The principle of estoppel in India is a rule of evidence incorporated in Section 115 of The Indian

Evidence Act, 1872. The section reads as follows:

When one person has, by his declaration, act or omission, intentionally caused or permitted another
person to believe such a thing to be true and to act upon such belief, neither he nor his
representative shall be allowed, in any suit or proceeding between himself and such person or his
representative, to deny the truth of that thing.

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 right to damages for breach of
contract. The doctrine has been variously called 'promissory estoppel', 'equitable estoppel', 'quasi
estoppel' and 'new estoppel'. 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.

The true principle of promissory estoppel is where one party has by his words or conduct made to
the other a clear and unequivocal promise which is intended to create legal relations or effect a legal
relationship to arise in the future, knowing or intending that it would be acted upon by the other party
to whom the promise is made and it is in fact so acted upon by the other party, the promise would be
binding on the party making it and he would not be entitled to go back upon it. It is not necessary, in
order to attract the applicability of the doctrine of promissory estoppel that the promisee acting in
reliance of the promise, should suffer any detriment. The only thing necessary is that the promisee
should have altered his position in reliance of the promise.

This rule is applied by the Courts of Equity in England, as estoppel is a rule of equity. 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 for 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.

Hence, as the doctrine is a principle of equity, the courts have taken a prerogative to lay emphasis
on equity and justice and have explained the doctrine of promissory estoppel in India. The
ingredients for the application of the doctrine are:
• That there was a representation or promise in regard to something to be done in the future,
• That the representation or promise was intended to affect the legal relationship of the parties and to
be acted upon accordingly, and,
• That it is, one on which, the other side has, in fact, acted to its prejudice.

Evolution of the doctrine of promissory estoppel

Promissory estoppel is a relatively new development. In order to trace the evolution of the doctrine in
England, we need to refer to some of the English decisions. The early cases did not speak of this
doctrine as estoppel. They spoke of it as 'raising equity'. Lord Cairns stated the doctrine in its earliest
form in the following words in Hughes v. Metropolitan Railway Company, [1877] 2 A.C. 439:
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 or with their won
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 them where it would be inequitable having regard to the dealings which have
thus taken place between the parties.

This principle of equity made sporadic appearances but it was only in 1947 that it was restated as a
recognized doctrine by Lord Denning in Central London Properties Ltd. v. High Trees House
Ltd., [1947] K.B. 130, who asserted:
A promise intended to be binding, intended to be acted upon, and in fact acted upon is binding.

In the formative period the doctrine of promissory estoppel could not be invoked by the promisee
unless he had suffered 'detriment' or 'prejudice'. All that is required is that the party asserting the
estoppel must have acted upon the assurance given by him. The alteration of position by the party Is
the only indispensable requirement of the doctrine.

In India, there are two stages in the evolution of the application of this doctrine; pre-Anglo Afghan
case and post- Anglo Afghan case. Prior to this case, the position was that promissory estoppel did
not apply against the Government. But the position altered with this case. In Union of India v. Anglo
Afghan Agencies , the Government of India announced 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 and not full concessions were extended as announced. The
Supreme Court held that the Government was estopped by its promise. Thereafter the courts have
applied the doctrine of promissory estoppel even against the Government.

Essential characteristics to make promise binding on Government

The following are the essentials to make any promise binding on the Government:
1. The State makes the promise within the ambit of law.
2. There is an intention to enter into a legal relationship.
3. The other party must do an act in furtherance of that promise or is forbidden to do anything.

No estoppel against statute and law

The doctrine of estoppel does not apply to statutes. In other words, a person who makes a
statement as to the existence of the provisions of a statute is not estopped, subsequently, from
contending that the statutory provision is different from what he has previously stated. A person may
not represent the true status of a statute or law, but the other person who relies on such a
representation is at liberty to find out the position of law on the matter and as the maxim says,
ignorance of law is no excuse. So a person can not take recourse to the defence of estoppel to
plead that a false representation has been made regarding the provisions of a statute or law. The
principles of estoppel can not override the provisions of a statute. Where a statute imposes a duty by
positive action, estoppel can not prevent it. The doctrine cannot also be invoked to prevent the
legislative and executive organs of the Government from performing their duties.

In Jit Ram Shiv Kumar v. State of Haryana , a municipality granted exemption from octroi for
developing a mandi, but subsequently is revoked the exemption. Later it again granted the
exemption in keeping with the terms of the original sale of plots, but levied taxes again. Even so, a
claim of estoppel against its legislative power was not allowed.

So is the case with the tax laws. If the law requires that a certain tax be collected, it cannot be given
up, and any assurances by the Government that the taxes would not be collected would not bind the
Government, when it chooses to collect the taxes. Thus it was held that when there was a clear and
unambiguous provision of law that entitles the plaintiff to a relief, no question of estoppel arises.

The following conditions have been laid down as necessary to invoke the maxim of 'No estoppel
against a statute':
• The parties must bilaterally agree to contract irrespective of statutory provisions of the applicable
Act.
• The agreement entered into by the parties must be expressly prohibited by the Act.
• The provision of law must be made for public interest and not pertain to a particular class of
persons.
• The agreement of the parties should not have been merged into an order of the court which by the
conduct of the parties had been dissuaded from performing its statutory obligations.

Application of Doctrine of Promissory Estoppel to Government

The doctrine of promissory estoppel has also been applied against the Government and the defence
based on executive necessity has been categorically negatived. The Government is not exempted
from liability to carry out the representation made by it to its future conduct and it cannot on some
undefined and undisclosed grounds of necessity or expediency fail to carry out the promise made,
solemnly by it. The Supreme Court has refused to make any distinction between a private individual
and public body so far as the doctrine of promissory estoppel is concerned. But if the promise is on
behalf of the Government is unconstitutional, against any statute or against public policy the
question of promissory estoppel against Government does not apply. Thus, the Government through
its officers is bound by the doctrine and cannot invoke any defence for their inaction, unless backed
by statutory authority. Statute imposes a public duty while the duties imposed by a promise are owed
by the Government not to the public but to private individuals. Thus estoppel does not apply to
contravention of a statute but applies to the breach of a promise by the Government.

Where the Government makes a promise knowing or intending that it would be acted upon by the
promisee and, in fact, the promisee acting in reliance of it, alters his position, the Government will 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 Article 299 of the Constitution
of India.

It is elementary in a republic, governed by a rule of law, no one howsoever high or low, is above the
law. Everyone is subjected 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 the rule of law that the Government
stands on the same footing as a private individual so far as obligation under the law is concerned.
The Government cannot claim immunity from the applicability of the rule of promissory estoppel and
repudiate a promise made by it on the ground that such promise may fetter its future executive
action.

Since the doctrine of promissory estoppel is an equitable doctrine it must yield when the equity so
requires. If it can be shown by the Government that having regard to the facts as they have
subsequently transpired, it would be inequitable to the Government to abide by the promise made by
it, the court would not raise an equity in favor of the promise and enforce the it against the
Government. The doctrine of promissory estoppel will be displaced is such a case because equity
would not require the Government to be bound by the promise. When the Government is able to
show that due to the facts which have transpired subsequent to the promise being made, public
interest would be prejudiced if the Government were required to carry out the promise made, the
court would have to balance the public interest in the Government carrying out the promise made to
a citizen which has induced the citizen to alter his position to his prejudice and the public interest
likely to suffer if the Government were to carry out the promise, and determine which way the equity
lies.

The doctrine of estoppel cannot be invoked for preventing the Government from acting in discharge
of its duties under the law. The doctrine of cannot be applied in teeth of an obligation or liability
imposed by the law. It cannot be used to compel the Government or even a private party to do an
act prohibited by law. There can be no promissory estoppel against the exercise of legislative power.
The legislature can never be precluded from exercising its legislative functions by resort to the
doctrine of promissory estoppel.

An insight into judicial behaviour further indicates that estoppel cannot be applied against the
Government if it jeopardizes the constitutional powers of Government. In the case of C.
Sankaranarayanan v. State of Kerala, the court rejected the contention of estoppel and held that
the power conferred by the Constitution cannot be curtailed by any agreement.

The court also did not allow the plea of estoppel against he Government if it had the effect of
repealing any provision of the Constitution. In Mulamchand v. State of Madhya Pradesh, the
Supreme Court did not apply estoppel against the Government in cases of contracts not entered into
in accordance with the form prescribed in Article 299 of the Constitution. The court held that if the
estoppel is allowed it would mean the repeal of an important constitutional provision, intended for the
protection of the general public.

The case of Motilal Padampat Sugar Mills v. State of U.P. is a trendsetter regarding the
application of the doctrine of promissory estoppel against the Government. In this case the Chief
Secretary of the Government gave a categorical assurance that total exemption from sales tax would
be given for three years to all new industrial units in order them to establish themselves firmly. Acting
on this assurance the appellant sugar mills set up a hydrogenation plant by raising a huge loan.
Subsequently, the Government changed its policy and announced that sales tax exemption will be
given at varying rates over three years. The appellant contended that they set up the plant and
raised huge loans only due to the assurance given by the Government. The Supreme Court held that
the Government was bound by its promise and was liable to exempt the appellants from sales tax for
a period of three years commencing from the date of production.

In State of Rajasthan v. Mahavir Oil Mills, a new industry was set up on the basis of an incentive
scheme from the Government wherein it promised some benefits. The Supreme Court held that the
State Government was bound by its promise held out in such situation. However, it does not
preclude the State Government from withdrawing the scheme prospectively. It could withdraw the
scheme even during its continuance, if public interest so requires. Even if the party has altered his
position, if due to supervening circumstances public interest requires the withdrawal of benefits, the
benefits can be withdrawn or modified. The supervening public interest would prevail over
promissory estoppel.

Further, in Century Spinning and Manufacturing Co. v. Ulhasnagar Municipality, the

municipality agreed to exempt certain existent industrial concerns in the area from octroi duty for a
period of seven years. However, later on it sought to impose duty. This was challenged and the
Supreme Court, while remanding the case to the High Court, held that where the private party had
acted upon the representation of a public authority, it could be enforced against the authority on the
grounds of equity in appropriate cases even though the representation did not result in a contract
owing to the lack of proper form.

However, the case of Jit Ram Shiv Kumar v. State of Haryana, cast a shadow on the Motilal case
where it was held that the doctrine of promissory estoppel is not available against the exercise of
executive functions of the State. The Supreme Court in Union of India v. Godfrey Phillips India Ltd.
soon removed this doubt. The court held that the law laid down in Motilal case represents the correct
law on promissory estoppel.

There is another landmark judgment given by the Supreme Court in Express Newspaper Pvt. Ltd.
v. Union of India wherein the doctrine was used to preclude the Government from quashing the
action of a minister for approval of a lease as it was within the scope of his authority to grant such
permission. Thus the fraud on power was checked. But if there is misrepresentation by the party
itself to obtain the promise then the State is not bound by the promissory estoppel as held in Central
Airmen Selection Board v. Surender Kumar. The court said that a person, who has himself misled
the authority by making a fake statement, couldn't invoke this principle, if his misrepresentation
misled the authority into taking a decision, which on discovery of the misinterpretation is sought to be
cancelled.

Significance of the doctrine of promissory estoppel in India

Today we are living in a world where a promise of Government to any citizen or non citizen matters a
lot especially if it is done in a contractual or business transaction. When a person relies on the
Government's promise and invests hard earned money and the Government afterwards does not
abide by its promise then it creates a position where the person's investment is in danger and he
becomes helpless and paralyzed. The judiciary in India has played a very significant role in making
the State responsible and accountable and made it abide by its promise.

Conclusion
In conclusion, it can be said that if the Government of India or of any State in India makes a promise
to any person and the promise is not inconsistent with the law of the land and is not against public
interest, then afterwards it cannot refuse to abide by its promise. The Supreme Court of India has
said that acting on the assurance or representations is enough and consequent detriment, damage
or prejudice caused is not to be proved. It is also immaterial whether such representation was wholly
or partially responsible for such alteration in the position. The Supreme Court has rightly observed
that the concept of detriment now is not merely monetary loss but whether it appears unjust. It is
inequitable that the promisor should be allowed to resile from the assurance or representation
having regard to what the promisee has done or refrained from doing in reliance on the assurance or
representation. Hence, one can rely on the lawful promise of the Government of India and can safely
act on the same because the law of the land is there to protect the citizens.
The author can be reached at: chitranshul.aryan@legalserviceindia.com
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PROMISSORY ESTGPPEL
_CHAPTER 1

lNTRODUCTli3N---CONSIDERATION & PROMISSORY ESTOPPEL G

l.l. Under s. 201) of the Indian Contract Act. 1872, a 'contract'
is an agree-coma."-ion
ment ctlfnrceuble by law. Under s. 2(e), every promise is an
agreement. But, '
unless the agreement is supported by 'consideration', the
agreement would be
void. except in the three instances mentioned in s. 25.
Therefore, unless a promise
is supported by 'consideration' it will not, ordinarily. be
enforceable by law. Sec-
tion 2(d) defines 'consideration' as follows:-- '

"When, at the desire of the promisor. the promisee or any other

person has
done or abstained from doing, or does or abstains .from doing, or
promises

to do, or abstain from doing. something. such act or abstinence

or promise
' is called a consideration for the promise."

Hence. when a person makes a promise. unless the promisee does,

has done or

promises to do something, at the desir of the promior. the

promise would be
without consideration and the promise cannot be enforced in a
court of law.

1.2. Suppose a person promises a subscription to a charitable

institution Prgrniggofy
with the knowledge that a building willlbe constructed with the
money received E"°PI?°1- -
from the subscribers, but does not desire the institution to do
so; the institution
however. on the faith of the promise. incurs expenditure in
putting up'a structure.

If'the pi-omisor does not honour _his promise, the institution

may not be able

_ to sue him successfully for the amount promised, because. the

promise i not

supported by consideration. '

Take the case of the Government making an announcement -relating

to some
relief such as a sales-tax _holidav.if something is done by the
citizen "such 'as

1 opening a new factory in a specified area. On the faith of the

announcement. a

citizen may do the necessary "thing and thus change his position.
The Govern- '
ment thereafter changes its policy.» Even if it is assumed-
thatthe citizen acted '
at the desireof the Government there' connot be a conduct
enforceable against
the Government, because." contracts; which can be enforced
against the Govern-
ment, should bejn a particular form.' n » G . = -

On the question whether the person promiing,the subscription _to

the insti-
tution or the Government._ example. could be held to the promise
\and representation respectively. that is. whether the court
could compel them
'to' honour their representation, one 'view is that the court
could on the
uni: ofthe_dodrinedPromissory.Eu*oppel.Thedocninehasbeenexp1eIud.
by a Bench of two Judges of the Supreme Court of India' as
foll_ows:---- '

"Where one partyhas by his words or conduct-made to the other a

clear .
and unequivocal, promise which is to_create legal or ejlect.

t a legal relationship to arise in t1he,f,I1ture'. knowing' or

intending.-'that it
be acted upon by the' other party to whom the promise'_is made
and it.is
in fact so acted upon by the other party. the promise would be
binding _on
the party making it and he would: not be entitled to go back
upon_it. if it

'Art. 299 of the Constitution India. ' g ' n n. n ' g'

' MP Sugar Mill: V.» of U.P.. A.I,lt. 1919 S.C. 621 (Bh_a¢wati
adTu1upurIl,r JD-g

N653?-'Y
for _

ex tier:
of_ '
doctrine.

Reponr on Pnomssonv Esroppar.

would be inequitable to allow him to do so having regard to the

dealings
which have taken place between the parties. and this would be so
irrespective
whether there is any preexisting relationship between the parties
or not?"

1.3. Apart from the fact that the above decision, holding that
the doctrine
can be _znvokcd against the Government in all cases, has been
expressly dissented
from by another Bench of twojudges of the Supreme Court," there
are observa-
tions in the first case which are contrary to the views expressed
in earlier larger
Benches of the Supreme Court and to the law in the U.K. and the
U.S. from
which the countries inspiration has been drawn for propounding
the doctrine.

The law, thus being in a state of uncertainty, the Law Commission

has,
suo motu, undertaken a study of the doctrine in order to define
precisely its scope
and ambit.

CHAPTER 2
EVOLUTION OF THE DOCTRINE IN INDIA

_ 2.1. In order to understand the precise scope of the doctrine

of promissory
estoppel, it is necessary to trace its. evolution in our country.
Such a study will
help one to understand the judicial process by which the doctrine
has been en-
larged or contracted and to formulate a precise rule. -
2.2 In this case," C contracted to buy a certain number of gunny
bags from
the appellant, and 107,500 bags remain undelivered as C, 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 iletterfrom C to the appellant
requesting the

appellant to direct delivery of the bags the representative of

the respondent V

who went along with C5 representative. [I'he.officer in charge of the appellant did so. The
reason was that the respondent had agreed to advance the necessary.

money to C. The appellant delivered bags to the representative of the respondent but refused
to deliver theirest, liecause, C had failed. to pay the price. Thereupon, the respondent sued
the appellant for delivery of the remaining bags alleging that they had advanded thei mioney
to C on the appellant's re- presentation that the goods will be deliveretl. The High Court
decreed that suit holding that as the delivery in favour of the respondent had been assented to
byi._= : the appellant, the appellant was' estopped from denying that the appellant held' tile
idelivery orders, at the disposal of' the person to whom the orders were
{g'iveI1,§:thai§t_is,Athe representative of the res; _ ' the goods, answering to the description
in pendent. In answer to the contentionlthat -nip estoppel could arise in the case, be- cause,  s.
155, Evidence Act, was not applicable; the Court observedz' 'Estoppels' in the sense in which
the ternt istused in English legal phraseology, are matter of infinite variety, and fare by not
means confined to subjects which are dealt with in Chapter VIII of'; the Evidence Act. A
man may be estopp- ed not only from giving particular evidetr1cé,but_ from doing acts, or
relying upon any particular arguments or? contention which the rules of equity and good
conscience prevent him from using as against his opponent.

1M.r{. Sugar Mills v. State of U.P., A.l.R. 1979 SC. 621, P. 63]. 3M]; Jr': Ram Shiv Kumar
v. State 'of Haryana, A.I.R. 1980 SC. 1283. (Murtaza Fazal Ali and Kailasam'JJ). ' 3(1880)
ILR 5 Cal. 669.

'(l880) ILR 5 Cal. 669 at P. 678.

EVOLUTION or THE Docrnms IN INDIA The law relating to cstoppel, as stated above,
appears to be too widely stated in the following observation of the Supreme Court' We doubt
whether the Court while determining whether the conduct_'of a particular person amounts to
an estoppel, could travel beyond the provisions . of s. 115 of the Evidence Act and rely upon
what is sometimes called equi-

table estoppel'.

But assuming that the law. as stated by the Calcutta High Court, is correct, the point to be
noted is that it was a case between private parties.

_ . _ _, . , . Ah ed Y ' 2.3. The lacts in this case' are 1 The appellant s predecessor was a
lessee from Khgil v_ the Government of certain revenue yielding lands. He constructed a
canal which Sec;'etal'Y passed through Government lands spending more than Rs. 8 lakhs.
Govemmento _ mt", permitted the construction. because. considerable area of land would be
rendered ' fit for cultivation and there would be an increase in Government revenue. The
canal also passed through the lands of private parties who also agreed to the construction on
certain terms as to compensation. After the period of the cur- rent settlement had expired the
Government gave by way of lnam, a large tract of land to the appellant's predecessor in
recognition of his loyalty and good ser- vice. One of the terms of the grant was that the
Government could take over the management of the canal for better administration.
Government. however, passed orders taking over permanently the canal lands, and denied
any proprietary right in the appellant to the canal lands.,§ ZThe.privy Council held." Taking
alllthe circumstances" intoeonsideration, having regard to the perma- nent character of the
proposed 'work, the indefinite amount of the probable expense of construction and: the fact
that the Government encouraged the undertakers to acquire the necessary land where the line
of the canal passed through property in private ownership, and also bearing in mind the View
of the Government at the time, as appears from Government records, that the work might be
constructed and maintained more economically by the Khans than by Government, find thatt
it would be better to leave the settlement of the country in the hands of natii/e Chiefs, it
'seems to be pretty clear that the Government must have 'intended 'the Khans to undersand,
and in fact must have led them to expect, that the Government land required for the canal
woud be made' over to them in proprietary right. If the Govem- ment had intended that at the
termination of the period of theithencurrfenlt settlement the Government land required and
used for the canal should vert to the Government, it is; difliciilt to suppose that the
Government would have omitted to say'so... or to mi1ke'..a provision for securing the
transfer to them of the land acquired by the iindertakers from private owners.

For arriving at this conclusion the Privy Cbuncil. relied on the following rule laid down in
Ramsderr v. Dyson :' -

'1"

If a man, under a verbal agreement with a landlord .for at certain inte1'est,i1! land, or, what
amounts to the same under an expectation, created or'- encouraged by the landlord that he
shall have a certain interest, takes posh session of such land, with ithe cdisent of the landlord,
and upon the faith of such promise or expectation, with theknowledge of the landlord and
without objection by him, lays outimoney upon the land, a court of equity will compel the
landlord to give effect to such promise or expectation. ' Vlladdnappa V. C/Iandramma, A.I.R.
l965 S.C. 1812. 2(l90l) 28 IA 211.

3Ibid P. 218.

'(l866) LR 1 HL 129, 170.

Rnrorcr ON Puomssoav Esrorrnr.

The Privy Council also held' that, upon the expiration of the period of the settle- ment for
which the lease of the bar-barini lands had been granted, Government made a grant to the
appe-llant's predecessor at a moderate assessment of a tract of land in full proprietary right
and in the deed of settlement, Government sti- pulated that they had the right when necessary
in the management of the canal. This however did not give the Government a right to seize
and confiscate 'the canal.

On the facts of the case. the appellant, under the Transfer of Property Act, 1882, would be
entitled to a perpetual lease of the canal lands from the Gov- ernment. But, perhaps, because
the Act was not in force at the time of the tran- saction, Lord Macnaghten applied the
Ramsden rule to give relief to the appel- lant. But the rule is the rule of Proprietary Estoppel
and not of Promissory Es- toppel. And Proprietary Estoppel had always a special status in the
English Law.

\ 2.4. In this case," the appelant surrendered its own -lands in favour of the 'Government in
consideration of a 'lease of government lands in favour of the appellant on a nominal rent.
After taking possession, the appellant spent enor- mous sums in making constructions.
Twenty seven years later, the respondent filed a suit claiming a large amount as arrears of
rent and for a declaration that the lease, if any, was determined. The High Court modified the
decree of the trial court in favour of the respondent. The High. Court allowed the parties to
redefine their rights, namely, the appellant's right to a leasehold and the respon- dent's right
to a reasonable rent. In the 'course of the judgment, Sir Lawrence Jenkins CJ referred to the
Ramsdezh rule and obesrved that the 'Crown comes Within the range of this equity'.

A perusal of the judgment, however, shows that the learned Chief Justice did not give any
relief to the appellant byéapplyilg the rule. ~ K. . * ' The learned Chief Justice noted: that
iheiparties were the Municipality' and the Government, both interested in public 'welfare, and
that the controversy

-between them should not be allovied become 'acute'. and that the suit ' even the rule of
proprietary estoppel kt al p was really not for eviction of theiappellant but lvyas only fo rrent
and for ascertain- ing the right 0 fthe parties. In fadt, the ldeéiee of the High Court was that
the Municipality should hold the lantl on agreed rent and that if the Munici- pality did not
cooperate, there would be at decree for eviction in favour of the respondent i ' This judgment
can, by no stretch of ' iaginntion. beiunderstood -as applying the doctrine of promissory
estoppel.

2.5. The facts which gave rise to this cahefiwere that in 1865 the Government of Bombay
called upon' the predecessor > title of the Municipal Corporation of Bombay to remove old
markets friom a ertain site and vacate it and on the application of the Municipal
Commfssionfe the Govemment passed a resolu- _« tion approving and authorising the rant'
pafaher 'site to. the Municipality. The Municipal Corporation gave up the 1s te ton which the
old markets were situated and spent a sum of Rsf 17 flakhs n erecting and maintaining
markets on the new site. In 1940 the Collectdr of Bbmhay assessed the new site to 'land
revenue and the Municipal Corporation 111 refipon' filed a suit for a declara- tion that it was
entitled to hold thei land tfori ever without" payment of any assessment. The majority of the
Judges of the Supreme Court heldfithat the 1(l90l) 28 IA 211, pp. 219, 220. .

2(l905) ILR 29 Born. .580.

'AIR 1951 SC 469. 1 EVOI.U1'I0'N OF THE DOCTRINE IN INDIA Govermnent was not.
under the circumstances of the ease. entitled to assess land revenue because the Municipal
Corporation had taken possession of the laud in terms of the Government resolution and has
continued in such posses- sion openly. tr~_inte:'rttptctll_t'. and of tight for over seventy years
and thereby ac-:1'.:i;'e:l the limited title it had been prescribing for during the period, that is
to say. the right to hold the land in perpetuity free of rent. Only Chandrasekhara lytr .I. while
e;'.neurriu_g with the majority. rested his decision on promissory estoppel that the
Government could Tu". be allowed to go back on its repre- sentation. He seems to have
misunderstood the reference to the Ramsden rule in the earlier case. He evidently thought
that if in the earlier case, the Ramsden rule was applied it could be applied with greater force
in the latter case. In doing so. he mistakenly called it 'promissory estoppel.'

2.e. In -.£1is case' the Government ot' India promulgated an Export Pro-Union of motion
Scheme for providing incentives to exporters of woollen goods. The I'M" Anglo Afghan
respondent exported goods of a certain value and claimed import entitlement Agencies. equal
to the full value of exports as notified in the scheme, but the Textile Commissioner reduced
the import entitlement. The Supreme Court held in favour of the 1-esponrlent on the ground
that the Textile Commisisoner and the Union of India did not act in exercise of the power
under cl. 10 of the scheme under which the Textile Commissioner may assess the value of
the goods ex-

ported and issue an entitlement certificate on the basis of such assessed value.

and that on the contrary. the Textile Commissioner reduced the import entitle-

ment without giving an adequate opportunity to the respondent to present its case. The Court
also observed:
We hold that the claim of the respondent is appropriately founded upon the equity which
arises in their favour as a result of the representation made on behalf of the Union of India in
the Export Promotion Scheme. and the action taken by the respondent acting upon that
repreentation tzruier the belief that the Government would carry out the representation made
by it.

Having held in favour of the respondent on the ground that the provisions of the Scheme had
not been followed by the appellants. any reference to pro- - missory estoppel for using
against the Government was totally uncalled for and the observation must be treated as obiter
pure and simple.

2.7. The facts of this case." are: In I956 the appellant set up its factory Cgntury in an
I'-.'.tIll5l'.I':aI area. A1 that time no oetroi was payable with respect to theggstgo V goods
imported into the industrial area. In 1960. Government constituted a ultfismfigf municipality
which included the industrial area. In 1962. the Government I'.'I""i°IP" agrcezl to cw.'-lude
the area but the District Municipality objected. agreeing 1 however. to exempt the existing
factories from payment of oetroi for 7 years.

In the I9-65 the Dt. Municipality became the Ulhasnagar Municipality which decided to levy
oetroi duty in 1968, and the appellant objected. Holding in favour of the appellant. the
Supreme Court held:

The'e I!' undoubtedly a clear distinction between a representation of an existing fact and a
representation that something will be done in future. The former may. if it amounts to a
representation as to some fact alleged at the time to be actually in existence. raise an
estoppel. if another person alters his position relying upon the representation. A
representation that 7x11: ms so 712:.

=A.1.R. 1971 s.c. 1021.

{or U & CA/NDI84 Narinder J Chem! v.

Uni_oh ' territory, H.P.

REPORT ON PROMISSORY ESTOPPEL something will be done in the future may result
in a contract, if another person to whom it is addressed acts upto it. A representation that
some- thing will be done in future is not a representation that it is true when made. But
between a representation of a fact which is untrue and a re- presentation, express or implied--
~to do something in future, there is no clear antithesis. A representation that something will
be done in future may involve an existing intention to act in future in the manner represent-

ed. If the representation is acted upon by another person it may, unless _ the stature
governing the person making the representation provides other- wise, result in an agreement
enforceable at law; if the statute requires that the agreement shall be in a certain' form, no
contract may result from the representation and acting the-refore but the law is not powerless
to raise in appropriate cases an equity against him to compel performance of the obli- gation
arising out of his representation.

Public bodies are as much bound as. private individuals to carry out representations of facts
and promises made by them, relying on which other person have not altered their position to
their prejudice. The obligation against an individual out of his representation amounting to a
promise may be en- forced ex contractu by a person who acts upon the promise: when the
law requires that a contract enforceable at law against a public body shall be in certain form
or be executed in the manner prescribed by the statute. the obligation, if the contract he not in
that form may be enforced -against it in appropriate cases in equity.

The Court also observed:

If our nascent democracy is to thrive, different standards of conduct for the people and the
public bodies camot ordinarily be permitted. A public body is in our judgment, not exempt
from liability to carry out its obligation aris- ing out of representations made by it 'relying
upon which a citizen has al- tered his position to his prejudice.

Three" points have to be noted with respect to this case. First, the applica- tion of the
principle of promissory estoppel in this case is obviously wrong. All the learned Judges who
had referred-, to this principle, including Bhagwati and Tulzapurkar JJ., are agreed that there
can be no promissory estoppel against the legislative_ power. Taxation, whether by. the
legislature or its delegate, is an exercise of the legislative power and octroi is nothing but tax.
Secondly the reference to a 'nascentdemocracy' by Shah J. is 'again unfortunate. A demo-
cracy in a developing country cannot be irieffective and the Government or a. municipality,
which is only an extension of die government, can be effective only if they are free to
formulate and reformulate their policies and augment their revenues. Thirdly, there is
absolutely no equity in favour of the appellant. When the industrial area was included in the
municipality, octroi became automatically 'payable with respect to the goods imported intfo
the area. It was only by way of concession that the municipality agreed to exempt. _ If later
on the concession was withdrawn, no grievance can be made oil it. It is not as if the appellant
was invited into the area with a promise of favourable treatment. .

2.8. In thiscase,' the appellant was the highest bidder at an auction for dealing in liquor. He
alleged that at the time of the auction, the Dy. Commis- sioner announced that no Sales-Tax
would be liable to be paid on the sales of liquor, but despite the announcement (assurance)
Government has levied and' was taking steps to levy sales-tax on such sales; The Courtxheld:

'.

r *r . . « 1A.I.R. '1971 S.C. 2399.

EVOLUTION OF THE DOCTORINE IN INDIA The powei to impose a tax is undoubtedly

a legislative power. That power can be exercised by the legislature directly or, subject to
certain conditions, the legislature may delegate the power tosome other authority. But the
exer- cise of that power, whether by the legislature or by its delegate is an exercise of a
legislative power Unless the executive is specifically empowered by law to give an
exemption, it cannot say that it will not enforce the law as against a particular person. No
court can give a direction to a Government to re-

frain from enforcing a provision of law.

Referring to the Bombay Corporation case, the Court incidently observed that it was case of
relationship between landlord and tenant.

2.9. In this case,' the respondent was a 100% shareholder of the appellantfigfigf The appellant
undertook to discharge the income-tax liability of the respondent, [.{ung¢,§',§u' and kept
back dividends due on respondent's shares for being utilized as working capital. The
appellant in fact paid the income-tax assessed on the respondent. ' ' While the appellant' was
keeping the respondent informed of the various steps it was taking and collecting any refunds
ordered and keeping 'them, at no time did it make any demand on the respondent to re-
imburse the tax paid. When the respondent transferred its shares, the appellant sued
respondent for the amount' of tax liability discharged by it and claimed a lien on the
respondent's shares.

The respondent pleaded as one of its defences, that the appellant was estoppedf The Court,
upholding the plea of promissory estoppel, observed:

Estoppel is a rule of equity. That rule has gained new dimensions in recent years. A new
class of estoppel i.c. promissory estoppel has come to be recognised by courts in this
country, as well as in England. The full impli- cation of 'promissory estoppel' is yet to be
spelled out The principle stated in the High Trees case2 is that, when one party has, by his
words or conduct, made to the other a promise or assurance which was intended to affect '
the legal relations between them and to" be acted on accordingly, then, once the other party'
has taken him at histword and acted on it, the party who gave the assurance or promise
cannot afterwards be allowed to revert to the pre- vious relationship as if no such promise or
assurance has been made by him, but he must accept their legal relations subject to the
qualification which he himself has so introduced even though it is not supported in point of
law by any consideration, but only by his word. But that principle does not create any cause
of action which did not exist before so that, where a promise is made which is not 'supported
by consideration, the promisee cannot bring an I action on the basis of the promise... The rule
-laid down in these decisions undoubtedly advances the cause of justice and hence we have
no hesitation in accepting it.

C This case, it may be noted is between parties.

2.10. In this case," the Commisisoner HR&CE sanctioned the leasing of Dewaswom land to
the petitioner and a -lease was executed for 99 years. The peti- tioner was given a permit for
clear felling with respect to a part of the land. But the Government, under s. 99, HR&CE Act,
cancelled the sanction of the lease. One of the contentions raised by petitioner was that by
the permit for clear- felling there was a representation by the Government that the sanction
was valid, that the petitioner acted on the representation to his detriment by investing large
amounts for developing the property. The High Court however held:

'A.I.R. 1972 s.c. 1311.

21947-41) K.B. 130.

3AIR 1972 Ker. 39.

iifié.

REPORT ON PROMISSORY ESTOPPEL The Government was not estopped from

exercising its statutory power under s. 99, first for the reason that there was no representation
by the Govern- ment. that the sanction for the lease was valid~--the grant of a clear-felling
permit under the MPPF Act by no means implied that the lease granted by the Devaswom is
valid; secondly, because the petitioner did not act to his detriment on the faith of the
representation; and thirdly, because the power under s. 99, is one conferred on the
Government to be exercised for the public good or at any rate for the benefit of persons other
than the Govern- ment.

Referring to the Anglo Afghan and Ulhasnagar cases, the High Courtobserved: These cases
have no application to the facts of this case as they did not consider or decide the result of an
impact of a representation on a discre- tionary statutory power to be exercised for the public
good or for' the bene- fit of a person other than the person or body exercising the power
There cannot be an estoppel in respect of the exercise of a discretionary statutory power
which is to be exercised for the public good or for the benefit of some one other than the
person against whom the estoppel is asserted.

2.1]. The validity of the Kerala P-rivate Forests (Vesting and Assignment) Act, 1971, was
challenged in this case' by owners or lessees of large tracts of forest lands. One of the
contentions was that the respondent Company establish- ed itself in Kerala for production of
rayon cloth pulp from raw material supplied by Government, that the Government was
unable to supply the raw material and by an agreement imdertook not to legislatefor the
acquisition of private forests for a period of 60 years if the company purchased forest lands
for the supply of raw materials, that the respondent did purchase a large tract and therefore,
the agreement not to legislate should operate as equitable estoppel against_ the Gov-
ernment. The Court held:

We do not see how an agreementofithe Government can preclude legislation on the subject.
The High Court has rightly pointed out that the surrender by the Government of its
legislative powersto be used for public cannot .

avail the company or operate against the Government as equitable estoppel.

2.12. The respondent, before purchasing a certain property, was informed by the Asstt.
Custodian that the property was not evacuee property. But later on the property was declared
evacuee property'. Rejecting the plea of estoppel, the Court? held:

We are of opinion that the view taken by the House of Loris" is the correct ' one and not the
one taken by Lord Dennlngt' The view taken by Lord Denning was as follows;

The Crown cannot escape by saying that estoppels do not bind the Crown, for that doctrine
has long been exploded I come therefore to the most difiicult question in the case. Is the
Minister of Pensions ,bound by the War Oflice latter? I think he is. , The views of the House
of Lords are expressed thus:

LORD SrMoNDs: Mr. Lords, I know of no such principle in our law nor was any authority
for it cited. The illegality "of an act is the same whether or not 1A.I.R. 1973 S.C. 2734.

"'A.I.R. 1974 s.c. 2325. . _ 3Howell V. Falmounth Boat Construction Co. (1951) A.C. -837.
'Robertson v. Minister of Pensions§(l94*) 1 _ = "of the country. Under the scheme cash
assistance was to be given to such ex-

EVOLUTION or THE DOCTRINE IN INDIA the actor has been misled by an assumption of
authority on the part ofia government cfiicer however high or low in the hierarchy. I do not
doubt that in criminal proceedings it would be a material factor that the actor had been thus
misled if knowledge was a necessary element of the oflence, and in any case it would have a
bearing on the sentence to be imposed. But that_is not the question. The question is whether
the character of an act done in the face of :1 statutory prohibition is affected by the fact that it
has been induced by a misleading assumption of authority. In my opinion the answer is clear-
ly No. Such an answer may make more diflicult the task. of a citizen who is anxious to wall:
the narrow way, but that does not justify a different answer being given. ' LORD
NORMAND: As I understand" this statement, the respondents were in the opinion of the
Lord Justice, entitled to say that the Crown was barred by representations made by Mr.
Thompson and acted on by them from alle- ging against them a breach of the statutory Order
and further that the res- pondents were equally entitled to say in a question with the appellant
that there had been no breach. But it is certain that neither a minister nor any subordinate
oflicer of the Crown can by any conduct or representation bar the Crown from enforcing a
statutory prohibition or entitle the subject to maintain that there has been no breach of it.

2.13. The appellant was appointed as Vigilance Commissioner which was aNo.- Raun-
temporary post. There was an agreement between the parties that the appellant's "3. 3? term
was to be for 5 years from 1 Oct, 3, 1968, or till he attained 60years, which- K5913, ever was
earlier. The post was abolished in Feb. 1970. One of the contentions raised by the appellant
was that the respondent was precluded from altering the terms of the agreement by
promissory estoppel. Rejecting the contention, the Court held' that appellant knew the post
was temporary and that the courts ex- clude the operation of 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, and relied on the following passage?
As a general rule the doctrine" of estoppel will not be applied against the State in its
governmental, public or sovereign capacity. An exception how-

ever arises where it is necessary to prevent fraud or manifest injustice. * 3 2.14. In 1973, the
Union of India formulated a scheme for providing incen- tives to registered exporters of
walnuts with _a view to offset the losses which & V exporters would otherwise incur and to
augment the foreign exchange earnings 1,, A porters upto September 30. I975. The cash
assistance scheme was withdrawn in September 1973. after notice to all concerned and after
taking into conside- ration thei: representations. Alleging that they had invested considerable
sums oi' money for expanding their business, the petitioners contended that the Gov- ernment
was estopped from going backon their representation. Rejecting the

- contention, the High Court held;3 ' V , ' It is well known that the sovereign authority like
the State has to look after ' the interest of millions of people and in the present socio-
economic set up of the country, it cannot be bound down by an assurance for all times to
come where the interest of the public comes into conflict with the assurance once given In
such cases (when the State' performs governmental, public or sovereign functions) the
doctrine would not apply when it clashes with the 1A.-LR. 1973 S.C. 2641 at 2649.

' 2American Jurisprudence 2nd p. 783, para. 123.

3A.I.R. 1976 I & K 41 at 45-48. . i 3, I 'V ' t REPORT ON PROMISSQRY ESTOPPEL

interest of the public at large, except when it is necessary to prevent fraud or manifest
injustice If the Government after a review of its policy deci- sion finds that modification or
alteration is required in the earlier policy in the interest of the public at large, the
Government cannot be debarred from reviewing that policy Ours'is not a country with
unlimited financial re- sources and the courts of law cannot ignore the fact. The utilisation of
the meagre financial resources by the Government therefore, has to be left to the judgment of
the Government which is the best judge 'of the needs of its people. The courts will only bind
the Government by its promises to pre- vent manifest injustice or fraud and will not make the
Government a slave of its policy for all times to come when the Government acts in its
Govern- mental, public or sovereign capacity. In its commercial activity the posi- tion would,
of course, be ditferent. In the present set up of the country, when 'finances are required for
starting and completing various projects in the inte- rest of the public at large, the
Government cannot be held bound by a repre- sentation made by it, when the need for
continuance of the representation is no longer there. The Government must be given a free
hand to determine the priorities when on the one hand there are the hungry millions for the
larger benefit of whom the money is required by the State, and on the other hand are the
affluent few who wish to bind the Government by its promise to make additional profits The
petitioners do not run the risk of incurring any losses except of course the loss of additional
profits.

2.15. In 1969, auctions were held in U.P. for grant of licences to sell country liquor. At the
time of the auction no announcement was made that the exemp- tion from sales-tax in respect
of sales of country liquor granted under a notifi- cation issued in 1959 under s. 4 of the U.P.
Sales Tax Act, 1948. would or would not be withdawn. The respondent in one of the appeals
was one of the highest bidders. When the 1959-notification was. withdrawn. with the result
that his sales 'became subject to the imposition of sales, tax, he contended that the l959-
notiii- cation operated as estoppel. Rejecting the contention, the Court observedz' It is now
well settled by a catena of decisions that there can be no question of estqppel against the
government in the exercise of its legislative, sovereign or executive powers.

The Court also relied on the following passage:-"

It is too late in the day to urge that the government is just another private litigant, for the
purpose of charging it with liability, when it takes over a business theretofore conducted by
privatetenterprise or engages in competi- tion with private ventures. Whatever the form in
which the government functions, anyone entering into an arrangement. with the government
takes the risk of having accurately-ascertained that he who purports to act for the government
stays within the bounds of his authority And this is so even though, as here, the agent himself
may have been, unaware 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 ex- presses
the duty of all courts toobservle the conditions defined by Congress for charging the public
treasury.

>Bihfar fl :i'~'. . 2.16. The fishery rights in a Jalkar were settled with the appellant for 'the
year 1974-75. Since the appellant defaulted in the payment of jamma. the set- Sinfihf," '
tlement for 1975-76 was made with the respondent, but before he could take 'A.I.R. 1976
S.C. 2237 at 224]. ' "Federal Crop Insurance Corp. V. Merrfil (1947) 332 US 380. i i 3 -

EVOLUTION or THE DOCTRINE IN INDIA possession, the State changed its mind in
favour of the appellant. A writ petition by the respondent was allowed by the High Court.
Allowing the appeal, the 1 Supreme Court held : ' It is well settled that there cannot be any
estoppel against the Government in exercise of its sovereign legislative and executive
functions.

2.17. On October 10. 1968, the respondent released a news item that all new M__p_ sum-
industrial units in the State would be given exemption from sales tax under s.g'g1t1'~f:)'-f-
4A, U.P. Sales Tax Act. 1948, for a period of 3 years from the date of commence-- u_p, ment
of production. On October 11, the appellant wrote to the Director of Indus- tries stating that
in view of the Sales Tax Holiday announced. it would set 'up a hydrogenation plant and
asked for confirmation regarding the exemption. On October 14, the Director replied
confirming the news item. On December 12, the appellant's representative met the Chief
Secretary of the Government and adviser to the Governor and informed him of the various
steps being taken for- setting up the plant and the Chief Secretary assured him that the
appellant would be entitled to the sales tax holiday. (The State was under President's rule
from Februry 26, 1968 to February 28, 1969. and the new elected Government assumed
oflice on February 27, 1969.) On December 13, the appellant wrote to the Chief Secretary a
letter recording the oral assurance given by the Chief Secretary with a request for
confirmation. On December 22, the Chief Secretary replied that the respondent would
consider the request for exemption on the submission of a formal application. By that time,
the appellant had in fact submitted such an application. The financial institutions which were
approached by the appellant for financial assistance were not satisfied with the letter of
December 22, as it mere~ ly stated that the respondent would consider the request for
exemption and so. on January 22, 1969, the appellant again wrote to the Chief Secretary for a
formal order of exemption. On January 23, the Chief Secretary gave the necessary as-
surance regarding the exemption. The appellant thereupon went ahead with the setting up of
th_e factory, and on April 25, 'wrote to the Chief Secretary informing him that the U.P.
FinanceiCorporation had sanctioned financial assistance in view of the assurance given by
him. On May 16, the Deputy Secretary to the Government, Industries, wrote to the appellant
requesting it to send its representa- tive to a meeting fixed by the Chief Minister to discuss
the question of exemption. The appellant replied that exemption had already been granted to
it but would however send its representative to the meeting. The appellant's representative
attended the meeting and reiterated that exemption had already been granted to the appellant.
Thereafter. the appellantproceeded with the work of setting up the factory. On January 20,
1970, the appellant was informed by the respondent that the respondent had taken a policy
decision that new -vanaspati units which go into production by September 30, would be
given partial exemption from sales tax. On June 25, 1970, the appellant wrote to the
respondent that it would avail itself of the concession rates. The appellant's factory went 'into
'pro- duction on July 2. On August 12. another news item appeared 'that the respondent had
decided to rescind even the partial concession. The appellant filed a writ petition for a
direction to the respondent to exempt the sales of vanaspathi manu- factured by the appellant
for a period of 3 years.

The Supreme Court held? that the respondent was bound to exempt the ap- pellant from
payment of sales tax in respect of sales of vanaspati for a period of 3 yea"s from the date of
commencement of production and was not entitled to 'A.I.R. 1977 s.c. 2149 at 2154.

'-'A.l.R. 1979 s.c. 621. l , REPORT ON PROMISSORY ESTOPPEL recover such tax from
the appellant subject to certain directions regarding th< refund of the tax already collected
and deposited by the appellant.

For arriving at this decision the Court relied on the doctrine of promissor1 estoppel after
review of the Indian, English and the US laws on the scope of th( doctrine. In doing so, the
Court laid down the following flrojmsitions:

(a) It is true that to allow promissory estoppel to found a cause of actior would seriously
dilute the principle which requires consideration to suppor a contractual obligation, but that
is no reason why the new principle, whicl is a child of equity brought into the world with a
view to promoting honest) and good faith and bringing' law closer to justice, should be held
in fetter: and not allowed to operate in all its activist magnitude, so that it may fulfil the
purpose for which it was conceived and born We do not see any reason why promissory
estoppel should not be allowed to found a cause of actio where, in order to satisfy the enuity,
it is necessary to do so. ' '
(b) The law may therefore, now be taken to be settled that when the Government makes a
promise knowing or intending that it would be acted upon by the promise 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 under 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. Everyone is subject to the law as fully and
completely as any other and the Government is no exception. No distinction can be made
between the exercise of a sovereign or governmental function and trading or business activity
of the Government, so far as the doctrine of promissory estoppel is concerned. ' '

(c) We do not think that it is necessary, in order to attract the appli- cability of the doctrine of
promissory ilstoppel, that the promise, acting in reliance on the promise, should suffer any
detriment. ' As regards the flrst proposition, Bhagwati J., in the instant case and Shah J., in
the two cases decided by him, on which Bhagwati J. placed strong reliance, per- mitted
promissory estoppel to be used as 1 cause of action, Bhagwati J. relied on a judgment of the
Court of Ameal' for his conclusion that promissory es- toppel can be the basis of a cause of
action, He noticed that Spancer Bower and Turner" have explained that decision on the basis
that it is an application of proprietary estoppel. But Bhagwati J. relied on Lord Scarman's
observation that the 'distinction (between promissory estoppel and proprietary estoppel) may
indeed be valuable to those who have to teach or. explain the law, but I do not think that, in
solving the particular problem' raised in a particular case, putting the law into categories is of
the slightest assistance and said that the decision, was . not based on any distinctive feature
of proprietary estoppel but proceeded on the assumption that there was no distinction
bietween promissory and prop:-ieltary estoppel so far as the problem before them {was
concerned.' '(emphasis supplied). And that is exactly the point to be noted" If it was a clear
case of promissory estoppel and not proprietary' estoppel, would the learned Law Lords have
given relief on the basis of estoppel as a cause of_:action? In' fact. Lord Denning with whom
Lord Scarmarn agreed had stated' 'there are estoppels and estopnels. Some do give rise to a
cause of action. Some don't...... in the species of es- ~ 'Crabb V. Arun Distr. Council, (1975)
3' ll 86_6. . , 'Treatise or the law relating to Estbppe bypkejjresfhtation. _
Evownors: .".l§{'..1.7"=.i?.".F.T._'¥l_§§»,'.1i.1!.=ili>.lA,.= ..

toppsl...cal1ed'.'prop:ietaty e§t9p2¢1'..'it -9o<°.--.s.i.s.iv.e rise to a. c.,au3w_, ..H;.0w- ever

there ismuch to be said in his favour when-Bhagwati. J,' " But on what principle, one 'may
ask, is the distinction to be" sustained bet- ween promissory" estoppel and 'proprietary'
estoppel in the matter of' en-

forcement by action? If proprietary estoppel can furnish a cause of action. _ why should
promissory estoppel ll0l?m. _ The Law Commission of lndial V » Great' injustice is done
sometimes 'wnerea 'promise is made which the ;pro--.3 ' missor knows will be acted upon
and which '-l8-in fact acted upon and then.
it is held that such promise is unenforceable ion the.- ground of want~ot. _ consideration.....'.
We recommend thatan exception. be added to section 25. .

' the exception 'recommended was:

48. 25(4). It is a promise, express or .implied.r.Wl1ich_ the promisor knew' or should

reasonably have known. would .be.i'.elied upon by ,th_e__p1'0misee, where the promiseehas
alteredhisposititmtohisdetrimentinrelianoe onthe pro The effect of this i'econimendat'ion is to
"allow promissory' estoppel 'as "a cause' of action, "though it is not cleariwhetlier the result
was 'foreseen; 'That recomf' mendation has not been so far accepted. ' "' ' ' As regards the
second proposition down by the learned Judge, we feel. he has gone too far for the following
reasons: 3 ' -'- - - - -A

(i) The learned author' on whonr'Bhagawat'i J. relied has himself stated thus:

One can easily see why courts" and other Judicatory tribunals should not ' be estopped in
_the performance" of the judicial function, ' andone call. readily see why major
governmenial pohcies must' be kept within the' con? trol of Congress and of the principal
policy making oflicers and why policies cannot feasibly be subjected to significant alteration
by enforced estoppel. But we canndt readily see why _the g§overnmei1't"1"i)ii'.'i ' business
and property dealiktgs 'should not be subject'-to the same: rules of fairness that courts apply'
to others engagingin such dealings. . .

_The author was only arguing for similar trfitment in. dealings and not with. respect to
governmental functions. This is made clear whenhesays: " ." . 4. .-

The movement is towards the idea that the government units in their Tprietary capacity may
be treated_ like any other party for purposes of es- toppel and that even in the governmental
capacity estoppel may be" when the accommodation ofé the needs; of to needs of eflective
ernment so u u up _ _ _ 1

(ii) It is true that a repulilieis: also pgdverpcd bylaw.' but a.de'_n'tocra.tic.:o_r_ republican
constitution cannot 'i he deiiedv' >-'-'tlie'>méans"for:preserving. itself: and such means are
Revenue.' it is for the 'government to determine. its ties between the hungry millions and the
affluent few. ' In: this Fveryrvital aspeefi there 'is absolutely no parallel or compaison
between an individual and the go A 9¥'".13eI,1t. As Sri S¢e,rvai.D'ut_s'it.'p . : ' e '
' :Th_irteenth nepgnpp. ')":i_1_lr'l;'/7',"(V1'.'?'5E}).:':W."'3' 4 - j 'I igc
D_avis,Adn1inistra_ti\': Law.Te3it'(3rd ed.,' 1972)' pp. 343 :uid'351; :

='4:onstini:ionai1i:axv'csr1ndis.3rd'ad.p.60CI l 2 '- .- of LJ Si cAy_~io;s4p ' -

- ».-x . " ,.. ,.x _.'~.

RBPOII 'ON 'l'$MI3%Y ETOPPEL *'

- 'lhe reterence (By Shah-J.)-to standards at conduct in-a nascent democracy- overlooks the
tact that public authorities 'are, and private parties' are not,"

H charged with protecting the publicrnterest; and the protection of the public in- terest must,
to that extent, require dilferent standards to be applied to pri- __ Hvate person,-sand public
authorities. " '

(iii) When a government changes its it is not right for the». court 'to assume' dishonesty or
immorality, and throw the burden on the government to satisfy the court that government has
[acted fairly under compulsion - of exe- cutive necessity The burden should be on the party
invoking estoppel against 'the Government to show fraud or injustice. Government acts as
honestly is laying down a legal proposition and-. later on changes its. view. If itis
arguedthatitisadilierentBenchoitheCourtthatgeneral1ychangesthe . law, it is also true that
change in government policy is often due to a change in the government. In the instant case
the original policy of tax holiday was President's Rule and the withdrawal of the concession
was by an elected gov-

» ernment. Even otherwise, the same govermnent can and must change its' policy policies
subject to drarge? He ,2 "

' rnissory estoppl cannot be-invoked}; to' it experience shows that sud: a change isnecesnry
in the public interes_t.., And whether such change is required in the public interest only the
government can de- cide and not a Court. Democratic process, requires changes of policy not
only by successive governments but also by the seine government. If a government can- not
change its 'policy when there is at change. in government it is incomprehen- sible when it can
do so. Judicial enforcement by invoking estoppel against' the government will be nothing but
trespassing into the legitimate field of 'activity of another limb of the government and would
be nothing short of interfering with the democratic process. a . '

(iv).Blngwati J. has excluded the from the operation of the doctrine. The reason can only be
because there is an irrebuttable presumption that thelegislature actsin public interest: because
«it -knows the public needs. Does not a similar presumption apply in the case" of the
executive? The utmost onecan say isthatitmaybeacaseofreliittable presumptioniftheperson ' '

- (v)sIn the Gwalior Rayon ungcquc has exempted the legislature from the doctrine and
Bhagwati J. it. In N. Ramamthns me. the who invokes the doctrine against the goV¢nIiIent
establishes fraud or manifest Court has held thatestoppel cannot be against an authority
which owes . C a duty to the public. In Ramkumarfs end the Curt -held 'that there can be
no'question of estoppel against the governrirem in the exercise of its lefislatiue, executive
and soveriegn functions. In thezcase of such unanimous, es» pecially of larger Benches of
five Juilges judicial cornity requires that a Bench of, two Judges should not have followed in
the Anglo-Afghm case and the Century Spg. am' Mfg.yC0. " These are Judgement! of three
Judges and the reference to pry ' ry _ by Shah I. in the first case was merely obiter. Bhagwati
I. t' "
i " ifiamanagtha saying that the petitioner knew that the post was t fiutthen are not all-
governmental 'where a government does a uty' A _ gnvemment. from tloing'so'.'_ en:
interpreted 'duty-to public' to mean 'a'coinsh.of3conduct enjoined by"Ia_wf.' No 'law'.
iinposeda duty on thetgovb . A abolish' a post in. Rfimgrubu. And what is more government
always owes a to the public not, only when-it is enjoined by law'. The reasorfi Why
Ramlmrmr did not 'refer to Anglo-Afghan. Century Spg. and Tuna, case's.'. Nference to
promissory estoppel in the that; was obiter: the second was because it dealt with legislative
power, and was between' Jjtamanatha .where it is' tflepublic to act differently. pro-.

EVOLUTION OF THE DOCTRINE IN INDIA Blmgwaiz J. relies on Mal/zotra for saying

that that decision shows that es- toppel can be invoked against the government. But
Mal/zotra says.

The doctrine of estoppel in its application to the State has undergone some radical thinking
since the judgment in the Anglo-Afghan: and Cen- tury Spg. cases. -

As already stated the re_ference to promissory estoppel by Shah J. in Anglo- A fglzanis

obiter and the same Judge's reliance on the doctrine in Century Spg. case is clearly wrong
even according to Bhagwati J.'s view because, the muni- cipality's decision to impose octroi
duty is the exercise of legislative power.

(vi) Lastly, many legal eyebrows in the U.K. and the US. are bound to be lifted at this
proposition, because, in those countries there has never been any controversy arising from a
government changing its policy.

In an interesting English case in 1972, theplaintifis were granted an air 7 ttransport licence by
the Civil Aviation Authority for low cost Passenger ser- vice to run what was called a
'Skytrain', for 10 years from 1973. The plaintifis spent large sums of money as operation
costs, but in 1975. there was a change ' of policy due to a change in the government, and the
licence was cancelled in 1975. The challenge to the cancellation was "successful on the
ground that the newpolicy was ultra vires the powers of the Secretary of State. But on the
question of estoppel the following -views were expressed:

Lord Denning: The underlying principle is that the Crown cannot be estopped from
exercising its powers, whether given int a statute or by Common law, when it is doing so in
the proper exercise of its duty to net for the public good, even though,,th's may work some
injustice or iifiib ness to a private individual .... .. It can however be 'estopped when i: i not
properly exercising its powers'but is misusing them; and it does" mis- , use them if it
exercises them in circumstances which work 'injustice or unfairness to the individual without
any countervailing benefit for the public. ' In the present case, if the Secretary of State did
have a prerogative to with- draw the resignation, and properly exercised the prerogative, then
-there 'would be no case for estoppel. He would be exercising the prerogative tor the public .

good and would be entitled to do it, even though it did work injustice sesame individuals. '
Lord Roskill pointed out that when a party comesintoipower, it gene- rally makes_a change
in policy an election issue and observed: . « The doctri.ne of estoppel cannot be allowed to
hinder the formation of government po1icy--or one might add the constitutional result of a
general election. . . .

Whatever representations' the Secretary of State in office between] 1972 and 1974 may have
made to the plaintiffs he made them pursuant to his public duty and in good faith. If in 1976
his successor was of the opinion that the public interest required him to go back on those
representations. he was in duty bound to go back on them. The fact that Laker Airways
suffered loss as a result of the change is unfortunate; they have 136611 flit? victims of a
change of government policy. This often happens. Bstdppel cannot be allowed to hinder;
thepfpnnation of government policy._ I & CAIND/34 L REPORT ON PROMISSORY
ESTOPPEL In the U.S. academic discussion has centered round two cases.' Neither of these
cases had anything to do with changes in governmental policy. In the first case, the U.S.
Supreme Court had categorically stated that even in business mat- ters there is a difference
between government and private individuals.

In both these countries, which continue to be a source for our law, the con- troversy is how
far government is bound by the representations of its officials.

As regards the third proposition of Bhagwati J. we feel that here also the learned Judge has
gone a bit too far in not requiring detriment to be established. After all the principle is one of
equity and no question of equity can ever arise unless someone is hurt. That is, unless the
person to whom the representation is made would be unjustly harmed if the,rule of equity is
not invoked.

On this question of detriment to the person to whom the representation is made, there are two
views. One view is that the more 'acting upon' the repre- sentation by the person to whom the
representation is made is itself 'detriment' suffered by such person. The other view is that the
person who acted upon the' representation, would suffer some injustice, if the person who
made the representation is allowed to resile from what he stated. The two views are lucidly
explained by Dixon J. as follows :

The principle upon which estoppel in pars is founded is that the law should not permit an
unjust departure by a party from an assumption of fact which he has caused another party to
adopt or accept for the purpose of their legal relations. This is, of course, a very general
statement. But it is the basis of the rules governing estoppel.-- Those rules work out the more
precise grounds upon which the law holds a party disentitled to depart from an assumption in
the assertion of rights against another. One condition appears always to be indis- pensable.
That other must have so acted or abstained from acting upon the footing of the state of affairs
assumed thatlhe would suffer a detriment if the' opposite party were afterwards allowed to
set up rights against him inconsistent with the assumption. In stating this essential condition,
particularly where the estoppel flows from representation. it is often said simply that the
party asserting 'the estoppel must have been induced to act to his detriment. Although sub-
stantially such a statement is correct and leads to no misirnderstanding-, 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 assump-
tion is adhered to, the party who altered his situation uponthe faith of it cannot complain. His
complaint is that when afterwards the other party makes a diffe- rent state of affairs the basis
of an assertion of right against him then, if it is allowed, his own original change of position
will operate as a detriment. His action or inaction must be such that.'if'the 'assumption upon
which he proceeded were shown to be wrong, and an inconsistent state of affairs were
accepted as the foundation of the rights and duties of himself and the opposite Pa1'tY- the
consequence would be to make his original act or failure to act a source of pre- iudice."

Spencer Bower and Turner'. have examined these 'two views critically and stated :

'Federal Crop. In.r. Corp. V. Merrill 332 US 380_andVUS (195!) 341 US 41. 2Grundt v.
Great Boulder Ptv. Gold Mines Ltd.': (1938) 59 C.L.R. 641. "Pb: Law Relating to Estoppel
by f.Reprfsent2iti?n ed.' pp. 391-394).

EVOLUTION OF THE DOCTRINE IN INDIA Notwithstanding general agreement by high

authority that there must be an alteration in theposition of the promisee in reliance on the
promise, it has been seriously argued that it is not necessary that such an alteration of
position should amount to "detriment". Lord Denning is the principal pro- tagonist for this
proposition...lf the meaning of "detriment", where that light is used in the estoppel cases, be
subjected to precise examination in the light of the discussion of it from the pen of Dixon 1.,
ft is clear that detriment means injustice to the promisee which would result if the promisor
were allowed to recede from his promise. This definition will be found to resolve the
diiiiculties between the two schools of thought in many of the actual cascs .... ..But all this
notwithstanding, there may possibly remain some cases in which it will be impossible to
maintain that any detriment resulted, and yet it can still be said that the promisee has "acted
on" the promise. It is dilficult perhaps to imagine such cases which would qualify in all other
re- quirements as promissory estoppel cases...But if and when a case arises to be determined
by a Court of the highest authority in which it is found as a fact that the promisee, while
"acting on" the promise has not done so to his detriment within the extended meaning which
Dixon J. gives to the term, it will become necessary to decide whether "acting on" without
"detriment" is sulficient. It is here submitted that in promissory' estoppel, as in orthodox
estoppel, detriment in Dixon J.'s sense, will be found essen- tial; for to go further must go
perilously close to the enforcement of a simple gratuitous promise."

We are inclined to accept the views of the learned authors and to require 'dettimen»t'--as
explained above---as a 'necessary element of the doctrine of Pro- missory Estoppel. In fact
the M. P. Sugar Mills case is the wrong case in which Justice Bhagwati has taken up arms. In
this case there was a change of govem- ment, the representation of the Chief Secretary was
beyond his authority, because an exemption from sales tax could be granted only under s.
4A of the Act; and the petitioner had not and would not sufier any loss. When sales tax is
imposed it will be passed on to the consumer and no monetary loss at all would be inflicted
on the petitioner.

2.18 On the establishing of a mandi the concerned Municipal Committee decided that
purchasers of the plots for sale in the mandi would not be required to pay octroi duty on
goods imported within the mandi. This was in 1918 and the state of affairs continued till
1965. During that time though the Municipal Committee had changed its mind the
Government. approved the Committee's original action of exempting the purchasers of plots
from octroi duty. In 1965, )n the request of the Municipal Committee, the Government
withdrew its approval of the earlier action and the Municipal Committee started levying
octroi duty. A challenge to this action of the Municipal Committee and the Government
'ailed in the High Court. Dismissing the appeal, the Supreme' Court held :1 ~ So far as the
recommendation of the Municipal Committee to the Govern- ment to levy octroi duty is
concerned, though it is contrary to the represen- tation it made to the buyers of the sites in the
mandi. the Municipality is not estopped as the representation made by it was beyond the
scope of its authority'. The levy of tax being for a public purpose i.e. for augmenting the lit
Ru) V. Stat ol'Har revenues of the Municipality as laid down in Ramkumafs case, '(AIR 1976
A SC/2237) the plea of estoppel is not available. The order of the G'ovem- ment directing the
levy of octroigin pursuance of the resolutions of the Municipality cannot also be challenged
as it is in the exercise of its statutory duty. ' ' 'A.I.R. 1980 SC. 1285.

yana REPORT ON PROMISSORY ESTOP'r-'EL In the course of the judgement the learned
Judges laid down the following pro- positions regarding promissory estoppel:

(1) The plea of promissory estoppel is not available against the exer- cise the legislative
functions of the State:

(2) The doctrine cannot be invoked for preventing ' the Government from discharging its
functions under the law; ' (3) When the" officer of the Government acts ou-tside the scope of
his authority, _the plea of promissory estoppel is not available. The doctrine of ultra vires
will come into operation and the Government cannot be held bound by the unauthorised acts
its officers.

(4) When the oflicer acts within the scope of his authority under a scheme and enters an
agreement and makes a representation and a person acting on the representation puts himself
in a disadvantageous position, the Court is entitled to require the officer to act according to
the scheme and the agreement or representation. The officer cannot arbit- rarily 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. The Court can enforce
compliance by a public authority or the obligation laid on him if he arbitrarily or on hise
mere whim ignores the promises made by him on behalf of the Govern- ment.
(5) The officer would be justified i1 changing the terms of the agree- ment to the prejudice of
the other party on special considerations such as diflicult foreign exchange or other matters
which have a bearing on the general interest of the State.

CHAPTER 3 THE LAW IN THE UNITED KINGDOM AND THE UNITED STATES K
follows:

SNELL: Promissory estoppel: Where by his words or conduct one party to a transaction
makes to the other a promise or assurance which is intend- ed to affect the legal relations
between them, and the other party acts upon it, altering his position to his detriment, the
party making the promise or assura-nce will not be permitted tit act inconsistently with it- .

Like estoppel at common law, promissory estoppel may provide a defence, but it can create
no cause of action. ' - .

The defference between it and proprietary estoppel is that the effect of promissory estoppel
may be only temporary whereas that of proprietary estoppel is not only permanent but is also
capable of operating positively so as to confer a right of action. .

HANBURY : Promissory estoppel : Where, by words or conduct a person makes an

unambiguous representation as to his future conduct, in-tending the re-

'Snell, Principles of Equity, 26th ed. (1966) pp 625 to 631. Hanbury, Modern Equity, r , llth
ed. (1981) pp. 735 to 739. 3 -

vim' ; 3.1. The law in the United Kingdom is stated succinctly in text books' as '
'EVOLUTION OF THE DOCTRINE IN INDIA presentation to be relied on and to affect the
legal relations between the parties, and the representee alters his position in reliance on it, the
1'°Pf€9¢fi' tor will be unable to act inconsistently with the representation if by so doing the
representee would be prejudiced.» Prornzssorg. estoppel contains a number of features which
distinguish it from estoppel by representation of fact. First, in that the representation may be
one of intention and not one of fact; which raises the question whether it is inconsistent with
the House of Lords decision in Jordan V. Money.' But the doctrine is now well established.
Secondly, the requirement of detriment to the representee is less stringent in the case of
promissory estoppel. Financial loss or other detriment is of course sufficient; but it seems
that it is not necessary to show more than that the representee committed himself to a
particular course of action as a result of the representation». Thirdly, the effect of the
estoppel may not be permanent. The representor may escape from the burden of the equity if
he can ensure that the representee will not be prejudiced. But, consistently with estoppel by
representation, promissory estoppel does not create a cause of action; it operates togive a
negative protection. It is a shield and not a sword.

Proprietary estoppel : This doctrine is applicable where one party knowingly encourages
another to act, or acquiesces in the other's actions, to his detriment and in infringement of the
first party's rights. A doctrine, based on encourage- ment and acquiescence, under which a
court of equity, will adjust the rights of the parties so as to do substantial justice between
them.

3.2. In the United States the law is stated as follows: Unfid Restatement? A promise which
the promisor should reasonably ex- pect to induce action or forbearance of a definite and
substantial cllnlncter ' on the part of the promisee, and which does induce such action at for-
bearance, is binding if injustice can be avoided only by etfexenant of the promise. . . -

American' Jurisprudence : There is considerable dispute as to the ap3 plication of estoppel

with respect to the State. While it is said, that equi- table estoppel will be invoked against the
State when justified' by the facts. clearly the doctrine of estoppel should not be lightly
invoked against the State. Generally State is not subject to an estoppel to..the same extent as
is an individual, or a private corporafim. Otherwise it might be rendered helpless' to assert its
powers in. gavemment. Therefore, as a general rule' the doctrine of estoppel will not be
applied against the State in its govem- mental, public or soverign capacity. An exception,
however, arises in the application of estoppel to the State when it is necessary to prevent
fraud or manifest injustice. " i ~ CHAPTER 4 ' ms PROBLEMS 4.1. We are now in a
position. to state the problems arising out of the" '€atl'1ifl1'.Pl'0b"flVI\-it discussion. They
are: ' g '

(a) Should promissory estoppel be allowed to used aua -cause of action?

(b) Could the doctrine be used agiinst the government and if so when? and

(c) Should the promisee surfer detriment before he can invoke the doctrine?

V1854) 5 H.L.C. 185.

2Article 90, American Law lnstitute's Restatement of the law of Contracts. 3Vol. 28, p. 783,
para. 123. ' REPORT, ON PROMISSORY ESTOPPEL These problems arise because,' in all
systems of civilised administration, citi- zens expect the concerned departments and agencies
to act in conformity with the procedure they have established for themselves or promises
they have made. Departure from that procedure or promise, be it a mere rule of practice,
frustrates legitimate expectations, and the citizens turn to the courts for re- dress against
arbitrary action. The courts will then have to decide whether the procedure or promise in
question is enforceable against the body that has adopt- cd or made it. To what extent can the
private law principle that persons could be held to representations made by them and acted
upon by others to their de- triment, be applied against such bodies?. One view is that a public
body en- trusted with powers and duties for public purposes cannot divest themselves of
these powers and duties by entering into contracts or making representations incompatible
with the discharge of the power and duties. If a departmental official makes a representation
which is relied on by a private party to his in- jury, the department can still go back on the
representations because that may be necessary in the public interest. .... ..Another view is that
the department can be held to the representation, unless it is shown to: the satisfaction of the
court that a departure will be justified by overriding considerations of public interest.
4.2 Our views are as follows:

(a) In view of the recommendation already made in the Thirteenth Report ot the Law
Commission, promissory estoppel may be allowed to be used as cause of action. '

(b) The doctrine can be used against the government in its business and property activities.
The position in this area is not similar to that of tortious liability where the distinction
unfortunately is perpetuated by the counts themselves. To invoke the doctrine of promissory
estoppel against the government in its governmental activities would be making the gov-
ernment and its agencies (public bodies) ineffective, and, thereforefit is that we are
recognising this dichotomy in this field.

(c) On this aspect we are of the view that there should be detriment in the sense explained by
Mr. Justice Dixon above, that is, the person to whom the representation or promise ' is made,
is likely to sulfer some damage or loss if the person 'making the representation or promise is
allowed to go back on 'his representation or promise.

CH'APTER 5 COMMENTS RECEIVED 5.1. The Law Commission has issued a working
paper on the aforesaid aspects and the following comments were received. The commission
is grateful for the response. -

5.2. The High Courts" had no comments to offer'. The Law Departments of three State
Governments3 agreed ._with the proposed amendments. The In- corporated Law Society of
Calcutta,' had L suggested the incorporation of cl.

(d) in the proposed sub. sec. (3) of sec. 25A that where the promisor is the Government, the
promise should have been: made by an authorised officer of the Government. The Society
also indicated that a sub. sec. (4) may be added .

that the doctrine of promissory estoppel shall not be available in any other case except those
provided for. When the Government is the promisor, the promise is deemed to be made by a
competent officer on behalf of the Gov-

'(19S3)K.L.T. 1083, 1039 (Govindan v. Cochin Shipyard). 2Law Commission File No.
2(2)/84~L.C. Sl. No. 3(R). 3Law Commission File No. 2(2)/84-L.C. No. 7( R).

'Law Commission File No. 2(2)/84.-L.C.,Sl. No? 501).

Recommenda-

tions of the Law Commi-

ssion.
Pmrlnssory cstoppel. ~ RECOMMENDATIONS ernment. Hence, the Law Commission is
not recommending that. such a provision should be made.

5.3. The Law Commission has given full consideration to the views ex- pressed. The Law
Commission accordingly makes recommendations set out in Chapter 6.

CHAPTER 6 RECOMMENDATIONS 6.1 It is suggested that since the doctrine of

promissory estoppel is a beneficial doctrine based on equity, 'exclusion of its operation may
be allowed only where absolutely necessary. The proper course would be to hold the
government bound by its promise which has been acted upon by the other party (promisee)
subject to certain narrowly drawn exceptions. We are not recommending the test of
'sovereign' and 'non-sovereign' functions, because, it is not an easy test to apply. Our
recommendation is that a new section may by inserted in the Indian Contract Act after s.
25 as suggested below.

Suggested Section 25A, Contract Act 6.2. 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 to 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, then,
notwithstanding that the promise is without consideration. it shall be binding on 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. 1 (2) The provisions of this section apply
whether or not there is a pre- _ existing relationship between the parties.

(3) The provisions of this section shall not apply:---

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

(b) Where the promisor is the Government and the public interest would suffer if the
Government is held to _be bound by the promise; or, and enforcing the pro-

(c) Where the promisor is the Government, or liability imposed on mise would be
inconsistent with an obligation the Government by law.

Explanation (l).--~Where a question arises whether public interest could sufl'er within the
meaning of Clause (b), the court shall have regard to the amount of harm likely to be caused
to the promisee if the promise is not en- forced and the extent of injury to be caused to the
public interest if the pro- mise is enforced, and shall decide the matter on a balance of the
two consi-

derations. , 4 Explanation (2).--In this secrtion §Gcivemment' includes all-public bodiesé'

(K.K. MATHEW) CHAIRMAN (LP. CHATURVEDI) IUEMBER (DR. MB. RAO)
MEMBER (PM. BAKSHI) PART-TIME MEMBER (VEPA P. SARATHDI PART-TIME
MEMBER (A.K. sm1~j1vAsjmwnmY) MEMBE:R-SE_ChE'I.'ARY DATED : 12th
December, 1984.

Iv--2o M of LJ .3; CA/ND/84