Administrative Law

Punjab Communications Ltd. v. Union of India

(1999) 2 SCR 1033

Facts

Punjab Communications was shortlisted for a telecom project funded by an ADB loan.
Later, the Government decided not to use the ADB loan due to heavy commitment charges.
The project changed into a broader rural telecom scheme for multiple backward areas.
Punjab Communications claimed it had a legitimate expectation that the earlier Eastern U.P. project/tender would continue.

Whether the Government’s change in policy defeated Punjab Communications’ legitimate expectation unlawfully.

Legitimate expectation may arise from representation, past practice, or conduct.
But it does not always guarantee fulfilment of the expectation.
A substantive legitimate expectation can be defeated by overriding public interest.
Courts review such policy change mainly on Wednesbury unreasonableness: whether the change was irrational, arbitrary, perverse, or not in public interest.

The Court accepted the doctrine of substantive legitimate expectation in Indian law.
But it treated the doctrine as a limited ground of judicial review, not as a strong right to demand performance.
The Government gave reasons for changing the policy:
the ADB loan carried heavy commitment charges;
the loan offer was later withdrawn;
the Government wanted a wider rural telecom policy covering all backward areas, not only Eastern U.P.
The Court said these were policy considerations.
Courts should not normally substitute their own policy judgment for the Government’s.
The question was not whether the old project was better.
The only question was whether the new policy was so unreasonable that no reasonable Government could have adopted it.
Since the new policy had a wider public-interest basis, the Court refused to interfere.
MP Jain notes that in this case, the Court held that public interest overriding substantive legitimate expectation is mainly for the decision-maker, and courts interfere only if the decision is irrational or perverse.

The Supreme Court rejected Punjab Communications’ claim.
It held that the Government was permitted to change policy.
The legitimate expectation, if any, was defeated by public interest and policy reasons.
Use this case for: legitimate expectation does not freeze Government policy; courts only check arbitrariness/Wednesbury irrationality.