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Administrative Law Project

Promissory Estoppel

Compiled By
Ankit Chowdhri
10/09
Table of Contents

Topic Covered Page Number

Table of Cases i

Abbreviations Used ii

Meaning of Estoppel 1

Estoppel – As a Rule of Evidence 2

Evolution of Doctrine of Promissory Estoppel 4

Promissory Estoppel: An Outline 5

Nature of Promissory Estoppel 6

Application of Doctrine of Promissory Estoppel to Government 7

Estoppel against a Statute 9

Conclusion 10

Bibliography 11

Webliography 11
Table of Cases

Amit Banaspati Co. Ltd. v. State of Punjab 10

Canada & Dominion Sugar Co. Ltd. v. Canadian National (W. Indies) Steamships Ltd. 2

Central London Property Trust Ltd. v. High Trees House Ltd. 4, 5

Century Spinning and Manufacturing Co. v. Ulhasnagar Municipality 8

Crabb v. Arun DC 7

Delhi University v. Ashok Kumar 3

Grundt v. The Great Boulder Proprietary Gold Miners Ltd. 6

Hughes v. Metropolitan Railway Company 4

Indira Bai v. Nand Kishore 2, 6

Jit Ram Shiv Kumar v. State of Haryana 8, 9

L.M.T. Limited v. State of Uttar Pradesh 5

Moorgate Mercantile Co. v. Twichings 7

Motilal Padampat Sugar Mills v. State of Uttar Pradesh 6, 8

Sharma Transport v. Government of Andhra Pradesh 1, 5

Shri Krishna v. Kurukshetra University 3

State of Punjab v. Nestle India Ltd. 9

Union of India v. Godfrey Phillips India Ltd. 8

Union of India v. Indo Afghan Agencies Ltd. 5, 9

Vasant Kumar Radhakrishan Vora v. Board of Trustees, Port of Bombay 10

i
Abbreviations Used

Abbreviation Used Used in Place of

AC Appeal Cases (Law Reporter)

AIR All India Reporter

All ER All England Reporter

BA Bachelor of Arts

Ch. Chancery

CLR Commonwealth Law Reports

Del. Delhi High Court

Ed. Edition

Ibid. Ibidem

J. Justice

KB King’s Bench

Ltd. Limited

p. Page number

SC Supreme Court of India

SCC Supreme Court Cases

SCR Supreme Court Reporter

v. versus

ii
Meaning of Estoppel

Estoppel in simple words is a bar which prevents a party from asserting a fact or
putting up claim inconsistent with the position he previously took. It is said to be a rule which
preludes a person from saying one thing at one time and another thing, totally inconsistent
with the earlier one, at another stage.1

In Black‟s New Dictionary, “estoppel” is indicated to mean “that a party is prevented


by his own acts from claiming a right to the detriment of other party who was entitled to rely
on such conduct and has acted accordingly.”2

According to Oxford Dictionary of Law estoppel is “a rule of evidence or a rule of


law that prevents a person from denying the truth of a statement he has made or from denying
facts that he has alleged to exist, The denial must have been acted upon (probably to his
disadvantage) by the person who wishes to take advantage of the estoppel or his position
must have been altered as a result.”3

When a person has, by his declaration, act or omission, intentionally caused or


permitted another person to believe a thing to be true, and to act upon such belief, neither he
nor his representative shall be allowed in any suit or proceeding between himself and such
person or his representative, to deny the truth of the thing. The former person is thus estopped
from denying the truth of his previous statement. He, thus, cannot both approbate and
reprobate, because of invocation of rule of estoppel against him.4

In other words, estoppel is a rule, whereby a party is precluded from or to say


estopped from denying the existence of some state of facts which he had previously asserted
and on which the other party has relied or is entitled to rely upon.

According to Wade and Forsyth the basic principle of estoppel is that a person who by
some statement or representation or representation of face causes the other to act to his

1 st
Kumar, Narender; Nature and Concepts of Administrative Law, 1 Ed., Allahabad Law Agency, Faridabad,
2011, p. 366.
2
Quoted in Sharma Transport v. Government of Andhra Pradesh, AIR 2002 SC 322.
3 th
A Dictionary of Law, 5 Ed., Oxford University Press, New York, 2003, p. 95.
4 st
Kumar, Narender; Nature and Concepts of Administrative Law, 1 Ed., Allahabad Law Agency, Faridabad,
2011, p. 366.

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determent in reliance on the truth of it is not allowed to deny it later, even though it is wrong.
Estoppel, thus, gives way to justice to prevail over the truth.5

In Indira Bai v. Nand Kishore,6 Sahai, J., stated “Estoppel is a rule of equity flowing
out of fairness striking on behaviour deficient in good faith. It operates as a check on spurious
conducting by preventing the inducer from taking advantage and assailing forfeiture already
accomplished. It is invoked and applied to aid the law in administration of justice. But for it
great many injustices may have been perpetrated.”

Estoppel – As a Rule of Evidence

Estoppel, as a rule of evidence, may be read in distinction to equitable principle of


promissory estoppel. While the former is more correctly described as “a principle of law.” 7
The latter is known as a rule of equity. As a principle of law estoppel applies only to
representations about past or present facts.8

The basic premise of estoppel is that a person, who by some statement or


representation of facts causes another act in reliance on the truth of it, is not allowed to deny
it later, even though it is wrong.9

The principle of estoppel embodies in Section 115 of the Indian Evidence Act, 1872 is
commonly known as a rule of evidence. The Section reads as under:

When one person has by his declaration, act or omission, intentionally caused or
permitted another person to believe a thing to be true and to act on such belief, neither he nor
his representatives shall be allowed in any suit or proceeding between himself and such
person or his representative, to deny the truth of that thing.

To invoke the principle of estoppel enshrined in the Section, the following three
conditions are necessarily be satisfied:

(i) there must be a declaration, act or omission on the part of a person;


(ii) by the said declaration, etc., that person must have intentionally caused or
permitted another person to believe a thing to be true; and

5 th
Wade, H.W.R. & Forsyth, C.F.; Administrative Law, 9 Ed., Oxford University Press, New Delhi, 2006, p.237.
6
(1990) 4 SCC 668 (670).
7
Canada & Dominion Sugar Co. Ltd. v. Canadian National (West Indies) Steamships Ltd., (1947) AC 46.
8 th
Wade, H.W.R. & Forsyth, C.F.; Administrative Law, 9 Ed., Oxford University Press, New Delhi, 2006, p.236.
9
Ibid.

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(iii) he must have intentionally caused or permitted the said another person, to act
upon such belief.

Section 115 explains that a party is precluded from denying the existence of some
state of facts which he had previously asserted and on which the other party has relied or is
entitled to rely on. That, a man should keep his words, all the more so when the promise is
made with the intention that the other party should act upon it.10

As a rule of evidence, embodied in Section 115, estoppel may lie against the
Government on a representation or statement of facts, if the statement does not operate
against the statute.

In Delhi University v. Ashok Kumar,11 the respondent, a student after passing the
Secondary School Certificate Examination of the Gujarat Board was admitted provisionally
in the B.A. I year course in the Delhi University. After over a year, the University informed
him that he was in eligible to join the course because the Gujarat Board Examination had
been recognised by the appellate University as equivalent to Matric Examination while the
qualification to join B.A. I year Course was passing the Higher Secondary Examination.
However, the Statute had authorised the Academic Council of the University to grant
exemption from the admission requirements. The High Court of accepted the plea of the
estoppel raised by the student against the University.

The Court stated that estoppel was within the meaning of Section 115 of the Evidence
Act, 1872, might arise from the silence as well as words, the Court held “inaction of the
University for over a year amounted to a representation by it that it had approved his
admission” and therefore the University would now be estopped from doing that.

In Shri Krishna v. Kurukshetra University,12 the Apex Court had ruled that the
University could not cancel the candidature of the appellant-student for the not complying
with the attendance requirement, as the respondents failed to tale the adequate care to
scrutinize his examination from at the relevant time to ascertain whether the candidate
fulfilled the necessary conditions.

10 st
Kumar, Narender; Nature and Concepts of Administrative Law, 1 Ed., Allahabad Law Agency, Faridabad,
2011, p. 368.
11
AIR 1968 Del. 131.
12
AIR 1976 SC 376.

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Evolution of Doctrine of Promissory Estoppel

Promissory estoppel is a relatively new development. In order to trace the evolution of


the doctrine in England, we need to refer to some of the English decisions. The early cases
did not speak of this doctrine as estoppel. They spoke of it as „raising equity‟. Lord Cairns
stated the doctrine in its earliest form in the following words in Hughes v. Metropolitan
Railway Company.13

“It is the first principle upon which all courts of equity proceed, that if parties who
have entered into definite and distinct terms involving certain legal results afterwards by their
own act or with their won consent enter upon a course of negotiation which has the effect of
leading one of the parties to suppose that the strict rights arising under the contract will not be
enforced, or will be kept in suspense, or held in abeyance, the person who otherwise might
have enforced those rights will not be allowed to enforce them where it would be inequitable
having regard to the dealings which have thus taken place between the parties.”

This principle of equity made sporadic appearances but it was only in 1947 that it was
restated as a recognized doctrine by Lord Denning in Central London Properties Trust Ltd.
v. High Trees House Ltd.,14 who asserted15:

“A promise intended to be binding, intended to be acted upon, and in fact acted upon
is binding.”

In the formative period the doctrine of promissory estoppel could not be invoked by
the promisee unless he had suffered „detriment‟ or „prejudice‟. All that is required is that the
party asserting the estoppel must have acted upon the assurance given by him. The alteration
of position by the party is the only indispensable requirement of the doctrine.

In India, there are two stages in the evolution of the application of this doctrine; pre-
Anglo Afghan case and post - Anglo Afghan case. Prior to this case, the position was that
promissory estoppel did not apply against the Government. But the position altered with this
case.

13
(1877) 2 AC 439.
14
(1947) KB 130.
15
See Infra 17.

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In Union of India v. Indo Anglo Afghan Agencies Ltd.,16 the Government of India
announced certain concessions with regard to the import of certain raw materials in order to
encourage export of woollen garments to Afghanistan. Subsequently, only partial concessions
and not full concessions were extended as announced. The Supreme Court held that the
Government was estopped by its promise. Thereafter the courts have applied the doctrine of
promissory estoppel even against the Government.

Promissory Estoppel: An Outline

Lord Denning in Central London Property Trust Ltd. v. High Trees House Ltd.,17
expressing the doctrine stated:18

“Once a promise has been made by a person knowing that it would be acted upon by
the person to whom it is made and in face it is no acted upon, then it is inequitable to allow
the party making the promise to go back upon it.”

In this case, during the Second World War, people left London owing to
bombardment and as a result, a number of flats remained unoccupied. „A‟ had left out his flat
to B for 99 years at the rate of £2500 a year. He, however, due to war conditions, agreed to
reduce the rent by fifty per cent. After the war was over, the tenants returned. A demanded
full amount of rent to which B objected relying on A‟s assurance. The Court applied the
doctrine of estoppel and granted relief to B.

The doctrine of Promissory Estoppel is premised to be conduct of a party making a


representation to the other so as to enable him to arrange its affairs in such a manner as if the
said representation is acted upon.19

In Sharma Transport v. Government of Andhra Pradesh,20 Promissory Estoppel was


defined as:

“… an estoppel which arises when there is a promise which promisor should


reasonably except to induce action or forbearance of a definite and substantial character on
the part of the promise and which does induce be avoided only by enforcement of promise.”

16
AIR 1968 SC 718.
17
(1947) 1 KB 130.
18
See Supra 14.
19
L.M.T. Limited v. State of Uttar Pradesh, AIR 2008 SC 1032.
20
AIR 2002 SC 322.

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“… the principle of promissory estoppel is that where one party has by his words or
conduct made to the other a clear and unequivocal promise or representation which is
intended to create legal relations or affect a legal relationship to arise in the future, knowing
or intending that it would be acted upon by the other party …, the promise or representation
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.”

Dixon, J., an Australian Jurist in Grundt v. The Great Boulder Proprietary Gold
Miners Ltd.,21 explained:

“It is often said that the party asserting the estoppel must have been inducted to act to
his detriment. Although substantially such a statement is correct and leads to no
misunderstanding, it does not bring out clearly the basal purpose of the doctrine. That
purpose is to avoid or prevent a determent to the party asserting the estoppel by compelling
the opposite party to adhere to the assumption upon which the former acted or abstained from
acting. This means that the real detriment or harm from which the law seeks to give
protection is that which would flow from the change of position if the assumptions were
deserted that led to it.”

Sahai, J., explaining the basis of the doctrine in Indira Bai v. Nand Kishore,22
observed “Estoppel is a rule of equity flowing out of fairness striking on behaviour deficient
in good faith. It operates as a check on the spurious conducting by preventing the intruder
from taking advantage and assailing forfeiture already accomplished. It is invoked and
applied to aid the law in administration of justice. But for it, great many injustices, may have
been perpetrated.”

Nature of Promissory Estoppel

It has been said that the rule of promissory estoppel cannot itself be the basis of an
action. It cannot be a cause of action; it can only be a shield and not a sword. Since the
doctrine has been usually invoked by way of defence, it has come to be identified as a
measure of defence.23

21
(1938) 59 CLR 641.
22
(1990) 4 SCC 668.
23
Motilal Padampat Sugar Mills v. State of Uttar Pradesh, AIR 1979 SC 621.

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But, in the present day judicial tendency appears to be that estoppel can be used as a
sword also.24 Stating that “there are estoppels and estoppels” Lord Denning held that “some
do give rise to cause of action, some do not.” In the species of estoppel called “proprietary
estoppel”, says the learned Lord “it does give rise to cause of action.”25

Estoppel is often described as a rule of evidence, but the whole concept is more
correctly viewed as a substantive rule of law. It is necessary to make it clear that the doctrine
of promissory estoppel or equitable estoppel is not based on the principle of estoppel but it is
a doctrine evolved by equity in order to prevent injustice. Estoppel by conduct proceeds on
the rule of substantive law and equity where a promise made by a person knowing that it
would be acted on by the person to whom it is made and in fact it is so acted and it is
inequitable to allow the party making the promise to go back upon it.26

It being an equitable principle evolved for doing justice, “there is no reason,” said
Bhagwati, J., “why it should be given only limited application by way of defence. It can be
the basis of cause of action.”27

Though commonly named as “promissory estoppel”, it is neither in the realm of


contract nor in the realm of estoppel. The basis of the doctrine is the interposition of equity
which has always, true to its form, stepped in to mitigate the rigour of strict law.28

Application of Doctrine of Promissory Estoppel to Government

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 the facts as
they have subsequently transpired, it would be inequitable to the Government to abide by the
promise made by it, the court would not raise equity in favour of the promise and enforce it
against the Government. When the Government is able to show that due to the facts which
have transpired subsequent to the promise being made, public interest would be prejudiced if
the Government were required to carry out the promise made, the court would have to
balance the public interest in the Government carrying out the promise made to a citizen

24
Moorgate Mercantile Co. v. Twichings, (1975) 3 All ER 314.
25
Crabb v. Arun DC, (1976) Ch. 179.
26
Halsbury’s Laws of England, XV, 168., Cited in Kumar, Narender; Nature and Concepts of Administrative Law,
st
1 Ed., Allahabad Law Agency, Faridabad, 2011, p. 371.
27
See Supra 24.
28 th
Wade, H.W.R. & Forsyth, C.F.; Administrative Law, 9 Ed., Oxford University Press, New Delhi, 2006, p.236.

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which has induced the citizen to alter his position to his prejudice and the public interest
likely to suffer if the Government were to carry out the promise, and determine which way
the equity lies.

The case of Motilal Padampat Sugar Mills v. State of Uttar Pradesh,29 is a


trendsetter regarding the application of the doctrine of promissory estoppel against the
Government. In this case the Chief Secretary of the Government gave a categorical assurance
that total exemption from sales tax would be given for three years to all new industrial units
in order them to establish themselves firmly. Acting on this assurance the appellant sugar
mills set up a hydrogenation plant by raising a huge loan. Subsequently, the Government
changed its policy and announced that sales tax exemption will be given at varying rates over
three years. The appellant contended that they set up the plant and raised huge loans only due
to the assurance given by the Government. The Supreme Court held that the Government was
bound by its promise and was liable to exempt the appellants from sales tax for a period of
three years commencing from the date of production.

In Century Spinning and Manufacturing Co. v. Ulhasnagar Municipality,30 the


municipality agreed to exempt certain existent industrial concerns in the area from octroi duty
for a period of seven years. However, later on it sought to impose duty. This was challenged
and the Supreme Court, while remanding the case to the High Court, held that where the
private party had acted upon the representation of a public authority, it could be enforced
against the authority on the grounds of equity in appropriate cases even though the
representation did not result in a contract owing to the lack of proper form.

However, the case of Jit Ram Shiv Kumar v. State of Haryana,31 cast a shadow on
the Motilal case where it was held that the doctrine of promissory estoppel is not available
against the exercise of executive functions of the State. The Supreme Court in Union of India
v. Godfrey Phillips India Ltd.,32 soon removed this doubt. The Court held that the law laid
down in Motilal case represents the correct law on promissory estoppel.

29
AIR 1979 SC 621.
30
AIR 1971 SC 1021 : 1970 SCR (2) 854.
31
AIR 1980 SC 1285 : 1980 SCR (3) 689 : (1981) SCC (1) 11.
32
1996 (85) ELT 242 Bom.

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In State of Punjab v. Nestle India Ltd.,33 the Apex Court said:

“…promissory estoppel long recognised as a legitimate defence in equity was held to


find cause of action against the Government, even when, and this needs to be emphasized, the
representation sought to be enforced was legally invalid in the sense that it was made in a
manner which was not in conformity with the procedure prescribed by the statute.”

It has also been made clear that the Government could not, on some undefined and
undisclosed ground of necessity or expediency fail to carry out the promise solemnly made
by it. Nor, the Government could claim to be the Judge of its own obligation to the citizen on
an ex parte appraisement of the circumstances in which the obligation had arisen.34

The doctrine of estoppel cannot be invoked for preventing the Government from
acting in discharge of its duties under the law. The doctrine of cannot be applied in teeth of
an obligation or liability imposed by the law. It cannot be used to compel the Government or
even a private party to do an act prohibited by law. There can be no promissory estoppel
against the exercise of legislative power. The legislature can never be precluded from
exercising its legislative functions by resort to the doctrine of promissory estoppel.35

Estoppel against a Statute

The doctrine of estoppel does not apply to statutes. In other words, a person who
makes a statement as to the existence of the provisions of a statute is not estopped,
subsequently, from contending that the statutory provision is different from what he has
previously stated. A person may not represent the true status of a statute or law, but the other
person who relies on such a representation is at liberty to find out the position of law on the
matter and as the maxim says, ignorance of law is no excuse.36

In Jit Ram Shiv Kumar v. State of Haryana,37 a municipality granted exemption


from octroi for developing a mandi, but subsequently is revoked the exemption. Later it again

33
AIR 2004 SC 4559.
34
Union of India v. Indo Afghan Agencies Ltd., AIR 1968 SC 718.
35 st
See Kumar, Narender; Nature and Concepts of Administrative Law, 1 Ed., Allahabad Law Agency, Faridabad,
2011, p. 381.
36 th
See Upadhyaya, Dr. J.J.R.; Administrative Law, 7 Ed., Central Law Agency, Allahabad, 2011, p. 333.
37
AIR 1980 SC 1285 : 1980 SCR (3) 689 : (1981) SCC (1) 11

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granted the exemption in keeping with the terms of the original sale of plots, but levied taxes
again. Even so, a claim of estoppel against its legislative power was not allowed.

So is the case with the tax laws. If the law requires that a certain tax be collected, it
cannot be given up, and any assurances by the Government that the taxes would not be
collected would not bind the Government, when it chooses to collect the taxes. Thus it was
held that when there was a clear and unambiguous provision of law that entitles the plaintiff
to a relief, no question of estoppel arises.

The following conditions have been laid down as necessary to invoke no estoppel against
a statute:

 The parties must bilaterally agree to contract irrespective of statutory provisions of the
applicable Act.
 The agreement entered into by the parties must be expressly prohibited by the Act.
 The provision of law must be made for public interest and not pertain to a particular
class of persons.
 The agreement of the parties should not have been merged into an order of the court
which by the conduct of the parties had been dissuaded from performing its statutory
obligations.

So, it is a well settled catena of decision that the doctrine of promissory estoppel cannot
be invoked against the provisions of Statutes.38

Conclusion

The Doctrine of Estoppel is necessary to maintain flexibility in the law of the land.
The Government and other parties are kept under check from making promises for which
they can be held accountable as discussed before. It is inequitable that the promisor should be
allowed to resize from the assurance or representation having regard to what the promisee has
done or refrained from doing in reliance on the assurance or representation. So the citizens
can rest assured about the lawful promises made.

38
Vasant Kumar Radhakrishan Vora v. Board of Trustees, Port of Bombay, AIR 1991 SC 14; Amit Banaspati
Co. Ltd. v. State of Punjab, AIR 1992 SC 1075.

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Bibliography

 A Dictionary of Law, 5th Ed., Oxford University Press, New York, 2003.
 Jain, M.P. & Jain, S.N.; Principles of Administrative Law, 6th Ed., Vol. II,
Wadhwa Nagpur, 2007.
 Kumar, Narender; Nature and Concepts of Administrative Law, 1st Ed., Allahabad
Law Agency, Faridabad, 2011.
 The Indian Evidence Act, 1872.
 Upadhyaya, Dr. J.J.R.; Administrative Law, 7th Ed., Central Law Agency,
Allahabad, 2011.
 Wade, H.W.R. & Forsyth, C.F.; Administrative Law, 9th Ed., Oxford University
Press, New Delhi, 2006.

Webliography

 http://en.wikipedia.org/wiki/Case_citation
 http://hanumant.com/index.php/articles/general-articles/41-promissory-estoppel-
application-to-the-govt-by-divya-bhargava.html
 http://www.indiankanoon.org/
 http://www.legalserviceindia.com/article/l249-Promissory-Estoppel.html

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