreeing and undertaking to refinance the loan. In this
connection, a reference to clauses 2 and 5 of the letter dated July
27, 1978 by the appellant to the respondent setting out the terms
and conditions subject to which loan was sanctioned would be
advantageous:
“2. Rate of interest will be 12½ per cent p.a. if
refinance is available from Industrial Development Bank
of India at the rate of 9 per cent p.a. otherwise it will be
at the rate of 13 per cent p.a. Higher rate of interest at
6 per cent over the normal rate of interest will be
charged on the amount in default.
5. Commitment charge at the rate of 1 per cent
p.a. on the amount of loan not drawn out of the loan
sanctioned shall be paid from the date as advised by the
Industrial Development Bank of India, if refinance is
sanctioned. In case, refinance is not sanctioned by the
Industrial Development Bank of India, commitment
charge at the rate of 1 per cent p.a. on the amount of
loan undrawn out of loan sanctioned shall be paid from
the expiry of six months from the date of sanction.”
66
A bare perusal of the clauses would show that the loan
sanctioned by the appellant in favour of the respondent was not
specifically subject to the condition upon the IDBI agreeing and
undertaking to refinance the loan. In fact, refinancing of the
loan by IDBI had an impact on the rate of interest only. This
clearly transpires from clause 2 which provides that if refinance
is available from IDBI at 9 per cent p.a., the rate of interest
payable by the respondent to the appellant will be 12½ per cent
p.a. otherwise it will be 13 per cent p.a. In clause 5 it is stated
that commitment charge at 1 per cent p.a. on the grant of loan
not drawn out of the sanctioned amount shall be paid from the
date as advised by IDBI if refinance is sanctioned but in case
refinance is not sanctioned by IDBI commitment charge at 1 per
cent p.a. on the amount of loan undrawn out of the loan
sanctioned shall be paid from the expiry of six months from the
date of sanction. Thus refinancing of the loan by IDBI was to
have an impact on the rate of interest and the commitment
charge and the sanctioning of the loan was not conditional upon
refinance from IDBI available. In fact consequences of IDBI not
agreeing to refinance loan are provided in the agreement. The
consequence was not that the appellant would be discharged
from performing the agreement but it would only be entitled to
higher rate of interest and liability to commitment charge from a
certain date, but the agreement to advance loan would remain
unaltered and binding. When these two clauses were pointed
out to Mr Bhatt, he could hardly pursue the point any more. The
parties had envisaged a situation where the refinance of the
loan may not be available from IDBI. The obligation undertaken
by the appellant to sanction the loan was independent of a
refinancing of loan available from IDBI. In such situation, the
first contention of Mr Bhatt cannot be accepted.
9. It was next contended that the dispute between
the parties is in the realm of contract and even if there was
a concluded contract between the parties about grant and
acceptance of loan, the failure of the Corporation to carry
out its part of the obligation may amount to breach of
contract for which a remedy lies elsewhere but a writ of
mandamus cannot be issued compelling the Corporation to
specifically perform the contract. It is too late in the day to
contend that the instrumentality of the State which would
be “other authority” under Article 12 of the Constitution
can commit breach of a solemn undertaking on which other
67
side has acted and then contend that the party suffering by
the breach of contract may sue for damages but cannot
compel specific performance of the contract. It was not
disputed and in fairness to Mr Bhatt, it must be said that he
did not dispute that the Corporation which is set up under
Section 3 of the State Financial Corporation Act, 1955 is an
instrumentality of the State and would be “other authority”
under Article 12 of the Constitution. By its letter of offer
dated July 24, 1978 and the subsequent agreement dated
February 1, 1979 the appellant entered into a solemn
agreement in performance of its statutory duty to advance
the loan of Rs 30 lakhs to the respondent. Acting on the
solemn undertaking, the respondent proceeded to
undertake and execute the project of setting up a 4-star
hotel at Baroda. The agreement to advance the loan was
entered into in performance of the statutory duty cast on
the Corporation by the statute under which it was created
and set up. On its solemn promise evidenced by the
aforementioned two documents, the respondent incurred
expenses, suffered liabilities to set up a hotel. Presumably,
if the loan was not forthcoming, the respondent may not
have undertaken such a huge project. Acting on the
promise of the appellant evidenced by documents, the
respondent proceeded to suffer further liabilities to
implement and execute the project. In the back drop of
this incontrovertible fact situation, the principle of
promissory estoppel would come into play. In Motilal
Padampat Sugar Mills Co. ( P ) Ltd. v. State of U.P. [(1979) 2
SCC 409 : 1979 SCC (Tax) 144 : AIR 1979 SC 621 : (1979)
2 SCR 641, 662] this Court observed as under : [SCC para
8, p. 425 : SCC (Tax) p. 160]
“The true principle of promissory estoppel,
therefore, seems to be that where one party has
by his words of conduct made to the other a clear
and unequivocal promise which is intended to
create legal relations or affect a legal relationship
to arise in the future, knowing or intending that it
would be acted upon by the other party to whom
the promise is made and it is in fact so acted upon
by the other party, the promise would be binding
on the party making it and he would not be
entitled to go back upon it, if it would be
inequitable to allow him to do so having regard to
68
the dealings which have taken place between the
parties, and this would be so irrespective of
whether there is any pre-existing relationship
between the parties or not.””
24.2. The Apex Court in ABL INTERNATIONAL LIMITED v.
EXPORT CREDIT GUARANTEE CORPORATION OF INDIA
2
LIMITED has held as follows:
“…. …. ….
3. Having failed to persuade the first respondent to
adhere to the contract of insurance between it and the
appellant, the appellant filed a writ petition before a
learned Single Judge of the Calcutta High Court, inter
alia, praying for quashing of the letters of repudiation
issued by the first respondent. It also consequentially
prayed for a direction to the first respondent to make
payment of the dues to it under the contract of insurance.
The learned Single Judge after hearing the parties came
to the conclusion that though the dispute between the
parties arose out of a contract, the first respondent being
a State for the purpose of Article 12, was bound by the
terms of the contract, therefore, for such non-
performance, a writ was maintainable and after
considering the arguments of the parties in regard to the
liability under the contract of insurance, allowed the writ
petition and issued the writ and directions as prayed for
by the appellants in the writ petition.
…. …. ….
10. It is clear from the above observations of this
Court in the said case, though a writ was not issued on
the facts of that case, this Court has held that on a given
set of facts if a State acts in an arbitrary manner even in
2
(2004) 3 SCC 553
69
a matter of contract, an aggrieved party can approach the
court by way of writ under Article 226 of the Constitution
and the court depending on facts of the said case is
empowered to grant the relief. This judgment in K.N.
Guruswamy v. State of Mysore [AIR 1954 SC 592 : (1955)
1 SCR 305] was followed subsequently by this Court in
the case of D.F.O. v. Ram Sanehi Singh [(1971) 3 SCC
864] wherein this Court held: (SCC p. 865, para 4)
“By that order he has deprived the
respondent of a valuable right. We are unable to
hold that merely because the source of the right
which the respondent claims was initially in a
contract, for obtaining relief against any arbitrary
and unlawful action on the part of a public
authority he must resort to a suit and not to a
petition by way of a writ . In view of the judgment
of this Court in K.N. Guruswamy case [AIR 1954
SC 592 : (1955) 1 SCR 305] there can be no doubt
that the petition was maintainable, even if the
right to relief arose out of an alleged breach of
contract , where the action challenged was of a
public authority invested with statutory power.”
(emphasis supplied)
11. In the case of Gujarat State Financial Corpn. v. Lotus
Hotels (P) Ltd. [(1983) 3 SCC 379] this Court following an
earlier judgment in Ramana Dayaram Shetty v. International
Airport Authority of India [(1979) 3 SCC 489] held: (SCC pp.
385- 86, paras 9 & 11)
The instrumentality of the State which would be
‘other authority’ under Article 12 cannot commit breach
of a solemn undertaking to the prejudice of the other
party which acted on that undertaking or promise and put
itself in a disadvantageous position. The appellant
Corporation, created under the State Financial
Corporations Act, falls within the expression of ‘other
authority’ in Article 12 and if it backs out from such a
promise, it cannot be said that the only remedy for the
aggrieved party would be suing for damages for breach
and that it could not compel the Corporation for specific
performance of the contract under Article 226.
70
…. …. ….
15. The learned counsel then contending that this Court
will not entertain a writ petition involving disputed questions of
fact relied on a judgment of this Court in the case of State of
Bihar v. Jain Plastics and Chemicals Ltd. [(2002) 1 SCC 216]
wherein this Court held: (SCC p. 218, para 7)
“ 7 . In our view, it is apparent that the order
passed by the High Court is, on the face of it,
illegal and erroneous. It is true that many matters
could be decided after referring to the contentions
raised in the affidavits and counter-affidavits, but
that would hardly be a ground for exercise of
extraordinary jurisdiction under Article 226 of the
Constitution in case of alleged breach of contract.
Whether the alleged non-supply of road permits by
the appellants would justify breach of contract by
the respondent would depend upon facts and
evidence and is not required to be decided or dealt
with in a writ petition. Such seriously disputed
questions or rival claims of the parties with regard
to breach of contract are to be investigated and
determined on the basis of evidence which may be
led by the parties in a properly instituted civil suit
rather than by a court exercising prerogative of
issuing writs .”
…. …. ….
23. It is clear from the above observations of this
Court, once the State or an instrumentality of the State is
a party of the contract, it has an obligation in law to act
fairly, justly and reasonably which is the requirement of
Article 14 of the Constitution of India. Therefore, if by the
impugned repudiation of the claim of the appellants the
first respondent as an instrumentality of the State has
acted in contravention of the abovesaid requirement of
Article 14, then we have no hesitation in holding that a
writ court can issue suitable directions to set right the
arbitrary actions of the first respondent . In this context, we
may note that though the first respondent is a company
registered under the Companies Act, it is wholly owned by the
Government of India. The total subscribed share capital of this
71
Company is 2,50,000 shares out of which 2,49,998 shares are
held by the President of India while one share each is held by
the Joint Secretary, Ministry of Commerce and Industry and
Officer on Special Duty, Ministry of Commerce and Industry
respectively. The objects enumerated in the memorandum of
association of the first respondent at para 10 read:
“To undertake such functions as may be
entrusted to it by the Government from time to time,
including grant of credits and guarantees in foreign
currency for the purpose of facilitating the import of raw
materials and semi-finished goods for manufacture or
processing goods for export.”
Para 11 of the said object reads thus:
“To act as agent of the Government, or with the
sanction of the Government on its own account, to give
the guarantees, undertake such responsibilities and
discharge such functions as are considered by the
Government as necessary in national interest.”
24. It is clear from the above two objects of the
Company that apart from the fact that the Company is
wholly a Government-owned company, it discharges the
functions of the Government and acts as an agent of the
Government even when it gives guarantees and it has a
responsibility to discharge such functions in the national
interest. In this background it will be futile to contend
that the actions of the first respondent impugned in the
writ petition do not have a touch of public function or
discharge of a public duty. Therefore, this argument of
the first respondent must also fail.
…. …. ….
27. From the above discussion of ours, the
following legal principles emerge as to the
maintainability of a writ petition:
( a ) In an appropriate case, a writ
petition as against a State or an instrumentality
72
of a State arising out of a contractual obligation
is maintainable.
( b ) Merely because some disputed
questions of fact arise for consideration, same
cannot be a ground to refuse to entertain a writ
petition in all cases as a matter of rule.
( c ) A writ petition involving a
consequential relief of monetary claim is also
maintainable.
28. However, while entertaining an objection as to
the maintainability of a writ petition under Article 226 of
the Constitution of India, the court should bear in mind
the fact that the power to issue prerogative writs under
Article 226 of the Constitution is plenary in nature and is
not limited by any other provisions of the Constitution.
The High Court having regard to the facts of the case, has
a discretion to entertain or not to entertain a writ
petition. The Court has imposed upon itself certain
restrictions in the exercise of this power. (See Whirlpool
Corpn. v. Registrar of Trade Marks [(1998) 8 SCC 1] .)
And this plenary right of the High Court to issue a
prerogative writ will not normally be exercised by the
Court to the exclusion of other available remedies unless
such action of the State or its instrumentality is arbitrary
and unreasonable so as to violate the constitutional
mandate of Article 14 or for other valid and legitimate
reasons, for which the Court thinks it necessary to
exercise the said jurisdiction .”
24.3. Again, the Apex Court in NOBLE RESOURCES
3
LIMITED v. STATE OF ORISSA has held as follows:
“…. …. ….
3
(2006) 10 SCC 236
73
19. On a conspectus of several decisions, a Division
Bench of this Court in ABL International Ltd. [(2004) 3 SCC 553]
opined that such a writ petition would be maintainable even if it
involves some disputed questions of fact. It was stated that no
decision lays down an absolute rule that in all cases involving
disputed questions of fact, the party should be relegated to a
civil court.
20. In Mahabir Auto Stores v. Indian Oil Corpn. [(1990) 3
SCC 752] this Court observed: (SCC p. 761, para 12)
“ It appears to us that rule of reason and
rule against arbitrariness and discrimination, rules
of fair play and natural justice are part of the rule
of law applicable in situation or action by State
instrumentality in dealing with citizens in a
situation like the present one. Even though the
rights of the citizens are in the nature of
contractual rights, the manner, the method and
motive of a decision of entering or not entering
into a contract, are subject to judicial review on
the touchstone of relevance and reasonableness,
fair play, natural justice, equality and non-
discrimination in the type of the transactions and
nature of the dealing as in the present case .”
…. …. ….
22. Interplay between writ jurisdiction and
contractual disputes has given rise to a plethora of
decisions by this Court. See, for example, Dwarkadas
Marfatia & Sons v. Board of Trustees, Port of Bombay [(1989) 3
SCC 293] and Mahabir Auto Stores [(1990) 3 SCC 752] .
26. In ABL International Ltd. [(2004) 3 SCC 553] this
Court opined that on a given set of facts, if a State acts in an
arbitrary manner even in a matter of contract, a writ
petition would be maintainable . It was opined: (SCC p. 570,
para 23)
“ 23 . It is clear from the above observations
of this Court, once the State or an instrumentality
of the State is a party to the contract, it has an
obligation in law to act fairly, justly and
74
reasonably which is the requirement of Article 14
of the Constitution of India. Therefore, if by the
impugned repudiation of the claim of the
appellants the first respondent as an
instrumentality of the State has acted in
contravention of the abovesaid requirement of
Article 14, then we have no hesitation in holding
that a writ court can issue suitable directions to
set right the arbitrary actions of the first
respondent .”
…. …. ….
28. Although the terms of the invitation to tender
may not be open to judicial scrutiny, but the courts can
scrutinise the award of contract by the Government or its
agencies in exercise of their power of judicial review to
prevent arbitrariness or favouritism. (See Directorate of
Education v. Educomp Datamatics Ltd. [(2004) 4 SCC 19] )
However, the court may refuse to exercise its jurisdiction,
if it does not involve any public interest.
29. Although the scope of judicial review or the
development of law in this field has been noticed
hereinbefore particularly in the light of the decision of
this Court in ABL International Ltd. [(2004) 3 SCC 553]
each case, however, must be decided on its own facts.
Public interest as noticed hereinbefore, may be one of the
factors to exercise the power of judicial review. In a case
where a public law element is involved, judicial review
may be permissible . (See Binny Ltd. v. V. Sadasivan [(2005)
6 SCC 657 : 2005 SCC (L&S) 881] and G.B. Mahajan v. Jalgaon
Municipal Council [(1991) 3 SCC 91] .)”
If the facts obtaining in the present case are tested upon the
anvil of the law declared by the Apex Court in the aforesaid
judgments, what unmistakably emerges is that
notwithstanding the contractual complexion of the dispute, a
75
writ petition under Article 226 would indeed be
maintainable. It is not in dispute that respondents 2 to 4 are
“other authorities” within the meaning of Article 12 of the
Constitution of India and therefore answer the description of
“State”. Once the State enters into a contractual relationship
and disputes arise therefrom, judicial review does not stand
eclipsed merely because the controversy has its genesis in
contract. The writ petition is therefore maintainable as well
as entertainable.
25. Reverting to the factual canvas, the petitioner’s plant was
admittedly established solely pursuant to the EOI floated by
respondents 2 to 4 and the consequent Long-Term Offtake
Agreement executed between the parties. The petitioner responded
to the Expression of Interest, was shortlisted, and thereafter
entered into the LTOA dated 13.01.2022. The capacity of the
petitioner’s plant, namely 9.90 crore litres per annum, was
disclosed right from inception in its response to the Expression of
Interest. The petitioner has neither expanded nor altered the unit
thereafter and continues to maintain the same production capacity.
76
26. The petitioner was expressly interdicted from supplying
ethanol produced by it to any entity other than respondents 2 to 4.
Such was the prevailing regime until issuance of the impugned
Expression of Interest. Respondents 2 to 4 admittedly exercise
overwhelming monopoly over procurement of ethanol from
dedicated ethanol plants. For over three years, the petitioner’s
production capacity to the extent of 3.30 crore litres annually stood
fully utilised through supplies made to respondents 2 to 4, and
significantly, such utilisation occurred squarely under Clause 6.8
itself.
27. Even subsequent to the impugned Expression of Interest,
Clause 6.8 has not remained wholly dormant; indeed, it has been
invoked to permit enhancement of supply from 1.44 crore litres to
3.30 crore litres. Respondents 2 to 4, therefore, cannot now be
heard to contend that the Long-Term Offtake Agreement is wholly
discretionary or that they may, at whim, induct alternative suppliers
and distribute procurement through preferential allocation
unfettered by prior assurances.
77
28. When an instrumentality of the State enjoys
monopoly power, fairness and reasonableness are not
matters of grace but constitutional obligation. The State
cannot, by a sudden volte-face, dismantle a long-standing
course of conduct or defeat the solemn assurances upon
which parties altered their positions and invested colossal
sums. It becomes apposite to refer to the judgments of the Apex
Court on the said issue:
28.1. The Apex Court in MAHABIR AUTO STORES v.
4
INDIAN OIL CORPORATION has held as follows:
“…. …. ….
11. We have heard learned counsel Dr L.M. Singhvi as
well as Mr Salve exhaustively. Further affidavits were filed and
documents produced before us. It was sought to be urged by Dr
Singhvi that the respondent was an instrumentality of State and
as such the question involved was whether an instrumentality of
State can suddenly, arbitrarily, unreasonably, without any
relevant factors and without any notice and determination or
proceeding stop supplies of products which, according to him,
had been supplied more than 1 crore 11 lakhs litres/kg of
product continuously and uninterruptedly over a period of more
than 18 years. Dr Singhvi suggested that the respondent IOC is
an instrumentality of State under Article 12 of the Constitution.
From the nature of the business carried on by the appellants, it
was manifest to us that the supply of the lubricants of the type
with which the respondent had a monopoly, could be carried on
by the appellants only as the supplier from the respondent. That
4
(1990) 3 SCC 752
78
business was not possible otherwise. The respondent had
monopoly in that respect. This aspect is important. The
respondent company was supplying from 1965 to 1983 large
quantities of lubricant oil and from 1983 onwards till 1989
supplies were continued on the interim order of the High Court
of Delhi. Supplies were stopped suddenly on May 27, 1983.
There is no dispute that no intimation was given, no notice was
given, no query or clarification sought for and there was no
adjudication as such. It was held that the appellant firm was not
entitled to supply; the stoppage of supply in May 1983 was ( sic
not), therefore, bad. The appellant further contended that the
case of the respondent company IOC was never made known or
revealed prior to the counter-affidavit in the High Court of the
appellants. The contention urged on behalf of the appellants was
that this is patent violation of all canons of natural justice, fair
play and reasonableness. It is submitted that natural justice and
reasonableness of the procedure are enshrined under Article 14
of the Constitution.
12. It is well settled that every action of the State
or an instrumentality of the State in exercise of its
executive power, must be informed by reason. In
appropriate cases, actions uninformed by reason may be
questioned as arbitrary in proceedings under Article 226
or Article 32 of the Constitution. Reliance in this
connection may be placed on the observations of this
Court in Radha Krishna Agarwal v. State of Bihar [(1977)
3 SCC 457] . It appears to us, at the outset, that in the
facts and circumstances of the case, the respondent
company IOC is an organ of the State or an
instrumentality of the State as contemplated under
Article 12 of the Constitution. The State acts in its
executive power under Article 298 of the Constitution in
entering or not entering in contracts with individual
parties. Article 14 of the Constitution would be applicable
to those exercises of power. Therefore, the action of
State organ under Article 14 can be checked. See Radha
Krishna Agarwal v. State of Bihar [(1977) 3 SCC 457] at
p. 462, but Article 14 of the Constitution cannot and has
not been construed as a charter for judicial review of
State action after the contract has been entered into, to
call upon the State to account for its actions in its
manifold activities by stating reasons for such actions. In
79
a situation of this nature certain activities of the
respondent company which constituted State under
Article 12 of the Constitution may be in certain
circumstances subject to Article 14 of the Constitution in
entering or not entering into contracts and must be
reasonable and taken only upon lawful and relevant
consideration; it depends upon facts and circumstances
of a particular transaction whether hearing is necessary
and reasons have to be stated. In case any right
conferred on the citizens which is sought to be interfered,
such action is subject to Article 14 of the Constitution,
and must be reasonable and can be taken only upon
lawful and relevant grounds of public interest. Where
there is arbitrariness in State action of this type of
entering or not entering into contracts, Article 14 springs
up and judicial review strikes such an action down. Every
action of the State executive authority must be subject to
rule of law and must be informed by reason. So, whatever
be the activity of the public authority, in such monopoly
or semi-monopoly dealings, it should meet the test of
Article 14 of the Constitution. If a governmental action
even in the matters of entering or not entering into
contracts, fails to satisfy the test of reasonableness, the
same would be unreasonable. In this connection reference
may be made to E.P. Royappa v. State of Tamil Nadu [(1974) 4
SCC 3 : 1974 SCC (L&S) 165] , Maneka Gandhi v. Union of India
[(1978) 1 SCC 248] , Ajay Hasia v. Khalid Mujib Sehravardi
[(1981) 1 SCC 722 : 1981 SCC (L&S) 258] , R.D. Shetty v.
International Airport Authority of India [(1979) 3 SCC 489] and
also Dwarkadas Marfatia and Sons v. Board of Trustees of the
Port of Bombay [(1989) 3 SCC 293] . It appears to us that
rule of reason and rule against arbitrariness and
discrimination, rules of fair play and natural justice are
part of the rule of law applicable in situation or action by
State instrumentality in dealing with citizens in a
situation like the present one. Even though the rights of
the citizens are in the nature of contractual rights, the
manner, the method and motive of a decision of entering
or not entering into a contract, are subject to judicial
review on the touchstone of relevance and
reasonableness, fair play, natural justice, equality and
non-discrimination in the type of the transactions and
nature of the dealing as in the present case.
80
…. …. ….
17. We are of the opinion that in all such cases
whether public law or private law rights are involved,
depends upon the facts and circumstances of the case.
The dichotomy between rights and remedies cannot be
obliterated by any strait-jacket formula. It has to be
examined in each particular case. Mr Salve sought to urge
that there are certain cases under Article 14 of arbitrary
exercise of such “power” and not cases of exercise of a
“right” arising either under a contract or under a statute.
We are of the opinion that that would depend upon the
factual matrix.
18. Having considered the facts and circumstances
of the case and the nature of the contentions and the
dealing between the parties and in view of the present
state of law, we are of the opinion that decision of the
State/public authority under Article 298 of the
Constitution, is an administrative decision and can be
impeached on the ground that the decision is arbitrary or
violative of Article 14 of the Constitution of India on any
of the grounds available in public law field. It appears to
us that in respect of corporation like IOC when without
informing the parties concerned, as in the case of the
appellant-firm herein on alleged change of policy and on
that basis action to seek to bring to an end to course of
transaction over 18 years involving large amounts of
money is not fair action, especially in view of the
monopolistic nature of the power of the respondent in
this field. Therefore, it is necessary to reiterate that even
in the field of public law, the relevant persons concerned
or to be affected, should be taken into confidence.
Whether and in what circumstances that confidence
should be taken into consideration cannot be laid down
on any strait-jacket basis. It depends on the nature of the
right involved and nature of the power sought to be
exercised in a particular situation. It is true that there is
discrimination between power and right but whether the
State or the instrumentality of a State has the right to
function in public field or private field is a matter which,
in our opinion, depends upon the facts and circumstances
81
of the situation, but such exercise of power cannot be
dealt with by the State or the instrumentality of the State
without informing and taking into confidence, the party
whose rights and powers are affected or sought to be
affected, into confidence. In such situations most often
people feel aggrieved by exclusion of knowledge if not
taken into confidence.
19. Such transaction should continue as an
administrative decision with the organ of the State. It
may be contractual or statutory but in a situation of
transaction between the parties for nearly two decades,
such procedure should be followed which will be
reasonable, fair and just, that is, the process which
normally be accepted ( sic is expected) to be followed by
an organ of the State and that process must be conscious
and all those affected should be taken into confidence.
20. Having regard to the nature of the transaction,
we are of the opinion that it would be appropriate to
state that in cases where the instrumentality of the state
enters the contractual field, it should be governed by the
incidence of the contract. It is true that it may not be
necessary to give reasons but, in our opinion, in the field
of this nature fairness must be there to the parties
concerned, and having regard to the large number or the
long period and the nature of the dealings between the
parties, the appellant should have been taken into
confidence. Equality and fairness at least demands this
much from an instrumentality of the State dealing with a
right of the State not to treat the contract as subsisting.
We must, however, evolve such process which will work .”
28.2. In DWARKADAS MARFATIA v. BOARD OF
5
TRUSTEES OF THE PORT OF BOMBAY the Apex Court has held
as follows:
5
(1989) 3 SCC 293
82
“…. …. ….
21. We are unable to accept the submissions. Being
a public body even in respect of its dealing with its
tenant, it must act in public interest, and an infraction of
that duty is amenable to examination either in civil suit or
in writ jurisdiction.
22. Our attention was drawn to the observations of this
Court in Radhakrishna Agarwal v. State of Bihar [(1977) 3 SCC
457 : (1977) 3 SCR 249] . Reliance was also placed on the
observations of this Court in Life Insurance Corpn. of India v.
Escorts Ltd. [(1986) 1 SCC 264 : 1985 Supp 3 SCR 909] , in
support of the contention that the public corporations dealing
with tenants is a contractual dealing and it is not a matter for
public law domain and is not subject to judicial review.
However, it is not the correct position. The Escorts decision
[(1986) 1 SCC 264 : 1985 Supp 3 SCR 909] reiterated that
every action of the State or as instrumentality of the
State, must be informed by reason. Indubitably, the
respondent is an organ of the State under Article 12 of
the Constitution. In appropriate cases, as was observed
in the last mentioned decision, actions uninformed by
reason may be questioned as arbitrary in proceedings
under Article 226 or Article 32 of the Constitution. But it
has to be remembered that Article 14 cannot be
construed as a charter for judicial review of State action,
to call upon the State to account for its actions in its
manifold activities by stating reasons for such actions.
23. The contractual privileges are made immune
from the protection of the Rent Act for the respondent
because of the public position occupied by the respondent
authority. Hence, its actions are amenable to judicial
review only to the extent that the State must act validly
for a discernible reason not whimsically for any ulterior
purpose. Where any special right or privilege is granted
to any public or statutory body on the presumption that it
must act in certain manner, such bodies must make good
such presumption while acting by virtue of such
privileges. Judicial review to oversee if such bodies are so
acting is permissible.
83
24. The field of letting and eviction of tenants is normally
governed by the Rent Act. The Port Trust is statutorily exempted
from the operation of the Rent Act on the basis of its
public/governmental character . The legislative assumption or
expectation as noted in the observations of Chagla, C.J. in
Rampratap Jaidayal case [1952 LR 54 Bom 927, 934]
cannot make such conduct a matter of contract pure and
simple. These corporations must act in accordance with
certain constitutional conscience and whether they have
so acted, must be discernible from the conduct of such
corporations. In this connection, reference may be made on
the observations of this Court in Som Prakash Rekhi v. Union of
India [(1981) 1 SCC 449 : (1981) 2 SCR 111] , reiterated in
M.C. Mehta v. Union of India [(1987) 1 SCC 395] , wherein at p.
148 this Court observed: (SCC p. 480, para 55)
“ It is dangerous to exonerate corporations
from the need to have constitutional conscience;
and so, that interpretation, language permitting,
which makes governmental agencies, whatever
their mien, amenable to constitutional limitations
must be adopted by the court as against the
alternative of permitting them to flourish as an
imperium in imperio .””
29. The question that now falls for consideration is, whether
the twin doctrines of promissory estoppel and legitimate
expectation stand attracted to the facts of the present case. It is
trite that neither legitimate expectation nor promissory estoppel
may operate against the command of a statute. The present case,
however, does not concern any statutory interdiction; rather, it
concerns interpretation of obligations flowing from a contract
entered into by the State with a contracting party.
84
30. It is also not in dispute that the petitioner invested
several hundred crores of rupees not upon some fanciful illusion of
its own creation, but upon the solemn assurances embedded within
the Long-Term Offtake Agreement. If, after years of adherence to a
settled course of conduct, the respondents seek to alter the regime
as a bolt from the blue through the impugned Expression of
Interest, such deviation cannot evade constitutional scrutiny.
31. The petitioner was not merely promised; the promise
stood acted upon and operationalised. It is now the execution of
that promise which is sought to be diluted through the impugned
tender condition. Legitimate expectation has, by judicial
evolution, attained the status of a facet of Article 14 itself,
and whenever a departure from settled policy results in
arbitrariness, constitutional courts have not hesitated to
interdict such action. It becomes apposite to refer to certain
judgments of the Apex Court on the issue.
85
31.1. The Apex Court in NAVJYOTI COOP. GROUP
6
HOUSING SOCIETY v. UNION OF INDIA has held as follows:
“…. …. ….
15. It also appears to us that in any event the new policy
decision as contained in the impugned memorandum of January
20, 1990 should not have been implemented without making
such change in the existing criterion for allotment known to the
Group Housing Societies if necessary by way of a public notice
so that they might make proper representation to the concerned
authorities for consideration of their viewpoints. Even assuming
that in the absence of any explanation of the expression “first
come first served” in Rule 6( vi ) of Nazul Rules there was no
statutory requirement to make allotment with reference to date
of registration, it has been rightly held, as a matter of fact, by
the High Court that prior to the new guideline contained in the
memo of January 20, 1990 the principle for allotment had
always been on the basis of date of registration and not the date
of approval of the list of members. In the brochure issued in
1982 by the DDA even after Gazette notification of Nazul Rules
on September 26, 1981 the policy of allotment on the basis of
seniority in registration was clearly indicated. In the aforesaid
facts, the Group Housing Societies were entitled to
‘legitimate expectation’ of following consistent past
practice in the matter of allotment, even though they may
not have any legal right in private law to receive such
treatment. 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
defeat 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. In this connection
reference may be made to the discussions on ‘legitimate
expectation’ at page 151 of Volume 1(1) of Halsbury's
Laws of England , 4th edn. (re-issue). We may also refer
6
(1992) 4 SCC 477
86
to a decision of the House of Lords in Council of Civil
Service Unions v. Minister for the Civil Service [(1984) 3
All ER 935] . 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
legitimately expected to be permitted to continue to
enjoy either until he was given reasons for withdrawal
and the opportunity to comment on such reasons.
16. 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 in case
of ‘legitimate expectation’, the reasonable opportunities
to make representation by the parties likely to be
affected by any change of consistent past policy, come in.
We, have not been shown any compelling reasons taken into
consideration by the Central Government to make a departure
from the existing policy of allotment with reference to seniority
in registration by introducing a new guideline. On the contrary,
Mr Jaitley the learned counsel has submitted that the DDA
and/or Central Government do not intend to challenge the
decision of the High Court and the impugned memorandum of
January 20, 1990 has since been withdrawn. We therefore feel
that in the facts of the case it was only desirable that before
introducing or implementing any change in the guideline for
allotment, an opportunity to make representations against the
proposed change in the guideline should have been given to the
registered Group Housing Societies, if necessary, by way of a
public notice.”
87
31.2. The Apex Court again in UNION OF INDIA v.
7
HINDUSTAN DEVELOPMENT CORPORATION has held as
follows:
“…. …. ….
22. Now coming to the notice inviting tender in the
instant case, we have already noted that the price quoted is
subject to price variation clause and the railways reserved a
right to accept the lowest price or accept the whole or any part
of the tender or portion of the quantity offered. The notice,
however, mentioned that the tenderer is at liberty to tender for
the whole or any portion or to state in the tender that the rate
quoted shall apply only if the entire quantity is taken from him.
From these provisions it becomes clear that the tenderer cannot
expect that his entire tender should be accepted in respect of
the quantity and that the railways have a right to accept the
tender as a whole or a part of it or portion of the quantity
offered. It is not in dispute that in the past also there were
many instances where the Railways as per the procedure
followed, arrived at decisions in respect of both price and
quantity for good and justifiable reasons. In the year 1991 the
quantities of M/s H.D.C. and Bhartiya were in fact reduced from
the allocations made by the Tender Committee which made its
recommendations on the basis of certain data. It has to be
noted that the Tender Committee is not a statutory authority
and its proposals are recommendatory in nature and have to be
considered in the distribution procedure culminating in the
decision of the approving authority who as a matter of fact, also
can take decisions in respect of price and allotment of quantities
taking into consideration various other aspects from the point of
view of public interest. Therefore it is evident that there is no
legally fixed procedure regarding fixation of price and
particularly regarding allotment giving scope to a legitimate
expectation. However, with this factual background, we shall
consider the contention regarding ‘legitimate expectation’.
7
(1993) 3 SCC 499
88
23. In Halsbury's Laws of England , Fourth Edition,
Volume I(I) 151 a passage explaining the scope of
“legitimate expectations” runs thus:
“81. Legitimate expectations .— A person
may have a legitimate expectation of being treated
in a certain way by an administrative authority
even though he has no legal right in private law to
receive such treatment. The expectation may arise
either from a representation or promise made by
the authority, including an implied representation,
or from consistent past practice.
The existence of a legitimate expectation
may have a number of different consequences; it
may give locus standi to seek leave to apply for
judicial review; it may mean that the authority
ought not to act so as to defeat the expectation
without some overriding reason of public policy to
justify its doing so; or it may mean that, if the
authority proposes to defeat a person's legitimate
expectation, it must afford him an opportunity to
make representations on the matter. The courts
also distinguish, for example in licensing cases,
between original applications, applications to
renew and revocations; a party who has been
granted a licence may have a legitimate
expectation that it will be renewed unless there is
some good reason not to do so, and may therefore
be entitled to greater procedural protection than a
mere applicant for a grant. ”
(emphasis supplied)
…. …. ….
25. In Council of Civil Service Unions v. Minister for the
Civil Service [(1984) 3 All ER 935] a question arose whether the
decision of the Minister withdrawing the right to trade union
membership without consulting the staff which according to the
appellant was his legitimate expectation arising from the
existence of a regular practice of consultation, was valid. It was
contended that the Minister had a duty to consult the staff as
per the existing practice and that though the employee did not
have a legal right, he had a legitimate expectation that the
89
existing practice would be followed. On behalf of the Minister on
the basis of the evidence produced, it was contended that the
decision not to consult was taken for reasons of national
security. The Court held as under:
“ An aggrieved person was entitled to invoke
judicial review if he showed that a decision of a
public authority affected him by depriving him of
some benefit or advantage which in the past he
had been permitted to enjoy and which he could
legitimately expect to be permitted to continue to
enjoy either until he was given reasons for its
withdrawal and the opportunity to comment on
those reasons or because he had received an
assurance that it would not be withdrawn before
he had been given the opportunity of making
representations against the withdrawal. The
appellants' legitimate expectation arising from the
existence of a regular practice of consultation
which the appellants could reasonably expect to
continue gave rise to an implied limitation on the
minister's exercise of the power contained in
Article 4 of the 1982 order, namely an obligation
to act fairly by consulting the GCHQ staff before
withdrawing the benefit of trade union
membership.
*
Once the minister produced evidence that her
decision not to consult the staff before withdrawing the
right to trade union membership was taken for reasons
of national security, that overrode any right to judicial
review which the appellants had arising out of the denial
of their legitimate expectation of consultation. The
appeal would therefore be dismissed.
*
Administrative action is subject to control
by judicial review under three heads: (1) illegality,
where the decision-making authority has been
guilty of an error of law, e.g. by purporting to
exercise a power it does not possess; (2)
irrationality, where the decision-making authority
has acted so unreasonably that no reasonable
90
authority would have made the decision; (3)
procedural impropriety, where the decision-
making authority has failed in its duty to act
fairly .”
(emphasis supplied)
Therefore the claim based on the principle of
legitimate expectation can be sustained and the decision
resulting in denial of such expectation can be questioned
provided the same is found to be unfair, unreasonable,
arbitrary and violative of principles of natural justice.
(vide Food Corpn. of India case [(1993) 1 SCC 71 : JT (1992) 6
SC 259] and Navjyoti Coop. Group Housing Society case
[(1992) 4 SCC 477] ).
…. …. ….
27. Of late the doctrine of legitimate expectation is
being pressed into service in many cases particularly in
contractual sphere while canvassing the implications
underlying the administrative law. Since we have not
come across any pronouncement of this Court on this
subject explaining the meaning and scope of the doctrine
of legitimate expectation, we would like to examine the
same a little more elaborately at this stage. Who is the
expectant and what is the nature of the expectation?
When does such an expectation become a legitimate one
and what is the foundation for the same? What are the
duties of the administrative authorities while taking a
decision in cases attracting the doctrine of legitimate
expectation .
28. Time is a three-fold present: the present as we
experience it, the past as a present memory and future as
a present expectation. For legal purposes, the
expectation cannot be the same as anticipation. It is
different from a wish, a desire or a hope nor can it
amount to a claim or demand on the ground of a right.
However earnest and sincere a wish, a desire or a hope
may be and however confidently one may look to them to
be fulfilled, they by themselves cannot amount to an
assertable expectation and a mere disappointment does
91
not attract legal consequences. A pious hope even leading
to a moral obligation cannot 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.
29. It has to be noticed that the concept of
legitimate expectation in administrative law has now,
undoubtedly, gained sufficient importance. It is stated
that “legitimate expectation” is the latest recruit to a
long list of concepts fashioned by the courts for the
review of administrative action and this creation takes its
place beside such principles as the rules of natural
justice, unreasonableness, the fiduciary duty of local
authorities and “in future, perhaps, the principle of
proportionality”. A passage in Administrative Law , Sixth
Edition by H.W.R. Wade page 424 reads thus:
“ These are revealing decisions. They show
that the courts now expect Government
departments to honour their published statements
or else to treat the citizen with the fullest personal
consideration. Unfairness in the form of
unreasonableness here comes close to unfairness
in the form of violation of natural justice, and the
doctrine of legitimate expectation can operate in
both contexts. It is obvious, furthermore, that this
principle of substantive, as opposed to procedural,
fairness may undermine some of the established
rules about estoppel and misleading advice, which
tend to operate unfairly. Lord Scarman has stated
emphatically that unfairness in the purported
exercise of a power can amount to an abuse or
excess of power, and this seems likely to develop
into an important general doctrine .”
Another passage at page 522 in the above book reads
thus:
92
“ It was in fact for the purpose of
restricting the right to be heard that
‘legitimate expectation’ was introduced into
the law. It made its first appearance in a case
where alien students of ‘scientology’ were
refused extension of their entry permits as an
act of policy by the Home Secretary, who had
announced that no discretionary benefits
would be granted to this sect. The court of
appeal held that they had no legitimate
expectation of extension beyond the
permitted time, and so no right to a hearing,
though revocation of their permits within that
time would have been contrary to legitimate
expectation. Official statements of policy,
therefore, may cancel legitimate expectation,
just as they may create it, as seen above. In a
different context, where car-hire drivers had
habitually offended against airport byelaws,
with many convictions and unpaid fines, it
was held that they had no legitimate
expectation of being heard before being
banned by the airport authority.
There is some ambiguity in the dicta
about legitimate expectation, which may
mean either expectation of a fair hearing or
expectation of the licence or other benefit
which is being sought. But the result is the
same in either case; absence of legitimate
expectation will absolve the public authority
from affording a hearing .”
(emphasis supplied)
30. In some cases a question arose whether the concept
of legitimate expectation is an impact only on the procedure or
whether it also can have a substantive impact and if so to what
extent. Attorney General for New South Wales v. Quin [(1990)
64 Aust LJR 327] is a case from Australia in which this aspect is
dealt with. In that case the Local Courts Act abolished Courts of
Petty Sessions and replaced them by Local Courts. Section 12 of
93
the Act empowered the Governor to appoint any qualified
person to be a Magistrate in the new court system. Mr Quin,
who had been a Stipendiary Magistrate in charge of a Court of
Petty Sessions under the old system, applied for, but was
refused, an appointment under the new system. That was
challenged. The challenge was upheld by the appellate court on
the ground that the selection committee had taken into account
an adverse report on him without giving a notice to him of the
contents of the same. In the appeal by the Attorney-General
against that order before the High Court, it was argued on
behalf of Mr Quin that he had a legitimate expectation that he
would be treated in the same way as his former colleagues
considering his application on its own merits. Coming to the
nature of the substantive impact of the doctrine,
Brennan, J. observed that the doctrine of legitimate
expectations ought not to “unlock the gate which shuts
the court out of review on the merits”, and that the
courts should not trespass “into the forbidden field of the
merits“ by striking down administrative acts or decisions
which failed to fulfil the expectations. In the same case
Mason, C.J. was of the view that if substantive protection
is to be accorded to legitimate expectations that would
encounter the objection of entailing “curial interference
with administrative decisions on the merits by precluding
the decision-maker from ultimately making the decision
which he or she considers most appropriate in the
circumstances ”.
31. In R v. Secretary of State for the Home Department
ex parte Ruddock [(1987) 2 All ER 518] Taylor, J. after referring
to the ratio laid down in some of the above cases held thus:
“ On these authorities I conclude that the
doctrine of legitimate expectation in essence
imposes a duty to act fairly. Whilst most of the
cases are concerned, as Lord Roskill said, with a
right to be heard, I do not think the doctrine is so
confined. Indeed, in a case where ex hypothesi
there is no right to be heard, it may be thought the
more important to fair dealing that a promise or
undertaking given by a minister as to how he will
proceed should be kept. Of course such promise or
undertaking must not conflict with his statutory
duty or his duty, as here, in the exercise of a
94
prerogative power . I accept the submission of counsel
for the Secretary of State that the respondent cannot
fetter his discretion. By declaring a policy he does not
preclude any possible need to change it. But then if the
practice has been to publish the current policy, it would
be incumbent on him in dealing fairly to publish the new
policy, unless again that would conflict with his duties.
Had the criteria here needed changing for national
security reasons, no doubt the respondent could have
changed them. Had those reasons prevented him also
from publishing the new criteria, no doubt he could have
refrained from doing so. Had he even decided to keep
the criteria but depart from them in this single case for
national security reasons, no doubt those reasons would
have afforded him a defence to judicial review as in the
GCHQ case.”
(emphasis supplied)
In Breen v. Amalgamated Engineering Union [(1971) 2
QB 175 : (1971) 1 All ER 1148, 1154 (f-h)] Lord Denning
observed as under:
“If a man seeks a privilege to which he has no
particular claim — such as an appointment to some post
or other — then he can be turned away without a word.
He need not be heard. No explanation need be given;
see the cases cited in Schmidt v. Secretary of State for
Home Affairs [(1993) 1 SCC 71 : JT (1992) 6 SC 259] at
pages 170-171. But if he is a man whose property is
at stake, or who is being deprived of his livelihood,
then reasons should be given why he is being
turned down, and he should be given a chance to
be heard. I go further. If he is a man who has
some right or interest, or some legitimate
expectation, of which it would not be fair to
deprive him without a hearing, or reasons given,
then these should be afforded him, according as
the case may demand . ”
(emphasis supplied)
32. At this stage it is necessary to consider the scope of
judicial review when a challenge is made on the basis of the
doctrine of legitimate expectation. In Findlay v. Secretary of
95
State for the Home Department [(1984) 3 All ER 801] it was
observed as under:
“ The doctrine of legitimate expectation has
an important place in the developing law of
judicial review. It is, however, not necessary to
explore the doctrine in this case, it is enough
merely to note that a legitimate expectation can
provide a sufficient interest to enable one who
cannot point to the existence of a substantive
right to obtain the leave of the court to apply for
judicial review. These two applicants obtained
leave. But their submission goes further. It is said
that the refusal to accept them from the new
policy was an unlawful act on the part of the
Secretary of State in that his decision frustrated
their expectation. But what was their legitimate
expectation? Given the substance and purpose of
the legislative provisions governing parole, the
most that a convicted prisoner can legitimately
expect is that his case will be examined
individually in the light of whatever policy the
State sees fit to adopt, provided always that the
adopted policy is a lawful exercise of the
discretion conferred on him by the statute. Any
other view would entail the conclusion that the
unfettered discretion conferred by the statute on
the minister can in some cases be restricted so as
to hamper, or even prevent, changes of policy.
Bearing in mind the complexity of the issues which
the Secretary of State has to consider and the
importance of the public interest in the
administration of parole, I cannot think that
Parliament intended the discretion to be restricted
in this way .”
In Council of Civil Service Unions' case [(1984) 3 All ER
935] Lord Diplock observed thus:
“ To qualify as a subject for judicial review
the decision must have consequences which affect
some person (or body of persons) other than the
decision-maker, although it may affect him too. It
must affect such other person either ( a ) by
altering rights or obligations of that person which
are enforceable by or against him in private law or
96
( b ) by depriving him of some benefit or advantage
which either ( i ) he has in the past been permitted
by the decision-maker to enjoy and which he can
legitimately expect to be permitted to continue to
do until there has been communicated to him
some rational ground for withdrawing it on which
he has been given an opportunity to comment or
( ii ) he has received assurance from the decision-
maker will not be withdrawn without giving him
first an opportunity of advancing reasons for
contending that they should not be withdrawn. I
prefer to continue to call the kind of expectation
that qualifies a decision for inclusion in class ( b ) a
‘legitimate expectation’ rather than a ‘reasonable
expectation’, in order thereby to indicate that it
has consequences to which effect will be given in
public law, whereas an expectation or hope that
some benefit or advantage would continue to be
enjoyed, although it might well be entertained by
a ‘reasonable’ man, would not necessarily have
such consequences .”
In Attorney General for New South Wales case [(1990) 64
Aust LJR 327] it is observed as under:
“ Some advocates of judicial intervention
would encourage the courts to expand the scope
and purpose of judicial review, especially to
provide some check on the Executive Government
which nowadays exercises enormous powers
beyond the capacity of the Parliament to supervise
effectively. Such advocacy is misplaced. If the
courts were to assume a jurisdiction to review
administrative acts or decisions which are ‘unfair’
in the opinion of the court — not to product of
procedural fairness, but unfair on the merits — the
courts would be assuming a jurisdiction to do the
very thing which is to be done by the repository of
an administrative power, namely, choosing among
the courses of action upon which reasonable
minds might differ .
*
If judicial review were to trespass on the
merits of the exercise of administrative power, it
97
would put its own legitimacy at risk. The risk must
be acknowledged for a reason which Frankfurter, J.
stated in Trop v. Dulles [(1958) 35 US 86, 119] :
‘ All power is, in Madison's phrase, “of an
encroaching nature” …. Judicial power is not
immune against this human weakness. It also
must be on guard against encroaching beyond its
proper bounds, and not the less so since the only
restraint upon it is self-restraint .’
If the courts were to postulate rules
ostensibly related to limitations on administrative
power but in reality calculated to open to the gate
into the forbidden field of the merits of its
exercise, the function of the courts would be
exceeded: of R. v. Nat Bell Liquors Ltd. [(1922) 2
AC 128, 156] If the courts were to define the
content of legitimate expectations as something
less than a legal right and were to protect what
would be thus defined by striking down
administrative acts or decisions which failed to
fulfil the expectations, the courts would be
truncating the powers which are naturally apt to
affect those expectations. To strike down the
exercise of administrative power solely on the
ground of avoiding the disappointment of the
legitimate expectations of an individual would be
to set the courts adrift on a 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 authority of the courts and
their salutary capacity judicially to review the
exercise of administrative power depend in the
last analysis on their fidelity to the rule of law,
exhibited by the articulation of general principles.
To lie within the limits of judicial power, the
notion of ‘legitimate expectation’ must be
restricted to the illumination of what is the legal
limitation on the exercise of administrative power
in a particular case. Of course, if a legitimate
expectation were to amount to a legal right, the
court would define the respective limits of the
98
right and any power which might be exercised to
infringe it so as to accommodate in part both the
right and the power or so as to accord to one
priority over the other. (That is a commonplace of
curial declarations.) But a power which might be
so exercised as to affect a legitimate expectation
falling short of a legal right cannot be truncated to
accommodate the expectation.
So long as the notion of legitimate
expectation is seen merely as indicating ‘the
factors and kinds of factors which are relevant to
any consideration of what are the things which
must be done or afforded’ to accord procedural
fairness to an applicant for the exercise of an
administrative power ( see per Mahoney, JA in
Macrae , at 285), the notion can, with one
important proviso, be useful. If, but only if, the
power is so created that the according of natural
justice conditions its exercise, the notion of
legitimate expectation may useful focus attention
on the content of natural justice in a particular
case; that is, on what must be done to give
procedural fairness to a person whose interests
might be affected by an exercise of the power. But
if the according of natural justice does not
condition the exercise of the power, the notion of
legitimate expectation can have no role to play. If
it were otherwise, the notion would become a
stalking horse for excesses of judicial review .”
(emphasis supplied)
In this very case, Brennan, J. after referring to Schmidt
case [(1969) 2 Ch 149 : (1969) 1 All ER 904] observed thus:
“ Again, when a court is deciding what must
be done in order to accord procedural fairness in a
particular case, it has regard to precisely the same
circumstances as those to which the court might
refer in considering whether the applicant
entertains a legitimate expectation, but the inquiry
whether the applicant entertains a legitimate
expectation is superfluous. Again, if an express
promise be given or a regular practice be adopted
by a public authority, and the promise or practice
99
is the source of a legitimate expectation, the
repository is bound to have regard to the promise
or practice in exercising the power, and it is
unnecessary to inquire whether those factors give
rise to a legitimate expectation. But the court
must stop short of compelling fulfilment of the
promise or practice unless the statute so requires
or the statute permits the repository of the power
to bind itself as to the manner of the future
exercise of the power. It follows that the notion of
legitimate expectation is not the key which
unlocks the treasury of natural justice and it ought
not unlock the gate which shuts the court out of
review on the merits. The notion of legitimate
expectation was introduced at a time when the
courts were developing the common law to suit
modern conditions and were sweeping away the
unnecessary archaisms of the prerogative writs,
but it should not be used to subvert the principled
justification for curial intervention in the exercise
of administrative power .”
(emphasis supplied)
In the same case, Dawson, J. observed thus:
“ It also follows that the required procedure may
vary according to the dictates of fairness in the
particular case .
Thus, in order to succeed, the respondent must
be able to point to something in the circumstances of
the case which would make it unfair not to extend to
him the procedure which he seeks. There is no doubt
that the respondent had a legitimate expectation of
continuing in his position as a stipendiary magistrate
such that it would, apart from statute, have been unfair
to remove him from that position without according him
a hearing. If the principle of judicial independence
extended to a stipendiary magistrate, then, no doubt,
that would have strengthened his expectation. But the
respondent was not removed from his position of
stipendiary magistrate by administrative decision. He
was removed by a statute which abolished the position
of stipendiary magistrate and established the new
position of magistrate. Not only that, the statute, the
100
Local Courts Act, clearly contemplated that not all the
former stipendiary magistrates would be appointed as
magistrates pursuant to its terms. Accordingly it made
provision for those who were not so appointed. It may
be possible to deprecate the manner in which the
statute removed the respondent from office, but it is not
possible to deny its effect. Any unfairness was the
product of the legislation which conferred no right upon
the respondent to a procedure other than that which it
laid down.”
(emphasis supplied)
33. On examination of some of these important
decisions it is generally agreed that legitimate
expectation gives the applicant sufficient locus standi for
judicial review and that the doctrine of legitimate
expectation is to be confined mostly to right of a fair
hearing before a decision which results in negativing a
promise or withdrawing an undertaking is taken. The
doctrine does not give scope to claim relief straightaway
from the administrative authorities as no crystallised
right as such is involved. The protection of such
legitimate expectation does not require the fulfilment of
the expectation where an overriding public interest
requires otherwise. In other words where a person's
legitimate expectation is not fulfilled by taking a
particular decision then decision-maker should justify the
denial of such expectation by showing some overriding
public interest. Therefore even if substantive protection
of such expectation is contemplated that does not grant
an absolute right to a particular person. It simply ensures
the circumstances in which that expectation may be
denied or restricted. 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 fulfil. 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. In considering the same
several factors which give rise to such legitimate
101
expectation must be present. The decision taken by the
authority must be found to be arbitrary, unreasonable
and not taken in public interest. If it is a question of
policy, even by way of change of old policy, the courts
cannot interfere with a decision. In a given case whether
there are such facts and circumstances giving rise to a
legitimate expectation, it would primarily be a question of
fact. If these tests are satisfied and if the court is
satisfied that a case of legitimate expectation is made out
then the next question would be whether failure to give
an opportunity of hearing before the decision affecting
such legitimate expectation is taken, has resulted in
failure of justice and whether on that ground the decision
should be quashed. If that be so then what should be the
relief is again a matter which depends on several factors.
34. We find in Attorney General for New South
Wales case [(1990) 64 Aust LJR 327] that the entire
case-law on the doctrine of legitimate expectation has
been considered. We also find that on an elaborate and
erudite discussion it is held that the courts' jurisdiction to
interfere is very much limited and much less in granting
any relief in a claim based purely on the ground of
‘legitimate expectation’. In Public Law and Politics edited
by Carol Harlow, we find an article by Gabriele Ganz in
which the learned author after examining the views
expressed in the cases decided by eminent judges to
whom we have referred to above, concluded thus:
“ The confusion and uncertainty at the heart
of the concept stems from its origin. It has grown
from two separate roots, natural justice or
fairness and estoppel, but the stems have become
entwined to such an extent that it is impossible to
disentangle them. This makes it very difficult to
predict how the hybrid will develop in future. This
could be regarded as giving the concept a healthy
flexibility, for the intention behind it is benign; it
has been fashioned to protect the individual
against administrative action which is against his
interest. On the other hand, the uncertainty of the
concept has led to conflicting decisions and
conflicting interpretations in the same decision .”
102
However, it is generally accepted and also clear
that legitimate expectation being less than right operates
in the field of public and not private law and that to some
extent such legitimate expectation ought to be protected
though not guaranteed .
35. Legitimate expectations may come in various forms
and owe their existence to different kind of circumstances and it
is not possible to give an exhaustive list in the context of vast
and fast expansion of the governmental activities. They shift
and change so fast that the start of our list would be obsolete
before we reached the middle. By and large they arise in cases
of promotions which are in normal course expected, though not
guaranteed by way of a statutory right, in cases of contracts,
distribution of largess by the Government and in somewhat
similar situations. For instance discretionary grant of licences,
permits or the like, carry with it a reasonable expectation,
though not a legal right to renewal or non-revocation, but to
summarily disappoint that expectation may be seen as unfair
without the expectant person being heard. But there again the
court has to see whether it was done as a policy or in the public
interest either by way of G.O., rule or by way of a legislation. If
that be so, a decision denying a legitimate expectation based on
such grounds does not qualify for interference unless in a given
case, the decision or action taken amounts to an abuse of
power. Therefore the limitation is extremely confined and
if the according of natural justice does not condition the
exercise of the power, the concept of legitimate
expectation can have no role to play and the court must
not usurp the discretion of the public authority which is
empowered to take the decisions under law and the court
is expected to apply an objective standard which leaves
to the deciding authority the full range of choice which
the legislature is presumed to have intended. Even in a
case where the decision is left entirely to the discretion of
the deciding authority without any such legal bounds and
if the decision is taken fairly and objectively, the court
will not interfere on the ground of procedural fairness to
a person whose interest based on legitimate expectation
might be affected. For instance if an authority who has
full discretion to grant a licence prefers an existing
licenceholder to a new applicant, the decision cannot be
interfered with on the ground of legitimate expectation
103
entertained by the new applicant applying the principles
of natural justice. It can therefore be seen that legitimate
expectation can at the most be one of the grounds which
may give rise to judicial review but the granting of relief
is very much limited. It would thus appear that there are
stronger reasons as to why the legitimate expectation
should not be substantively protected than the reasons as
to why it should be protected. In other words such a legal
obligation exists whenever the case supporting the same
in terms of legal principles of different sorts, is stronger
than the case against it. As observed in Attorney General
for New South Wales case [(1990) 64 Aust LJR 327] : “To
strike down the exercise of administrative power solely
on the ground of avoiding the disappointment of the
legitimate expectations of an individual would be to set
the courts adrift on a 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.” 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 expectation without anything more
cannot ipso facto give a right to invoke these principles.
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
very much on the facts and the recognised general
principles of administrative law applicable to such facts
and the concept of legitimate expectation which is the
latest recruit to a long list of concepts fashioned by the
courts for the review of administrative action, must be
restricted to the general legal limitations applicable and
binding the manner of the future exercise of
administrative power in a particular 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
104
concept. As cautioned in Attorney General for New South
Wales case [(1990) 64 Aust LJR 327] the courts should
restrain themselves and restrict such claims duly to the
legal limitations. It is a well-meant caution. Otherwise a
resourceful litigant having vested interests in contracts,
licences etc. can successfully indulge in getting welfare
activities mandated by directive principles thwarted to
further his own interests. The caution, particularly in the
changing scenario, becomes all the more important .”
31.3. Later the Apex Court in IFGL REFRACTORIES
8
LIMITED v. ORISSA STATE FINANCIAL CORPORATION has
held as follows:
“…. …. ….
Doctrine of legitimate expectations in Indian Law
104. Under Indian law, the doctrines of promissory
estoppel and legitimate expectation have often tended to
be conflated in judicial discourse . This tendency has been
noted and analysed in Jain and Jain's well-known treatise,
th
Principles of Administrative Law (7 edn., EBC 2013):
“ At times, the expressions ‘legitimate
expectation’ and ‘promissory estoppel’ are used
interchangeably, but that is not a correct usage
because ‘legitimate expectation’ is a concept much
broader in scope than ‘promissory estoppel’ .
xxxxxxxxx
A reading of the relevant Indian cases,
however, exhibit some confusion of ideas. It
seems that the judicial thinking has not as yet
crystallised as regards the nature and scope of the
doctrine. At times, it has been referred to as
8
2026 SCC OnLine SC 28
105
merely a procedural doctrine; at times, it has been
treated interchangeably as promissory estoppel.
However both these ideas are incorrect. As stated
above, legitimate expectation is a substantive
doctrine as well and has much broader scope than
promissory estoppel .
xxxxxxxxx
In Punjab Communications Ltd. v. Union of
India, the Supreme Court has observed in relation
to the doctrine of legitimate expectation:
“the doctrine of legitimate expectation in
the substantive sense has been accepted as part of
our law and that the decision maker can normally
be compelled to give effect to his representation in
regard to the expectation based on previous
practice or past conduct unless some overriding
public interest comes in the way Reliance must
have been placed on the said representation and
the representee must have thereby suffered
detriment.”
It is suggested that this formulation of the
doctrine of legitimate expectation is not correct as
it makes “legitimate expectation” practically
synonymous with promissory estoppel. Legitimate
expectation may arise from conduct of the
authority; a promise is not always necessary for
the purpose .”
105. While such doctrinal conflation has the
regrettable effect of introducing uncertainty into the law,
it is ultimately citizens who bear its adverse
consequences. Representations made by public
authorities must, therefore, be subjected to the most
exacting standards, for citizens order their affairs and
regulate their conduct on the basis of the trust they
repose in the State. The same considerations apply with
equal force in the commercial sphere, where
predictability and consistency are indispensable to
rational business planning. A failure on the part of public
authorities to honour their representations, absent
adequate and cogent justification, undermines the
106
confidence of citizens in the State and erodes the
credibility of governmental action. The creation of a
business-friendly environment conducive to investment
and trade is intrinsically linked to the degree of faith that
may be placed in government to fulfil the expectations it
engenders. Professors Jain and Deshpande have
characterised the consequences of this doctrinal
confusion in the following terms:
“Thus, in India, the characterization of
legitimate expectations is on a weaker footing,
than in jurisdictions like UK where the courts are
now willing to recognize the capacity of public law
to absorb the moral values underlying the notion
of estoppel in the light of the evolution of
doctrines like LE [Legitimate Expectations] and
abuse of power. If the Supreme Court of India has
shown its creativity in transforming the notion of
promissory estoppel from the limitations of private
law, then it does not stand to reason as to why it
should also not articulate and evolve the doctrine
of LE for judicial review of resilement of
administrative authorities from policies and
longstanding practices. If such a notion of LE is
adopted, then not only would the Court be able to
do away with the artificial hierarchy between
promissory estoppel and legitimate expectation,
but, it would also be able to hold the
administrative authorities to account on the
footing of public law outside the zone of promises
on a stronger and principled anvil. Presently, in
the absence of a like doctrine to that of promissory
estoppel outside the promissory zone, the
administrative law adjudication of resilement of
policies stands on a shaky public law foundation .”
106. Further, the necessity for this doctrine to possess an
independent and autonomous existence was articulated by
Justice Frankfurter of the United States Supreme Court in
Vitarelli v. Seaton , reported in 359 US 535 (1959), in the
following words:
“An executive agency must be rigorously held to
the standards by which it professes its action to be
judged. Accordingly, if dismissal from employment is
107
based on a defined procedure, even though generous
beyond the requirements that bind such agency, that
procedure must be scrupulously observed. This judicially
evolved rule of administrative law is now firmly
established and, if I may add, rightly so. He that takes
the procedural sword shall perish with the sword.”
107. In National Buildings Construction Corporation v. S.
Raghunathan reported in [2003] 1 WLR 348, a three Judge
bench of this Court, speaking through Justice S. Saghir Ahmad,
held that:
“18 . The doctrine of “legitimate expectation”
has its genesis in the field of administrative law.
The Government and its departments, in
administering the affairs of the country, are
expected to honour their statements 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
expectation” have been held to require reliance on
representations and resulting detriment to the
claimant in the same way as claims based on
promissory estoppel .”
(Emphasis Supplied)
108. However, it is necessary to bear in mind that the
aforesaid observation was made by this Court in the context of
examining the contours of the doctrine of legitimate expectation
under English law as it then stood. As noticed earlier, at that
stage of its development, English law exhibited a significant
degree of overlap between the doctrines of legitimate
expectation and promissory estoppel, the former often
being invoked by analogy with the latter. Subsequent
developments in English law, particularly following the
decision of this Court in National Buildings Construction
Corporation (supra), reflect a conscious effort to
108
disentangle the two doctrines and to locate the doctrine
of legitimate expectation on a distinct and more
expansive doctrinal footing. In Regina ( Reprotech
(Pebsham) Ltd) v. East Sussex County Council , reported
in [2003] 1 WLR 348, the House of Lords has held thus:
“33. In any case, I think that it is unhelpful
to introduce private law concepts of estoppel into
planning law. As Lord Scarman pointed out in
Newbury District Council v. Secretary of State for
the Environment [1981] AC 578, 616, estoppels
bind individuals on the ground that it would be
unconscionable for them to deny what they have
represented or agreed. But these concepts of
private law should not be extended into “the
public law of planning control, which binds
everyone. (See also Dyson J in R v. Leicester City
Council, Ex p Powergen UK Ltd [2000] JPL 629,
637.)
34. There is of course an analogy between a
private law estoppel and the public law concept of
a legitimate expectation created by a public
authority, the denial of which may amount to an
abuse of power… But it is no more than an analogy
because remedies against public authorities also
have to take into account the interests of the
general public which the authority exists to
promote. Public law can also take into account the
hierarchy of individual rights which exist under
the Human Rights Act 1998, so that, for example,
the individual's right to a home is accorded a high
degree of protection (see Coughlan's case, at pp
254—255) while ordinary property rights are in
general far more limited by considerations of
public interest: see R (Alconbury Developments
Ltd) v. Secretary of State for the Environment,
Transport and the Regions [2001] 2 WLR 1389.
35. It is true that in early cases such as the Wells
case [1967] 1 WLR 1000 and Lever Finance Ltd v.
Westminster (City) London Borough Council [1971] 1 QB
222, Lord Denning MR used the language of estoppel in
relation to planning law. At that time the public law
concepts of abuse of power and legitimate expectation
were very undeveloped and no doubt the analogy of
109
estoppel seemed useful […] It seems to me that in this
area, public law has already absorbed whatever is useful
from the moral values which underlie the private law
concept of estoppel and the time has come for it to
stand upon its own two feet.”
(Emphasis Supplied)
109. In a concurring opinion in Monnet Ispat and
Energy Ltd. v. Union of India , reported in (2012) 11 SCC
1, Justice H. L. Gokhale underscored the distinct
considerations underlying the doctrines of promissory
estoppel and legitimate expectation. It was observed that
the invocation of promissory estoppel presupposes the
existence of a clear promise, acting upon which the
promisee has altered its position to its detriment. In
contrast, the application of the doctrine of legitimate
expectation is primarily informed by considerations of
fairness and reasonableness in State action. The relevant
observation is as under:
“Promissory Estoppel and Legitimate
Expectations
289. As we have seen earlier, for invoking
the principle of promissory estoppel there has to
be a promise, and on that basis the party
concerned must have acted to its prejudice. In the
instant case it was only a proposal, and it was very
much made clear that it was to be approved by the
Central Government, prior whereto it could not be
construed as containing a promise. Besides, equity
cannot be used against a statutory provision or
notification .
290. […] In any case, in the absence of any
promise, the Appellants including Aadhunik cannot
claim promissory estoppel in the teeth of the
notifications issued under the relevant statutory
powers. Alternatively, the Appellants are trying to
make a case under the doctrine of legitimate
expectations. The basis of this doctrine is in
reasonableness and fairness. However, it can also
not be invoked where the decision of the public
110
authority is founded in a provision of law, and is in
consonance with public interest .”
(Emphasis Supplied)
110. In Union of India v. Lt. Col. P. K. Choudhary ,
reported in (2016) 4 SCC 236, this Court considered the
decision in Monnet Ispat (supra) and noted its reliance on the
judgment in Attorney General for New South Wales v. Quinn ,
reported in (1990) 64 Aust LJR 327. This Court thereafter
observed as follows:
“ This Court went on to hold that if denial of
legitimate expectation in a given case amounts to
denial of a right that is guaranteed or is arbitrary,
discriminatory, unfair or biased, gross abuse of
power or in violation of principles of natural
justice, the same can be questioned on the well-
known grounds attracting Article 14 of the
Constitution but a claim based on mere legitimate
expectation without anything more cannot ipso
facto give a right to invoke these principles .”
111. Thus, the Court held that the doctrine of
legitimate expectation cannot be claimed as a right in
itself, but can be used only when the denial of a
legitimate expectation leads to the violation of Article 14
of the Constitution .
112. As regards the relationship between Article 14
and the doctrine of legitimate expectation, a three judge
Bench in Food Corporation of India v. Kamdhenu Cattle
Feed Industries , reported in (1993) 1 SCC 71, held thus:
“7. In contractual sphere as in all other
State actions, the State and all its
instrumentalities have to conform to Article 14 of
the Constitution of which non-arbitrariness is a
significant facet. There is no unfettered discretion
in public law: A public authority possesses powers
only to use them for public good. This imposes the
duty to act fairly and to adopt a procedure which is
‘fairplay in action’. Due observance of this
obligation as a part of good administration raises a
111
reasonable or legitimate expectation in every
citizen to be treated fairly in his interaction with
the State and its instrumentalities, with this
element forming a necessary component of the
decision-making process in all State actions. To
satisfy this requirement of non-arbitrariness in a
State action, it is, therefore, necessary to consider
and give due weight to the reasonable or
legitimate expectations of the persons likely to be
affected by the decision or else that unfairness in
the exercise of the power may amount to an abuse
or excess of power apart from affecting the bona
fides of the decision in a given case. The decision
so made would be exposed to challenge on the
ground of arbitrariness. Rule of law does not
completely eliminate discretion in the exercise of
power, as it is unrealistic, but provides for control
of its exercise by judicial review.
8. 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 consideration 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 expectation
of the claimant is reasonable or legitimate in the
context is a question of fact in each case.
Whenever the question arises, it is to be
determined not according to the claimant's
perception but in larger public interest wherein
other more important considerations may
outweigh what would otherwise have 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 law and operates in our legal system
in this manner and to this extent .”
(Emphasis Supplied)
112
113. In NOIDA Entrepreneurs Assn. v. NOIDA , reported
in (2011) 6 SCC 508, a two judge bench of this Court, speaking
through Justice B. S. Chauhan, elaborated on this relationship in
the following terms:
“39. State actions are required to be non-
arbitrary and justified on the touchstone of Article
14 of the Constitution. Action of the State or its
instrumentality must be in conformity with some
principle which meets the test of reason and
relevance. Functioning of a “democratic form of
Government demands equality and absence of
arbitrariness and discrimination”. The rule of law
prohibits arbitrary action and commands the
authority concerned to act in accordance with law.
Every action of the State or its instrumentalities
should neither be suggestive of discrimination, nor
even apparently give an impression of bias,
favouritism and nepotism. If a decision is taken
without any principle or without any rule, it is
unpredictable and such a decision is antithesis to
the decision taken in accordance with the rule of
law .
xxxxxxxxx
41. Power vested by the State in a public
authority should be viewed as a trust coupled with
duty to be exercised in larger public and social
interest. Power is to be exercised strictly adhering
to the statutory provisions and fact situation of a
case. “Public authorities cannot play fast and loose
with the powers vested in them.” A decision taken
in an arbitrary manner contradicts the principle of
legitimate expectation. An authority is under a
legal obligation to exercise the power reasonably
and in good faith to effectuate the purpose for
which power stood conferred. In this context, “in
good faith” means “for legitimate reasons”. It
must be exercised bona fide for the purpose and
for none other […]”
As such, we can see that the doctrine of substantive
legitimate expectation is one of the ways in which the
113
guarantee of non-arbitrariness enshrined under Article 14
finds concrete expression .
114. As briefly discussed above, the operation of doctrine
of promissory estoppel against government instrumentalities
finds its reference in a pivotal decision of this Court in the case
of Motilal Padampat (supra). In this case, the State Government
of UP in 1968 had taken a policy decision to grant the incentive
of exemption from sales tax for a period of three years to all
new industrial units being established within the State. Pursuant
to this policy, the appellant addressed a communication to the
Director of Industries, stating that, in view of the sales-tax
exemption announced by the Government, it intended to set up
a plant unit for the manufacture of vanaspati and sought
confirmation regarding the availability of the exemption. The
Director of Industries affirmed the position, and the assurance
was further endorsed and confirmed by the Chief Secretary to
the State Government. Acting on the strength of these
assurances, the appellant proceeded to establish the plant unit.
In and around 1969, the State Government expressed
reservations regarding the grant of exemption and requested
the appellant to attend a meeting, during which the appellant
reiterated that the government had already granted sales-tax
exemption and that it had proceeded with the establishment of
the plant unit on the strength of that assurance. Subsequently,
in 1970, the State Government adopted a revised policy
decision whereby new vanaspati units in the State that
commenced commercial production by 30.09.1970 would be
entitled only to a partial concession in sales tax. Although the
appellant's unit went into commercial production on 02.07.1970,
the State Government once again altered its policy and, on
12.08.1970, communicated its decision to rescind the
concession earlier granted in favour of the appellant. On this
note, this Court thoroughly examined the doctrine of promissory
estoppel and observed that it is a principle evolved by equity to
avoid injustice. It is neither in the realm of contract nor in the
realm of estoppel.
115. According to this Court, the true principle of
promissory estoppel seemed to be that where one party
has, by his words or conduct, made to the other a clear
and unequivocal promise which is intended to create
114
legal relations or effect a legal relationship to arise in the
future, knowing or intending that it would be acted upon
by the other party to whom the promise is made. Where
it is in fact so acted upon by the other party, the promise
would be binding on the party making it, and he would
not be entitled to go back upon it, if it would be
inequitable to allow him to do so, having regard to the
dealings which have taken place between the parties.
This would be so irrespective of whether there is any pre-
existing relationship between the parties or not .
116. It was further observed that it is not necessary, in
order to attract the applicability of the doctrine of
promissory estoppel, that the promisee, acting on the
promise, should suffer any detriment. What is necessary
is only that the promisee should have altered his position
in reliance on the promise. This Court was of the view
that the doctrine of promissory estoppel is also applicable
against the government, where the government makes a
promise knowing or intending that it would be acted upon
by the promisee. Where, in fact, the promisee, acting on
it, alters his position, the government would be held
bound by the promise. The promise would be enforceable
against the government at the instance of the promisee,
notwithstanding that there is no consideration for the
promise and the promise is not recorded in the form of a
formal contract.
117. Applying the said doctrine to facts of that case, this
Court had observed that the in the letter of the chief secretary
to the government, a categorical representation was made by
him on behalf of the government that the proposed vanaspati
unit of the appellant would be entitled to exemption sales tax
for a period of three years from the date of commencement of
production. This representation was made by way of clarification
and as a definite commitment on the part of the government to
grant exemption. Therefore, the representation was made by
the government knowing and intending that it would be acted
on by the appellant, because, the appellant had decided to set
up a unit for manufacture of vanaspati only on account of the
exemption from sales tax promised by the government. The
relevant observations are as under:
115
“7. That takes us to the question whether
the assurance given by respondent 4 on behalf of
the State Government that the appellant would be
exempt from Sales Tax for a period of three years
from the date of commencement of production
could be enforced against the State Government
by invoking the doctrine of promissory estoppel.
Though the origins of the doctrine of promissory
estoppel may be found in Hughes v. Metropolitan
Railway Co. and Birmingham and District Land Co.
v. London and North-Western Rail Co. authorities
of old standing decided about a century ago by the
House of Lords, it was only recently in 1947 that it
was rediscovered by Mr. Justice Denning, as he
then was, in his celebrated judgment in Central
London Property Trust Ltd. v. High Trees House
Ltd.. This doctrine has been variously called
‘promissory estoppel’, ‘equitable estoppel’, ‘quasi
estoppel’ and ‘new estoppel’. It is a principle
evolved by equity to avoid injustice and though
commonly named ‘promissory estoppel’, it is, as
we shall presently point out, neither in the realm
of contract nor in the realm of estoppel […]
8. […] The true principle of promissory
estoppel, therefore, seems to be that where one
party has by his words or conduct made to the
other a clear and unequivocal promise which is
intended to create legal relations or affect a legal
relationship to arise in the future, knowing or
intending that it would be acted upon by the other
party to whom the promise is made and it is in fact
so acted upon by the other party, the promise
would be binding on the party making it and he
would not be entitled to go back upon it, if it
would be inequitable to allow him to do so having
regard to the dealings which have taken place
between the parties, and this would be so
irrespective of whether there is any pre-existing
relationship between the parties or not .
xxxxxxxxx
32. We may now turn to examine the facts in the
light of the law discussed by us. It is clear from the
letter of respondent 4 dated January 23, 1969 that a
116
categorical representation was made by respondent 4 on
behalf of the Government that the proposed vanaspati
factory of the appellant would be entitled to exemption
from sales tax in respect of sales of vanaspati effected in
Uttar Pradesh for a period of three years from the date
of commencement of production, This representation
was made by way of clarification in view of the
suggestion in the appellant's letter dated January 22,
1969 that the financial institutions were not prepared to
regard the earlier letter of respondent 4 dated December
22, 1968 as a definite commitment on the part of the
Government to grant exemption from sales tax. Now the
letter dated January 23, 1969 clearly shows that
respondent 4 made this representation in his capacity as
the Chief Secretary of the Government, and it was
therefore, a representation on behalf of the Government
[…] We must, therefore, proceed on the basis that this
representation made by respondent 4 was a
representation within the scope of his authority and was
binding on the Government. Now, there can be no doubt
that this representation was made by the Government
knowing or intending that it would be acted on by the
appellant, because the appellant had made it clear that
it was only on account of the exemption from sales tax
promised by the Government that the appellant had
decided to set up the factory for manufacture of
vanaspati at Kanpur. The appellant, in fact, relying on
this representation of the Government, borrowed
moneys from various financial institutions, purchased
plant and machinery from M/s. De Smet (India) Pvt.
Ltd., Bombay and set up a vanaspati factory at Kanpur.
The facts necessary for invoking the doctrine of
promissory estoppel were, therefore, clearly present and
the Government was bound to carry out the
representation and exempt the appellant from sales tax
in respect of sales of vanaspati effected by it in Uttar
Pradesh for a period of three years from the date of
commencement of the production.
33. The State, however, contended that the
doctrine of promissory estoppel had no application in the
present case because the appellant did not suffer any
detriment by acting on the representation made by the
Government: the vanaspati factory set up by the
appellant was quite a profitable concern and there was
no prejudice caused to the appellant. This contention of
the State is clearly unsustainable and must be rejected.
117
We do not think it is necessary, in order to attract
the applicability of the doctrine of promissory
estoppel, that the promisee, acting in reliance on
the promise, should suffer any detriment. What is
necessary is only that the promisee should have
altered his position in reliance on the promise […]”
(Emphasis Supplied)
118. Further, this Court in the case of Pawan Alloys &
Casting (P) Ltd. v. U.P. SEB , reported in (1997) 7 SCC 251, had
the occasion to consider the application of the doctrine of
promissory estoppel against the government with respect to an
incentive policy. In this case, the U.P. State Electricity Board
had issued three notifications dated 29.10.1982, 13.07.1984,
and 28.01.1986 respectively on identical terms, notifying the
revised rate schedules appended thereto, which were to apply to
all consumers directly supplied with electricity by the Board
throughout the State of U.P. Each of these notifications
stipulated that the revised rate schedule would come into force
from the respective dates mentioned therein. Among the items
incorporated in these rate schedules was one relating to
incentives for new industrial units. The corresponding item in
the last notification dated 28.01.1986 provided that a
development rebate of 10% (ten percent) on the amount of the
bill pertaining to energy charges would be granted to a new
industrial unit for a period of three years from the date of
commencement of supply. The Board, however, issued a
subsequent notification dated 31.07.1986 deleting the said item
relating to incentives for new industrial units from the
notification dated 28.01.1986. The appellant contended that, by
virtue of the principle of promissory estoppel, the Board was not
entitled to withdraw the rebate prematurely through its
notification dated 31.07.1986.
119. This Court, for the purpose of applying the doctrine
of promissory estoppel to the above set of facts, held that the
Board had issued the notifications in question, acting in its
wisdom and pursuant to the directions of the State, in
furtherance of the package of incentives offered by the State of
U.P. to new industrial units. By the plain terms of these
notifications, the Board, functioning as an arm of the State
Government had extended concessions in the form of rebates in
118
electricity duty to the new industrial units, with the objective of
attracting such units to invest in the state and bringing them
within its fold as prospective consumers of electricity. Through
these notifications, the Board had clearly held out a promise to
new industries, and since such industries had admittedly
established themselves in the region where the Board operated,
acting upon that promise, equity required that the Board be held
bound by it. It was further observed that the new industrial
units, having been induced to establish themselves in the region
on the strength of the promise, had altered their position
irretrievably. They had invested substantial amounts in setting
up infrastructure and had necessarily changed their position
relying on the representation that they would receive the
promised benefit i.e., a rebate of 10% (ten percent) on their
electricity bills for at least three years as an infancy benefit, so
as to enable them to effectively compete with existing industries
in the market. On the force of these facts, this Court was of the
opinion that the Board could certainly be pinned down to its
promise by the application of the doctrine of promissory
estoppel. The relevant observation is as under:
“ 19. It is, therefore, not possible to agree with
the contention of learned Senior Counsel for the Board
that these three notifications did not hold out any
promise or any representation to the general public
enabling the new industries to get established acting on
the said representation. It is obvious that after the
expiry of this three-year period the Board would be able
to charge full rate for electricity supplied to these new
customers who would then become sufficiently old and
mature and would not need any more rebate. It cannot,
therefore, be said that the Board had no interest in
these new industries, their prospective customers, and
was not interested in attracting them to the territory
catered to by it by the supply of electricity. It may be
that the Board exercised its statutory powers under
Section 49 of the Act for that purpose but all the same it
in its wisdom and acting on the direction under Section
78-A of the Act pursuant to the package of incentives
offered by the State of U.P. to these new industries, had
issued the said notifications holding out these promises.
But even assuming that the State had no role to play in
this connection as submitted by Shri Dave for the
respondents, these three notifications on their own
wordings leave no room for doubt that they did contain
119
offers of incentives to new industries who would be the
prospective new consumers of electricity and, therefore,
the Board's future customers .
xxxxxxxxx
21. In the present case even leaving aside the
promissory estoppel against the State of U.P. it can
clearly be visualised that by the mere wordings of the
aforesaid three notifications the Board acting as a limb
of the State of U.P. had offered these concessions by
way of rebate in electricity duty to the new industries so
as to attract them to the State to enable the Board to
take them in its fold as prospective consumers of
electricity to be sold by it to them .
xxxxxxxxx
24. Consequently it cannot be held on the clear
recitals found in the aforesaid three notifications issued
by the Board that no representation whatsoever
guaranteeing 10% rebate on electricity consumption
bills could be culled out from these notifications. We,
therefore, agree with the finding of the High Court on
Issue No. 1 that by these notifications the Board had
clearly held out a promise to these new industries and
as these new industries had admittedly got established
in the region where the Board was operating, acting on
such promise, the same in equity would bind the Board.
Such a promise was not contrary to any statutory
provision but on the contrary was in compliance with the
directions issued under Section 78-A of the Act. These
new industries which got attracted to this region relying
upon the promise had altered their position irretrievably.
They had spent large amounts of money for establishing
the infrastructure, had entered into agreements with the
Board for supply of electricity and, therefore, had
necessarily altered their position relying on these
representations thinking that they would be assured of
at least three years' period guaranteeing rebate of 10%
on the total bill of electricity to be consumed by them as
infancy benefit so that they could effectively compete
with the old industries operating in the field and their
products could effectively compete with their products.
On these well-established facts the Board can certainly
120
be pinned down to its promise on the doctrine of
promissory estoppel.”
(Emphasis Supplied)
120. Additionally, in the case of Gujarat State Financial
Corpn. v. Lotus Hotels (P) Ltd. , reported in (1983) 3 SCC 379,
this Court had observed that the doctrine of promissory estoppel
applies against a statutory corporation which in the discharge of
its duties makes a clear and unequivocal promise that is acted
upon by the promisee. In this case, the appellant was Gujarat
State Financial Corporation (GSFC) that had sanctioned a loan in
favour of the respondent for setting up a hotel. On the basis of
such sanctioning, the respondent invested in securities, incurred
expenditures, and undertook substantial liabilities upon for its
business. Subsequently, the appellant GSFC refused to disburse
the loan. Dismissing the appeal, this Court held that the GSFC,
being an instrumentality of the State under Article 12 of
the Constitution of India, could not have arbitrarily
resiled from its solemn promise, particularly when the
promisee had altered its position by relying thereon. In
such circumstances, this Court held that promissory
estoppel would operate against the appellant GSFC, and
such promise would be enforceable to compel the
performance of its obligation. The relevant observation is as
under:
“9. It was next contended that the dispute
between the parties is in the realm of contract and
even if there was a concluded contract between
the parties about grant and acceptance of loan,
the failure of the Corporation to carry out its part
of the obligation may amount to breach of contract
for which a remedy lies elsewhere but a writ of
mandamus cannot be issued compelling the
Corporation to specifically perform the contract. It
is too late in the day to contend that the
instrumentality of the State which would be “other
authority” under Article 12 of the Constitution can
commit breach of a solemn undertaking on which
other side has acted and then contend that the
party suffering by the breach of contract may sue
for damages but cannot compel specific
performance of the contract. It was not disputed and
121
in fairness to Mr Bhatt, it must be said that he did not
dispute that the Corporation which is set up under
Section 3 of the State Financial Corporation Act, 1955 is
an instrumentality of the State and would be “other
authority” under Article 12 of the Constitution. By its
letter of offer dated July 24, 1978 and the subsequent
agreement dated February 1, 1979 the appellant
entered into a solemn agreement in performance of its
statutory duty to advance the loan of Rs. 30 lakhs to the
respondent. Acting on the solemn undertaking, the
respondent proceeded to undertake and execute the
project of setting up a 4-star hotel at Baroda. The
agreement to advance the loan was entered into in
performance of the statutory duty cast on the
Corporation by the statute under which it was created
and set up. On its solemn promise evidenced by the
aforementioned two documents, the respondent incurred
expenses, suffered liabilities to set up a hotel.
Presumably, if the loan was not forthcoming, the
respondent may not have undertaken such a huge
project. Acting on the promise of the appellant
evidenced by documents, the respondent proceeded to
suffer further liabilities to implement and execute the
project. In the back drop of this incontrovertible fact
situation, the principle of promissory estoppel would
come into play. In Motilal Padampat Sugar Mills Co. (P)
Ltd. v. State of U.P.2 this Court observed as under:
[SCC para 8, p. 425: SCC (Tax) p. 160]
“ The true principle of promissory estoppel,
therefore, seems to be that where one party has
by his words of conduct made to the other a clear
and unequivocal promise which is intended to
create legal relations or affect a legal relationship
to arise in the future, knowing or intending that it
would be acted upon by the other party to whom
the promise is made and it is in fact so acted upon
by the other party, the promise would be binding
on the party making it and he would not be
entitled to go back upon it, if it would be
inequitable to allow him to do so having regard to
the dealings which have taken place between the
parties, and this would be so irrespective of
whether there is any preexisting relationship
between the parties or not .”
122
10. Thus the principle of promissory
estoppel would certainly estop the Corporation
from backing out of its obligation arising from a
solemn promise made by it to the respondent .
xxxxxxxxx
13. Now if appellant entered into a solemn
contract in discharge and performance of its statutory
duty and the respondent acted upon it, the statutory
corporation cannot be allowed to act arbitrarily so as to
cause harm and injury, flowing from its unreasonable
conduct, to the respondent. In such a situation, the
court is not powerless from holding the appellant to its
promise and it can be enforced by a writ of mandamus
directing it to perform its statutory duty. A petition
under Article 226 of the Constitution would certainly lie
to direct performance of a statutory duty by “other
authority” as envisaged by Article 12.”
(Emphasis Supplied)”
31.4. In ARMY WELFARE EDUCATION SOCIETY v. SUNIL
9
KUMAR SHARMA the Apex Court has held as follows:
“.….. .….. .…..
( ii ) Doctrine of legitimate expectation
58. During the course of the arguments, a submission was
canvassed that the respondents were under a legitimate
expectation that their service conditions and salary would not be
unilaterally altered by the appellant Society to their
disadvantage. Thus, as the respondents were neither consulted
with nor taken in confidence by the appellant Society before
effecting the changes in their service conditions, it amounted to
9
(2024) 16 SCC 598
123
a breach of their legitimate expectation, thereby making it a fit
case for the exercise of writ jurisdiction by the High Court.
59. The doctrine of legitimate expectation was also
referred to and relied upon by the Single Judge of the
High Court as one of the reasons to allow the writ petition
filed by the respondents. The relevant observations made by
the Single Judge in the judgment and order dated 5-8-2014
[ Sunil Kumar Sharma v. Union of India , 2014 SCC OnLine Utt
1865] are reproduced hereinbelow: ( Sunil Kumar Sharma
case [ Sunil Kumar Sharma v. Union of India , 2014 SCC OnLine
Utt 1865] , SCC OnLine Utt para 28)
“ 28 . We also have to appreciate the “legitimate
expectations” of the petitioners who expect equity, fair
play and justice, from a public authority which
Respondents 2, 3 and 7 indeed are and, therefore, they
must meet such standards as a public authority ought to
have. The new management of the School, including
Respondents 2, 3 and 7 are hereby directed not to
change or vary the conditions of the petitioners to their
disadvantage.”
60. Before parting with the matter, we deem it necessary
to answer the aforesaid submission of the respondents. This
Court in Union of India v. Hindustan Development Corpn. [ Union
of India v. Hindustan Development Corpn. , (1993) 3 SCC 499]
enunciated that the doctrine of legitimate expectation is a
creature of public law aimed at combating arbitrariness in
executive action by public authorities . It held thus: (SCC p.
540, para 28)
“ 28 . Time is a threefold present: the present
as we experience it, the past as a present memory
and future as a present expectation. For legal
purposes, the expectation cannot be the same as
anticipation. It is different from a wish, a desire or
a hope nor can it amount to a claim or demand on
the ground of a right. However earnest and sincere
a wish, a desire or a hope may be and however
confidently one may look to them to be fulfilled,
they by themselves cannot amount to an
assertable expectation and a mere disappointment
124
does not attract legal consequences. A pious hope
even leading to a moral obligation cannot 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 .”
61. In Ram Pravesh Singh v. State of Bihar [ Ram Pravesh
Singh v. State of Bihar , (2006) 8 SCC 381 : 2006 SCC (L&S)
1986] , this Court explained the doctrine of legitimate
expectation in detail as follows: (SCC pp. 390-391, para 15)
“ 15 . What is legitimate expectation? Obviously, it is
not a legal right. It is an expectation of a benefit, relief or
remedy, that may ordinarily flow from a promise or
established practice. The term “established practice” refers
to a regular, consistent, predictable and certain conduct,
process or activity of the decision-making authority. The
expectation should be legitimate, that is, reasonable, logical
and valid. Any expectation which is based on sporadic or
casual or random acts, or which is unreasonable, illogical or
invalid cannot be a legitimate expectation. Not being a
right, it is not enforceable as such. It is a concept fashioned
by the courts, for judicial review of administrative action. It
is procedural in character based on the requirement of a
higher degree of fairness in administrative action, as a
consequence of the promise made, or practice established.
In short, a person can be said to have a “legitimate
expectation” of a particular treatment, if any representation
or promise is made by an authority, either expressly or
impliedly, or if the regular and consistent past practice of
the authority gives room for such expectation in the normal
course. As a ground for relief, the efficacy of the doctrine is
rather weak as its slot is just above “fairness in action” but
far below “promissory estoppel”. It may only entitle an
expectant: ( a ) to an opportunity to show cause before the
expectation is dashed; or ( b ) to an explanation as to the
cause for denial. In appropriate cases, the courts may grant
a direction requiring the authority to follow the promised
procedure or established practice. A legitimate expectation,
125
even when made out, does not always entitle the expectant
to a relief. Public interest, change in policy, conduct of the
expectant or any other valid or bona fide reason given by
the decision-maker, may be sufficient to negative the
“legitimate expectation”. The doctrine of legitimate
expectation based on established practice (as contrasted
from legitimate expectation based on a promise), can be
invoked only by someone who has dealings or transactions
or negotiations with an authority, on which such
established practice has a bearing, or by someone who has
a recognised legal relationship with the authority. A total
stranger unconnected with the authority or a person who
had no previous dealings with the authority and who has
not entered into any transaction or negotiations with the
authority, cannot invoke the doctrine of legitimate
expectation, merely on the ground that the authority has a
general obligation to act fairly.”
62. In Jitendra Kumar v. State of Haryana [ Jitendra
Kumar v. State of Haryana , (2008) 2 SCC 161 : (2008) 1
SCC (L&S) 428] , this Court, while differentiating between
legitimate expectation on the one hand and anticipation,
wishes and desire on the other, observed thus: (SCC p.
183, para 58)
“ 58 . … A legitimate expectation is not the same thing as
an anticipation. It is distinct and different from a desire
and hope. It is based on a right. [See Chanchal
Goyal v. State of Rajasthan [ Chanchal Goyal v. State of
Rajasthan , (2003) 3 SCC 485 : 2003 SCC (L&S) 322]
and Union of India v. Hindustan Development
Corpn. [ Union of India v. Hindustan Development Corpn. ,
(1993) 3 SCC 499] It is grounded in the rule of law as
requiring regularity, predictability and certainty in the
Government's dealings with the public. We have no doubt
that the doctrine of legitimate expectation operates both
in procedural and substantive matters.”
63. A reading of the aforesaid decisions brings forth
the following features regarding the doctrine of legitimate
expectation:
63.1. First , legitimate expectation must be based on
a right as opposed to a mere hope, wish or anticipation;
126
63.2. Secondly , legitimate expectation must arise
either from an express or implied promise; or a consistent
past practice or custom followed by an authority in its
dealings;
63.3. Thirdly , expectation which is based on
sporadic or casual or random acts, or which is
unreasonable, illogical or invalid cannot be treated as a
legitimate expectation;
63.4. Fourthly , legitimate expectation operates in
relation to both substantive and procedural matters;
63.5. Fifthly , legitimate expectation operates in the
realm of public law, that is, a plea of legitimate action can
be taken only when a public authority breaches a promise
or deviates from a consistent past practice, without any
reasonable basis.
63.6. Sixthly , a plea of legitimate expectation based
on past practice can only be taken by someone who has
dealings, or negotiations with a public authority. It cannot
be invoked by a total stranger to the authority merely on
the ground that the authority has a duty to act fairly
generally.”
(Emphasis supplied at each instance)
32. In the teeth of the elucidation of law by the Apex Court in
the aforesaid judgments, the action of a contracting party which
answers the description of “State” under Article 12 of the
Constitution can undoubtedly be subjected to judicial review and
struck down if it falls foul of the doctrine of legitimate expectation.
127
In the case at hand, the petitioner had a legitimate expectation of
continuance of the prevailing policy, such expectation having arisen
directly from the agreement itself and the consistent past conduct
of the respondents. The impugned tender condition could not have
travelled beyond, or contrary to, the terms of the agreement
entered into between the parties. It cannot be gainsaid that the
State may alter or deviate from an earlier policy or agreement; yet,
such deviation must withstand the scrutiny of law and comport with
the mandate of Article 14 of the Constitution. Arbitrariness can
never masquerade as discretion.
33. In the light of the aforesaid unequivocal facts, the
towering objections raised by the learned Attorney General and the
learned senior counsels appearing for the respondents becomes
unacceptable. Ethanol is admittedly required. The present
notification seeks procurement of 1500 crore litres of ethanol.
Dedicated Ethanol Plants, which have hitherto supplied
ethanol exclusively to the OMCs and which are contractually
prohibited from either manufacturing anything else or
supplying ethanol to any third party, cannot now be
128
relegated to the short end of the stick, thereby visiting them
with grave and manifest prejudice.
34. The petitioner, therefore, becomes entitled to issuance of
a writ of mandamus directing respondents 2 to 4/OMCs to act in
consonance with Clause 6.8 of the agreement, particularly when the
respondents themselves invoked Clause 6.8 to enhance
procurement from 1.44 crore litres to 3.92 crore litres. There
cannot be selective or partial invocation of Clause 6.8 by denying
9.90 crore liters as sought for. If such conduct were to be
countenanced, operation of the clause would be reduced to the
whims and fancies of respondents 2 to 4, an eventuality wholly
antithetical to law. In that view of the matter, the writ petition
deserves to succeed.
35. For the aforesaid reasons, the following:
O R D E R
(i) Writ Petition is allowed.
129
(ii) Mandamus issues to respondents 2 to 5 to consider the
representation of the petitioner dated 27-10-2025 for
enhancement of procurement as sought for in the
representation, bearing in mind the observations made
in the course of the order. The consideration should
precede the decision on the tender now issued.
(iii) Appropriate order on the representation shall be passed
within four weeks from the date of receipt of a copy of
this order.
In the light of the aforesaid order impleading applications/
I.A.Nos.7 to 16 need not be considered and they are disposed as
unnecessary. Other pending applications also stand disposed, as a
consequence.
Sd/-
M.NAGAPRASANNA)
(
JUDGE
bkp
CT:MJ