# 3 S.C.R. 718 M/S MANUELSONS HOTELS PRIVATE LIMITED v. STATE OF KERALA & OTHERS

- **Citation:** [2016] 3 S.C.R. 718
- **Court:** Supreme Court of India
- **Decided:** 2016-05-11
- **Case number:** Civil Appeal No. 2480 of2008
- **Bench:** A.K. Sikri, R.F. Nariman
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/3-s-c-r-718-m-s-manuelsons-hotels-private-limited-v-state-of-kerala-others-31247
- **Pages:** 26

## Headnote

Administrative law: Promissory estoppel -
By way of
government order datecf 11.7.1986, exemption from building tax
granted if hotels set up in the State of Kera/a -
Pursuant to
government order, s.3A added to the Kera/a Building Tax Act, 1975
granting exemption from payment of building tax - Pursuant thereto,
appellant constructed hotel building -. However, on 6.2.1997,
concession promised by way of government order denied ·to the
D ·appellant stating that as s.3A had been omitted w.ej 1.3.1993, the
power ro grant exemption had· itself gone; that no exemption
notification was issued u/s. 3A when it was in· existence in the statute
book; and that mere promise to amend the law does not hold out a
promise of exemption - Held:. s.3A was enacted by the Kera/a
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legislature by suitably amending the Kera/a Buildings Tax Act, 1975
on 6.11.1990 - The said provision continued on the statute book
and was de'/eted only w.e.f 1.3.1993 - This shows that from
6.11.1990 to 1.-3.1993. the power to grant exemption from building
tax was statutorily conferred by s.3A on the Government - s.3A was
introduced in order to fulfill one of the promises contained in the
GO. dated 11. 7.1986 - Appellants, having relied on the said G 0.,
had,, in fact, constructed a hotel building by 1991 - Therefore, nonissuance of a notifh:ation u/s. 3A was an arbitrary act of the
Government which must be remedied by application of the doctrine
of promissory estoppel - The ministerial act of non-issue of the
notification cannot possibly stand in the way of the appellants getting
relief under the said doctrine for it would be unconscionable on
the part of the Government to get away without fi1lfilling its promise
-Admittedly, no other consideration of overwhelming public interest
existed in order that the Government be justified in resiting from its
promise - The relief that inust therefore be moulded on the facts of
r
718
M/S MANUELSONS HOTELS PRIVATE LIMITED v. STATE OF · 719
KERALA
the present case is that for the period that s.3A was in force, no
building tax was payable by the app~llants - However, for the period
post 1. 3.1993, no statutory provision for the grant of exemption
being available, no relief can be given to the appellants as the
doctrine of promissory estoppel must yield when it is found that it
' would be contrary to statute to grant such relief - Kera!a.Buildirig
Tax Act, 1975 - s.3A.
Partly ~llowing the appeal, the Court
HELD: In the present Cl)se, no Writ of Mandamus is being.
issued to the executive to frame a body of rules or regula!ions
which would be subordinate legislation in the nature. of primary
legislation (being general rules of conduct which would apply to
those bound by them). On the facts of the present case, a
discretionary power has to be exercised on facts under S~ction
3A of the Kerala Buildings Tax Act, 1975. The non-exercise of
such discretionary power is clearly vitiated on account of the
application of the doctrine of promissory· estoppel in terms of
this Court's judgments in 'Motjlal Padampat'and Nestle. Thjs is
for the reason that non-exercise of such power is itself an arbitrary
act which is vit.iated by non-application of mind to relevant .facts,
namely, tb.e fact that a GO. dated 11.7.1986 specific-ally provided
for exemption from build fog tax if hotels were t.O be set- up in the
State of Kera la pursuant to the representation· mad(in the said
GO. True, no mandamus. could.issue to the legislature to alJ!end
the Kerala Buildings Tax Ac~, 1975, for that would necessarily
involve the judiciary in transgressing into a forbidden field under
the constitutional scheme of separation of powers. However, o'n
facts, Section 3A was, in fact, enacted by the Kerala legislature
by suitably amending the Ke,rala .Buildings Tax Act, 1975 oit
6.11.1990 in oi:_der to give effect to the representation made by
the G.O. dated 11.7.1986. The said prowsion continued_ on the
statute book and was deleted only ~ith effect from 1.3.19.93. This
w

## Text

_Characters 0–39,798 of 60,396. This is a partial read: ask again with offset=39798 for what follows._

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(2016] 3 S.C.R. 718
M/S MANUELSONS HOTELS
PRIVATE LIMITED
v.
STATE OF KERALA & OTHERS
(Civil Appeal No. 2480 of2008)
MAY 11, 2016
[A.K. SIKRI AND R.F. NARIMAN, JJ.J
Administrative law: Promissory estoppel -
By way of
government order datecf 11.7.1986, exemption from building tax
granted if hotels set up in the State of Kera/a -
Pursuant to
government order, s.3A added to the Kera/a Building Tax Act, 1975
granting exemption from payment of building tax - Pursuant thereto,
appellant constructed hotel building -. However, on 6.2.1997,
concession promised by way of government order denied ·to the
D ·appellant stating that as s.3A had been omitted w.ej 1.3.1993, the
power ro grant exemption had· itself gone; that no exemption
notification was issued u/s. 3A when it was in· existence in the statute
book; and that mere promise to amend the law does not hold out a
promise of exemption - Held:. s.3A was enacted by the Kera/a
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legislature by suitably amending the Kera/a Buildings Tax Act, 1975
on 6.11.1990 - The said provision continued on the statute book
and was de'/eted only w.e.f 1.3.1993 - This shows that from
6.11.1990 to 1.-3.1993. the power to grant exemption from building
tax was statutorily conferred by s.3A on the Government - s.3A was
introduced in order to fulfill one of the promises contained in the
GO. dated 11. 7.1986 - Appellants, having relied on the said G 0.,
had,, in fact, constructed a hotel building by 1991 - Therefore, nonissuance of a notifh:ation u/s. 3A was an arbitrary act of the
Government which must be remedied by application of the doctrine
of promissory estoppel - The ministerial act of non-issue of the
notification cannot possibly stand in the way of the appellants getting
relief under the said doctrine for it would be unconscionable on
the part of the Government to get away without fi1lfilling its promise
-Admittedly, no other consideration of overwhelming public interest
existed in order that the Government be justified in resiting from its
promise - The relief that inust therefore be moulded on the facts of
r
718
M/S MANUELSONS HOTELS PRIVATE LIMITED v. STATE OF · 719
KERALA
the present case is that for the period that s.3A was in force, no
building tax was payable by the app~llants - However, for the period
post 1. 3.1993, no statutory provision for the grant of exemption
being available, no relief can be given to the appellants as the
doctrine of promissory estoppel must yield when it is found that it
' would be contrary to statute to grant such relief - Kera!a.Buildirig
Tax Act, 1975 - s.3A.
Partly ~llowing the appeal, the Court
HELD: In the present Cl)se, no Writ of Mandamus is being.
issued to the executive to frame a body of rules or regula!ions
which would be subordinate legislation in the nature. of primary
legislation (being general rules of conduct which would apply to
those bound by them). On the facts of the present case, a
discretionary power has to be exercised on facts under S~ction
3A of the Kerala Buildings Tax Act, 1975. The non-exercise of
such discretionary power is clearly vitiated on account of the
application of the doctrine of promissory· estoppel in terms of
this Court's judgments in 'Motjlal Padampat'and Nestle. Thjs is
for the reason that non-exercise of such power is itself an arbitrary
act which is vit.iated by non-application of mind to relevant .facts,
namely, tb.e fact that a GO. dated 11.7.1986 specific-ally provided
for exemption from build fog tax if hotels were t.O be set- up in the
State of Kera la pursuant to the representation· mad(in the said
GO. True, no mandamus. could.issue to the legislature to alJ!end
the Kerala Buildings Tax Ac~, 1975, for that would necessarily
involve the judiciary in transgressing into a forbidden field under
the constitutional scheme of separation of powers. However, o'n
facts, Section 3A was, in fact, enacted by the Kerala legislature
by suitably amending the Ke,rala .Buildings Tax Act, 1975 oit
6.11.1990 in oi:_der to give effect to the representation made by
the G.O. dated 11.7.1986. The said prowsion continued_ on the
statute book and was deleted only ~ith effect from 1.3.19.93. This
would make it clear that from 6.11.1990 to 1.3.1993, the power
to grant exemption from building tax was statutorily conferred
by Section 3A on the Government. And the statement of objects
and reasons for introducing Section 3A expressly states that the
said Section was i~troduced in order to folfill one of the promises
contained in the G.O. dated 1L7.1986. The appellants;.haviilg
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relied on the said G.O. dated 11.7.1986, ·had, in fact, constructed
a hotel building by 1991. It is clear, therefore, that the nonissuance of a notification under s·ection 3A was an arbitrary act of
the Government which must be .remedied by application of the
doctrine of promissory estoppels. The ministerial act of non issue
of the notification cannot possibly stand in the way of the appellants
getting relief under the said doctrine for it would be
unconscionable on the part of Government to get away without
fulfilling its promise. It is also an admitted fact that no other
consideration of overwhelming public interest exists in order that
the Government be justified in resiling from its promise. The
relief that must therefore be moulded on the facts of the present
case is that for the period that Section 3A was in force, no building
tax is payable by the appellants. However, for the period post
1.3.1993, no statutory provision for the grant of exemption being
available, no relief can be given to the appellants as the doctrine
of promissory estoppel must yield when it is found that it would
be contrary to statute to grant such relief.
[Para 39) [741-H;
742-A-H; 743-A]
MIS Motilal Padampat Sugar Mills v. State Of Uttar
Pradesh & Ors. (1979) 2 SCR 641; Shrijee Sales
Corporation & Anr. v. Union of India (1997) 3
SCC:l996 (10) Suppl. SCR 888; State of Punjab v.
Nestle India Ltd. (2004) 6 SCC 465: 2004 (2) Suppl.
SCR 135 - relied on.
Shree Sidhbali Steels Limited and others v. State of Uttar
Pradesh and others (2011) 3 SCC 193: 2011 (3) SCR
134; Sharma Transport v. Govt. of A.P. (2002) 2 SCC
188: 2001 (5) Suppl. SCR 390; Bannari Amman
Sugars Ltd. v. CTO (2005) 1 SCC 625: 2004 (6) Suppl.
SCR 264;Avinder Siilgh v. State of Punjab (1979) 1
.sec 137: 1979 (1) SCR 845 - distinguished.
Pournami Oil Mills & Ors. v. State of Kera/a & Am:
(1986) Supp. sec 728: 1987 SCR 654; State of
Jammu & Kashmir v. A.R. Zakki & Ors. 1992 Supp. (1)
SCC 548; 1991 (3) Suppl. SCR 216 State of Uttar
Pradesh and Ors. v. Mahindra and Mahindra Limited
(2011) 13 SCC 77: 2011 (5) SCR 509; Indian Express
MIS MANUELSONS HOTELS PRIVATE LIMITED v. STATE OF
KERALA
Newspapers (Bombay) Private Limited and others v.
Union of India and others (1985) 1 SCC 641:1985 (2)
SCR 287; Kasinka Trading and Am: v. Union of India
and Am: (1995) 1 SCC 274: 1994 (4) Suppl. SCR 448;
Shree Sidhbali Steels Limited and others v. State of Uttar
Pradesh and others (2011) 3 SCC 193: 2011 (3) SCR
134; UP. Power C01poration Limited v. Sant Steels and
Alloys (P) Ltd. (2008) 2 sec 777: 2007 (12) SCR 1160;
State of Rajasthan and another v . .J.K. Udaipur Udyog
Ltd. and another (2004) 7 SCC 673: 2004 (4) Suppl.
SCR 812; Arvind Industries and others v. State of
Gujarat and others (1995) 6 SCC 53: 1995 (3) Suppl.
SCR 16; Mahabir Vegetable Oils (P) Ltd. And Am: v.
State of Haryana and Ors. (2006) 3 SCC 620: 2006
(2) SCR 1172; Excise Co111111issio11er. U.P. v. Ram Kumar
(1976) 3 SCC 540:1976 (0) Suppl. SCR 535; State of
Punjab v. Nestle India Ltd. (2004) 6 SCC 465: 2004
(2) Suppl. SCR135; Devi Multiplex & Ors. v. State of
Gujarat (2015) 9 SCC 132: 2015 (6) SCR 1 - referred
to.
The. Co111111011wealth of Australia v. Verwayen 170 C.L.R.
394 - referred to.
Case Law Reference
(1979) 2 SCR 641
relied on
Paras
1996 (10) Suppl. SCR 888
relied on
Paras
2004 (2) Suppl. SCR 135
relied on
Para12
1987 SCR 654
referred to
Para 16
2004 (2) Suppl. SCR 135
referred to
Para 17
2015 (6) SCR 1
referred to
Para 20
1991 (3) Suppl. SCR 216
referred to
Para24
2011 (5) SCR 509
referred to
Para 24
1985 (2) SCR 287
referred to
Para 25
1994 (4) Suppl. SCR 448
referred to
Para 27
2011 (3) SCR 134
referred to
Para29 ·
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2007 (12) SCR 1160
referred to
Para29
2004 (4) Suppl. SCR 812
referred to
Para30
1995 (3). Suppl. SCR . 16
referred to
Para30
2006 (2) SCR·1172
referred to
Para 32
2011 (3) SCR 134
referred to
Para34
1976 (0) Suppl; SCR 535
referred to
Para35
2001 (5) Suppl. SCR 390
distinguished Para37
2004 (6) Suppl. SCR 264
distinguished Para 37
1979 (l)' SCR 845
distinguished Para38
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2480 of
2008.
From the Judgment and Order dated 05.12.2006 of the High Court
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ofKe1:ala at Ernakulum, in WA No. 2123 of2005.
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V. Giri, Sr. Adv., Reghenth Basant, Ms. Aanchal Tikmani, Senthil
-.Jagadeesan, Advs. for the Appellant.
K. Radhakrishnan, Sr. Adv., Jogy Scaria, Ms. Beena Victor, Advs.
for the Respondents ..
The Judgment of the Court was delivered by
R.F. NARIMA'N, J. I. 0111 l'h July, 1986, the State Government,
by a Government Order (GO.); accepted the recommendations of the
Government oflndia suggesting that tourism be declared an "industry'.'.
The fallout of this G.0. was that this would enable those engaged in
tourism promotional activities to become automatically eligible for concessions/ incentives as applicable to the industrial sector from time to
time. Apart from various other concessions that were granted, exemption from Building Tax levied by the Revenue Department was one such
concession. It was stated in the said G.O. that action to amend the
Kerala Building Tax Act, 1975 will be taken separately. The G.0. went
on to state that persons eligible for such concessions will, among others,
be classified hotels i.e: from I to 5 stars. A Committee was set up consistfog.of three government .officers_ to oversee the af9resaid scheme.
2.Vide a letter dated 25'h March, 1987, the Government oflndia
MIS MANUELSONS HOTELS PRIVATE LIMITED v. STATE OF
723
KERALA [R.F. NARIMAN, J .)
approved the hotel projei:t of the appellants, being a 55 double room 3
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star hotel project to be set up in the city of Calicut.
3. Pursuant to the aforesaid G.O. dated I J1h July, 1986 and the
aforesaid approval, the appellants began constructing the hotel building,
which was completed in the year 1991. Notice for fi I ing returns under
the Kerala Buildings Tax Ai:t was issued to the appellants on 5•h SepB
tember, 1988. The appellants replied that they relied upon the G.O.
dated I J 1h July, 1986 and stated that they were under no obligation to
furnish any retUrn under the said Act as they ~ere exempt from payment of building tax.
4. In pursuance of the said G.O. dated JI •h July, 1986, the Kera la c
Buildings Tax Amendment Act of 1990 was passed with effect from 61h
November, 1990. The Objects and Reasons for said amendment act
read as follows:
··
"STATEMENT OF OBJECTS AND REASONS
TheGovernJ'tte)lt has declared touris1'n as an industry with a view
to develop tourism in the State and announce various concessions
to tourism related activities as per GO (P) 224/86/GAD dated
11.07.1986. One of the concess_ions declared by Government was
to exempt the buildings constructed in relation to tourism from the
provisions of, the Kerala Bui I ding Tax Act, 1975.
For ~chieving the above said purpose the Kerala- Building Tax
Act, 1975 has to be amended-suitably and the Government have
decided to amend the" Kerala Bui.lding Tax Act 1975 for'the
purpose.
As the above proposal had to be given effect to immediately and
as the Legislative assembly was not in session the Kerala Buildiqg
Tax (Amendment) Ordinance, 1990 (Ordinance No.8 of 1990)
was promulgated by the Governor of Kerala on the 2nd day of
November, 1990, and published in the Kerala Gazette Extraordinary
dated 6th day of November, 1990.
Tile Bill seeks to replace the said ordinance by an Act of
Legislature. .
·
·
(Published in KG Ex No.1159 dt 7.12.1990)"
{
5. In pursuance of the said object, Section 3A was added, which·
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[2016] 3 S.C.R.
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reads as under:
''3A.( 1) Power to make exemption:- The Government may, if they
consider it necessary so to do for the promotion of tourism, by
notification in the Gazette make exemption from the payment of
building tax under the Act in respect of any building or buildings
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the construction of which is completed during such period and in
such areas as may be specified in the notification and having such
specifications as may be prescribed in the rules in this behalf."
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Also, to effectuate the said exemption provision, Rule 14A was
added in the Kerala Bui I.dings Tax Rules, 1974 as under:
"Rule 14A
( 1) The exemption contemplated in Section 3A of the Kerala
Building Tax Act, 1975 shall be applicabk J the buildings having
the following specifications in such Tourism sector and the
construction of which is completed c: .ring such period as may be
specified in the notifications:-
(i) Classified hotels (I to 5 stars)
(ii) Motels(which conform to the specification of the Department
of Tourism of Kera la/ Central Government)
(iii) Restaurants (approved by Classification committee of the
Government of India)
(iv) Amusement parks and research centres approved by the
Government.
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(v) Ropeways at tourist centres.
(vi) Construction of structures like Koothambalam/ Auditorium etc
by schools/institutions teaching Kalaripayattu and traditional art
forms of Kerala.
(vii) Institutions teaching surfing, sking, gliding, trekkingand similar
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activities which will promote tourism;
(viii) Ayurvedic centres with tourism potential;
(ix) Exclusive handicrafts with emporia (approved by the State/
Central Department of Tourism)
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(2) The area so notified shall be approved Tourist Centres and
M/S MANUELSONS HOTELS PRIVATE LIMITED v. STATE OF
725
KERALA [R.F. NARIMAN, J.]
such other locations certified by a Committee consisting of
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Secretary to Government, Tourism Department, Secretary to
Government Taxes Department and Director, Department of
Tourism.
(3) The period of exemption shall be 10 years or such shorter
period in respect of specific areas as may be notified in the Gazette
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based on the recommendation of the Committee."
6. By a Writ Petition filed in 1989, the appellants challenged the
notice dated S'h September, 1988. This resulted in a judgn1ent of the
Kerala High Court dated JO•h August, 1995 by ·which the appellants
were relegated to the Committee set up under the 1986 G.O. to pursue · c
their claim. Till final orders were passed by the Committee, the judgment stated that the respondents would not take any coercive steps to
recover any building tax assessed on the building constructed by the
appellants.
·
7. By a letter dated 61hfebruary, 1997, the exemption promised by
the (J.O. of 1986 was denied to the appellants stating that as Section 3A
had been omitted w.e.f. 1" March, 1993, the power to grant exemption
had itself gone and, therefore, no such exemption could be given to the
appellants.
·
8. Pursuant to the aforesaid letter dated 61h February, 1997, a notice dated 2811t April, 1997 was issued by the authorities asking the appellants to submit the necessary statutory return under the Kera la Buildings Tax Act. This notice was, in turn, challenged in O.P. No. 960 I of
1997, which culminated in a judgment dated 20•h July, 1998. Vide this
judgment, the High Court allowed the original petition and directed the
Committee to consider the matter afresh in the light of the judgment of
the Supreme Court in MIS Motilal Padampat Sugar Mills v. State
Of Uttar Pradesh & Ors., ( 1979) 2 SCR 641 and Shrijee Sales
Corporation & Anr. v. Union of India, ( 1997) 3 SCC 398.
9. Vide·an order dated 4•1t February, 1999, the authorities once again
rejected the appellant's application for exemptio1i from property tax.
This order was challenged in Writ Petition No. 9820of1999 which has
led to the impugned judgment dated s•h December, 2006. The High Co mt
essentially rejected the aforesaid Writ Petition on two grounds. First, it
stated that as no exemption Notification had, in fact, been issued under
Section 3A when it was in existence in the statute book, no claim for
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exemption from payment of building tax would be allowed. It further
held that the mere promise to amend the law doe~ not hold out a promise
of exemption from payment ofbuilding tax. And finally, the High Court
held that the question ofnow exempting the appellants from building tax
would not arise as Section 3A itself had been omitted w.e.f. I st March,
1993.
10. ShriV. Giri, learned Senior Advocate appearing on behalf of
the appellants before us, has argued that the High C~urt has failed to
consider various Supreme Court judgments on promissory estoppel in
their true perspective. In his submission, the aforesaid judgment clearly
led to the cot!clusion that when the Government holds out a promise
which has been acted upon, except in cases of overriding public interest,
which has not been claimed inthe facts of the present case, the Government cannot resile from the said promise and must be held to be bound
thereby. He added that there was no necessity for the Govern11,1ent to
be directed to actually issue a Notification under Section 3A as that
wpuld only be a ministerial act which would be regarded as having been
performed if Government was to be held to its promise. According to
the learned counsel, therefore, a reading ofth.e judgments of this Court
would necessarily lead to granting ofreliefto his client.
11. Shri Radhakrishnan, learned senior counsel appearing on behalf
of the respondents, countered these submissions and supported the im:
pugnedjudgment of the High Court. Aceording to Shri Radhakrishnan,
a mandamus cannot be issued to the executive to frame or amend the
law. In any event, according to the learned counsel, Section 3A having
been deleted w.e.f. I st March, 1993, it is clear that no relief can be
granted to the appellants as on date.
12. Having heard the learned counsel for both the sides, we are of
the view that it will first be necessary to examine the d-octrine of promissory estoppel as laid down in M/S Motilal Padampat Sugar Mills,
( 1979) 2 SCR 641 and as followed in State of Punjab v. Nestle India
Ltd., (2004) 6 sec 465.
13. In the MIS Motilal Padampat Sugar Mills ease, the appel-
·1ant before this Court was primarily engaged in the business of manufacture and sale of sugar. An assurance was given by the State Government in tirnt case that new Vanaspati units in the State which go into
commercial production by 30th September, 1970 would be given partial
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concession in sales tax for a period of three years. The-appellant having
....
M/S MANUELSONS HOTELS PRIVATE LIMITED v. STATE OF
KERALA [R.F. NARIMAN, J.]
set up such Vanaspati unit thereafter went into the production ofVanaspati
on 2"d July, I 970 and sought exemption. The Government apparently
turned around and rescinded its earlier decision of January, 1970 in August 1970, by which time the factory of the appellant had gone into
commercial production. A Writ Petition was filed in the High Court of
Allahabad asking for a writ directing the State Government to exempt
the sales ofVanaspati manufacturer from sales tax for a period of three
years con1mencing 2"d July, 1970 as per the promise held out. This plea
fell upon deaf ears in the High Court, as a result of which the petitioner
in that case appealed to the Supreme Com1. After discussing the authorities in detail, this Court held:
"The law may, therefore, now be taken to be settled as a result of
this decision, that where the Government makes a promise knowing
or intending that it would be acted on by the promisee and, in fact,
the promisee, acting in reliance on it, alters his position, the
Government would be held bound by the promise and the promise
would be enforceable against the Government at the instance of
the promisee, notwithstanding that there is no consideration for
the promise and the promise is not recorded in the form of a
formal contract as required by Article 299 of the Constitution. It
is elementary that in a republic governed by the rule of law, no
one, howsoever high or low, is above the law. Everyone is subject
to the law as fully and completely as any other and the Government
is no exception. It is indeed the pride of constitutional democracy
and rule of law that the Government stands on the same footing
as a private individual so far as the obligation of the law is
concerned: the former is equally bound as the latter. It is indeed
difficult to see on what principle can a Government, committed to
the rule of law, claim immunity from the doctrine of promissory
estoppel. Can the Government say that it is under no obligation to
act in a manner that is fair and just or that it is not bound by
consider.ations of "honesty and good faith''? Why should the
Government not be held to a high "standard of rectangular
rectitude while dealing with its citizens"? There was a time when
the doctrine of executive necessity was regarded as sufficient
justification for the Government to repudiate even its contractual
obligations; but, let it be said to the eternal glory oftl!is Court, this
doctrine was emphatically negatived in the !11do-Afgha11 Agencies
case and the supremacy of the rule of law was established. It
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was laid down by this Court that the Government cannot claim to
be immune from the applicability of the rule of promissory estoppel
and repudiate a promise made by it on the ground that such promise
may fetter its future executive action. If the Government does
not want its freedom of executive action to be hampered or
restricted, the Government need not make a promise knowing or
intending that it wo.uld be acted on by the promisee and the
promisee would alter his position relying upon it. But if the
Government makes such a promise and the promisee acts in
reliance upon it and alters his position, there is no reason why the
Government should not be compelled to make good such promise
like any other private individual. The law cannot acquire legitimacy
and gain social acceptance unless It accords with the moral values
of the society and the constant endeavour of the Courts and the
legislature, must, therefore, be to close the gap between law and
morality and. bring about as near an approximation between the
two as possible. The doctrine of promissory estoppel is a significant
judicial contribution in that direction. But it is necessary to point
out that since the doctrine of promissory estoppel is an equitable
doctrine, it must yield when the equity so requires .. lf it can be
shown by the Government that having regard to the facts as they
have transpired, it would be inequitable to hold the Government to
the promise made by it, the Court would not raise an equity in
favour of the promisee and enforce the promise against the
Government. 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. _When the Government is able to show that in view of
the facts as have transpired since the making of the promise,
public interest would be prejudiced if the Government were required
to carry out the promise, the Court would have to balance the
public interest in the Government carrying out a promise made to
a citizen which has induced the citizen to act upon it and alter his
position and the public interest likely to suffer if the promise were
required to be carried out by the Government and determine which
way the equity lies. It would not be enough for the Government
just to say that public interest requires thatthe Government should
not be compelled to carry out the promise or that the public intexest
would suffer if the Government were required to honour it. The
MIS MANUELSONS HOTELS PRIVATE LIMITED v. STATE OF
KERALA [R.F. NARIMAN, J.]
Government cannot, as Shah, J., pointed out in the Indo-Afghan
Agencies case, claim to be exempt from the liability to carry out
the promise "on some indefinite and undisclosed ground of
necessity or expediency", nor can the Government claim to be
the sole Judge of its liability and repudiate it "on an ex parte
appraisement of the circumstances". If the Government wants to
resist the liability, it will have to disclose to the Court what are the
facts and circumstances on account of which the Government
claims to be exempt from the liability and it would be for the
Court to decide whether those facts and circumstances are such
as to render it inequitable to enforce the liability against the
Government. Mere claim of change of policy would not be
sufficient to exonerate the Government from the liability: the
Government would have to show what precisely is the changed
policy and also its reason and justification so that the Court can
judge for itself which way the public interest lies and what the
equity of the case demands. It is only ifthe 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 which 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 the 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 competent 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
E111111a11ue!AvodejiAjaye v. Briscoe [( 1964) 3 All ER 556: (1964)
I WLR 1326]." [pp. 682- 685]
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14. The Court further went on to hold that it was not necessary for
the petsitioner to show that it had suffered any detriment, and it was
enough that the petitioner had relied upon the promise or representation
held out, and altered its position relying upon such assurance. Importantly, the Court held:
"Of course, it may be pointed out that ifthe U.P. Sales Tax Act,
1948 did not contain a provision enabling the Government to grant
exemption, it would not be possible to enforce the representation
against the Government, because the Government cannot be
compelled to act contrary to the statute, but since Section 4 of the
U.P. Sales Tax Act, 1948 confers power on the Government to
grant exemption from sales tax, the Government can legitimately
be held bound by its promise to exempt the appellant from payment
of sales tax. It is true that taxation is a sovereign or governmental
function, but, for reasons which we have already discussed, no
distinction can be made between the exercise of a sovereign or
governmental function and a trading or business activitv of the
Government, so far as the doctrine of promissory estoppel is
concerned. Whatever be the nature of the function which the
Government is discharging, the Government is subject to the rule
of promissory estoppel and ifthe essential ingredients of this rule
are satisfied, the Government can be compelled to carry out the
promise made by it: We are, therefore, of the view that in the
present case the Government was bound to exempt the appellant
from payment of sales tax in respect of sales ofvanaspati effected
by it in the State ofUttar Pradesh for a period of three years from
the date of commencement of the production and was not entitled
to recover such sales tax from the appellant." [pp. 696 - 697]
15. Having so held, the Court then went on to hold that since the
Government is bound to exempt the appel I ant from payment of sales tax
for a· period of three years w.e.f. 2°d July, 1970, being the date of commencement of the production ofVanaspati, the appellant would not be
liable to pay any sales tax, subject only to the State's claim to retain any
part of such amount under any provision of law. In the absence of such
claim, the State would have to refund the amount of sales tax collected
by it from the appellant with interest thereon.
16. It is important to notice that the necessary exemption Notification in Motilal Padam pat's case had not been issued under Section 4
MIS MANUELSONS HOTELS PRIVATE LIMITED v. STATE OF
KERALA [R.F. NARIMAN, J.]
of the U .P. Sales Tax Act, 1948. Yet, this Court held that sales tax for
the period in question could not be recovered. This was done presumably because promissory estoppel is itself an equitable doctrine. One of
the maxims of equity is that one must regard as done that which ought to
be done. In this view of the matter; it is obvious that the High Court
judgment is incorrect when it holds that as no exemption Notification
was, in fact, issued by the Government under Section 3A, the petitioner
would have to be denied relief. This judgment has been followed repeatedly and has been applied to give the benefit of sales tax exemption in
similar circumstances in Pournami Oil Mills & Ors. v. State ofKerala
& Anr., (1986) Supp. SCC 728 at Paras 7 and 8.
17. The same result would obtain on a reading of a more recent
judgment of this Court reported in State of Punjab v. Nestle India
Ltd., (2004) 6 SCC 465 .. On the facts of that case, for the period from
l.4.1996 to 4.6. I 997, purchase tax on milk was to be abolished by the
State Government. An announcement to th is effect was given wide publicity in several newspapers in the State and a speech was given to the
aforesaid effect by the Finance Minister of the State while presenting
the budget for the year 1996-1997. That was further translated into a
memorandum of the financial Commissioner, dated 26.4.1996, which
was addressed to the Excise and Taxation Commissioner of the State.
When a meeting was held on 271h June, 1996 by the Chief Minister and
the Finance. Minister with the Excise and Taxation Commissioner and
various Financial a financial notification would be issued "in a day or
two".· For the first time, on 4'h June, 1998, the Council of Ministers
decided that the decision to a_bolish purchase tax on milk was not accepted and, consequently, the authorities issued notice to the respondents requiring them to pay purchase tax on milk for the year 19961997.
18. In this background, the High Court held that the State Government was bound by its promise and representation to abolish purchase
tax. According to the High Court, the absence of a financial notification
was no more than a ministerial act which remained to be perfonned. As
the respondents had acted on the representation made, they could not be
asked to pay purchase tax for the year 1996-1997. The Writ Petition
was allowed and the demand notice of tax for the aforesaid year was
struck down.
19. This Court, after adverting to Section 30 of the Punjab General
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Sales Tax Act, 1948, which gave the State Government the power to
exempt from purchase tax, by notification, any of the goods mentioned
in the Schedule, recapitulated the entire law of promissory estoppel in
great detail. It referred to MIS Motilal Pad am pat Sugar Mills, ( 1979)
2 SCR 641 and other judgments, and finally held:
' "The appellant has been unable to establish any overriding public
interest which would make it inequitable to enforce the estoppel
against the State Government. The representation was made by
the highest authorities including the Finance Minister in his Budget
speech after considering the financial implications of the grant of
the exemption to milk. It was found that the overall benefit to the
State's economy and the public would be greater ifthe exemption
were allowed. The respondents have passed on the benefit of
that exemption by providing various facilities and concessions for
the upliftment of the milk producers. This has not been denied. It
would, in the circumstances, be inequitable to allow the State
Government now to resile from its decision to exempt milk and
demand the purchase tax with retrospective effect from 1-4-1996
so that the respondents cannot in any event readjust the expenditure
already_11rnde. The High Court was also right when it held that
the operation of the estoppel would come to an end with the 1997
decision of the Cabinet.
In the case before us, the power in the State Government to grant
exemption under the Act is coupled with the word "may" -
signifying the discretionary nature of the power. We are of the
view that the State Government's refusal to exercise its discretion
to issue the necessary notification "abolishing" or exempting the
tax on milk was not reasonably exercised for the same reasons
that we have upheld the plea of promissory estoppel raised by the
respondents. We, therefore, have no hesitation in affirming the
decision of the High Court and dismissing the appeals without
costs." [paras 47 - 48]
20. A perusal of this judgment would also show that relief was not
denied on the ground that no exemption notification was, in fact, issued
under Section 30 of the Punjab General Sales Tax Act, 1948. In fact, this
Court emphasized the discretionary nature of the power to grant exemption. This Court held that the State Government's refusal to exercise its discretion to issue the necessary notification abolishing or ex-
MIS MANUELSONS HOTELS PRIVATE;_ LIMITED v. STATE OF
KERALA [R.F. NARIMAN, J.]
empting tax on milk was not reasonably exercised inasmuch as it was
bound by the doctrine of promissory estoppel to do so. And the finding of
the High Court that such Notification would only be a ministerial act
which had t~ be performed was, therefore, upheld by this Court. This
judgment has been recently applied and followed in Devi Multiplex &
Ors. v. State of Gujarat & Ors .. (2015) 9 SCC 132 at Para 20.
21. In fact, we must never forget that the doctrine of promissory
estoppel is a doctrine whose foundation is that an unconscionable
departure by one party from the subject matter of an assumption which
may be offact or law, present or future, and which.has been adopted by
the other party as the basis of sorrie course of conduct, act or omission,
should not be allowed to pass muster. And the relief to be given in cases
involving the doctrine of promissory estoppels contains a degree of
flexibility which would ultimately render justice to the aggrieved party.
The entire basis of this doctrine has been well put in a judgment of the
Australian High Court reported in The Commo11wealth of Australia
v. Verwayen, 170 C.L.R. 394, by Deane,J. in the following words:
I. While the ordinary operation of estoppel by conduct is between
parties to litigation, it is a doctrine of substantive law the factual
ingredients of which fall to be pleaded and resolved like other
'factual issues in a case. The persons who may be bound by or
who may take the benefit of such an estoppel extend beyond the
immediate parties to it, to their privies, whether by blood, by estate
or by contract. That being so, an estoppel by conduct can be the
origin of primary rights.of prope11y and of contract.
2. The central principle of the doctrine is that the law will not
permit an unconscionable - or. more accurately, unconscientious -
depar1ure by one party from the subject matter of an assumption
which has been adopted by the other party as the basis of some
relationship, course of conduct, act or omission which would operate
to that other party's detriment ifthe assumption be not adhered to
for the purposes of the litigation.
3. Since an estoppel will not arise unless the party claiming the
benefit of it has adopted the assumption as the basis of action or
inaction and thereby placed himself in a position of significant
disadvantage if departure from the assumption be permitted, the
resolution of an issue of estoppel by conduct will involve an
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examination of the relevant belief, ac.tions and position of that ·
party.
4. The question whether such a departure would be unconscionable
relates to the conduct of the allegedly estopped party in all the
circumstances. That party must have played such a part in the
adoption of, or persistence in, the assumption that he would be
guilty of unjust and oppressive conduct ifhe were now to depart
from it. The cases indicate four main, but not exhaustive, categories
in which an affinhative answer to that question may be justified,
namely, where that party: (a) has induced the assumption by
express or implied representation; (b) has entered into contractual
or other material relations with the other party on the conventional
basis of the assumption; (c) has exercised against the other party
rights which would exist only ifthe assumption were correct; (d)
knew that the other party laboured under the assumption and
refrained from correcting him when it was his duty in c.onscience
to do so. Ultimately, however, the question whether departure
from the assumption would be unconscionable must be resolved
not by reference to some preconceived formula framed to serve
as a universal yardstick but by reference to all the circumstances
of the case, including the reasonableness of the conduct of the
other party in acting upon the assumption and the nature and extent
of the detriment which he would sustain by acting upon the
assumption if departure frqm the assumed state of affairs were
permitted. In cases falling within category (a}, a critical
consideration will commonly be that the allegedly estopped party
knew or intended or clearly ought to have known that the other
party would be induced by his conduct to iidopt, and act on the
basis of, the assumption. Particularly in cases falling within
category (b ), actual belief in the correctness of the fact or state
of affairs assumed may not be_ necessary. "Obviously, the facts of
a particular case may be such that it falls within more than one of
the above categories.
5. The assumption may be of fact or law, present or future. That
is to say it may be about the present or future existence of a fact
or state of affairs (including the state of the law or the existence
of a legal right, interest or relationship or the content of future
conduct).
M/S MANUELSONS HOTELS PRIVATE LIMITED v. STATE OF
KERALA [R.F. NARIMAN, J.]
6. The doctrine should be seen as a unified one which operates
consistently in both law and equity. In that regard, ."equitable
estoppel" should not be seen as a separate or distinct doctrine
which operates only in equity or as restricted to certain defined
categories (e.g. acquiescence, encouragement", promissory
estoppel or proprietary estoppel ).
7. Estoppel by conduct does not of itself constitute an ind_ependent
cause of action.