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1980 (4) TMI 303

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..... improve trade in the area. The Municipal Committee decided that the purchasers of the plots for sale in the Mandi would not be required to pay octroi duty on goods imported within the said Mandi. In pursuance of this decision, resolution No. 8 dated 20-12-1916 was passed by the Municipality. Handbills were issued for the sale of the plots on the basis of the resolution and it was proclaimed that Fateh Mandi would remain exempt from payment of octroi. Subsequently by resolution No. 4 dated 20-5-1917, the Municipal Committee decided that the term No. 14 to the conditions of sale, namely, that the plots would not be required to pay octroi, be amended to the effect that the Mandi shall remain immune from payment of Octroi Duty for ever. When the resolution was received by the Commissioner of Ambala, in paragraph 3 of his letter dated 26-6-1917 marked as Annexure A in the writ petition, he noted:- I note that by its resolution No. 4 of 20-5-1917, the Municipal Committee has undertaken that Octroi shall never be imposed in the Mandi. This is ultra vires, the Municipal Committee cannot make such an undertaking and this should be explained to the purchasers of sites before they begin b .....

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..... dent of the Municipal Committee that the Government's action in confirming the resolution No. 1 of 2-3-1954 of the Municipal Committee, Bahadurgarh exempting goods imported into Fateh Mandi from levy of octroi duty under S. 70(2) (c) of the Municipal Act, 1911, is quite in order and that no separate notification to this effect was necessary under the rules. Again on 21-7- 1965, the Municipal Committee Bahadurgarh resolved that the Government be requested to cancel Resolution No. 1 dated 2- 3-1954. The State of Haryana Respondent No. 1 which came into existence on 1-11-1964 under the Punjab Reorganisation Act, by its memo dated 13-10-1967 approved the resolution No. 6 dated 21-7-1965 of Municipal Committee and cancelled the Municipal Resolution No. 1 of 2-3-1954. As a result of the decision of the Government, the Municipal Committee started charging octroi duty on the goods imported into the Mandi. On these facts, the petitioners submitted that the resolution No. 6 of the Municipal Committee dated 21-7-1965 (Annexure G) and the approval granted by the Haryana State as per its order dated 30-10-1967 (Ann. H) are illegal and ultra vires and without jurisdiction. A Full Bench of .....

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..... r dated 4-5-1954 confirmed resolution No. 1 passed by the Municipal Committee in its special meeting held on 2-3- 1954 regarding the exemption of goods imported into Fateh Mandi from levy of Octroi Duty. Subsequently, in reply to the objection raised by the Examiner of Local Funds, the Government pointed out by its letter dated 9-4-1956 (Ann. F) that the Government's action confirming the resolution No. 1 dated 2-3-1954 of the Municipal Committee exempting Goods imported into Fateh Mandi, under S. 70(2) (c) of the Punjab Municipal Act, 1911, is quite in order. By the impugned order dated 20-10-1967 the Government approved the resolution No. 6 of the Municipal Committee dated 21-7-1965 and permitted the Municipality to levy the Octroi Duty. The action taken by the State Government is strictly in conformity with the powers conferred on it under S. 70(2) (c) of the Act. It exempted the petitioners from payment of Octroi Duty for a particular period and ultimately withdrew the exemption. The action of the Government cannot be questioned as it is in exercise of its statutory functions. The plea of estoppel is not available against the State in the exercise of its legislative or s .....

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..... ore the High Court is not sustainable. Again, regarding the third objection, that there is no allegation that the original purchasers would not have purchased the plots if condition 14 about immunity from payment of Octroi had not been there, it was submitted as erroneous as in the affidavit filed in support of the writ petition, the petitioners had pleaded in paragraph 2 that on the faith of the representation, the petitioners purchased the plots and constructed establishments. The learned counsel is, therefore, right in his submission that the third objection raised before the High Court is without substance. But the High Court was right in pointing out that none of the sale deeds executed by the Municipal Committee in favour of the purchasers was produced before the Court. These circumstances would show that the contract between the parties have not been proved to have been reduced in writing and executed in the manner prescribed under S. 47 of the Act. Strictly, therefore, under the terms of the Municipal Act, the appellants are not entitled to any enforceable legal right. But it was submitted that even though the contract had not been executed in due form, the appellants would .....

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..... ion cannot be permitted in such a case. (emphasis Ours) It was contended before this Court in Karamshi Jethabhai Somayya v. State of Bombay, that in an agreement entered into under the Act by statutory authority in pursuance of a statutory power, that consequences provided under the statute would follow and would not fall within the ambit of S. 175(3) of the Government of India Act. This Court after examining the terms of the contract found that it did not fall within the provisions of the Act and, found it unnecessary to deal with the contention. The scope of the doctrine of equitable estoppel arose for consideration before this Court in Collector of Bombay v. Municipal Corporation of the City of Bombay and Ors. In 1865, the Government of Bombay called upon the predecessor in title of the Corporation of Bombay to remove some markets from a certain site and vacate it, and on the application of the then Municipal Commissioner the Government passed a resolution approving and authorising the grant of another site to the Municipality. The resolution stated further that the Government do not consider that any rent should be charged to the Municipality as the markets will be, like o .....

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..... ne of the judges, Chandrasekhara Aiyar, J. constituting the majority expressed his view thus:- Whether it is the equity recognised in Ramsden's case, or it is some other form of equity, is not of much importance. Courts must do justice by the promotion of honesty and good faith so far as it lies in their power. As pointed out by Jenkins C. J. in Dadoba Janardhan's case a different conclusion would be opposed to what is reasonable, to what is probable and what is fair. The other judges of the Court who spoke for the Court refrained from going into this question. The view of Chandrasekhara Aiyer, J. being the view of one of the judges of the majority, cannot be taken as the view of the Court. Patanjali Sastri, J. as he then was dissented with the majority and stated:- The principle of Ramsden v. Dyson cannot prevail against statutory requirements regarding disposition of property or making of contract by Government * * *The right to levy land revenue is no part of the Government's right to property but a prerogative of the Crown and adverse possession of the land could not destroy the Crown's prerogative to impose assessment on the land. A Bench of .....

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..... xport policy, because the policy depended upon the economic climate and other related matters and had to be in its very nature flexible with power in the Government to modify or adjust it as the altered circumstances necessitate. It was pleaded that if the Government was held bound by every representation made by it regarding its intentions, it would amount to holding the Government as being bound by contractual obligations even though no formal contract in the manner required by Art. 299 of the Constitution was executed. Regarding the objection on the ground of contravention of Art. 299 of the Constitution, the Court held that the respondents were not seeking to enforce any contractual right but were seeking to enforce compliance of the obligation which is laid upon the Textile Commissioner by the terms of the Scheme and the claim of the respondents was founded upon the equity which arose in their favour as a result of the representation made on behalf of the Government in the Export Promotion Scheme. (emphasis supplied). It may be noted that no finding was recorded by the Textile Commissioner, that there was any infringement which entitled him to reduce the quota under Cl. 10 of .....

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..... cheme and acted arbitrarily and at their mere whim ignoring the promises made by the Government. The question as to the applicability of the doctrine of promissory estoppel against the legislative or executive acts of the Government did not strictly arise in the case. The decision was thus generally understood as stated above is seen from the view expressed by Mr. H.M. Seervai on Constitution of India, 2nd Edn. Vol. I, paragraph 11 at para 146-B, p. 433: The authorities considered by the Supreme Court, and the conclusions drawn from them, by Shah, J. in the present case, merely affirm the proposition that the Government could not go back upon promises made in the exercise of discretionary power as embodied in a scheme, merely on a whim (emphasis by Mr. Seervai) x x x x x X A promissory estoppel cannot stand on a higher footing than a contract entered into between a citizen or subject and a public authority and it is settled by numerous decisions that no public authority entrusted with discretionary power to be exercised for the public can bind itself by a contract not to exercise that discretion when the public good demands its exercise . It is only in public interest .....

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..... ces in which the obligation has arisen. The observations of the Court that the claim of the respondents is properly founded on the equity should be understood on the facts and findings of the Court in the case. The Court relying on the observations of Chief Justice Jenkins, observed that even though the case does not fall within the terms of S.115 of the Evidence Act, it is still open to a party who has acted on a representation made by the Government to claim that the Government shall be bound to carry out the promise made by it, even though the promise is not recorded in the from of a formal contract as required by the Constitution. The Court would be bound when the officer made the promise within the scope of his authority and failed to act upon it at his mere whim and acted arbitrarily on some undefined and undisclosed grounds of necessity. Before proceeding further with the case, we will refer briefly to the purport of the doctrine of promissory estoppel. The doctrine of promissory estoppel burst into sudden blaze in 1946 when Denning. J. sitting in the Court of Kings Bench delivered the judgment in Central London Property Trust Ltd. v. High Trees House Ltd. which has n .....

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..... and glosses have appeared in the reports. Turner in his book Estoppel by Representation, has a separate chapter dealing with promissory estoppel. The doctrine, as observed by the author at the conclusion of the chapter, burst out into sudden blaze in 1946 has ever since continued to smoulder, and that its original author has constantly maintained his interest in its further development, now in this direction, now in that . But there has been high places counselling conservatism *** Lord Hailsham of St. Marylebone, has expressed his views in Woodhouse Ltd. v. Nigerian Produce Ltd. as follows:- I desire to add that the time may soon come when the whole sequence of cases based on promissory estoppel since the war *** systematically explored . This subject though interesting may not be relevant in administering Indian Law. S. 63 of the Contract Act provides that when a creditor accepts a lesser sum in satisfaction of the whole debt, the whole debt become discharged. This provision is a wide departure from the English Law and the discussion about Jordan v. Money wherein it was held that a promise to accept a smaller sum is devoid of consideration, becomes pointless. So also the .....

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..... isability and received a reply that his disability had been accepted as attributable to military service . Relying on that assurance, he forbore to obtain an independent medical opinion. The Minister of Pensions took the view that appellant's disability could not be attributed to war services. Lord Denning held that between the subjects such an assurance would be enforceable because it was intended to be binding, intended to be acted upon, and it was in fact acted upon; and the assurance was also binding on the Crown because no term could be implied that the Crown was at liberty to revoke it. The decision in Robertson's case is quoted with approval in the Indo-Afghan case but before we revert to the Indo-Afghan case, we will follow the course which Robertson's case took. The correctness of the case came up for consideration before the House of Lords in Howell v. Falmouth Boat Construction Co. Ltd. The appeal was preferred to the House of Lords from the Court of Appeal against the judgment of Bucknil, Singhleton and Denning, L.JJ. In his judgment in the Court of Appeal, Denning L. JJ. pressed the principle in the following terms:- Whenever Government Officers, in .....

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..... roached the appellant for opening a club for officers serving in his Majesty's forces. The appellant stated his willingness to take on lease certain premises and asked the Military authorities to procure him a licence to continue the club after the termination of the war. The military authorities failed to obtain a licence and the appellant was informed of their inability to obtain the licence and an officer on behalf of the military authorities stated that the appellant should have a guarantee seeing that the war was not likely to come to an end quickly and that the club would be kept open throughout the war. The rules for the conduct of the club were drawn up and were approved by the Military Authorities. Rule 18 provided that the club should endure during the time when the said hostilities existed. The club was placed out of bounds for service members by order of the Military Authorities because the club was being mismanaged by the sale of liquor long after permitted hours. As the club was a purely Service Club, it was subsequently wound up. The appellant complained of the loss to which he had been put by placing the club out of bounds and sought to hold the Military Authori .....

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..... e Court quoted the passage from Denning's judgment which did not approve the view of Rowlatt, J. The Privy Council approved the view taken by Rowlatt, J. in Rederiaktiabolaget Amphtrita case. In William Cory Son Ltd. v. London Corporation, London Corporation acting as sanitary authority under the Public Health (London) Act, 1936 made a contract with the claimants, barge and lighter owners, for the removal of refuse from a wharf in the City of Horn church, Essex, where it was to be dumped. In April, 1948, the Corporation acting as port health authority for the Port of London, sealed by- laws concerning the disposal of refuse in the area of the port one of which relating to co-amings and coverings of barges, was far more onerous on the claimants than the requirements in the contract of 1936. It was provided that this by-law was not to come into effect until November 1, 1950. It was contended by the claimants that by the provisions of the contract of 1936, there was an implied or an express term that the corporation should not impose more onerous burden on the claimants as to the coamings and coverings of their barges than those contained in the contract of 1936. The plea of .....

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..... case were different held that the general proposition laid down by Denning L. J. was not accepted by the House of Lords in Howell v. Falmouth Boat Construction Co. Ltd. (supra). Devlin, J. stated the principle in the following terms :- When the Crown, or any other person, is entrusted, whether by virtue of the prerogative or by statute, with discretionary powers to be exercised for the public good, it does not when making a private contract in general terms, undertake (and it may be that it could not even with the use of specific language validly undertake) to fetter itself in the use of those powers, and in the exercise of the discretion. Referring to the view of Denning, L. J. in Robertson v. Minister of Pension (supra), the learned Judge observed :- The observations of Denning, L. J. in Robertson v. Minister of Pensions on the doctrine of `executive necessity', were I think, directed to a case of that sort. Here we are dealing with an act done for a general executive purpose, and not done for the purpose of achieving a particular result under the contract in question. In Southend-on-Sea Corporation v. Hodgson (Wickford) Ltd. a company wished to establish .....

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..... proper scope. The Court quoted the passage of Denning, J. at p. 231 wherein the learned Judge expressed the disagreement with the view of Rowlatt, J :- The Crown cannot escape by saying that estoppel do not bind the Crown for that doctrine has long been exploded. Nor can the Crown escape by praying in aid the doctrine of executive necessity, that is, the doctrine that the Crown cannot bind itself so as to fetter its future executive action. The doctrine was propounded by Rowlatt, J. in Rederiaktiebolaget Amphitrite v. The King but it was unnecessary for the decision because the statement there was not a promise which was intended to be binding but only an expression of intention. Rowlatt, J., seems to have been influenced by the cases on the right of the Crown to dismiss its servants at pleasure, but those cases must now all be read in the light of the judgment of Lord Atkin in Reilly v. The King- (1954) A.C. 176, 179). In my opinion the defence of executive necessity is of limited scope. It only avails the Crown where there is an implied term to that effect or that is the true meaning of the contract. After quoting the above passage, the Court summarised the facts and dec .....

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..... ctated by policy decision, exigencies of circumstances and administrative necessity. The creation, the continuance and the abolition of post are all decided by the Government in the interest of administration and general public. The learned Chief Justice after quoting a passage in American Jurisprudence 2d. at p. 783, paragraph 123, observed that the estoppel alleged by the appellant Ramanathan Pillai was on the ground that he entered into an agreement and thereby changed his position to his detriment. The High Court rightly held that the Courts exclude the operation of the 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. In State of Kerala v. Gwalior Rayon Silk Manufacturing (Wvg.) Co. Ltd. (supra), Palekar, J. who delivered the opinion with which Krishna Iyer, J. and Bhagwati, J. agreed, rejected the contention that an agreement entered into by the Government with the parties, excluded the legislation on the subject. The plea of equitable estoppel was put forward on the ground that the company established itself in Kerala for the production of rayon cloth pu .....

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..... of estoppel against the legislative and sovereign functions. A passage in American Jurisprudence 2d. at page 783 paragraph 123 was extracted by Ray C. J. in Ramanathan Pillai's case and Jaswant Singh J. in Excise Commissioner's case. The passage at p. 123 is as follows :- Generally, a State is not subject to an estoppel to the same extent as an individual or a private corporation. Otherwise, it might be rendered helpless to assert its powers in Government. Therefore, as a general rule the doctrine of estoppel will not be applied against the State in its Governmental, Public or sovereign capacity. An exception however arises in the application of estoppel to the State where it is necessary to prevent fraud or manifest injustice. But the learned Judges did not include the last sentence : An exception however arises in the application of estoppel to the State where it is necessary to prevent fraud or manifest injustice. In Bihar Eastern Gangetic Fisherman Co-operative Society Ltd., v. Sipahi Singh Ors. this Court held that the respondent could not invoke the doctrine of promissory estoppel because he was unable to show that relying on the representation of .....

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..... t that all that the Indo-Afghan Agencies case laid down was, that a public authority acting on behalf of the Government cannot on its own whim and in an arbitrary manner seek to alter the conditions accepted by him to the prejudice of the other side. The decision in terms accepts the view expressed in earlier cases that after taking into consideration the exigencies and change of circumstances, the authority can modify the conditions in exercise of his powers as a public authority. In Century Spinning and Manufacturing Co. Ltd. and Anr. v. The Ulhasnagar Municipal Council and Anr., the facts of the case is set out in the head note and may be briefly stated. The State of Maharashtra on the representation made by certain manufacturers proclaimed the exclusion of the Industrial Area from the Municipal Jurisdiction. The Municipality made representations to the State requesting that the proclamation be withdrawn, agreeing to exempt the factories in the industrial area from payment of octroi from the date of levy. The State acceded to the request of the Municipality. The appellants expanded their activities relying on the Municipality's assurance. The Maharashtra Municipalities Ac .....

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..... rule of estoppel will be applicable against the Government in the exercise of its legislative and statutory powers. The Court quoted the following passage from Denning J. :- Crown cannot escape by saying that estoppel do not bind the Crown for that doctrine has long been exploded. Nor can the Crown escape by praying in aid the doctrine of executive necessity, that is, the doctrine that the Crown cannot bind itself so as to fetter its future executive action . and observed that the Court in Indo-Afghan case held that it was applicable to India. It may be noted that apart from not noticing Howell's case, the Court in Indo-Afghan case did not say that the law as extracted from Denning J's. judgment was applicable to India. The Court after considering the Indo-Afghan case and Howell's case, expressed thus :- If our nascent democracy is to thrive different standards of conduct for the people and the public bodies cannot ordinarily be permitted. A public body is, in our judgment, not exempt from liability to carry out its obligation arising out of representation made by it relying upon which a citizen has altered his position to his prejudice . The third decisio .....

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..... r party on special considerations such as difficult foreign exchange position or other matters which have a bearing on general interest of the State. Before we conclude, we would refer to a recent decision of this Court in M/s. Moti Lal Padampat Sugar Mills Co. (P.) Ltd. v. State of Uttar Pradesh and Ors. It has been held that there can be no promissory estoppel against the exercise of legislative power and the legislature cannot be precluded from exercising its legislative functions by resort to the doctrine of promissory estoppel. It has also held that when the Government owes a duty to the public to act differently, promissory estoppel could not be invoked to prevent the Government from doing so. The doctrine cannot be invoked for preventing the Government from acting in discharge of its duty under the law. The Government would not be bound by the acts of its officers and agents, who act beyond the scope of their authority. A person dealing with an agent of the Government must be held to have noticed all the limitations of his authority. With respect, we are in complete agreement with the law as stated above but we find the judgment is not in accordance with the view consi .....

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..... s such a promise and the promises acts in reliance upon it and alters his position, there is no reason why the Government should not be compelled to make good such promise like any other private individual do not appear to convey the true effect of the decision. The decision of this Court in Century Spinning and Manufacturing Co. Ltd. and Anr. v. The Ulhashagar Municipal Council and Anr. (supra) was understood by Justice Bhagwati as refusing to make a distinction between the private individual and public body so far as the doctrine of promissory estoppel is concerned. These observations would be correct only if they are read with the exceptions recognised by Justice Bhagwati himself elsewhere in his judgment along with other restrictions imposed by Judgments of this Court. We find ourselves unable to ignore the three decisions of this Court, two by Constitution Benches M. Ramanatha Pillai v. The State of Kerala and Anr. (supra) and State of Kerala and Anr. v. The Gwalior Rayon Silk Manufacturing (Wvg.) Co. Ltd. etc. (supra) and the third by a Bench of four Judges of this Court in Excise Commissioner, U. P. Allahabad v. Ram Kumar (Supra) on the ground that the observations are i .....

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..... ve to bear in mind that the Indian Constitution as a matter of high policy in public interest, has enacted Article 299 so as to save the Government liability arising out of unathorised acts of its officers and contracts not duly executed. The learned Judge has considered at some length the doctrine of consideration and how it has thwarted the full development of the new equitable principle of promissory estoppel. After discussing the American Law on the subject, he has observed that the leading text book writers view with disfavour the importance given to consideration . The learned Judge proceeds to observe that : having regard to the general opprobrium to which the doctrine of consideration has been subjected to by eminent jurists, we need not be unduly anxious to project this doctrine against assault of erosion nor allow it to dwarf or stultify the full development of the equity of promissory estoppel or inhibit or curtail its operational efficacy as a justice device for preventing injustice. Here again we have to bear in mind that the Indian Contract Act regulates the right of parties, and expressly insists on the necessity for lawful consideration which cannot be dispens .....

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..... te from and add to the list of approved text books and the publishers can have no grievance. In M/s. Andhra Industrial Works v. Chief Controller of Imports and Ors., a four judges Bench of this Court held that an applicant for a permit under Import Trade Policy has no absolute right to the grant of import licence and that the applicant cannot complain that the existing instructions or orders made in pursuance of the Import and Export Control Act place unreasonable restrictions on the petitioners' right to carry on trade or business. These restrictions obviously have been imposed in the interests of the general public and national economy and with the development of imports, regulating foreign exchange have necessarily to be appropriately controlled and regulated. Professor S. A. De Smith in his Judicial Review on Administrative Action, 3rd Edn. p. 279 sums up the position thus: Contracts and Covenants entered into by the Crown are not to be construed as being subject to implied terms that would exclude the exercise of general discretionary powers for the public good: On the contrary they are to be construed as incorporating an implied term that such powers remain exercisa .....

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..... nt plea for the doctrine to speak in all its activist magnitude the learned Judge observes that is no reason why this new principle, which is a child of equity brought into the world with a view to promoting honesty and good faith and bringing law closer to justice should be held in fetters and not allowed to operate in all the activist magnitude, so that it may fulfil the purpose for which it was conceived and born . It is no doubt desirable that in a civilised society man's word should be as good as his bond and his fellow men should be able to rely on his promise. It may be an improvement if a cause of action would be based on a mere promise without consideration. The law should as far as possible accord with the moral values of the society, and efforts should be made to bring the law in conformity with the moral values. What are the moral values of the Society ? This is a very complex question because the concept of moral values amongst different persons and classes of persons is not always the same. The concept of moral values is not static one. It differs from time to time and from society to society. It is hazardous for a Court to attempt to-enforce what according to it .....

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..... and cannot compel blind adherence . The Courts by its very nature are most ill-suited to undertake the task of legislating. There is no machinery for the Court to ascertain the conditions of the people and their requirements and to make laws that would be most appropriate. Further two Judges may think that a particular law would be desirable to meet the requirements whereas another two Judges may most profoundly differ from the conclusions arrived at by two Judges. Conscious of these handicaps, the law requires that even an amendment of the Supreme Court Rules which govern the procedure to be adopted by it for regulating its work, can only be effected by the whole Court sitting and deciding. The result is that so far as the recommendation of the Municipal Committee to the Government to levy octroi duty, is concerned though it is contrary to the representation it made to the buyers of the sites in the Mundi, 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 revenues of the Municipality as laid down in Ram Kumar's case, the plea of estoppel is not availa .....

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