Prior Executive Decision Does Not Bar State Legislature From Making a Law or Policy Conflicting with Larger Public Interest: Supreme Court

In a recent judgment (M/S Rewa Tollway P. Ltd. vs. The State of Madhya Pradesh & Ors.), the Supreme Court (SC) of India ruled that a prior executive decision does not prevent the State Legislature from enacting conflicting laws or policies if it serves the larger public interest. This decision came from a batch of civil appeals against a Madhya Pradesh High Court judgment regarding whether giving toll collection rights in exchange for construction costs under the BOT (Build, Operate & Transfer) Scheme counts as a 'lease' under the Transfer of Property Act, 1882, and the Indian Stamp Act, 1899. The Court stated that "a prior executive decision does not bar the State legislature from enacting a law or framing any policy contrary to or in conflict with the previous executive decision in furtherance of larger public interest." The matter was heard by a two-judge bench of the SC constituting Justice Vikram Nath and Justice Ahsanuddin Amanullah.

The case involved the Madhya Pradesh Rajya Setu Nirman Nigam Ltd. (MPRSNN), which was authorized to execute a road project under the BOT Scheme. An amendment to the Indian Stamp Act in Madhya Pradesh imposed a 2% stamp duty on the project's cost. The appellants challenged the recovery of a deficit stamp duty. The SC noted that the promise cannot be enforced as a right if an executive decision is withdrawn to a party's detriment. It illustrated, "Where the executive takes a decision based upon which a party acts and, later on, the executive withdraws that decision to the detriment of the party acting upon the earlier decision, it can be said to be estopped from withdrawing its promise or depriving the party from its legitimate expectation of what had been promised"

However, the Court clarified that legislative changes in the public interest cannot be enforced as a promise. "It is evident that the principles of legitimate expectation and promissory estoppel would not apply here," the Court added. The Court concluded that stamp duty should be charged only on the amount spent by the lessee, not the entire project cost, and directed the Collector (Stamps) to calculate the amounts individually. "From a clear reading of the above proviso (c) to Clause(C), the stamp duty would be chargeable @ 2% on the amount likely to be spent under the agreement by the lessee." The Supreme Court partly allowed the appeals.