It means a certain hope that the other party would do what it is statutorily bound and contractually obliged. It will arise only after a legal and contractual relationship between the parties is established. A party obtaining a loan from bank or any other financial institution can have a legitimate expectation that the bank would extend and continue the loan. Similarly, a party who is promised concessions if he opens industries in backward areas can have a legitimate expectation that the Government would grant the promised facilities after he has undertaken and established industry in the backward area. In such cases, the parties having legitimate expectation can enforce the continuance of benefits. They can claim damages if the other party commits the breach on the ground that the latter have failed to act fairly. The other party can be compelled to perform and continue their undertaking if the parties to whom the promises are made acts upon their promises.
[Ref.: Tata Cellular Case, 1994 (4) SCC 651; F.C.I. v. Kamadhenu Seeds, AIR 1993 SC 1601; Ram Pravesh Singh & Ors. v. State of Bihar, 2006 (8) SCC 381.]