Holding

The Court held that the sanction order under Ex. P‑4 created a legitimate expectation, the government had no statutory or general‑clauses power to rescind it, and the cancellation order Ex. P‑7 was void for violating natural‑justice principles and for being based on extraneous considerations.

Summary

The State of Kerala issued a Gazette order (Ex. P‑4) sanctioning 91 private agencies to open or upgrade unaided recognised schools under the Kerala Education Act, 1957. After a change of government, a subsequent order (Ex. P‑7) cancelled the earlier sanction without hearing the applicants. The applicants challenged the cancellation before the High Court, which quashed the cancellation and directed the government to consider their applications under the statutory procedure. On appeal, the Supreme Court examined whether the sanction created a legitimate expectation, whether the government could rescind the sanction under the Act, the Rules or Section 20 of the Kerala General Clauses Act, and whether the cancellation violated natural‑justice principles. The Court held that the sanction conferred a legitimate expectation to have the applications processed, that the government lacked authority to cancel the sanction, and that the cancellation order was void for breaching natural justice and for being based on extraneous considerations. Consequently, the appeals were dismissed and the cancellation order remained set aside.

Issues considered

The sanction granted under Ex. P‑4 created a legitimate expectation or enforceable right to have the applications considered under Rules 9 and 11.
Whether the State Government, under the Kerala Education Act, the Kerala Education Rules, or Section 20 of the Kerala General Clauses Act, possessed the power to cancel the sanction order issued under Rule 2A(5).
Whether the cancellation order Ex. P‑7 was vitiated by non‑observance of the principles of natural justice and by reliance on extraneous factors.
Locus standi of the private school agencies to challenge the cancellation order.
The scope of the inherent power of cancellation inherent in the power to sanction new schools.

Legislation cited

Constitution of Indias. Article 19(1)(g), s. Article 226, s. Article 30(1)
Kerala Education Act, 1957s. 2(2), s. 2(7), s. 2(8), s. 3(1), s. 3(3), s. 3(4), s. 3(5), s. 36, s. 37
Kerala General Clauses Acts. 20

Subjects

education lawunaided recognised schoolslegitimate expectationnatural justiceadministrative lawKerala Education Actrevocation of sanctionSection 20 General Clauses Actwrit petitionmandamuscancellation order

Judgment

STATE OF KERALA AND ORS.
A
v.
K.G. MADHAVAN PILLAI AND ORS.

SEPTEMBER 19, 1988

B [A.P. SEN AND S. NATARAJAN, JJ.]

Kera/a Education Act, 1957/Kerala Education Rules-Sec-
tions 2(7), 2(8), 37/Chapter V-Rules 2, 2A, 9, 11 and 12-0pening
new unaided recognised· Schools or upgrading existing schools-
Government according sanction to educational agencies-Later order
c:; cancelled-Held Order vitiated by reason of non-observance of
principles of naturaljustice.

Respondents are running Private Schools. In pursuance of the
State of Kerala publishing in the Gazette a final list of areas where new
unaided recognised high schools/upper primary schools/lower primary
D schools were to be opened or existing unaided lower primary schools/
upper primary schools were to be upgraded in the year 1986-87 the
Respondents-educational agencies submitted applications for grant of
sanction to open the unaided recognised schools or for upgrading the
schools already run by them. These applications were duly inquired and
considered by the District Educational Officer as also by the Director of
i;. Education as per the Rules & procedure laid down therefor, particu-
larly Rules 24(3) and (4) and thereafter the Government considered the
applications in accordance with Rule 2A(S) and took a final decision for
grant of necessary sanction for opening/upgrading of 36 lower primary
schools, 36 upper primary schools and 19 high schools, totalling in all
91 schools in the list of areas selected. On 4.2.87, the State Government
p issued an Order under Ex. P-4, granting sanction to the Respondents to
open new unaided schools or to upgrade their existing schools subject to
the conditions set out therein. However, by an Order Ex. P-5, dated
20.2.87, the Government directed that the earlier order under Ex P-4
be kept in abeyance. The Respondents challenged the Order of the
Government by means of a Writ Petition.
G
During the pendency of the Writ Petition general elections were
held to the ·Kerala Legislative Assembly as a result whereof a new
Ministry assumed office. The Government under the new Ministry pas-
sed an order dated 19.5.87 under Ex P-7 cancelling in toto the order
under Ex-P-4 granting sanction to the Respondents to open the school
H or to_ upgrade the existing schools.
94.
STATE OF KERALA v. K.G.M. PILLAI 95

The Respondents thereupon amended their Petition suitably and
A
challenged the validity of the order of cancellation passed under Ex.P·7.
The Single Judge of the High Court before whom the Writ Petition first
I
came up for hearing took the view that while it was obligatory for the
Government to follow the procedure prescribed in Rules 2 & 2A, Chap·
ter V, if it was to permit the opening of new unaided recognised schools
or upgradation of existing schools, the converse result would not follow B
i.e. wherever the Government had gone through the procedure under
the Rules the Government could not retrace its steps and was bound to
proceed further in the matter and that the Governlnent had no option to
reverse its decision. On. the question of revocation of the order of sane-
tion, however, the learned Judge held that the power to sanction new
schools carried with it the inherent power of cancellation 11f an order
passed under Rule 2A(S). Accordingly the learned Single Judge dlsmls·
c
sed the petitions. The respondents thereafter preferred appeals before
the Division Bench. The Division Bench allowed the appeals, reversed
the order passed by the Single Judge but granted only limited reliefs to
the Respondents in that it quashed the order under Ex. p.7 dated
19.S.87 and issued a mandamus to the State Government to consider the D
applications of the Respondents on their merits on the basis of the
earlier order passed in their favour under Ex. p.4 dated 4.2.87. The
Division Bench further held that the Respondents have /ocus-standi to
challenge the order of cancellation and that the Government did not
have the power or jurisdiction to revoke the cancellation order. It also
held that the cancellation order violated the principle ofnaturaljust/ce. E

Being aggrieved by the decision of the Division Bench of the High
Court, the State filed these appeals after obtaining special leave.

Dismissing the appeals this Court,
F
HELD: The importance of securing recognition lies in the fact
that without recognition the students studying in the unaided schools
will neither be permitted to appear as candidates In the examinations
conducted by, the State nor be eligible to avail of the opportunities for
higher education or to enter public service examination. The obtain·
,-
ment-of recognition from the Government is therefore a vital factor for G

'
)
the educational agencies starting new schools or newly upgrading their
existing schools. [I07B-C]

Rule 2A(l) makes it imperative for the Director to call for
applications from interested parties for opening new schools or up·
grading existing schools in the selected areas. The mandate contained H
96 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.

A therein goes to show that the identification and selection of inade-
quately served areas under Rule 2(4) is not an idle or meaningless
exercise. [IIIA-C]

When even an unsuccessful applicant is conferred a right to re-
present to Government against the non-approval of the application,
B can it be said that an approved applicant has no right whatever to
complain when the sanction granted to him is revoked all of a sudden
without he being given any opportunity to show cause against such
cancellation. [ lllD-E]

The further scrutiny of the application of the approved applicant
under Rule 9 and the confirmation of approval under Rule 11 would
c not, however, mean that the earlier sanctii>u granted under Rule 2A(S)
does not create "legitimate expectation right" in the approved
applicant. [lllG-H; 112A]

The Rules do not provide for the Government reviewing suo moto
D any order of sanction passed under Rule 2A(S) in favour of any appli-
cant for opening of a new school or upgrading an existing school and its
power of revision under Rule 12 is conimed to the reconsideration of the
case of any applicant whose name did not find a place in the final list of
~ ""
approved applications published hy the Government. [116D-EJ

E Though the sanction granted to the respondents under Ex. P-4
would not by itself entitle them to open new schools or upgrade the
existing schools, it did confer on them a right to seek the continuance of
the statutory procedural stream in order to have their applications
considered under Rule 9 and dealt with them under Rule II. [122C]

F It was not open to the Government, either under the Act or Rules
or under Section 20 of the Kerala General Clauses Act to cancel the
approval granted to the respondents under Rule 2A(S), for opening new

·~
schools or upgrading existing schools in the selected areas on the basis
of a revised policy. [122D]

G The impugned order under Ex. P-7, irrespective of the question
whether the government had the requisite power of cancellation or not,
is vitiated by reason of non-observance of the principles of natural I
ff'
justice and the vice of extraneous factors. [ 122E]

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1407-
15 of 1988.
•
{rn~
STATE OF KERALA v, K.G.M. PILLAI (NATARAJAN, J,] 97

From the Judgment and Order dated 29.9.1987 of the Kerala A
High Court in W .A. Nos. 60·1, 602, 604, 605, 610, 655, 664, 680 and
" 735of1987.

P.S. Poti, K. Sudhakaran and K.R. Nambiar for the Appellants.

T.S. Krishnamurthy Iyer, K.K. Venugopal, Dr. Y.S. Chitale, B
E.M.S. Anam and Mrs. Baby Krishnan for the Respondents.

The Judgment of the Court was delivered by

NATARAJAN, J. These appeals by special leave arise out of a
., common judgment rendered by the High Court of Keral.a in a batch of ·
writ appeals filed by the respondents herein against the dismissal of C
their petitions under Article 226 of the Constitution of India for the
issue of writs of certiorari, mandamus, prohibition etc. by a leamed
single Judge. Though the appeals were allowed and the order of
learned single Judge wa• reversed, the Division Bench has granted
only limited reliefs to the respondents in that it has quashed the D
impugned order of the Government under Ex. P-7 dated 19-5-87 and
issued a mandamus to the State Government to consider the applica-
tions of the respondents on their merits on the basis of the earlier
order passed in their favour under Ex. P-4 dated 4-2-87. The State of
Kerala, feeling aggrieved with the judgment of the Division Bench,
has preferred these appeals. E

Pursuant to the State Government ·publishing in the Gazette a
final list of areas where new unaided recognised high schools/upper
primary schools/lower primary schools are to be opened or existing
unaided lower primary schools/upper primary schools are to be
upgraded in the year 1986--87, the respondent educational agencies .F
submitted applications for grant of sanction to open new unaided
recognised schools or for upgrading the schools already run by •them.
By 4-2-87, the State Government issued an.order under Ex. P-4 grant-
ing sanction to the respondents to open new unaided schools or to
upgrade their existing schOols subject to the conditions set out therein.
However, by an order under Ex. P-5 dated 20-2-87, ihe Government ·G
directed the earlier order under Ex. P-4 to be kept in abeyance. The
respondents challenged the order of the Government by means of
petitions under Article 226 of the Constitution. During the pendency
of the writ petitions, the general elections were held in Kerala State
and a new ministry came to assume office. The government under the
new ministry passed an order dated 19-5-87 under Ex. P-7 cancelling in :fi
98 SUPREME COURT REPORTS (1988] Supp. 3 S.C.R.

to to the order under Ex. P-4 granting sanction to the respondents to
A open new schools or to upgrade the existing schools. This led to the
respondents amending the writ petitions suitably so as to direct their
challenge to the validity of the cancellation order passed under Ex.
P-7. The respondents failed before the single Judge but on appeal the
Division Bench has granted them limited reliefs as set out above.
B
Before adverting to factual matters, it is necessary to refer to
some of tite relevant provisions of the Kerala Education Act (for short
'The Act') and the Kerala Education Rules (for short 'The Rules).
After the Kerala Education Bill, 1957, had been passed by the Kerala
Legislative Assembly and was reserved by the Governor for the
consideration of the President, the President made a reference to the
C Supreme Court under Article 143(1) of the Constitution for obtaining
the opinion of the Court upon certain questions relating to the
constitutional validity of some of the provisions of the Bill and the
Supreme Court gave its opinion as reported In re. Kerala Education
Bill, 1957 (1959 SCR 995). The preamble to the Act states that the Act
.O is being enacted "to provide for the better organisation and develop-
ment of educational institutions in the State providing a varied and
comprehensive educational service throughout the State". Section 2 is
the definition section and for our purpose it is enough if we look at the
definitions of 'educational agency', 'private school', and 'recognised
school' because we are concerned in these appeals only with private
E recognised schools and not with government or departmental schools
or aided schools. Section 2(2), 2(7) and 2(8) read as under:
\ '

"2(2). "Educational agency" means any person or body of
persons permitted to establish and maintain any private
f.···
school under this Act;

2(7). "Private school" means an aided or recognised school; •
·.,

2(8). "Recognised school," means a priVate school recog-
nised by the Government under this Act".

O Section 3(1) empowers the Government to regulate primary and other
stages of education and courses of instruction in government and
private schools. It is apposite to mention here that recognised schools
do not receive any financial aid from the Goverlll]lent though they are
bound to impart instruction only according to the prescribed curriculum
of studies and they can have recognised standards or divisions of clas-
H ses only in accordance with the Act and the Rules. Section 3(3) sets out
STATE OF KERALA v. K.G.M. PILLAI [NATARAJAN, J.J 99

that the Government may provide. educational facilities by (a)
establishing and maintaining schools or (b) permitting any person or A
body of persons to establish and maintain aided schools or (c) re-
cognising arty school established and maintained by any person or
body of persons. Section 3(4) confers deemed recognition to all the
schools which were in existence when the Act came into force. Section
3(5) stipulates that after the commencement of the Act, the establish- B
ment of a new school or the opening of a higher class in any private
school shall be subject to the provisions of the Act and the Rules made
thereunder and that if any school or higher class is established or
opened otherwise than in accordance with the provisions of the Act
and the Rules, they will not be entitled to be recognised by the
Government. Section 9 provides that the Government shall pay the
salary of all teachers in aided schools direct or through the Head- c
master of the school. Section 13 lays down that if there is any retrench-
ment of teachers in any aided school on account of orders of Govern-
ment, then the retrenched teachers can be absorbed in any Govern-
ment school or aided school. Section 36 confers power on Government
to make Rules, either prospectively or retrospectively for the purpose D
of carrying into effect the provisions of the Act. Section 37 provides
that all Rules made under the Act shall be laid before the Legislative
Assembly for its approval.

In exercise of its powers under Section 36, the Government have
framed Rules and they have been approved by the Legislature. E
Though the Rules contain several chapters, we need look only into
chapter V and the relevant rules therein. Rule 2 provides for the
Director of Public Instructions (hereinafter the Director) preparing
once in two years "a report indicating the locality where new schools '
or class or grades are to be opened and existing lower primary schools
or upper primary schools or both are to be upgraded." In preparing F
such a report,. the Director is enjoined to take into consideration
several factors. The list so prepared by the Director should be
published in the Gazette before the end of January of the year of
publication, inviting objections or representations against such list.
Every objection filed by an objector has to be accompanied by a
challan for Rs. 10. On receipt of the objection, the educational G
authorities have to conduct enquiries, hear the parties, visit the areas
and submit their reports, together with their views on the objections
raised, to the Director within a period of two months. The Director, if
he finds it necessary, may also hear the parties and thereafter he has to
finalise the list and send his recommendations with the final list to
Government within a period of two months. The Government has H
100 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.

A thereafter to scrutinise the records and approve the list with or without
modifications and cause the approved list to be published by the
Director. As against the final list published by the Director, there is no
right of appeal or revision for anyone but the Government is
empowered to review the list. As Rules 2(4) and 2(5) are relevant for
consideration, they are extracted hereunder: !'I
B
"2(4). Government after scrutinising all the records
may approve the list, with or without modification and for-
ward it to the Director within a month from the last date of
the receipt of the recommendation of the Director. The list
shall be finalised before the end of July by the Government
and shall be published by the Director."
c
"2(5). No appeal or revision shall lie against the final list
published by the Director

Provided that the Government may, either suo mo to or on
IJ> application by any person objecting to the list published by
the Director under sub-rule (4) made before the expiry of
thirty days from the 'date of such publication, review their
order finalising such list and make such modifications in
that list aa they deem fit by way of additions or omissions, if
they are satisfied that any relevant ground has not been
taken into consideration or any lrr<ilevant ground has been
taken into account while finalising the said list;

Provided further that no modification shall be made under
the preceding proviso without giving any person likely to
be affected thereby an opportunity to make representa-
tions against such modification."

Then comes Rule 2A which is. an important provision and requires
close scrutiny. Rule 2A(l) provides that after the publication of the
final list under Rule 2(4) the Director shall, by notification in the
Gazette in the month of October, call for applications for opening of
{) new schools and for upgradation of existing schools in the areas
specified in the final list. Rule 2A(2) lays down that only applications
made in response to the notification published by the Director will
merit consideration and not applications made otherwise. Rule 2A(3)
lays down that on receipt of such applications for permission to open
new schools or for upgrading of existing schools, the District Educa-
H tional Officer should make appropriate enquiries -regarding the. cor-
STATE OF KERALA v. K.G.M. PILLAI (NATARAJAN, J.] 101

rectness of the particulars contained in the application and other rele-
A
vant matters and then forward the applications with his report thereon
to the Director. Rule 2A(4) obligates the Director to peruse the appli-
cations and the reports of the. District Educational Officers and for-
ward all the papers to the Government with his own report. Rule
2A(5) enjoins the Government to consider the applications and the
reports accompanying them and take a final decisfon and publish the B
same in the Gazette. As this sub-rule is of importance it requires
extraction: ·

"2A(5). The Government shall consider the applications
in the light of the report of the District Educational 'Officer
.and the Director and other relevant matters which the
· Government think necessary to be considered in this C
connection and shall take a final decision and publish their
decision in the Gazette with the list containing necessary
particulars." ·

Rule 2A(7) sets out the time schedule in which the applications are to D
be made and the orders of Government are to be issued. It is worthy of
note that as against the list of applications approved by the Govern-
ment and published in the Gazette under Rule 2A(5), there is no
provision for the Government reviewing the list to the detriment of the
applicants whose applications have been approved and the provision
made under Rule 12 is only for unsuccessful applicants to present E
revision petitions to complain of their non-selection. The next rule
which requires notice is Rule 9 which sets out the conditions for grant
of permission to open new schools. Rule 10 which was originally in the
Rules and which prescribed the preparation of a Development Plan by
the Director came to be deleted when the Rules were amended. Rule
11 pertains to grant of permission to open new schools. The rule pro· p
vides that if the Government are satisfied that permission to open the
schools included in the development plan may be granted, the Govern-
. ment may issue orders to that effect through the Director specifying (i)
the educational agency to whom permissiOn is granted, (ii) the grade
of the school, (iii) the standard or standards to be opened, (iv) the
location of the school, (v) the date from which the school should start G
functioning and (vi) the conditions to be fulfilled by the educational
agency in respect of the site, area, buildings, equipments, staff, finan-
cial guarantee etc. Rule 14 provides that when a new school is opened
with permission granted under Rule 11, the District Educational
Officer and the Director should be informed of the date of opening of
the school, the location, the standards opened, the name and qualifica· H
102 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.

tions of the staff etc. etc. The District Educational Officer should then
A visit the school and report to the Director ab6ut the conditions
stipulated for opening the school being complied with. Rule 15 pro-
vides for withdrawal of permission if the conditions stipulated have not
been fulfilled. Rule 16(a) deals with applications for recognition of
schools or of additional standards. The rule states that within three
B months from the date of opening of schools or of additional standards,
applications should be made to the educational authorities for grant of
recognition or continuance of temporary recognition. Rule 17 sets out
that if all the conditions prescribed have been satisfied, then the school
shall be granted recognition.

Now turning to factual matters, the Director published on March
c 6, 1986 a list indicating the areas where new un-recognised schools are
to be opened and existing lower/upper primary schools are to be
upgraded and inviting objections or representations against the list
from interested parties. Thereafter, the educational authorities con-
ducted the necessary enquiries, considered the objections/representa-
D tions received and submitted their reports to the Director. Thereupon
the Director bestowed his consideration to the matter and finalised the
list and sent his recommendations to the Government. The Govern-
ment approved the list with some modifications and then caused the
approved list to be published by the Director on June 24, 1986 in the
Gazette. The list published by the Government set out 122 areas where
E new schools are to be opened or existing schools are to be upgraded in
order to fulfil the educational needs of the notified areas. The Gazette
publication was under the caption "The final list of areas where new
unaided recognised High schools/Upper primary schools/Lower pri-
mary schools are to be opened or existing unaided L.P. Schools/Upper
primary schools are to be upgraded in the year 1986-87."
F
The task of identifying and approving the areas where new
unaided schools are to be opened or existing schools are to be
upgraded having been accomplished, the Director took the next step
of issuing a notification under Rule 2A(l) calling for applications from
intending applicants for opening new schools or for upgrading of exist-
0 ing schools in the selected areas. The respondents submitted their
applications in response to the notification made by the Director.
These applications were duly enquired into and considered by the
District Educational Officer and thereafter by the Director as laid
down in Rule 2A(3) and (4) and thereafter the qovernment con-
sidered the applications in accordance with Rule 2A(5) and took a
H. final decision and caused their decision to be published in the Gazette
STATE OF KERALA v. K.G.M. PILLAI !NATARAJAN, J.] 103

on February 4, 1987. As per the Gazette notification, the Government
A
granted sanction for the opening/upgrading of 36 lower primary
schools, 36 upper primary schools and 19 high schools, totalling in all
91 schools in the list of areas selected. This Gazette notification has
been marked as Ex. P-4. The names of all the respondents found a
place in the notification and they were granted permfssion to open/
upgrade unaided schools. The order reads as under: B

"Government are pleased to accord sanction to open/
upgrade unaided recognised schools as detailed in
Annexure to the Government Order subject to the follow-
ing conditions.

I. The schools will be permitted to be opened during the
c
academic year 1986-87 ...... .

2. For L.P. Schools and U.P. Schools without L.P. Sec-
tion, the educational agencies must provide one acre of
land; for U.P. School with L.P. Section 1.5 acres of land; o-
and for High Schools with or without primary section 3
acres of land. Recognition will be given only to the educa-
tional agency who produce evidence before the concerned
controlling authority of having provided the required site.

3. The applicants for opening of the schools or upgrada- E
tion of the schools shall give an undertaking as provided
under Note (V) to Rule 11 Chapter V of K.E.Rs."

It so happened that on February 4, 1987, itself an announcement was
made regarding the holding of general elections in Kerala State but no
dates were announced for the election. Presumably, to avoid criticism F
about the timing of the publication of the sanction order, the Chief
Minister passed orders for keeping in abeyance the sanction accorded
to the successful applicants under Ex. P-4 and a Gazette notification to
that affect was published on February 23, 1987. Thereupon, the
respondents moved the High Court through petitions under Article
226 of the Constitution cha~'3nging the actio;i of the Government. G
_,During the pendency of the writ petitions, the general elections came
to be held and a new ministry assumed power in Kerala State.-The new
ministry decided to revoke the order of sanction passed under Ex. P-4
and caused a Gazette notification Ex. P'7 to be made in that behalf.
The notification was as under:
H
104 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.

"In the G.0. read as first paper above sanction was
A
accorded to open/upgrade 91 unaided recognised schools
of various categories during the academic year 1986-87. As
per G. 0. read as second paper above the orders issued in
the said G.O. were kept in abeyance until further orders.

B 2. Government have reconsidered the matter. At present
there are more than 16000 schools in the State. Thousands
of protected teachers will have to be absorbed from these
schools. Every time a recognised school is started in an
area, there is an immediate impact on the neighbouring
aided and Government schools leading to fall in strength
and divisions, creating mqre protected teachers and
thereby leading to wasteful expenditure. The 91 schools
sanctioned were at the fag end of the academic year 1986-
81 and it was not possible to start the schools during the
same year. Many schools do not fulfil the conditions for
starting the schools. In several cases exemption will have to
be given to fulfil the conditions year after year. As such
.Government strongly feel that instead of starting new
schools the existing schools should be strengthened in all
respects, i.e. site, building, equipment etc.

3. In the circumstances the orders issued in the G.0. read
as first paper will stand cancelled. No recognised schools
will be upgraded or sanctioned during 1987-88 also."

The learned single judge who heard the writ petitions filed by the
respondents took the view that while it was obligatory for the Govern-
ment to follow the procedure prescribed in Rules 2 and 2A of Chapter
p V of the Rules, if it was to permit the opening of new unaided reco-
gnised schools or the sanctioning of upgradation of existing schools,
the converse result would not follow i.e. wherever the Government
had gone through the exercise of the procedure laid down in Rules 2
and 2A, the Government could not retrace its steps and was bound to
proceed further in the matter of the opening of new schools or upgrad-
0 Ing o( existing schools and that the Government had no option to
reverse its decision. In so far as the Government's power to revoke an
order of sanction made under Rule 2A(5) is concerned, the learned
judge held that the Government's power ~o sanction new schools also
carried with it an inherent right of cancellation of an order passed
under Rule 2A(5). The learned judge saw justification for the cancel-
H Iation order being passed by the Government on another ground also
STATE OF KERALA v. K.G.M. PILLAI [NATARAJAN. J.I 105

viz. that the sanction for opening of new schools or upgrading of
A
schools was given only at the fag end of the academic year 1986-87 and,
as such, the order of sanction was not capable of in1plementation.
Besides these grounds, the single judge found merit in the reasons
given by the Government in the impugned order Ex. P-7 for revoking
the sanction viz. that the opening of new unaided schools or upgrading
of existing unaided schools invariably resulted in fall of pupil strength B
and/or division strength in the government-run as well .as aided schools
and this led to the ousting of teachers from aided schools whom the State
had to treat as "protected teachers" and take care of them and pro-
vide appointments for them in government as well as aided schools.
The last reason which weighed with the single judge was that the
Government's experience in the past showed that many of the schools
proposed to be started or seeking upgradation were not ablt\ to fulfil c
the minimum requirements and resorted to seeking Government's in-
dulgence for granting them exemption from complying with the pre-
scribed conditions and requirements. In accordance with these views,
the foamed single judge dismissed the writ petitions.
D
The Division Bench which heard the writ appeals viewed the
matter in a wholly different manner and allowed the appeals. The
Division Bench held that firstly the writ petitioners had adequate locus
standi to challenge the cancellation order of the Government and that
the Government did not have power or jurisdiction·· to revoke the
sanction order; secondly the order of cancellation violated the princi- E
ples of natural justice; thirdly there was no application of mind and
fourthly the order of cancellation was passed on the basis of irrelevant
grounds.

In presenting the case of the State before us in tl!ese appeals Mr.
Subramania Poti, learned senior advocate appearing for the State as- F
sailed everyone of the findings and reasons given by the Division
Bench and argued that the notifications made under E'.xs: P-4 arid P-7
were oniy a!lnouncements of the policy decisions taken by the Govern-
ment and, the Government could revise its decision at any time and
even if they are to be viewed as administrath·l orders passed by the
Government, it was always open to the Government, in exercise of its G
powers under Section 20 of the Kerala General Clauses Act (corres-
ponding to Section 21 of the General Clauses Act X of 1897) to add,
amend, vary, or rescind the notifications. The learned counsel further
stated that the respondents would get the status of 'aggrieved persons'
and acquire locus_Jiandi to question any order of revocation passed by
the Government only if they had been__granted permission under Rule H
106 SUPREME COURT REPORTS [1988) Supp. 3 S.C.R.

A 11 to open new schools and not before as they would acquire "legiti-
mate expectation rights" only after satisfying the requirements of Rule
11. Proceeding on the same lines, the learned counsel stated that the
Government had not indulged in any adjudicative process nor had the
Government violated any provisions of the Act or Rules or even the
principles of natural justice and, as such, the writ petitions did not
B present any justiciable iSsue for consideration -by the Court. The last
submission made was that the cancellation order did not suffer either
from the vice of non-application of mind or the permeation of irrele-
vant grounds.

Controverting the arguments of the appellant's counsel, Dr.
Chitale, Mr: Krishnamurthy Iyer.and Mr. K.K. Venugopal, learned
C Sr. Advocates appearing for the respondents contended that the deci-
sion rendered by the Division Bench is fully in accordance with law
and needs no interference by this Court. They pointed out that the
Division Bench has done nothing more than to place the parties in
,their status quo ante position by quashing Ex. P-7 and directing the
D Government to proceep further with the applications in order to see
whether permission could be granted under Rule 11 of Chapter V.

In the light of these conflicting arguments what falls for consi-
deration in these appeals may broadly be enunciated under the follow-
ing heads:
E
(l) Whether any rights accrued to the respondents pursuant to
the sanction granted to them under Ex. P-4 for opening new
. schools or upgrading existing schools; so as to challenge t~
cancellation order under Ex. P-7 or whether the right of
challenge would accrue to them only after further approval was
F granted under Rule 11.

2. Whether it was open to the Government under the Act and
Rules or under Section 20 of the Kerala General Clauses Act to
cancel in toto the sanction given to 91 approved applicants for
opening new schools or upgrading existing schools;
G
3. Even if the Government had powers of cancellation, whether
the order under Ex. P-7 is vitiated by reason of (a) non-
,observance of the principles of natural justice (b) non-applica-
tion of mind and (c) influence of irrelevant grounds.

Bef.ore taking up for consideration these questions, we may set
STAIB OF KERALA v. K.G.M. PILLAI [NATARAJAN, J.] 107

out the various stages contemplated by the. Rules which have to be
A
passed through by an educational agency in order to open a new school
or upgrade an existing school and obtain recognition from the Govern-
ment. It is relevant at this juncture to mention that the Act and the
Rules do not prohibit the starting and running of private unaided
schools by any agency and the only restriction is that it will not be
entitled to secure recognition for the said school from the Government B
unless the conditions imposed by the Rules are satisfied and complied
with. The importance of securing recognition lies in the fact that with-
out recognition the students studying in the unaided schools will
neither be permitted to appear as candidates in the examinations con-
ducted by the State nor be eligible to avail of the opportunities for
higher education or to enter public service examination. The obtain-
. ment of recognition from the Government is therefore a vital factor for
c
the educational agencies starting new schools or newly upgrading their
eidsting schools.

Coming now \o th~ ~!ages which should be gone through, there
·.are five stages as set out by the Division Bench and which enunciation D
is accepted by the learned counsel for the appellants as the correct
position. The first stage consists of the Government going through the
exercise under Rule 2 culminating in the Government publishing
under Rule 2(4) the localities where new schools are to be opened or
existing schools are to be upgraded. The second stage consists of the
Government calling for applications under Rules 2A(l) from intend- E
ing applicants for opening new schools or for upgrading the existing
·schools in the areas specified and taking a final decision and publishing
the list of approved applicants in the Gazette under Rule 2A(5). Then
comes tlie third stage when the applications are subjected to more
detailed scrutiny under Rule 11 regarding the fulfilment of conditions
se,t out in Rule 9 and the drawing up of the order setting out the name F
of the educational agency, the grade of the school, the standards to be
opened, the location and the date of opening of the school etc. The
fourth .stage is envisaged under Rule 14 and ii,,consists of the educa-
tim1.al agency permitted under Rule 11 to rep9rt to the educational
authorities the factum of the opening of the school and the fulfilment
of the conditions set out in the order and the names and qualifications G
of the staff etc. so that the educational officer can visit the school and
submit a report to the Director regarding the fulfilment of all the
conditions by the school authority. The fifth and the last stage is set
out in Rules 16 and 17 and it pertains to the school authority applying
for recognition under Rule 16A and the Director granting sanction
under Rule .17 after being satisfi.~d tha! the school authority has H
108 SUPREME COURT REPORTS (1988] Supp. 3 S.C.R.

satisfied all the requisite conditions for grant of recognition.
A
A four-fold argument was advanced by Mr. Po ti to assail the
judgment of the Division Bench. The contentions were formulated as
under:

B 1. The respondents are not-entitled to the issue of a writ of
mandamus because firstly they had unauthorisedly opened new
schools in contravention of Section 3(5) without obtaining the
Government's permission under Rule 11 Chapter V and secondly
the proceedings under Chapter V had reached only the second
stage of passing of an order under Rule 2A(5) and had not
reached the third stage of permission being granted under Rule
c 11 whereafter only the respondents would acquire "legitimate-
expectation rights" cognisable in law.

2. There was no violation of any Rule or the principles of natural
justice when the Government dropped the proposal of permit-
D ting new schools to be opened or existing schools to be upgraded
in the 91 localities mentioned in Ex. P-4 notification because it
was an administrative decision based on Government's policy
and no adjudicative process was involved in the passing of the
cancellation order.

E 3. In any event the Government had inherent powers of revoca-
tion under Section 20 of the Kerala General Clauses Act cor-
responding to Section 21 of the Central Act and the exercise of
such powers is not open to challenge. I

4.-In any view of the matter, this was not a case where the High
F Court should have exercised its powers under Section 226 to
restore the sanction order under Ex. P-4 because the Court can-
not impose an economic burden on the State's resources by
issuance of a writ.

Taking up for consideration the first limb of the first contention
G of the learned counsel, it is true the respondents have opened new
schools or upgraded their existing schools at the approved localities on
2.6.1986 itself i.e. even before the final list of approved areas under
Rule 2(4) was published on 24.6.1986 and the sanction order under
Ex.P-4 was published on 4.2.1987. The question however will be
whether by reason of the opening of the schools prematurely, the
H respondents stand forfeited of their right to question the cancellation
STATE OF KERALA v. K.G.M. PILLAI INATARAJAN, J.] 109

order under Ex.P-7. We think not. This is because Section 3(5) of the
A
Act does not totally ban the establishment of a new school or the
opening of a higher class but only states that if any school or higher
class is opened without following the procedure, then such new school
or higher class will not be entitled to recognition by the Government.
It will not therefore, be per sea contravention of the Act and the Rules
if an educational agency started a new school or opened a higher class B
without following the provisions of the Act and the Rules and the only
disqualification it would suffer is its disentitlement to Government's
recognition. That apart the order of cancellation is not challenged by
the respondents on the ground they have already established new
schools or opened higher classes in existing schools but on the ground
the earlier order of sanction under Ex. P-4 had been cancelled without
justifiable reason and without the respondents being heard. Therefore, c
the respondents cannot be non-suited merely on the ground they had
opened new schools or higher standards even before the Government
published its final list of approved areas under Rule 2(4). Hence, the
first limb of the first argument of Mr. Poti cannot be countenanced.
·D
In so far as the second limb of the first contention is concerned, it
was urged by Mr. Poti that the publication of the final list under Rule
2(4) was only a preliminary exercise and not a final one because the
initial selection of localities under Rule 2(4) for opening new schools
or upgrading existing schools requires further scrutiny and approval
under Rule 9 and consequently any order of sanction granted under i:,.
Rule 2A(5} would leave the grantee only in the position of an applicant
and not confer on him legitimate expectation rights. In support of his
contention Mr. Poti placed reliance on certain passages in Chingleput
Bottlers v. Magestic Bottling. [1984] 3 SCR 190 at 211to213: AIR 1982
SC 149 paras 14 to 17; State of Kera/av. A. Laxmi Kutti, (1986] 4 SCC
632 at 654 and certain passages in Wade on Administrative Law pages F
464, 465, 624 and 625.

Looking at Rule 2 and the procedure enunciated therein for
determining the areas where new schools are to be opened or existing
schools are to be upgraded, we are unable to accept the contention of '
Mr. Poti that the selection of areas where additional educational G
facilities are to be provided is only an informal and inconsequential
exercise and as such the final list published by the Government carried
no force with it till such time the further selection process under Rule 9
is gone through. The reason for our saying so is because Rule 2 pre-
scribes an elaborate procedure and the due application of mind by
several agencies before the final list of approved areas is published H
110 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.

under Rule 2(4). Rule 2(1), enjoins the Director to prepare a list of
A localities where new schools or upgraded schools are to be opened
after taking into consideration all the relevant factors viz. the existing
schools in and around the locality, the strength of the several standards
and the accommodation position in the existing schools, distance
factors and the educational needs of the locality with reference to the
B habitation and backwardness of the areil etc. Besides publishing the
tentative list, the Director has to call for representations and
objections from interested parties and they have to be duly considered
by the Educational Officers of the locality and then by the Director
himself and eventually the Government itself has to apply its mind to
the selection of areas and then cause the final list to be published. The
proviso to Rule 2(5) grants only limited powers of modification to the
C Government viz. to alter the list here and there .and not to scrap it
outright. Even the power of modification can be exercised only after
giving the affected parties an opportunity to make representations
against the proposed modification. The selection of approved areas
becomes final once the list is published under Rule 2(4), with or
D _ without modification and the finality is not contingent upon furthel"
approval under Rule 9. What Rule 9 itself provides for is the grant of
permission to applicants approved under Rule 2A(5) to open new
schools depending - upon the applicant subjectively satisfying the
Government about his ownership or right to possession of the site,
buildings and oJher needs of the school, his financial guarantee, has
E not being convicted of any offence involving moral terpitude and
about the locality being in need of the new school and the accessibility
of the new school to the members of the public. It is significant to point
out that Rule 9 speaks of fulfilment of conditions only for opening new
schools and not for the upgrading of existing schools. Thus it may be
seen that Rule 9 lays down subjective tests while Rule 2 prescribes
f objective as well as subjective standards in the matter of selecting
areas which are in need of new schools or upgraded schools. It was also
pleaded that the final list published under Rule 2( 4) was vulnerable to
cancellation at any time before new schools were actually opened in
the selected areas in accordance with the Rules because of change of
conditions in the selected areas or because of the selected area losing
G their place of priority. This is too fragile a statement to merit accept-
ance because the need of a selected area, given recognition after an
elaborate process of selection, cannot disappear overnight unless the
need is fulfilled by the Government itself opening a new school or by
the residents of the locality ·migrating on a large scale to another place.

l:L That the_publication of the final list under Rule 2( 4) has not only
STATE OF KERALA v. K.G.M. PILLAI [NATARAJAN, J.] 111

binding force on the Government but it also entails consequential
obligations on the Government could be seen from the fact that Rule A
2A(l) makes it imperative for the Director to call for applications from
interested parties for opening new schools or upgrading existing
schools in the selected areas. Mr. Poti argued that it was only to
prevent a deluge of applications for opening new schools all over the
State, the sel~tion of areas under Rule 2 is gone through so that the B
number of applications could be restricted. It is difficult for us _to
accept this statement because it runs counter to the scheme of Rule 2
regarding the selection of areas on objective factors and subjective
considerations. Be that as it may, the mandate contained in Rule
2A(l). goes to show that the identification and selection of inade-
quately served areas under Rule 2(4) is not an idle or meaningless
exercise. Such being the case the applications made under Rule 2A( 1) c
cannot be treated as applications made by mere speculators or ad-
venturers. On the contrary the applications' carry with them a certain
amount of legitimacy in that they pertaiq to opening of schools in the
inadequately served areas notified by the Government and are made in -
response to the Director's notification calling for applications. In fact D
.Rule 12 confers a right of revision on those applicants whose applica-
tions for the opening of new /upgraded schools are not i!lduded in the
list of approved applicants published by the Government under Rule
2A( 5). Thus when even an unsuccessful applicant is conferred a right
to. represent to Government against the non-approval of his applica-
tion, can it be said that an approved applicant has no right whatever to E
complain when the sanction granted to him is revoked all of a sudden
without he being given any opportunity to show cause against such
cancellation. It is significant to note that the Rules do not provide for
the revocation or cancellation of a final list published under Rule
2A(5) and that the right of cancellation is given to the Government
only if the approved applicant fails to satisfy the•conditiones. laid down F
in Rule 9 and thereby becomes disentitled to obtain sanction under
Rule 11. The scheme of the Rules is such that after sanction is
accorded to an applicant under Rule 2A(5) to open a new/upgraded
school, then the applicant acquires a right to have his application
. considered further under Rule 9 as regards his ownership or possession
of Iand, buildings etc. his declaration of financial guarantee, the suita- G
bility of the place offered by him for location of the school and about
he being free of any conviction by any criminal court so as to entitle
him to the issue of an order under Rule 11. The further scrutiny of the
application of the approved applicant under Rule 9 and the confirma-
tion of approval under Rule 11 would not, however, mean that the .
.earlier sanction granted under Rule 2A(5) does not create "legitimate H
112 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.

expectation rights" in the approved applicant.
A
Mr. Poti contended that an applicant obtaining sanction under
Rule 2A(5) would only remain in the position of an applicant and it is
only after further permission is granted under Rule 11, the applicant
can be said to acquire "legitimate expectation rights" and the requisite
B locus to challenge any order of cancellation passed by the Govern-
ment. In support of his argument Mr. Poti relied upon (1) State of
Kera/av. Laxmi Kutty, (supra) where the Court after referring to the
ruling in Mani Subrat Jain v. State of Haryana, [1977] 1SCC486 that a
person whose name had been recommended for appointment as a
District Judge by the High Court under Article 233(1) had no legal
right to the post, held that unless there was a judicially enforceable
c right no w: 't of mandamus for enforcement of a right would lie; (2)
Chinglepet Bottler v. Majestic Bottling, (supra) where the distinction
drawn by Megarry V.C. in Mecinnes v. Onslow Fane and Anr., [1978]
3 All. E.R. 211 between initial applications for grant of licence and the
revocation, suspension or refusal to renew licence already granted was
D referred to and the Court observed that "the principle that there was
a duty to observe the audi alteram partem" Rule may not apply to
cases which relate not to rights or legal expectations but to mere
privilege or licence; (3) Wade on Administrative Law, Vth Edition,
where difference between rights, liberties and expectations have been
set out as under:
E
"In many cases legal rights are affected, as where property
is taken by compulsory purchase or someone is dismissed
from a public office. But in other cases the person affected
may have no more than an interest, a liberty or an expecta-
tion. An applicant for a licence, though devoid of any legal
F right to it, is as a general rule, entitled to a fair hearing and
to an opportunity to deal with any allegations against him.
The holder of a licence who applies for its renewal is
likewise entitled to be fairly heard before renewal can be
refused. So also is a race goer before he can be put under a
statutory ban against entering a public race course.
G
In none of these situations is there legal right, but
they may, involve what the courts sometimes call "legiti-
mate expectation". This expression furnishes judges with a
flexible criterion whereby they can reject unmeritorious or
unsuitable claims. It was introduced in a case where alien
H students of "scientology" were refused extension of their
STATE OF KERALA v. K.G.M. PILLAI [NATARAJAN, J.] 113

entry permits as an act of policy by the Home Secretary.
The Court of Appeal held that they had no legitimate ex- A
pectation 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. Likewise where car-hire drivers had habitually
offended against airport byelaws, with many convictions 8
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 apparently 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 c
expectation will absolve the public authority from affording
a hearing.

For the purpose of natural justice the question which
matters is not whether the claimant has some legal right but D
whether legal power is being exercised over him to his dis-
advantage. It is not a matter of property or of vested in-
terests, but simply of the exercise of governmental power
in a manner which is fair and considerate."

The argument, therefore, was that the respondents had no locus E
standi to move the court to seek the quashing of Ex.P-7 order and
mancjamus for their applications being approved and granted sanc-
tioned under Rule 17. Refuting this contention Dr. Chitale argued that
the respondents were "persons aggrieved" and they had locus standi in
the full sense of the term to move the court since their right to open a
school, though not claimed as a constitutional right was a natural right F
and their suitability to open a school in the selected area having been
accepted and their names included in the list published under Rule
2A(5), the Government could not cancel the list. Dr. Chitale relied
upon the decisions of this Court in Ebrahim Aboobakar and Anr. v.
Custodian General of Evacuee Property, [1952] SCR 696 and S. P.
Gupta v. Union of India, [1981] Supp. SCC 87. Arguments were also G
advanced by the appellant's counsel to contend that any permission
given under the R_ule to run a school would only be a privilege while
the respondent's counsel would say that it was a right within the
meaning of Article 19(1)(g) of the Constitution. We do not think it
· necessary to go into this aspect of the matter because of the contro-
versy narrowing down to the question whether after having granted H
114 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.

sanction to the respondents under Rule 2A(5) to open/upgrade
A schools, subject to satisfying the conditions under Rule 9 and obtain-
ing clearance under Rule 11, the Government could go back on the
matter and cancel the sanction order and that too without giving the
respondents any hearing at all.

B. In the course of the arguments Mr. Poli laid stress upon the fact
that while Rule 9 lays down several conditions for being fulfilled
before p~rmission can be granted under Rule 11 to an educational
agency to start a new school or upgrade a school, the order made
under Rule 2A(5) makes mention of only one of.the several conditions
being noticed by the Government viz the provision of land for the
C .proposed school and as such the order, despite the use of the word
"sanction" can by no stretch of imagination be considered as an order
which conferred rights upon the respondents and therefore it was futile
for the respondents to say that legally enforceable recognition had
been given to them to open schools in the selected areas. Going a step
further Mr. Poti said tha.t in_many cases even the solitary factor noticed
D by the Government viz the provision of land for the proposed school
had not been adequately satisfied and this shortcoming has been refer-
red to in the alleged sanction order passed under Rule 2A(5). Going to
the other end, Mr. Iyer and Dr. Chitale tried to take up the stand that
the sanction order passed under Rule 2A(5) was virtually one under
Rule 11 because the respondents had furnished information pertaining
E to all the conditions enunciated in Rule 9 and therefore what remained
for the Government was only to see whether the schools opened or
upgraded by the respondents were entitled to grant of recognition
under Rule 17 or not. We are unable to find merit in the last conten-
tion of the respondents in this behalf because the Division Bench has
clearly stated in para 52 of the judgment that the stage of the Govern-
F ment giving directions for fulfilment of various conditions has not been
reached and therefore it was directing "the State to proceed to take
the further steps commencing from Rule 11, Chapter V of the K.E.R."
In view of tl)is categoric finding and since it is the admitted position
that the Government have not subjectively scrutiniseq the application
of each of the respondents with reference to the conditions enunciated
G in Rule 9, there is no scope for the respondents to say that the sanction
order made under Ex. P-4 was for all practical purposes an order made
under Rule 11. Even so, we cannot accept the contention of the State
that the applications submitted by the respondents, despite their
approval by the District Educational Officer, the Director and the
Government and the publication of the sanction order under Rule
H 2A(5) remained only at the threshold and_it was therefore open to the
STATE OF KERALA v. K.G.M. PILLAI [NATARAJAN, J.] 115

Government to revise its policy of opening new schools or upgrading A
existing schools and throw overboard all the approved applications.
We do not therefore feel persuaded to accept the first contention of
the appellant's counsel that the sanction order passed in favour of the
respondents under Rule 2A(5) carried no rights .with them and that
they would remain still-born orders till they passed through the third
stage and were given acceptance under Rule 11. B

The second major contention of the appellant'-s counsel, it may
be recalled, was that the Government had not violated any statutory
provision or the principles of natural justice when it passed the cancel-
lation order Ex. P-7 revoking the earlier order Ex. P-4. To a large
extent the arguments on this aspect of the matter overlapped the argu- C
ments advanced with reference to the first ground of attack already
dealt with.)! was once again argued that the identification and selec-
tion of poorly served areas in the ma\ter of educational facilities under
Rule 2 was only an administrative exercise in order to restrict the
number of applications for opening new schools within manageable
limits and that the real test of selection of the areas began only when D
the applications were processed under Rule 9. It was likewise urged
that though the Government was bound to implement the Directive
Principles contained in Article 41 of the Constitution in the matter of
providing educational facilities, the obligation was subject to the limits
of the economic capacity of the Government and as such the Govern-
ment cannot be compelled by any educational agency or even by the E
Court to open new schools unmindful of the financial burden that
would be cast on the State by the opening of such schools.

The last submission made in this behalf was that the revocation
order passed under Ex. P-7 was not in pursuance of any adjudication
of the rights of the applicants but to make known the revised policy of F
the Government which was taken after considering· several relevant
factors such as the inadequate resources of the applicants in providing
lands, buildings, equipment, financial guarantee etc. for opening the
proposed schools, the backlash on Government's finances due to the
resultant surplusage of teachers that would occur in aided and govern-
ment schools due to opening of more unaided schools etc. and there- G
fore the respondents could neither complain of violation of the statute
or the principles of natural justice when the Government passed the
impugned order under Ex. P-7. It was pointed out by Mr. Poti that the
Secretary to Government, Education Department had pointed out in
January 1983 about the inadvisability of opening 'new schools and
about many of the applicants failing to satisf¥ most of the required H
116 SUPREME COURT REPORTS [1988] Supp. 3 S.C.R.

A conditions for opening new schools but in spite of it the .Education
Minister had acted in a cavalier manner in passing the order of sanc-
tion under Ex. P-4 and therefore the Government was well within its
rights in witholding the order in the first instance and revoking it in
toto subsequently. •

B We are unable to see persuasive force in these contentions be-
cause they do not take notice of the realities of the situation. As we
have already pointed out, the identification of inadequately served
local areas in the matter Of educational facilities and their selection
process under Rule 2 cannot be construed as a meaningless and idle
exercise. That apart, the final list of selected areas published under
Rule 2(4) has not been revoked or cancelled by the Government.
C Though a fresh list of areas has to be prepared once in two years, that
would not mean that the list can be rendered irrelevant due to non-
implementation. Such being the case the sanction order gra~ted to the
91 applicants from·among the total number of 122 applications has the
support of the earlier Government order made under Rule 2(4). It
D must, therefore, logically follow that the approved applicanis are
entitled to have their applications taken to the next stage for considera-
tion on more subjective factors so as to obtain permission under Rule
11 if tney satisfied the requirements laid down by Rule 9. We have
already pointed out that the Rules do not provide for the Government
reviewing suo motu any order of sanction passed under Rule 2A(5) in
E favour of any applicant for opening of a new school or upgrading an
existing school and its power of revision under Rule 12 is confined to
the reconsideration of the case of any applicant whose name did not
find a place in the final list of approved applications published by the
Government.

F In so far as the argument that the Government cannot be com-
pelled by any educational agency or by the Court to incur additional
financial burden by opening new schools, or new classes is concerned,
we have to point out that the argument in the present context has no
force because all the applications that were approved pertained to the
opening of unaided schools. Therefore, there is no question of the
G Government being put to additional financial burden due to the open-
ing of new schools in the selected areas. Moreover, the sanction order
under Ex. P-4 specifically provided that "the applicants for opening of
the schools or upgradation of the schools shall give an undertaking as
provided under note (v) to Rule 11 Chapter (V) of the K.E.R." The
undertaking referred to above is for ensuring that the approved ap-
H plicant "shall not move the Government at any time for the conversion
STATE OF KERALA v. K.G.M. PILLAI INATARAJAN, J.] 117

of the school into an aided school" and clause (b) of Rule 11 further
provides that "if any application is made for conversion mto an aided A
school, the permission granted for opening of the school shall auto-
matically lapse." Hence the argument that the Government will be
•. saddled with additional financial burden by the opening of new
unaided schools is a mis-conceived one.
B
It cannot be disputed that the applicants have to necessarily
make arrangements for purchasing or taking on lease the required
extent of land as well as making arrangements for the building and
equipment that would be needed, for obtaining sanction from the
Government even at the stage of making an application under Rule
2A(2). The Government cannot, therefore, be heard to say that no
prejudice would occur to the respondents by reason of the cancellation c
order and that no principles of natural justice would be voilated if the
Government unilaterally revokes an order of sanction granted under
Rule 2A(5) to the respondents for opening new schools or for upgrad-
•
ing existing schools. For all these reasons, we are unable to accept the
second contention of the appellant's counsel. D

We now pass on to the third contention that even if there ls no
provision in the Rules for the Government cancelling the sanction
order passed under Ex. P.4, the Government is always possessed of
inherent powers of revocation under Section 20 of the Kerala General
Clauses Act and hence the Division Bench was wrong in holding that E
the Government had no jurisdiction to pass the impugned order
Ex. P-7. In support of this argument, Mr. Poti referred to the decisions
in M.P. State v. V.P. Sharma, [1966] 3 SCR 557 at 570 and Lt. Gover-
nor v. Avinash Sharma, [1971] 1SCR413 at 416. Both the cases arose
under the Land Acquisition Act and what was in issue before the
Court was whether the Government co11ld exercise powers only under F
Section 48 of the Land Acquisition Act to withdraw a notification for
acquisition made under Section 4(1) of the Act. In the first case, after
the issue of a notification under Section 4(1), the Government issued
successive notifications under Section 6 of the Act covering different
portions of the land notified for acquisition under Section 4(1). The
validity of the last of the notifications under Section 6 was challenged G
on the ground that a notification under Section 4(1) could be followed
only by one notification under Section 6 and that· successive notifica-
tions with respect to different parts of the land comprised in one notifi-
cation under Section 4(1) cannot be made. The contention was upheld
by the High Court and also by this Court after over ruling the plea that
once a notification was made under Section 4(1), the Government H
118 SUPREME CQURT REPORTS [1988) Supp. 3 S.C.R.

A could issue successive notifications under Section 6 as long as the
notification under Section 4( 1) was not withdrawn by the Government
in exercise of its powers under Section 48. In repelling this contention,
the Court incidentally observed that the argument "that the only way
in which the notification under Section 4(1) can come to an end is by
withdrawal under Section 48(1)" is not correct because "under Section
a 21 of the General Clauses Act the power to issue a notification
includes the power to rescind it and therefore it is always open to the
Government to rescind a notification under Section 4 or under Section
6 and a withdrawal under Section 48(1) is not the only way in which a
notification under Section 4 or Section 6 can be brought to an end."

In Lt. Governor v. Avinash Sharma, (supra) the Government
a
C caused notification under Section 4 of the Land Acquisition Act to be
made on March 31, 1964 and followed the same by a c(\mposite notifi-
cation on May 16, 1964 under Section 6, 17(1) and (4). Then the
Collector served notices under Sectioin 9 in June 1964. Subsequently
on October 5, 1965 the State Government published an order cancel-
D ling the earlier notifications dated March 31, 1964 and May 16, 1964.
The owner of the land challenged the cancellation order and sought a
mandamus to direct the Government to proceed with the acquisition in
accordance with law and determine the compensation payable to him
for compulsory and urgent acquisition. It was contended on behalf of
the State that under Section 21 of the General Clauses Act the State
E had the power to cancel the notification at any time and that Section 48
of the Land Acquisition Act did not trench upon that power. The
contention was rejected and the Writ Petition filed by the owner of the
land was allowed. In the course of the judgment it was observed as
follows:

F "Power to cancel a notification for compulsory acquisition
is, it is true, not affected by Section 48 of the Act. By a
notification under Section 21 of the General Clauses Act,
the government may cancel or rescind the notifications
under Sections 4 and 6 of the Land Acquisition Act". The
Court, however pointed out that "The power under Section
G 21 of the General Clauses Act cannot be exercised after the
land statutorily vested in the State Government.

In another portion of the judgment it was observed
that after possession has been taken pursuant to a notifica-
tion under Section 17(1) the land is vested in the Govern-
H ment and the notification cannot be cancelled under Sec-
STATE OF KERALA v. K.G.M. PILLAI [NATARAJAN, J.I 119

tion 21 of the General Clauses Act, nor can the notification
be withdrawn in exercise of the powers under Section 48 A
and that any other view would enable the Government to
circumvent the specific provision by relying upon a general
power.''

Mr..,Poti's contention was that till the permission was granted under B
Rule 11 for opening_ new schools or upgrnding schools, the power of
the Government under Section 20 of the Kerala General Clauses Act
remained unaffected. We are unable to accept this argument because
as pointed out by the Division Bench, the Act and the Rules do not
provide for revocation of an order of sanction granted under Rule
2A(5) before taking the application to the third stage and evaluating it
on subjective considerations as to whether· permission should be C
granted under Rule 11 or not. In other words once the government
approves an application for opening a new unaided· school or a higher
class in an existing unaided schools and passes an order under Rule
2A(5), then the successful applicant acquires a right of legitimate ex-
pectation to have his application further considered under Rules 9 and D
11 for the issue of a sanction order under Rule 11 for opening a new
school or upgrading an existing school. It is no doubt true, as pointed
out by the Division Bench, that by the mere grant of an approval under
Rule 2A(5), an applicant will not acquire a right to open a new school ·
or to upgrade an existing school but he certainly acquires a right
enforceable in law to have his al'Plication taken to the next stage of E
consideration under Rule 11. The Division Bench was, therefore, right
in taking the view that the general power of rescindment available to
the State Government under Section 20 of the Kerala General Clauses
Act has to be determined in the light of the "subject matter, context
and the effect of the relevant provisions of the statute." For the
aforesaid reasons the fourth contention of Mr. PotiJias also to fail. F

The last contention of Mr. Poti was that.the Division Bench of
the High Court ought not to have issued writs under Article 226 of the
Constitution for quashing the ord_er under Ex. P-7 .and issuing a man-
damus to the Government to proceed with the 'approval-exercise' and
consider the eligibility of the respondents for being granted permission G
under Rule 11 fiir opening new schools or upgrading existing ·schools in
the selected areas. Various factors were adverted to in support of this
plea. It was first of all stated that the respondents have no enforceable
right under law to open a school or to insist upon government accord-
ing them sanction. Secondly, it was stated that many of the respon-
dents were not possessed of adequate land or suitable buildings or H
120 SUPREME COURT REPORTS [1988) Supp. 3 S.C.R.

A necessary equipment.or financial resources etc. to open the schools.
Thirdly, it was urged that the academic year 1986-87 had almost come
to a close when the order under Ex. P-4 was issued and hence the order
had practically become infructuous. Fourthly, it was stated that though
there would be no direct expenditure for the State in the opening of
unaided schools, the consequential results would affect the finances of
B the State. It was said that as a result of the opening of new unaided
schools or upgraded schools, the pupil strength and the division
strength in the existing g.ivernment and aided schools inevitably get
reduced and this led to reduction in the teaching staff strength of those
schools and the teachers thrown out of employment have to be given
pr;Jtection by the State by treating them as protected teachers and
absorbing them in other government and aided schools as and when
C vacancies arose and it was in this manner the State's finances came to
be affected. By this devious reasoning it was contended that the State
cannot be compelled to incur additional expenditure in order to oblige
the respondents opening new schools etc.

D We have given our careful consideration to these submissions
and find that they have no merit or substance. We have already set out
that though the respondents do not claim a fundamental right, since
none of them base their claim under Article 30(1), to open new
schools, they do acquire a legal right under the Act and the Rules,
after the Government finalises the list of approved applicants for
E opening new schools or upgrading existing schools in the selected
areas. The Rules enjoin the Government to scrutinise the applications
at various levels and then cause a list of the approved applications to
be published. Any applicant whose name is not included in the ap-
proved list can file a revision to Government under Rule 12 and seek
redressal of his grievance. Therefore it follows that if an application is
F approved and sanction is granted under Rule 2A(5), the applicant
acquires a justiciable right to have his application considered at the
next level of determination under Rule 9 and Rule 11. To take any
other view of the matter would run counter to the Rules in Chapter V
and the legislative intent underlying them. In so far as many of the
respondents not possessing the required extent of land or the type of
G building or the amount of finance etc. for opening a new school, it is
always open to the Government when scrutinising the applications in
the context of Rule 9, to refuse grant of permission to those applicants
and reject their applications. By the judgment of the Division Bench,
the right of the State Government to pass appropriate orders under
Rules 9 and 11 have not been taken away. As regards the contention
H that the sanction granted under Ex. P-4_on 4.2.87 was almost at the
STATE OF KERALA v. K.G.M. PILLAI (NATARAJAN, J.) Ul

close of the academic year and as such the order could not have been
effectively implemented by the respondents even if the order had not A
been revoked, we have only to point out that the applications were
made well in time but at the instance of some parties who moved the
High Court, the Government was restrained from passing sanction
orders and it was on account of that there was some delay. Even
otherwise Rule 11 provides for the Government prescribing the date B
from which the school should start functioning. It is always therefore
open to the Governm~nt to fix the date from which the school should
start functioning and the Government is not left without power to
exercise regulatory control in such matters. The last of the reasons
given viz .. that by the opening of new aided schools, the ieachers in the
government and aided schools will be rendered surplus due to fall in
the pupil strength or the division strength in the existing schools, itc
speaks rather poorly of the standards of education in Government and
aided schools .. Be that as it may, this cannot be a reason which can be
advanced by the Government after it had gone half the way through
the exercise of opening new schools in areas and localities where educa-
tional facilities are not adequate. It was urged that there are 16,000 D
schools in Kerala State and they themselves cast a heavy burden on the
finances of the State and as such the State cannot afford to have more
teachers thrown out of employment in Government and aided schools
due to opening of new schools and pay them their salary till such time
they are absorbed in regular vacancies in the existing schools. The
argumen,t fails to take note of the fact that all these factors were not E
new developments but were in existence even when the Government
took steps under Rule 2 to identify the poorly served areas and then
called for applications from interested parties for grant of permission
to open new schools or to upgrade existing schools. If really the open·
ing of new aided schools would result in an adverse effect upon the
finances of the State, then the Government should find remedy for the F
situation by amending the Rules suitably so as to severely limit the
scope for opening new unaided schools by putting more stringent con-
ditions. In fact, the Government have already proceeded in that direc-
tion and even now Rule 11 stipulates that any unaided school granted
recognition should not seek cpnversion into an aided institution and
that if such conversion is sought for, then the recognition granted G
earlier will automatically lapse. Over and above all these things, it is
inconceiveable that by the opening of 91 unaided schools, new or
upgraded, even assuming all of them are granted permission under
Rule 11, the impact on the pupil strength of division strength ill-the
existing government and aided schools will be so great as to cause a
large number of teachers being rendered surplus and the Government H
122 SUPREME COURT REPORTS (1988] Supp. 3 S.C.R.

being forced to incur heavy expenditure by treating them as protected
A teachers and paying them their salary. We are, therefore, in complete
agreement with t11e Division Bench that these factors are undoubtedly
extraneous ones and do not afford justification for the passing of the
impugned order Ex. P-7 for revoking the earlier sanction order Ex.
P-4. Hence the last contention also fails.
B
In the light of our reasoning and conclusions, our answers for the
three questions formulated by us are as under:

( 1) Though the sanction granted to the respondents under
Ex. P-4 would not by itself entitle them to open new schools or
upgrade the existing schools, it did confer en them a right to seek
c the continuance of the statutory procedural stream in order to
have their applications considered under Rule 9 and dealt with
under Rule 11.

(2) It was not open to the Government, either under the Act or
D Rules or under Section 20 of the Kerala .General Clauses Act to
cancel in toto the approval granted to the respondents under
Rule 2A(5), for opening new schools or upgrading existing
schools in the selected areas on the basis of a revised policy.

(3) The impugned order under Ex. P-7, irrespective of the ques-
E tion whether the Government had the requisite power of cancel-
lation or not, is vitiated by reason of non-observance of the
principles of natural justice and the vice of extraneous factors.

In the result, all the appeals fail and are accordingly dismissed. There
will be no order as to costs. However, even as the Division Bench has
F done, we make it clear that we are not making any pronouncement
about the suitability or otherwise of the respondents to be granted
permission under Rule 11 to open new schools or upgrade existing
schools: All that we hold is that the respondents are entitled, on the
basis of the earlier order passed in their favour under Ex. P-4, to seek
continuance of the statutory procedure in order to have their applica-
G tions considered under Rule 9 and for appropriate orders being passed
under Rule 11 in accordance with law.

Y. Lal Appeals dismissed.