TaxTMI 
TaxTMI 
1978 (12) TMI 45
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....f comparatively recent origin but it is potentially so fruitful and pregnant with such vast possibilities for growth that traditional lawyers are alarmed lest it might upset existing doctrines which are looked upon almost reverentially and which have held the field for a long number of years. The law in regard to promissory estoppel is not yet well settled though it has been the subject of considerable debate in England as well as the United States of America and it has also received consideration in some recent decisions in India and we, therefore, propose to discuss it in some detail with a view to defining its contours and demarcating its parameters. We will first state briefly the facts giving rise to this appeal. This is necessary because it is only where certain fact-situations exist that promissory estoppel can be invoked and applied. The appellant is a limited company which is primarily engaged in the business of manufacture and sale of sugar and it has also a cold storage plant and a steel foundry. On 10th October, 1968, a news item appeared in the National Herald in which it was stated that the State of Uttar Pradesh had decided to give exemption from sales tax for a p....
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....ly that the appellant would have to (sic) option to terminate the agreement, if within 10 weeks exemption from sales tax was not granted by the State Government. The 4th respondent replied on 22nd December, 1968, confirming that " the State Government will be willing to consider your request for grant of exemption from U. P. sales tax for a period of three years from the date of production " and asked the appellant to obtain the requisite application form and submit a formal application to the Secretary to the Government in the Industries Department and in the meanwhile to " go ahead with the arrangements for setting up the factory ". The appellant had in the meantime submitted an application dated 21st December, 1968, for a formal order granting exemption from sales tax under s. 4A of the Act. It appears that the letter of the 4th respondent dated 22nd December, 1968, was not regarded as sufficient by the financial institutions which were approached by the appellant for financing the project since it merely stated that the State Government would be willing to consider the request for grant of exemption and did not convey any decision of the State Government that the exemption woul....
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.... its letter dated 19th May, 1969, pointed out to the 5th respondent that so far as the appellant was concerned, the State Government had already granted exemption from sales tax by the letter of the Chief Secretary dated 23rd January, 1969, but still, the appellant would be glad to send its representative to attend the meeting as desired by the 5th respondent. The proposed meeting was, however, postponed and the appellant was intimated by the 5th respondent by his letter dated 23rd May, 1969, that the meeting would now be held on 3rd June, 1969. The appellant's representative attended the meeting on that day and reiterated that so far as the appellant was concerned, it had already been granted exemption from sales tax and the State Government stood committed to it. The appellant thereafter proceeded with the work of setting up the vanaspati plant on the basis that in accordance with the assurance given by the 4th respondent on behalf of the State Government, the appellant would be exempt from payment of sales tax for a period of three years from the date of commencement of production. The State Government, however, went back upon this assurance and a letter dated 20th January, 1....
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.... years from the date of commencement of the production and this assurance was given by the 4th respondent intending or knowing that it would be acted on by the appellant and in fact the appellant, acting in reliance on it, established the vanaspati factory by investing a large amount and the State Government was, therefore, bound to honour the assurance and exempt the vanaspati manufactured and sold by the appellant from payment of sales tax for a period of three years from 2nd July, 1970. This plea based on the doctrine of promissory estoppel was, however, rejected by the Division Bench of the High Court principally on the ground that the appellant had waived the exemption, if any, by accepting the concessional rates set out in the letter of the Deputy Secretary dated 20th January, 1970. The appellant thereupon preferred the the present appeal after obtaining a certificate of fitness from the High Court. The principal argument advanced on behalf of the appellant in support of the appeal was that the 4th respondent had given a categorical assurance on behalf of the State Government that the appellant would be exempt from payment of sales tax for a period of three years from the ....
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....ver, in the absence of notification under s. 4A, the State Government could not be prevented from enforcing the liability to sales tax imposed on the appellant under the provisions of the Act. It was urged on behalf of the State Government that there could be no promissory estoppel against the State Government so as to inhibit it from formulating and implementing its policies in public interest. These were broadly the rival contentions urged on behalf of the parties and we shall now proceed to consider them. We shall first deal with the question of waiver since that can be disposed of in a few words. The High Court held that even if there was an assurance given by the 4th respondent on behalf of the State Government and such assurance was binding on the State Government on the principle of promissory estoppel, the appellant had waived its right under it by accepting the concessional rates of sales tax set out in the letter of the 5th respondent dated 20th January, 1970. We do not think this view taken by the High Court can be sustained. In the first place, it is elementary that waiver is a question of fact and it must be properly pleaded and proved. No plea of waiver can be allo....
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....n under the assurance given by the 4th respondent and that it intentionally abandoned such right. It is difficult to speculate what was the reason why the appellant addressed the letter dated 25th June, 1970, stating that it would avail of the concessional rates of sales tax granted under the letter dated 20th January, 1970. It is possible that the appellant might have thought that since no notification exempting the appellant from sales tax had been issued by the State Government under s. 4A, the appellant was legally not entitled to exemption and that is why the appellant might have chosen to accept whatever concession was being granted by the State Government. The claim of the appellant to exemption could be sustained only on the doctrine of promissory estoppel and this doctrine could not be said to be so well defined in its scope and ambit and so free from uncertainty in its application that we should be compelled to hold that the appellant must have had knowledge of its right to exemption on the basis of promissory estoppel at the time when it addressed the letter dated 25th June, 1970. In fact, in the petition as originally filed, the right to claim total exemption from sales....
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.... quasi-estoppel " and " new estoppel ". It is a principle evolved by equity to avoid injustice and, though commonly named " promissory estoppel ", it is, as we shall presently point out, neither in the realm of contract nor in the realm of estoppel. It is interesting to trace the evolution of this doctrine in England and to refer to some of the English decisions in order to appreciate the true scope and ambit of the doctrine particularly because it has been the subject of considerable recent development and is steadily expanding. The basis of this doctrine is the interposition of equity. Equity has always, true to form, stepped in to mitigate the rigours of strict law. The early cases did not speak of this doctrine as estoppel. They spoke of it as " raising an equity ". Lord Cairns stated the doctrine in its earliest form-it has undergone considerable development since then-in the following words in Hughes v. Metropolitan Railway Company [1877] 2 App Cas 439, 448 (HL) : " ........ it is the first principle upon which all courts of equity proceed, that if parties who have entered into definite and distinct terms involving certain legal results ...... afterwards by their own act o....
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.... to act in a particular manner in the future. Mr. Justice Denning, however, pointed out ([1947] 1 KB 130, 134 (KB)) : " The law has not been standing still since Jorden v. Money [1854] LR 5 HL Cas 185 (HL). There has been a series of decisions over the last fifty years which, although they are said to be cases of estoppel are not really such. They are cases in which a promise was made which was intended to create legal relations and which, to the knowledge of the person making the promise, was going to be acted on by the person to whom it was made, and which was in fact so acted on. In such cases the courts have said that the promise must be honoured. " The principle formulated by Mr. Justice Denning was, to quote his own words, " that a promise intended to be binding intended to be acted on and in fact acted on, is binding so far as its terms properly apply ". Now, Hughes v. Metropolitan Railway Co. [1877] 2 App Cas 439 (HL) and Birmingham and District Land Co. v. London North Western Railway Co. [1889] 40 Ch D 268 (CA), the two decisions from which Mr. Justice Denning drew inspiration for evolving this new equitable principle, were clearly cases where the principle was appl....
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....d us, however, to the second edition of Spencer Bower's Book on Estoppel by Representation (1966) by Sir Alexander Turner, a judge of the New Zealand Court of Appeal. He suggests that promissory estoppel is limited to cases where parties are already bound contractually one to the other. I do not think it is so limited : see Durham Fancy Goods Ltd. v. Michael Jackson (Fancy Goods) Ltd. [1968] 2 All ER 987 (QB). It applies whenever a representation is made, whether of fact or law, present or future, which is intended to be binding, intended to induce a person to act on it and he does act on it. " This observation of Lord Denning clearly suggests that the parties need not be in any kind of legal relationship before the transaction from which the promissory estoppel takes its origin. The doctrine would seem to apply even where there is no pre-existing legal relationship between the parties, but the promise is intended to create legal relations or affect a legal relationship which will arise in future. Vide Halsbury's Laws of England, 4th Edn., p. 1018, Note 2 to para. 1514. Of course it must be pointed out in fairness to Lord Denning that he made it clear in the High Trees' case [19....
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.... to be binding on the party making it, not understanding that under the old common law it might be difficult to find any consideration for it, " the courts have not gone so far as to give a cause of action in damages for the breach of such a promise, but they have refused to allow the party making it to act inconsistently with it ". Lord Denning also pointed out in Combe v. Combe [1951] 2 KB 215 ; [1951] 1 All ER 767, 769 (CA) that : " Much as I am inclined to favour the principle stated in the High Trees' case [1947] 1 KB 130 ; [1956] 1 All ER 256 (KB), it is important that it should not be stretched too far lest it should be endangered. That principle does create new causes of action where none existed before. It only prevents a party from insisting upon his strict legal rights, when it would be unjust to allow him to enforce them, having regard to the dealings which have taken place between the parties. " So also said Buckley J., in the more recent case of Beesly v. Hollwood Estates Ltd. [1960] 2 All ER 314, 324 (Ch D) : " The doctrine may afford a defence against the enforcement of otherwise enforceable rights ; it cannot create a cause of action. " It is, however, ....
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....stoppel, in or over land, will be protected by the courts and in this way give rise to a cause of action. " The Court of Appeal in this case allowed Crabb a declaration of " a right of access at point B over the verge on to Mill Park Road and a right of way along that road to Hook Lane " on the basis of an equity arising out of the conduct of the Arun District Council. Of course, Spencer Bower and Turner, in their Treatise on the Law Relating to Estoppel by Representation have explained this decision on the basis that it is an instance of the application of the doctrine of estoppel by encouragement or acquiescence or what has now come to be known as proprietary estoppel which, according to the learned authors, forms an exception to the rule that estoppel cannot found a cause of action. But if we look at the judgments of Lord Denning and Scarman L.J., it is apparent that they did not base their decision on any distinctive feature of proprietary estoppel but proceeded on the assumption that there was no distinction between promissory and proprietary estoppel so far as the problem before them was concerned. Both the learned Law Lord and the learned Lord justice applied the principle o....
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....Council at the instance of Crabb. The case was one which fell within the category of promissory estoppel and it may be regarded as supporting the view that promissory estoppel can be the basis of a cause of action. It is possible that the case also came within the rule of proprietary estoppel enunciated by Lord 'Kingsdown in Ramsden v. Dyson [1866] LR 1 HL Cas 129 (HL) : " The rule of law applicable to the case appears to me to be this : If a man, under a verbal agreement with a landlord for a certain interest in land, or what amounts to the same thing, under an expectation, created or encouraged by the landlord that he shall have a certain interest, takes possession of such land, with the consent of the landlord, and upon the faith of such promise or expectation, with the knowledge of the landlord, and without objection by him, lays out money upon the land, a court of equity will compel the landlord to give effect to such promise or expectation. And Spencer Bower and Turner may be right in observing that that was perhaps the reason why it was held that the promise made by Arun District Council gave rise to a cause of action in favour of Crabb. But, on what principle, one may....
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....ficult to see how in a case of promissory estoppel a promise can be used to found a cause of action without according to it operative contractual force and it is for this reason that " a contention that a promissory estoppel may be used to found a cause of action must be regarded as an attack on the doctrine of consideration ". The learned authors have also observed at page 387 that " to give a plaintiff a cause of action on a promissory estoppel must be little less than to allow an action in contract where consideration is not shown " and that cannot be done because consideration " still remains a cardinal necessity of the formation of a contract ". It can hardly be disputed that over the last three or four centuries the doctrine of consideration has come to occupy such a predominant position in the law of contract that under the English law it is impossible to think of a contract without consideration and, therefore, it is understandable that the English courts should have hesitated to push the doctrine of promissory estoppel to its logical conclusion and stopped short at allowing it to be used merely as a weapon of defence, though, as we shall point out, there are quite a few ca....
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....h report made as far back as 1937 accepted Prof. Holdsworth's view and advocated that a contract should exist if it was intended to create or affect legal relations and either consideration was present or the contract was reduced to writing. This recommendation, however, did not fructify into law with the result that the present position remains what it was. But having regard to the general opprobrium to which the doctrine of consideration has been subjected by eminent jurists, we need not be unduly anxious to protect this doctrine against assault or erosion nor allow it to dwarf or stultify the full development of the equity promissory estoppel or inhibit or curtail its operational efficacy as a juristic device for preventing injustice. It may be pointed out that the Law Commission of India in its 13th report adopted the same approach and recommended that, by way of exception to s. 25 of the Indian Contract Act, 1872, a promise, express or implied, which the promisor knows or reasonably should know, will be relied upon by the promisee, should be enforceable, if the promisee has altered his position to his detriment in reliance on the promise. We do not see any valid reason why pro....
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.... a social process, the end product of which is justice and hence it must keep on growing and developing with changing social concepts and values. Otherwise, there will be estrangement between law and justice and law will cease to have legitimacy. It is true, as pointed out by Mr. Justice Holmes, that continuity with the past is a historical necessity but it must also be remembered at the same time, as pointed out by Mr. Justice Cardozo, that " conformity is not to be turned into a fetish ". We would do well to recall the famous words uttered by Mr.Justice Cardozo while closing his first lecture on Paradoxes of Legal Science " The disparity between precedent and ethos may so lengthen with the years, that only covin and chicanery would be disappointed if the separation were to end. There are many intermediate stages, mores, if inadaquate to obliterate the past, may fix direction for the future. The evil precedent may live, but so sterilized and truncated as to have small capacity for harm. It will be prudently ignored when invoked as an apposite analogy in novel situations, though the novel element be small. There will be brought forward other analogies, less precise, it may be, b....
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....twithstanding that there is no consideration in the sense in which that word is used in English and Common wealth Jurisprudence. Of course, the basic requirement for invoking this principle must be present, namely, that the fact-situation should be such that " injustice can be avoided only by enforcement of the promise ". There are numerous examples of the application of this principle to be found in recent American decisions. There is, for instance, the long line of cases in which a promise to give a charitable subscription has been consistently held to be enforceable at the suit of the charity. Though attempts have been made to justify these decisions by reasoning that the charity by commencing or continuing its charitable work after receiving promise has given good consideration for it, we do not think that, on closer scrutiny, the enforceability of the promise in these cases can be supported by spelling out the presence of some form of consideration and the true principle on which they are really based is the principle of promissory estoppel. This is also the view expressed in the following statement at page 657 of vol. 19 of American jurisprudence : " A number of courts hav....
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.... N.Y. 18 the subscription was made without request, express or implied, that the church do anything on the faith of it. Later, the church did incur expense to the knowledge of the promisor, and in the reasonable belief that the promise would be kept. We held the promise binding, though consideration there was none except upon the theory of a promissory estoppel. In 74 N.Y. 72 a situation substantially the same became the basis for a like ruling. So in 103 N.Y. 600 and (1901) 167 N.Y. 96 the moulds of consideration as fixed by the old doctrine were subject to a like expansion. Very likely, conceptions of public policy have shaped, more or less subconsciously, the ruling thus made. Judges have been affected by the thought that ' defences of that character ' are ' breaches of faith towards the public, and especially towards those engaged in the same enterprise, and an unwarrantable disappointment of the reasonable expectations of those interested '. W. F. Allen J. in 12 N. Y. 18 and of 97 Vt. 495 and cases there cited. The result speaks for itself irrespective of the motive. Decisions which have stood so long, and which are supported by so many considerations of public policy and reas....
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....octrine of promissory estoppel applicable against the Government. So far as the law in England is concerned, the position cannot be said to be very clear. Rowlatt J., in an early decision in Rederiaktiebolaget Amphitrite v. King [1921] 3 KB 500 (KB), held that an undertaking given by the British Government to certain neutral shipowners during the First World War that if the shipowners sent a particular ship to the United Kingdom with a specified cargo, she shall not be detained, was not enforceable against the British Government in a court of law and observed that his main reason for taking this view was that : "...it is not competent for the Government to fetter its future executive action, which must necessarily be determined by the needs of the community when the question arises. It cannot by contract hamper its freedom of action in matters which concern the welfare of the State. " This observation has, however, not been regarded by jurists as laying down the correct law on the subject since it is " very wide and it is difficult to determine its proper scope ". Anson's English Law of Contract, 22nd. Edn. 174. The doctrine of executive necessity propounded by Rowlatt J. ....
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....ppel may apply to the Government when justice so requires. The second edition of American Jurisprudence brought out in 1966, in paragraph 123, points out that " equitable estoppel will be invoked against the State when justified by the facts ", though it does warn that the doctrine " should not be lightly invoked against the State ". Later in the same paragraph, it is stated that " as a general rule, the doctrine of estoppel will not be applied against the State in its governmental, public or sovereign capacity ", but a qualification is introduced that promissory estoppel may be applied against the State even in its governmental, public or sovereign capacity if " its application is necessary to prevent fraud or manifest injustice ". Since 1966 there is an increasing trend towards applying the doctrine of promissory estoppel against the State and the old law that promissory estoppel does not apply against the Government is definitely declining. There have been numerous cases in the State courts where it has been held that promissory estoppel may be applied even against the Government in its governmental capacity where the accommodation of the needs of justice to : the needs of effec....
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....of the limitations upon his authority...' Men must turn square corners when they deal with the Government ', does not reflect a callous outlook. It merely expresses the duty of all courts to observe the conditions defined by Congress for charging the public treasury. " It will be seen that the Corporation was held entitled to repudiate its liability because the wheat crop insurance regulations prohibited insurance of re-seeded wheat and the assurance given by the county committee as the agent of the Corporation that the re-seeded wheat was insurable being contrary to the wheat crop insurance regulations, could not be held binding on the Corporation. It was not within the authority of the county committee to give such assurance contrary to the wheat crop insurance regulations and hence no promissory estoppel against the Corporation could be founded upon it. This decision did not say that even if an assurance given by an agent is within the scope of his authority and is not prohibited by law, it could still not create promissory estoppel against the Government. But, it may be pointed out, even this limited holding has come in for considerable criticism at the hands of jurists in t....
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....therwise impermissible under the law, they " will work estoppel against the Government ". When we turn to the Indian law on the subject it is heartening to find that in India not only has the doctrine of promissory estoppel been adopted in its fullness but it has been recognized as affording a cause of action to the person to whom the promise is made. The requirement of consideration has not been allowed to stand in the way of enforcement of such promise. The doctrine of promissory estoppel has also been applied against the Government and the defence based on executive necessity has been categorically negatived. It is remarkable that as far back as 1880, long before the doctrine of promissory estoppel was formulated by Denning J., in England, a Division Bench of two English Judges in the Calcutta High Court applied the doctrine of promissory estoppel and recognised a cause of action founded upon it in Ganges Manufacturing Co. v. Sourujmull [1880] ILR 5 Cal 669. The doctrine of promissory estoppel was also applied against the Government in a case subsequently decided by the Bombay High Court in Municipal Corporation of Bombay v. Secretary of State for India [1904] ILR 29 Bom 580.....
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....ed the ground, and erected the movable stables in 1866 in the belief that they had against the Government an absolute right not to be turned out until not only the expiration of six months' notice, but also other suitable ground was furnished : that this belief is referable to an expectation created by the Government that the enjoyment of the land would be in accordance with this belief : and that the Government knew that the Municipality were acting in this belief so created...... " an equity was created in favour of the Municipality which entitled, it " to appeal to the court for its aid in assisting them, to resist the Secretary of State's claim that they shall be ejected from the ground ". The learned Chief justice pointed out that the doctrine which he was applying took, its origin " from the jurisdiction assumed by courts of equity to intervene in the case of or to prevent fraud " and after referring to Ramsden v. Dyson [1866] LR I HL 129 at p. 170 (HL) 7 observed that the Crown also came within the range of this equity. This decision of the Bombay High Court is a clear authority for the proposition, that it is open to a party who has acted on a representation made by the ....
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....e period, that is to say, the right to hold the land in perpetuity free of rent. Chandrasekhara Aiyar J. agreed with the conclusion reached by the majority but rested his decision on the doctrine of promissory estoppel. He pointed out that the Government could not be allowed to go back on the representation made by it and stressed the point in the form of an interrogation by asking : " if we do so, would it not amount to our contenancing the perpetration of what can be compendiously described as legal fraud which a court of equity must prevent being committed ? " He observed that even if the resolution of the Government amounted merely to " the holding out of a promise that no rent will be charged in the future, the Government must be deemed in the circumstances of this case to have bound themselves to fulfil it. Whether it is the equity recognised in Ramsden's case [1866] LR I HL Cas 129 (HL) 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, as far as it lies in their power ". This was of course the solitary view of Chandrasekhara Aiyar J., but it was approved by this court in no uncertain terms in Ang....
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....y, that is, the doctrine that the Crown cannot bind itself so as to fetter its future executive action ...... the defence of executive necessity is of limited scope. It only avails the Crown where there is an implied term to that effect, or where that is the true meaning of the contract ", and this statement of Denning J. was to be preferred as laying down the correct law on the subject. Shah J., speaking on behalf of the court, observed (AIR 1968 SC 718, 723) : We are unable to accede to the contention that the executive necessity releases the Government from honouring its solemn promises relying on which citizens have acted to their detriment. Under our constitutional set-up, no person may be deprived of his right or liberty except in due course of and : by authority of law : if a member of the executive seeks to deprive a citizen of his right or liberty otherwise than in exercise of power derived from the law-common or statute the, courts will be competent to, and indeed would be bound to, protect the rights of the aggrieved citizen. " The defence of executive necessity was thus clearly negatived by this court and it was pointed out that it did not release the Government f....
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....ex parte appraisement of the circumstances in which the obligation has arisen. " The law may, therefore, now be taken to be settled as a result of this decision, that where the Government makes a promise knowing or intending that it would be acted on by the promisee and, in fact, the promisee, acting in reliance on it, alters his position, the Government would be held bound by the promise and the promise would be enforceable against the Government at the instance of the promisee, notwithstanding that there is no consideration for the promise and the promise is not recorded in the form of a formal contract as required by art. 299 of the Constitution. It is elementary that in a republic governed by the rule of law, no one, howsoever high or low, is above the law. 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. It is indeed difficult to see on what principle can a Government, committed to the rule ....
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....ty would not require that the Government should be held bound by the promise made by it. When the Government is able to show that in view of the facts which have transpired since the making of the promise, public interest would be prejudiced if the Government were required to carry out the promise, the court would have to balance the public interest in the Government carrying out a promise made to a citizen which has induced the citizen to act upon it and alter his position and the public interest likely to suffer if the promise were required to be carried out by the Government and determine which way the equity lies. It would not be enough for the Government just to say that public interest requires that the Government should not be compelled to carry out the promise or that the public interest would suffer if the Government were required to honour it. The Government cannot,as Shah J. pointed out in the Anglo-Afghan Agencies case, AIR 1968 SC 718, claim to be exempt from the liability to carry out the promise " on some indefinite and undisclosed ground of necessity or expediency ", nor can the Government claim to be the sole judge of its liability and repudiate it " on an ex parte....
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....this case was whether the Ulhasnagar Municipal Council could be compelled to carry out a promise made by its predecessor municipality that the factories in the industrial area within its jurisdiction would be exempt from payment of octroi for seven years from the date of the levy. The appellant-company, in the belief induced by the assurance and undertaking given by the predecessor municipality that its factory would be exempt from octroi for a period of seven years, expanded its activities, but when the municipal council came into being and took over the administration of the former municipality, it sought to levy octroi duty on the appellant-company. The appellant-company thereupon filed a writ petition under art. 226 of the Constitution in the High Court of Bombay to restrain the municipal council from enforcing the levy of octroi duty in breach of the promise made by the predecessor municipality. The High Court dismissed the petition in limine but, on appeal, this court took the view that this was a case which required consideration and should have been admitted by the High Court. Shah J., speaking on behalf of the court, pointed out : " Public bodies are as much bound as pr....
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....as well as in England. The full implication of 'promissory estoppel' is yet to be spelled out. " The learned judge, after referring to the decisions in High Trees' case [1947] 1 KB 130 (KB), Robertson v. Minister of Pensions [1949] 1 KB 227 (KB) and the Anglo-Afghan Agencies' case, AIR 1968 SC 718, pointed out that " the rule laid down in these decisions undoubtedly advances the cause of justice and hence we have no hesitation in accepting it." We must also refer to the decision of this court in M. Ramanatha Pillai v. State of Kerala [1974] 1 SCR 515 ; AIR 1973 SC 2641, because that was a decision strongly relied upon on behalf of the State for negativing the applicability of the doctrine of estoppel against the Government. This was a case, where the appellant was appointed to a temporary post and on the post being abolished, the service of the appellant was terminated. The appellant challenged the validity of termination of service, inter alia, on the ground that the Government was precluded from abolishing the post and terminating the service, on the principle of promissory estoppel. This ground based on the doctrine of promissory estoppel was negatived and it was pointed o....
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....itatingly allow the doctrine to be invoked in cases where it is necessary in order " to prevent fraud or manifest injustice ". This passage leaves no doubt that the doctrine of promissory estoppel may be applied against the State even in its governmental, public or sovereign capacity where it is necessary to prevent fraud or manifest injustice. It is difficult to imagine that the court citing this passage with approval could have possibly intended to lay down that in no case can the doctrine of promissory estoppel be invoked against the Government. Lastly, a proper reading of the observation of the court clearly shows that what the court intended to say was that where the Government owes a duty to the public to act differently, promissory estoppel cannot be invoked to prevent the Government from doing so. This proposition is unexceptionable, because where the Government owes a duty to the public to act in a particular manner, and here obviously duty means a course of conduct enjoined by law, the doctrine of promissory estoppel cannot be invoked for preventing the Government from acting in discharge of its duty under the law. The doctrine of promissory estoppel cannot be applied in ....
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.... of estoppel against the Government in the exercise of its legislative, sovereign or executive powers ", but for reasons which we shall presently state, we do not think this observation can persuade us to take a different view of the law than that enunciated in Anglo-Afghan Agencies' case, AIR 1968 SC 718. In the first place, it is clear that in this case there was factually no foundation for invoking the doctrine of promissory estoppel. When the State auctioned the licence for retail sale of country liquor and the respondents being the highest bidders were granted such licence, there was in force a notification dated 6th April, 1959, issued under s. 4 of the U.P. Sales Tax Act, 1948, exempting sale of country liquor from payment of sales tax. No announcement was made at the time of the auction whether the exemption from sales tax under this notification dated 6th April, 1959, was or was not likely to be withdrawn. However, on the day following the commencement of the licence granted to the respondents, the Government of U.P. issued a notification dated 2nd April, 1969, superseding the earlier notification dated 6th April, 1959, and imposing sales tax on the turnover in respect of ....
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.... question of estoppel against the Government in exercise of its legislative, sovereign or executive powers " may appear to be wide and unqualified, it is not so, if read in its proper context. This observation was made on the basis of certain decisions which the court proceeded to discuss in the succeeding paragraphs of the judgment. The court first relied on the statement of the law contained in para. 123 at p. 783, volume 28, of the American Jurisprudence (2d), but it omitted to mention the two important sentences at the commencement of the paragraph and the words " unless its application is necessary to prevent fraud or manifest injustice " at the end, which clearly show that even according to the American Jurisprudence, the doctrine of promissory estoppel is not wholly inapplicable against the Government in its governmental, public or sovereign capacity, but it can be invoked against the Government " when justified by the facts " as for example where it is necessary to prevent fraud or injustice. In fact, as already pointed above, there are numerous cases in the United States where the doctrine of promissory estoppel has been applied against the Government in the exercise of it....
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....n without expressly referring to these earlier decisions and overruling them. We are, therefore, of the opinion that the observation made by the court in Ram Kumar's case, AIR 1976 SC 2237, does not militate against the view we are taking on the basis of the decisions in Anglo-Afghan Agencies' case, AIR 1968 SC 718, Century Spinning & Manufacturing Co.'s case, AIR 1971 SC 1021, and Turner Morrison's case [1972] 85 ITR 607 (SC), in regard to the applicability of the doctrine of promissory estoppel against the Government. We may then refer to the decision of this court in Bihar Eastern Gangetic Fishermen Co-operative Society Ltd. v. Sipahi Singh, AIR 1977 SC 2149. It was held in this case in para. 12 of the judgment that the respondent could not invoke the doctrine of promissory estoppel because he was unable to show that, relying on the representation of the Government, he had altered his position by investing moneys and the allegations made by him in that behalf were " much too vague and general " and there was accordingly no factual foundation for establishing the plea of promissory estoppel. On this view, it was unnecessary to consider whether the doctrine of promissory estopp....
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....ernment that the proposed vanaspati factory of the appellant would be entitled to exemption from sales tax in respect of sales of vanaspati effected in Uttar Pradesh for a period of three years from the date of commencement of production. This representation was made by way of clarification in view of the suggestion in the appellant's letter dated 22nd January, 1969, that the financial institutions were not prepared to regard the earlier letter of the 4th respondent dated 22nd December, 1968, as a definite commitment on the part of the Government to grant exemption from sales tax. Now, the letter dated 23rd January, 1969, clearly shows that the 4th respondent made this representation in his capacity as the Chief Secretary of the Government, and it was, therefore, a representation on behalf of the Government. It was faintly contended before us on behalf of the State that this representation was not binding on the Government, but we cannot countenance this argument, because, in the first place, the averment in the writ petition that the 4th respondent made this representation on behalf of the Government was not denied by the State in the affidavit-in-reply filed on its behalf, and, s....
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....son making the promise, was going to be acted on by the person to whom it was made and which was in fact acted on ". (emphasis supplied). If a promise is " acted on ", " such action, in law as in physics, must necessarily result in an alteration of position ". This was again reiterated by Lord Denning in W. J. Alan & Co. Ltd. v. El Nasr Export and Import Co. [1972] 2 All ER 127, 140 ; [1972] 2 QB 189 (CA), where the learned Law Lord made it clear that alteration of position " only means that he (the promisee) must have been led to act differently from what he would otherwise have done. And, if you study the cases in which the doctrine has been applied, you will see that all that is required is that the one should have acted on the belief induced by the other party ". Viscount Simonds also observed in Tool Metal Manufacturing Co. Ltd. v. Tungsten Electric Co. Ltd. [1955] 2 All ER 657 ; [1955] 1 WLR 761 (HL) that " ...the gist of the equity lies in the fact that one party has by his conduct led the other to alter his position ". The judgment of Lord Tucker in the same case would be found to depend likewise on a fundamental finding of alteration of position, and the same may be said o....
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....misee, if the promisor were allowed to go back on the promise. The classic exposition of detriment in this sense is to be found in the following passage from the judgment of Dixon J. in the Australian case of Grundt v. Great Boulder Pty. Gold Mines Ltd. [1938] 59 CLR 641 : " ...It is often said simply that the party asserting the estoppel must have been induced to act to his detriment. Although substantially such a statement is correct and leads to no misunderstanding, it does not bring out clearly the basal purpose of the doctrine. That purpose is to avoid or prevent a detriment to the party asserting the estoppel by compelling the opposite party to adhere to the assumption upon which the former acted or abstained from acting. This means that the real detriment or harm from which the law seeks to give protection is that which would flow from the change of position if the assumption were deserted that led to it. So long as the assumption is adhered to, the party who altered his situation upon the faith of it cannot complain. His complaint is that when afterwards the other party makes a different state of affairs the basis of an assertion of right against him then, if it is allow....
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.... the nature of the function which the Government is discharging, the Government is subject to the rule of promissory estoppel and if the essential ingredients of this rule are satisfied, the Government can be compelled to carry out the promise made by it. We are, therefore, of the view that in the present case the Government was bound to exempt the appellant from payment of sales tax in respect of sales of vanaspati effected by it in the State of Uttar Pradesh for a period of three years from the date of commencement of the production and was not entitled to recover such sales tax from the appellant. Now, for the assessment year 1970-71, that is, 2nd July, 1970, to 31st March, 1971, the appellant collected from its customers sales tax amounting to Rs. 6,81,178.95 calculated at the rate of 3 1/2% on the sale price. But when the assessment was made by the sales tax authorities, sales tax was levied on the appellant at the rate of 7% and the appellant was required to pay up a further sum of Rs. 6,80,949.42. The appellant had prayed for an interim order in the present appeal staying further proceedings, but this court, by an order dated 3rd April, 1974, granted interim stay only on ....