Introduction

Men must turn square corners when they deal with the government” [1]

The sanctity of promises in our society lies in the societal and moral conventions that allow a promisor
to be treated as bound to his promise. This moral convention is usually reflected in law by the
enforcement of promises that are given in return of other promises or consideration, compelling the
promisor to perform his end of the promise or pay expectation damages. In order to maintain this,
there are yet more moral rules which govern promises, statements and agreements. These are
embodied in the concept of estoppel which may be invoked in case of a breach in contract or against
the government.

The doctrine of promissory estoppel is a doctrine of equity. It makes a promise irrevocable when the
acceptor acts on the promise and irreversibly changes his position. The rationale behind this doctrine
is that it is unfair if one party, acting on the promise of the other, does something to his detriment and
receives no consideration because the promise is revoked. [2]

The government can enter into a contract just like any other individual or entity. Today, state officials
make promises to individual parties who enter into commitments on the basis of these promises, only
to find that the government’s discretion cannot be relied upon. The defence of statutory provisions
provide sufficient umbrage for the government to go back on promises. Therefore, in this time of
escalating administrative and executive facets of the State, the doctrine of promissory estoppel has
gained considerable importance in the field of administrative law.

The purpose of this project is to study the concept of promissory estoppel and its evolution, which is a
good relief for the suffered party which was not at fault at all. There is no provision as such which clears
availability of relief under this principle but it is enforceable and based on equity, to protect the
innocent party as a shield. The doctrine itself, its evolution and jurisprudence behind this principle is
dealt with in this project.

Various cases in which this principle is followed and these are precedents to assure the availability of
this principle in Indian law are mentioned in this project. The realm of this principle is ambiguous, the
law commission suggested recommendation to make new section as 25A in the Indian contract act in
the 108th report. These recommendations are mentioned in the project.

Doctrine of Promissory Estoppel

The principle is that when one party with the intention of creating or affecting legal relationship makes a
promise with another party and that party acts on it, that promise should be binding for the party who is
making it. It will not be allowed to go back from its words. Because reverting from the words will be
against equity.

In Motilal Padampat Sugar Mills vs State Of Uttar Pradesh And Ors, the Chief Secretary of Govt. made an
assurance that in order to establish industries firmly the total tax exemption will be given to the new
industrial units for next 3 years based on this assurance M.P. sugar mill started hydro generation plant
taking huge amount of money as loan. Afterward govt. makes some changes in the tax policy saying that
industries will be taxed at a varying rate.

Applying the doctrine of promissory estoppels the SC held that appellant took a huge loan relying on the
assurance made by govt. so no tax should be imposed for the period of 3 years from the date of
production as the promise was made. And there is nothing like to make that promise enforceable one
party should suffer harm or damages, in absence of detriment also the promise is binding.

Jurisprudence Behind the Doctrine

The doctrine of promissory estoppel is an equitable doctrine. Like all equitable remedies, it is
discretionary, in contrast to the common law absolute right like the right to damages for breach of
contract. It is a principle evolved by equity to avoid injustice and though commonly named ‘promissory
estoppel’, it is neither in the realm of contract nor in the realm of estoppel.

In India, however, as the rule of estoppel is a rule of evidence, the ingredients of Section 115 of the
Indian Evidence Act, 1872, must be satisfied with the application of the doctrine. The doctrine of
promissory estoppel does not fall within the scope of Section 115 as the section talks about
representations made as to existing facts whereas promissory estoppel deals with future promises. The
application of the doctrine would negate the constitutional provision, as under Article 299, which affords
exemption from personal liability of the person making the promise or assurance.
ROLE OF COURTS

While it can be said that it is essential in a constitutional democracy that no one howsoever high or low
is above the law and that everyone is subject to the law as fully as another, the government being no
exception [3] , it is also true that this in itself is not sufficient. There remain factors such as rule of law,
sovereign immunity, public interest and appropriate regard for administrative veracity of public
programs that must be taken into consideration when establishing a case against the government.

Indian Courts have, even whilst taking these considerations into mind, estopped the government every
so often and held it to its representations. However, there is no single interpretation that can explain all
the cases and the judges take on it. The various requirements of promissory estoppel are hard to state
and harder still to apply. [4] The doctrine of estoppel is one that is based on equity and accordingly
applied with respect to the circumstances of the case. Such application cannot follow a set of predictive
rules. [5]

In essence, the courts are required to examine whether the injustice done to an individual outweighs
the disadvantages to public interest. Lord Denning explained the balancing approach in a succinct
manner as follows:

“ The underlying principle is that the Crown cannot be estopped from exercising its powers, whether
given in a statute or by common law, when it is doing so in the proper exercise of its duty to act for the
public good, even though this may work some injustice or unfairness to the private individual…it can,
however, be estopped, when it is not properly exercising its powers but is misusing them; and it does
misuse them if it exercises them in circumstances which work injustice or unfairness to the individual
without any countervailing benefit to the public.” [6]

Evolution of the Doctrine in India

The History of the doctrine of promissory estoppels in India can be traced to the case of Ganges Mfg Co.
v. Sourajmul, in this case, C entered into a contract to purchase a particular number of gunny bags from
the appellant for the respondent and 107,500 bags remain undelivered as R was unable to pay for them.
When C represented that arrangements had been made for the payment for 87,500 bags, delivery
orders were given to C for delivery against payment. C’s representative took a letter from C to the
appellant requesting the appellant to direct delivery of bags to the representative of the R who went
along with the representative of the C because the R had agreed to advance the necessary money to C.
The officer in charge of the appellant did so. Then A delivered 50.000 bags to the representative of R but
refused to deliver the rest because of C’s failure to pay.

Thereupon the R sued the A for delivery of the remaining bags alleging that they had advanced the
money to C on the A’s representation that the goods will be delivered. HC decreed that the appellant
was estopped from denying and Calcutta High Court observed that “the doctrine of estoppels was not
only limited to the law of evidence but that a person may be prevented from doing any act or relying
upon any particular argument or connection, which the rules of equity and good conscience prevent him
from using as against the opponent.’’

In Municipal Corporation of the City of Bombay v. Secretary of State appellant surrendered its own land
in favor of the Govt. in consideration of a lease of government lands in favor of the appellant on a
nominal rent. After getting possession, the appellant spent enormous sums in making constructions. 27
years later, the respondent filed a suit claiming a large amount as arrears of rent. HC allowed the parties
to redefine their rights, namely, the appellant’s right to leasehold and the R’s right to reasonable rent. It
was observed by the Bombay High Court that even though there is no formal contract as required by the
statute, the Govt. should be bound by a representation made by it.

The term ‘promissory estoppel was used for the first time by the Supreme Court in the case of Collector
of Bombay v. Bombay Municipal Corporation. In this case the govt. of Bombay called upon the
predecessor in the name of MC of Bombay to remove old markets from a certain site and vacate it on
the application of MC in 1865. MC gave up that site and spent a sum of Rs. 17 lacks in erecting and
maintaining markets on the new site. The collector of Bombay assessed the new site to land revenue in
1940 and the MC thereupon filed a suit for a declaration that it was entitled to hold the land even
without payment of any assessment. SC held that C has the right to hold the land in perpetuity free of
rent. Chandrasekhar Iyer J. while concurring with the majority rested his decision on promissory
estoppels that the govt. could not be allowed to go back on its representation.

The doctrine found a complete and eloquent exposition in the cases of U.O.I v. Anglo-Afghan Agencies
the Government of India made an announcement regarding certain concessions with regard to the
import of certain raw materials in order to encourage export of woolen garments to Afghanistan.
Subsequently, only partial concessions were allowed and not full concessions were extended as
promised. The Supreme Court held that the Government was estopped by its promise. And after this
case, the courts have applied the doctrine of promissory estoppel and Motilal Padampat Sugar Mills Co.
Ltd. v. the State of U.P.
Promissory estoppel in relation to contract

• Promissory estoppel (p.e.) basically prevents a party to a contract from acting in a certain way because
they promised not to act in that way, and the other party to the contract relied on that promise and
acted upon it. – Hughes v. Metropolitan Railway Co. (1877), as per Lord Cairns:

• “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 – certain penalties or legal forfeiture –
afterwards by their own act or with their own consent enter upon a course of negotiation which has the
effect of leading one of the parties to suppose that the strict rights arising under the contract will not be
enforced, or will be kept in suspense, or held in abeyance, the person who otherwise might have
enforced those rights will not be allowed to enforce themwhere it would be inequitable having regard to
the dealings which have thus taken place between the parties”.

– These principles were applied in Central London Property Trust Ltd. v. High Trees House Ltd. (1947) by
Denning J. (as he then was) to found the modern doctrine of p.e. Denning J. was attempting to arrive at
a fair solution to the problem of part payment of debt, and, in doing so, to circumvent precedent
created by Foakes v. Beer (1884)

Requirements of promissory estoppel (1)

1) There is a pre-existing contractual relationship.

2) One party to that contract makes a clear promise that they will not fully enforce their legal rights
(under that contract).

3) The promisor intends that promise be relied upon and promisee does in fact rely upon it.

4) It would be inequitable for promisor to go back on (resile

from) their promise.

• Re (2), promise need not be express; it can be implied

from circumstnaces (situation in Hughes).

• Re (3), it would seem that promisee’s reliance need not be detrimental in the sense that, if the
promise were revoked, the promisee would be worse off than if promise had never been made.

– It is sufficient that promisee has altered their position in reliance upon promise so that they would be
prejudiced if promisor resiled from promise. “The nub is the promisee’s inability to resume his original
position due to the reliance. The corollary is that if he can resume his original position, or can do so on
reasonable notice (as in High Trees), there is no inequity in resiling from the promise either completely
or for the future, as the case may be”. (M. Chen-Wishart, Contract Law, OUP, 2006, p. 175.

• Re (4), this overlaps with (3) but mere fact of reliance will not necessarily mean that inequity
requirement is met.– Inequity = separate and independent requirement. Whether inequity would result,
depends on assessment of all circumstances of case at hand.

If promisee extracts promise through extortion and/or deception, then (4) would not be met. See e.g. D
& C Builders v. Rees (1966)

Effect of promissory estoppel on

promisee’s position (1)

• While promisee need not provide any consideration for promisor’s promise, they cannot sue on
promise (they have not provided consideration for it). In other words, doctrine cannot be used as cause
of action in itself; it does not confer or create new rights on promisee; it only operates to stop promisor
from fully enforcing previous rights against promisee (i.e. doctrine operates as “shield but not as
sword”).

• Concomitantly, doctrine can only be used where there is preexisting contractual relationship (or other
relationship creating legal rights), for which consideration will have been required.

It cannot be used where one party promises to do more than what contract requires or to pay more
than required

Effect of promissory estoppel on

• These limitations are exemplified by Combe v. Combe (1951).

• What is rationale for these limitations?

• In Australia, the limitations have been largely dispensed with Waltons Stores (Interstate) Ltd. v. Maher
(1988). See further Poole, section 4.8.6.1. Focus of Australian courts is on preventing “unconscionable
conduct” (vaguely defined).

Effect or promissory estoppel on

promisor’s legal rights

• It suspends but does not fully extinguish the promisor’s strict legal rights.

– Tool Metal Manufacturing Co. Ltd. v. Tungsten Electric Co. Ltd. (1955); operation of rights may be
resumed once reasonable notice given of intention to resume their operation and if promisee can
resume their original position (Emmanuel Ayodei Ajayi v. RT Briscoe Ltd. (1964)). If latter condition
cannot be met, effect of doctrine is to extinguish rights.

• Some terminological debate here:

– Denning says the rights are extinguished even during the time they are suspended because, in reality,
they cannot be claimed back for that period (even if they can be revived later).

IMMUNITY FROM ESTOPPEL

It is important to note that the doctrine of promissory estoppel cannot be invoked unreservedly keeping
in mind factors such as rule of law and public interest. A wanton use of this doctrine would amount to
rendering the government and its agencies ineffective, presenting a difficulty. Therefore, courts have
laid down certain immunities to prevent the same.
The essence of the doctrine of estoppel lies in the notion of equity. Therefore it is only expected that the
doctrine must yield to equity when so requisite. A promise cannot be enforced against the government
if it is inequitable to do so. It was contended in Motilal Padampat Sugar Mills v Uttar Pradesh that where
the government claims that public interest would be at stake by enforcement of a promise, the onus
would be upon the government to prove the facts and circumstances confirming the same. It is on this
basis that the court would decide whether it is inequitable to enforce liability against the government.
However, a plea of change of policy is not deemed sufficient. It must be shown that overriding and
overwhelming public interest required that the government be absolved of its past promise. [23]

The doctrine of promissory estoppel cannot be applied against the government if it endangers the
constitutional powers of the government. Similarly, the plea of estoppel also may not be enforced
against the government if it has the effect of repealing any constitutional provision intended for the
protection of the general public. [24] In C. Sankaranarayan v State of Kerala [25] , a notification was
issued under Article 309 of the Constitution, raising the age for retirement while a later notification
brought it down again. The Supreme Court, in this case, rejected the contention of estoppel and held
that the powers conferred by Article 309 could not be curtailed by any agreement.

Furthermore, the principle of estoppel cannot be invoked to defeat the plain provisions of a statute as
there can be no estoppel against the law. The doctrine of estoppel cannot be called upon to render valid
a transaction which the legislature has said to be invalid on the basis of general public policy. Neither
can it be used to give the court jurisdiction which is denied to it by statute or to oust the court’s
statutory jurisdiction under an enactment which precludes the parties contracting out of its provisions.
[26] The government cannot be compelled to carry out a representation if it is in contradiction with the
law or beyond its authority. It cannot be applied in the exercise of legislative power. The legislature
cannot be precluded from exercising its function by this doctrine. [27]

Applicability of the Doctrine of Promissory Estoppel

For the application of the doctrine of promissory estoppel, the requirement is that the party asserting
the estoppels must have “changed or altered the position’’ by relying on that representation.

In Maxey Charan v. Rohilkhand Uni, Bareilly the petitioner appeared in an examination conducted by the
university and declared to have passed. Subsequently, she got the admission for next year on the basis
of the defected mark sheet. Later the mistake was found out and her admission got canceled. Court held
that there was no mistake of petitioner and hence she is not responsible for such a mistake. In view of
the conduct of the University, it was a fit case in which the principles of promissory estoppel should be
applied to the respondent University.
Areas where the doctrine of promissory estoppels is not applicable:

1. There are no estoppels against the settled principle of law.

2. It is not applicable in case of concluded commercial contract.

3. The doctrine of promissory estoppels cannot be invoked if the assurance is held out but not
incorporated in the agreement between parties.

4. For applying the principles of promissory estoppels, alteration of the position by the plaintiff is the
only requirement.

Ingredients of the Doctrine of Promissory Estoppel

In Union Of India & Anr vs Wing Commander R.R. Hingorani, where a Govt. Servant retained
accommodation 2 months after the concessional period. The liability to pay damages equivalent to the
market rent for the period of such unauthorized occupation was claimed in the court of law. The
Government has failed to serve the respondent with a notice that he would be liable to pay market rent
for the period of such unauthorized occupation, the doctrine of promissory estoppel precluded the
Government from claiming damages equivalent to the market rent. The principle was laid down that to
invoke the doctrine of estoppels, there are three conditions which must be satisfied;

1. Representation by a person to another

2. The other should have acted upon the said representation and

3. Such action should have been detrimental to the interests of the person to whom the representation
has been made.
In the case of Central London Property Trust v High-trees House, High-trees leased a block of flats from
CLP at a fixed amount of rent later at the time of war it was not getting tenants other flats were
unoccupied because The defendant had difficulty in getting tenants for all the flats during wartime. CLP
agreed to reduce the rent amount until the war prevails.

Then war was over, all the flats got occupied on the normal rent amount. The defendant asked high
trees for the normal rent for the present time and for the earlier time also. High trees went to court;
court held that high-trees acted upon the words of CLP that during the wartime rent will be reduced,
after the end of war amount cannot be claimed after the war they should continue with the normal rent
only. In this case, Denning J established the doctrine of promissory estoppel. Here all the three
ingredients are fulfilled.

In S Ramabhadran v State of TN, the petitioner appeared in the test for the post of stenographer in Raj.
Secretariat Services, but could not get an appointment as vacancies did not exist. The petitioners were
given the option to join the subordinate services with the clear understanding that if vacancies were
available before the expiry of the selection list, they would be absorbed in secretariat services and the
petitioners did join the subordinate services. After the expiry of the selection list, fresh vacancies were
available and fresh posts were advertised. It was held that the govt. was not bound to appoint the
petitioners after the expiry of the period of selection list; the principle of promissory estoppels did not
apply in this case. There is no promise as such denial of which causes detriment.

Promissory Estoppel – Only a Shield, not a Sword

Promissory estoppel is used as a defense only not as a course of action so in general, it is available as a
shield. Defense of promissory estoppel can be used by promise only against the promiser to enforce the
promise, not by promise. For using promissory estoppel as a sword the doctrine of consideration should
be followed. In Combe v Combe earlier maintenance was given Denning LJ overruled the decision stating
that the estoppel could only be used as a “shield” and not a “sword”. In the Motilal Padamat case,
Justice Bhagwati said if the doctrine of promissory estoppel can be used as a sword the floodgates will
be opened.

In Waltons Stores (Interstate) Ltd v Maher, Maher owns a property. WS wanted that to take it on the
lease, demolish the building, and erect a new one. WS acted on the negotiation and constructed new
building, Maher acted that it consented for the negotiation. When WS’s solicitor prepared lease paper
according to the negotiation Maher denied. The Court held that Maher is bound by the contract.
Promissory estoppel, it has been said, is defensive equity and the traditional notion has been that
estoppel could only be relied upon defensively as a shield and not as a sword High Trees’ case itself was
an instance of the defensive use of promissory estoppel.

Law Commission Recommendations

In the 108th report of law commission submitted in 1984 suggested Section 25 A in ICA. As follows:

25A.

(1) where

(a) A person has, by his words or conduct made to another person, an unequivocal promise which is
intended to create legal relations or to affect a legal relationship in arise in the future; and

(b) Such person knows or intends that the promise would be acted upon by the person to whom it is
made; and

(c) The promise is, in fact, so acted upon by the other person, by altering his position. When
notwithstanding that the promise is without consideration if shall be binding to the person making it. If
having regard to the dealings which have taken place between the parties, it would be unjust not to hold
him to be so bound.

(2) The provision of this section shall not apply:-

(a) Where the events that have subsequently happened show that it would be unjust to hold the
promisor to be bound by the promise; or,

(b) Where the promisor is the Govt. and enforcing the promise would be inconsistent with an obligation
or liability imposed on the Govt. by law,

Legal Provisions
There is no provision of promissory estoppel in Indian law. Section 25 of ICA talks about contracts made
without consideration (in other words the enforceability of promises) and Section 115 of IEA deals with
estoppels only.

Conclusion

A man cannot live in isolation when we are living in a society; everyone is dependent on each other. It
brought contractual and commercial relationship. The promise of one person, when becomes important
for another and cause for profit and loss, if it is denied it may cause harm to another one, for their
protection the doctrine of promissory estoppels is available as a shield. Promissory estoppel is a good
defense and a good principle to avoid injustice. The judiciary in India has played a very significant role in
making the promise responsible and accountable and made it abide by its promise.

CONCLUSION

Conclusion

A man cannot live in isolation when we are living in a society; everyone is dependent on each other. It
brought contractual and commercial relationship. The promise of one person, when becomes important
for another and cause for profit and loss, if it is denied it may cause harm to another one, for their
protection the doctrine of promissory estoppels is available as a shield. Promissory estoppel is a good
defense and a good principle to avoid injustice. The judiciary in India has played a very significant role in
making the promise responsible and accountable and made it abide by its promise.

The doctrine of promissory estoppel is a doctrine of equitable adjustment. It is in place to ensure that no
party to an agreement suffers any detriment while attempting to perform the act that would serve as
consideration for a unilateral promise by another party. However, this doctrine can only be applied
when certain conditions are fulfilled. Firstly, the party seeking to impose the estoppel must have altered
his position. Secondly, the other party must not have given reasonable notice or reasonable opportunity
to the party to resume his position. Finally, the party must be unable to resume his original position. If
the above three conditions are fulfilled, then the doctrine of promissory estoppel is applicable.

The doctrine of promissory estoppel is necessary to place checks on the arbitrary powers of the State
and this doctrine is one that would certainly serve that purpose by protecting the freedom to contract of
citizens. In recent times, there is emphasis on government promises, especially in the realm of contract
law and business transactions. It follows that an ordinary citizen who invests his assets based on the
government’s promise only to find that the government does not abide by its promise must be afforded
protection.

It is thus unfortunate to note that the judicial pronouncements in India, post Motilal Padampat Sugar
Mills v Uttar Pradesh have neither been uniform nor consistent. Where there have been certain
instances when the doctrine of promissory estoppel has been used to bind the government to its
representation, there have also been certain similar instances when it has not. In recent times, the trend
has been not to apply the doctrine and allow the use of the doctrine of executive necessity as an
effective defence. However, the author is of the opinion that it is not equitable to do so as it has a
retrospective effect even if it is in the exercise of the government’s statutory powers.

While the contribution and role of the Supreme Court in the development of the doctrine of promissory
estoppel has been significant, the author is discontent with the restrictive view and limited application
of the doctrine. The powers and limitations given to the government have a social function to perform,
namely for the benefit of its people. The transformation in the attitude of the Apex Court is not an
agreeable one as it tilts the balance in favour of one against the other, with the government emerging
victorious against the ordinary citizen.