TaxTMI 
TaxTMI 
1980 (4) TMI 303
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.... Mandi Fateh in Bahadurgarh Town, with a view to improve trade in the area. The Municipal Committee decided that the purchasers of the plots for sale in the Mandi would not be required to pay octroi duty on goods imported within the said Mandi. In pursuance of this decision, resolution No. 8 dated 20-12-1916 was passed by the Municipality. Handbills were issued for the sale of the plots on the basis of the resolution and it was proclaimed that Fateh Mandi would remain exempt from payment of octroi. Subsequently by resolution No. 4 dated 20-5-1917, the Municipal Committee decided that the term No. 14 to the conditions of sale, namely, that the plots would not be required to pay octroi, be amended to the effect that the Mandi shall remain immune from payment of Octroi Duty for ever. When the resolution was received by the Commissioner of Ambala, in paragraph 3 of his letter dated 26-6-1917 marked as Annexure A in the writ petition, he noted:- "I note that by its resolution No. 4 of 20-5-1917, the Municipal Committee has undertaken that Octroi shall never be imposed in the Mandi. This is ultra vires, the Municipal Committee cannot make such an undertaking and this should be e....
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....Government after discussing the issue on 9-4-1956 informed the President of the Municipal Committee that the Government's action in confirming the resolution No. 1 of 2-3-1954 of the Municipal Committee, Bahadurgarh exempting goods imported into Fateh Mandi from levy of octroi duty under S. 70(2) (c) of the Municipal Act, 1911, is quite in order and that no separate notification to this effect was necessary under the rules. Again on 21-7-1965, the Municipal Committee Bahadurgarh resolved that the Government be requested to cancel Resolution No. 1 dated 2-3-1954. The State of Haryana Respondent No. 1 which came into existence on 1-11-1964 under the Punjab Reorganisation Act, by its memo dated 13-10-1967 approved the resolution No. 6 dated 21-7-1965 of Municipal Committee and cancelled the Municipal Resolution No. 1 of 2-3-1954. As a result of the decision of the Government, the Municipal Committee started charging octroi duty on the goods imported into the Mandi. On these facts, the petitioners submitted that the resolution No. 6 of the Municipal Committee dated 21-7-1965 (Annexure G) and the approval granted by the Haryana State as per its order dated 30-10-1967 (Ann. H) are il....
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....description of property. In exercise of these powers, the State Government had by its order dated 4-5-1954 confirmed resolution No. 1 passed by the Municipal Committee in its special meeting held on 2-3- 1954 regarding the exemption of goods imported into Fateh Mandi from levy of Octroi Duty. Subsequently, in reply to the objection raised by the Examiner of Local Funds, the Government pointed out by its letter dated 9-4-1956 (Ann. F) that the Government's action confirming the resolution No. 1 dated 2-3-1954 of the Municipal Committee exempting Goods imported into Fateh Mandi, under S. 70(2) (c) of the Punjab Municipal Act, 1911, is quite in order. By the impugned order dated 20-10-1967 the Government approved the resolution No. 6 of the Municipal Committee dated 21-7-1965 and permitted the Municipality to levy the Octroi Duty. The action taken by the State Government is strictly in conformity with the powers conferred on it under S. 70(2)(c) of the Act. It exempted the petitioners from payment of Octroi Duty for a particular period and ultimately withdrew the exemption. The action of the Government cannot be questioned as it is in exercise of its statutory functions. The plea ....
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.... to satisfy us that some of the appellants are the original purchasers and as such the first objection raised before the High Court is not sustainable. Again, regarding the third objection, that there is no allegation that the original purchasers would not have purchased the plots if condition 14 about immunity from payment of Octroi had not been there, it was submitted as erroneous as in the affidavit filed in support of the writ petition, the petitioners had pleaded in paragraph 2 that on the faith of the representation, the petitioners purchased the plots and constructed establishments. The learned counsel is, therefore, right in his submission that the third objection raised before the High Court is without substance. But the High Court was right in pointing out that none of the sale deeds executed by the Municipal Committee in favour of the purchasers was produced before the Court. These circumstances would show that the contract between the parties have not been proved to have been reduced in writing and executed in the manner prescribed under S. 47 of the Act. Strictly, therefore, under the terms of the Municipal Act, the appellants are not entitled to any enforceable legal ....
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....nstitutional provision intended for the protection of the general public. That is why the plea of estoppel or ratification cannot be permitted in such a case." (emphasis Ours) 10. It was contended before this Court in Karamshi Jethabhai Somayya v. State of Bombay, that in an agreement entered into under the Act by statutory authority in pursuance of a statutory power, that consequences provided under the statute would follow and would not fall within the ambit of S. 175(3) of the Government of India Act. This Court after examining the terms of the contract found that it did not fall within the provisions of the Act and, found it unnecessary to deal with the contention. 11. The scope of the doctrine of equitable estoppel arose for consideration before this Court in Collector of Bombay v. Municipal Corporation of the City of Bombay and Ors. In 1865, the Government of Bombay called upon the predecessor in title of the Corporation of Bombay to remove some markets from a certain site and vacate it, and on the application of the then Municipal Commissioner the Government passed a resolution approving and authorising the grant of another site to the Municipality. The resolution s....
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....udges did not express any opinion on this question but decided the appeal on a narrower and shorter ground stated above. One of the judges, Chandrasekhara Aiyar, J. constituting the majority expressed his view thus:- "Whether it is the equity recognised in Ramsden's case, or it is some other form of equity, is not of much importance. Courts must do justice by the promotion of honesty and good faith so far as it lies in their power. As pointed out by Jenkins C. J. in Dadoba Janardhan's case a different conclusion would be opposed to what is reasonable, to what is probable and what is fair." The other judges of the Court who spoke for the Court refrained from going into this question. The view of Chandrasekhara Aiyer, J. being the view of one of the judges of the majority, cannot be taken as the view of the Court. Patanjali Sastri, J. as he then was dissented with the majority and stated:- "The principle of Ramsden v. Dyson cannot prevail against statutory requirements regarding disposition of property or making of contract by Government * * *The right to levy land revenue is no part of the Government's right to property but a prerogative of the Crown....
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.... that the Government on grounds of executive necessity was the sole judge of the validity of its action in matters relating to import and export policy, because the policy depended upon the economic climate and other related matters and had to be in its very nature flexible with power in the Government to modify or adjust it as the altered circumstances necessitate. It was pleaded that if the Government was held bound by every representation made by it regarding its intentions, it would amount to holding the Government as being bound by contractual obligations even though no formal contract in the manner required by Art. 299 of the Constitution was executed. Regarding the objection on the ground of contravention of Art. 299 of the Constitution, the Court held that the respondents were not seeking to enforce any contractual right but were seeking to enforce compliance of the obligation which is laid upon the Textile Commissioner by the terms of the Scheme and the claim of the respondents was founded upon the equity which arose in their favour as a result of the representation made on behalf of the Government in the Export Promotion Scheme. (emphasis supplied). It may be noted that n....
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....ernment (emphasis supplied). On the facts of the case, the Court gave relief as the authorities declined to act according to the terms of the Scheme and acted arbitrarily and at their mere whim ignoring the promises made by the Government. The question as to the applicability of the doctrine of promissory estoppel against the legislative or executive acts of the Government did not strictly arise in the case. The decision was thus generally understood as stated above is seen from the view expressed by Mr. H.M. Seervai on Constitution of India, 2nd Edn. Vol. I, paragraph 11 at para 146-B, p. 433: "The authorities considered by the Supreme Court, and the conclusions drawn from them, by Shah, J. in the present case, merely affirm the proposition that the Government could not go back upon promises made in the exercise of discretionary power as embodied in a scheme, merely on a whim (emphasis by Mr. Seervai) X X X A promissory estoppel cannot stand on a higher footing than a contract entered into between a citizen or subject and a public authority and it is settled by numerous decisions that no public authority entrusted with discretionary power to be exercised....
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....xpediency fail to carry out the promise solemnly made by it, nor claim to be the judge of its own obligation to the citizen on an ex parte appraisement of the circumstances in which the obligation has arisen." The observations of the Court that the claim of the respondents is properly founded on the equity should be understood on the facts and findings of the Court in the case. The Court relying on the observations of Chief Justice Jenkins, observed that even though the case does not fall within the terms of S.115 of the Evidence Act, it is still open to a party who has acted on a representation made by the Government to claim that the Government shall be bound to carry out the promise made by it, even though the promise is not recorded in the from of a formal contract as required by the Constitution. The Court would be bound when the officer made the promise within the scope of his authority and failed to act upon it at his mere whim and acted arbitrarily on some undefined and undisclosed grounds of necessity. 17. Before proceeding further with the case, we will refer briefly to the purport of the doctrine of promissory estoppel. The doctrine of promissory estoppel burst int....
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....to the development of law of promissory estoppel starting from High Trees case. It is sufficient to state that since the High Trees decision was rendered, many elaborations and glosses have appeared in the reports. Turner in his book Estoppel by Representation, has a separate chapter dealing with promissory estoppel. The doctrine, as observed by the author at the conclusion of the chapter, "burst out into sudden blaze in 1946 has ever since continued to smoulder, and that its original author has constantly maintained his interest in its further development, now in this direction, now in that". But there has been high places counselling conservatism *** Lord Hailsham of St. Marylebone, has expressed his views in Woodhouse Ltd. v. Nigerian Produce Ltd. as follows:- "I desire to add that the time may soon come when the whole sequence of cases based on promissory estoppel since the war *** systematically explored". 18. This subject though interesting may not be relevant in administering Indian Law. S. 63 of the Contract Act provides that when a creditor accepts a lesser sum in satisfaction of the whole debt, the whole debt become discharged. This provision is a wide departu....
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....there is an implied term to that effect or that is the true meaning of the contract." Lord Denning was dealing with a case of a serving army officer who wrote to the War Office regarding a disability and received a reply that his disability had been accepted as attributable to "military service". Relying on that assurance, he forbore to obtain an independent medical opinion. The Minister of Pensions took the view that appellant's disability could not be attributed to war services. Lord Denning held that between the subjects such an assurance would be enforceable because it was intended to be binding, intended to be acted upon, and it was in fact acted upon; and the assurance was also binding on the Crown because no term could be implied that the Crown was at liberty to revoke it. 20. The decision in Robertson's case is quoted with approval in the Indo-Afghan case but before we revert to the Indo-Afghan case, we will follow the course which Robertson's case took. The correctness of the case came up for consideration before the House of Lords in Howell v. Falmouth Boat Construction Co. Ltd. The appeal was preferred to the House of Lords from the Court of Appeal agai....
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....arily be determined by the needs of the community when the question arises, that it cannot by contract hamper its freedom of action in matters which concern the welfare of the State. The competent Military Authority approached the appellant for opening a club for officers serving in his Majesty's forces. The appellant stated his willingness to take on lease certain premises and asked the Military authorities to procure him a licence to continue the club after the termination of the war. The military authorities failed to obtain a licence and the appellant was informed of their inability to obtain the licence and an officer on behalf of the military authorities stated that the appellant should have a guarantee seeing that the war was not likely to come to an end quickly and that the club would be kept open throughout the war. The rules for the conduct of the club were drawn up and were approved by the Military Authorities. Rule 18 provided that the club should endure during the time when the said hostilities existed. The club was placed out of bounds for service members by order of the Military Authorities because the club was being mismanaged by the sale of liquor long after pe....
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....obertson's case, the Privy Council approved the law laid down by Rowlatt, J. in Rederiaktiebolaget Amphtrite case which was dissented to by Denning, J. in Roberston's case. It may be noted that in Indo-Afghan case, the Court quoted the passage from Denning's judgment which did not approve the view of Rowlatt, J. The Privy Council approved the view taken by Rowlatt, J. in Rederiaktiabolaget Amphtrita case. 22. In William Cory & Son Ltd. v. London Corporation, London Corporation acting as sanitary authority under the Public Health (London) Act, 1936 made a contract with the claimants, barge and lighter owners, for the removal of refuse from a wharf in the City of Horn church, Essex, where it was to be dumped. In April, 1948, the Corporation acting as port health authority for the Port of London, sealed by- laws concerning the disposal of refuse in the area of the port one of which relating to co-amings and coverings of barges, was far more onerous on the claimants than the requirements in the contract of 1936. It was provided that this by-law was not to come into effect until November 1, 1950. It was contended by the claimants that by the provisions of the contract of ....
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....at the effect of a representation made by the Crown could no longer be qualified so as to be subject to the future exercise by the Crown of its Executive authority, was relied on. Lord Evershet M. R. while observing that the facts of the case were different held that the general proposition laid down by Denning L. J. was not accepted by the House of Lords in Howell v. Falmouth Boat Construction Co. Ltd. (supra). Devlin, J. stated the principle in the following terms :- "When the Crown, or any other person, is entrusted, whether by virtue of the prerogative or by statute, with discretionary powers to be exercised for the public good, it does not when making a private contract in general terms, undertake (and it may be that it could not even with the use of specific language validly undertake) to fetter itself in the use of those powers, and in the exercise of the discretion." Referring to the view of Denning, L. J. in Robertson v. Minister of Pension (supra), the learned Judge observed :- "The observations of Denning, L. J. in Robertson v. Minister of Pensions on the doctrine of `executive necessity', were I think, directed to a case of that sort. Here we ar....
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....fter quoting a passage from Rowlatt, J. in Rederiakiabolaget Amphtrte v. The King (supra) agreed that the view expressed by Anson's English Law of Contract 22nd Ed. p. 174 that the observation is clearly very wide and it is difficult to determine its proper scope. The Court quoted the passage of Denning, J. at p. 231 wherein the learned Judge expressed the disagreement with the view of Rowlatt, J :- "The Crown cannot escape by saying that estoppel do not bind the Crown for that doctrine has long been exploded. Nor can the Crown escape by praying in aid the doctrine of executive necessity, that is, the doctrine that the Crown cannot bind itself so as to fetter its future executive action. The doctrine was propounded by Rowlatt, J. in Rederiaktiebolaget Amphitrite v. The King but it was unnecessary for the decision because the statement there was not a promise which was intended to be binding but only an expression of intention. Rowlatt, J., seems to have been influenced by the cases on the right of the Crown to dismiss its servants at pleasure, but those cases must now all be read in the light of the judgment of Lord Atkin in Reilly v. The King- (1954) A.C. 176, 179). I....
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....t the power to create or abolish a post is not related to the doctrine of pleasure. It is a matter of governmental policy. Every sovereign Government has this power in the interest and necessity or internal administration. The creation or abolition of a post is dictated by policy decision, exigencies of circumstances and administrative necessity. The creation, the continuance and the abolition of post are all decided by the Government in the interest of administration and general public. The learned Chief Justice after quoting a passage in American Jurisprudence 2d. at p. 783, paragraph 123, observed that the estoppel alleged by the appellant Ramanathan Pillai was on the ground that he entered into an agreement and thereby changed his position to his detriment. The High Court rightly held that the Courts exclude the operation of the doctrine of estoppel, when it is found that the authority against whom estoppel is pleaded has owed a duty to the public against whom the estoppel cannot fairly operate. 28. In State of Kerala v. Gwalior Rayon Silk Manufacturing (Wvg.) Co. Ltd. (supra), Palekar, J. who delivered the opinion with which Krishna Iyer, J. and Bhagwati, J. agreed, rejecte....
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....use of Lords it correct and not that is taken by Lord Denning. 30. In Excise Commissioner U. P., Allahabad v. Ram Kumar (supra), the Court after consideration of the case law on the subject, held that it was settled by a catena of cases that there could be no question of estoppel against the legislative and sovereign functions. 31. A passage in American Jurisprudence 2d. at page 783 paragraph 123 was extracted by Ray C. J. in Ramanathan Pillai's case and Jaswant Singh J. in Excise Commissioner's case. The passage at p. 123 is as follows :- "Generally, a State is not subject to an estoppel to the same extent as an individual or a private corporation. Otherwise, it might be rendered helpless to assert its powers in Government. Therefore, as a general rule the doctrine of estoppel will not be applied against the State in its Governmental, Public or sovereign capacity. An exception however arises in the application of estoppel to the State where it is necessary to prevent fraud or manifest injustice." 32. But the learned Judges did not include the last sentence : "An exception however arises in the application of estoppel to the State where it is nece....
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....gislative and statutory functions as they were in the nature of obiter dicta and that on the facts the present case could be distinguished. The Indo-Afghan Agencies, Century Spinning and Manufacturing Co. and Turner Morisson Co. Ltd. v. Hungerford Investment Trust Ltd., were strongly relied on. We have pointed out that all that the Indo-Afghan Agencies case laid down was, that a public authority acting on behalf of the Government cannot on its own whim and in an arbitrary manner seek to alter the conditions accepted by him to the prejudice of the other side. The decision in terms accepts the view expressed in earlier cases that after taking into consideration the exigencies and change of circumstances, the authority can modify the conditions in exercise of his powers as a public authority. 37. In Century Spinning and Manufacturing Co. Ltd. and Anr. v. The Ulhasnagar Municipal Council and Anr., the facts of the case is set out in the head note and may be briefly stated. The State of Maharashtra on the representation made by certain manufacturers proclaimed the exclusion of the Industrial Area from the Municipal Jurisdiction. The Municipality made representations to the State requ....
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....is not exempt from the equity arising out of the acts done by citizens to their prejudices, relying upon the representations as to its future conduct made by the Government. This observation will have to be read alongwith the conditions that were laid down in the Indo-Afghan case and cannot be read as holding that the rule of estoppel will be applicable against the Government in the exercise of its legislative and statutory powers. The Court quoted the following passage from Denning J.:- "Crown cannot escape by saying that estoppel do not bind the Crown for that doctrine has long been exploded. Nor can the Crown escape by praying in aid the doctrine of executive necessity, that is, the doctrine that the Crown cannot bind itself so as to fetter its future executive action". and observed that the Court in Indo-Afghan case held that it was applicable to India. It may be noted that apart from not noticing Howell's case, the Court in Indo-Afghan case did not say that the law as extracted from Denning J's. judgment was applicable to India. The Court after considering the Indo-Afghan case and Howell's case, expressed thus :- "If our nascent democracy is to....
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....nnot arbitrarily act on his mere whim and ignore his promise on some undefined and undisclosed grounds of necessity or change the conditions to the prejudice of the person who had acted upon such representation and put himself in a disadvantageous position. (5) The officer would be justified in changing the terms of the agreement to the prejudice of the other party on special considerations such as difficult foreign exchange position or other matters which have a bearing on general interest of the State. 40. Before we conclude, we would refer to a recent decision of this Court in M/s. Moti Lal Padampat Sugar Mills Co. (P.) Ltd. v. State of Uttar Pradesh and Ors. It has been held that there can be no promissory estoppel against the exercise of legislative power and the legislature cannot be precluded from exercising its legislative functions by resort to the doctrine of promissory estoppel. It has also held that when the Government owes a duty to the public to act differently, promissory estoppel could not be invoked to prevent the Government from doing so. The doctrine cannot be invoked for preventing the Government from acting in discharge of its duty under the law. Th....
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....d Judge that: "Every one is subject to the law as fully and completely as any other and the Government is no exception. It is indeed the pride of constitutional democracy and rule of law that the Government stands on the same footing as a private individual so far as the obligation of the law is concerned, the former is equally bound as the latter." Again "but if the Government makes such a promise and the promises acts in reliance upon it and alters his position, there is no reason why the Government should not be compelled to make good such promise like any other private individual do not appear to convey the true effect of the decision." The decision of this Court in Century Spinning and Manufacturing Co. Ltd. and Anr. v. The Ulhashagar Municipal Council and Anr. (supra) was understood by Justice Bhagwati as refusing to make a distinction between the private individual and public body so far as the doctrine of promissory estoppel is concerned. These observations would be correct only if they are read with the exceptions recognised by Justice Bhagwati himself elsewhere in his judgment along with other restrictions imposed by Judgments of this Court. 44. We find ourselves unabl....
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....on relying on a representation has acted upon it and put himself in a disadvantageous position. Apart from the case in Robertson v. Minister of Pensions, the House of Lords in Howell's case and the Privy Council in Antonio Buttigieg's case and the other English Authorities do not agree with the view that the plea of promissory estoppel is available against the Government. Further we have to bear in mind that the Indian Constitution as a matter of high policy in public interest, has enacted Article 299 so as to save the Government liability arising out of unathorised acts of its officers and contracts not duly executed. 47. The learned Judge has considered at some length the doctrine of consideration and how it has thwarted the full development of the new equitable principle of promissory estoppel. After discussing the American Law on the subject, he has observed that the leading text book writers view with disfavour the importance given to "consideration". The learned Judge proceeds to observe that : "having regard to the general opprobrium to which the doctrine of consideration has been subjected to by eminent jurists, we need not be unduly anxious to project this doctr....
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....ed by the publishers on the ground that the rules were in derogation of their rights. It was held that the rules were in the nature of Departmental instructions and do not confer any right on the publishers nor are they designed to safeguard the interest of publishers and that the policy of nationalisation was conceived in public interest and as the Government is at liberty to change the text books and delete from and add to the list of approved text books and the publishers can have no grievance. In M/s. Andhra Industrial Works v. Chief Controller of Imports and Ors., a four judges Bench of this Court held that an applicant for a permit under Import Trade Policy has no absolute right to the grant of import licence and that the applicant cannot complain that the existing instructions or orders made in pursuance of the Import and Export Control Act place "unreasonable restrictions" on the petitioners' right to carry on trade or business. These restrictions obviously have been imposed in the interests of the general public and national economy and with the development of imports, regulating foreign exchange have necessarily to be appropriately controlled and regulated. 49. Pro....
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....e of the limitations of his authority. The Court can enforce compliance by a public authority of the obligation laid on him if he arbitrarily or on his mere whim ignores the promises made by him on behalf of the Government. It would be open to the authority to plead and prove that there were special considerations which necessitated his not being able to comply with his obligations in public interest. 51. In a fervent plea for the doctrine to speak in all its activist magnitude the learned Judge observes "that is no reason why this new principle, which is a child of equity brought into the world with a view to promoting honesty and good faith and bringing law closer to justice should be held in fetters and not allowed to operate in all the activist magnitude, so that it may fulfil the purpose for which it was conceived and born". It is no doubt desirable that in a civilised society man's word should be as good as his bond and his fellow men should be able to rely on his promise. It may be an improvement if a cause of action would be based on a mere promise without consideration. The law should as far as possible accord with the moral values of the society, and efforts should....