TMI Blog1978 (12) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Government so far as the doctrine of promissory estoppel is concerned. Whatever be the nature of the function which the Government is discharging, the Government is subject to the rule of promissory estoppel and if the essential ingredients of this rule are satisfied, the Government can be compelled to carry out the promise made by it. We are, therefore, of the view that in the present case the Government was bound to exempt the appellant from payment of sales tax in respect of sales of vanaspati effected by it in the State of Uttar Pradesh for a period of three years from the date of commencement of the production and was not entitled to recover such sales tax from the appellant. Appeal allowed. - Civil Appeal No. 1597 of 1972, Civil Misc. Writ No. 3788 of 1970 - - - Dated:- 12-12-1978 - Judge(s) : P. N. BHAGWATI., V. D. TULZAPURKAR S.T. Desai, Senior Advocate (Shri Narain, J.B. Dadachanji, Ravinder Narain, S. Swarup and Talat Ansari, Advocates, with him), for the appellant. Girish Chandra, Advocate, for the respondent No. 4. G.N. Dikshit, Senior Advocate (M.V. Goswami and O.P. Rana, Advocates, with him), for the respondents Nos. 1-3 and 5. A.B. Dewan, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Director of Industries replied by his letter dated 14th October, 1968, confirming that " there will be no sales tax for three years on the finished product of your proposed vanaspati factory from the date it gets power connection for commencing production ". The appellant thereupon started taking steps to contact various financiers for financing the project and also initiated negotiations with manufacturers for purchase of machinery for setting up the vanaspati factory. On 12th Decemher, 1968, the,appellant's representative met the 4th respondent who was at that time the Chief Secretary to the Government as also Adviser to the Governor and intimated to him that the appellant was setting up the vanaspati factory solely on the basis of the assurance given on behalf of the Government that the appellant would be entitled to exemption from sales tax for a period of three years from the date of commencement of commercial production at the factory and the 4th respondent reiterated the assurance that the appellant would be entitled to sales tax holiday in case the vanaspati factory was put up by it. The appellant by its letter dated 13th December, 1968, placed on record what had tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pressed his surprise that " a letter from the Chief Secretary to the State Government stating this fact in clear and unambiguous words should not carry conviction with the financial institutions ". In view of this unequivocal assurance given by the 4th respondent, who not only occupied the post of Chief Secretary to the Govt. but was also Adviser to the Governor functioning under the President's rule the appellant went ahead with the setting up of the vanaspati factory. The appellant by its letter dated 25th April, 1969, advised the 4th respondent that the U. P. Finance Corporation, being convinced by the clear and categorical assurance given by the 4th respondent that the vanaspati factory of the appellant would be entitled to exemption from sales tax for a period of three years from the date of commencement of production, had sanctioned financial assistance to the appellant and the appellant was going ahead with the project in fall speed to enable it to start production at the earliest. The appellant made considerable progress in the setting up of the vanaspati factory but it seems that by the middle of May, 1969, the State Government started having second thoughts on the questio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 1/2% instead of 7% on the sales of vanaspati manufactured by it for a period of one year commencing from 1st July, 1970. The factory of the appellant thereafter went into production from 2nd July, 1970, and the appellant informed the Secretary to the Government about the same by its letter dated 3rd July, 1970. The State Government, however, once again changed its decision and on 12th August, 1970, a news item appeared in the Northern India Patrika stating that the Government had decided to rescind the earlier decision, i.e., the decision set out in the letter dated 20th January, 1970, to allow concession in the rate of sales tax to new vanaspati units. The appellant thereupon filed a writ petition in the High Court of Allahabad asking for a writ directing the State Government to exempt the sale of vanaspati manufactured by the appellant from sales tax for a period of three years commencing from 2nd July, 1970, by issuing a notification under s. 4A and not to collect or charge sales tax from the appellant for the said period of three years. It appears that in the writ petition, as originally filed, there was no plea of promissory estoppel taken against the State Government and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent dated 20th January, 1970, and charged sales tax at the concessional rate of 3 1/2% instead of 7% during the first year of its production. The appellant urged that waiver was a question of fact which was required to be pleaded and since no plea of waiver was raised in the affidavit filed on behalf of the State Government in opposition to the writ petition, it was not competent to the State Government to rely on the plea of waiver for the first time at the hearing of the writ petition. Even if the plea of waiver were allowed to be raised, notwithstanding that it did not find place in the pleadings, no waiver was made out, said the appellant, since there was nothing to show what were the circumstances in which the appellant had addressed the letter dated 25th June, 1970, stating that it would avail of the exemption granted under the letter dated 20th January, 1970, and it was not possible to say that the appellant, with full knowledge of its right to claim total exemption from payment of sales tax, waived that right and agreed to accept the concessional rates set out in the letter dated 20th January, 1970. The State Government on the other hand strongly pressed the plea of waiver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant of its right to exemption under the assurance given by the 4th respondent. But, in the absence of such pleading in the affidavit-in-reply, this opportunity was denied to the appellant. It was, therefore, not right for the High Court to have allowed the plea of waiver to be raised against the appellant and that plea should have been rejected in limine. Secondly, it is difficult to see how, on the facts, the plea of waiver could be said to have been made out by the State Government. Waiver means abandonment of a right and it may be either express or implied from conduct, but its basic requirement is that it must be " an intentional act with knowledge ". Per Lord Chelmsford L.C. in Earl of Darnley v. London, Chatham and Dover Rail Co. [1867] LR 2 HL Cas 43, 57 (HL). There can be no waiver unless the person who is said to have waived is fully informed as to his right and with full knowledge of such right, he intentionally abandons it. It is pointed out in Halsbury's Laws of England (4 ed.), volume 16 in paragraph 1472, at page 994, that for a " waiver to be effectual it is essential that the person granting it should be fully informed as to his rights " and Isaacs J., deliv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when he said in Evans v. Bartlam [1937] AC 473 : "....... the fact is that there is not and never has been a presumption that every one knows the law. There is the rule that ignorance of the law does not excuse, a maxim of very different scope and application." It is, therefore, not possible to presume, in the absence of any material placed before the court, that the appellant had full knowledge of its right to exemption so as to warrant an inference that the appellant waived such right by addressing the letter dated 25th June, 1970. We. accordingly, reject the plea of waiver raised on behalf of the State Government. That takes us to the question whether the assurance given by the 4th respondent on behalf of the State Government that the appellant would be exempt from sales tax for a period of three years from the date of commencement of production could be enforced against the State Government by invoking the doctrine of promissory estoppel. Though the origin of the doctrine of promissory estoppel may be found in Thomas Hughes v. Metropolitan Railway Co. [1877] 2 App Cas 439 (HL) and Birmingham District Land Co. v. London North-Western Railway Co. [1889]40 Ch D 268 (CA) aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efendants, a subsidiary of the plaintiffs, in 1937 a block of flats for 99 years at a rent of pound 2,500 a year. Early in 1940 and because of the war, the defendants were unable to find sub-tenants for the flats and unable in consequence to pay the rent. The plaintiffs agreed at the request of the defendants to reduce the rent to pound 1,250 from the beginning of the term. By the beginning of 1945, the conditions had improved and tenants had been found for all the flats and the plaintiffs, therefore, claimed the full rent of the premises from the middle of that year. The claim was allowed because the court took the view that the period for which the full rent was claimed fell outside the representation, but Mr. justice Denning, as he then was, considered obiter whether the plaintiffs could have recovered the covenanted rent for the whole period of the lease and observed that in equity the plaintiffs could not have been allowed to act inconsistently with their promise on which the defendants had acted. It was pressed upon the court that according to the well-settled law as laid down in Jorden v. Money [1854] LR 5 HL Cas 185 (HL), no estoppel could be raised against the plaintiffs s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stoppel is limited in its operation to cases where the parties are already contractually bound and one of the parties induces the other to believe that the strict rights under the contract would not be enforced. But we do not think any such limitation can justifiably be introduced to curtail the width and amplitude of this doctrine. We fail to see why it should be necessary to the applicability of this doctrine that there should be some contractual relationship between the parties. In fact Donaldson J. pointed in Durham Fancy Goods Ltd. v. Michael Jackson (Fancy Goods) Ltd. [1968] 2 All ER 987 (QB) : " Lord Cairns in his enunciation of the principle assumed a pre-existing contractual relationship between the parties, but this does not seem to me to be essential, provided that there is a pre-existing legal relationship which could in certain circumstances give rise to liabilities and penalties. " But even this limitation suggested by Donaldson J. that there should be a pre-existing legal relationship which could in certain circumstances give rise to liabilities and penalties is not warranted and it is significant that the statement of the doctrine by Mr. justice Denning in the H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, 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 of whether there is any pre-existing relationship between the parties or not. It may be pointed out that in England the law has been well settled for a long time, though there is some indication of a contrary trend to be found in recent juristic thinking in that country, that promissory estoppel cannot itself be the basis of an action. It cannot found a cause of action : it can only be a shield and not a sword. This narrow approach to a doctrine which is otherwise full of great potentialities is largely the result of an assumption, encouraged by its rather misleading nomenclature, that the doctrine is a branch of the law of estoppel. Since estoppel has always been traditionally a principle invoked by way of defence, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the strict sense. They are really promises, promises intended to be binding intended to be acted upon and in fact acted upon ". Jenkins C.J. also pointed out in Municipal Corporation of Bombay v. Secretary of State [1904] ILR 29 Bom 580 at 607 that the " doctrine is often treated as one of estoppel, but I doubt whether this is correct, though it may be a convenient name to apply ". The doctrine of promissory estoppel need not, therefore, be inhibited by the same limitation as estoppel in the strict sense of the term. It is an equitable principle evolved by the courts for doing justice and there is no reason why it should be given only a limited application by way of defence. It may be noted that even Lord Denning recognised in Crabb v. Arun District Council [1975]3 All ER 865 ; [1976] Ch 179,187 (CA), that " ...there are estoppels and estoppels. Some do give rise to a cause of action. Some don't " and added that : " In the species of estoppel called ' proprietary estoppel ', it does give rise to a cause of action. " The learned Law Lord, after quoting what he had said in Moorgate Mercantile Co. Ltd. v. Twitchings [1975] 3 WLR 286 (CA), namely, that the effect of estoppel on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also other cases supporting the doctrine of promissory estoppel. Scarman L.J. also observed that in pursuing the inquiry as to whether there was an equity in favour of Crabb, he did not find helpful " the distinction between promissory and proprietary estoppel ". He added that ([1976] Ch 179, 193) : " This distinction may indeed be valuable to those who have to teach or expound, the law ; but I do not think that, in solving the particular problem raised by a particular case, putting the law into categories is of the slightest assistance. " It does appear to us that this was a case decided on the principle of promissory estoppel. The representative of the Arun District Council clearly gave assurance to Crabb that they would give him access to the new road at point B to serve the southern portion of his land and the Arun District Council in fact constructed a gate at point B, and in the belief induced by this representation that he would have the right of access to the new road at point B, Crabb agreed to sell the northern portion of his land without reserving for himself as owner of the southern portion any right of way over the northern portion for the purpose of access to the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of Lord Denning in the High Trees' case [1947] 1 KB 130 (KB) represented a bold attempt to escape from the limitation imposed by the House of Lords in Jorden v. Money [1854] LR 5 HL Cas 185 (HL), and it rediscovered an equity which was long embedded beneath the crust of the old decisions in Hughes v. Metropolitan Railway Co. [1877] 2 App Cas 439 (HL) and Birmingham and District Land Co. v. London and North-Western Railway Co. [1889] 40 Ch D 268 (CA), and brought about a remarkable development in the law with a view to ensuring its approximation with justice, an ideal for which the law has been constantly striving. But it is interesting to note that Lord Denning was not prepared to go further, as he thought that having regard to the doctrine of consideration which was so deeply entrenched in the jurisprudence of the country, it might be unwise to extend promissory estoppel so as to found a cause of action and that is why he uttered a word of caution in Combe v. Combe [1951] 2 KB 215 ; [1951] 1 All ER 767, 770 (CA), that the principle of promissory estoppel " should not be stretched too far, lest it should be endangered ". The learned Law Lord proceeded to add : " Seeing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to the difficulties of the doctrine. Lord Wright remarked in an article published in 49 Harvard Law Review, 1225, that the doctrine of consideration in its present form serves no practical purpose and ought to be abolished. Sir Frederick Pollock also said in his well-known work on Genius of Common Law, p. 91, that the application of the doctrine of consideration " to various unusual but not unknown cases has been made subtle and obscured by excessive dialectic refinement ". Equally strong is the condemnation of this doctrine in judicial pronouncements. Lord Dunedin observed in the well-known case of Dunlop Pneumatic Tyre Co. [1915] AC 847, 855 (HL). " I confess that this case is to my mind apt to nip any budding affection which one might have had for the doctrine of consideration. For the effect of that doctrine in the present case is to make it possible for a person to snap his fingers at a bargain deliberately made, a bargain not in itself unfair, and which the person seeking to enforce it has a legitimate interest to enforce. " The doctrine of consideration has also received severe criticism at the hands of Dean Roscoe Pound in the United States. The reason is that promise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t his cause of action, without actually founding his cause of action exclusively upon it. Two such cases are : Robertson v. Minister of Pensions [1949] 1 KB 227 (KB) and Evenden V. Guildford City Association Football Club Ltd.[1975]3 All ER 269 (CA). The English courts have thus gone a step forward from the original position when promissory estoppel was regarded merely as a passive equity and allowed it to be used as a weapon of offence to a limited extent as a part of the cause of action, but still the doctrine of consideration continues to inhibit the judicial mind and that has thwarted the full development of this new equitable principle and the realisation of its vast potential as a juristic technique for doing justice. It is true that to allow promissory estoppel to found a cause of action would seriously dilute the principle which requires consideration to support a contractual obligation, but 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 its activist magnitude, so that it may fulfil the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of Lord Denning in the High Trees' case [1947] KB 130 (KB) but antedates this decision by a number of years ; perhaps it is possible that it may have helped to inspire that decision. It was long before the decision in the High Trees' case that the American Law Institute's Restatement of the Law of Contracts came out with the following proposition in article 90 : " A promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee, and which does induce such action or forbearance, is binding if injustice can be avoided only by enforcement of the promise. " This proposition was explained and elucidated by several illustrations given in the article and one of such illustrations was as follows : " A promises B to pay him an annuity during B's life. B thereupon resigns a profitable employment, as A expected that he might. B receives the annuity for some years, in the meantime becoming disqualified from again obtaining good employment. A's promise is binding. " It is true that the Restatement has not the same weight, as a source of law, as actual decisions of courts of high standing, yet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disregarded or forgotten. The doctrine of consideration has not escaped the common lot. As far back as 1881, judge Holmes in his lectures on the Common Law separated the detriment which is merely a consequence of the promise from the detriment which is in truth the motive or inducement, and yet added that the courts ' have gone far in obliterating this distinction '. The tendency toward effacement has not lessened with the years. On the contrary there has grown up of recent days a doctrine that a substitute for consideration or an exception to its ordinary requirements can be found in what is styled a ' promissory estoppel '. Willston Contract, ss. 139, 116. Whether the exception has made its way in this State to such an extent as to permit us to say that the general law of consideration has been modified accordingly, we do not now attempt to say. Cases such as 234 N.Y. 479 and 221 N.Y. 431 may be signposts on the road. Certain at least it is that we have adopted the doctrine of promissory estoppel as the equivalent of consideration in connection with our law of charitable subscriptions. So long as those decisions stand, the question is not merely whether the enforcement of a chari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tract, invites a sub-contractor to submit a bid for a sub-contract and after receiving his bid, the sub-contractor has been held unable to retract his bid and be liable in damages if he does so. It is not possible to say that any detriment which the contractor may be able to show in these cases would amount to consideration in its strict sense and these decisions have plainly been reached on an application of the doctrine of promissory estoppel. One of such cases was Orennan v. Star Paving Company [1958] 31 Cal 2d 409, where Traynor J. explicitly adopted as good law the text of article 90 of the Restatement of the Law of Contracts quoted above and stated in so many words that " the absence of consideration is not fatal to the enforcement of such a promise ". There are also numerous cases where the doctrine of promissory estoppel has been applied against the Government where the interest of justice, morality and common fairness clearly dictated such a course. We shall refer to these cases when we discuss the applicability of the doctrine of equitable estoppel against the Government. Suffice it to state for the present that the doctrine of promissory estoppel has been taken much furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easure, but those cases must now all be read in the light of the judgment of Lord Atkin in Reilly v. King [1934] AC 176 179 (PC) ....... 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 where that is the true meaning of the contract. It is true that the decision of Denning J. in this case was overruled by the House of Lords in Howell v. Falmouth Boat Construction Co. Ltd. [1951] AC 837 (HL), but that was on the ground that the doctrine of promissory estoppel cannot be invoked to " bar the Crown from enforcing a statutory prohibition or entitle the subject to maintain that there has been no breach of it ". The decision of the House of Lords did not express any disapproval of the applicability of the doctrine of promissory estoppel against the Crown nor did it overrule the view taken by Denning J. that the Crown cannot escape its obligation under the doctrine of promissory estoppel by " praying in aid the doctrine of executive necessity ". The statement of the law by Denning J. may, therefore, still be regarded as holding the field and it may be taken to be a judicially favoured view th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n application for insurance which was forwarded by the county committee to the Denver office of the Corporation with a recommendation for acceptance. The application did not mention that any part of the insured crop was re-seeded and it was accepted by the Denver office of the Corporation. There were at this time wheat crop insurance regulations framed by the Corporation and published in the Federal Register which prohibited insurance of spring wheat re-seeded on winter wheat acreage but neither the respondents nor the county committee which was acting as the agent of the Corporation was aware of them. A few months later, most of the respondent's crop was destroyed by drought and on a claim being made by the respondents under the policy of insurance, the Corporation refused to pay the loss on the ground that the wheat crop insurance regulations expressly prohibited insurance of re-seeded wheat. The refusal was upheld by the Supreme Court by a majority of five to four. The majority observed : " It is too late in the day to urge that the Government is just another private litigant, for purposes of charging it with liability, whenever it takes over a business therefore conducted by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of justice, morality and common fairness clearly dictate that course ". It is being increasingly felt that " that the Government ought to set a high standard in its dealings and relationships with citizens and the word of a duly authorised Government agent, acting within the scope of his authority, ought to be as good as a Government bond ". Of course, as pointed out by the United States Court of Appeals, Third Circuit, in Valsonavich v. United States (335 FR 2d 96) the Government would not be estopped " by the acts of its officers and agents who without authority enter into agreements to do what the law does not sanction or permit " and those dealing with an agent of the Government must be held to have notice of limitations of his authority " as held in Merrill's case (332 US 380 ; 92 L Ed 10). This is precisely what the House of Lords also held in England in Howell v. Falmouth Boat Construction Co. Ltd. [ 1951] AC 837 ; [1951] 2 All ER 278, 280 (HL), where Lord Simonds stated the law to be : " The illegality of an act is the same whether or not the actor has been misled by an assumption of authority on the part of a Government officer however high or low in the hierarchy ...... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be removed at six months' notice on other suitable ground being provided by Government ". The Government accepted the suggestion of the Municipal Commissioner and sanctioned the application of the Municipal Commissioner for a site for stabling on the terms set out above and the Municipal Commissioner thereafter entered into possession of the land and constructed stables, workshops and chawls on the same at considerable expense. Twenty-four years later, the Government served a notice on the Municipal Commissioner determining the tenancy and requesting the Municipal Commissioner to deliver possession of the land within six months and in the meantime to pay rent at the rate of Rs. 12,000 per month. The Municipal Corporation declined to hand over possession of the land or to pay the higher rent and the Secretary of State for India thereupon filed a suit against the Municipal Corporation for a declaration that the tenancy of the Municipality stood determined and for an order directing the municipality to pay rent at the rate of Rs. 12,000 per month. The suit was resisted by the Municipal Corporation on the ground that the events which had transpired had created an equity in favour of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernment 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 other public buildings ; for the benefit of the whole community ". The Municipal Corporation gave up the site on which the old markets were situated and spent a sum of Rs. 17 lakhs in erecting and maintaining markets on the new site. In 1940, the Collector of Bombay assessed the new site to land revenue and the Municipal Corporation thereupon filed a suit for a declaration that the order of assessment was ultra vires and it was entitled to hold the land for ever, without payment of any assessment. The High Court of Bombay held that the Goverment had lost its right to assess the land in question by reason of the equity arising on the facts of the case in favour of the Municipal Corporation and there was thus a limitation on the right of the Government to assess under s. 8 of the Bombay City Land Revenue Act. On appeal by the Collector to this court, the majority judges held that the Government was not, under the circumstances of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he total amount equal to 100% of the f.o.b. value of his exports. The respondents contended that, relying on the promise contained in the Scheme, they had exported woollen goods to Afghanistan and were, therefore, entitled to enforce the promise against the Government and to obtain import entitlement certificate for the full f.o.b. value of the goods exported on the principle of promissory estoppel. This contention was sought to be answered on behalf of the Government by pleading the doctrine of executive necessity and the argument of the Government based on this doctrine was that it is not competent for the Government to fetter its future executive action which must necessarily be determined by the needs of the community When the question arises and no promise or undertaking can be held to be binding on the Government so as to hamper its freedom of executive action. Certain observations of Rowlatt J. in Rederiaktiebolaget Amphitrite v. King [1921] 3 KB 500 (KB) were sought to be pressed into service on behalf of the Government in support of this argument. We have already referred to these observations earlier and we need not reproduce them over again. These observations undoubtedl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the obligation which is laid upon the Textile Commissioner by the terms of the scheme, and we are of the view that even if the scheme is executive in character, the respondents who were aggrieved because of the failure to carry out the terms of the scheme were entitled to seek resort to the court and claim that the obligation imposed upon the Textile Commissioner by the scheme be ordered to be carried out ". It was thus laid down that a party who has, acting in reliance on a promise made by the Government, altered his position, is entitled to enforce the promise against the Government, even though the promise is not in the form of a formal contract as required by art. 299 and that article does not militate against the applicability of the doctrine of promissory estoppel against the Government. This court finally, after referring to the decisions in Ganges Manu- facturing Co. v. Sourujmull [1880] ILR 5 Cal 669 Municipal Corporation of the City of Bombay v. Secretary of State for India [1904] ILR 29 Bom 580 and Collector of Bombay v. Municipal Corporation of the City of Bombay [1952] SCR 43 ; AIR 1951 SC 469, summed up the position as follows (AIR 1968 SC 718, 728) : " Under o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udiate a promise made by it on the ground that such promise may fetter its future executive action. If the Government does not want its freedom of executive action to be hampered or restricted, the Government need not make a promise knowing or intending that it would be acted on by the promisee and the promisee would alter his position relying upon it. But if the Government makes such a promise and the promisee 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. The law cannot acquire legitimacy and gain social acceptance unless it accords with the moral values of the society and the constant endeavour of the courts and the legislatures must, therefore, be to close the gap between law and morality and bring about as near an approximation between the two as possible.' The doctrine of promissory estoppel is a significant judicial contribution in that direction. But it is necessary to point out that 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be held bound by the promise but should be free to act unfettered by it, that the court would refuse to enforce the promise against the Government. The court would not act on the mere ipse dixit of the Government, for it is the court which has to decide and not the Government whether the Government should be held exempt from liability. This is the essence of the rule of law. The burden would be upon the Government to show that the public interest in the Government acting otherwise than in accordance with the promise is so overwhelming that it would be inequitable to hold the Government bound by the promise and the court would insist on a highly rigorous standard of proof in the discharge of this burden. But even where there is no such overriding public interest, it may still be competent for the Government to resile from the promise " on giving reasonable notice, which need not be a formal notice, giving the promisee a reasonable opportunity of resuming his position " provided of course it is possible for the promisee to restore status quo ante. If, however, the promisee cannot resume his position, the promise would become final and irrevocable. Vide Emmanuel Ayodeji Ajayi v. R. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon the representations as to its future conduct made by the Government ". It was also pointed out by the learned judge that in Anglo-Afghan Agencies case this court approved of the observations made by Denning J. in Robertson v. Minister of Pensions [1949] 1 KB 227 (KB), rejecting the doctrine of executive necessity and held them to be applicable in India. The learned judge concluded by saying in words pregnant in the hope and meaning for democracy (AIR 1971 SC 1021, 1025) : " 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 representations made by it relying upon which a citizen has altered his position to his prejudice. " This court refused to make a distinction between a private individual and a public body so far as the doctrine of promissory estoppel is concerned. We then come to another important decision of this court in Turner Morrison Co. Ltd. v. Hungerford Investment Trust Ltd. [1972] 3 SCR 711 ; [1972] 85 ITR 607 ; 42 Comp Cas 512 (SC), where the doctrine of promissory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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. It was this observation which was heavily relied, upon on behalf of the State but we fail to see how it can assist the contention of the State. In the first place, this observation was clearly obiter, since, as pointed out by us, there was on the facts of the present case no scope for the applicability of the doctrine of promissory estoppel. Secondly, this observation was based upon a quotation from the passage in para. 123 at p. 783 of Vol. 28 of American Jurisprudence (2d), but unfortunately this quotation was incomplete and it overlooked, perhaps inadvertently, the following two important sentences at the commencement of the paragraph, which clearly show that even in the United States the doctrine of promissory estoppel is applied against the State " when justified by the facts " : " There is considerable dispute as to the application of estoppel with respect to the State. While it is said that equitable estoppel will be invoked against the State when justified by the facts, clearly the doctrine of estoppel should not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Howell's case (1951] AC 837 (HL) negative the applicability of the doctrine of promissory estoppel against the Government. What it laid down was merely this, namely, that no representation or promise made by an officer can preclude the Government from enforcing a statutory prohibition. The doctrine of promissory estoppel cannot be availed of to permit or condone a breach of the law. The ratio of the decision was succinctly put by Lord Normand when he said " ........ neither a minister nor any subordinate officer 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 ". It may also be noted that promissory estoppel cannot be invoked to compel the Government or even a private party to do an act prohibited by law. There can also be no promissory estoppel against the exercise of legislative power. The legislature can never be precluded from exercising its legislative function by resort to the doctrine of promissory estoppel. Vide State of Kerala v. Gwalior Rayon Silk Manufacturing (Wvg.) Co. Ltd. [1974] 1 SCR 671 ; AIR 1973 SC 2734. The next decision to which we mus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the State. Now, it is clear that, even taking the case of the respondents at its highest, there was no representation or promise made by the Government that they would continue the exemption from sales tax granted under the notification dated 6th April, 1959, and would not withdraw it, and the notification dated 2nd April, 1969, could not, therefore, be assailed as being in breach of any such representation or promise. There was, accordingly, no factual basis for making good the plea of promissory estoppel and the observation made by the court in regard to the applicability of the doctrine of promissory estoppel against the Government was clearly obiter. That perhaps was the reason why the court did not consider it necessary to refer to the earlier decisions in Century Spinning Manufacturing Co.'s case, AIR 1971 SC 1021 and Turner Morrison's case [1972] 85 ITR 607 ; 42 Comp Cas 512 (SC) and particularly the decision in the Anglo-Afghan Agencies' case, AIR 1968 SC 718, where the court in so many terms applied the doctrine of promissory estoppel against the Government in the exercise of its executive power. It is not possible to believe that the court was oblivious of these earl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sons v. Union of India, AIR 1976 J K 41, but this passage itself makes it clear that the courts will bind the Government by its promise where it is necessary to do so in order to prevent manifest injustice or fraud. The last decision on which the court relied was Federal Crop Insurance Corporation v. Merrill (332 US 380 ; 92 L Ed I0) but this decision also does not support the view contended for on behalf of the State. We have already referred to this decision earlier and pointed out that the Federal Crop Insurance Corporation in this case was held not liable on the policy of insurance, because the regulations made by the Corporation prohibited the insurance of re-seeded wheat. The principle of this decision was not that promissory estoppel cannot be invoked to compel the Government or a public authority to carry out a representation or promise which is contrary to law. It will thus be seen from the decisions relied upon in the judgment that the court could not possibly have intended to lay down an absolute proposition that there can be no promissory estoppel against the Government in the exercise of its governmental, public or executive powers. That would have been in complete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case before the court, a contractual right was sought to be enforced. There is, therefore, nothing in this decision which should compel us to take a view different from the one we are otherwise inclined to accept. We may point out that in the latest decision on the subject in Radha-krishna Agarwal v. State of Bihar [1977] 3 SCC 457 : AIR 1977 SC 1496, this court approved of the decisions in Anglo-Afghan Agencies' case, AIR 1968 SC 718, and Century Spinning and Manufacturing Co.'s case, AIR 1971 SC 1021, and pointed out that these were cases " where it could be held that public bodies or the State are as much bound as private individuals are to carry out obligations incurred by them because parties seeking to bind the authorities have altered their position to their disadvantage or have acted to their detriment on the strength of the representation made by these authorities ". It would, therefore, be seen that there is no authoritative decision of the Supreme Court which has departed from the law laid down in the celebrated decisions in Anglo-Afghan Agencies' case, AIR 1968 SC 718, and the Century Spinning Manufacturing Co.'s case, AIR 1971 SC 1021. The law laid down in these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... presentation of the Government, borrowed moneys from various financial institutions, purchased plant and machinery from M/s. De Smith (India) Pvt. Ltd., Bombay, and set up a vanaspati factory at Kanpur. The facts necessary for invoking the doctrine of promissory estoppel were, therefore, clearly present and the Government was bound to carry out the representation and exempt the appellant from sales tax in respect of sales of vanaspati effected by it in Uttar Pradesh for a period of three years from the date of commencement of the production. The State, however, contended that the doctrine of promissory estoppel had no application in the present case because the appellant did not suffer any detriment by acting on the representation made by the Government : the vanaspati factory set up by the appellant was quite a profitable concern and there was no prejudice caused to the appellant. This contention of the State is clearly unsustainable and must be rejected. We do not think it is necessary, in order to attract the applicability of the doctrine of promissory estoppel, that the promisee, acting in reliance on the promise, should suffer any detriment. What is necessary is only that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land where detriment is insisted upon as a necessary ingredient of promissory estoppel. In fact, in W. J. Alan Co. Ltd. v. El Nasr Export and Import Co. [1972] 2 All ER 127, 140 ; [1972] 2 QB 189, 213 (CA), Lord Denning expressly rejected detriment as an essential ingredient of promissory estoppel, saying : " A sellor may accept a less sum for his goods than the contracted price, thus inducing (his buyer) to believe that he will not enforce payment of the balance : See Central London Property Trust Ltd. v. High Trees House Ltd. [1947] 1 KB 130 (KE) and D. C. Builders Ltd. v. Rees [1965] 3 All ER 837. In none of these cases does the party who acts on the belief suffer any detriment. It is not a detriment, but a benefit to him, to have an extension of time or to pay less, or as the case may be. Nevertheless, he has conducted his affairs on the basis that he has that benefit and it would not be equitable now to deprive him of it. " We do not think that in order to invoke the doctrine of promissory estoppel it is necessary for the promisee to show that he suffered detriment as a result of acting in reliance on the promise. But we may make it clear that if by detriment we mean i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cting in reliance on the promise, altered his position and it is not necessary for him to further show that he has acted to his detriment. Here, the appellant clearly altered its position by borrowing moneys from various financial institutions, purchasing plant and machinery from M/s. De Smet (India) Pvt. Ltd., Bombay, and setting up a vanaspati plant, in the belief induced by the representation of the Government that sales tax exemption would be granted for a period of three years from the date of commencement of the production. The Government was, therefore, bound on the principle of promissory estoppel to make good the representation made by it. Of course, it may be pointed out that if the U.P. Sales Tax Act, 1948, did not contain a provision enabling the Government to grant exemption, it would not be possible to enforce the representation against the Government, because the Government cannot be compelled to act contrary to the statute, but since s. 4 of the U.P. Sales Tax Act, 1948, confers power on the Government to grant exemption from sales tax, the Government can legitimately be held bound by its promise to exempt the appellant from payment of sales tax. It is true that tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 19,36,597.23 as and by way of sales tax at the rate of 7% of the sale price and this amount was deposited by the appellant in the Treasury and so also for the first quarter of the assessment year 1973-74 up to the end of which the exemption from sales tax was to continue, the appellant collected and paid an aggregate sum of Rs. 4,84,884.05 at the rate of 7% of the sale price. It appears that surcharge amounting to Rs. 2,85,008.09 for the period of the exemption was also paid by the appellant into the Treasury. The assessments for the assessment years 1971-72, 1972-73 and 1973-74 were, however, not completed in view of the stay order granted by this court. Now, obviously since the Government is bound to exempt the appellant from payment of sales tax for a period of three years from 2nd July, 1970, being the date of commencement of the production, the appellant would not be liable to pay any sales tax to the State in respect of sales of vanaspati effected during that period and hence the State would have to refund to the appellant the amount of sales tax paid for the period 2nd July, 1970, to 31st March, 1971, subject to any claim which the State may have to retain any part of s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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