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 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
Grundt v. The Great Boulder Proprietary Gold Miners Ltd.
3 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 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 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.” 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 b y 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
6
Kishore , Sahai, J., stated “Estoppel is a rule of equity flowing In Indira In Indira Bai v. Nand Kishore, 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. 11
Kumar, In Delhi University v. Ashok Kumar,
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 Cour t 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. 12
University , In Shri Krishna v. Kurukshetra University,
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 estoppel is a relatively r elatively 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 t erms 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 appearances but it was only in 1947 that it was restated as a recognized doctrine by Lord Denning in Central London Properties Trust Ltd. rees House Ltd. , v. High T rees
14
15
who asserted :
“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 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; preAnglo 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. (1947) KB 130. 15 See Infra 17. 14
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Ltd. , 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, Subsequently, only partial concessions 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 17
Lord Denning in Central London Property Trust Ltd. v. High Trees House Ltd. , 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. (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. 17
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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 21
Miners Ltd., Ltd. , 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.” 22
Kishore, Sahai, J., explaining the basis of the doctrine in Indira Bai v. Nand Kishore,
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. (1990) 4 SCC 668. 23 Motilal Padampat Sugar Mills v. State of Uttar Pradesh , AIR 1979 SC 621. 22
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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 mi tigate 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. Crabb v. Arun DC , (1976) Ch. 179. 26 Halsbury’s Laws of England, XV, 168., Cited in Kumar, Narender; Nature and Concepts of Administrative 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. 25
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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. 29
The case of Motilal Padampat Sugar Mills v. State of Uttar Pradesh,
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. 31
Jit Ram Shiv Kumar v. State of Haryana, However, the case of Jit
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 32
v. Godfrey Phillips India Ltd ., .,
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. 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. 30
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33
Ltd. , In State of Punjab v. Nestle India Ltd.,
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.” 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. 37
Haryana, In In Jit Ram Shiv Kumar v. State of Haryana,
36
a municipality granted exemption
from octroi for developing a mandi, but subsequently is revoked the exemption. Later it again
33
AIR 2004 SC 4559. 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 34
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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 o f 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 i nvoke 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 th
A Dictionary of Law, 5 Ed., Oxford University Press, New York, 2003.
Jain, M.P. & Jain, S.N.; Principles of Administrative Law, 6
th
Ed., Vol. II,
Wadhwa Nagpur, 2007.
st
Kumar, Narender; Nature and Concepts of Administrative Law, 1 Ed., Allahabad Law Agency, Faridabad, 2011.
The Indian Evidence Act, 1872.
Upadhyaya, Dr. J.J.R.; Administrative Law, 7
th
Ed., Central Law Agency,
Allahabad, 2011.
Wade, H.W.R. & Forsyth, C.F.; Administrative Law, 9
th
Ed., Oxford University
Press, New Delhi, 2006.
Webliography
http://en.wikipedia.org/wiki/Case_citation
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http://www.indiankanoon.org/
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