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DOCTRINE OF PROMISSORY ESTOPPEL

(i) (PAWAN ALLOYS & CASTING PVT. LTD., MEERUT, v. U.P.STATE


ELECTRICITY BOARD AND OTHERS): 1997 (7) SUPREME COURT CASES
251

"If a statutory authority functioning on behalf of the State in exercise of its legally
permissible powers has held out any promise to a party, who relying on the same, has
changed its position not necessarily to its detriment, and if this promise does not offend any
provision of law or does not fetter any legislative power inhering in the promissor, then on
the principle of promissory estoppel, the promissor can be pinned down to the promise
offered by it by way of representation containing such promise for the benefit of the
promisee."

(ii) MOTILAL PADAMPAT SUGAR MILLS CO. LTD. V. STATE OF U.P., [1979] 2
SCC 409.

"It is only if the Court is satisfied, on proper and adequate material placed by the
Government, that overriding public interest requires that the Government should not 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 who 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 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 comptent to 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. Briscoe,
(1964) 3 All ER 556."
(iii) (AMRIT BANASPATI CO.LTD. v. STATE OF PUNJAB) : 1992 (2) SUPREME
COURT CASES 411

"The law of promissory estoppel furnishes a cause of action to a citizen, enforceable in a


court of law, against the Government, if it extends any promise which creates legal
relationship and it is acted upon by the promisee irrespective of any prejudice.... Acting on
the assurance, both express and implied, the appellant invested substantial amount in setting
up the unit requesting, in the meanwhile, for grant of written sanction from the Government,
which too, came. The equity arose in favour of the appellant by having altered its position on
the assurance given by the authorities. Thus, basic ingredients of promise by the
Government, by which the position was altered by investing substantial amount, were
established to invoke promissory estoppel against the Government.... Exemption from tax to
encourage industrialisation should not be confused with refund of tax. They are two different
legal and distinct concepts. Tax holiday or concession to new industries is well known to be
one of the methods to grant incentive to encourage industrialisation.... The incentive to new
industries by way of tax holiday or tax exemption could validly form the subject matter of
promissory estoppel. This would not be against public policy. Insofar as any representation
seeks to enable the promisee to get refund of the collected sales tax, it would remain
unconstitutional. Therefore, it would be contrary to public policy. But on the promise for
exemption from tax and relying upon the promise, the units had altered their position
irretrievably. They have spent large amounts of money for establishing the infrastructure.
Therefore, they had necessarily altered their position, relying on the representation, thinking
that they would be assured of at least three years' period... On these well established facts,
the Board can certainly be pinned down to its promise, on the doctrine of promissory
estoppel."

(iv) (KASINKA TRADING v. UNION OF INDIA) : 1995 (1) SCC 274

"The doctrine of promissory estoppel cannot be pressed into service, to compel the
Government or the public authority, to carry out a representation or promise, which is
contrary to law or which is outside the authority or power of the officer of the Government or
of the public authority to make.... The Courts have to do equity. The fundamental principles
of equity must for ever be present to the mind of the Court, while considering the
applicability of the doctrine. The doctrine must yield when the equity so demands.

(v) (M/S.SHARMA TRANSPORT v. GOVERNMENT OF A.P.) : 2002 (2) SUPREME


COURT 188

"The doctrine of promissory estoppel would apply to the Government also. Every one is
subject to the law as fully and completely as any other and the Government is no exception.
The Government cannot claim immunity from the doctrine of promissory estoppel. The
doctrine of promissory estoppel would be displaced in such a case, because on the facts,
equity would not require that the Government should be held bound by the promise made by
it. But the Government must be able to show that in view of the fact as has been transpired,
public interest would not be prejudiced. In order to resist its liability, the Government would
disclose to the Court the various events insisting its claim to be exempt from liability and it
would be for the Court to decide whether those events are such as to render it equitable and
to enforce the liability against the Government.

It is equally settled law that promissory estoppel cannot be used, compelling the Government
to carry out a promise which is prohibited by law or which is devoid of the authority or
power of the Government.

(vi) (D.C.M. LTD. v. UNION OF INDIA) : 1996 (5) SUPREME COURT CASES 468

"It is well settled that the doctrine of promissory estoppel represents a principle evolved by
equity to avoid injustice. The basis of this doctrine is the inter-position of equity, stepped in
to mitigate the rigour of strict law."

(vii) (BANGALORE DEVELOPMENT AUTHORITY v. R.HANUMAIAH) : 2005 (12)


SUPREME COURT CASES 508

"The doctrine of promissory estoppel is not based on the principle of estoppel. It is a doctrine
evolved by equity in order to prevent injustice. Where a party by his word or conduct makes
a promise to another person in unequivocal and clear terms intending to create legal relations
knowing or intending that it would be acted upon by the party to whom the promise is made
and it is so acted upon by the other party the promise would be binding on the party making
it. It would not be entitled to go back on the promise made... The principle of promissory
estoppel would be applicable to the Government as well where it makes a promise knowing
or intending that it would be acted upon by the promisee, and the promisee in fact acting on
the promise alters his position, then the Government will be held bound by the promise and
such a promise would be enforceable against the Government, at the instance of the
promisee. The Government stood on the same footing as a private individual, so far as the
obligation of law is concerned."

DOCTRINE OF LEGITIMATE EXPECTATION

In the case of Council of Civil Service Unions and Others v. Minister for the Civil
Service ([1985] AC 374), that the decision by the public authority should affect the person
such that-

 His rights or obligations are altered, which are enforceable by or against him
 He is deprived of some benefit or advantage which he had been permitted by the
authorizing body in the past and which he could have legitimately expected to
enjoy until a valid ground for withdrawal of the same was communicated to him or
he had been assured by the decision making body that such a benefit or advantage
would not be withdrawn until him being given an opportunity of contending
reasons as to why they were withdrawn.

In another Supreme Court case, Navjyoti Coop. Group Housing Society v. Union of
India ((1992) 4 SCC 477), wherein the new criteria for allotment of land was challenged. In
the original policy, the seniority with regards to allotment was decided on the basis of date of
registration. Subsequently, a change in policy was made in 1990, changing the criteria for
deciding seniority based on the date of approval of the final list.

 The Supreme Court was of the opinion that the Housing Societies were entitled to
‘legitimate expectation’ owing to the continuous and consistent practice in the past in
matters of allotment. Court further elucidates on the principle stating that presence of
‘legitimate expectations’ can have different outcomes and one such outcome is that
the authority should not fail ‘legitimate expectation’ unless there is some justifiable
public policy reason for the same.

 It is further emphasized that availability of reasonable opportunity to those likely


being affected by the change in a policy which was consistent in nature is well within
the ambit of acting fairly. The Honorable Court held that such an opportunity should
have been given to the Housing Societies by way of a public notice.

 In Mahabir Vegetable Oils (P) Ltd. & Another Vs. State of Haryana & Others
reported in (2006) 3 SCC 620 as held that the doctrine of promissory estoppel
operates even in legislative field. The Hon’ble Court in MRF Ltd. Vs.
Assistant Commissioner (Assessment) Sales Tax reported in (2006) 8 SCC 702
again considered the question of principle of promissory estoppel and held that
the doctrine of promissory estoppel applies to statutory notifications as well.
The Hon’ble High Court on the aforesaid issue held as under:-

 “45. In view of the ratio of the aforesaid judgments it transpires that the
principle of promissory estoppel can be pressed against the Subordinate
Legislation. Nonetheless the executive government is bound to honour its
promise made to any person. Issuance of notification under any statutory
provision, though a delegated legislative action but it is ex-facie based upon
the decision of the executive and has to be viewed from that angle. We are,
therefore, of the opinion that by issuance of the impugned notifications accrued
rights cannot be negated to the detriment of the petitioners, irrespective of the
fact that impugned notifications are issued in exercise of statutory power.
Doctrine of legitimate expectation and promissory/ equitable estoppel are
attached in the present set of circumstances.”


 The issue is well settled by the judgement of the Hon'ble Supreme Court in the
case of M/s Suprabhat Steels reported in 1999 (1) SCC 31 wherein while
considering the 1993 Industrial Policy of the State of Bihar the Hon'ble Court
had been pleased to hold that pursuant to the Industrial Policy, the State
Government can issue notifications but that notifications if imposes or
negates the incentive and benefits available in the policy resolution, then, this
restriction to that extent, is contrary and repugnant to the main provisions of
the Industrial Policy and bad and therefore liable to be struck down

 The full bench of the Hon’ble Patna High Court, Ranchi Bench, Ranchi in the
case of “Tara Steel Industries Vs. Assistant Commissioner of Commercial
Taxes & other reported in (1986) 61 STC 301 (FB) while considering the similar
facts and circumstances, has held inter-alia that the law has not prescribed
any particular form for a notification generally on those under the Sales Tax
Act and that being so, where a formal resolution of the Government expressly
issued in its name and recorded by the order of the Governor is duly published
in the Gazette specifying in express terms the exemption to be granted, it
cannot be said that it would not come within the ambit of notifications
referred to in the Sales Tax Act and further held that such resolution would be
a notification in terms or in any case a substantial compliance with the law
which would render any distinction between the two as one without a legal
difference and also that such resolution would come squarely within the
import and ambit of section 7(3) of the Bihar Finance Act, 1981 and in this
context, the rule of law that any beneficent tax provision has to be liberally
construed would also come into play

 The provisions laid down in the Policies works as a promissory estoppel and
the concerned departments cannot put their feet back and deny the incentives
allowed under the Policy.
 When the Govt. promises to grant an exemption/ subsidy from any incentives
or concession and acting upon that promise the consumer takes some steps to
avail of the exemption or concession the question of promissory estoppel arises
in case the Govt. Organization backs out of the promise.

 The matter was specifically and with great detail dealt in by the Apex Court in
the matter of Motilal Padampat Sugar Mills Vs. State of Uttar Pradesh
reported in 44 STC 42 wherein it was specifically stated by the Hon’ble Apex
Court that “ absence of any consideration for the promise will not stand in the
way of enforcing it as this doctrine is a juristic device for preventing injustice;
this is a potent weapon of offence, by itself giving rise to the cause of action.
 The respondents cannot act in a arbitrary manner in violation to the Article 14
of the Constitution, while the underlying principle of Policy is to accelerate
growth of the Cold Storages and by denying the benefit the legitimate right of
the petitioner has been violated.