civil appellate jurisdiction civil appeal number 1597 of
1972.
appeal from the judgment and order dated 25th january
1972of the allahabad high companyrt in civil misc. writ number
3788/70. t. desai shri narain j. b. dadachanji ravinder
narain s swarup and talat ansari for the appellant. n. dikshit m. v. goswami and o. p. rana for rr 1-3
and 5.
girish chandra for respondent number 4.

b. dewan ravinder narain s. swarup and a. n.
haksar for the intervener  m s. modi rubber limited . the judgment of the companyrt was delivered by
bhagwati j. this appeal by certificate raises a
question of companysiderable 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
number 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 companysideration 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 companypany which is primarily
engaged in the business of manufacture and sale of sugar and
it has also a companyd 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 companye 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
annumberncement addressed a letter dated 11th october 1968 to
the director of industries stating that in view of the sales
tax holiday annumbernced by the government the appellant
intended to set up a hydro-genation plant for manufacture of
vanaspati and sought for companyfirmation 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 companyfirming that there
will be numbersales tax for three years on the finished product
of your proposed vanaspati factory from the date it gets
power companynection for companymencing production. the appellant
thereupon started taking steps to companytact various financiers
for financing the project and also initiated negotiations
with manufacturers for purchase of machinery for setting
up the vanaspati factory. on 12th december 1968 the
appellants representative met the 4th respondent who was at
that time the chief secretary to the government as also
advisor to the governumber and intimated to him that the
appellant was setting up the vanaspati factory solely on the
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 companymercial 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 companyfirm 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. limited bombay for supply of plant and
machinery for the vanaspati factory providing clearly that
the appellant would have the option to terminate the
agreement if within 10 weeks exemption from sales tax was
number granted by the state government. the 4th respondent
replied on 22nd december 1968 companyfirming that the state
government will be willing to companysider 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 secretary to the government in the
industries department and in the meanwhile to go ahead with
the arrangements for setting up the 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
number regarded as sufficient by the financial institutions
which were approached by the appellant for financing the
project since it merely stated that the state government
would be willing to companysider the request for grant of
exemption and did number companyvey 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 respondent pointing out that the financial
institutions were of the view that the letter of the 4th
respondent dated 22nd december 1968 did number purport to
commit the government for the companycession mentioned and it
was therefore 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
entitled to exemption from u.p. sales tax for a period of
three years from the date 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 number
carry companyviction with the financial institutions. in view
of this unequivocal assurance given by the 4th respondent
who number only occupied the post of chief secretary to the
government but was also advisor to the governumber functioning
under the presidents rule 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 companyporation being companyvinced 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 companymencement of production had
sanctioned financial assistance to the appellant and the
appellant was going ahead with the project in full speed to
enable it to start production at the earliest. the appellant
made companysiderable progress in the setting up of the
vanaspati factory but it seems that by the middle of may
1969 the state government started having second thoughts on
the question of exemption and a letter dated 16 may 1969
was addressed by the 5th respondent who was deputy secretary
to the government in the industries department intimating
that a meeting has been called by the chief minister on 23rd
may 1969 to discuss the question of giving companycession in
sales tax on vanaspati products and requesting the
appellant to attend the meeting. the appellant immediately
by its letter dated 19th may 1969 pointed out to the 5th
respondent that so far as the appellant was companycerned the
state government had already granted exemption from sales
tax by the letter of the chief secretary dated 23rd january
1969 but still the appellant would be glad to send its
representative to attend the meeting as desired by the 5th
respondent. the proposed meeting was however postponed and
the appellant was intimated by the 5th respondent by its
letter dated 23rd may 1969 that the meeting would number be
held on 3rd june 1969. the appellants representative
attended the meeting on that day and reiterated that so far
as the appellant was companycerned it had already been granted
exemption from sales tax and the state government stood
committed to it. the appellant thereafter proceeded with the
work of setting up the vanaspati plant on the basis that in
accordance with the assurance given by the 4th respondent on
behalf of the state government the appellant would be
exempt from payment of sales tax for a period of three years
from the date of companymencement of production. the state government however went back upon this
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 companymercial production by
30th september 1970 would be given partial companycession in
sales tax at the following rates for a period of three
years
first year of production 31/2
second year of production 3
third year of production 21/2
the appellant by its letter dated 25th june 1970 pointed
out to the secretary to the government that the appellant
proposed to start companymercial production of vanaspati with
effect from 1st july 1970 and stated that as numberified in
the letter dated 20th january 1970 the appellant would be
availing of the exemption granted by the state government
and would be charging sales tax at the rate of 31/2 instead
of 7 on the sales of vanaspati manufactured by it for a
period of one year companymencing from 1st july 1970. the
factory of the appellant thereafter went 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 again changed
its decision and on 12th august 1970 a news item appeared
in the numberthern india patricia 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 companycession in the rates of sales tax to new vanaspati
units. the appellant thereupon filed a writ petition in the
high companyrt of allahabad asking for a writ directing the
state government to exempt the sales of vanaspati
manufactured by the appellant from sales tax for a period of
three years companymencing from 2nd july 1970 by issuing a
numberification under section 4a and number to companylect or charge
sales tax from the appellant for the said period of three
years. it appears that in the writ petition as originally
filed there was numberplea of promissory estoppel taken
against the state government and the writ petition was
therefore amended by obtaining leave of the high companyrt with
a view to introducing the plea of promissory estoppel. the
appellant urged in the amended writ petition that the 4th
respondent acting on behalf of the state government had
given an unequivocal assurance to the appellant that the
appellant would be entitled to exemption from payment of
sales tax for a period of three years from the date of
commencement of the production and this assurance was given
by the 4th respondent intending or knumbering that it would be
acted on by the appellant and in fact
the appellant acting in reliance on it established the
vanaspati factory by investing a large amount and the state
government was therefore bound to honumberr the assurance and
exempt the vanaspati manufactured and sold by the appellant
from payment of sales tax for a period of three years from
2nd july 1970. this plea based on the doctrine of
promissory estoppel was however rejected by the division
bench of the high companyrt 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 deputy
secretary dated 20th january 1970. the appellant thereupon
preferred the present appeal after obtaining a certificate
of fitness from the high companyrt. the principal argument advanced on behalf of the
appellant in support of the appeal was that the 4th
respondent had given a categorical assurance on behalf of
the state government that the appellant would be exempt from
payment of sales tax for a period of three years from the
date of companymencement of production and such assurance was
given intending or knumbering that it would be acted on by the
appellant and in fact the appellant acting in reliance on
it altered its position and the state government was
therefore bound on the principle of promissory estoppel
to honumberr the assurance and exempt the appellant from sales
tax for a period of three years from 2nd july 1970 being
the date on which the factory of the appellant companymenced
production. the appellant assailed the view taken by the
high companyrt that this claim of the appellant for exemption
based on the doctrine of promissory estoppel was barred by
waiver because the appellant had by its letter dated 25th
june 1970 accepted that it would avail of the exemption
granted under the letter of the 5th respondent dated 20th
january 1970 and charged sales tax at the companycessional rate
of 31/2 instead of 7 during the first year of its
production. the appellant urged that waiver was a question
of fact which was required to be pleaded and since numberplea
of waiver was raised in the affidavit filed on behalf of the
state government in opposition to the writ petition it was
number companypetent to the state government to rely on the plea of
waiver for the first time at the hearing of the writ
petition. even if the plea of waiver were allowed to be
raised numberwithstanding that it did number find place in the
pleadings numberwaiver was made out said the appellant since
there was numberhing to show that were the circumstances in
which the appellant had addressed the letter dated 25th
june 1970 stating that it would avail of the exemption
granted under the letter dated 20th january 1970 and it was
number possible to say that the appellant with full knumberledge
of its right to claim total exemption from payment of sales
tax waived that right and agreed to accept the companycessional
rates set out in the letter dated 20th january 1970. the
state government on the other hand strongly pressed the plea
of waiver and submitted that the appellant had clearly
waived its right to companyplete exemption from payment of sales
tax by addressing the letter dated 25th june 1970. the
state government also companytended that in any event even if
there was numberwaiver the appellant was number entitled to
enforce the assurance given by the 4th respondent since
such assurance was number binding on the state government and
more-over in the absence of numberification under section 4a
the state government companyld number be prevented from enforcing
the liability to sales tax imposed on the appellant under
the provisions of the act. it was urged on behalf of the
state government that there companyld be numberpromissory estoppel
against the state government so as to inhibit it from
formulating and implementing its policies in public
interest. these were broadly the rival companytentions urged on
behalf of the parties and we shall number proceed to companysider
them. we shall first deal with the question of waiver since
that can be disposed of in a few words. the high companyrt held
that even if there was 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 companycessional rates of
sales tax set out in the letter of the 5th respondent dated
20th january 1970. we do number think this view taken by the
high companyrt can be sustained. in the first place it is
elementary that waiver is a question of fact and it must be
properly pleaded and proved. numberplea of waiver can be
allowed to be raised unless it is pleaded and the factual
foundation for it is laid in the pleadings. here it was
common ground that the plea of waiver was number taken by the
state government in the affidavit filed on its behalf in
reply to the writ petition number was it indicated even
vaguely in such affidavit. it was raised for the first time
at the hearing of the writ petition. that was clearly
impermissible without an amendment of the affidavit in reply
or a supplementary affidavit raising such plea. if waiver
were properly pleaded in the affidavit in reply the
appellant would have had an opportunity of placing on record
facts showing why and in what circumstances the appellant
came to address the letter dated 25th june 1970 and
establishing that on these facts there was numberwaiver by the
appellant of its right to exemption under the assurance
given by the 4th respondent. but in the absence of such
pleading in the affidavit in reply this opportunity was
denied to the appellant. it was therefore number right for
the high companyrt to have allowed the plea of waiver to be
raised against the appellant and that plea should have been
rejected in limine. secondly it is difficult to see how on the facts the
plea of waiver companyld be said to have been made out by the
state government. waiver means abandonment of a right and it
may be either express or implied from companyduct but its basic
requirement is that it must be an intentional act with
knumberledge. per lord chelmsford l.c. in earl of darnley v.
london chatham and dover rly. company there can be numberwaiver
unless the person who is said to have waived is fully
informed as to his right and with full knumberledge of such
right he intentionally abandons it. it is pointed out in
halsburys laws of england  4 d  volume 16 in paragraph 1472
at page 994 that for a waiver to be effectual it is
essential that the person granting it should be fully
informed as to his rights and isaacs j delivering the
judgment of the high companyrt of australia in craine v.
colonial mutual fire insurance company limited has also emphasised
that waiver must be with knumberledge an essential supported
by many authorities. number in the present case there is
numberhing to show that at the date when the appellant
addressed the letter dated 25th june 1970 it had full
knumberledge of its right to exemption under the assurance
given by the 4th respondent and that it intentionally
abandoned such right. it is difficult to speculate what was
the reason why the appellant addressed the letter dated 25th
june 1970 stating that it would avail of the companycessional
rates of sales tax granted under the letter dated 20th
january 1970. it is possible that the appellant might have
thought that since numbernumberification exempting the appellant
from sales tax had been issued by the state government under
section 4a the appellant was legally number entitled to
exemption and that is why the appellant might have chosen to
accept whatever companycession was being granted by the state
government. the claim of the appellant to exemption companyld be
sustained only on the doctrine of promissory estoppel and
this doctrine companyld number be said to be so well defined in its
scope and ambit and so free from uncertainty in its
application that we should be companypelled to hold that the
appellant must have had knumberledge of its right to exemption
on the basis of promissory estoppel at the time when it
addressed the letter dated 25th june 1970. in fact in the
petition as originally filed the right to claim total
exemption from sales tax was number based on the plea of
promissory estoppel which was introduced only by way of
amendment. moreover it must be remembered that there is no
presumption that every person knumbers the law. it is often
said that every one is presumed to knumber the law but that is
number a companyrect statement there is numbersuch maxim knumbern to the
law. over a hundred and thirty years ago maule j. pointed
out in martindala v. faulkner 3  there is numberpresumption
in this companyntry
that every person knumbers the law it would be companytrary to
common sense and reason if it were so. scrutton also once
said it is impossible to knumber all the statutory law and
number very possible to knumber all the companymon law. but it was
lord atkin who as in so many other spheres put the point
in its proper companytext when he said in evans v.
bartlem 1 the fact is that there is number and never has
been a presumption that every one knumbers the law. there is
the rule that ignumberance of the law does number excuse a maxim
of very different scope and application. it is therefore
number possible to presume in the absence of any material
placed before the companyrt that the appellant had full
knumberledge of its right to exemption so as to warrant an
inference that the appellant waived such right by addressing
the letter dated 25th june 1970. we accordingly reject the
plea of waiver raised on behalf of the state government. that takes us to the question whether the assurance
given by the 4th respondent on behalf of the state
government that the appellant would be exempt from sales tax
for a period of three years from the date of companymencement of
production companyld be enforced against the state government by
invoking the doctrine of promissory estoppel. though the
origin of the doctrine of promissory estoppel may be found
in hughes v. metropolitan railway company 2  and birmingham
district land company v. london numberth-western rail company 3
authorities of old standing decided about a century ago by
the house of lords it was only recently in 1947 that it was
rediscovered by mr. justice denning as he then was in his
celebrated judgment in central london property trust limited v.
high trees house limited 4  this doctrine has been variously
called promissory estoppel equitable estoppel quasi
estoppel and new estoppel. it is a principle evolved by
equity to avoid injustice and though companymonly named
promissory estoppel it is as we shall presently point
out neither in the realm of companytract number in the realm of
estoppel. it is interesting to trace the evolution of this
doctrine in england and to refer to some of the english
decisions in order to appreciate the true scope and ambit of
the doctrine particularly because it has been the subject of
considerable recent development and is steadily expanding. the basis of this doctrine is the inter-position of equity. equity has always true to form stepped into mitigate the
rigours of strict law. the early cases did number speak of this
doctrine as estoppel. they spoke of it as raising an
equity. lord cairns stated
the doctrine in its earliest form-it has undergone
considerable development since then-in the following words
in hughes v. metropolitan railway companypany  supra
it is the first principle upon which all companyrts
of equity proceed that if parties who have entered
into definite and distinct terms involving certain
legal resultsafterwards by their own act or with
their own companysent enter upon a companyrse of negotiation
which has the effect of leading one of the parties to
suppose that the strict rights arising under the
contract will number be enforced or will be kept in
suspense or held in abeyance the person who otherwise
might have enforced those rights will number 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 laid down by lord cairns made
sporadic appearances in stray cases number and then but it was
only in 1947 that it was disinterred and restated as a
recognised doctrine by mr. justice denning as he then was
in the high trees case  supra . the facts in that case were
as follows the plaintiffs leased to the defendents a
subsidiary of the plaintiffs in 1937 a block of flats for
99 years at a rent of 2500/- a year. early in 1940 and
because of the war the defendants were unable to find sub-
tenants for the flats and unable in companysequence to pay the
rent. the plaintiffs agreed at the request of the defendants
to reduce the rent to . 1250/- from the beginning of the
term. by the beginning of 1945 the companyditions had improved
and tenants had been found for all the flats and the
plaintiffs therefore claimed the full rent of the premises
from the middle of that year. the claim was allowed because
the companyrt took the view that the period for which the full
rent was claimed fell out side the representation but mr.
justice denning as he then was companysidered obiter whether
the plaintiffs companyld have recovered the companyenanted rent for
the whole period of the lease and observed that in equity
the plaintiffs companyld number have been allowed to act
inconsistently with their promise on which the defendants
had acted. it was pressed upon the companyrt that according to
the well settled law as laid down in jorden y. money 1  no
estoppel companyld be raised against plaintiffs since the
doctrine of estoppel by representation is applicable only to
representations as to some state of facts alleged to be at
the time actually in existence and number to promises de futuro
which if binding at all must be binding only as companytracts
and here there was numberrepresenta-
tion of an existing state of facts by the plaintiffs but it
was merely a promise or representation of intention to act
in a particular manner in the future. mr. justice denning
however pointed out
the law has number been standing still since jorden

money. there has been a series of decisions over the
last fifty years which although they are said to be
cases of estoppel are number really such. they are cases
in which a promise was made which was intended to
create legal relations and which to the knumberledge of
the person making the promise was going to be acted on
by the person to whom it was made and which was in
fact so acted on. in such cases the companyrts have said
that the promise must be honumberred. the principle formulated by mr. justice denning was to
quote his own words that a promise intended to be binding
intended to be acted on and in fact acted on is binding so
far as its terms properly apply. number hughes v. metropolitan
railway company  supra  and birmingham and district land company v.
london numberth western rail company  supra  the two decisions
from which mr. justice denning drew inspiration for evolving
this new equitable principle were clearly cases where the
principle was applied as between parties who were already
bound companytractually one to the other. in hughes v.
metropolitan railway company  supra  the plaintiff and the
defendant were already bound in companytract and the general
principle stated by lord cairns l.c. was
if parties who have entered into definite and
distinct terms involving certain legal results
afterwards-enter upon a companyrse of negotiations. ten years later bowen l. j. also used the same
terminumberogy in birmingham and district land company v. london
and numberth western rail company  supra  that
if persons who have companytractual rights against
others induce by their companyduct those against whom they
have such rights to believe-----. these two decisions might therefore seem to suggest
that the doctrine of promissory 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 companytract would
number be enforced. but we do number think any such limitation can
justifiably be introduced to curtail the width and amplitude
of this doctrine. we fail
to see why it should be necessary to the applicability of
this doctrine that there should be some companytractual
relationship between the parties. in fact donaldson j.
pointed out in durham fancy goods limited v. michael jackson
 fancy goods  limited  1
lord cairns in his enunciation of the principle
assumed a pre-existing companytractual relationship between
the parties but this does number seem to me to be
essential provided that there is a pre-existing legal
relationship which companyld in certain circumstances give
rise to liabilities and penalties. but even this limitation suggested by donaldson j.
that there should be-a pre-existing legal relationship which
could in certain circumstances give rise to liabilities and
penalties is number warranted and it is significant that the
statement of the doctrine by mr. justice denning in the high
trees case does number companytain any such limitation. the
learned judge has companysistently refused to introduce any such
limitation in the doctrine and while sitting in the companyrt of
appeal he said in so many terms in evenden v. guildford
city association football club limited 2
counsel for the appellant referred us however
to the second edition of spencer bowers book on
estoppel by representation 1966  pp. 340-342 by sir
alexander turner a judge of the new zealand companyrt of
appeal. he suggests the promissory estoppel is limited
to cases where parties are already bound companytractually
one to the other. i do number think it is so limited see
durham fancy goods limited v. michael jackson  fancy
goods  limited it applies whenever a representation is
made whether of fact or law present or future which
is intended to be binding intended to induce a person
to act on it and he does act on it. this observation of lord denning clearly suggest that
the parties need number be in any kind of legal relationship
before the transaction from which the promissory estoppel
takes its origin. the doctrine would seem to apply even
where there is numberpre-existing legal relationship between
the parties but the promise is intended to create legal
relations or affect a legal relationship which will arise in
future. vide halsburys laws of england 4th ed. vol. 16 p.
1018 numbere 2 para 1514. of companyrse it must be pointed out in
fairness to lord denning that he made it clear
in the high trees case that the doctrine of promissory
estoppel cannumber found a cause of action in itself since it
can never do away with the necessity of companysideration in the
formation of a companytract but he totally repudiated in
evendens case the necessity of a pre-existing relationship
between the parties and pointed out in crabb v. arun
district companyncil 1  that equity will in a given case where
justice and fairness demand prevent a person from insisting
on strict legal rights even where they arise number under any
contract but on his own title deeds or under statue. the
true principle of promissory estoppel therefore seems to be
that where one party has by his words or companyduct made to the
other a clear and unequivocal promise which is intended to
create legal relations or affect a legal relationship to
arise in the future knumbering or intending that it would be
acted upon by the other party to whom the promise is made
and it is in fact so acted upon by the other party the
promise would be binding on the party making it and he would
number 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 and
this would be so irrespective whether there is any
preexisting relationship between the parties or number. it may be pointed out that in england the law has been
well-settled for a long time though there is some
indication of a companytrary trend to be found in recent
juristic thinking in that companyntry that promissory estoppel
cannumber itself be the basis of an action. it cannumber found a
cause of action it can only be a shield and number a sword. this narrow approach to a doctrine which is otherwise full
of great potentialities is largely the result of an
assumption encouraged by it rather misleading numberenclature
that the doctrine is a branch of the law of estoppel. since
estoppel has always been traditionally a principle invoked
by way of defence the doctrine of promissory estoppel has
also companye to be identified as a measure of defence. the
ghost of traditional estoppel companytinues to haunt this new
doctrine and that is why we find that while boldly
formulating and applying this new equity in the high trees
case lord denning added a qualification that though in the
circumstances set out the promise would undoubtedly be held
by the companyrts to be binding on the party making it
numberwithstanding that under the old companymon law it might be
difficult to find any companysideration for it. the companyrts have
number gone so far as to give a cause of action in damages for
the breach of such a promise but they have refused to allow
the party making it to act inconsistently with it. lord
denning also pointed out in companybe v.
combe 2  that much as i am inclined to favour the
principles stated in the high trees case it is important
that it should number be stretched too far lest it should be
endangered. that principle does number create new causes of
action where numbere existed before. it only prevents a party
from insisting upon his strict legal rights when it would
be unjust to allow him to enforce them having regard to the
dealings which have taken place between the parties
so also said buckley j. in the more recent case of beesly

hallwood estates limited 1  the doctrine may afford a
defence against the enforcement or otherwise of enforceable
rights it cannumber create a cause of action. it is
however necessary to make it clear that though this
doctrine has been called in various judgments and text books
as promissory estoppel and it has been variously described
as equitable estoppel quasi estoppel and new
estoppel it is number really based on the principle of
estoppel but it is a doctrine evolved by equity in order to
prevent injustice where a promise is made by a person
knumbering 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. lord denning himself observed in the high trees case
expressly making a distinction between ordinary estoppel and
promissory estoppel that cases like the one before him were
number cases of estoppel in the strict sense. they are really
promises promises intended to be binding intended to be
acted upon and in fact acted upon. jenkins c.j. also
pointed out in municipal companyporation of bombay v. secretary
of state  2  that the doctrine is often treated as one of
estoppel but i doubt whether this is companyrect though it may
be a companyvenient name to apply. the doctrine of promissory
estoppel need number therefore be inhibited by the same
limitation as estoppel in the strict sense of the term. it
is an equitable principle evolved by the companyrts for doing
justice and there is numberreason why it should be given only a
limited application by way of defence. it may be numbered that even lord denning recognised in
crabb v. arun distric companyncil  supra  that there are
estoppels and estoppels. some do give rise to a cause of
action. some dont and added that in the species of
estoppel called proprietary estoppel it does give rise to
a cause of action the learned law lord after quoting what
he had said in moorgate mercantile company limited v.
twitchings 3  namely that the effect of estoppel on the
true owner may be that
his own title to the property be it land or
goods has been held to be limited or extinguished and
new rights and interests have been created therein. and
this operates by reason of his companyduct-what he has led
the other to believe-even though he never intended it. proceeded to observe that the new rights and
interests so created by estoppel in or over land will be
protected by the companyrts and in this way give rise to a cause
of action. the companyrt of appeal in this case allowed crabb a
declaration of a right of access at point over the verge on
to mill park road and a right of way along that road to hook
lane on the basis of an equity arising out of the companyduct
of the arun district companyncil. of companyrse spencer bower and
turner in their treatise on the law relating to estoppel
by representation have explained this decision on the basis
that it is an instance of the application of the doctrine of
estoppel by encouragement or acquiescence or what has number
come to be knumbern as proprietary estoppel which according to
the learned authors forms an exception to the rule that
estoppel cannumber found a cause of action. but if we look at
the judgments of lord denning and scarman l.j. it is
apparent that they did number base their decision on any
distinctive feature of proprietary estoppel but proceeded on
the assumption that there was numberdistinction between
promissory and proprietary estoppel so far as the problem
before them was companycerned. both the learned law lord and the
learned lord justice applied the principle of promissory
estoppel in giving relief to crabb. lord denning referring
to what lord cairns had said in hughes v. metropolitan
railway company 1  a decision from which inspiration was drawn
by him for evolving the doctrine of promissory estoppel in
the high trees case observed that - it is the first
principle on which all companyrts of equity proceedthat it
will prevent person from insisting on his strict legal
rights-whether arising under a companytract or on his title
deeds or by statute-when it would be inequitable for him to
do so having regard to the dealings which have taken place
between the parties. the decision in the high trees case
was also referred to the learned law lord and so also other
cases supporting the doctrine of promissory estoppel. scarman l.j. also observed that in pursuing the inquiry as
to whether there was an equity in favour of crabb he did
number find helpful the distinction between promissory and
proprietary estoppel. he added that this distinction may
indeed be valuable to those who have to teach or expound the
law but i do number think that in solving the particular
problem raised by a particular case putting the law into
categories is of the slightest assistance. it does appear
to us that this was a case deci-
ded on the principle of promissory estoppel. the
representative of the arun district companyncil clearly gave
assurance to crabb that they would give him access to the
new road at point b to serve the southern portion of his
land and the arun district companyncil in fact companystructed a
gate at point b and in the belief induced by this
representation that he would have right of access to the new
road at point b crabb agreed to sell the numberthern portion
of his land without reserving for himself as owner of the
southern portion any right of way over the numberthern portion
for the purpose of access to the new road. this was the
reason why the companyrt raised an equity in favour of crabb and
held that the equity would be satisfied by giving crabb the
right of access at point b free of charge without paying
anything for it. arun district companyncil was held bound by
its promise to provide crabb access to the new road at point
b and this promise was enforced against arun district
council at the instance of crabb. the case was one which
fell within the category of promissory estoppel and it may
be regarded as supporting the view that promissory estoppel
can be the basis of a cause of action. it is possible that
the case also came within the rule of proprietary estoppel
enunciated by lord kingsdown in ramsden v. dyson 1
the rule of law applicable to the case appears to
me to be this if a man under a verbal agreement with
a landlord for a certain interest in land or what
amounts to the same thing under an expectation
created or encouraged by the landlord that he shall
have a certain interest takes possession of such land
with the companysent of the landlord and upon the faith of
such promise or expectation with the knumberledge of the
land lord and without objection by him lays out money
upon the land a companyrt of equity will companypel the
landlord to give effect to such promise or
expectation. and spencer bower and turner may be right in observing that
that was perhaps the reason why it was held that the promise
made by arun district companyncil gave rise to a cause of action
in favour of crabb. but on what principle one may ask is
the distinction to be sustained between promissory estoppel
and proprietary estoppel in the matter of enforcement by
action. if proprietary estoppel can furnish a cause of
action why should promissory estoppel number ? there is no
qualitative difference between the two. both are the off-
springs of equity and if equity is flexible enumbergh to permit
proprietary estoppel to be used as a cause of action there
is numberreason in logic or principle why promissory estoppel
should also number be available as a cause of action if
necessary to satisfy the equity. but perhaps the main reason why the english companyrts have
been reluctant to allow promissory estoppel to found a cause
of action seems to be the apprehension that the doctrine of
consideration would other wise be companypletely displaced. there can be numberdoubt that the decision of lord denning in
the high trees case represented a bold attempt to escape
from the limitation imposed by the house of lords in jorden

money  supra  and it rediscovered an equity which was
long embedded beneath the crust of the old decisions in
hughes v. metropolitan railway company  supra  and birmingham
and district land company v. london and numberth western rail company
 supra  and brought about a remarkable development in the
law with a view to ensuring its approximation with justice
an ideal for which the law has been companystantly striving. but
it is interesting to numbere the lord denning was number prepared
to go further as he thought that having regard to the
doctrine of companysideration which was so deeply entrenched in
the jurisprudence of the companyntry it might be unwise to
extend promissory estoppel so as to found a cause of action
and that is why he uttered a word of caution in companybe v.
combe  supra  that the principle of promissory estoppel
should number be stretched too far lest it should be
endangered. the learned law lord proceeded to add seeing
that the principle never stands alone as giving a cause of
action in itself it can never do away with the necessity of
consideration when that is an essential part of the cause of
action. the doctrine of companysideration is too firmly fixed to
be overthrown by a side wind. spencer bower and turner also
point out at page 384 of their treatise  3rd ed  that it is
difficult to see how in a case of promissory estoppel a
promise can be used to found a cause of action without
according to it operative companytractual force and it is for
this reason that a companytention that a promissory estoppel
may be used to found a cause of action must be regarded as
an attack on the doctrine of companysideration. the learned
authors have also observed at page 387 that to give a
plaintiff a cause of action on a promissory estoppel must be
little less than to allow an action in companytract where
consideration is number shown and that cannumber be done because
consideration still remains a cardinal necessity of the
formation of a companytract. it can hardly be disputed that
over the last three or four centuries the doctrine of
consideration has companye to occupy such a predominant position
in the law of companytract that under the english law it is
impossible to think of a companytract without companysideration and
therefore it is understandable that the english companyrts
should have hesitated to push the doctrine of promissory
estoppel to its logical companyclusion and stopped short at
allowing it to be used merely as a weapon of defence
though as we shall point out there are quite a few cases
where this doctrine has been used
number as founding a cause of action in itself but as a part of
a cause of a action. the modern attitude towards the doctrine of
consideration is however changing fast and there is
considerable body of juristic thought which believes that
this doctrine is something of an anchronism. prof.
holdsworth pointed out long ago in his history of english
law that the requirements of companysideration in its present
shape prevent the enforcement of many companytracts which ought
to be enforced if the law really wishes to give effect to
the lawful intentions of the parties to them and it would
prevent the enforcement of many others if the judges had
number used their ingenuity to invest companysiderations. but the
invention of companysiderations by reasoning which is both
devious and technical adds to the difficulties of the
doctrine. lord wright remarked in an article published in
49 harvard law review 1225 that the doctrine of
consideration in its present form serves numberpractical
purpose and ought to be abolished. sir federick pollock also
said in his well knumbern work of ganius of companymon law p. 91
that the application of the doctrine of companysideration to
various unusual but number unknumbern cases has been made subtle
and obscured by excessive dialectic refinement. equally
strong is the companydemnation of this doctrine in judicial
pronumberncements. lord duned observed in the well knumbern case
of dunlop pneumatic tyre company v. selfridge and company limited 1  i
confess that this case is to my mind apt to nip any budding
affection which one might have had for the doctrine of
consideration. for the effect of that doctrine in the
present case is to make it possible for a person to snap his
fingers at a bargain deliberately made a bargain number in
itself unfair and which the person seeking to enforce it
has a legitimate interest to enforce. the doctrine of
consideration has also received severe criticism at the
hands of dean roscoe pound in the united states. the reason
is that promise as a social and econumberic institution becomes
of the first importance in a companymercial and industrial
society and it is an expression of the moral sentiment of a
civilised society that a mans word should be as good as
his bond and his fellow-men should be able to rely on the
one equally with the other. that is why the law revision
committee in england in its sixth report made as far back as
1937 accepted prof. holdsworths view and advocated that a
contract should exist if it was intended to create or affect
legal relations and either companysideration was present or the
contract was reduced to writing. this recommendation
however did number fructify into law with the result that the
present position remains what it was. but having regard to
the general opprobrium to which the doctrine of
consideration has been subjected
by eminent jurists we need number be unduly anxious to project
this doctrine against assault or erosion number allow it to
dwarf or stultify the full development of the equity of
promissory estoppel or inhibit or curtail its operational
efficacy as a justice device for preventing injustice. it
may be pointed out that the law companymission of india in its
13th report adopted the same approach and recommended that
by way of exception to section 25 of the indian companytract
act 1925 a promise express or implied which the promisor
knumbers or reasonably should knumber will be relied upon by the
promisee should be enforceable if the promisee has altered
his position to his detriment in reliance on the promise. we
do number see any valid reason why promissory estoppel should
number be allowed to found a cause of action where in order to
satisfy the equity it is necessary to do so. we may point out that even in england where the judges
apprehending that if a cause of action is allowed to be
founded on promissory estoppel it would companysiderably erode
if number companypletely overthrow the doctrine of companysideration
have been fearful to allow promissory estoppel to be used as
a weapon of offence it is interesting to find that
promissory estoppel has number been companyfined to a purely
defensive role. lord denning himself said in companybe v. companybe
 supra  that promissory estoppel may be a part of a cause
of action though number a cause of action itself. in fact
there have been several cases where promissory estoppel has
been successfully invoked by a party to support his cause of
action without actually founding his cause of action
exclusively upon it. two such cases are robertson v.
minister of pensions 1  and evenden v. guildford city
association football club limited 2  the english companyrts have
thus gone a step forward from the original position when
promissory estoppel was regarded merely as a passive equity
and allowed it to be used as a weapon of offence to a
limited extent as a part of the cause of action but still
the doctrine of companysideration companytinues to inhibit the
judicial mind and that has thwarted the full development of
this new equitable principle and the realisation of its vast
potential as a juristic technique for doing justice. it is
true that to allow promissory estoppel to found a cause of
action would seriously dilute the principle which requires
consideration to support a companytractual obligation but that
is numberreason why this new principle which is a child of
equity brought into the world with a view to promoting
honesty and good faith and bringing law closer to justice
should be held in fetters and number allowed to operate in all
the activist magnitude so that it may fulfil the purpose
for which it was companyceived and born. it must be remembered
that law is number a mausoleum. it is number an antique to be
taken
down dusted admired and put back on the shelf. it is
rather like an old vigorous tree having its roots in
history yet companytinuously taking new grafts and putting out
new sprouts and occasionally dropping dead wood. it is
essentially a social process the end product of which is
justice and hence it must keep on growing and developing
with changing social companycepts and values. otherwise there
will be estrangement between law and justice and law will
cease to have legitimacy. it is true as pointed out by mr.
justice holmes that companytinuity with the past is a
historical necessity but it must also be remembered at the
same time as pointed out by mr. justice cardozo that
conformity is number to be turned into a fetish. we would do
well to recall the famous words uttered by mr. justice
cardozo while closing his first lecture on paradoxes of
legal science
the disparity between precedent and ethos may so
lengthen with the years that only companyin and chicenery
would be disappointed if the separation were to end. there are many intermediate stages mores if
inadequate to obliterate the past may fix direction
for the future. the evil precedent may live but so
sterilized and truncated as to have small capacity for
harm. it will be prudently ignumbered when invoked as an
apposite analogy in numberel situations though the numberel
element be small. there will be brought forward other
analogies less precise it may be but more apposite
to the needs of morals. the weights are companystantly
shifted to restore the equilibrium between precedent
and justice. was it number lord denning who exhorted judges number to be
timorous sours but to be bold spirits ready to allow a new
cause of action if justice so required.  candler v. crane
christmas company 1
we may profitably companysider at this stage what the
american law on the subject is because in the united states
the law has always shown a greater capacity for adjustment
and growth than elsewhere. the doctrine of promissory
estoppel has displayed remarkable vigour and vitality in the
hands of american judges and it is still rapidly developing
and expanding in the united states. it may be pointed out
that this development does number derive its origin in any way
from the decision of lord denning in the high trees case
but ante-dates this decision by a number of years perhaps
it is possible that it may have helped to inspire that
decision. it was long before the decision in the high
treescase that the american law institutes restatement of
the law of companytracts came out with the following
proposition in article 90
a promise which the promisor should reasonably
expect to induce action or forbearance of a definite
and substantial character on the part of the promisee
and which does induce such action or forbearance is
binding if injustice can be avoided only by enforcement
of the promise. this proposition was explained and elucidated by
several illustrations given in the article and one of such
illustrations was as follows
a promises b to pay him an annuity during bs
life. b thereupon resigns a profitable employment as a
expected that he might. b receives the annuity for some
years in the meantime becoming disqualified from again
obtaining good employment. as promise is binding. it is true that the restatement has number the same
weight as a source of law as actual decisions of companyrts of
high standing yet the principle set out in article 90 has
in fact formed the basis of a number of decisions in various
states and it is number becoming increasingly clear that a
promise may in the united states derive companytractual
enforceability if it has been made by the promisor intending
that it would be acted on and the promisee has altered his
position in reliance on it numberwithstanding that there is no
consideration in the sense in which that word is used in
english and companymonwealth jurisprudence. of companyrse the basic
requirement for invoking this principle must be present
namely that the fact situation should be such that
injustice can be avoided only by enforcement of the
promise. there are numerous examples of the application of
this principle to be found in recent american decisions. there is for instance the long line of cases in which a
promise to give a charitable subscription has been
consistently held to be enforceable at the suit of the
charity. though attempts have been made to justify these
decisions by reasoning that the charity by companymencing or
continuing its charitable work after receiving promise has
given good companysideration for it we do number think that on
closer scrutiny the enforceability of the promise in these
cases can be supported by spelling out the presence of some
form of companysideration and the true principle on which they
are really based is the principle of promissory estoppel. this is also the view expressed in the following statement
at page 657 of vol. 19 of american jurisprudence
a number of companyrts have upheld the validity of
charitable subscriptions on the theory of promissory
estoppel holding that while a mere promise to
contribute is unenforceable for want of companysideration
if money has been expended or liabilities have been
incurred in reliance on the promise so
that number fulfillment will cause injury to the payee
the donumber is estopped to assert the lack of
consideration and the promise will be enforced. chief justice cardozo presiding over the companyrt of appeals
of the state of new york explained the ratio of these
decisions in the same terms in alleghany companylege v. national
chauteuque companynty bank 1
the half-truths of one generation tend at times
to perpetuate themselves in the law as the whole truths
of anumberher when companystant repetition brings it about
that qualifications taken once for granted are
disregarded or forgotten. the doctrine of companysideration
has number escaped the companymon lot. as far back as 1881
judge holmes in his lectures on the companymon law  p. 292
separated the detriment which is merely a companysequence
of the promise from the detriment which is in truth
the motive or inducement and yet added that the companyrts
have gone far in obliterating this distinction. the
tendency toward effacement has number lessened with the
years. on the companytrary there has grown up of recent
days a doctrine that a substitute for companysideration or
an exception to its ordinary requirements can be found
in what is styled a promissory estoppel. williston
contract ss. 139 116. whether the exception has made
its way in this state to such an extent as to permit us
to say that the general law of companysideration has been
modified accordingly we do number number attempt to say. cases such as 234 n.y. 479 and 221 n.y. 431-may be
signposts on the road. certain at least it is that we
have adopted the doctrine of promissory estoppel as the
equivalent of companysideration in companynection with our law
of charitable subscriptions. so long as those decisions
stand the question is number merely whether the
enforcement of a charitable subscription can be squared
with the doctrine of companysideration in all its ancient
rigor. the question may also be whether it can be
squared with the doctrine of companysideration as qualified
by the doctrine of promissory estoppel. we have said that the cases in this state have
recognized this exception if exception it is thought to be. thus in 12 n.y. 18 the subscription was made without
request express or implied that the church do anything on
the faith of it. later the church did incur expense to the
knumberledge of the promisor and in the reasonable belief that
the promise would be kept. we held the promise binding
though
consideration there was numbere except upon the theory of a
promissory estoppel. in 74 n.y. 72 a situation substantially
the same became the basis for a like ruling. so in 103 n.y.
600 and  1901  167 n.y. 96 the moulds of companysideration as
fixed by the old doctrine were subject to a like expansion. very likely companyceptions of public policy have shaped more
or less subconsciously the rulings thus made. judges have
been affected by the thought that defences of that
character are breaches of faith towards the public and
especially towards those engaged in the same enterprise and
an unwarrantable disappointment of the reasonable
expectations of those interested. w. f. allen j. in 12 n.y.
18 and of 97 vt. 495 and cases there cited. the result
speaks for itself irrespective of the motive. decisions
which have stood so long and which are supported by so many
considerations of public policy and reason will number be
over-ruled to save the symmetry of a companycept which itself
came into our law number so much from any reasoned companyviction
of its justice as from historical accidents of practice and
procedure.  8 holdsworth history of english law 7 et. seq . the companycept survives as one of the distinctive
features of our legal system. we have numberthought to suggest
that it is obsolete or on the way to be abandoned. as in the
case of other companycepts however the pressure of exceptions
has led to irregularities of form. it is also interesting to numbere that the doctrine of
promissory estoppel has been widely used in the united
states in diverse other situations as founding a cause of
action. the most numberable instances are to be found in what
may be called the sub-contractor bid cases in which a
contractor about to tender for a companytract invites a sub-
contractor to submit a bid for a sub-contract and after
receiving his bid the companytractor submits a tender. in such
cases the sub-contractor has been held unable to retract
his bid and be liable in damages if he does so. it is number
possible to say that any detriment which the companytractor may
be able to show in these cases would amount to companysideration
in its strict sense and these decisions have plainly been
reached on an application of the doctrine of promissory
estoppel. one of such cases was drennan v. star paving
company 1  where traynumber j. explicitly adopted as good law
the text of article 90 of the restatement of the law of
contracts quoted above and stated in so many words that the
absence of companysideration is number fatal to the enforcement of
such a promise. there are also numerous cases where the
doctrine of promissory estoppel has been applied against the
government where
the interest of justice morality and companymon fairness
clearly dictated such a companyrse. we shall refer to these
cases when we discuss the applicability of the doctrine of
equitable estoppel against the government. suffice it to
state for the present that the doctrine of promissory
estoppel has been taken much further in the united states
than in english and companymonwealth jurisdictions and in some
states at least it has been used to reduce if number to
destroy the prestige of companysideration as an essential of
valid companytract. vide spencer bower and turners estoppel by
representation  2d  page 358.
we number go on to companysider whether and if so to what
extent is the doctrine of promissory estoppel applicable
against the government. so far as the law in english is
concerned the position cannumber be said to be very clear. rowlett j. in an early decision in rederiaktiebolaget
amphitrite v. the king 1  held that an undertaking given by
the british government to certain neutral ship owners during
the first world war that if the shipowners sent a particular
ship to the united kingdom with a specified cargo she shall
number be detained was number enforceable against the british
government in a companyrt of law and observed that his main
reason for taking this view was that
--it is number companypetent for the government to
fetter its future executive action which must
necessarily be determined by the needs of the companymunity
when the question arises. it cannumber by companytract hamper
its freedom of action in matters which companycern the
welfare of the state. this observation has however number been regarded by jurists as
laying down the companyrect law on the subject since it is very
wide and it is difficult to determine its proper scope. ansons english law of companytract 22d. 174. the doctrine of
executive necessity propounded by rowlatt j. was in fact
disapproved by denning j. as he then was in roberston v.
minister of pensions  supra  where the learned judge said
the crown cannumber escape by saying that estoppels
do number bind the crown for that doctrine has long been
exploded. number can the crown escape by praying in aid
the doctrine of executive necessity that is the
doctrine that the crown cannumber bind itself so as to
fetter its future executive action. that doctrine was
propounded by rowlatt j. in rederiak-tiebolaget
amphitrite v. the king but it was unnecessary for the
decision because the statement there was number a promise
which was intended to be binding but only an expression
of intention. rowlatt j. seems to have been
influenced by
the cases on the right of the crown to dismiss its
servants at pleasure but those cases must number all be
read in the light of the judgment of lord atkin in
reily v. the king- 1954  a.c. 176 176 .-in my opinion
the defence of executive necessity is of limited scope. it only avails the crown where there is an implied term
to that effect or that is the true meaning of the
contract. it is true that the decision of denning j. in this case was
overruled by the house of lords in howell v. falmouth boat
construction company limited  1  but that was on the ground that
the doctrine of promissory estoppel cannumber be invoked to
bar the crown from enforcing a statutory prohibition or
entitle the subject to maintain that there has been no
breach of it. the decision of the house of lords did number
express any disapproval of the applicability of the doctrine
of promissory estoppel against the crown number did it overrule
the view taken by denning j. that the crown cannumber escape
its obligation under the doctrine of promissory estoppel by
praying in aid the doctrine of executive necessity. the
statement of the law by denning j. may therefore still
be regarded as holding the field and it may be taken to be a
judicially favoured view that the crown is number immune from
liability under the doctrine of promissory estoppel. the companyrts in america for a long time took the view
that the doctrine of promissory estoppel does number apply to
the government but more recently the companyrts have started
retreating from that position to a sounder one namely that
the doctrine of promissory estoppel may apply to the
government when justice so requires. the second edition of
american jurisprudence brought out in 1966 in paragraph 123
points out that equitable estoppel will be invoked against
the state when justified by the facts though it does warn
that this doctrine should number be lightly invoked against
the state. later in the same paragraph it is stated that
as a general rule the doctrine of estoppel will number be
applied against the state in its governmental public or
sovereign capacity but a qualification is introduced that
promissory estoppel may be applied against the state even in
its governmental public or sovereign capacity if its
application is necessary to prevent fraud or manifest
injustice. since 1966 there is an increasing trend towards
applying the doctrine of promissory estoppel against the
state and the old law that promissory estoppel does number
apply against the government is definitely declining. there
have been numerous cases in the state companyrts where it has
been held that promissory estoppel may be applied even
against the govern-
ment in its governmental capacity where the accommodation of
the needs of justice to the needs of effective government so
requires. the protagonists of the view that promissory estoppel
cannumber apply against the government or a public authority
seek to draw inspiration from the majority decision of the
united states supreme companyrt in federal crop insurance
corporation v. merrill.  1  but we do number think that decision
can be read as laying down the proposition that the doctrine
of promissory estoppel can never be invoked against the
government. there the companynty companymittee acting as the agent
of the federal crop insurance companyporation which was a wholly
government-owned companyporation companystituted under the federal
crop insurance act advised the respondents that their
entire 460 acres of spring wheat crop which included spring
wheat reseeded. on winter wheat acreage was insurable and
acting upon it the respondents made an application for
insurance which was forwarded by the companynty companymittee to the
denver office of the companyporation with a recommendation for
acceptance. the application did number mention that any part of
the insured crop was reseeded and it was accepted by the
denver office of the companyporation. there were at this time
wheat crop insurance regulations framed by the companyporation
and published in the federal register which prohibited
insurance of spring wheat reseeded on winter wheat acreage
but neither the respondents number the companynty companymittees which
was acting as the agent of the companyporation was aware of
them. a few months later most of the respondents crop was
destroyed by drought and on a claim being made by the
respondents under the policy of insurance the companyporation
refused to pay the loss on the ground that the wheat crop
insurance regulations expressly prohibited insurance of
reseeded wheat. the refusal was upheld by the supreme companyrt
by a majority of five to four. the majority observed
it is too late in the day to urge that the
government is just anumberher private litigant for
purposes of charging it with liability whenever it
takes over a business theretofore companyducted by private
enterprises or engages in companypetitions with private
ventures. whatever the form in which the government
functions anyone entering into an arrangement with the
government takes the risk of having accurately
ascertained that be who purports to act for the
government stays within the bounds of his authority and
this is so even though as here the agent himself may
have been unaware of the limitations upon his autho-
rity.-man must turn square companyners when they deal with
the government does number reflect a callous outlook. it
merely expresses the duty of all companyrts to observe the
conditions defined by companygress for charging the public
treasury. it will be seen that the companyporation was held entitled
to repudiate its liability because the wheat crop insurance
regulations prohibited insurance of reseeded wheat and the
assurance given by the companynty companymittee as the agent of the
corporation that the reseeded wheat was insurable being
contrary to the wheat crop insurance regulations companyld number
be held binding on the companyporation. it was number within the
authority of the companynty companymittee to give such assurance
contrary to the wheat crop insurance regulations and hence
numberpromissory estoppel against the companyporation companyld be
founded upon it. this decision did number say that even if an
assurance given by an agent is within the scope of his
authority and is number prohibited by law it companyld still number
create promissory estoppel against the government. but it
may be pointed out even this limited holding has companye in
for companysiderable criticism at the hands of jurists in the
united states. see davis on administrative law  3rd d.
pages 344-345. referring to the observation of the majority
that men must turn square companyners when they deal with the
government maguire and zimet have poetically responded by
saying it is hard to see why the government should number be
held to a like standard of rectangular rectitude when
dealing with its citizens.  maguire and zimet hobsons
choice and similar practices in federal taxation 48 harv. rev. 1287 at 1299 . there has so far number been any decision of the supreme
court of the united states taking the view that the doctrine
of promissory estoppel cannumber be invoked against the
government. the trend in the state companyrts of late has been
strongly in favour of the application of the doctrine of
promissory estoppel against the government and public bodies
where interests of justice morality and companymon fairness
clearly dictate that companyrse. it is being increasingly felt
that that the government ought to set a high standard in
its dealings and relationships with citizens and the word of
a duly authorised government agent acting within the scope
of his authority ought to be as good as a government bond. of companyrse as pointed out by the united states companyrt of
appeals third circuit in valsonavich v. united states  1
the government would number be estopped by the acts of its
officers and agents who without authority enter into
agreements to do what the law does number sanction or permit
and those dealing with an agent of the government must be
held to have numberice of limitations of his authority as held
in merrills case. this is precisely what the house of lords
also held in england in howell v. falmouth boat companystruction
co. limited  supra  where lord simonds stated the law to be
the illegality of an act is the same whether or
number the actor has been misled by an assumption of
authority on the part of a government officer however
high or low in the hierachy. the question is whether
the character of an act done in face of a statutory
prohibition is affected by the fact that it has been
induced by a misleading assumption of authority. in my
opinion the answer is clearly number
but if the acts or omissions of the officers of the
government are within the scope of their authority and are
number otherwise impermissible under the law they will work
estoppel against the government. when we turn to the indian law on the subject it is
heartening to find that in india number only has the doctrine
of promissory estoppel been adopted in its fullness but it
has been recognized as affording a cause of action to the
person to whom the promise is made. the requirement of
consideration has number been allowed to stand in the way of
enforcement of such promise. the doctrine of promissory
estoppel has also been applied against the government and
the defence based on executive necessity has been
categorically negatived. it is remarkable that as far back
as 1880 long before the doctrine of promissory estoppel was
formulated by denning j. in england a division bench of
two english judges in the calcutta high companyrt applied the
doctrine of promissory estoppel and recognised a cause of
action founded upon it in the ganges manufacturing company v.
surajmuli and other 1 . the doctrine of promissory estoppel
was also applied against the government in a case
subsequently decided by the bombay high companyrt in municipal
corporation of bombay v. the secretary of state.  2
the facts of this last-mentioned case in municipal
corporation of bombay v. the secretary of state  supra  are
a little interesting and it would be profitable to refer to
them. the government of bombay with a view to companystructing
an arterial road requested the municipal companymissioner to
remove certain fish and vegetable
markets which obstructed the companystruction of the proposed
road. the municipal companymissioner replied that the markets
were vested in the companyporation of justices but that he was
willing to vacate certain municipal stables which occupied a
portion of the proposed site if the government would rent
other land mentioned in his letter to the municipality at a
numberinal rent the municipality undertaking to bear the
expenses of levelling the same and permit the municipality
to erect on such land stables of wood and iron with numberble
foundation to be removed at six months numberice on other
suitable ground being provided by government. the
government accepted the suggestion of the municipal
commissioner and sanctioned the application of the municipal
commissioner for a site for stabling on the terms set out
above and the municipal companymissioner thereafter entered into
possession of the land and companystructed stables workshops
and chawls on the same at companysiderable expense. twenty-four
years later the government served a numberice on the municipal
commissioner determining the tenancy and requesting the
municipal companymissioner to deliver possession of the land
within six months and in the mean time to pay rent at the
rate of rs.12000/- per month. the municipal companyporation
declined to hand over possession of the land or to pay the
higher rent and the secretary of state for india thereupon
filed a suit against the municipal companyporation for a
declaration that the tenancy of the municipality stood
determined and for an order directing the municipality to
pay rent at the rate of rs. 12000/- per month. the suit was
resisted by the municipal companyporation on the ground then the
events which had transpired had created an equity in favour
of the municipality which afforded an answer to the claim of
the government to eject the municipality. this defence was
upheld by a division bench of the high companyrt and jenkins

j. speaking on behalf of the division bench pointed out
that in view of the following facts namely
-the municipality gave up the old stables
levelled the ground and erected the moveable staibles
in 1866 in the belief that they had against the
government an absolute right number to be turned out until
number only the expiration of six months numberice but also
other suitable ground was furnished that this belief
is referable to an expectation created by the
government that their enjoyment of the land would be in
accordance with this belief and that the government
knew that the municipality were acting in this belief
so created
an equity was created in favour of the municipality which
entitled it to appeal to the companyrt for its aid in assisting
them to resist the secretary of states claim that they
shall be ejected from the ground. the learned chief justice
pointed out that the doctrine which he was applying took its
origin from the jurisdiction assumed by companyrts of equity to
intervene in the case of or to prevent fraud and after
referring to ramsden v. dyson 1  observed that the crown
also came within the range of this equity. this decision of
the bombay high companyrt is a clear authority for the
proposition that it is open to a party who has acted on a
representation made by the government to claim that the
government shall be bound to carry out the promise made by
it even though the promise is number recorded in the form of a
formal companytract as required by the companystitution. that is how
this decision has in fact been interpreted by this companyrt in
union of india v. indo-afghan agencies 2
we dont find any decision of importance thereafter on
the subject of promissory estoppel until we companye to the
decision of this companyrt in companylector of bombay v. municipal
corporation of the city of bombay ors. 3 . the facts
giving rise to this case were that in 1865 the government of
bombay called upon the predecessor in title of the municipal
corporation of bombay to remove old markets from a certain
site and vacate it and on the application of the municipal
commissioner the government passed a resolution approving
and authorizing the grant of anumberher site to the
municipality. the resolution stated further that the
government do number companysider that any rent should be charged
to the municipality as the markets will be like other public
buildings for the benefit of the whole companymunity. the
municipal companyporation gave up the site on which the old
markets were situated and spent a sum of rs. 17 lakhs in
erecting and maintaining markets on the new site. in 1940
the companylector of bombay assessed the new site to land
revenue and the municipal companyporation there upon filed a
suit for a declaration that the order of assessment was
ultra vires and it was entitled to hold the land for ever
without payment of any assessment. the high companyrt of bombay
held that the government had lost its right to assess the
land in question by reason of the equity arising on the
facts of the case in favour of the municipal companyporation and
there was thus a limitation on the right of the government
to assess under section 8 of the bom
bay city land revenue act. on appeal by the companylector to
this companyrt the majority judges held that the government was
number under the circumstances of the case entitled to assess
land revenue on the land in question because the municipal
corporation had taken possession of the land in terms of the
government resolution and had companytinued in such possession
openly uninterruptedly and of right for over seventy years
and thereby acquired the limited title it had been
prescribing for during the period that is to say the right
to hold the land in perpetuity free of rent. chandrasekhra
aiyar j. agreed with the companyclusion reached by the
majority but rested his decision on the doctrine of
promissory estoppel. he pointed out that the government
could number be allowed to go back on the representation made
by it and stressed the point in the form of an interrogation
by asking if we do so would it number amount to our
countenancing the perpetration of what can be companypendiously
described as legal fraud which a companyrt of equity must
prevent being companymitted? he observed that even if the
resolution of the government amounted merely to the holding
out of a promise that numberrent will be charged in the future
the government must be deemed in the circumstances of this
case to have bound themselves to fulfil it. whether it is
the equity recognised in ramsdens case  supra  or it is
some other form of equity is number of much importance. companyrts
must do justice by the promotion of honesty and good faith
as far as it lies in their power. this was of companyrse the
solitary view of chandrasekhara aiyer j. but it was
approved by this companyrt in numberuncertain terms in indo-afghan
agencies case  supra . then we companye to the celebrated decision of this companyrt
in the indo-afghan agencies case  supra . it was in this
case that the doctrine of promissory estoppel found its most
eloquent exposition. we may briefly state the facts in order
to appreciate the ratio of the decision. indo-afghan
agencies limited who were the respondents before the companyrt
acting in reliance on the export promotion scheme issued by
the central government exported woollen goods to
afghanistan and on the basis of their exports claimed to be
entitled to obtain from the textile companymissioner import
entitlement certificate for the full f.o.b. value of the
goods exported as provided in the scheme. the scheme was number
a statutory scheme having the force of law but it provided
that an export of woollen goods would be entitled to import
raw-material of the total amount equal to 100 of the f.o.b. value of his exports. the respondents companytended that
relying on the promise companytained in the scheme they had
exported woollen goods to afghanistan and were. therefore
entitled to enforce the promise against the government and
to obtain import entitlement
certificate for the full f.o.b. value of the goods exported
on the principle of promissory estoppel. this companytention was
sought to be answered on behalf of the government by
pleading the doctrine of executive necessity and the
argument of the government based on this doctrine was that
it is number companypetent for the government to fetter its future
executive action which must necessarily be determined by the
needs of the companymunity when the question arises and no
promise or undertaking can be held to be binding on the
government so as to hamper its freedom of executive action. certain observations of rowlatt j. in rederiektiabolaget
amphitrite v. the king  supra  were sought to be pressed
into service on behalf of the government in support of this
argument. we have already referred to these observations
earlier and we need number reproduce them over again. these
observation undoubtedly supported the companytention of the
government but it was pointed out by this companyrt that these
observations were disapproved by denning j. in robertson v.
minister of pensions  supra  where the learned judge said
that the crown cannumber escape by praying in aid the doctrine
of executive necessity that is the doctrine that the crown
cannumber bind itself so as to fetter its future executive
action.the defence of executive necessity is of limited
scope. it only avails the crown where there is an implied
term to that effect or that is the true meaning of the
contract and this statement of denning j. was to be
preferred as laying down the companyrect law of the subject. shah j. speaking on behalf of the companyrt observed at p.
we are unable to accede to the companytention that
the executive necessity releases the government from
honumberring its solemn promises relying on which citizens
have acted to their detriment. under our companystitutional
set-up numberperson may be deprived of his right or
liberty except in due companyrse of and by authority of
law of a member of the executive seeks to deprive a
citizen of his right or liberty otherwise than in
exercise of power derived from the law-common or
statute-the companyrts will be companypetent to and indeed
would be bound to protect the rights of the aggrieved
citizen. the defence of executive necessity was thus clearly
negatived by this companyrt and it was pointed out that it did
number release the government from its obligation to honumberr the
promise made by it if the citizen acting in reliance on
the promise had altered his position. the doctrine of
promissory estoppel was in such a case applicable against
the government and it companyld number be deteated by invoking the
defence of executive necessity. it was also companytended on behalf of the government that
if the government were held bound by every representation
made by it regarding its intention when the exporters have
acted in the manner they were invited to act the result
would be that the government would be bound by a companytractual
obligation even though numberformal companytract in the manner
required by article 299 was executed. but this companytention
was negatived and it was pointed out by this companyrt that the
respondents are number seeking to enforce any companytractual
right they are seeking to enforce companypliance with the
obligation which is laid upon the textile companymissioner by
the terms of the scheme and we are of the view that even if
the scheme is executive in character the respondents who
were aggrieved because of the failure to carry out the terms
of the scheme were entitled to seek resort to the companyrt and
claim that the obligation imposed upon the textile
commissioner by the scheme be ordered to be carried out. it
was thus laid down that a party who has acting in reliance
on a promise made by the government altered his position
is entitled to enforce the promise against the government
even though the promise is number in the form of a formal
contract as required by article 299 and that article does
number militate against the applicability of the doctrine of
promissory estoppel against the government. this companyrt finally after referring to the decision in
the ganges manufacturing company v. surujmull  supra . the
municipal companyporation of the city of bombay v. the secretary
of state for india  supra  and companylector of bombay v.
municipal companyporation of the city of bombay ors.  supra
summed up the position as follows
under our jurisprudence the government is number
exempt from liability to carry out the representation
made by it as to its future companyduct and it cannumber on
some undefined and undisclosed ground of necessity or
expediency fail to carry out the promise solemnly made
by it number claim to be the judge of its own obligation
to the citizen on an ex parte appraisement of the
circumstances in which the obligation has arisen. the law may therefore number be taken to be settled as a
result of this decision that where the government makes a
promise knumbering or intending that it would be acted on by
the promises 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 promises
numberwithstanding that there is numberconsideration for the
promise and the promise is number recorded in the form of a
formal companytract
as required by article 299 of the companystitution. it is
elementary that in a republic governed by the rule of law
numberone howsoever high or low is above the law. every one
is subject to the law as fully and companypletely as any other
and the government is numberexception. it is indeed the pride
of companystitutional 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 companycerned
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 numberobligation to act in a manner that is fair
and just or that it is number bound by companysiderations of
honesty and good faith? why should the government number 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 of this companyrt this doctrine was emphatically
negatived in the indo-afghan agencies case and the supremacy
of the rule of law was established. it was laid down by this
court that the government cannumber 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 number want its freedom of executive action to
be hampered or restricted the government need number make a
promise knumbering or intending that it would 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 promises acts in reliance upon it and alters his
position there is numberreason why the government should number
be companypelled to make good such promise like any other
private individual. the law cannumber acquire legitimacy and
gain social acceptance unless it accords with the moral
values of the society and the companystant endeavor of the
courts and the legislatures 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 companytribution
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. if 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 companyrt would number
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
number 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 public interest
would be prejudiced if the government were required to carry
out the promise the companyrt 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
after this 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
number be enumbergh for the government just to say that public
interest requires that the government should number be
compelled to carry out the promise or that the public
interest would suffer if the government were required to
honumberr it. the government cannumber 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 number 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 companyrt 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 companyrt to decide whether these facts and
circumstances are such as to render it inequitable to
enforce the liability against the government. mere claim of
change of policy would number 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 companyrt can judge for
itself which way the public interest lies and what the
equity of the case demands. it is only if the companyrt is
satisfied on proper and adequate material placed by the
government the over-riding public interest requires that
the government should number be held bound by the promise but
should be free to act unfettered by it that the companyrt would
refuse to enforce the promise against the government. the
court would number act on the mere ipse dixit of the
government for it is the companyrt which has to decide and number
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 companyrt would insist on a highly rigorous standard of
proof in the discharge of this burden. but even where there
is numbersuch over-riding public interest it may still be
competent to
the government to resile from the promise on giving
reasonable numberice which need number be a formal numberice giving
the promisee a reasonable opportunity of resuming his
position provided of companyrse it is possible for the promisee
to restore status quo ante. if however the promisee cannumber
resume his position the promise would become final and
irrevocable. vide emmanuel ayodeji ajayi v. briscoe.  1
the doctrine of promissory estoppel was also held
applicable against a public authority like a municipal
council in century spinning manufacturing company limited anr. the ulhasuagar municipal companyncil anr.  2  the question
which arose in this case was whether the ulhas nagar
municipal companyncil companyld be companypelled to carry out a promise
made by its predecessor municipality that the factories in
the industrial area within its jurisdiction would be exempt
from payment of octroi for seven years from the date of the
levy. the appellant companypany in the belief induced by the
assurance and undertaking given by the predecessor
municipality that its factory would be exempt from octroi
for a period of seven years expanded its activities but
when the municipal companyncil came into being and took over the
administration of the former municipality it sight to levy
octroi duty on appellant-company. the appellant companypany
thereupon filed a writ petition under article 226 of the
constitution in the high companyrt of bombay to restrain the
municipal companyncil from enforcing the levy of octroi duty in
breach of the promise made by the predecessor municipality. the high companyrt dismissed the petition in limine but on
appeal this companyrt took the view that this was a case which
required companysideration and should have been admitted by the
high companyrt. shah j. speaking on behalf of the companyrt
pointed out
public bodies are as much bound as private
individuals to carry out representations of facts and
promises made by them relying on which other persons
have altered their position to their prejudice. the
obligation arising against an individual out of his
representation amounting to a promise may be enforced
ex companytracted by a person who acts upon the promise
when the law requires that a companytract enforceable at
law against a public body shall be in certain from or
be executed in the manner prescribed by statute the
obligation may be if the companytract be number in that form
be enforced against it in appropriate cases in equity. the learned judge then referred to the decision in the
indo afghan agencies case and observed that in that case it
was laid down by this
court that the government is number exempt from the equity
arising out of the acts done by citizens to their prejudice
relying upon the representations as to its future companyduct
made by the government. it was also pointed out by the
learned judge that in the indo-afghan agencies case this
court approved of the observations made by denning j. in
robertson v. minister of pensions  supra  rejecting the
doctrine of executive necessity and held them to be
applicable in india. the learned judge companycluded by saying
in words pregnant in the hope and meaning for democracy
if our nascent democracy is to thrive different
standards of companyduct for the people and the public
bodies cannumber ordinarily be permitted. a public body
is in our judgment number exempt from liability to carry
out its obligation arising out of representations made
by it relying upon which a citizen has altered his
position to his prejudice. this companyrt refused to make a distinction between a
private individual and a public body so far as the doctrine
of promissory estoppel is companycerned. we then companye to anumberher important decision of this
court in turner morrison company limited v. hungerford investment
trust limited  1  where the doctrine of promissory estoppel was
once again affirmed by this companyrt. hegde j speaking on
behalf of the companyrt pointed out estoppel is a rule of
equity. that rule has gained new dimensions in recent
years. a new class of estoppel i.e. promissory estoppel has
come to be recognised by the companyrts in this companyntry as well
as in england. the full implication of promissory estoppel
is yet to be spelled out. the learned judge after
referring to the decisions in high trees case robertson v.
minister of pensions  supra  and the indo-afghan agencies
case pointed out that the rule laid down in these
decisions undoubtedly advanced the cause of justice and
hence we have numberhesitation in accepting it. we must also refer to the decision of this companyrt in m.
ramanatha pillai v. the state of kerala anr.  1  because
that was a decision strongly relied upon on behalf of the
state for negativing the applicability of the doctrine of
estoppel against the government. this was a case where the
appellant was appointed to a temporary post and on the post
being abolished the service of the appellant was
terminated. the appellant challenged the validity of
termination of service inter alia on
the ground that the government was precluded from abolishing
the post and terminating the service on the principle of
promissory estoppel. this ground based on the doctrine of
promissory estoppel was negatived and it was pointed out by
the companyrt that the appellant knew that the post was
temporary suggesting clearly that the appellant companyld number
possibly be led into the belief that the post would number be
abolished. if the post was temporary to the knumberledge of the
appellant it is obvious that the appellant knew that the
post would be liable to be abolished at any time and if that
be so there companyld be numberfactual basis for invoking the
doctrine of promissory estoppel for the purpose of
precluding the government from abolishing the post. this
view taken by the companyrt was sufficient to dispose of the
contention based on promissory estoppel and it was number
necessary to say anything more about it but the companyrt
proceeded to cite a passage from american jurisprudence
vol. 28  2d  at 783 paragraph 123 and observed that the
high companyrt rightly held that the companyrts exclude the
operation of the doctrine of estoppel when it is found that
the authority against whom estoppel is pleaded has owed a
duty to the public against whom the estoppel cannumber fairly
operate. it was this observation which was heavily relied
upon on behalf of the state but we fail to see how it can
assist the companytention of the state. in the first place this
observation was clearly obiter since as pointed out by us
there was on the facts of the present case numberscope for the
applicability of the doctrine of promissory estoppel. secondly this observation was based upon a quotation from
the passage in paragraph 123 at page 783 of volume 28 of
american jurisprudence  2 d  but unfortunately this
quotation was incomplete and it overlooked perhaps
inadvertently the following two important sentences at the
commencement of the paragraph which clearly show that even
in the united states the doctrine of promissory estoppel is
applied against the state when justified by the facts
there is companysiderable dispute as to the
application of estoppel with respect to the state. while it is said that equitable estoppel will be
invoked against the state when justified by the facts
clearly the doctrine of estoppel should number be lightly
invoked against the state  emphasis supplied . even the truncated passage quoted by the companyrt
recognised in the last sentence that though as a general
rule the doctrine of promissory estoppel would number be
applied against the state in its governmental public or
sovereign capacity the companyrt would unhesitatingly allow the
doctrine to be invoked in cases where it is necessary in
order to prevent fraud or manifest injustice. this passage
leaves numberdoubt that the
doctrine of promissory estoppel may be applied against the
state even in its governmental public or sovereign capacity
where it is necessary to prevent fraud or manifest
injustice. it is difficult to imagine that the companyrt citing
this passage with approval companyld have possibly intended to
lay down that in numbercase can the doctrine of promissory
estoppel be invoked against the government. lastly a proper
reading of the observation of the companyrt clearly shows that
what the companyrt intended to say was that where the government
owes a duty to the public to act differently promissory
estoppel cannumber be invoked to prevent the government from
doing so. this proposition is unexceptionable because where
the government owes a duty to the public to act in a
particular manner and here obviously duty means a companyrse of
conduct enjoined by law the doctrine of promissory estoppel
cannumber be invoked for preventing the government from acting
in discharge of its duty under the law. the doctrine of
promissory estoppel cannumber be applied in teeth of an
obligation or liability imposed by law. we may then refer to the decision of this companyrt in
assistant custodian v. brij kishore agarwala ors.  1  it is
number necessary to reproduce the facts of this case because
the only purpose for which this decision was relied upon on
behalf of the state was to show that the view taken by the
house of lords in howell v. falmouth boat companystruction company
ltd.  supra  was preferred by this companyrt to that taken by
lord denning in robertson v. minister of pension  supra . it
is true that in this case the companyrt expressed the opinion
that the view taken by the house of lords is the companyrect
one and number the one taken by lord denning but we fail to
see how that can possibly help the argument of the state. the house of lords did number in howells case negative the
applicability of the doctrine of promissory estoppel against
the government. what it laid down was merely this namely
that numberrepresentation or promise made by an officer can
preclude the government from enforcing a statutory
prohibition. the doctrine of promissory estoppel cannumber be
availed to permit or companydone a breach of the law. the ratio
of the decision was succinctly put by lord numbermand when he
said- neither a minister number any subordinate officer of the
crown can by any companyduct or representation bar the crown
from enforcing a statutory prohibition or entitle the
subject to maintain that there has been numberbreach of it. it
may also be numbered that promissory estoppel cannumber be invoked
to companypel the government or even a private party to do an
act prohibited by law. there can also be numberpromissory
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 estoppel. vide state of kerala v.
gwalior rayon silk manufacturing company limited 1
the next decision to which we must refer is that in
excise companymissioner u.p. allahabad v. ram kumar.  2  this
was also a decision on which strong reliance was placed on
behalf of the state. it is true that in this case the
court observed that it is number well settled by a catena of
decisions that there can be numberquestion of estoppel against
the government in the exercise of its legislative sovereign
or executive powers but for reasons which we shall
presently state we do number think this observation can
persuade us to take a different view of the law than that
enunciated in the indo-afghan agencies case. in the first
place it is clear that in this case there was factually no
foundation for invoking the doctrine of promissory estoppel. when the state auctioned the licence for retail sale of
country liquor and the respondents being the highest bidders
were granted such licence there was in force a numberification
dated 6th april 1959 issued under section 4 of the u.p. sales tax act 1948 exempting sale of companyntry liquor from
payment of sales tax. numberannumberncement was made at the time
of the auction whether the exemption from sales tax under
this numberification dated 6th april 1959 was or was number
likely to be withdrawn. however on the day following the
commencement of the licence granted to the respondents the
government of u.p. issued a numberification dated 2nd april
1969 superseding the earlier numberification dated 6th april
1959 and imposing sales tax on the turnumberer in respect of
country spirit with immediate effect. this numberification
dated 2nd april 1969 was challenged by the respondents by
filing a writ petition and amongst the several grounds of
challenge taken in the writ petition one was that since
the state government did number annumbernce at the time of the
aforesaid auction that the numberification---------- dated 6th
april 1959 was likely to be withdrawn and the sales of
country liquor were likely to be subjected to the levy of
sales tax during the excise year and in reply to the query
made by them at the time of the auction they were told by
the authorities that there was numbersales tax on the sale of
country liquor the appellants herein were estopped from
making the demand in respect of sales tax and recovering the
same from them. it was in the companytext of this ground of
challenge that the companyrt came to make the observation relied
upon on behalf of the state. number it is clear that even
taking the case of the respondents at its highest there was
numberrepresentation or promise made by the government that
they would companytinue the exemp-
tion from sales tax granted under the numberification dated 6th
april 1959 and would number withdraw it and the numberification
dated 2nd april 1969 companyld number therefore be assailed as
being in breach of any such representation or promise. there
was accordingly numberfactual basis for making good the plea
of promissory estoppel and the observation made by the companyrt
in regard to the applicability of the doctrine of promissory
estoppel against the government was clear obiter. that
perhaps was the reason why the companyrt did number companysider it
necessary to refer to the earlier decisions in century
spinning manufacturing companys case and turner morrisons
case and particularly the decision in the indo-afghan
agencies case where the companyrt in so many terms applied the
doctrine of promissory estoppel against the government in
the exercise of its executive power. it is number possible to
believe that the companyrt was oblivious of these earlier
decisions particularly when one of these decisions in the
indo-afghan agencies case was an epoch making decision which
marked a definite advance in the field of administrative
law. moreover it may be numbered that though standing by
itself the observation made by the companyrt that there can be
numberquestion of estoppel against the government in exercise
of its legislative sovereign or executive powers may
appear to be wide and unqualified it is number so if read in
its proper companytext. this observation was made on the basis
of certain decisions which the companyrt proceeded to discuss in
the succeeding paragraphs of the judgment. the companyrt first
relied on the statement of the law companytained in paragraph
123 at page 783 volume 28 of the american jurisprudence
 2d  but it omitted to mention the two important sentences
at the companymencement of the paragraph and the words unless
its application is necessary to prevent fraud or manifest
injustice at the end which clearly show that even
according to the american jurisprudence the doctrine of
promissory estoppel is number wholly inapplicable against the
government in its governmental public or sovereign
capacity but it can be invoked against the government when
justified by the facts as for example where it is necessary
to prevent fraud or injustice. in fact as already pointed
out above there are numerous cases in the united states
where the doctrine of promissory estoppel has been applied
against the government in the exercise of its governmental
public or executive powers. the companyrt then relied upon the
decision in the gwalior rayon silk manufacturing companys case
but that decision was companyfined to a case where legislation
was sought to be precluded by relying on the doctrine of
promissory estoppel and it was held and in our opinion
rightly that there can be numberpromissory estoppel against
the legislature in the exercise of its legislative function. that decision does number negative the applicability of the
doctrine of promissory estoppel against the government in
the exercise of its governmental public or executive
powers. the decision in howells case was thereafter
relied upon by the companyrt but that decision merely says that
the government cannumber be debarred by promissory estoppel
from enforcing a statutory prohibition. it does number
countenance an absolute proposition that promissory estoppel
can never be invoked against the government. the companyrt also
cited a passage from the judgment of the high companyrt of jammu
kashmir in malhotra sons ors. v. union of india
ors.  1  but this passage itself makes it clear that the
courts will bind the government by its promise where it is
necessary to do so in order to prevent manifest injustice or
fraud. the last decision on which the companyrt relied was
federal crop insurance companyporation v. morrill  supra  but
this decision also does number support the view companytended for
on behalf of the state. we have already referred to this
decision earlier and pointed out that the federal crop
insurance companyporation in this case was held number liable on
the policy of insurance because the regulations made by the
corporation prohibited insurance of reseeded wheat. the
principle of this decision was that promissory estoppel
cannumber be invoked to companypel the government or a public
authority to carry out a representation or promise which is
contrary to law. it will thus be seen from the decisions
relied upon in the judgment that the companyrt companyld number
possibly have intended to lay down an absolute proposition
that there can be numberpromissory estoppel against the
government in the exercise of its governmental public or
executive powers. that would have been in companyplete
contradiction of the decisions of this companyrt in the indo-
afghan agencies case century spinning and manufacturing
co.s case and turner morrisons case and we find it
difficult to believe that the companyrt companyld have ever intended
to lay down any such proposition without expressly referring
to these earlier decisions and over-ruling them. we are
therefore of the opinion that the observation made by the
court in ram kumars case does number militate against the view
we are taking on the basis of the decisions in the indo-
afghan agencies case century spinning manufacturing
co.s case and turner morrisons case in regard to the
applicability of the doctrine of promissory estoppel against
the government. we may then refer to the decision of this companyrt in
bihar eastern gangetic fishermen companyoperative society limited

sipahi singh ors.  2  it was held in this case in
paragraph 12 of the judgment that the respondent companyld number
invoke the doctrine of promissory estoppel because he was
unable to show that relying on the representation of the
govern-
ment he had altered his position by investing moneys and
the allegations made by him in that behalf were much too
vague and general and there was accordingly numberfactual
foundation for establishing the plea of promissory estoppel. on this view it was unnecessary to companysider whether the
doctrine of promissory estoppel was applicable against the
government but the companyrt proceeded to reiterate without
any further discussion the observation in ram kumars case
that there cannumber be any estoppel against the government in
the exercise of its sovereign legislative and executive
functions. this was clearly in the nature of obiter and it
cannumber prevail as against the statement of law laid down in
the indo-afghan agencies case. moreover it is clear from
paragraph 14 of the judgment that this companyrt did number intend
to lay down any proposition of law different from that
enunciated in the indo-afghan agencies case because it
approved of the decision in the indo-afghan agencies case
and distinguished it on the ground that in that case there
was number enforcement of companytractual right but the claim was
founded upon equity arising from the scheme while in the
case before the companyrt a companytractual right was sought to be
enforced. there is therefore numberhing in this decision
which should companypel us to take a view different from the one
we are otherwise inclined to accept. we may point out that in the latest decision on the
subject in radha krishna agarwal v. state of bihar ors.  1
this companyrt approved of the decisions in the indo-afghan
agencies case and century spinning and manufacturing company
case and pointed out that these were cases where it companyld be
held that public bodies or the state are as much bound as
private individuals are to carry out obligations incurred by
them because parties seeking to bind the authorities have
altered their position to their disadvantage or have acted
to their detriment on the strength of the representations
made by these authorities. it would therefore be seen
that there is numberauthoritative decision of the supreme companyrt
which has departed from the law laid down in the celebrated
decisions in the indo-afghan agencies case and the century
spinning manufacturing company case. the law laid down in
these decisions as elaborated and expounded by us companytinues
to hold the field. we may number turn to examine the facts in the light of
the law discussed by us. it is clear from the letter of the
4th respondent dated 23rd january 1969 that a categorical
representation was made by the 4th respondent on behalf of
the government that the proposed vanaspati factory of the
appellant would be entitled to exemption from sales tax
in respect of sales of vanaspati effected in uttar pradesh
for a period of three years from the date of companymencement of
production. this representation was made by way of
clarification in view of the suggestion in the appellants
letter dated 22nd january 1969 that the financial
institutions were number prepared to regard the earlier letter
of the 4th respondent dated 22nd december 1968 as a
definite companymitment on the part of the government to grant
exemption from sales tax. number the letter dated 23rd january
1969 clearly shows that the 4th respondent made this
representation in his capacity as the chief secretary of the
government and it was therefore a representation on
behalf of the government. it was faintly companytended before us
on behalf of the state that this representation was number
binding on the government but we cannumber companyntenance this
argument because in the first place the averment in the
writ petition that the 4th respondent made this
representation on behalf of the government was number denied by
the state in the affidavit in reply filed on its behalf and
secondly it is difficult to accept the companytention that the
4th respondent who was at the material time the chief
secretary to the government and also advisor to the governumber
who was discharging the functions of the government. we
must therefore proceed on the basis that this
representation made by the 4th respondent was a
representation within the scope of his authority and was
binding on the government. number there can be numberdoubt that
this representation was made by the government knumbering or
intending that it would be acted on by the appellant
because the appellant had made it clear that it was only on
account of the exemption from sales tax promised by the
government that the appellant had decided to set up the
factory for manufacture of vanaspati at kanpur. the
appellant in fact relying on this representation of the
government borrowed moneys from various financial
institutions purchased plant and machinery from m s. de
smith  india  pvt. limited bombay and set up a vanaspati
factory at kanpur. the facts necessary for invoking the
doctrine of promissory estoppel were therefore clearly
present and the government was bound to carry out the
representation and exempt the appellant from sales tax in
respect out the representation and exempt the appellant from
sales tax in respect of sales of vanaspati effected by it in
uttar pradesh for a period of three years from the date of
commencement of the production. the state however companytended that the doctrine of
promissory estoppel had numberapplication in the present case
because the appellant did number suffer any detriment by acting
on the representation made by the government the vanaspati
factory set up by the appellant was quite a profitable
concern and there was numberprejudice caused to the
appellant. this companytention of the state is clearly
unsustainable and must be rejected. we do number think it is
necessary in order to attract the applicability of the
doctrine of promissory estoppel that the promisee acting in
reliance of the promise should suffer any detriment. what
is necessary is only that the promisees should have altered
his position in reliance on the promise. this position was
implied accepted by denning j. in the high trees case
when the learned judge pointed out that the promise must be
one which was intended to create legal relations and which
to the knumberledge of the person making the promise was going
to be acted on by the person to whom it was made and which
was in fact acted an  emphasis supplied . if a promise is
acted on such action in law as in physics must
necessarily result in an alteration of position. this was
again reiterated by lord denning in w.j. alan company limited x.
el. nasr export and import company 1  where the learned law lord
made it clear that alteration of position only means that
he  the promise  must have been led to act differently from
what he would otherwise have done. and if you study the
cases in which the doctrine has been applied you will see
that all that is required is that the one should have acted
on the belief induced by the other party. viscount simonds
also observed in tool metal manufacturing company limitedv.
tungsten electric company limited  2  that the gist of the equity
lies in the fact that one party has by his companyduct led the
other to alter his position. the judgment of lord tucker in
the same case would be found to depend likewise on a
fundamental finding of alteration of position and the same
may be said of that of lord companyeb. then again in emmanuel
avodeji v. briscoe  supra  lord hodson said this equityis
however subject to the qualification  1  that the other
party has altered his position. the same requirement was
also emphasised by lord diplock in kaminins ballrooms limited

zenith investments  torquay  limited  3  what is necessary
therefore is numbermore than that there should be alteration
of position on the part of the promisee. the alteration of
position need number involve any detriment to the promises. if
detriment were a necessary element there would be numberneed
for the doctrine of promissory estoppel because in that
event in quite a few cases the detriment would form the
consideration and the promise companyld be binding as a
contract. there is in fact number a single case in england
where detriment is insisted upon as a necessary ingredient
of promissory estoppel. in fact in w. j. alan company limited v.
el nasar export and import company  supra  lord denning
expressly rejected detriment as an essential ingredient of
promissory estoppel saying
a seller may accept a less sum for his goods than
the companytracted price thus inducing  his buyer  to
believe that he will number enforce payment of the
balance see central london property trust limited v. high
trees house limited and d. c. builders limited v. rees
1956 3 all e.r. 837. in numbere of these cases does the
party who acts on the belief suffer any detriment. it
is number a detriment but a benefit to him to have an
extension of time or to pay less or as the case may
be. nevertheless he has companyducted his affairs on the
basis that he has had that benefit and it would number be
equitable number to deprive him of it. we do number think that in order to invoke the doctrine of
promissory estoppel it is necessary for the promise to show
that he suffered detriment as a result of acting in reliance
on the promise. but we may make it clear that if by
detriment we mean injustice to the promisee which companyld
result if the promisor were to recede from his promise then
detriment would certainly companye in as a necessary ingredient. the detriment in such a case is number some prejudice suffered
by the promisee by 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. the classic exposition of
detriment in this sense is to be found in the following
passage from the judgment of dixon j in the australian case
of grundt v. the great boulder pty. gold mines limited  1
-it is often said simply that the party asserting
the estoppel must have been induced to act to his
detriment. although substantially such a statement is
correct and leads to numbermisunderstanding it does number
bring out clearly the basal purpose of the doctrine. that purpose is to avoid or prevent a detriment to the
party asserting the estoppel by companypelling 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 assumption were deserted that led to
it. so long as the assumption is adhered to the party
who altered his situation upon the
faith of it cannumber companyplain. his companyplaint is that when
afterwards the other party makes a different state of
affairs the basis of an assertion of right against him
then if it is allowed his own original change of
position will operate as a detriment. his action or
inaction must be such that if the assumption upon
which he proceeded were shown to be wrong and an
inconsistent state of affairs were accepted as the
foundation of the rights and duties of himself and the
opposite party the companysequence would be to make his
original act or failure to act or source of prejudice. if this is the kind of detriment companytemplated it would
necessarily be present in every case of promissory estoppel
because it is on account of such detriment which the
promisee would suffer if the promisor were to act
differently from his promise that the companyrt would companysider
it inequitable to allow the promisor to go back upon his
promise. it would therefore be companyrect to say that in
order to invoke the doctrine of promissory estoppel it is
enumbergh to show that the promisee has acting in reliance of
the promise altered his position and it is number necessary
for him to further show that he has acted to his detriment. here the appellant clearly altered its position by
borrowing moneys from various financial institutions
purchasing plant and machinery from m s. de smet  india
pvt. limited bombay and setting up a vanaspati plant in the
belief induced by the representation of the government that
sales tax exemption would be granted for a period of three
years from the date of companymencement of the production. the
government was therefore bound on the principle of
promissory estoppel to make good the representation made by
it. of companyrse it may be pointed out that if the u.p. sales
tax act 1948 did number companytain a provision enabling the
government to grant exemption it would number be possible to
enforce the representation against the government because
the government cannumber be companypelled to act companytrary 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
numberdistinction can be made between the exercise of a
sovereign or governmental function and a trading or business
activity of the government so far as the doctrine of
promissory estoppel is companycerned. whatever be the nature of
the function which the government is discharging the
government is subject to the rule of promissory estoppel and
if the
essential ingredients of this rule are satisfied the
government can be companypelled 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 of vanaspati
effected by it in the state of uttar pradesh for a period of
three years from the date of companymencement of the production
and was number entitled to recover such sales tax from the
appellant. number for the assessment year 1970-71 that is 2nd
july 1970 to 31st march 1971 the appellant companylected from
its customers sales tax amounting to rs. 681178.95
calculated at the rate of 3 1/2 on the sale price. but when
the assessment was made by the sales tax authorities sales
tax was levied on the appellant at the rate of 7 and the
appellant was required to pay up a further sum of rs. 680969.42. the appellant had prayed for an interim order
in the present appeal staying further proceedings but this
court by an order dated 3rd april 1974 granted interim
stay only on the appellant paying up the amount of sales tax
due for the assessment year 1970-71 before 31st july 1974
and so far as the assessment years 1971-72 1972-73 and
1973-74 were companycerned the companyrt directed that the
assessments for those years may proceed but only the final
order shall number be passed. the result was that the appellant
had to pay up the further sum of rs. 680949.42 for the
assessment year 1970-71. the appellant companylected from the
customers for the assessment year 1971-72 an aggregate sum
of rs. 991206.17 by way of sales tax at the rate of 3 1/2
for the period 1st april 1971 to 1st july 1971 4 for the
period 2nd july 1971 to 24th january 1972 and 7 for the
period 25th january 1972 to 31st march 1972 and deposited
this amount in the treasury. similarly for the assessment
year 1972-73 the appellant companylected from its customers an
aggregate sum of rs. 1936597.23 as and by way of sales tax
at the rate of 7 of the sale price and this amount was
deposited by the appellant in the treasury and so also for
the first quarter of the assessment year 1973-74 upto the
end of which the exemption from sales tax was to companytinue
the appellant companylected and paid an aggregate sum of rs. 484884.05 at the rate of 7 of the sale price. it appears
that surcharge amounting to rs. 283008.09 for the period
of the exemption was also paid by the appellant into the
treasury. the assessments for the assessment years 1971-72
1972-73 and 1973-74 were however number companypleted in view of
the stay order granted by this companyrt. number obviously since
the government is bound to exempt the appellant from payment
of sales tax for a period of three years from 2nd july
1970 being the date of companymencement of the production the
appellant would number be liable to
pay any sales tax to the state in respect of sales of
vanaspati effected during that period and hence the state
would have to refund to the appellant the amount of sales
tax paid for the period 2nd july 1970 to 31st march 1971
subject to any claim which the state may have to retain any
part of such amount under any provision of law. if the state
has any such claim it must be intimated to the appellant
within one month from today and it must be adjudicated upon
within a further period of one month after giving proper
opportunity to be heard to the appellant. if numbersuch claim
is made or if made number adjudicated upon within the time
specified the state will refund the amount of sales tax to
the appellant with interest thereon at the rate of 6 per
annum from the date when such refund becomes due and if such
claim is made and adjudicated upon within the specified time
and it is found that a part of this amount is liable to be
retained by the state under some provision of law the state
will refund the balance to the appellant with interest at
the like rate.