Holding

Foreign allowance is a discretionary, residuary perk under Fundamental Rule 51(2) and, absent any assurance, the doctrine of legitimate expectation does not apply; therefore the High Court's order is set aside.

Summary

The respondents, engineers deputed from the Central Public Works Department to the National Building Construction Corporation (NBCC) for projects in Iraq, were paid a foreign allowance of 125% of their basic salary. After the Fourth Pay Commission revised their basic pay, they sought a direction that the foreign allowance be calculated on the revised basic pay. The Delhi High Court allowed the petition on the ground of "legitimate expectation". NBCC appealed, arguing that foreign allowance was a discretionary, residuary perk under Fundamental Rule 51(2), that no assurance was given that it would be linked to revised pay, and that the doctrine of legitimate expectation was not pleaded. The Supreme Court held that foreign allowance is not a contractual entitlement, that the policy fixing it on pre‑revised pay displaced any legitimate expectation, and that the High Court could not base its decision on an unpleaded doctrine. Consequently, the appeal was allowed and the High Court orders were set aside.

Issues considered

The applicability of the doctrine of legitimate expectation to the claim for increased foreign allowance.
Whether foreign allowance is a contractual entitlement that must be linked to revised basic pay.
Whether the High Court could consider a doctrine not pleaded in the writ petition.
Whether the policy decision under Fundamental Rule 51(2) displaces any legitimate expectation.
The scope of discretion conferred by Fundamental Rule 51(2) on the President/Corporation regarding foreign allowance.

Legislation cited

Constitution of Indias. Art. 14
Indian Evidence Act, 1872s. s.115

Subjects

legitimate expectationforeign allowancedeputationFundamental Rule 51administrative lawnatural justicepay revisionFourth Pay Commissiondiscretionary powerwrit petitionpublic law

Judgment

A NATIONAL BUILDING CONSTRUCTION CORPORATION
v.
S. RAGHUNATHAN AND ORS.

AUGUST 28, 1998

B [S.C. AGRAWAL, S. SAGHIR AHMAD AND
M. SRINIVASAN, J.I.]

Administrative Law :

C Legitimate Expectation-Doctrine of-Nature-Invoking of-Cmuli-
tions f 01-National Building Constmction C01poration decided to grant
foreign allowance according to pre-revised basic pay and not according to
revised basic pay-Validit}-Held: Docuine of Legitimate Expectation is akin
to natural justice, reasonableness and promissmy estoppel--Jt assures fair
play in administrative action--State cannot disregard policy statement unfairly
D or apply it selectivelJ-17re doctn.ne is a source of substa11tive as well as
procedural 1ight.1-17re docuine can be invoked by an aggiieved person who
altered his position by acting upon state action--Wlzether an expectation is
legitimate or not is a question of fact--171is question has to be decided not
according to the claimant's perception but in larger public interest-Jn the
E circumstances of the case, policy decision which was based 011 objective

'
assessment of prevailing circumstance displaced legitimate expecta-
tion-Hence, C01poration's decision, upheld-Constitution of India, 1950,
A1t. 14--Evidence Act, 1872, S. ·115.

Legitimate Expectation-ls a question offact-Hence must be pleaded
F in writ petition.

Se1vice Law :

Allowances-Foreign allowance-Linked with basic pay-Increase of
G basic pay-Effect on foreign alloww1ce-171ere was no assurance by the
employer that foreign allowance would be increased with i11crease of basic
pay-'-Held, no11-gra11t of foreig11 allowance according to increase in basic pay,
valid.
-
Fundamental Rule 5 J--Compensat01y and foreign allowances-Grant
H of-To employees on deputation-Held: Grant of such allowances is at the
156
NATIONAL BUILDING CONSTRUCTION CORPN. v. S. RAGHUNATHAN 157

absolute discretion of the President-Further, foreign allowance cannot be A
treated as a salary component akin to deputation (duty) allowance as it is in
the nature of a residuary perk.

Practice and Procedure :

Pleadings-Writ petition-Question of fact-Not raised in writ petition B
but raised during arguments-Petitioners neither raised question of legitimate
expectation in writ petition nor laid a foundation for such a plea in the
pleadings nor in the affidavits-But High Court entertained the plea dudng
arguments and allowed the petition on this ground only-Correctness
of-Held :In the absence of pleadings and affidavits of petitioners, allowing C
the petition only ~n the ground of legitimate expectation which is a question
offact is a speculative exercise, and is erroneous.

The respondents who were engineers in the Central Public Work
Department (CPWD) were sent on deputation to the National Building
Construction Corporation (NBCC) for one of the overseas projects being D
executed by NBCC in Iraq. Under the servi.~e agreement the respondents
were given the option either to draw theji' salary in the scale of pay of
CPWD together with deputation (duty) allowance or get their pay fixed
under normal rules applicable to the posts for which they were selected by
NBCC. The respondents opted for the first choice. The respondents were E
also granted foreign allowance @f 125% of their basic pay by NBCC.

In the meanwhile the pay scale of the respondents in CPWD were
revised w.e.f. 1.1.1986 as a result of the recommendation of the Fourth
Central Pay Commission and consequently the pay scale of the respon-
F
dents increased. The respondents filed a writ petition before the High
Court for a direction that the respondents be paid foreign allowance @
125% of the revised basic pay which was allowed on the basis of the
Doctrine of "Legitimate Expectation". Hence this appeal.

On behalf of the appellants it was contended that foreign allowance G
was not part of the agreement between the respondents and NBCC; that
NBCC issued an order dated 15.10.1990 fixing foreign allowance @ 125%
of the pre-revised pay; that the High Power Committee constituted to look
into the wage structure of public sector undertakings after the recommen-
dations of the l<'ourth Central Pay Commission had not recommended any H

,. .
158 SUPREME COURT REPORTS [1998) SUPP. 1 S.C.R.

A increase in foreign allowance, that the Doctrine of "Legitimate Expectation"
was not pleaded in the writ petition; and that it was not open to the High
Court to entertain this plea at the stage of arguments and decide the
petition on that basis.

Allowing the appeal, the Court
B
HELD : 1.1. 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
C 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
D O!I representations and resulting detriment to the claimant in the same way
as claims based on promissory estoppel. [169-D-E]

1.2. Unfairness in the purported exercise of power can amount to
an abuse or excess of power. Thus the doctrine of "Legitimate Expectation"
E has been developed both in the context ofreasonable1;ess and in the context
of natural justice. [169-F]

1.3. In all State actions, the State has to conform to Article 14 of the
Constitution of which non-arbitrariness is a significant facet. There is no
unfettered discretion in public law and a public authority possesses powers
F only to use them for public good. Though the doctrine of "Legitimate
Expectation" is essentially procedural in character and assures fair play
in administrative action, it may, in a given situation, be enforced as a
substantive right. [171-B; 172-G]

G Food Corporation of India v. Kamdhenu Cattlefield Industries, [1993]
1 SCC 71; M.P. Oil Extraction v. State of M.P., [1997] 7 SCC 592 and Union
of India v. Hindustan Development Corporation, [1993) 3 SCC 499, relied
on.

R v. /RC exp. Preston, [1985] AC 835 and Attorney General for New
H South Wales v. Quin, [1990) 64 Aust. I.JR 327, referred to.
NATIONAL BUILDING CONSTRUCTION CORPN. v. S. RAGHUNATHAN 159

2.1. The doctrine of "Legitimate Expectation" can be invoked if the A
decision which is challenged in the court has some person aggrieved either
(a) by altering rights or obligations of that person which are enforceable
by or against him in private law; or (b) by depriving him of some benefit
or advantage which either (i) he had in the past" been permitted by the
)~ . decision- maker to enjoy and which he can legitimately expect to be B
permitted to continue to do until there has been communicated to him
some rational grounds for withdrawing it on which he has been given an
opportunity to comment; or (ii) he has received assurance from the
decision-maker that it will not be withdrawn without giving him first an
opportunity of advancing reasons for contending that it should not be
withdrawn. The Indian scenario in the field or "Legitimate Expectation" is c
not different. [169-G-H; 170-A-B]

Navjyoti Coop. Group Housi11g Society v. U11io11 of India, (1992] 4
sec 477, relied on.
D
Council of Civil SeTVice Unions v. Minister for the Civil SeTVice, (1985)
AC 374, referred to.

2.2. The question whether the expectation and the claim are
reasonable or legitimate, is a question of fact in each case. This question
has to be determined not according to the claimants' perception but in E
larger public interest. (174-E]

Food Corporatio11 of India v. Kamdhe11u Cattlefield Industries, (1993]
1 sec 71, relied on.
F
3.1 Foreign allowance was not one of the allowances which was
promised to be paid to the respondents at the time of their induction in
the service of National Building Construction Corporation (NBCC) nor
had NBCC, at any time, given any assurance to any of the respondents that
this allowance wo11ld be payable to them at the revised rate. The agreement
of the ·contract of service, executed between the respondents and the NBCC, G
does not stipulate payment of foreign allowance. [173-H]

3.2. The High Court suffered from a misconception that whenever
there was a revision of the pay scales, foreign allowance as also the other
allowances were correspondingly raised on the basis of the revised basic H
160 SUPREME COURT REPORTS [1998) SUPP.1 S.C.R.

A salary. Respondents had served on deputation with the NBCC in their
foreign projects at different periods and during these periods the pay
structure was revised only once to implement the recommendations of the
l<'ourth Central Pay Commission. There is no material on record to sup-
port the view of the High Court that whenever there was a revision in the
B pay scales, foreign allowance was correspondingly increased and, there-
fore, the respondents had come to entertain "Legitimate Expectation". The
High Court's view is speculative besides being erroneous. [174-H; 175-A-C]

4. NBCC had taken a policy decision on account of strange situations
and conditions prevailing in Iraq where the respondents were deputed on
c foreign projects assigned to NBCC, that foreign allowance would be pay-
able only on the original basic salary of the respondents and not on the
salary as revised on account of the recommendations of the Fourth Central
Pay Commission. In such a situation, the policy decision shall have the
effect of displacing the doctrine of "Legitimate Expectation", particularly
D as the decision was based on objective assessment of the prevailing cir-
cumftances including the financial stringency in which Iraq came to be
placed. There is, therefore, no element to arbitrariness in that decision.
The respondents entertained a false hope in that they were entitled to
foreign allowance according to their revised pay. [176-F -G]
E
5. In this case, the question of "Legitimate Expectation" was not
raised in the petition and no foundation was laid in the pleadings for such
a plea being advanced before the Court. Strangely, the High Court enter-
tained this plea at the stage of argument and allowed the petition only on
the ground of "Legitimate Expectation" without least realising that there
F
was hardly any legitimacy in the claim of the respondents. In the absence
of pleadings and the affidavit of the respondents in support thereof, the
whole exercise done by the High Court cannot but be termed to be specula-
tive. [174-F-G]

G 6.1. Foreign allowance could not be treated as a salary component
or akin to Deputation (Duty) Allowance as it is in the nature of a residuary
perk regulated by the provisions of Fundamental Rule 51(2). [175-D]

6.2. Fundamental Rule 51 gives a discretion to the Government to
H pay to the Government servant, on deputation in a foreign country, such
NATIONALBUILDI.NG CONSTRUCTION CORPN. '· S. RAGHUNATHAN [S. SAGHJRAHMAD, J.] 161

comperisatory allowance as may be thought fit by the President. The A
payment of compensatory allowance as also the quantum of such allowance
is left to the absolute discretion of the President. It was for this reason
perhaps that the High Power Committee did not make any recommenda-
tion in respect of foreign allowance and left it to the discretion of NBCC
to decide whether it would be payable or not at all, and if payable, at what B
rate. [176-B-C]

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4483 of
1998 Etc.

From the Judgment and Order dated 13.9.96 of the Delhi High Court C
in C.W.P. No. 1464 of 1992.

Altaf Ahmed, Additional Solicitor General, Raju Ramachandran, M.
Chandrasekaran, Ravindra Kumar, Manoj Kumar, V.J. Francis and Dr.
Vincent Panikulangara, C.V. Subba Rao and P.I. Jose, for the appearing D
parties.

The Judgment of the Court was delivered by

S. SAGHIR AHMAD, J. Leave granted.
E
2. S.L.P. (C) 10372 of 1997 has been filed by the appellant
(hereinafter referred to as 'NBCC') against the judgment and order dated
13.9.96 of the Delhi High Court by which C.W.P. No. 1464 of 1992 in which
the respondents' prayer for directions to NBCC to pay the Foreign Al-
lowance @ 125% of the basic pay, as revised by the Fourth Pay Commi.s-
sion, w.e.f. 1.1.1986 while they were still in foreign service in a Foreign F
Country, was allowed, payment of Deputation (Duty) Allowance was also
allowed by anclther order dated 25.7.97 passed in CM 8287/96 filed in the
same Civil Writ. The other S.L.P. namely, S.L.P. (Civil) No. 20753 of 1997
arises out of C.W.P. No. 472 of 1994 filed by the respondents in that case
for the same reliefs. This writ petition has also been allowed by the Delhi G
High court by judgment and order dated 25.7.97 in which the earlier
judgments dated 13.9.96 and 25.7.97 have been followed. The questions
involved in both the appeals are the same with the only difference that in
the first petition there are 11 respondents while in the 2nd there are 5, out
of whom one is the widow of a deceased respondent. H
162 SUPREME COURT REPORTS (1998] SUPP. 1 S.C.R.

A 3. NBCC is a Government of India Enterprise (Government Com-
pany) engaged in the business of construction work in India and abroad.
In addition to its own permanent work force, it obtained the services of
personnel drawn from other Government Departments, including Central
Public Works Department, from where the respondents were brought on
B deputation for one of the overseas projects being executed by the NBCC
in Iraq. Respondents joined the NBCC on deputation on the basis of
certain office orders one of which is the office order dated 21.11.1993
which reads as under:
I

"The Director General of works, CPWD, has been pleased to place
C the services of the following Executive Engineers (Civil) of this
department at the disposal of National Buildings Construction
Corporation, New Delhi for appointments as Resident Engineer
(Civil) for posting on their projects in Iraq for a period of two
years in ~he first instance with immediate effect in public interest
D as per terms and conditions of foreign se1vice shown in the
Ann exure :.
..
~

S/Shri

1. V. Nainani, Asian Games, New Delhi.
E
2. AK. Mittal, EE(C), 0/0 C.E. (CDO) New Delhi

3. Pawan Kumar, EE(C), Bikaner Cen. Divn., Bikaner

4. KVLN Rao, EE(C), Fly-over Project, New Delhi.
F
5. G. C. Khattar EE(C), SSW (Constn. Zone) CPWD, New
Delhi.

6. SK Mittal, EO To CE (NDZ), CPWD, New Delhi

G 7. S. Ramamurty, EE(C), Fly-over Project, New Delhi.

8. K. John Surgeon, EE(C), Hyderabad Cen. Division, CPWD,
Hyderabad.

2. It is certified that but for their deputation to National Building
H Construction Corporation, New Delhi, these officers would have
NATIONAL BUILDING CONSTRUCTION CORPN. v, S. RAGHUNATHAN (S.SAGHIRAHMAD, J.] 163

continued to officiate as Executive Engineer (Civil) in CPWD. A
3. These Executive Engineers (Civil) may please be relieved im-
mediately by making dual arrangements. Their substitutes are
being posted separately.

4. This issues with the approval of Ministry of Works & Housing B
vide their U.0. No. 1445-SF/FW/82 dated 22.12.82.
)

Sd/-
Mrs. Neena Garg
Dy. Director of Admn."
c
4. The terms and conditions of foreign service were contained in
a separate document annexed to this office order which provided as
under:

1. The officer will have the option either to draw his grade pay in
the Central P.W.D. from time to time plus a deputation (duty) D
allowance or the pay in the scale of pay of the new post as may
be fixed under normal rules as per Ministry of Finance (Deptt. of
Expenditure) No. 10/24/E11(6)/60, dated 4.5.61, as amended from
time to time.

2. Dearness allowance will be regulated at the rates admissible to
E
Central Government Servants.

3. House Rent and City Compensatory Allowance will be regulated
at the rate admissible to the employees of the foreign employer.
F
4. Liability for leave salary in respect of disability leave granted on
account of disability incurred in or through foreign service even
though such disability manifests itself after the termination of
foreign service, will be borne by the foreign service employer.

5. He would be entitled to travelling and daily allowance for G
journeys in connection with his duties on foreign services as
admissible to him under the Rules framed by the Foreign
Employer.

6. The contribution towards leaves salary and pension for the
period the officer remains on foreign service will be paid by foreign H
164 SUPREME COURT REPORTS (1998) SUPP. 1 S.C.R.

A employer according to the rates in force from time to time in
accordance with the orders issued by the President under F.R. 116.

7. He will remain subject to leave rules applicable to the service
of which he is a member.

B 8. He will be eligible to the Medical Attendance and the treatment
not inferior to that admissible to an officer of the corresponding
state under the Central Government Rules.

9. Joining time, joining time pay and travelling allowance on
transfer to the foreign service and reversion therefrom shall be
C regulated under rules framed by foreign Employer and paid for by
him. ·

10. He will be entitled to leave travel concessions as admissible to
Central Government Employees of his status and expenditure on
this <..nount will be borne by the foreign employer.
D
11. The whole expenditure in respect of any compensatory al-
lowance for the period of leave in or at the end of foreign service
shall be borne by the foreign employer.

12. He will not be allowed to join pension scheme which may be
E in force in the Foreign Service.

13. The foreign service will commence from the date he relin-
quishes the post under the Central P.W.D. and end on the day he
resumes duty in the Central P.W.D.

F 14. The provisions of Government accommodation, if any, oc-
cupied by him at the time of proceeding on deputation would be
subject to the conditions laid down in the Ministry of W.H. &
.S.O.M. No. 12016 (1)/68-PII, dated 13.12.68, as may be amended
from time to time.

G 15. He will be subject to C.G.F.l.S Recovery contributions towards
C.G.F.I.S. May be effected from the deputationist and the amount
remitted to the pay & Accounts officer concerned.

5. The other Office Orders were also issued in similar terms. Each
of the respondents executed separate and individual contract/employment \
H agreement with the NBCC and worked with the NBCC for different
NATIONAL BUILDING CONS1RUCTION CORPN. '· S. RAGHUNATHAN [S.SAGHIRAHMAD, J.] 165

periods from 1982-83 to 1987-88. Under the service agreement, the respon- A
dents were given an option either to draw their salary in the scale of pay
admissible to the employees of Central P.W.D. from time to time together
with Deputation (Duty) Allowance or salary in the scale of pay for the new
posts fixed under normal rules in terms of Ministry of Finance (Depart-
ment of Expenditure) No. 10/24/EII(6) /60 dated 4.5.1961 as amended from
time to time.
B

6. The respondents opted for the Central P.W.D. scale and wanted
their salary to be paid to them in that scale as revised from time to time.

7. In order to .give effect to the recommendations of the Fourth Pay C
Commission, Central Civil Service (Revised Pay) Rules, 1986 were made
by the Government of India which provided, inter alia, that revised pay
would be payable with effect from 1st January, 1986.

8. The pay of the respondents in their parent Department, namely,
C.P.W.D., was also revised and fixed in the new scales with effect from D
01.01.86 by office order dated 02.01.91 which related to respondent No. 5.
Similar orders were issued in respect of all the respondents. It is pointed
out that although arrears were paid to other employees, it was not paid to
the respondents or the employees who were posted abroad despite their
representations. Ultimately, NBCC informed the respondents that in the
E
case of deputationists who were posted on overseas projects and were
drawing the pay of their parent Department, their cases were under
consideration and they would be informed of the decision as and when the
same was finally taken.

9. The recommendations of the Fourth Pay Commission, allegedly, F
had given rise to some unrest amongst employees of various public sector
undertakings who filed a Writ Petition directly in this Court. The Writ
Petition was disposed of on 14th March, 1986 with the direction to the
Government of India to appoint a High Power Committee to look into their
grievances. Consequently, the Government of India appointed a High G
Power Committee on 7th April, 1986 under the Chairmanship of Mr.
Justice R.B. Mishra, a retired judge of this Court.

10. The High Power Committee submitted its report to the Govern-
ment on 24.11.88 and by Order dated 03.05.90, this Court directed that the
recommendations of the Committee may be implemented. H
166 SUPREME COURT REPORTS [1998) SUPP. 1 S.C.R.

A 11. In order to implement the High Power Committee report, NBCC
issued an order dated 15th October, 1990 for revision of wages of all its
employees posted on overseas projects including those who had joined on
deputation. This order was challenged by the respondents directly in this
Court in Civil Writ Petition No. 1091 of 1991 but it was dismissed as
B withdrawn on 18.12.91 with liberty to approach the High Court. The
respondents then filed the Writ Petition in the High Court claiming the
following reliefs:-

(i) To issue a writ of mandamus, or a writ, order or direction in
the nature of mandamus directing the respondent to make
c payments due to the petitioners from 1.1.1986 till their
repatriation to India on the basis of the CCS (Revised Pay)
Rules, 1986 announced by the Government, and in accord-
ance with the terms originally agreed upon at the time of
deputation;
D
(ii) To pass a writ of mandamus, or a writ, order or direction in
the nature of mandamus directing the respondent Corpora-
tion to pay duty allowance and DA from the due dates
announced by the Government for admissibility of DA from
1982 onwards;
E
(iii) To issue a writ of mandamus, or a writ, order or direction in
the nature of mandamus directing respondent to effect
proportionate increases in HRA, CCA, other Special al-
lowances (like foreign allowance, area allowance, medical
F allowance, non- practising allowance, food subsidy etc.) and
terminal benefits of the petitioners also, as in the case of
deputationists who are posted in India;

(iv) To issue a writ of mandamus, or a writ, order or direction in
the nature of mandamus directing respondent to make the
G payment of arrears of pay as admissible to the petitioners;

v) To issue a writ of mandamus, or a writ, order or direction in
the nature of mandamus directing the respondent to pay
interest @ 18% on the amounts due to the petitioners from
H 1.1.1986 for the delay committed by the respondents;

'
"'
NA TI ON AL BUILDING CONSTRUCTION CORPN. v. S. RAGHUNATHAN (S.SAGHIR AHMAD, J.] 167

(vi) To issue a writ of certiorari, or a writ, order or direction in A
the nature of certiorari quashing the order dated 15.10.1990
passed by respondent corporation.

(vii) To grant cost of the petition; ancr

B
(viii) To pass such other order or orders, as may be deemed fit
and proper in the facts of the present case.

12. ln this writ petition, a statement was given by the counsel for
NBCC on 30th, October, 1992 that the claim of the respondents was not
disputed but the payment could not be made to them on account of the C
embargo put up by the United Nations and that the Government of India
had approached the United Nations Authorities for lifting the embargo.
On 15th February, 1993, another statement was given by the counsel for
NBCC before the High Court that NBCC had applied for loan to make
payment to the employees who had worked in Iraq and who were entitled D
to be paid on the basis of the Fourth Pay Commission Report. Consequent-.
Iy, the time was prayed for making the payment.

13. On the basis of these two statements of the counsel for NBCC,
the Writ Petition was disposed of on 21st July, 1993 by issuing a direction
E
to NBCC to make payment to the respondents within eight weeks. NBCC,
however, filed a review application before the High Court on the ground
that the statements of the counsel made before it do not correctly reflect
their stand but the High Court dismissed the review application on 12th
October, 1993. It was against this order that NBCC filed Special Leave
Petitions before this Court. Leave was granted and the two Civil Appeals F
No. 7113/95 and 7114/95 were disposed of by this Court on 4th August,
1995. The appeals were allowed and the order dated 21st July, 1992, passed
. by the High Court, was set aside. The Writ Petitions were directed to be
restored for being disposed of on merits.
G
14. The High Court by the impugned judgment dated September 13,
1996 and 25.7.97 disposed of both the petitions and it is its direction to
NBCC to pay Foreign Allowance @ 125% on the revised basic pay with
~-

effect from 01.01.86 which is the only contentious issue between the parties
in these appeals. H
168 SUPREME COURT REPORTS (1998] SUPP. 1 S.C.R.

A 15. Shri Altaf Ahmad, Additional Solicitor General, appearing on
behalf of NBCC has contended that the claim of the respondents could not
have been legally allowed by the High Court merely on the basis of
"Legitimate Expectation" particularly when it has been found, as a fact, by
the High Court itself that l"oreign Allowance was not covered by the terms
B of the contract which contemplated only a Deputation (Duty) Allowance.
It is also contended that NBCC had taken a policy decision that Foreign
Allowance will be payable only on the basis of pre-revised basic pay and
not on the basis of basic pay as revised in terms of the recommendations
of the Fourth Pay Commission and, therefore, the doctrine of "Legitimate
Expectation" stood excluded. Moreover, the High Power Committee had
c not, it is further contended, recommended any increase in the Foreign
Allowance and had, on the contrary, followed the principle contained in
FR 51(2) in respect of perquisites and, therefore, the residuary perks as
also their quantum was left to the discretion of the Corporation and it was
for the Corporation to allow or not to allow any of the residuary perks. It
D is also pointed out that the doctrine of "Legitimate Expectation" was not
pleaded in the Writ Petition and no foundation was laid for applying this
doctrine to the facts of the present case and, therefore, it was not open to
the High Court to entertain this plea at the stage of arguments and to
decide the question on that basis.
E
16. Learned counsel for the respondents contended that NBCC was
paying Foreign Allowance to the respondents @ 125% of their basic pay
and since after the recommendations of the Fourth Pay Commission,
NBCC itself had decided to increase certain allowances on the basis of
F revised pay, it could not deny such increase in respect of Foreign Al-
lowance. Freezing of Foreign Allowances on pre-revised basic pay was
arbitrary and consequently the High Court was justified in holding it to be
illegal. It is pointed out that when the respondents were sent to Iraq, the
Foreign Allowance, payable to them, was linked to their basic pay and,
G therefore, it was not open t9 NBCC to freeze the Foreign Allowance on
the pre-revised basic pay even after the implementation of the recommen-
dations of the Fourth Pay Commission by which all other allowances stood
payable, according to the own decision of NBCC, on the basis of revised
basic pay. There was, therefore, no rationale or reasonable basis for
I
I

H rejecting any such increase in respect of Foreign Allowance. I
!•
I
f
NATIONAL ijUILDING CONSTRUCTION CORPN. '· S. RAGHIJNATHAN JS.SAGHIRAHMAD, J.] 169

17. From the facts set out above and those pleaded before the High A
Court, it will be seen that Foreign Allowance was not part of the agreement
between the respondents and NBCC. The respondents were inducted into
NBCC on deputation and, therefore, NBCC had agreed to pay them the
Deputation (Duty) Allowance. As pointed out earlier, with regard to this
allowance or, for that matter, any other allowance, there is no dispute
B
between the parties involved in this petition and the only question with
which we are concerned in this petition is the payment of Foreign Al-
lowance payable at the rate of 125% of the revised basic pay. The further
question is whether the High Court merely on the basis of the doctrine of
"Legitimate Expectation" was justified in allowing the claim of the respon-
dents?
c
18. The doctrine of "Legitimate Expectation" has its genesis in the
field of administrative law. The Government and its departments, in ad-
ministering the affairs of the country are expected to honour their state-
ments of policy or intention and treat the citizens with full personal D
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 E
rights. But claims based on "Legitimate ExpectaLion" have been held to
require reliance on representations and resulting detriment to the claimant
in the same way as claims based on promissory estoppel.

19. Lord Scarman in R. v. Inland Revenue Commissioners ex p.
F
Preston, (1985) AC 835 laid down emphatically that unfairness in the
pm:ported exercise' of power can amount to an abuse or excess of power.
- Thus the doctrine of "Legitimate Expectation" has been developed, both in
the context of reasonableness and in the context of natural justice.

20. Lord Diplock in Council of Civil Service Unions v. Minister for G
...... the Civil Service, (1985) AC 374 laid down that doctrine of "Legitimate
Expectation" can be invoked if the decision which is challenged in the
Court has some person aggrieved either (a) by alteling 1ights or obligations
of that person which are enforceable by or against him in plivate law; or (b)
by depliving him of some benefit or advantage which either (i) he had in the H
170 SUPREME COURT REPORTS [1998) SUPP. 1 S.C.R.

A past been permitted by the decision-maker to enjoy and which he can
legitimately expect to be pennitted to continue to do until there has been.
communicated to him some rational grounds for withdrawing it on w~1ich ile .~
has been given an opp01tunity to comment; or (ii) he has received assurance
from the decision-maker that it will not be withdrawn without giving him first
B an oppo1tunity of advancing reasons for contending that it should not be
withdrawn. (Emphasis supplied).

21. The Indian scenario in the field of "Legitimate Expectation" is not
different. In fact, this Court, in several of its decisions, has explained the
doctrine in no uncertain terms.
c
22. In Navjyoti Coop. Group Housing Society and Others v. Union of
India and Others, (1992] 4 SCC 477, the decision of the House of Lords in
Council of Civil Se1vice Unions v. Minister for the Civil Se1vice, (supra) was
followed and that decision was summarised in the following words:-

D "It has been held in the said decision that an aggrieved person was
entitled to judicial review if he could show that a decision of the
public authority affected him of some benefit or advantage which
in the past he had been permitted to enjoy and which he legitimate-
ly expected to be permitted to continue to enjoy either until he
E was given reasons for withdrawal and the opportunity to comment
on such reasons."

23. This Court further observed as under:-

"The existence of 'legitimate expectation' may have a number of
F different consequences and one of such consequences is that
the authority ought not to act to def~at the "legitimate
expectation' without some overriding reason of public policy to
justify its doing so. In a case of 'legitimate expectation' if the
authority proposes to defeat a person's 'legitimate expectation'
it should afford him an opportunity to make representations in
G
the matter ........................................... .

It may be indicated here that the doctrine of 'legitimate .
. expectation' imposes in essence a duty on public authority to act
fairly by taking into consideration all relevant factors relating to
H such 'legitimate expectation'. Within the conspectus of fair dealing
NATIONAL BUILDING CON,'TRUCTION CORPN." S. RAGHUNATHAN {S.SAGHIRAHMAD, J.] 171

in case of 'legitimate expectation', the reasonable opportunities to A
make representation by the parties likely to be affected by any
change of consistent past policy, come in."

24. In Food C01poration of India v. Mis Kamdhenu Cattlefield In-
dust1ies, [1993] 1 SCC 71, it was held that in all state actions, the State has
to conform to Article 14 of the Con,stitution of which non-arbitrariness is B
a significant facet. It was further observed that there is no unfettered
discretion in public law and a public authority possesses powers only to use
them for public good. It was further observed as under:-

"The mere reasonable or legitimate expectation of a citizen, in
such a situation, may not by itself be a distinct enforceable right,
c
but failure to consider and give due weight to it may render the
decision arbitrary, and this is how the requirement of due con-
sideration of a legitimate expectation forms part of the principle
of non-arbitrariness, a necessary concomitant of the rule of law.
Every legitimate expectation is a relevant factor requiring due D
consideration in a fair decision-making process. Whether the apec-
tation of the claimant is reasonable or legitimate in the context is a
questio11 offact in each case. Whenever the question an"ses, it is to
be detennined not according to the claimant's perception but in larger
public interest wherei11 other more imp01tant considerations may
E
outweigh what would othe1Wise hav_e been the legitimate expectation
of the claimant. A bona fide decision of the public authority
reached in this manner would satisfy the requirement of non-
arbitrariness and withstand judicial scrutiny. The doctrine of
legitimate expectation gets assimilated in the rule of Jaw and
operates in our legal system in this manner and to this extent." F
(Emphasis supplied)

25. In U11io11 of India and Others v. Hindustan Developme11t C01pora-
tion and Others, (1993) 3 SCC 499, the meaning cf word "Legitimate
Expectation" was again considered. Quoting from the case of Attomey G
Ge11eral for New South Wales v. Qui11, [1990] 64 Aust LJR 327, the following
lines:-

"To strike down the exercise of administrative power solely on the
ground of avoiding the disappointment of the legitimate expecta-
tions of an individual would be to set the Courts adrift on a H
172 SUPREME COURT REPORTS (1998] SUPP. 1 S.C.R .

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 Court observed as under:-
B
"If a denial of legitimate expectation in a given case amounts to
denial of right guaranteed or is arbitrary, discriminatory, unfair or
biased, gross abuse of power or violation of principles of natural
justice, the same can be questioned on the well-known grounds
attracting Article 14 but a claim based on mere legitimate expecta-
c tion without anything more cannot ipso facto gi1'e a light to invoke
these p1i1Zciples. It can be one of the grounds to consider but the
court must lift the veil and see whether the decision is violative of
these principles warranting interference. It depends ve1y much 011
the facts and the recog1Zised general p1inciples of administrative law
D applicable to such facts and the concept of legitimate expectation
which is the latest recmit to a long list of concepts fashioned by the
cowts for the review of administrative actioll, must be resaicted to
the general legal limitations applicable and bi1Zdi1Zg the manner of •
the future exercise of administrative power in a pa1ticular case. It
E follows that the concept of legitimate expectation is "not the key
which unlocks the treasury of natural justice and it ought not to
unlock the gates which shuts the court out of review on the merits",
particularly when the element of speculation and uncertainty is
inherent in that very concept."

F 26. This doctrine was reiterated in M.P. Oil Extraction and Another
V. State of M.P. and Others' (1997] 7 sec 592, in which it was also laid
down that though the doctrine of "Legitimate Expectation" is essentially
procedural in character and assures fair play in administrative action, it
may, in a given situation, be enforced as a substantive right.
G 27. Applying the principles discussed above in the instant case, it will
· be seen that Foreign Allowance was not one of the allowances which was
promised to be paid to the respondents at thie time of their induction in
the service of NBCC nor had NBCC, at any time, given any assurance to ·
any of the respondents that this allowance would be payable to them at the
H revised rate. The agreement or the contract of service, executed between
NATIONAL BUILDING CONSTRUCTION CORPN . .-. S. RAGHUNATHAN (S.SAGHIRAHMAD. J.] 173

the respondents and the NBCC, does not stipulate payment of Foreign A
Allowance to them. Even the High Court has observed that Foreign
Allowance was not one of the allowances mentioned in the terms of
deputation. The exact observations of the High Court need to be
reproduced here:

"No doubt, foreign allowance is not one of the allowances men- B
tioned in terms of deputation, but the same is akin to the deputa-
tion (duty) allowance referred to in clause (1) of the terms of
deputation. When the sam_e was made intrinsically linked with the
basic pay and in the past there has been correspondingly increase
on every revision of pay on the same percentage basis, there is no c
reason forthcoming that why the same now stands frozen on the
pre-revised basic pay and why it is not allowed at the same
percentage on the revised basic pay. In the absence of any justifi-
able reasons this act of the respondents will have to be held to be
illegal and arbitrary. Petitioners legitimately expected that on D
revision of the basic pay, the foreign allowance would also cor-
respondingly stand enhanced on percentage basis. Foreign al-
lowance, which is akin to and deputation (duty) allowance has to
be regulated as per the rates specified for the purpose, namely, on
percentage basis of the basic pay and in case there has been a
revision of basic pay, it would automatically stand revised. The E
deputation (duty) allowance is also an allowance payable on per-
centage basis and on revision of pay, it is payable on percentage
basis on the revised basic pay."

28. At another place, the High Court has observed as under: F

"Petitioners were to be governed by the terms and conditions
contained in order of deputation, copy of which was also sent to
the respondent. The respondent accepted the petitioners services
on deputation on the terms and conditions, as attached to the said
order. Since the n~spondent has not produced on record the G
alleged contract or its copy and nothing was alleged during the
course of arguments on the alleged contract, we have no hesitation
in holding that the office order similar to annexure P-1, issued in
the case of each petitioner containing terms and conditions of
deputation would govern their case and in so far as the foreign H
174 SUPREME COURT REPORTS [1998) SUPP. 1 S.C.R.

A allowance is concerned, the same would be payable to the
petitioners on the same percentage on the revised basic pay at
which it was payable prior to revision on the pre-revised basic pay
and the action of the respondent as regards this allowances is
concerned, is bad inasmuch as the petitioners legitimately expected
'that this allowance would stand revised and become payable to
B them, as in the past, on percentage basis of the revised pay. In case
the respondents wanted to effect any change in the same, it was
reasonably expected that the respondents ought to have informed
the petitioners and in case the .fresh proposed terms would not
have been acceptable to the petitioners, the petitioners might have
c taken a decision to get themselves repatriated or got terminated
their deputation."

29. The above extracts indicate the reasoning and the approach of
the High Court. They indicate the precise ground on which the claim of
the respondents was allowed. We are constrained to observe that the
D approach of the High Court was wholly erroneous and the reasoning is
equally fallacious.

30. As pointed out by this Court in Food Co1poration of India v.
Kamdhenu Cattlefield Indust1ies, [1993] 1 SCC 71, which has already been
E referred to above, the question whether the expectation and the claim is
reasonable or legitimate, is a question of fact in each case. It was also
observed that this question had to be determined not according to the
claimants' perception but in larger public interest.

31. Incidentally, in this case, the question of "Legitimate Expectation"
F was not raised in the petition and no foundation was laid in the pleadings
for such a plea being advanced before the Court. Strangely, the High Court
'allowed this plea at the stage of argument and allowed the petitions only
on the ground of "Legitimate Expectation" without least realising that there
was hardly any legitimacy in the claim of the respondents. In the absence
G of pleading and the affidavit of the respondents in support thereof,' the
whole exercise done by the High Court cannot but be termed to be
speculative.

32. That apart, the High Court suffered from a misconception that
whenever there was a revision of the pay scales, Foreign Allowance as also
H the other allowances were correspondingly raised on the basis of the
NATIONAL BUILDING CONSTRUCTION CORPN. '· S. RAGHUNATHAN [S.SAGHIR AHMAD. J.j 175

: ' ' revised basic salary. Respondents had served on deputation with the NBCC A
in their foreign projects at Iraq from 1982-83 to 1986-87 and during this ,, ...
period the pay structure was revised only once to implement the reeom-
mendations of the Fourth Pay Commission. Was there any other revision
in the pay structure of the respondents or any of them during their tenure
with the NBCC; if so, when ? To whom was the benefit of such revision
B
available? Who are those other officers and employees serving on deputa-
tion in a foreign country who were benefitted by any revision in the pay
structure during the period 1982-83 to 1986-87? These are the few ques-
lions which legitimately arise, and unless there is material on record to
answer these questions, the observations of the High Court that whenever
there was a revision in the pay scales, Foreign Allowance was correspond- c
ingly increased and, therefore, the respondents had come to entertain
"Legitimate Expectation" , are wholly speculative, besides being erroneous.

33. Foreign Allowance could also not be treated as a salary com-
ponent or akin to Deputation (Duty) Allowance as it was in the nature of
a residuary perk regulated by the provisions of P.R. 51(2).
D

34. Fundamental Rule 51 provides as under:-

"F.R. 51. (1) When a Government servant is, with proper sanction,
temporarily deputed for duty out of India either in connection with E
the post held by him in India or in connection with any special
duty on which he may temporarily be placed, he may be allowed
by the President to draw during the period of deputation the same
pay which he would have drawn had he remained on duty in India:
F
Provided that a Government servant, who is placed on deputa-
tion while already on leave out of India on average pay, may be
required by the President to continue to be on leave, in which case
he shall be given during that period, in addition to his leave salary,
an honorarium of one-sixth of the pay which he would have drawn
had he remained on duty in India; the cost of passages from and G
to India shall be borne by him.
.
'!
(2) A Government servant on deputation may also be granted a
compensatory allowance in a foreign country of such amount as
the President may think fit. H
176 SUPREME COURT REPORTS [1998) SUPP. 1 S.C.R.

A (3) The foreign exchange equivalent of the pay, honorarium or
compensatory allowance admissible under sub-rule (1) Sub-rule
(2) shall be calculated at such rate of exchange as the President
may by order prescribe."

35. Sub-rule (2) of Rule 51, quoted above, gives a discretion to the
B Government to pay to the Government servant, on deputation in a foreign
country, such compensatory allowance as may be thought fit by the Presi-
dent. The payment of compensatory allowance as also the quantum of such
allowance is left to the absolute discretion of the President. It was for this
reason perhaps that the High Power Committee did not make any recom-
C mendation in respect of Foreign Allowance and left it to the discretion of
NBCC to decide whether it would be payable or not at all, and if payable,
at what rate. The Ministry of External Affairs had already fixed Foreign
Allowance under F.R. 51(2) for its officers and other staff working in its
Missions abroad. The NBCC, therefore, issued the order dated 15th Oc-
D tober, 1990 specifying the benefits which would be available to its
employees and deputationists with effect from 1.1.1986. It was in this order
that it was indicated that Foreign Allowance would continue to be payable
at the rate of 125% of the basic pay (pre-revised) as on or upto 31.12.1985.
There was thus no increase in the Foreign Allowance payable to the
E respondents; nor was the amount reduced in any way.

36. NBCC had taken a policy decision on account of strange situa-
tions and conditions prevailing in Iraq where respondents were deputed on
foreign projects assigned to NBCC, that Foreign Allowance would be
payable only on the original basic salary of the respondents and not on the
F
salary as revised on account of the recommendations of the Fourth Pay
Commission. In such a situation, the policy decision shall have the effect
of displacing the doct~ine of "Legitimate Expectation", particularly as the
decision was based on objective assessment of the prevailing circumstances
including the financial stringency in which Iraq came to be placed. There
G I is, therefore, no element of arbitrariness in that decision.

37. The respondents were the prisoners of hope. They attempted to
water the leaves when the tree itself was found cut off at its root. This is
the least that can be said of this case which had no pleadings and yet the
H plea prevailed.
NATIONAL BUILDING CONSJRUCTION CORPN. v. S. RAGHUNATHAN [S.sAGHJR AHMAD, J.) 177

38. For the reasons stated above, the appeals are allowed, the judg- A
ment and order dated 13.9.96 and 25.7.97 passed by the Delhi High Court
are set aside and the wiit petitions relating to Foreign Allowance are
dismissed, but without any order as to costs.

v.s.s. Appeal allowed.