The doctrine of promissory estoppel or equitable estoppel

The doctrine of promissory estoppel or equitable estoppel is well established in the administrative law of the country. To put it simply, the doctrine represents a principle evolved by equity to avoid injustice. The basis of the doctrine is that where any party has by his word or conduct made to the other party an unequivocal promise or representation by word or conduct, which is intended to create legal relations or effect a legal relationship to arise in ;the future, knowing as well as intending that the representation, assurance or the promise would be acted upon by the other party to whom it has been made and has in fact been so acted upon by the other party, promise, assurance or representation should be binding on the party making it and that party should not be permitted 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 or are intended to take place between the parties.

 It has been settled by the Apex Court that the doctrine of promissory estoppel is applicable against the Government also particularly where it is necessary to prevent fraud or manifest injustice. The doctrine, however, cannot be pressed into aid to compel the Government or the public authority to carry out a representation or promise which is contrary to law or which was outside the authority or power of the officer of the Government or of the public authority to make. There is preponderance of judicial opinion that to invoke the doctrine or promissory estoppel clear, sound and positive foundation must be laid int he petition itself by the party invoking the doctrine and that bald expressions, without any supporting material, to the effect that the doctrine is attracted because the party invoking the doctrine has altered its position relying on the assurance of the Government would not be sufficient to press into aid the doctrine. The doctrine of promissory estoppel cannot be invoked in the abstract and the Courts are bound to consider all aspects including the results sought to be achieved and the public good at large, because while considering the applicability of the doctrine, the Courts have to do equity and 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 if it can be shown having regard to the facts and circumstances of the case that it would be inequitable to hold the Government or the public authority to its promise, assurance or representation.

 The ambit, scope and amplitude of the doctrine of promissory estoppel has been evolved in this country over the last quarter of a century through several decisions of the Apex Court starting with Union of India (UOI) and Others Vs. Indo-Afghan Agencies Ltd., . Reference in this connection may be made with advantage to Century Spinning and Manufacturing Company Ltd. and Another Vs. The Ulhasnagar Municipal Council and Another, ; Motilal Padampat Sugar Mills Co. Ltd. Vs. State of Uttar Pradesh and Others, ; Jit Ram Shiv Kumar and Others Vs. State of Haryana and Others, ; Union of India (UOI) and Others Vs. Godfrey Philips India Ltd., ; Indian Express Newspapers (Bom) (P) Ltd v. Union of India ; Amrit Banaspati Co. Ltd. v. State of Punjab, (1992) 2 SCC 511 and Union of India and others Vs. Hindustan Development Corpn. and others, . In Godfrey Philips India Ltd (supra), the Apex Court observed as under:

“We may also point out that the doctrine of promissory estoppel being an equitable doctrine, it must yield when the equity so requires; if ti can be shown by the government or public authority that having regard to the facts as they have transpired, it would be inequitable to hold the Government or public authority to the promise or representation made by it, the Court would not raise an equity in favor of the person to whom the promise or representation is made and enforce the promise or representation against the Government or public authority. The doctrine of promissory estoppel would be displaced in such a case, because on the facts, equity would not require that the Government or public authority should be held bound by the promise or representation made by it.

 In Excise Commissioner, Uttar Pradesh, Allahabad and Others Vs. Ram Kumar and Others, the Apex Court observed in para 19 as under :-

“The fact that sales of country liquor had been exempted form sales tax vide Notification No. ST-1149/X-802 (33)-51 dated 6-4-1959 could not operate as an estoppel against the State Government and preclude it from subjecting the sales to tax if it felt impelled to do so int he interest of the revenues of the State which are required for execution of the plans designed to meet the ever increasing pressing needs of the developing society. It is now well settled by a catena of decisions that there can be no question of estoppel against the government in the exercise of its legislative, sovereign of executive powers.”

 Prof. S.A. de Smith in his celebrated treatise Judicial Review of Administrative Action, 3rd Edn., at p. 279 sums up the position thus :

“Contracts and covenants entered into by the Crown are not be construed as being subject to implied terms that would exclude the exercise of general discretionary powers for the public good. On the contrary they are to be construed as incorporating an implied term that such powers remain exercisable. This is broadly true of other public authorities also. But the status and functions of the Crown in this regard are of a higher order. The Crown cannot be allowed to tie its hand completely by prior undertakings is as clear as the proposition that the Courts cannot allow the Crown to evade compliance with ostensibly binding obligations whenever it thinks fit. If a public authority lawfully repudiates or departs from the terms of a binding contract in order to have been bound in law by an ostensibly binding contract because the undertakings would improperly fetter it general discretionary powers the other party to the agreement has no right whatsoever to damages or compensation under the general law, no matter how serious the damages that party may have suffered.”

Determination of applicability of promissory estoppel against the Government hinges upon balance of equity or public interest. In case there is a supervening factor i.e. public equity, the Government would be allowed to change its stand; it would then be able to withdraw from the representation made by it which induced persons to take certain steps which may have gone adverse to the interest of such persons on account of such withdrawal. Once public interest was accepted as the superior equity which can override individual equity, the aforesaid principle should be applicable even in cases where a period had been indicated for operation of the promise. Similar view was expressed by the Apex Court in Shrijee Sales Corporation and Another Vs. Union of India (UOI), . In that case, a notification was issued exempting customs duty on PVC. By a second notification the exemption was withdrawn. The Court held that the facts of ;the case revealed that there was a supervening public Interest and the government was competent to withdraw the first notification without giving any prior notice tot eh respondent. View on identical lines taken earlier in Kasinka Trading and another, etc. etc. Vs. Union of India and another, was reiterated.

 This view was again reiterated by the Apex Court in Sales Tax Officer v. Shree Durga Oil Mills (1998) 108 STC 274. The principle which can be culled out from various decisions is that once public interest is accepted as superior equity the same can override the equity, the same is applicable in cases where a period had been indicated for operation of the promise. As stand of the Government would go to show that there was considerable loss of revenue and the purpose for which the exemption was granted was amply fulfilled.

 The Courts will only bind the Government by its promises to prevent manifest injustice or fraud and will not make the Government a slave of its policy for all times to come when the Government acts in its governmental, public or sovereign capacity.