TMI Blog1983 (5) TMI 218X X X X Extracts X X X X X X X X Extracts X X X X ..... such situation, the first contention of Mr. Bhatt cannot be accepted. The true principle of promissory estoppel, therefore seems to be that where one party has by his words of conduct made to the other a clear and unequivocal promise which is intended to create legal relations or affect 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, if it 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. The High Court accordingly was fully justified in issuing a writ of mandamus to disburse the loan and therefore the appeal fails. - C.A. 1099 OF 1982 - - - Dated:- 3-5-1983 - D.A. DESAI, AND R.B. MISRA, JJ. JUDGMENT 1. This appeal was dismissed by an order made by us which reads as under : Having heard Mr. R.P. Bhatt, learned Counsel for the appellant and Mr. F.S. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loan, as agreed to be advanced by the Corporation to the Company. It inter alia provided that the rate of interest will be 121/2% p.a. if re-finance is available from Industrial Development Bank of India (IDBI) at 9% p.a. otherwise it will be 13% p.a. 5. The trouble erupted when in October, 1978 two Pseudonymous letters purporting to have been written by Ramlal V. Patel and Chandrakant Pandya addressed to the Chief Minister, Gujarat State and Chairman Industrial Development Bank of India, Bombay, respectively were received making serious allegations against the promoter Shri Jaiswal about his character and creditworthiness and also pointing out that he was facing several prosecutions in various courts on account of his nefarious activities. Presumably, acting on this letter, the IDBI who was approached for re-financing the loan addressed certain enquiries to the office of the Corporation and then started an enquiry which led to the delay in processing the promised loan. Ultimately by its letter dated February 13, 1979 IDBI informed the Corporation that in view of the pending police enquiry against the Promoter Shri Jaiswal, the application for re-finance is treated as closed, l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the loan by the Corporation in favour of the respondent was conditional upon IDBI agreeing to and undertaking to re-finance the loan and as IDBI has declined, for the time being, to re-finance the loan, the Corporation cannot be compelled to undertake the onerous liability of financing a huge loan to one undertaking and therefore the appellant was discharged from performing its part of the contract. Both the learned Single Judge and the Division Bench of the High Court have concurrently held that the sanctioning of the loan by the Corporation in favour of the respondent was not conditional upon IDBI agreeing and undertaking to re-finance the loan. In this connection, a reference to Clauses 2 and 5 of the letter dated July 27, 1978 by the appellant to the respondent setting out the terms and conditions subject to which loan was sanctioned would be advantageous: 2. Rate of interest will be 121/2% p.a. if re-finance is available from Industrial Development Bank of India @ 9% p.a. otherwise it will be @ 13% p.a. Higher rate of interest at 6% over the normal rate of interest will be charged on the amount in default. 5. Commitment charge @ l%p.a, on the amount of loan not drawn ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct between the parties about grant and acceptance of loan, the failure of the Corporation to carry out its part of the obligation may amount to breach of contract for which a remedy lies elsewhere but a writ of mandamus cannot be issued compelling the Corporation to specifically perform the contract. It is too late in the day to contend that the instrumentality of the State which would be 'other authority' under Article 12 of the Constitution can commit breach of a solemn under-taking on which other side has acted and then contend that the party suffering by the breach of contract may sue for damages but cannot compel specific performance of the contract. It was not disputed and in fairness to Mr. Bhatt, it must be said that he did not dispute that the Corporation which is set up under Section 3 of the State Financial Corporation Act, 1955 is an instrumentality of the State and would be 'other authority' under Article 12 of the Constitution. By its letter of offer dated July 24, 1978 and the subsequent agreement dated Feb. 1, 1979 the appellant entered into a solemn agreement in performance of its statutory duty to advance the loan of Rs. 30 lakhs to the respondent. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sadvantageous position, the Court is entitled to regulate the officer to act according to the scheme and the agreement or the representation. The officer can not arbitrarily on his mere whim ignore his promise of some undefined and undisclosed grounds of necessity or changed the conditions to the prejudice of a person which had acted upon such representation and put himself in a disadvantageous position. On this point, both the decisions concur and the ratio would govern the decision in this appeal. The respondent acting upon the solemn promise made by the appellant incurred huge expenditure and if the appellant is not held to its promise, the respondent would be put in a very disadvantageous position and therefore also the principle of promissory estoppel can be invoked in this case. 12. Viewing the matter from a slightly different angle altogether it would appear that the appellant is acting in a very unreasonable manner. It is not in dispute that the appellant is an instrumentality of the Government and would be other authority' under Article 12 of the Constitution. If it be so, as held by this Court in R.D. Shetty v. The International Airports Authority of India Ors. t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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