Promissory Estoppel

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

i

Table of Cases

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

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

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

Century Spinning and Manufacturing Co. v. Ulhasnagar Municipality 8

Crabb v. Arun DC 7

Delhi University v. Ashok Kumar 3

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

Hughes v. Metropolitan Railway Company 4

Indira Bai v. Nand Kishore 2, 6

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

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

Moorgate Mercantile Co. v. Twichings 7

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

Sharma Transport v. Government of Andhra Pradesh 1, 5

Shri Krishna v. Kurukshetra University 3

State of Punjab v. Nestle India Ltd. 9

Union of India v. Godfrey Phillips India Ltd. 8

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

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

ii

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

Page | 1

Meaning of Estoppel

Estoppel in simple words is a bar which prevents a party from asserting a fact or

putting up claim inconsistent with the position he previously took. It is said to be a rule which

preludes a person from saying one thing at one time and another thing, totally inconsistent

with the earlier one, at another stage.1

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

by his own acts from claiming a right to the detriment of other party who was entitled to rely

on such conduct and has acted accordingly.”2

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

law that prevents a person from denying the truth of a statement he has made or from denying

facts that he has alleged to exist, The denial must have been acted upon (probably to his

disadvantage) by the person who wishes to take advantage of the estoppel or his position

must have been altered as a result.”3

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

permitted another person to believe a thing to be true, and to act upon such belief, neither he

nor his representative shall be allowed in any suit or proceeding between himself and such

person or his representative, to deny the truth of the thing. The former person is thus estopped

from denying the truth of his previous statement. He, thus, cannot both approbate and

reprobate, because of invocation of rule of estoppel against him.4

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

estopped from denying the existence of some state of facts which he had previously asserted

and on which the other party has relied or is entitled to rely upon.

According to Wade and Forsyth the basic principle of estoppel is that a person who by

some statement or representation or representation of face causes the other to act to his

1 Kumar, Narender; Nature and Concepts of Administrative Law, 1

st Ed., Allahabad Law Agency, Faridabad,

2011, p. 366. 2 Quoted in Sharma Transport v. Government of Andhra Pradesh, AIR 2002 SC 322.

3 A Dictionary of Law, 5

th Ed., Oxford University Press, New York, 2003, p. 95.

4 Kumar, Narender; Nature and Concepts of Administrative Law, 1

st Ed., Allahabad Law Agency, Faridabad,

2011, p. 366.

Page | 2

determent in reliance on the truth of it is not allowed to deny it later, even though it is wrong.

Estoppel, thus, gives way to justice to prevail over the truth.5

In Indira Bai v. Nand Kishore,6 Sahai, J., stated “Estoppel is a rule of equity flowing

out of fairness striking on behaviour deficient in good faith. It operates as a check on spurious

conducting by preventing the inducer from taking advantage and assailing forfeiture already

accomplished. It is invoked and applied to aid the law in administration of justice. But for it

great many injustices may have been perpetrated.”

Estoppel – As a Rule of Evidence

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

promissory estoppel. While the former is more correctly described as “a principle of law.”7

The latter is known as a rule of equity. As a principle of law estoppel applies only to

representations about past or present facts.8

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

representation of facts causes another act in reliance on the truth of it, is not allowed to deny

it later, even though it is wrong.9

The principle of estoppel embodies in Section 115 of the Indian Evidence Act, 1872 is

commonly known as a rule of evidence. The Section reads as under:

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

permitted another person to believe a thing to be true and to act on such belief, neither he nor

his representatives shall be allowed in any suit or proceeding between himself and such

person or his representative, to deny the truth of that thing.

To invoke the principle of estoppel enshrined in the Section, the following three

conditions are necessarily be satisfied:

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

(ii) by the said declaration, etc., that person must have intentionally caused or

permitted another person to believe a thing to be true; and

5 Wade, H.W.R. & Forsyth, C.F.; Administrative Law, 9

th 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.



9 Ibid.

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

upon such belief.

Section 115 explains that a party is precluded from denying the existence of some

state of facts which he had previously asserted and on which the other party has relied or is

entitled to rely on. That, a man should keep his words, all the more so when the promise is

made with the intention that the other party should act upon it.10

As a rule of evidence, embodied in Section 115, estoppel may lie against the

Government on a representation or statement of facts, if the statement does not operate

against the statute.

In Delhi University v. Ashok Kumar,11

the respondent, a student after passing the

Secondary School Certificate Examination of the Gujarat Board was admitted provisionally

in the B.A. I year course in the Delhi University. After over a year, the University informed

him that he was in eligible to join the course because the Gujarat Board Examination had

been recognised by the appellate University as equivalent to Matric Examination while the

qualification to join B.A. I year Course was passing the Higher Secondary Examination.

However, the Statute had authorised the Academic Council of the University to grant

exemption from the admission requirements. The High Court of accepted the plea of the

estoppel raised by the student against the University.

The Court stated that estoppel was within the meaning of Section 115 of the Evidence

Act, 1872, might arise from the silence as well as words, the Court held “inaction of the

University for over a year amounted to a representation by it that it had approved his

admission” and therefore the University would now be estopped from doing that.

In Shri Krishna v. Kurukshetra University,12

the Apex Court had ruled that the

University could not cancel the candidature of the appellant-student for the not complying

with the attendance requirement, as the respondents failed to tale the adequate care to

scrutinize his examination from at the relevant time to ascertain whether the candidate

fulfilled the necessary conditions.

10

Kumar, Narender; Nature and Concepts of Administrative Law, 1st

Ed., Allahabad Law Agency, Faridabad, 2011, p. 368. 11

AIR 1968 Del. 131. 12

AIR 1976 SC 376.

Page | 4

Evolution of Doctrine of Promissory Estoppel

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

the doctrine in England, we need to refer to some of the English decisions. The early cases

did not speak of this doctrine as estoppel. They spoke of it as „raising equity‟. Lord Cairns

stated the doctrine in its earliest form in the following words in Hughes v. Metropolitan

Railway Company.13

“It is the first principle upon which all courts of equity proceed, that if parties who

have entered into definite and distinct terms involving certain legal results afterwards by their

own act or with their won consent enter upon a course of negotiation which has the effect of

leading one of the parties to suppose that the strict rights arising under the contract will not be

enforced, or will be kept in suspense, or held in abeyance, the person who otherwise might

have enforced those rights will not be allowed to enforce them where it would be inequitable

having regard to the dealings which have thus taken place between the parties.”

This principle of equity made sporadic appearances but it was only in 1947 that it was

restated as a recognized doctrine by Lord Denning in Central London Properties Trust Ltd.

v. High Trees House Ltd.,14

who asserted15

:

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

is binding.”

In the formative period the doctrine of promissory estoppel could not be invoked by

the promisee unless he had suffered „detriment‟ or „prejudice‟. All that is required is that the

party asserting the estoppel must have acted upon the assurance given by him. The alteration

of position by the party is the only indispensable requirement of the doctrine.

In India, there are two stages in the evolution of the application of this doctrine; pre-

Anglo Afghan case and post - Anglo Afghan case. Prior to this case, the position was that

promissory estoppel did not apply against the Government. But the position altered with this

case.

13

(1877) 2 AC 439. 14

(1947) KB 130. 15

See Infra 17.

Page | 5

In Union of India v. Indo Anglo Afghan Agencies Ltd.,16

the Government of India

announced certain concessions with regard to the import of certain raw materials in order to

encourage export of woollen garments to Afghanistan. Subsequently, only partial concessions

and not full concessions were extended as announced. The Supreme Court held that the

Government was estopped by its promise. Thereafter the courts have applied the doctrine of

promissory estoppel even against the Government.

Promissory Estoppel: An Outline

Lord Denning in Central London Property Trust Ltd. v. High Trees House Ltd.,17

expressing the doctrine stated:18

“Once a promise has been made by a person knowing that it would be acted upon by

the person to whom it is made and in face it is no acted upon, then it is inequitable to allow

the party making the promise to go back upon it.”

In this case, during the Second World War, people left London owing to

bombardment and as a result, a number of flats remained unoccupied. „A‟ had left out his flat

to B for 99 years at the rate of £2500 a year. He, however, due to war conditions, agreed to

reduce the rent by fifty per cent. After the war was over, the tenants returned. A demanded

full amount of rent to which B objected relying on A‟s assurance. The Court applied the

doctrine of estoppel and granted relief to B.

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

representation to the other so as to enable him to arrange its affairs in such a manner as if the

said representation is acted upon.19

In Sharma Transport v. Government of Andhra Pradesh,20

Promissory Estoppel was

defined as:

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

reasonably except to induce action or forbearance of a definite and substantial character on

the part of the promise and which does induce be avoided only by enforcement of promise.”

16

AIR 1968 SC 718. 17

(1947) 1 KB 130. 18

See Supra 14. 19

L.M.T. Limited v. State of Uttar Pradesh, AIR 2008 SC 1032. 20

AIR 2002 SC 322.

Page | 6

“… the principle of promissory estoppel is that where one party has by his words or

conduct made to the other a clear and unequivocal promise or representation which is

intended to create legal relations or affect a legal relationship to arise in the future, knowing

or intending that it would be acted upon by the other party …, the promise or representation

would be binding on the party making it and he would not be entitled to go back upon it, if it

would be inequitable to allow him to do so, having regard to the dealings which have taken

place between the parties.”

Dixon, J., an Australian Jurist in Grundt v. The Great Boulder Proprietary Gold

Miners Ltd.,21

explained:

“It is often said that the party asserting the estoppel must have been inducted to act to

his detriment. Although substantially such a statement is correct and leads to no

misunderstanding, it does not bring out clearly the basal purpose of the doctrine. That

purpose is to avoid or prevent a determent to the party asserting the estoppel by compelling

the opposite party to adhere to the assumption upon which the former acted or abstained from

acting. This means that the real detriment or harm from which the law seeks to give

protection is that which would flow from the change of position if the assumptions were

deserted that led to it.”

Sahai, J., explaining the basis of the doctrine in Indira Bai v. Nand Kishore,22

observed “Estoppel is a rule of equity flowing out of fairness striking on behaviour deficient

in good faith. It operates as a check on the spurious conducting by preventing the intruder

from taking advantage and assailing forfeiture already accomplished. It is invoked and

applied to aid the law in administration of justice. But for it, great many injustices, may have

been perpetrated.”

Nature of Promissory Estoppel

It has been said that the rule of promissory estoppel cannot itself be the basis of an

action. It cannot be a cause of action; it can only be a shield and not a sword. Since the

doctrine has been usually invoked by way of defence, it has come to be identified as a

measure of defence.23

21

(1938) 59 CLR 641. 22

(1990) 4 SCC 668. 23

Motilal Padampat Sugar Mills v. State of Uttar Pradesh, AIR 1979 SC 621.

Page | 7

But, in the present day judicial tendency appears to be that estoppel can be used as a

sword also.24

Stating that “there are estoppels and estoppels” Lord Denning held that “some

do give rise to cause of action, some do not.” In the species of estoppel called “proprietary

estoppel”, says the learned Lord “it does give rise to cause of action.”25

Estoppel is often described as a rule of evidence, but the whole concept is more

correctly viewed as a substantive rule of law. It is necessary to make it clear that the doctrine

of promissory estoppel or equitable estoppel is not based on the principle of estoppel but it is

a doctrine evolved by equity in order to prevent injustice. Estoppel by conduct proceeds on

the rule of substantive law and equity where a promise made by a person knowing that it

would be acted on by the person to whom it is made and in fact it is so acted and it is

inequitable to allow the party making the promise to go back upon it.26

It being an equitable principle evolved for doing justice, “there is no reason,” said

Bhagwati, J., “why it should be given only limited application by way of defence. It can be

the basis of cause of action.”27

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

contract nor in the realm of estoppel. The basis of the doctrine is the interposition of equity

which has always, true to its form, stepped in to mitigate the rigour of strict law.28

Application of Doctrine of Promissory Estoppel to Government

Since the doctrine of promissory estoppel is an equitable doctrine it must yield when

the equity so requires. If it can be shown by the Government that having regard to the facts as

they have subsequently transpired, it would be inequitable to the Government to abide by the

promise made by it, the court would not raise equity in favour of the promise and enforce it

against the Government. When the Government is able to show that due to the facts which

have transpired subsequent to the promise being made, public interest would be prejudiced if

the Government were required to carry out the promise made, the court would have to

balance the public interest in the Government carrying out the promise made to a citizen

24

Moorgate Mercantile Co. v. Twichings, (1975) 3 All ER 314. 25

Crabb v. Arun DC, (1976) Ch. 179. 26

Halsbury’s Laws of England, XV, 168., Cited in Kumar, Narender; Nature and Concepts of Administrative Law, 1

st Ed., Allahabad Law Agency, Faridabad, 2011, p. 371.

27 See Supra 24.



Page | 8

which has induced the citizen to alter his position to his prejudice and the public interest

likely to suffer if the Government were to carry out the promise, and determine which way

the equity lies.

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

is a

trendsetter regarding the application of the doctrine of promissory estoppel against the

Government. In this case the Chief Secretary of the Government gave a categorical assurance

that total exemption from sales tax would be given for three years to all new industrial units

in order them to establish themselves firmly. Acting on this assurance the appellant sugar

mills set up a hydrogenation plant by raising a huge loan. Subsequently, the Government

changed its policy and announced that sales tax exemption will be given at varying rates over

three years. The appellant contended that they set up the plant and raised huge loans only due

to the assurance given by the Government. The Supreme Court held that the Government was

bound by its promise and was liable to exempt the appellants from sales tax for a period of

three years commencing from the date of production.

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

the

municipality agreed to exempt certain existent industrial concerns in the area from octroi duty

for a period of seven years. However, later on it sought to impose duty. This was challenged

and the Supreme Court, while remanding the case to the High Court, held that where the

private party had acted upon the representation of a public authority, it could be enforced

against the authority on the grounds of equity in appropriate cases even though the

representation did not result in a contract owing to the lack of proper form.

However, the case of Jit Ram Shiv Kumar v. State of Haryana,31

cast a shadow on

the Motilal case where it was held that the doctrine of promissory estoppel is not available

against the exercise of executive functions of the State. The Supreme Court in Union of India

v. Godfrey Phillips India Ltd.,32

soon removed this doubt. The Court held that the law laid

down in Motilal case represents the correct law on promissory estoppel.

29

AIR 1979 SC 621. 30

AIR 1971 SC 1021 : 1970 SCR (2) 854. 31

AIR 1980 SC 1285 : 1980 SCR (3) 689 : (1981) SCC (1) 11. 32

1996 (85) ELT 242 Bom.

Page | 9

In State of Punjab v. Nestle India Ltd.,33

the Apex Court said:

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

find cause of action against the Government, even when, and this needs to be emphasized, the

representation sought to be enforced was legally invalid in the sense that it was made in a

manner which was not in conformity with the procedure prescribed by the statute.”

It has also been made clear that the Government could not, on some undefined and

undisclosed ground of necessity or expediency fail to carry out the promise solemnly made

by it. Nor, the Government could claim to be the Judge of its own obligation to the citizen on

an ex parte appraisement of the circumstances in which the obligation had arisen.34

The doctrine of estoppel cannot be invoked for preventing the Government from

acting in discharge of its duties under the law. The doctrine of cannot be applied in teeth of

an obligation or liability imposed by the law. It cannot be used to compel the Government or

even a private party to do an act prohibited by law. There can be no promissory estoppel

against the exercise of legislative power. The legislature can never be precluded from

exercising its legislative functions by resort to the doctrine of promissory estoppel.35

Estoppel against a Statute

The doctrine of estoppel does not apply to statutes. In other words, a person who

makes a statement as to the existence of the provisions of a statute is not estopped,

subsequently, from contending that the statutory provision is different from what he has

previously stated. A person may not represent the true status of a statute or law, but the other

person who relies on such a representation is at liberty to find out the position of law on the

matter and as the maxim says, ignorance of law is no excuse.36

In Jit Ram Shiv Kumar v. State of Haryana,37

a municipality granted exemption

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

33

AIR 2004 SC 4559. 34

Union of India v. Indo Afghan Agencies Ltd., AIR 1968 SC 718. 35

See Kumar, Narender; Nature and Concepts of Administrative Law, 1st

Ed., Allahabad Law Agency, Faridabad, 2011, p. 381. 36

See Upadhyaya, Dr. J.J.R.; Administrative Law, 7th

Ed., Central Law Agency, Allahabad, 2011, p. 333. 37

AIR 1980 SC 1285 : 1980 SCR (3) 689 : (1981) SCC (1) 11

Page | 10

granted the exemption in keeping with the terms of the original sale of plots, but levied taxes

again. Even so, a claim of estoppel against its legislative power was not allowed.

So is the case with the tax laws. If the law requires that a certain tax be collected, it

cannot be given up, and any assurances by the Government that the taxes would not be

collected would not bind the Government, when it chooses to collect the taxes. Thus it was

held that when there was a clear and unambiguous provision of law that entitles the plaintiff

to a relief, no question of estoppel arises.

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

a statute:

The parties must bilaterally agree to contract irrespective of statutory provisions of the

applicable Act.

The agreement entered into by the parties must be expressly prohibited by the Act.

The provision of law must be made for public interest and not pertain to a particular

class of persons.

The agreement of the parties should not have been merged into an order of the court

which by the conduct of the parties had been dissuaded from performing its statutory

obligations.

So, it is a well settled catena of decision that the doctrine of promissory estoppel cannot

be invoked against the provisions of Statutes.38

Conclusion

The Doctrine of Estoppel is necessary to maintain flexibility in the law of the land.

The Government and other parties are kept under check from making promises for which

they can be held accountable as discussed before. It is inequitable that the promisor should be

allowed to resize from the assurance or representation having regard to what the promisee has

done or refrained from doing in reliance on the assurance or representation. So the citizens

can rest assured about the lawful promises made.

38

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

Page | 11

Bibliography

A Dictionary of Law, 5th

Ed., Oxford University Press, New York, 2003.

Jain, M.P. & Jain, S.N.; Principles of Administrative Law, 6th

Ed., Vol. II,

Wadhwa Nagpur, 2007.

Kumar, Narender; Nature and Concepts of Administrative Law, 1st Ed., Allahabad

Law Agency, Faridabad, 2011.

The Indian Evidence Act, 1872.

Upadhyaya, Dr. J.J.R.; Administrative Law, 7th

Ed., Central Law Agency,

Allahabad, 2011.

Wade, H.W.R. & Forsyth, C.F.; Administrative Law, 9th

Ed., Oxford University

Press, New Delhi, 2006.

Webliography

http://en.wikipedia.org/wiki/Case_citation

http://hanumant.com/index.php/articles/general-articles/41-promissory-estoppel-

application-to-the-govt-by-divya-bhargava.html

http://www.indiankanoon.org/

http://www.legalserviceindia.com/article/l249-Promissory-Estoppel.html

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Promissory Estoppel

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