Promissory estoppel yielded to public interest and equitable adjustment, making later payment conditional on repayment of earlier wrongful gain.

Promissory estoppel and legitimate expectation cannot be used to compel payment where the claim is linked to a prior fraudulent encashment and would prejudice public interest. The Court treated the earlier representation as non-enforceable against the Government, holding that equity will not protect a party that has already obtained pecuniary advantage at the public exchequer's cost. It also accepted that prior binding directions between the parties and the claimant's earlier wrongful gain justified an equitable adjustment, making later release conditional on repayment of the earlier amount. The repayment-and-release mechanism was therefore upheld, and immediate payment was denied.

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Issues: (i) Whether the doctrine of promissory estoppel or legitimate expectation could compel payment of premium on the genuine Exim scrips in view of the earlier fraudulent encashment and the public interest involved; (ii) whether the earlier Division Bench directions and the prior pecuniary gain obtained by the purchaser justified denial of immediate payment and an adjustment against the earlier amount.

Issue (i): Whether the doctrine of promissory estoppel or legitimate expectation could compel payment of premium on the genuine Exim scrips in view of the earlier fraudulent encashment and the public interest involved.

Analysis: The earlier representation made in the connected writ proceedings was not treated as an enforceable promise capable of overriding the consequences of the prior fraudulent transaction. The Court held that promissory estoppel is an equitable doctrine and cannot be invoked to protect a person who has already obtained pecuniary advantage at the cost of the public exchequer. Since public interest and equity were found to outweigh the claimed entitlement, the respondents were not bound to honour the demand merely on the basis of the earlier representation.

Conclusion: The plea of promissory estoppel and legitimate expectation failed against the assessee.

Issue (ii): Whether the earlier Division Bench directions and the prior pecuniary gain obtained by the purchaser justified denial of immediate payment and an adjustment against the earlier amount.

Analysis: The Court treated the earlier Division Bench order as final and binding between the parties, and held that the petitioner had not complied with the security requirement imposed therein. It also held that the earlier wrongful gain of Rs. 14,11,200/- could not be ignored while considering the later claim for Rs. 8,83,400/-. On that basis, the Court approved an equitable adjustment structure requiring repayment of the earlier amount before release of the later payment.

Conclusion: The adjustment-based defence succeeded, and the later payment was made conditional on repayment of the earlier amount.

Final Conclusion: The writ appeals were allowed, the single judge's order was set aside, and the claimant's entitlement to immediate payment was denied while an equitable repayment-and-release mechanism was directed.

Ratio Decidendi: Promissory estoppel cannot be enforced against the Government where doing so would perpetuate a benefit traceable to fraud or would prejudice public interest, and prior binding directions between the parties may justify equitable adjustment before any further payment is released.

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