TMI Blog1983 (3) TMI 170X X X X Extracts X X X X X X X X Extracts X X X X ..... of products wholly or mainly of silver with more than 50 per cent silver contents. 3. The petitioners entered into a contract, dated 25th March, 1977, with the foreign buyers for the supply of 25 tonnes of Indian real zari badla. A part of the supply was made. Before the remaining supply could be made the Central Government changed the policy. The policy as laid down in the Exports (Control) Order, 1977, was that manufactures and products wholly or mainly of silver with more than 50 per cent of silver contents, excluding silver zari goods, were permitted to be exported under the open general licence. This policy was changed on 30th March, 1979. Under the Exports (Control) 22nd Amendment Order, dated 30th March, 1979, this item was deleted from the open general licence and was placed under the heading on merits which meant that the exporter concerned will have to apply to the licensing authority for permission or licence to export. 4. Contemporaneously with the amendment of the Exports (Control) Order the Central Government issued a public notice, dated 30th March, 1979, informing the public about the change in the policy. This public notice stated that the provisions of para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tory promises because sub-paragraph (6) of paragraph 316 itself says that these guidelines shall not confer any right on the persons concerned to the grant of any export licence or permission to export . 9. The petitioners cannot claim any right to the export of goods under paragraph 316 when those provisions have been made inapplicable by the Public notice, dated 30th March, 1979. If under section 3 of the Act the Exports (Control) Orders can be amended from time to time it is difficult to see why paragraph 316 of the Hand Book cannot be replaced by a new set of guidelines for conserving a certain commodity in the national or public interest. This is its statutory birth right , to use a phrase of Lord Summer: Birkdale District Electric Supply Co. v. Southport Corporation [1926] AC 355, 372 (HL). The Government policy can be changed from time to time as the occasion arises and the needs of the country demand. This is why the Hand Book announces: Instructions and guidelines contained in this book are applicable subject to such amendments/changes as may be made from time to time (Ch. I, p. 1). So when the policy changes the guidelines can also be changed. 10. Assuming for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 13. The facts : The petitioners in this case challenge the validity of the amendment made to the Exports (Control) Order of 1977 by the Exports (Control) 43rd Amendment Order, 1979, and the public notice, dated 13th August, 1979. The Exports (Control) Order, 1979, changed the policy of the Government. The earlier export policy was that an exporter of handicrafts with less than 50 per cent silver contents was allowed to export the same freely without any export licence. On 13th August, 1979, the Central Government issued the Exports (Control) 43rd Amendment Order, 1979. Manufactures and products having 50 per cent or less silver contents were placed in the category of those cases where export was to be allowed on merits . The provisions of paragraph 295 of the Hand Book were made inapplicable to pre-control commitments consequent to the public notice, dated 13th August, 1979. The pre-control commitments were to be decided in the light of the new guidelines issued by the Central Government. These were: (i) Advance payment received through an authorised dealer in foreign exchange covering the full f.o.b. value of the consignment before the date of this public notice; or (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n export scheme under which the respondents were entitled to get an import entitlement certificate equal to 100 per cent of the f.o.b. value of their exports. Without deciding the question whether the import policy was legislative or executive in character, the court held that even if it were executive in character, the courts had the power in appropriate cases to compel the performance of the obligations imposed by the scheme upon the authorities. 19. The Union of India contended that to enforce on it the policy announced by the Government would amount to enforcing contractual rights even though the contract did not comply with Article 299. The court rejected the argument, holding that the respondents did not seek to enforce a contractual right, but an equity arising in their favour after they had carried out their part under the policy announced by the Government. The court observed that the licensing authorities were not entitled at their whim to ignore the promises made by the Government: to concede such a power would be to strike at the very root of the Ruleof law. 20. Even if the scheme is executive in character, the court said, the respondents who are aggrieved because o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 968 S.C. 718 is the sheet anchor of the doctrine of promissory estoppel: Jit Ram Shiv Kumar v. State of Haryana - AIR 1980 S.C. 1285, 1292. It decided that the Government is bound to honour its solemn promises and assurances made in the scheme, or a representation on the faith of which a person acts to his detriment. The assurances were enforced on grounds of equity. This was not an enforcement of a contract. It was the recognition and application of the basic concepts of honesty, fairness and justice in the field of public law. The claim cannot be defeated on some undefined and undisclosed ground of executive necessity. Indo-Afghan decisively rejected the plea that promissory estoppel did not bind the State or a policy statement of the Government cannot fetter its executive action. No public authority can be permitted to go back on its representation at the sheer convenience of the administration. 24. To do justice to the exporters the court pressed into service nearly all the well-known concepts of administrative law. (1) Rule of law; (2) judicial review; (3) natural justice; (4) access to the courts and the right of redress; and (5) promissory estoppel were all summoned to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... WLR 1000 (CA), Lever Finance Ltd. v. Westminster (City) London Borough Council - [1971] 1 QB 222 (CA) and Prof. Wade s criticism of Lever in Administrative Law 4th Edn. at page 329. In India, Motilal Padampat Sugar Mills extended the frontiers of administrative law. .It gave a wide berth. It placed the doctrine on the basis of the Rule of law; equality before the law and justice and morality. It is no new doctrine in India. It emerged as early as 1880: see Ganges Mfg. Co. v. Sourujmull - (1880) ILR 5 Cal. 669. It was applied against the Government by Jerikins, C.J., in 1905 [see Municipal Corporation of Bombay v. Secretary of State - (1905) ILR 29 Bom. 580]. Throughout its history the basic concepts of justice and fair play , to use the words of Shah, J., or honesty or good faith , to use the expression of Chandrasekhara Aiyar, J., have been largely responsible for the development of the doctrine in its modern form . The accepted standards of right conduct , Justice Cardozo has said, have inevitably shaped the progress of law. 27. The modern doctrine of promissory estoppel is a recent advance in public law. The common law doctrine of estoppel contained in the Evidence Act, 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has questioned its correctness. So the authority of Indo-Afghan remains unshaken. Legislative powers of the administration 30. Whenever promissory estoppel is invoked what the court ought to ask is: Whether the communication (I use a neutral word) coming from the Government is legislative or executive in character. If the communication is legislative the doctrine of promissory estoppel cannot be invoked. In the exercise of its statutory powers the Government cannot fetter itself or its. successors. It cannot divest itself of the freedom of action. A public authority created to exercise statutory powers vested in it in the public interest under the authority of the legislature cannot act inconsistently or incompatibly with the purposes for which the statutory powers have been granted. Estoppel would create contractual fetters. It would fetter the exercise of statutory powers. 31. This raises the question of relationship between this doctrine and the doctrine concerning the fettering of public powers. Would the doctrine of estoppel be excluded whenever its operation would fetter the powers of a public body in a way that could not be done by a contract? It seems logical that it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n was drawn to a judgment of the Constitution Bench of five Judges in Seth Sat Narain v. Dominion of India - (1968) 2 S.C.WR 335 (S.C.), where the pronouncements of Lord Denning on this doctrine were examined. It is not possible to accept the view that the doctrine does not apply against the executive power and the executive is free to do what it likes. Indo-Afghan - AIR 1968 S.C. 718 is a milestone on the road to the Ruleof law. Control of the administrative powers 36. So much for promissory estoppel in the legislative domain. Now, we turn to the executive field. It is in the area of State action that promissory estoppel has produced most beneficial results in protecting the individual against the executive excesses. 37. If the communication is executive in character, on the authorities, it appears to me, that the doctrine of promissory estoppel can be properly pressed against public authorities, as was done in Indo-Afghan against the Textile Commissioner, and against the Chief Secretary in Motilal Padampat Sugar Mills. The State in both cases was held bound by its representation, in one case by the representation made to the exporters in the export promotion scheme and in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnment would grind to a halt if there were not built into our Constitution an adequate system of executive legislation. : D. Foulkes Administrative Law, 5th Edn. (1982), p. 73. See Gwalior Rayon Mills v. Assistant Commissioner of Sales Tax - 94 ITR 204 (S.C.); AIR 1974 S.C. 1660, Tata Iron Steel Co. v. Workmen - AIR 1972 S.C. 1917, N.K. Papiah v. Excise Commissioner - (1975) 1 S.C.C 492 and Sita Ram Bishambhar Dayal v. State of U.P. - AIR 1972 S.C. 1168. 4l. The Exports (Control) Orders are legislative in character no one can dispute. It was so held in Indo-Afghan - AIR 1968 S.C. 718. These statutory instruments, if we may call them, can be amended from time to time. The power to make statutory instruments or Rule s, regulations, by-laws, carries with it the power to revoke, amend or re-enact them. This power may be exercised or the duty performed from time to time as occasion arises. The petitioners attack, therefore, on the Exports (Control) 43rd Amendment Order, 1979, dated 13th August, 1979, cannot be sustained. The short answer is that it is legislative in character. 42. Against the legislature the doctrine of estoppel cannot be pleaded. That the Exports (Control) Orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... faith of which they acted to their detriment and altered their position and it would be unfair to them to allow the State to replace this paragraph by a new set of guidelines. 46. It is difficult to distinguish the legislative from the executive acts. Text book writers have laid down a miscellany of indicia to distinguish the one from the other. It is unnecessary to discuss them here. Here section 3 says: The Central Government may, by order published in the Official Gazette, make provision for prohibiting, restricting or otherwise controlling , the imports or exports. So the Exports (Control) Orders are legislative in character. The export policy is evolved to facilitate the mechanism of the Act and the orders issued thereunder.. The policy statement is a jumble of executive instructions and matters which impose several restrictions on the rights of the citizens . The Government issues executive or administrative instructions in order to implement the policy declared by the statutory Orders: Indo-Afghan AIR 1968 S.C. 718, 723. 47. I will assume, and that is the case of the petitioners, that paragraph 295 is executive in character and has a direct impact upon the rights and l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ban on the export of silver for conserving the country s stocks of silver for its own use. But in 1974 export was permitted, because the country needed foreign exchange to meet the oil crisis. In 1979 the export of silver was sought to be controlled by placing the item of manufactures and products having 50 per cent or less silver contents in the licensing policy under the heading on merits . This means that each case will be decided on merits, and if it is in public interest to allow export, permission will be granted. 50. So public interest is pleaded in defense by the Government. Is it a good defense to the petitioners plea of promissory estoppel? A public body has a right, nay a duty, to exercise its discretion in the way in which it believes best promoted the public interest: Southend-on-Sea Corporation v. Hodgson (Wickford) Ltd. [1962] a QB H16 (per Parker, C.J.). A citizen can say that he has acted on the faith of the representation of the announced policy to his detriment, and therefore, the Government is bound by promissory estoppel to allow him to export certain commodities under the pre-amendment policy. But, if the overriding public interest requires the Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If the common weal demands, the policy can be changed. The announcer of the policy, namely, the Central Government has not assured the exporters that the policy will not be changed. The opening chapter of the Exports (Control) Policy, on the contrary, announces that any change in the policy will be duly notified by a public notice. Change in the land of the living is essential. The Exports (Control) Orders issued from time to time are, so to speak, so many legislative experiments in the laboratory of international trade. They are the lessons of experience. So the Government cannot effectively contract not to exercise its statutory powers or to abdicate its statutory duties. A sea of change 55. The export policy as declared in the statutory orders from time to time is indissolubly connected with the guidelines framed for pre-ban commitments . Section 3 of the Act confers wide powers on the Government. The power is one and indivisible, although in the exercise of it, various Exports (Control) Orders are issued from time to time. It is a fallacy to think that the Government enters into a contract when it announces its policy. There is no enforceable contract between the Governme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e foreign exchange position had radically changed against India, the promises made for the exercise of discretionary power would still be binding on the Union and would be enforced by the courts. If Shah, J. judgment did lay down such a proposition a leading authority suggests that it would clearly be wrong: (Seervai, Constitutional Law of India, 2nd Edn., Vol. I, p. 433). 59. It will be impossible to hold that there are any accrued rights under paragraph 295 of the Hand Book which the statutory power cannot alter. More so when the policy can be changed. More so when it is announced publicly that the guidelines also can be changed. Nothing confers rights which cannot be changed. Neither the statutory orders, nor the policy nor the guidelines. There is nothing permanent on which a plea of promissory estoppel can be successfully founded. There is no representation which can furnish the ground for an equitable estoppel. Everything is subject to change. Assuming there is a representation, the Government can always show that public good requires the exercise of the power contrary to the representation. 60. In a word promissory estoppel will always be subservient to public interest. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the liability; the Government would have to show what precisely is the changed policy and also its reason and justification so that the court can judge for itself which way the public interest lies and what the equity of the case demands , [p. 73 of 44 STC; AIR 1979 S.C. at p. 644 (Col. 2)]. 63. In Motilal Padampat Sugar Mills - AIR 1979 S.C. 621 as in Indo-Afghan - AIR 1968 S.C. 718, one finds a fuller development of the doctrine of Ruleof law that permeates our whole constitutional system - here, there are less of nuts and bolts, and more of theoretical framework in which promissory estoppel is woven into the fabric of Ruleof law. But it must not be forgotten that promissory estoppel is an equitable doctrine, it must yield when the equity so requires . : Motilal Padampat Sugar Mills, p. 644 of AIR 1979 S.C.. 64. Promissory estoppel is a brake on the exercise of discretionary power. Repudiation of promissory liability by the State for no good reason is synonymous with arbitrary power. This is what Indo-Afghan holds. This is our commitment to the Ruleof law. There is one lasting benefit of Indo-Afghan. It established the supremacy of the law : Motilal Padampat Sugar Mills ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f executive powers is the subject of the decision. The main issue is the concern of every citizen. Indo-Afghan discusses the Rule of law, judicial review of doctrines of executive necessity and promissory estoppel. And, what not? The menu is so varied that there is something or the other to suit the taste of every lover of liberty. Conclusion 69. Promissory estoppel is rooted in equity. The gist of the equity lies in the fact that one party has by his conduct or representation led the other to alter his position. If injustice can be avoided only by an enforcement of the promise it is a case of estoppel. But the doctrine of promissory estoppel cannot be applied against the statute. Nor can it be applied in a manner that the State becomes paralysed in promoting the good of the greatest number. It strikes at executive action. Not legislative action. In other words, the doctrine can be properly pressed against administrative action. It strikes at executive action where, in the name of State necessity, individual interests are affected adversely for no disclosed reason. Jit Ram - AIR 1980 S.C. 1285 emphasises that promissory estoppel cannot be invoked against the legislative or stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : See Plimmer v. Wellingdon Corporation - (1884) 9 App Cas 699 at p. 714 (PC), Chalmers v. Pardoe - [1963] I WLR 677 at p. 682 (PC), E.R. Ives Investment Ltd. v. High - [1667] 2 QB 379 at p. 395 (CA), Pascoe v. Turner - [1979] 1 WLR 431 at p. 437 (CA). There is, however, one important exception. Against public interest promissory estoppel will not prevail. 73. In my opinion the State has discharged the burden of showing that its action in changing guidelines of paragraph 295 to a new set of guidelines was dictated by public interest and nothing else. If the public good outweighs the private interest of an individual the doctrine cannot be applied. Whenever and wherever the element of public interest enters into the performance of statutory duties the doctrine of promissory estoppel cannot be invoked. Because it is an instrument of justice. When the State is able to show that it was required to act differently because the public interest demanded it, the doctrine of promissory estoppel cannot be properly pressed against it. The Government, I think, has succeeded in showing that its action was in the best public interest. The argument that the Government cannot replace paragraph 29 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnment is bound to honour its solemn promises and assurances, if on the basis of representations a person has acted to his detriment or, as said in Motilal Padampat Sugar Mills - AIR 1979 S.C. 621, even altered his position. The Government would be bound even though the promise made is not recorded in the form of a formal contract as required by the Constitution. 80. The doctrine of promissory estoppel is evolved by equity in order to do justice or, to put it in other words, to prevent injustice, where a promise is made by a person knowing that it would be acted upon by the person to whom it is made, and in fact it is so acted upon, and where it will be inequitable to allow the party making the promise to go back upon it. This doctrine would be applicable notwithstanding that there is no consideration for the promise which is made by the Government. 81. The detriment which is to be suffered is not some prejudice suffered, the promisee by acting on the promise, but the prejudice which would be caused to the promisee if the promisor were allowed to go back on the promise. The guidelines and the Hand Book of Import Export Procedures as well as the Import and Export Policy, referre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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