M/S MOTILAL PADAMPT SUGAR MILLS v.

STATE OF UTTAR PRADESH

1979 SCR (2) 641

ADMINISTRATIVE LAW

Submitted to
Dr. V. P. Tiwari
Associate Professor of Law

Submitted by
Utkarsh Pandey
UG2016-58

Academic year 2018-19

Maharashtra National Law University, Nagpur

 TABLE OF CONTENTS
TABLE OF CASES ........................................................................................................................ II

INTRODUCTION .......................................................................................................................... 1

RESEARCH METHODOLOGY.................................................................................................... 1

RESEARCH AIM AND OBJECTIVES ......................................................................................... 1

RESEARCH SCOPE AND LIMITATIONS .................................................................................. 1

FACTS OF THE CASE .................................................................................................................. 2

ISSUES BEFORE THE COURT.................................................................................................... 2

QUORUM ....................................................................................................................................... 2

ARGUMENTS ADVANCED ........................................................................................................ 3

JUDGEMENT................................................................................................................................. 4

RELEVANCE: ................................................................................................................................ 7

JURISPRUDENCE BEHIND THE DOCTRINE ....................................................................... 7

EVOLUTION OF THE DOCTRINE IN INDIA: ....................................................................... 7

APPLICABILITY OF THE DOCTRINE OF PROMISSORY ESTOPPEL .................. 9

INGREDIENTS OF THE DOCTRINE OF PROMISSORY ESTOPPEL .................................. 9

GOOD FAITH AND BAD FAITH ........................................................................................... 11

CONCLUSION ............................................................................................................................. 11

BIBLIOGRAPHY ......................................................................................................................... 12

I
 TABLE OF CASES
Central London Property Trust Ltd v High Trees House Ltd ......................................................... 8
Central London Property Trust v High- trees House .................................................................... 13
Collector of Bombay v. Bombay Municipal Corporation ............................................................ 11
Combe v Combe ............................................................................................................................. 8
Hughes v. Metropolitan Railway Co .............................................................................................. 7
Karnal Singh v State ..................................................................................................................... 14
Maxey Charan v. Rohilkhand Uni, Baeilly ................................................................................... 12
Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P................................................................ 11
Municipal Corporation of the City of Bombay v. Secretary of State .................................. 11
Ramabhadran v State of Tamil Nadu ............................................................................................ 13
U.O.I v. Anglo Afghan Agencies................................................................................................ 11
Union Of India & Anr vs Wing Commander R.R. Hingorani ...................................................... 12

II
INTRODUCTION

The doctrine of promissory estoppels is based on the principles of justice, fair play and
good conscience. It was evolved by equity to prevent injustice. It neither comes under contract
nor under estoppels proper. The principle is that when one party with the intention of
creating or affecting legal relationship makes a promise with another party and that party
acts on it, that promise should be binding for the party who is making it. It will not be allowed
to go back from its words. Because reverting from the words will be against equity. In Motilal
Padampat Sugar Mills v. State Of Uttar Pradesh And Ors, the chief secretary of Govt. made an
assurance that in order to establish industries firmly the total tax exemption will be given to
the new industrial units for next 3 years based on this assurance M.P. sugar mill started
hydro generation plant taking huge amount of money as loan. Afterwards government makes some
changes in the tax policy saying that industries will be taxed at varying rate. Applying the doctrine
of promissory estoppels, the Apex Court held that the appellant took huge loan relying on the
assurance made by government so no tax should be imposed for the period of 3 years from the
date of production as promise was made. And there is nothing like to make that promise
enforceable one party should suffer harm or damages, in absence of detriment also the promise is
binding.

RESEARCH METHODOLOGY

Doctrinal method of research has been used, the judgment has been reviewed with respect to the
literature present and other judgments in which the case has been cited as a reference have been
reviewed. Furthermore, the principle developed has been researched extensively.

RESEARCH AIM AND OBJECTIVES

The research aims at reviewing the principle laid down in judgement.

RESEARCH SCOPE AND LIMITATIONS

The research is extended to but is not limited to the principle in question and its relevance in
Administrative law.

1
FACTS OF THE CASE

Government of UP announced to give tax exemption from sales tax for three years under Section
4A of U.P. Sales Tax Act to all new industrial units of the state with a view to enabling them
"to come on firm footing in developing stage". Based on this, plaintiff sought confirmation from
Director of Industries who reiterated the decision of UP govt. Further unequivocal assurance was
given by Chief Secretary of Govt., on behalf of UP Government, to plaintiff about the same.
Plaintiff on this categorical assurance, borrowed money from financial institutions, brought plant
and machinery and set up a new plant in UP. However, State govt. went back upon this assurance
and instead now promised to give partial concession to which plaintiff consented and started
production. Once again, however, State government went back even on this promise denying
any concession to be given. The plaintiff sued the government on account of promissory
estoppels.

ISSUES BEFORE THE COURT

1) Whether plaintiff waived his right to have a cause of action by accepting partial exemption.

2) Whether plaintiff can have a cause of action on grounds of promissory estoppel.

3) Whether any such action against government acting in governmental, sovereign

or administrative capacity can lie.

4) Whether in present case, plaintiff’s action is bound to succeed.

Court: Supreme Court of India

QUORUM:
Division Bench: Justice P.N. Bhagwati and Justice V.D. Tulzapurkar.

2
ARGUMENTS ADVANCED

The principal argument advanced on behalf of the appellant in support of the appeal was that the
4th respondent had given a categorical assurance on behalf of the State Government that the
appellant would be exempt from payment of sales tax for a period of three years from the date of
commencement of production and such assurance was given intending or knowing that it would
be acted on by the appellant and in fact the appellant, acting in reliance on it, altered its position
and the State Government was, therefore, bound, on the principle of promissory estoppel, to
honour the assurance and exempt the appellant from sales tax for a period of three years from 2nd
July, 1970, being the date on which the factory of the appellant commenced production. The
appellant assailed the view taken by the High Court that this claim of the appellant for exemption
based on the doctrine of promissory estoppel was barred by waiver, because the appellant had by
its letter dated 25th June, 1970 accepted that it would avail of the exemption granted under the
letter of the 5th respondent dated 20th January, 1970 and charged sales tax at the concessional rate
of 31/2% 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 that 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 and submitted that the appellant had clearly waived its right to
complete exemption from payment of Sales Tax by addressing the letter dated 25th June, 1970.
The State Government also contended that, in any event, even if there was no waiver, the appellant
was not entitled to enforce the assurance given by the 4th respondent, since such assurance was
not binding on the State Government and more-over, in the absence of notification under section
4A, the State Government could not be prevented from enforcing the liability to sales tax imposed
on the appellant under the provisions of the Act. It was urged on behalf of the State Government

3
that there could be no promissory estoppel against the State Government so as to inhibit it from
formulating and implementing its policies in public interest. These were broadly the rival
contentions urged on behalf of the parties and we shall now proceed to consider them.

JUDGEMENT

Waiver as to a person’s right can operate only when person granting it has full knowledge
of his right and intentionally abandons it, either expressly or impliedly.

However, in present case, there was no such waiver of rights by plaintiff: he didn’t have any full
knowledge of his rights to exemption under the assurance given by Chief Secretary. Firstly, the
doctrine of promissory estoppel is not so well defined in scope and ambit and so free
from uncertainty that plaintiff must have had full knowledge of his rights. Secondly, there
is no presumption that every person knows the law; there is the rule that ignorance of law is not
an excuse which is altogether different in its scope and application. The doctrine of Promissory
Estoppel state that whenever an unequivocal promise is made with the intention of creating legal
relationship or affect a legal relationship to arise in the future (notwithstanding any pre-existing
legal or contractual relationship between the parties), knowing or intending that it would
be acted on by other party and is in fact acted on (altering the position of other party,
not necessarily detrimentally) then the promisor will be abstained from going back on the
promise if it will be inequitable for him to do so (i.e. if promisor’s going back on the promise
will detrimentally affect the promisee).

Statement of Lord Cairns in Hughes v. Metropolitan Railway Co.1 that “If parties, who had
entered into definite and distinct terms involving certain legal results, afterwards…enter upon a
course of negotiation” may suggest that the scope of Promissory Estoppel is limited only to cases
where parties are already bound by legal or contractual relationship and one of the parties
promises to other that strict legal rights under contract will not be enforced. However, in
present case, Motilal Padampat Sugar Mills, the Court held that the principle of Promissory

1
Hughes v. Metropolitan Railway Co [1877] 2 AC 439

4
 Estoppel, even when formulated by Lord Denning in High Trees case2 didn’t contain any such
limitation, and in present also, this limitation can’t apply.

Further, in order to attract the applicability of PE it is not necessary that promisee, acting on the
promise should have suffered any detriment, albeit the essential condition of alteration of
position is to be fulfilled. If detriment is to be necessary condition, it would have acted
as consideration in many cases and there would have been no need to evolve this
equitable principle. However, promisee must show that it will be inequitable for promisor to go
back on his promise which can be proven by adducing the evidence of any ‘detriment’
which will be suffered by promisee if such promise isn’t abided by.

Though in English law, promissory Estoppel ‘can only be a shield and not a sword’ (High Trees
case) i.e. plaintiff can’t have a cause of action solely on grounds of Promissory Estoppel though
latter can serve as a part of cause of action then it will be tantamount to doing away with the
necessity of consideration, and ‘doctrine of consideration is too firmly fixed to be overthrown
by a side wind’ (Combe v. Combe3). However, in Indian context such a limitation of
application of doctrine of PE only by way of defence doesn’t apply (Motilal Padampat Sugar
Mills case). This is because of following reasons: Firstly, it is not based on the principle of
estoppel rather is under the realm of equity and hence, can’t be inhibited by same limitation as
estoppel in strict sense of term; Secondly, rule of equity has been flexible enough to give
‘Propreitary Estoppel’ an independent cause of action, which in qualitative terms is similar
to Promissory Estoppel, albeit with difference of its applicability only to cases of interest
in land, equity must also allow an independent cause of action grounded on PE; SC hence
refused to draw any distinction between PE and Prop E; thirdly, law must be constantly
developing and changing according to changing social concepts and values, if equity demands
promises to be enforced to promote justice, honesty and good faith, there is no reason that
the “dead wood” of need for consideration as necessity in enforcing any promise is not dropped
away.

Where the government makes a promise, even in sovereign, administrative or

governmental capacity, knowing or intending that it would be acted on by the promisee

2
Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130
3
Combe v Combe [1951] 2 KB 215

5
and, in fact, promisee, acting in reliance on it, alters his position, the Government will be
abstained to go back on its promise if it will be inequitable to do so, notwithstanding that there
is no consideration for the promise and promise is in fact is not recorded in form of a formal
contract as required by Art.299 of Constitution. The defence of ‘executive necessity’ which
holds that Government can’t fetter its future executive action to be determined by needs of
community at relevant time do not release government from being bound by such promises for
it will be ultra-vires to rule of law and justice.

However, Firstly, Government can’t be bound by its promise to do an act or omission

either expressly prohibited by Law or is in prevention of its acting in discharge of its public duty
under the Law; Secondly, government can’t be bound by any promises made by officers
or agents without any authority; Thirdly, if in accordance with facts that have subsequently
transpired, it will be inequitable to hold Government to its promise, Courts will not invoke equity
in favor of any such promise made, albeit this onerous burden to prove that any such
enforcement of promise will be against ‘public interest’ and hence against ‘equity’ lies on
the Government; Fourthly, even when there is no overriding public interest, if government
gives a reasonable notice, thereby providing promisee a reasonable opportunity to resume his
position, it will be allowed to go back on it unless promisee has so altered his position that
status quo can’t be restored.
Hence, in light of categorical promise made by Chief Secretary, on behalf of Government, that
plaintiff will be entitled to sales tax exemption in respect of new industrial plant established in
UP, and the knowledge of government that such promise is to be acted on, it will be inequitable
to allow Government to go back on promise because it was in fact acted on by promisee resulting
into altering his position which could not now be restored. Plaintiff not only borrowed money
from various financial institutions, purchased machinery but also established hydrogenation
plant in UP and went ahead with production. Hence, rule of promissory estoppel can be
evoked in present case to be of avail to plaintiff.

6
RELEVANCE:

JURISPRUDENCE BEHIND THE DOCTRINE:

The doctrine of promissory estoppel is an equitable doctrine. Like all equitable remedies, it is
discretionary, in contrast to the common law absolute right like right to damages for breach of
contract. It is a principle evolved by equity to avoid injustice and though commonly named
‘promissory estoppel’, it is neither in the realm of contract nor in the realm of estoppel. In
India, however, as the rule of estoppel is a rule of evidence, the ingredients of section 115
of the Indian Evidence Act, 1872, must be satisfied for the application of the doctrine. The
doctrine of promissory estoppel does not fall within the scope of section 115 as the section
talks about representations made as to existing facts whereas promissory estoppel deals with
future promises. The application of the doctrine would negate the constitutional provision, as
under Article 299, which affords exemption from personal liability of the person making the
promise or assurance.

EVOLUTION OF THE DOCTRINE IN INDIA:

The History of doctrine of promissory estoppels in India can be traced to the case of
Ganges Mfg Co. v. Sourajmul, in this case C entered into a contract to purchase a particular
number of gunny bags from the appellant for the respondent and 107,500 bags remain
undelivered as R was unable to pay for them. When C represented that arrangements had
been made for the payment for 87,500 bags, delivery orders were given to C for delivery
against payment. C’s representative took a letter from C to the appellant requesting the
appellant to direct delivery of bags to the representative of the R who went along with the
representative of the C because the R had agreed to advance the necessary money to C. The
officer in charge of the appellant did so. The A deliver 50.000 bags to the representative
of R but refused to deliver the rest because C failed to pay. Thereupon the R sued the A for
delivery of the remaining bags alleging that they had advanced the money to C on the A’s
representation that the goods will be delivered. HC decreed that the appellant was stopped from
denying and Calcutta High Court observed that “the doctrine of estoppels was not only
limited to the law of evidence, but that a person may be prevented from doing any act or relying
upon any particular argument or connection, which the rules of equity and good conscience
prevent him from using as against the opponent”

7
 In Municipal Corporation of the City of Bombay v. Secretary of State4 appellant
surrendered its own land in favor of the Govt. in consideration of a lease of government
lands in favor of the appellant on a nominal rent. After getting possession, the appellant spent
enormous sums in making constructions. 27 years later, the respondent filed as suit claiming a
large amount as arrears of rent. HC allowed the parties to redefine their rights, namely, the
appellant’s right to leasehold and the R’s right to reasonable rent. It was observed by the
Bombay High Court that even though there is no formal contract as required by the statute, the
Govt. should be bound by a representation made by it. The term ‘promissory estoppel was
used for the first time by the Supreme Court in the case of Collector of Bombay v. Bombay
Municipal Corporation5 . In this case the govt. of Bombay called upon the predecessor in the
name of MC of Bombay to remove old markets from a certain site and vacate it on the
application of MC in 1865. MC gave up that site and spent a sum of Rs. 17 lacks in erecting and
maintaining markets on the new site. The collector of Bombay assessed the new site to land
revenue in 1940 and the MC thereupon filed a suit for a declaration that it was entitled to hold
the land even without payment of nay assessment. SC held that C has right to hold the land in
perpetuity free of rent. Chandrasekhar Iyyer J. while concurring with the majority rested his
decision on promissory estoppels that the govt. could not be allowed to go back on its
representation. The doctrine found a complete and eloquent exposition in the cases of U.O.I v.
Anglo Afghan Agencies6 the Government of India made announcement regarding certain
concessions with regard to the import of certain raw materials in order to encourage export of
woolen garments to Afghanistan. Subsequently, only partial concessions were allowed and not
full concessions were extended as promised. The Supreme Court held that the Government was
estopped by its promise. And after this case the courts have applied the doctrine of promissory
estoppel and Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P.7

4
(1934) 36 BOMLR 568.
5
1951 AIR 469.
6
1968 AIR 718.
7
1979 AIR 621.

8
 APPLICABILITY OF THE DOCTRINE OF PROMISSORY ESTOPPEL:
For the application of the doctrine of promissory estoppel the requirement is that the party
asserting the estoppels must have “changed or altered the position’’ by relying on that
representation. In Maxey Charan v. Rohilkhand Uni, Baeilly8, the petitioner appeared in
examination conducted by university and declared to have passed. Subsequently she got the
admission for next year on the basis of defected mark sheet. Later the mistake was found
out and her admission got cancelled. Court held that there was no mistake of petitioner and
hence she is not responsible for such mistake. In view of the conduct of the University it was a
fit case in which the principles of promissory estoppel should be applied to the respondent
university. Areas where doctrine of promissory estoppels is not applicable:(1)There is no
estoppels against settled principle of law.(2)It is not applicable in case of concluded
commercial contract.(3)Doctrine of promissory estoppels cannot be invoked if the assurance is
held out but not incorporated in the agreement between parties.(4)For applying the principles of
promissory estoppels, alteration of the position by the plaintiff is only requirement.

INGREDIENTS OF THE DOCTRINE OF PROMISSORY ESTOPPEL:

In Union Of India & Anr vs Wing Commander R.R. Hingorani9, where a Govt. Servant retained
accommodation 2 months after the concessional period. The liability to pay damages equivalent
to the market rent for the period of such unauthorized occupation was claimed in the court of
law. The Government having failed to serve the respondent with a notice that he would be liable
to pay market rent for the period of such unauthorized occupation, the doctrine of promissory
estoppel precluded the Government from claiming damages equivalent to the market rent.
Principle was laid down that to invoke the doctrine of estoppels, there are three conditions
which must be satisfied
(1)Representation by a person to another
(2)The other should have acted upon the said representation and
(3)Such action should have been detrimental to the interests of the person to whom the
representation has been made.

8
AIR 1992 All 122.
9
1987 AIR 808.

9
 In the case of Central London Property Trust v High- trees House10 , High-trees leased a block
of flats from CLP at a fixed amount of rent later at the time of war it was not getting tenants
other flats were unoccupied because The defendant had difficulty in getting tenants for all
the flats during war time. CLP agreed to reduce the rent amount till the war prevails. Then
war was over, all the flats got occupied on the normal rent amount. The defendant asked high
trees for the normal rent for the present time and for the earlier time also. High trees
went to court; court held that high-trees acted upon the words of CLP that during the war
time rent will be reduced, after the end of war amount cannot be claimed after the war
they should continue with the normal rent only. In this case, Denning J established the doctrine
of promissory estoppel. Here all the three ingredients are fulfilled. In S Ramabhadran v State of
Tamil Nadu11 the petitioner appeared in the test for the post of stenographer in Raj. Secretariat
Services, but could not get appointment as vacancies did not exist. The petitioners were
given option to join the subordinate services with clear understanding that if vacancies
were available before the expiry of the selection list, they would be absorbed in secretariat
services and the petitioners did join the subordinate services. After the expiry of selection
list, fresh vacancies were available and fresh posts were advertised. It was held that the govt.
was not bound to appoint the petitioners after the expiry of the period of selection list; the
principle of promissory estoppels did not apply in this case. There is no promise as such denial
of which causes detriment.

10
[1947] KB 130.
11
1978 AIR 1204.

10
 GOOD FAITH AND BAD FAITH:
Good faith is defined as “good faith requires the discretion-exercising party to act fairly, in
order to protect justifiable expectations arising from their agreement. Good faith has also
been associated with the legal rules related to honesty, fairness and reasonableness. GF in
contract is just and honest conduct, which should be expected of both parties in their
dealings.Bad faith when the discretion exercising party refuses to pay expected cost of
performance.Good faith is required according to natural principles. Where the party is guilty of
fraud, there can no equity in favor for applying the principle of estoppels. In Karnal Singh v
State12 the petitioner got admission to an educational institution by producing a false certificate
that he was a harijan, and subsequently on inquiry it is found that he is not a harijan,
the government was not stopped from cancelling the petitioner’s admission.

CONCLUSION

A man cannot live in isolation, when we are living in a society; everyone is dependent on each
other. It brought contractual and commercial relationship. Promise of a person, when becomes
important for another and cause for profit and loss, if it is denied it may cause harm to other one,
for their protection the doctrine of promissory estoppels is available as a shield. Promissory
estoppel is a good defense and good principle to avoid injustice. The judiciary in India
has played a very significant role in making the promise responsible and accountable and
made it abide by its promise.

12
1954 AIR 204.

11
BIBLIOGRAPHY

Books:
1. Dr V Keshava Rao, Law of Evidence, Vol. IV (18th ed, Lexis Nexis. 2009, Nagpur).
2. M.L. Singhal and Chitaley, Evidence Act, vol. IV (1st ed, All India Reporter Pvt. Ltd.,2000,
Nagpur).
3. S.C. Sarkar, Commentary on law of evidence, Vol III (3rd ed, Dwivedi law agncy,
2010, Allahabad.
Articles
1. TETLEY, William “Good Faith in Contract: Particularly in the Contracts of Arbitration and
Chartering” Vol. 35, Issue 4 (October 2004), Journal of Maritime Law and Commerce, pp. 561
2. E. K. TEH “Promissory estopple as a sword” Vol.13 Issue 2, 1984 Anglo American
law review.
Websites:
1. www.westlawindia.com
2. www.manupatra.com
3. www.heinonline.org

12