NATIONAL LAW INSTITUTE UNIVERSITY, BHOPAL

PROJECT

SUBJECT- LAW OF CONTRACTS

TOPIC- CASE ANALYSIS-AMRIT BANASPATI CO.LTD.AND ANR v

STATE OF PUNJAB AND ANR

SUBMITTED BY SUBMITTED TO
ADHYA SINGH TOMAR ASST. PROF. NEHA SHARMA
2020BALLB 03
 ACKNOWLEDGEMENT
Through the means of this project, I would take this opportunity to thank Asst. Prof. Neha
Sharma gave me this opportunity to study the subject in-depth and improve my understanding
of the concept of promissory estoppel and its applicability through an analysis of Amrit
Banaspati Co.Ltd.And Anr vs State Of Punjab And Anr on 5 March 1992 case. I would also
like to express my sincere gratitude to my parents, friends, and the Gyan Mandir officials
without whose invaluable support this project could not have completed successfully.

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 DECLARATION
I, Adhya Singh Tomar, D/o Sandeep Singh Tomar, Roll Number: 2020BALLB 03 Enrolment
Number A-2176 do hereby declare that the Project titled “Amrit Banaspati Co.Ltd.And Anr
vs State Of Punjab And Anr on ” is an outcome of my own independent research endeavour
and has been carried out under the guidance of Prof. Neha Sharma. Literature relied on by me
for the purpose of this Project has been fully and completely acknowledged in the footnotes
and bibliography. The Project is not plagiarized and all reasonable steps have been taken to
avoid plagiarism. Similarity Index as per the Turnitin Report is____%. In case, my project is
found to be plagiarized, the course teacher shall have the full liberty to ask me to revise the
Project. If I fail to comply with the instructions of the teacher, my project may be referred to
the Committee Against Use of Unfair Means and I will comply with the decision of the said
Committee.

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Table of Contents
ACKNOWLEDGEMENT.........................................................................................................2

DECLARATION.......................................................................................................................3

JUDGEMENT............................................................................................................................5

BENCH......................................................................................................................................5

COUNSEL.................................................................................................................................5

BACKGROUND........................................................................................................................6

MATERIAL FACTS OF THE CASE........................................................................................6

ISSUES RAISED BEFORE THE COURT...............................................................................7

ARGUMENTS ADVANCED ON BEHALF OF THE APPELLANT.....................................7

ARGUMENTS ADVANCED ON BEHALF OF RESPONDENT...........................................7

PROVISIONS AND CONCEPTS.............................................................................................7

PROMISSORY ESTOPPEL..................................................................................................7

Ingredients of The Doctrine Of Promissory Estoppel........................................................8

Areas where the doctrine of promissory estoppels is not applicable.................................8

SECTION 23 OF THE INDIAN CONTRACT ACT............................................................9

CITATIONS RELIED UPON....................................................................................................9

1. Motilal Padampat Sugar Mills v. State of U.P................................................................9

2. Purnami Oil Mills etc. v. State of Kerala........................................................................9

3. Union of India v. Indo Afghan Agencies......................................................................10

JUDGMENT............................................................................................................................10

CONCRETE JUDGMENT......................................................................................................12

RATIO DECIDENDI...............................................................................................................12

CONCLUSION........................................................................................................................13

BIBILIOGRAPHY...................................................................................................................14

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 JUDGEMENT
Amrit Banaspati Co.Ltd.And Anr vs State Of Punjab And Anr on 5 March, 1992

In the Supreme Court of India

Civil Appellate Jurisdiction

Civil Appellate Petition No. 2832-2833 of 1979

1992 AIR 1075

BENCH
There was a Division Bench constituted by Justice R M Sahai and Justice S Mohan. The
Judgment was delivered by Justice R.M. Sahai.

COUNSEL
Kapil Sibal, U.K. Khaitan, Praveen Kumar and Vivek Sibal for the Appellants whereas D.S.
Mehra, Mrs Jayshree Anand, Arun Mehra, Sanjay Bansal and G.K. Bansal, for the
Respondents.

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 BACKGROUND
In the present case, the appellant challenged the judgment of the division bench of Punjab and
Haryana High Court which overruled the judgment of the single judge bench which directed
the Punjab government to return the sales tax and interstate sales tax paid by the appellant on
the principle of Promissory Estoppel. On selling its finished goods to the State government,
the appellant demanded a refund of the sales tax charged by the government. In response to
the respondents' failure to reimburse the sum, the appellant filed a written petition with the
High Court of Punjab and Haryana asking the appellant for an order to reimburse the sales
tax.1

The decision of the single judge bench of Punjab and Haryana High Court was overruled by
the Division Bench. The Division Bench of the High Court gave two arguments for enabling
the Government to exempt from the rigor of the principle of promissory estoppel, one that the
brochure itself was unauthorized and the other that the policy had already been altered when
the Government's decision arrived.

MATERIAL FACTS OF THE CASE

 In December 1966, the Government of Punjab released a brochure announcing its
'New Strategy' stating that benefits and discounts, one of them being sales tax refunds,
would be open to those citizens who were willing to work on setting up selective
large-scale factories.
 The appellant's manager wrote a letter to the Chief Minister of Punjab in June 1968
attracted by concessions and rewards expressing the appellant's readiness to set up a
vanaspati facility given that it obtained the concession. By its letter dated 2nd July,
1968 the Director of Industries replied the appellant assuring that the concession
would be granted to it.2
 Thereafter, emails and numerous meetings were shared between the appellant's
representative and the government officials.
 By its letter dated 25th October, 1968 the appellant requested for confirmation of the
concession. By a letter dated 16th June, 1969 it was confirmed that the State
Government had agreed to give the concession and incentives.

1
Amrit Banaspati CoLtdAnd Anr vs State Of Punjab And Anr [1992] SC, 1075 AIR (SC).
2
Amrit Banaspati CoLtdAnd Anr vs State Of Punjab And Anr [1992] SC, 1075 AIR (SC).

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  Acting on the assurance the appellant purchased the land, which by a notification
issued by the Government was included in the focal point, and also invested
substantial amount in setting up the unit

ISSUES RAISED BEFORE THE COURT

 Whether the appellant can claim a refund in tax from the Punjab government under
promissory estoppel?
 Whether a promise of return of sales tax valid in the court of law?

ARGUMENTS ADVANCED ON BEHALF OF THE APPELLANT

 The appellant argued that the promise made by the government comes under the
principle of promissory estoppel and hence makes it liable to pay the damages to the
company

ARGUMENTS ADVANCED ON BEHALF OF RESPONDENT

 In the lack of any guarantee from the responsible authority on behalf of the State, the
pledge, if any, was incapable of giving birth to any kind of equity.
 That the policy of the Government declared in the brochure was merely a bid and the
letter of the appellant submitted on 25 October 1968 was a counter offer under
consideration by the Government, which made another counter offer on 16 June,
which was approved by the appellant, who subsequently submitted for registration
and informed the Government of the declaration of the factory at the focal point.

PROVISIONS AND CONCEPTS

PROMISSORY ESTOPPEL
Promissory estoppels' doctrine is based on the principles of justice, fairness and good
conscience. It was developed to prevent injustice by means of equity. It neither comes under
contract nor under estoppels proper.

The principle is that if a party makes a promise or acts upon a promise with another party for
the purpose of creating or influencing legal relationships, that promise should be binding on
the party making it. It will not be allowed to go back from its words. Because it will be
against equity to revert from the words.

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The promissory estoppel doctrine is an equitable doctrine. Like all equitable remedies, it is
discretionary, in relation to common law, to have full protection such as the right to damages
for breach of contract. In order to deter injustice, it is a concept established by equity and
while generally referred to as 'promissory estoppel,' it is not in the domain of contract nor in
the realm of estoppel.3

In India, however, as the law of estoppel is a rule of evidence, the terms of Section 115 of the
Indian Evidence Act, 1872 must be fulfilled with the implementation of the doctrine. The
Promissory estoppel doctrine is not protected by Section 115 as the section concerns claims
regarding current evidence, while Promissory estoppel addresses future commitments.
Applying this doctrine would, as referred to in Article 299, oppose the constitutional
provision enabling the individual giving the promise or guarantee to be exempted from
personal liability.

Ingredients of The Doctrine Of Promissory Estoppel

 Representation by a person to another
 The other should have acted upon the said representation and
 Such action should have been detrimental to the interests of the person to whom the
representation has been made.

Areas where the doctrine of promissory estoppels is not applicable

 There are no estoppels against the settled principle of law.
 It is not applicable in case of concluded commercial contract.
 The doctrine of promissory estoppels cannot be invoked if the assurance is held out
but not incorporated in the agreement between parties.
 For applying the principles of promissory estoppels, alteration of the position by the
plaintiff is the only requirement.

SECTION 23 OF THE INDIAN CONTRACT ACT

Section 23 of The Indian Contract Act talks about the lawfulness of the object of a contract. It
says the consideration or object of an agreement is lawful unless-

It is forbidden by law or Is of such nature that, if permitted, it would defeat the provision of
any law; or is fraudulent, or involves or implies injury to the person or property of another or
the court regards it as immoral or it is opposed to public policy
3
Madhubala Solanki, Promissory Estoppel, Lawctopus.com(Oct 8 2017)
https://www.lawctopus.com/academike/promissory-estoppel/.

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In all the above cases the consideration is said to be unlawful and all the agreements are void
if they have a consideration that is not lawful.4

CITATIONS RELIED UPON

1. Motilal Padampat Sugar Mills v. State of U.P5
In this case, the Chief Secretary of the Government gave a categorical promise that all new
industrial units would be granted a complete exemption from sales tax for a period of three
years in order to develop themselves firmly. On this basis, the appellant sugar mills set up a
hydrogenation plant by collecting a massive loan. Subsequently, the Government revised its
stance and declared that the exemption from sales tax would be provided at variable rates for
a period of three years. The appellant argued that they had set up a plant and had raised huge
loans only on the basis of the guarantee provided by the Government.

The Supreme Court of India held that if one meeting made a direct promise by his words or
action (which is supposed to give rise to valid ties or affect a legitimate relationship later on)
and the other party changed their mind on that conviction, the first party would be liable to
any harm. The obligation to invoke the law must be made available, in fact, that the verifiable
condition should be to such a degree that "shamefulness can remain away from the mere
requirement of the guarantee."

2. Purnami Oil Mills etc. v. State of Kerala6

By order dated 11 April 1979, the Government of the State, with a view to promoting
industrialisation, provided incentives for small scale factories to be developed thereafter, in
the form of exemption from sales tax and purchasing tax, for a period of five years from the
date of commencement of production. By a second order dated 29 September 1980, published
in the Gazette on 21 October 1980, purported to be rendered pursuant to subsection 10 of the
Act, the Government removed the exemption relating to purchasing tax and reduced the
exemption from sales tax to the extent laid down.

The appellants who developed their businesses after 11 April 1979, including those who did
so after 21 October 1980, argued that they benefited from the first order exemption from
purchase tax and sales tax. In making the second order, they pleaded the estoppel law against
the Government of the State. In rejecting their Writ Petition, the High Court continued on the

4
Sec 23, The Indian Contract Act, 1872, Act no. 9 of 1872,(25 Apr 1872.)
5
M/S Motilal Padampat Sugar Mills v State Of Uttar Pradesh And Ors ,[12 December, 1978]1979 AIR 621
6
Pournami Oil Mills, Etc v State Of Kerala & Anr, [19 December, 1986], 1987 AIR 590

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ground that the first order had not been rendered in the exercise of statutory powers, although
the second order had been given pursuant to I0 of the Act.

The Government was not allowed to return to its earlier pledge of a broader exemption from
sales tax in the basis of which the industries were established on the principle of promissory
interruption and the notification issued after one year of a reduction in the exemption was
considered to extend to the industries established afterwards.

3. Union of India v. Indo Afghan Agencies7

Union of India v. Indo Afghan Agency, A.I.R. 1968 S.C. In India, 718 is the first prominent
case where the doctrine of the promissory estoppel doctrine was used Again, it has been
stated strongly that nobody should be refused his or her right or liberty, except in due course
and by statute.

The bench held that the contention raised by the government that the executive necessity
would release the government from it’s promise made to the citizens relying on which they
acted on the detriment will not hold.

The doctrine of promissory estoppel is invoked against the Government as an equitable

doctrine, which it does, of course, surrender if equity so demands. The Government is bound
by its promise, or it would be inequitable to allow it to refrain from carrying out its solemn
promise or representation on its future actions on any "undefined and undisclosed ground of
necessity or expediency."

JUDGMENT
The honorable Supreme Court held that “a citizen of a State would have no way of
ascertaining that the declaration by the Chief Minister and the Minister of State of the
Industries that the concession made in the booklet would have been made available had the
government policy not been as previously agreed by the Cabinet Sub-Committee. The
Government cannot be able to revert to its pledge by creating any documents in its file that
were neither recognized, nor released, nor acted upon as unjust and unequal, and thus
unlawful. The whole matter of granting concessions was debated at Cabinet level and all of
these considerations (namely exemption from sales tax) * were taken into account when the
Government took the decision to award such enticing concessions to the industry.”8

7
Union Of India & Ors v. M/S. Indo-Afghan Agencies Ltd [ 1967] 1968 AIR 718
8
Amrit Banaspati CoLtdAnd Anr vs State Of Punjab And Anr [1992] SC, 1075 AIR (SC) Para 14

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it is not worth finding that the policy was subject to a modification by the time the
government had agreed to grant a concession in writing so appellant should get concession
only under the new policy. Estoppel did not rise against the Government by letter dated 16
June 1969, but by a letter dated December 1968 for those willing to set up a new unit, an
assurance was given by its authorities, both in writing and in oral form. And the appellant
based on the promise that the sales tax charged would be refunded not only bought land,
machinery and other parts long before any adjustment was made to the scheme, but also
informed by the Government of the region in which the factory was built to be at the focal
point.9

Promissory Estoppel, however, being on the basis of the extension of the principle of
equality, the basic purpose of which is to foster justice based on dignity and to relieve the
promise of any wrongdoing perpetrated as a result of the promise made by the Promisor, is
incapable of being imposed in a court of law if the promise which gives rise to the cause of
the action or the arrangement, as it is implicit, gives rise to a binding contract which is
prohibited by the law. Consequently, even a state, much less a government, cannot pass a
statute or grant an order or agree to refund the tax charged by it to citizens in the exercise of
their sovereign rights, even if the levy or execution is contrary to the legislation validly
passed. A promise or arrangement to refund the tax due under the Act and rendered in
compliance with the legislation would constitute a fraud to the Constitution and to the
confidence of the people.10

“The refund of the tax shall be rendered as a result of the overpayment of the tax or its
execution, which is unconstitutional or contrary to the rules of the statute. A clause or
arrangement on the refund of tax owed or rendered in compliance with the statute cannot be
interpreted. No provision can be passed to refund the tax to a manufacturer rendered contrary
to a statute. That would have been invalid and ultra vires. The Punjab Sales Tax Act provided
for the refund of sales tax and the granting of exemption in the conditions set out in sections
12 and 30, respectively. Neither has the Government been empowered to refund the income
tax charged by the seller on the selling of the finished goods. Refund could be allowed if the
tax payment was higher than the sum due.”11

No legal relationship may have occurred as a result of the promissory operation

9
Amrit Banaspati CoLtdAnd Anr vs State Of Punjab And Anr [1992] SC, 1075 AIR (SC) Para 16
10
Amrit Banaspati CoLtdAnd Anr vs State Of Punjab And Anr [1992] SC, 1075 AIR (SC)Para 17
11
Amrit Banaspati CoLtdAnd Anr vs State Of Punjab And Anr [1992] SC, 1075 AIR (SC) Para 19

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Estoppel was opposed to both the Constitution and the statute. Taxation by the State of Amrit
Banaspati Co.Ltd.And Anr vs. State of Punjab And Anr on 5 March 1992 by means of a
process for paying it directly or indirectly to a private citizen is forbidden under the
constitutional scheme. The statute does not authorize it, nor should it be taken into account by
equity. The method of refunding sales tax was also incapable of being applied by a court of
law.

Failure of such a legally inhibited scheme, undermining public interest resulting in illicit
private gratification is revealed by a refund demand for almost Rs. 2 crores, for a period of
three years only, when the overall expenditure in the establishment of the unit amounted to
Rs. 1.5 crores, a tax levy to collect revenue to foster economic growth of the State reduced
itself by increasing the profit margin of the entity. Such a contrivance of statute, even though
the bona fide is legally inapplicable12.

CONCRETE JUDGMENT
The Supreme Court held that the doctrine of promissory estoppel can not be applied to the
current case because the government’s promise of returning the sales tax to the appellant was
illegal and hence the contract is void.

Hence, the appeal was dismissed.

RATIO DECIDENDI
“Promissory Estoppel being on extension of principle of equity, the basic purpose of which is
to promote justice founded on fairness and relieve a promisee of any injustice perpetrated due
to promisor's going back on its promise, is incapable of being enforced in a court of law if the
promise which furnishes the cause of action or the agreement, express of implied, giving rise
to binding contract is statutorily prohibited or is against public policy.”13

12
Amrit Banaspati CoLtdAnd Anr vs State Of Punjab And Anr [1992] SC, 1075 AIR (SC)Para 20
13
Amrit Banaspati CoLtdAnd Anr vs State Of Punjab And Anr [1992] SC, 1075 AIR (SC)Para 17

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 CONCLUSION
The present case is one of the landmark cases which deals with the concept of “promissory
estoppel” and its applicability in cases. Estoppel is the law of evidence and the general rule is
enforced under section 115 of the Indian Evidence Act, 1872, which specifies that where a
person has induced or allowed another person to believe a thing to be true by his statement,
act, or omission and to act on such belief, neither he nor his agent shall be permitted in any
suit or proceeding between himself and that person.

The theory of estoppel is one that is founded on equity against the state or government and
thus extends to the conditions of the situation. As a result, certain predictive laws do not
apply to the role of estoppel against the state.

By fostering integrity and good conscience, the aim is to discourage bribery and ensure
justice between the parties. The theory of estoppel is one founded on equity and is applied
accordingly regarding the facts of the situation.

The case also deals with Section 23 of the Indian Contract Act which talks about the legality
of a contract. In the present case, the promise made by the government about the return of
sales tax to the plaintiff was illegal and hence could not be fulfilled.

The court emphasized upon the fact that if the object of the contract is not lawful the party
who made the promise can not be held liable for not fulfilling the promise.

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 BIBILIOGRAPHY
 Amrit Banaspati CoLtdAnd Anr vs State Of Punjab And Anr [1992] SC, 1075 AIR
(SC)
 M/S Motilal Padampat Sugar Mills v State Of Uttar Pradesh And Ors [1978] SC, 621
AIR (SC)
 Pournami Oil Mills, Etc v State Of Kerala & Anr, [1986], 1987 AIR 590
 Union Of India & Ors v. M/S. Indo-Afghan Agencies Ltd [ 22 November, 1967] 1968
AIR 718
 Solanki M, 'Promissory Estoppel - Academike' (Academike, 2021)
<https://www.lawctopus.com/academike/promissory-estoppel/> accessed 7 February
2021
 The Indian Contract Act, 1872, Act no. 9 of 1872,(25 Apr 1872.)

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