# • • • 6 41 M/s MOTILAL PADAMPAT SUGAR MILLS CO. (P.) LTD v. STATE OF UTTAR PRADESH AND ORS . December 12, 1978. -. ·

- **Citation:** [1979] 2 S.C.R. 641
- **Court:** Supreme Court of India
- **Decided:** 1978-12-12
- **Case number:** Civil Appeal No. 1597 of 1972
- **Bench:** P. N. Bhagwati, V. D. Tulzapurkar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/6-41-m-s-motilal-padampat-sugar-mills-co-p-ltd-v-state-of-uttar-pradesh-and-ors-7621
- **Pages:** 58

## Headnote

Waiver, doctrine of-Waiver is a question of fact and it must be properly
p(~aded and proved.
Public luw-Doctrine of Pro111issory Estoppel, its contours and para1neters,
explnined.
Estoppel-Estoppel in pais-Promissory
Estoppel-Applicability of the
doctri11e against th~ Governn1ent and extent thereof-Doctrine of executive
necessity, whether could be a valid defence and if so under what circumstanc-
"·
Representations de futuro by a public body, if enforceable ex-contractu by
a person who acts upon such representation or promise intended to be acted
on-Burden of proof-Degree of standard of proof in such cases.
The appellant is a limited company which is primarily
engaged
in
the
bpsiness of manufacture and sale of suglar and it has a cold
storage plant
and a steel foundry. With reference to a news item dated 10th October 1968
in the National Herald in which it was stated that the State of Uttar Pradesh
had decided to give exemption from 001.es tax for a period of three ~ years
under section 4A of the U .P. Sales Tax Act to all new industrial units in the
State with a view to enabling them "to come on firm footing in developing
stage", the appellant addressed a letter dated !Ith October 1968 to the
Director of Industries stating that in view of the sales tax holiday announced
by the Government the appellant intended to set up a Hydrogenation plant
for manufacture of Vanaspati and sought for confirmation that this industrial
unit which it proposed to set up, would be entitled to sales tax holiday' for
a period of three years from the date it commenced production. The Director
of Industries by his letter dated 14th October 1968, confirmed that
"there
will be no sales tax for three years on the finished product of your proposed
Vanaspati factory from the date it gets power connection for commencing
production". Thereafter
when the
appellant's
representative
met the
4th
respondent, who was at that time the Chief Secretary to the Government as
also Advisor to the Governor and apprised the latter that the appellant was
setting up the Vanaspati factory solely on the basis of the assurance given
on behalf of the Government thet the appellant would be entitled to exemption from sales tax for a pe'riod of three years from the date of commencement of commercial production at the factory, the 4th respondent reiterated the
assurance made. Again the appellant, by its letter dated 13th December 1968,
requested the 4th respondent "to please confirm that we shall be allowed sales
tax holiday for a period of three years on the sale of Vanaspati from the date
we start production". The 4th respondent replied on 22nd December 1968 that
"the State Government will be willing to consider your request for grant of
exemption from U.P. Sales Tax for a period of three years from the date of
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642
SUPREME COURT REPORTS
[ J 979] 2 S.C.R.
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production" and asked the appellant to obtain the requisite application
form
and subn1it a formal application to the Secretary to the Government in the
Industries department, nnd in the meanwhile "to go ahead with the arrangements for setting up the factory".
The appellant ill the meantime had submitted an application dated 21st December 1968 for a formal order granting
exemption from sales tax under section 4A of the U.P. Sales Tax Act. The
appellant v,1.1•3 also subsequently inforn1ed by the letter dated 23rd
January
B
1969 of the 4th respondent categorically that the proposed Vanaspati factory
of the appellant "will be entilled to exemption fro1n U.P. Sales Tax
for
a
period of three years from the date of going into production and that this
\Vill apply to all Vanaspati sold during that period in Uttar Pradesh itself".
The appellant, on the basis of these unequivocal assurances, \Vent ahead with
the setting of the Vanaspati factory and made much progress.
c
By the middle of May 1969, the State Government started having second
thoughts on the question of exemption nnd the appellant \Vas
requested to
attend a n1e

## Text

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6 41
M/s MOTILAL PADAMPAT SUGAR MILLS CO. (P.) LTD.
A
v.
STATE OF UTTAR PRADESH AND ORS .
December 12, 1978. -. ·
[P. N. BHAGWATI AND V. D. TULZAPURKAR, JJ.J
Waiver, doctrine of-Waiver is a question of fact and it must be properly
p(~aded and proved.
Public luw-Doctrine of Pro111issory Estoppel, its contours and para1neters,
explnined.
Estoppel-Estoppel in pais-Promissory
Estoppel-Applicability of the
doctri11e against th~ Governn1ent and extent thereof-Doctrine of executive
necessity, whether could be a valid defence and if so under what circumstanc-
"·
Representations de futuro by a public body, if enforceable ex-contractu by
a person who acts upon such representation or promise intended to be acted
on-Burden of proof-Degree of standard of proof in such cases.
The appellant is a limited company which is primarily
engaged
in
the
bpsiness of manufacture and sale of suglar and it has a cold
storage plant
and a steel foundry. With reference to a news item dated 10th October 1968
in the National Herald in which it was stated that the State of Uttar Pradesh
had decided to give exemption from 001.es tax for a period of three ~ years
under section 4A of the U .P. Sales Tax Act to all new industrial units in the
State with a view to enabling them "to come on firm footing in developing
stage", the appellant addressed a letter dated !Ith October 1968 to the
Director of Industries stating that in view of the sales tax holiday announced
by the Government the appellant intended to set up a Hydrogenation plant
for manufacture of Vanaspati and sought for confirmation that this industrial
unit which it proposed to set up, would be entitled to sales tax holiday' for
a period of three years from the date it commenced production. The Director
of Industries by his letter dated 14th October 1968, confirmed that
"there
will be no sales tax for three years on the finished product of your proposed
Vanaspati factory from the date it gets power connection for commencing
production". Thereafter
when the
appellant's
representative
met the
4th
respondent, who was at that time the Chief Secretary to the Government as
also Advisor to the Governor and apprised the latter that the appellant was
setting up the Vanaspati factory solely on the basis of the assurance given
on behalf of the Government thet the appellant would be entitled to exemption from sales tax for a pe'riod of three years from the date of commencement of commercial production at the factory, the 4th respondent reiterated the
assurance made. Again the appellant, by its letter dated 13th December 1968,
requested the 4th respondent "to please confirm that we shall be allowed sales
tax holiday for a period of three years on the sale of Vanaspati from the date
we start production". The 4th respondent replied on 22nd December 1968 that
"the State Government will be willing to consider your request for grant of
exemption from U.P. Sales Tax for a period of three years from the date of
B
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SUPREME COURT REPORTS
[ J 979] 2 S.C.R.
A
production" and asked the appellant to obtain the requisite application
form
and subn1it a formal application to the Secretary to the Government in the
Industries department, nnd in the meanwhile "to go ahead with the arrangements for setting up the factory".
The appellant ill the meantime had submitted an application dated 21st December 1968 for a formal order granting
exemption from sales tax under section 4A of the U.P. Sales Tax Act. The
appellant v,1.1•3 also subsequently inforn1ed by the letter dated 23rd
January
B
1969 of the 4th respondent categorically that the proposed Vanaspati factory
of the appellant "will be entilled to exemption fro1n U.P. Sales Tax
for
a
period of three years from the date of going into production and that this
\Vill apply to all Vanaspati sold during that period in Uttar Pradesh itself".
The appellant, on the basis of these unequivocal assurances, \Vent ahead with
the setting of the Vanaspati factory and made much progress.
c
By the middle of May 1969, the State Government started having second
thoughts on the question of exemption nnd the appellant \Vas
requested to
attend a n1eeting "to discuss the question of giving concession in Sales Tax
on Vanaspati products".
The appellant immediately by its letter dated 19th
May 1969 pointed out to the 5th respondent that so far as the appellant was
concerned, the State Government htrd already granted exemption from sales
tax by the letter of the Chief Secretary dated 23rd January, 1969. but still,
the appellant would
b~ glad to send its representative to attend the meeting.
The appellant's representative did attend the meeting held on 3rd
June
69
and reiterated that so far as the appellant \vas concerned, it had already been
granted exemption fron1 sales tax and the State Government stood committed
to it.
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Tha State Government, ho\vever, went back upon the assurance
and a
letter dated 20th January 1970 was addressed by the 5th respondent intimating
that the Government had taken a policy decision that new Vanaspati units in
the State which go into commercial production by 30th
September
1970,
would be given only partial concession in Sales Tax at different rates on each
year of production. The appellant, by its letter dated 25th June 1970, pointed
out to the Secretary to the Government that the appellant proposed to start
con1n1ercial production of Vanaspati with effect fron1 1st July 1970 and stated
that, as notified in the letter of 20th January 1970, the appellant would
be
availing of the exemption granted by the State Government and
would
be
charging Sales Tax lit the rate of 3~-% instead of 7% on the sales of Vanaspati
manufactured by it for the period of one year commencing from 1st July
1970. The factory of the appellant thereafter \vent
into production from
2nd July 1970 and the appellant informed the Secretary to the
Government
about the same by its letter dated 3rd July 1970. The State Government,
however, once a@a1n changed its decision and on 12th August 1970, a news
item appeared in the 'Northern Indian Patrika' stating that the Government
had decided to rescind the earlier decision i.e. the
decision set
out in
the
letter dated 20th January 1970, to allow concession in the rates of
Sales
Tax to new Vanaspati Units. The appellant thereupon filed a
writ
petition
in the High Court of Allahabad asking for a writ directing the State Government to exempt~ the sales of Vanaspati manufactured by the appe11ant
fron1
Sales Tax for b: period of three years commencing from 2nd January 1970
by issuing a notification under section 4A of the U.P. Sales Tax Act from
the appellant for the said period of three years.
The plea based on
the
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MOT!LAL SUGAR MILLS V. U.P.
643
doctrine of promissory estoppel was, however rejected by the Division Bench
A
-0f the High Court principally on the ground that the appellant had waived
the exemption, if any, by
accepting the
concessional rates set out in the
letter of the respondent dated 20th January 1970.
Allowing the appeal by certificate, the Court,
'
HELD : 1.
The view taken by the High Court, namely, that
even if
1here \1.'as an assurance given by the 4th respondent on behalf of the State
Government and such assurance was binding on the State Government on the
principle of promissory estoppel, the appellant had waived its right under it by
.accepting the concessional rates of sales tax set out in the letter of the 5th respondent dated 20th January, 1970 is not correct. [656 D-E]
2. Waiver is a question of fact and it must be
properly
pleaded
and
!J)roved.
No plea of waiver can be allowed to be raised unless it is pleaded and
the factual foundation for it is laid in the pleadings. [656 E-F]
In the instant case :
(a) the plea of waiver was not taken by the State Governn1ent
in
the
.affidavit filed on its behalf in reply to the writ petition, nor was it indicated
B
c
.even vaguely in such affidavit.
It wns raised for the first time at the hearing
D.
of the writ petition. That was clearly impermissible without an amendment
<>f the affidavit in reply or a supplementary affidavit raising such plea. [656 P].
(b) It was not right for the High Court to have
allowed
the
plea of
waiver to be raised against the appellant and that plea should have been
Teiected in lin1i11e.
If waiver were properly pleaded in the affidavit in
reply,
the appellant would hla'Ve had an opportunity of placing on record facts ShowE
ing why and in what circumstances {he appellant came to address the Jetter
dated 25th June 1970 and establishing that on those facts there was no waiver
by the appe!Jant of its right to exempt:on under the assurance given
by
the
4th respondent. But in the absence of such pleading in the affidavit in reply,
1his opportunit}r \\'as denied lo the appellant. [656 F-H]
3. Waiver means abandonment of a right and it may be either- express or
F
implied
from
conduct, but its
basic
requirement is that it must be
"an
intentional act \Vith knowledg·e".
There can be no waiver unless the
person
who is said to have waived is fully informed as to his right and with full
l::nowledge of such right, he intentionally abandons it. [657 A, B]
Jn the instant case, on the facts, the plea of waiver could not be slJ:id to
tave been made out by the State Government : There was nothing
to
state
that at the date when the appellant addressed the letter dated "25th June 1970,
it had full knowledge of its right to exemption under the assurance given bv
the 4th respondent and that it intentionally abandoned such right. It is not
-possible to presume in the absence of any material placed before the Court,
that the appellant had full knowledge of its right to exen1ption so
as
to
-warrant an inference that the
appellant waived such right by addressing the
letter dated 25th June 1970. It is difficult to speculate what was the reason
why the appellant addressed the letter 25th June 1970 stating that it would
-avaiJ of the concessional rates of sales tax granted under the Jetter
Gbted
20th January 1970. [657 D-El
G
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644
SUPREME COURT REPORTS
[1979] 2 S.C.R.
A
Earl of Darnley v. London, Chathani and Dover Rly. Co.
(Proprietors
etc.), [1867] L.R. 2 H.L. 43 @ 57 Craine v. Colonial Mutual Fire
lnsuranc<"
Co. Ltd. 28 C.L.R. 305; Martindala v. Faulkner {1846] 2 Q.B. 706; quo~d
with approval.
4. The doctrine ca11e<l 'pr0-missory cstoppel', 'equitable estoppel',
'quast
estoppel', and 'new estoppel' is a principle evolved by equity to avoid injustice
B
where a promise is 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 on and
it is inequitable to allow the party making the promise to go back upon it.
Though commonly named 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
rigours of strict law. [658 E-G]
c
D
5. The true principle of promissory estoppel is that where one party bas.
by his words or conduct made to the other a clear and unequivocal promise
which is intended to create le~ relations or effect a legal relationship
t.D
arise in the future, knowing or intending that it would be acted upon by
the other party to whom the promise is made and it is infact so acted upon
by the other party, the promise would be binding on the party making it arid
he would not be entitled to go back upon it, if it would be inequitable toallow him to do so having regard to the dealings which have taken
place
between the parties, and this would be so irrespective whether there
is
any
pre·existing relationship between the parties or not. Equity will in a given
case where justice and fairness demand, ·prevent a person from insisting on
strict legal rights even where they arise, not under any contract, but on his
own title deeds or under statute. [662 B-D]
F
G
H
To the applicability of the doctrine of promissory estoppel
it is
not
necessary that there should be some contractual relationship
between thct
parties. Nor can any such limitation, namely, that the doctrine of promis·
rory estoppel is limited in its operation to cases where the parties are already
contractually bound and one of the parties induces the other to believe that
the strict rights under the contract would not be enforced be justifiably introduced to curtail the width and amplitude of the doctrine. The parties need
not be in any kind of legal relationship before the transaction from which thea
promissory estoppel take its origin. The doctrine would apply even
where
there is no pre-existing legal relationship between the parties, but the promiso
is intended to create legal relations or affDtct a legal relationship which will
arise in future. [660 G·H, 661 A, F-G].
Jorden v. Money, [1854] 5 H.L. 185, Hughes v. M<tropolitan Railway Co.,
[1857] 2 A.C. 439, Birmingham & District Land Co. v. London and NorthWestern Rail Co., ]1888] 40 Ch. D. 268; discussed and questioned.
Central London Property Trust Ltd. v. High Trees House Ltd., {1947] K.B.
p. 130:: [1956] 1 All. E.R. 256; explained.
Evenden v. Guildford City Association Football Club Ltd., [1975] 3 All.
E.R. 269 @ 272 : : [1975] 3 W.L.R. 251 @ 255;
Crabb v.
Arun District
Council. [1975] All E.R. 865 @ 875 : : [1975] 8 W.L.R. 847 @ 858
CA;
quoted with upproval.
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MOTILAL SUGAR MILLS v. U.P.
645
6. The doctrine of promissory estoppel cannot be inhibited by
the
same
lim;t!'!tion as estoppel in the strict sense of the term. It is
an equitable
principle evolved by the Court<; for doing justice and there is no reason \Yhy
it should be given only a limited application by way of
defence
and
it
should only be a shield and not a sword to found a cause of action.
It can
b,. the basis of a cause of action. [662 D·E, 663 E~FJ .
There is no qualitative difference between 'proprietary estoppel' !lnd 'promis&\' ry estoppel'. Both are the off springs of equity and if equity is
flexible
enough to permit proprietacy estoppel to be used as a cause of action, there
is no reason in logic or principle why promissory estoppel should also not
be available as a cause of action, if necessary to satisfy the equity. [665 G-I-JJ.
Central London Property Trust Ltd. v. High
Tr.ees
House
Ltd.
[1947}
I K.ll. p. 130 : [1956] I All. E.R. 256; Comb,e, v.
Combe,
[1951]
2
K.B.
215; Beesly v. Hallwood Estate Ltd. [1960] 2 All.
E.R.
314;
Municipal
Corporation of Bon1bay v. Seely. of State, I.L.R. 29 Bomb. 580 @ 607; Moore-
[.!ate Mercantile Co. Ltd. v. Twilchings, {19751 3 W.L.R. 286; referred to.
Crabb v. Arun District Council, [1975] All. E.R. 865 @ 875 explained.
A
B
c
Ramsden v. Dysen, [1866} L.R. 1 H.L. 129; Dunlop Pneumatic Tyre (,~o. v.
D
)..
•
Saifridge & Co. Ltd. 1915 A.C. 847; discussed.
7. Law is not a m:iusoleum. It is not an antique to be taken down, dusted,
admired and put back on the shelf. It is rather like an old but vigorous
tree
having its roots in history, yet continuously taking new· grafts and putting out
ne\v sprouts and occasionaUy dropping dead wood.
It is essentia11y a Social
process, the end product of which is justice _and hence it must keep on grciwing
and d.eveloping with changing social concepts and
values.
Otherwise,
there
will be esrrangement between law and justice and Jaw \.\'ill cease. to ha·ve legitimacy. Thougt1 'continuity with the past is a historical necessity', 'conformity is
not to be turned into a fetish'. [668 H, 669 A-BJ.
Therefore, despite the fact that allowing pron1issory estoppel to found a
c<'<>U<>e of action would seriously dilute the principle whic3 requires consideration
to support a contractual obligation, this new principle, which is a child ot
equity brought into the world with a view to promoting honesty and good faith
and bringing law closer to justice should not be hdd in fetters but allowed
tu operate in all its activist magnitude. so that it rnay fulfir the purpose for
v.'hich it was conceived and born. [668 F-G].
Robertson v Minister of Pensions, [1949] 1 K. B. 227 Evende11 Guldford
City A.1.<0r:iatio~ Foctbal/ Club Ltd., [1975] 3 AIL E.R. p. 269.
Candler
v.
-"
Crane Christlnas & Co. [1951] 2 K. B. 164 @ 178; quoted \dth approval.
8. A promise ma}1• in the United States, derive contractual enforceability if
it bas been made by the promiser knowing or intending that it would be acted
on and the promisee has altered his position in reliance on it, notwithstanding
that there is no consideration in the sense in which that word is used in English
3-40SCI/79
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SUPREME COURT REPORTS
[1979] 2 S.C.R.
A
anli Common¥.-'ealth jurisprudence. However, the basic requirement for invoking
ttis principle must be present namely that the fact situation should be such that
injustice can be avoided only by enforcement of the promise.
The doctrine
of pron1issory e~toppel has been used in the United States to reduce, if not to
destroy, the prestige of consideration as oo. essential of valid contract and alse
used in dive2se other situations as founding a cause of action:
[670
D-E,
673 Bl.
B
Alleghany College v. National Chauteaque Cozintry 'Bank, 57 Am
L. R. 980; Drennan v. Star Paving Company, [1958J 31
California
2nd 409: referred to.
c
Under the English la.w, the judicially formed vie\V js that the crown i'i not
immune from liability under the doctrine of promissory estoppel and the view
taken by Denning J., in [1949J I K. B. 227 that the crown cannot escape its
obligation under the doctrine Of promissory estoppel by "praying in aid the
doctrine of executive necessity" still holds the field. [674 DJ.
D
E
F
G
B
Robertson v. Minister of Pensions [1949] 1 K. B. 227; quoted
with approval;
Redrriaktiebolaget Amphitritise v. The King, [1921J 3 K. B. 500;
referred to.
llowell v. Falmouth Boat Construction Co. Ltd., 1951 A. C. 837;
explained.
10. Even in the United States, the trend in the State Courts, of late, has
been strongly in favour of the application of thei doctrine of promis.sory estoppel
against the Govemmerlt and public bodies "where interests of justice, morality
and common fairness clearly dictate that course". It is being increasingly felt
that "the Government ought to set a high standatrd in its jealings and relation~
;,hips V•ith cii izens and the word of a duly authorised Gove1nment agent, acting
\Vithin the scope of his authority, ought to be as good as a Government bond".
The Government would not be estopped "by the acts of its officers and ag€-nts
who 'vithout authority enter into agreements to do what the law does not sMlCw
tion or permit" and "these dealing with an agent of the Government must be
held to have notice of limitations of his authority". But if the acts of om.is ..
sions of officers of the Government are within the scope of their authority and
are not otherwise impermissible under the law, they '
1will work estoppel against
the Government''. [676 F-H, 677 A-DJ
Federal Crop Insurance Corporation v. Maroill, 332 U. S. 380 : 92
L. ed. J8; discussed and explained.
Valsonavich v. United States 335 Fed. Rep. 2nd p. 96; quoted with
approval.
11. \Vhere 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 aga-inst the Government at the instance
of the promisee notwithstanding that there is no consideration for the promise
and the pron1ise is not recorded in the form of a formal contract as required
by Article 299 of the Constitution. [682 G-H, 683-A].
_,.,,-
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MOTILAL SUGAR MILLS V. U.P.
647
It is elementary that in a Republic governed by the rule of law, no one,
ho\vsoevcr high or low is above
1 the law.
Every one is subject to the law as
fully a-nd con1pletely as any other and the Govern111ent is no exception. It is
indeed the pride cf constitutional democracy and rule of law that the Govern·
n1ent 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. On no
principle can a. Government committed to the n1le of Jaw, claim immunity
from the doctrine of promissory estoppel. The Government cannot be heard
to say that it is under no obligation to act in a manner that is fair and just oi·
that it is not bound by considerations of 'honesty and good faith
1
•
In -fact,
tbe,r Government should be held to a high "standard of rectangular rectitude
while dealing with its citizens". [683 A-CJ.
Ganges Manufacturing Co. v. Surajmull and Ors., I.L.R. 5 Cal. 669;
lJunicfpal Corp•ration of Bombay v. The Secretary of Stare, I.L.R. 29
Bon1b. 588; approved.
Co/lee/or of Bombay v. Municipal Corporation of Jbe City of
Bombay and Ors., [1952] S.C.R. 43; Union of India v. lndo-Afghan
Agencies, [1968] 2 S.C.R. 366; followed.
Ransden v. Dyson, [1866] L.R. lHL 170; referred to.
Robertsan v. Minister of Pensions, [1949] 1 K. H. 227; quoted with
approval as the correct law.
12. The doctrine of executive necessity, regarded as sufficient justification
for the Governrr1ent to repudiate even its contractual obligations was en1phatical1y negatived in the Inda-Afghan Agencies case and the supremacy of
the
A
B
c
D
laws was established. [683 C-DJ.
E
Therefore, it is not open to Government to clain1 immunity from the applicability of the rule of promissory estoppel and thereby repudiate a promise made
by it on the ground that such promise may fetter its future executive
action.
If the Government wants to preserve its freedom of executive action from being
hampered or restricted the Government should not make a promise knov-ring or
intending that it would be acted on by the promisee and the promisec would
alter his position relying upon it.
But, if the Govern1nent makes such a pro·
mise and the promisee acts in reliance upon it and alters his position the Govern·
ment \vould be compeiled to make good such promise like. any other private
individual. [683 D-F].
13. The la\v cannot acquire legitimacy and gain social acceptance unless· it
accords with the moral values of the society. It should be the constant endeavour
of the Courts and the legislatures 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.
[683 F-GJ.
Since the <locfline of promissory estoppel is an equiiahle doctrine, it must
yield ·when the equity so requires. If it could be i.hov1n by th:: Government that
having reg-ard to the facts as they have transpired, it \vould 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.
"
F
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H
A
648
SUPREME COURT REPORTS
[1979] 2 s.c.R.
The doctrine of promissory
estoppel
V.'ould be
displaced in such a
case
because on the facts, equity· V.'Ould not require lhat the Government should be
held bound by the promise 1nade by it. [683 G-H, 684 A].
Vo/hen the Government is able to show thatl in view of the facts, as they have
transpired public interest \vould be prejudiced if ~he Government v.1ere required
to carry out the promise, the Court would have to balance, the public interest
B
in the Government carrying out a promise made to a ci!izen which has induced
the citizen to act upon it and alter his position and the public interest likely to
suffer if the pron1ise 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 that the Governn1ent should not
be con1pellcd to carry out the promise or that the public interest would suffer
if the Governn1ent were required to honour it.
-The Government cannot cl<iim
C
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 pa1te appraisement
of the circumstances. [684 A-DJ
In order to resist its liability, the Government should disclos·e to the Court
the various events necessitating its claim to be exempt from the liability and it
D
would be for the Court to decide whether those events are such as to render it
inequitable to enforce the liability against the Government. [684 D-E].
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Mere claim of change of policy would not be sufficient to exonerate
theGovernment from the liability : the Government would have to show precis~ly
the changed policy with the reason and justification therefor, to enable the
Court to judge for "itself which way the public interest lies and what equity
of the case demands. It is only if the Court is satisfiedi on proper and adequate
material placed by the Government, that over-riding 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. [684 E-F].
The essence of the rule of law is that the Court \vould not act on the mere
i.pse 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.
[684 F-GJ,
The burde.n-\\'ould be upon the Government to show that the public interest
in the Governn1ent 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 over-riding
public interest, it may still be competent to the Government to resile from m.·e
promise 'on giving reasonable notice, which need not be a formal notice, giving
the pron1isee a reasonable opportunity of resuming
hi~ position' provided of
course it 'is possible for the promisee to restore status quo ante.
If, ho\\'ever,
the promisee cannot resume his position, the promise would become final and
irrevocable. [684 G-H, 685 A],
Emmanuf.l Ayodeii Aiayi v. R. T. Briscoe, [1964] 3 AIL E.R. 556; referred
to,
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MOTILAL SUGAR MILLS V. U.P.
649
14. So frir as the doctrine of promissory estoppel is concerned, no distinc-
·tion can be rnade between a private individual and a public body.
This doctrine is nlso a-pplicable against a public body like a municipal council.
Hcv.'-
ever, this doctrine cannot be applied in teeth of an
obligation
or liability
imposed by hnv.
It cannot be invoked to compel the Government or even a
private party to do an act prohibited by law. There can also be no promissory
estoppel against the exercise of legislative power.
The Legislature can never be
precluded from exercising its legislative function by resort to the doctrine of promissory "stoppel. [688C, G-H, 689 A].
Century Spinning and Manufacturing Co. Ltd. & Anr. v. The Ulhasnagar
!,Municipal Council and Anr., [1970] 3 SCR 854; Turner Mossison and
Co. Ltd. v. ll1111gerford /11rest111ent Trust Ltd,, [1972] 3 S.C.R. 711; discussed
-& followed.
lvt. Ra1na11atha Pillai v. The State of Kerala & Anr., [1974] 1 SCR
515 @ 526; Assistant Custodian v. Brij Kishore Agarwala & Ors.,
[1975] 2 SCR 359, explained and held inapplicable.
State of Kerala v. Gwalior Rayon Silk lt>fanufacturing Co. Ltd.
A
B
c
[19741 1 S.C.R. 671 @ 688; reiterated.
D
Afalhotra and Sons & Ors. v. Union of lndia and Ors., A.LR.
1976 J & K p. 41 approved.
Excise Conunissioncr, U.P. Allahabad v. Ran1 Ku1nar [19761 Suppl.
S.C.R. 532; Bihar Eastern Gangetic Fishern1en Cooperative Society
Ltd. '" Sipah1 Sangh and Ors. [1978] 1 SCR 375; A.l.R. 1977 S.C.
2149; Radha Krishan Agarwal v. State of Bihar and Ors., [1977] 3
S.C.R. 249; : [1977] 3 S.C.C. 457; explained.
15. Jn order to attract the applicability of the doctrine of promissory estop~
·pel, it is not necessary that the promisee, acting in reliance on the promise,
should suffer any deteriment. \Vhat is necessary is no more than that there should
be alteration of his position in reliance on the promise.
If detriment were a
necessary element, there \~'ould be no need for the doctrine of promissory estop·
pel because, in that event in quite a few cases, the detriment would form the
consideration and the promise \vould be binding as a contract. If by deteriment is
·meant injustice to the promisee \Vhich would result if the promisor were
to
resile from his promise, then detriment V.'OUld cert«·inly come in as a necessary
ingredient. The detriment in such a case is not so1ne prejudice suffered by the
promisee acting on the promise, but the prejudice which would be caused to the
promisee, if the promisor were allowed to go back on the promise.
It is not
necessary for the promisee to show that he has acted. to his detriment. All that
he has to shov..· is that he has acted in reliance on the promise and altered his
position. [694 A-B, F-G, 695 E, 694 DJ.
Central London Property Trusf Ltd. v. Higl1 Trees llouse, [1947]
K.B. p. 130 : : [1956] 1 All. E.R. 256, W. J. Alan & Co. Ltd. v. El
Nasar Export and Import Co., [1972] 2 All. E.R. p. 127, @ p. 140,
Tool 1Vfffal !t1anufacturing Co. Ltd. v. Tungsten Electric Co. Ltd.,
_(1955] All. E. R. 657; [1975] 1 W .. L. R. 761
Emmanuel Ayodeii
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650
SUPREME COURT REPORTS
[1979] 2 S.C.R.
A
Ajayi v. R. T. Briscoe, [1964] All. E. R. 556; Kanunins Ballroo1ns
Ltd. v. Zenith Investments (Torquay) Ltd. (1970] 2 AIL E.R. 871,
Gmndt v. The Boulder Pty. Gold Mines Ltd., (1938] 59 C.L.R. 641;
quoted. \vith approval.
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In the instant case,
The facts necessary for involving the doctrine of promissory estoppel \Vere
clearly present and the Government WM bound to carry out the representation
and ex.empt the appellant from sales tax iQ respect of sales of Vanaspati effected
by it in lJttar Pradesh for a period of three years from the date of comn1ence~
ment of the production. [693 F-G]
(a) The letter dated 23rd Januaq 1969 was a representation on behalf of
the Governn1ent, the representation having been made by the 4th respondent
in his capacity as the Chief Secretary of the Govern111ent categorica1ly to the
effect that the appellant would be entitled to exemption from sales tax in respect
of the sale of vanaspati effected in Uttar Pradesh for a period of three years
irom the date of commencement of production. This representation was n1ade
by way uf clarification in view of the suggestion in the appellant's letter dated
22nd January 1969 that the financial institutions were not prepared to regard
the earlier letter of the 4th respondent dated 22nd Decernber 1968 oo a definite
commitment on the part of the Government to grant exemption from sales tax.
(692 H, 693 A-Bl
(b) The representation made by the 4th respondent was a representation
within the scope of his authority and was binding on the Government in as
much as the 4th respondent, who was at the materia·l time the Chief Secretary
to the Government and also Adviser to the Governor discharging the. functions
of the Government during the President's Rule had authority to bind the Gover·
nor. 1\foreo\'er the averment to this effect in the \Vrit Petition was not denieO
by the State in the affidavit in reply filed on its behalf [693 C-D].
( c) This representation was made by the Government knowing or intending
that it would be acted on by the appellant because the appellant made it clear
that it v,ias only on account of the exemption from sales tax promised by the
Govern1nent that the appellant had decided to set up the factory for manufacture of Vanaspati. In fact the appellant relying on this representr..tion of the
Goverrunent, borrowed moneys from various financial institutions,
purchfl-~.ed
plant and machinery from Mjs. De Smith (India) Pvt. Ltd., Bombay and set
up a Vanaspati factory at Kanpur. [693 E-F]
G
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1597 of 1972.
H
Appeal from the Judgment and Order dated 25th January, 1972
of the Allahabad High Court in Civil Misc. Writ No. 3788/70.
S. T. Desai, Shri Narain, J. B. Dadachanji, Ravinder Narain, S.
Swarup and Talat Ansari for the Appellant.
G. N. Dikshit, M. V. Goswami and 0. P. Rana for RR 1-3 and 5.
Girish Chandra for Respondent No. 4.
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MOT!LAL SUGAR MILLS v. u. P. (Bhagwati, !.)
6 51
A. B. Dewan, Ravinder Narain, S. Swarup and A. N. Haksar for
A
the Intervener (M/s. Modi Rubber Ltd.).
The Judgment of the Court was delivered by
BHAGWATI, J., This appeal by certificate raises a question of considerable importance in the field of public law. How far and to what
extent is the State bound by the doctrine of promissory estoppel ? It
is a doctrine of comparatively recent origin but it is potentially so
fruitful and pregnant with such vast possibilities for growth that traditional lawyers are alarmed lest it might upset existing doctrines which
are looked upon almost reverentially and which have held the field for
a long number of years. The law in regard to promissory estoppel is
not yet well settled though it has been the subject of considerable debate in England as well as the United States of America and it has also
received consideration in some recent decisions in India and we, therefore, propose to discuss it in some detail with a view to defining its
contours and demarcating its parameters. We will first state briefly the
facts giving rise to this appeal.
This is necessary because it is only
where certain fact-situations exist that promissory estoppel can be invoked and applied.
The appellant is a limited company which is primarily engaged in
the businc.ss of manufacture and sale of sugar and it has also a cold
storage plant and a steel foundry.
On 10th October, 1968 a news
item appeared in the National Herald in which it was stated that the
State of Uttar Pradesh had decided to give exemption from sales tax for
a period of three years under section 4A of the U.P. Sales Tax Act to
all new industrial units in the State with a view to enabling them "to
come on firm footing in developing stage". This news item was based
upon a statement made by Shri M. P. Chatterjee the then Secretary
in the Industries Department of the Government. The appellant, on
the basis of this announcement, addressed a letter dated 11th October,
1968 to the Director of Industries stating that in view of the sales tax
holiday announced by the Government, the appellant intended to set
up a Hydm-genation Plant for manufacture of Vanaspati and sought
for confirmation that this industrial unit, which it proposed to set up
would be entitled to sales tax holiday for a period of three years from
the date it commenced production. The Director of Industries replied
by his letter dated 14th October, 1968 confirming that "there will be
no sales tax for three years on the finished product of your proposed
Vanaspati factory from the date it gets power connection for commencing production." The appellant thereupon started taking steps to
contact various financiers for financing the project and also initiated
negotiations with manufacturers for purchase of machinery for setting
B
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652
SUPRE'V!E COURT REPORTS
(1979] 2 S.C.R.
up the Vanaspati factory.
On 12th December, 1968 the appellant's
representative met the 4th respondent who was at that time the Chief
Secretary to the Government as also Advisor to the Governor and intimated to him that the appellant was setting up the Vanaspati factory
solely on ti;e basis of the assurance given on behalf of the Government
that the appellant would be entitled to exemption from sales tax for a
period of three years from the date of commencement of commercial
production at the factory and the 4th respondent reiterated the assurance that the appellant would be entitled to sales tax holiday in case
the Vanaspati factory was put up by it.
The appellant by its letter
dated 13th December, 1968 placed on record what had transpired at
the meeting on the previous day and requested the 4th respondent "to
please confirm that we shall be allowed sales tax holiday for a period
of three years on the sale of Vanaspati from the date we start production." On the same day the appellant entered into an agreement with
M/s. De Smith (India) Pvt. Ltd., Bombay for supply of plant and
machinery for the Vanaspati factory, providing clearly that the appellant wo~ld have the option to terminate the agreement, if within 10
weeks exemption from sales tax was not granted by the State Government. Tht 4th respondent replied on 22nd December, 1968 confirming that "the State Government will be willing to consider your request
for grant of exemption from U.P. Sales Tax for a period of three years
from the date of production" and asked the appellant to obtain the
requisite application form and submit a formal application to
the
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Secretary to the Government in the Industries Department and in the
/
meanwhile to "go ahead with the arrangements for setting
up
the r
factory". The appellant had in the meantime submitted an application
dated 21st December, 1968 for a formal order granting exemption from
sales tax under section 4A of the Act. It appears that the letter of the
4th respondent dated 22nd December, 1968 was not regarded as sufficient by the financial institutions which were approached by the appellant for financing the project since it merc!y stated that the State
Government would be willing to consider the request for grant of
exemption and did not convey any decision of the State Government
that the exemption would be granted. The appellant, therefore,
addressed a letter dated 22nd January, 1969 to the 4th n;spondent
pointing out that the financial institutions were of the view that the
letter of the 4th respondent dated 22nd December, 1968
"did not
purport to commit the Government for the concession mentioned" and
it was, thtrefore, necessary to obtain a formal order of exemption in
terms of the application submitted by it.
The 4th respondent, however, stated categorically in his letter in reply dated 23rd January,
1969 that the proposed Vanaspati Factory Of the appellant "will be
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MOTILAL SUGAR MILLS v. u. P. (Bhagwati, J.)
G53
entitled to exemption from U.P. Sales Tax for a period of three years
from the Jate of going into production and that this will apply to all
Vanaspati sold during that period in Uttar Pradesh itself" and expressed his surprise that "a letter from the Chief Secretary to the State
Government stating this fact in clear and unambiguous words should
not carry conviction with the financial institutions."
In view of this
unequivocal assurance given by the 4th respondent, who not
only
occupied the post of Chief Secretary to the Government but was also
Advisor to the Governor functioning under the President's rnle. the
appellant went ahead with the setting up of the Vanaspati Factory.
The appellant by its letter dated 25th April, 1969 advised the 4th respondent that the U.P. Finance Corporation, being convinced by the
clear and categorical assurance given by the 4th respondent that the
Vanaspati Factory of the appellant would be entitled to exemption
from sales tax for a period of three years from the date of commencement of production, had sanctioned financial assistance to the appellant
and the appellant was going ahead with the project in full speed to
enable it lo start production at the earliest.