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PETITIONER: M/S MOTILAL PADAMPAT SUGAR MILLS CO. (P.) LTD.

       Vs.

RESPONDENT: STATE OF UTTAR PRADESH AND ORS.

DATE OF JUDGMENT12/12/1978

BENCH: BHAGWATI, P.N. BENCH: BHAGWATI, P.N. TULZAPURKAR, V.D.

CITATION:  1979 AIR  621            1979 SCR  (2) 641  1979 SCC  (2) 409  CITATOR INFO :  F          1980 SC 768  (1)  O          1980 SC1285  (40)  R          1983 SC 848  (8)  E&R        1985 SC 941  (4)  R          1986 SC 806  (9,10,11,12,13,14)  RF         1986 SC 872  (181,182)  F          1987 SC 590  (7)  RF         1987 SC2414  (22,23)  RF         1988 SC1247  (3)  RF         1989 SC1933  (28)  R          1989 SC2138  (64)  C          1991 SC  14  (11)  D          1991 SC 818  (18)  RF         1992 SC1075  (3)  RF         1992 SC2169  (28)

ACT:      Waiver doctrine  of-Waiver is a question of fact and it must be properly pleaded and proved.      Public  law-Doctrine   of  Promissory   Estoppel,   its contours and parameters, explained.      Estoppel-Estoppel    in    pais-Promissory    Estoppel- Applicability of  the doctrine  against the   Government and extent  threreof-Doctrine  of  executive  necessity  whether could be a valid defence and if so under what  circumstance.      Representations  de   futureo  by     public   body  if enforceable ex-contractu  by a  person   who acts upon  such representation or  promise intended to be acted on-Burden of proof-Degree of standard of proof in such  cases.

HEADNOTE:      The appellant  is a  limited company which is primarily engaged in the business of manufacture and sale of sugar and it has  a cold  storage plant  and  a  steel  foundry.  With reference to  a news  item dated  10th October  1968 in  the National Herald  in which  it was  stated that  the State of Uttar Pradesh  had decided  to give exemption from sales tax for a  period of  three years  under section  4A of the U.P. Sales Tax  Act to all new industrial units in the State with a view  to  enabling  them  "to  come  on  firm  footing  in developing stage",  the appellant  addressed a  letter dated 11th October 1968 to the Director of Industries stating that

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in view of the sales tax holiday announced by the Government the appellant  intended to  set up a Hydrogenation plant for manufacture of  Vanaspati and  sought for  confirmation that this industrial  unit which  it proposed to set up, would be entitled to  sales tax  holiday’ for a period of three years from the  date it  commenced  production.  The  Director  of Industries by  his letter dated 14th October 1968, confirmed that "there  will be  no sales  tax for  three years  on the finished product of your proposed Vanaspati factory from the date it  gets power  connection for  commencing production". Thereafter when  the appellant’s  representative met the 4th respondent, who  was at that time the Chief Secretary to the Government as  also Advisor to the Governor and apprised the latter that  the appellant  was  setting  up  the  Vanaspati factory solely on the basis of the assurance given on behalf of the  Government that  the appellant  would be entitled to exemption from  sales tax  for a  period of three years from the date  of commencement  of commercial  production at  the factory, the  4th respondent  reiterated the assurance made. Again the appellant, by its letter dated 13th December 1968, requested the  4th respondent  "to please  confirm  that  we shall be  allowed sales  tax holiday  for a  period of three years on  the sale  of Vanaspati  from  the  date  we  start production". The  4th respondent  replied on  22nd  December 1968 that  "the State Government will be willing to consider your request  for grant of exemption from U.P. Sales Tax for a period of three years from the date of 642 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 in the meantime had submitted an  application dated  21st December  1968  for  a formal order granting exemption from sales tax under section 4A of  the U.P.  Sales  Tax  Act.  The  appellant  was  also subsequently informed  by the letter dated 23rd January 1969 of  the  4th  respondent  categorically  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".  The  appellant,  on  the  basis  of  these unequivocal assurances,  went ahead  with the setting of the Vanaspati factory and made much progress.      By the middle of May 1969, the State Government started having second  thoughts on the question of exemption and the appellant was  requested to attend a meeting "to discuss the question of  giving concession  in Sales  Tax  on  Vanaspati products". The  appellant immediately  by its  letter  dated 19th May  1969 pointed out to the 5th respondent that so far as the  appellant was  concerned, the  State Government  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.  The appellant’s  representative did attend the meeting held  on 3rd  June 69  and reiterated that so far as the appellant  was concerned,  it had  already been  granted exemption from  sales tax  and the  State  Government  stood committed to it      The State  Government,  however,  went  back  upon  the assurance and a letter dated 20th January 1970 was addressed by the  5th respondent  intimating that  the Government  had taken a  policy decision  that new  Vanaspati units  in  the State which  go into commercial production by 30th September

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1970, would be given only partial concession in Sales Tax at different rates  on each  year of production. The appellant, by its  letter dated  25th June  1970, pointed  out  to  the Secretary to  the Government  that the appellant proposed to start commercial  production of  Vanaspati with  effect from 1st July  1970 and stated that, as notified in the letter of 20th January  1970, the  appellant would  be availing of the exemption granted  by the  State  Government  and  would  be charging Sales  Tax at  the rate  of 3 1/2% instead of 7% on the sales  of Vanaspati manufactured by it for the period of one year  commencing from  1st July 1970. The factory of the appellant thereafter 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  ’Northern Indian Patrika’  stating that  the Government had decided to rescind the  earlier decision  i.e. the  decision set out in the letter  dated 20th  January 1970, to allow concession in the rates of Sales Tax to new Vanaspati Units. The appellant thereupon filed  a  writ  petition  in  the  High  Court  of Allahabad asking  for a  writ directing the State Government to  exempt  the  sales  of  Vanaspati  manufactured  by  the appellant from  Sales  Tax  for  a  period  of  three  years commencing from  2nd January  1970 by issuing a notification under section  4A  of  the  U.P.  Sales  Tax  Act  from  the appellant for the said period of three years. The plea based on the 643 doctrine of promissory estoppel was, however rejected by the Division Bench   of the High Court principally on the ground that the  appellant had  waived the  exemption, if  any,  by accepting the  concessional rates  set out  in the letter of the respondent dated 20th January 1970.      Allowing the appeal by certificate, the Court, ^      HELD: 1. The view taken by the High Court, namely, that even if  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 a accepting the concessional rates of sales tax set out  in the  letter of  the 5th  respondent  dated  20th January, 1970 is not correct. [656 D-E]      2. Waiver is a question of fact and it must be properly pleaded and  proved. No  plea of waiver can be allowed to be raised unless  it is  pleaded and the factual foundation for it is laid in the pleadings. [656 E-F]      In the instant case:      (a) the  plea of  waiver was  not taken  by  the  State Government in  the affidavit filed on its behalf in reply to the writ petition, nor 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. [656 F]      (b) It was not right for the High Court to have allowed the plea  of waiver  to be  raised against the appellant and that plea  should have  been rejected  in limine.  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 those facts there was no waiver by the appellant of  its right  to exemption  under  the  assurance

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given by  the 4th  respondent. But  in the  absence of  such pleading in  the affidavit  in reply,  this opportunity  was denied to the appellant [656F-H]      3. Waiver  means abandonment  of a  right and it may be either express  or  implied  from  conduct,  but  its  basic requirement is  that it  must be  "an intentional  act  with knowledge". There  can be no waiver unless the person who is said to  have waived  is fully  informed as to his right and with full knowledge of such right, he intentionally abandons it. [657A, B]      In the  instant case,  on the facts, the plea of waiver could not  be said  to have  been  made  out  by  the  State Government: There was nothing to state that at the date when the appellant  addressed the letter dated 25th June 1970, it had full  knowledge of  its right  to  exemption  under  the assurance  given   by  the   4th  respondent   and  that  it intentionally abandoned  such right.  It is  not possible to presume in  the absence  of any  material placed  before the Court, that the appellant had full knowledge of its right to exemption so  as to  warrant an inference that the appellant waived such  right by  addressing the letter dated 25th June 1970. It  is difficult  to speculate what was the reason why the appellant  addressed the  letter 25th  June 1970 stating that it  would avail  of the concessional rates of sales tax granted under the letter dated 20th January 1970. [657 D-E] 644      Earl of  Darnley v.  London, Chathan and Dover Rly. Co. (Proprietors etc.),  [1867] L.R.  2 H.L.  43 @  57 Craine v. Colonial Mutual  Fire Insurance   Co.  Ltd. 28  C.L.R.  305; Martindala v.  Faulkner  [1846]  2  Q.B.  706;  quoted  with approval.      4.   The   doctrine   called   ’promissory   estoppel’, ’equitable estoppel’,  ’quasi estoppel’,  and ’new estoppel’ is a  principle evolved by equity to avoid injustice where a promise is  made by  a person knowing that it would be acted on and it is  person to whom it is made and in fact it is so acted on and it is inequitable to allow the party making the promise to go back upon it. Though commonly named promissory estoppel it  is neither  in the realm of contract nor in the realm of  estoppel. The  basis of  the doctrine is the inter position of  equity, which  has  always  true  to  its  form stepped in to mitigate the rigours of strict law. [658 E-G]      5. The  true principle  of promissory  estoppel is that where one  party has  by his  words or  conduct made  to the other a  clear and  unequivocal promise which is intended to create legal  relationship effect  a legal  relationship  to arise in  the future,  knowing or intending that it would be acted upon  by the  other party  to whom the promise is made and it  is infact  so acted  upon by  the other  party,  the promise would be binding on the party making it and he would not be  entitled  to  go  back  upon  it,  if  it  would  be inequitable to  allow him  to do  so having  regard  to  the dealings which  have taken  place between  the parties,  and this would  be so  irrespective whether  there is  any  pre- existing relationship  between the  parties or  not.  Equity will in  a given  case where  justice and  fairness  demand, prevent a  person from insisting on strict legal rights even where they  arise, not  under any  contract, but  on his own title deeds or under statute. [662 B-D]      To the  applicability of  the  doctrine  of  promissory estoppel it  is not  necessary that  there  should  be  some contractual relationship  between the  parties. Nor  can any such limitation,  namely, that  the doctrine  of  promissory estoppel is  limited in  its operation  to cases  where  the parties are  already contractually  bound  and  one  of  the

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parties induces  the other to believe that the strict rights under the  contract would  not be  enforced  be  justifiably introduced  to  curtail  the  width  and  amplitude  of  the doctrine. The  parties need  not be  in any  kind  of  legal relationship  before   the  transaction   from   which   the promissory estoppel  take its  origin.  The  doctrine  would apply even where there is no pre-existing legal relationship between the  parties, but  the promise is intended to create legal relations  or affect  a legal  relationship whish will arise in future. [660 G-H, 661 A, F-G].      Jorden  V.   Money,  [1854]   5  H.L.  185,  Hughes  v. Metropolitan Railway  Co., [1857]  2 A.C.  439, Birmingam  & District Land  Co. v.  London and  North- Western  Rail Co., ]1888] 40 Ch. D. 268; discussed and questioned.      Central London  Property Trust Ltd. v. High Trees House Ltd.,  [1947]   K.B.  p.  130::  [1956]  1  All.  E.R.  256; explained.      Evenden v.  Guildford City  Association  Football  Club Ltd., [1975]  3 All. E.R. 269 @ 272 :: [1975] 3 W.L.R. 251 @ 255; Crabb  v. Arun  District Council. [1975] All E.R. 865 @ 875:: [1975] 8 W.L.R. 847 @ 858 CA; quoted with approval. 645      6.  The  doctrine  of  promissory  estoppel  cannot  be inhibited by  the same            limitation estoppel in the strict sense  of the  term. It  is  an  equitable  principle evolved by  the Courts  for doing  justice and  there is  no reason why  it should be given only a limited application by way of  defence and  it should  only be  a shield  and not a sword to  found a  cause of action. It can be the basis of a cause of action. [662 D-E, 663 E-F].      There is no qualitative difference between ’proprietary estoppel’  and  ’promissory  estoppel’.  Both  are  the  off springs of equity and if equity is flexible enough to permit proprietary estoppel  to be used as a cause of action, there is no  reason in  logic or principle why promissory estoppel should  also  not  be  available  as  cause  of  action,  if necessary to satisfy the equity. [665 G-H]      Central London  Property Trust Ltd. v. High Trees House Ltd .  [1947]1 K.B.P.  130: [1956] 1 All. E.R. 256; Combe v. Combe [1951]  2 K.B.  215; Beesly  v. Hallwood  Estate  Ltd. [1960] 2  All. E.R.  314; Municipal  Corporation of Bombay.v Secty. of  State  I.L.R.  29  Bomb.  580  @  607;  Mooregate Mercantile Co.  Ltd. v.  Twichings,s [1975]  3  W.L.R.  286; referred to.      Crabb v.  Arun District  Council [1975] All. E.R. 865 @ 875 explained.  Ramsden v. Dysen,[1866] L.R H.L. 129; Dunlop Pneuntafic Tyre  Co. v.  Saifridge & Co. Ltd. 1915 A.C. 847: discussed.      7. Law  is not  a mausoleum. It is not an antique to be taken down, dusted  admired and put back on the shelf. It is rather like  an old  but vigorous  tree having its roots  in history, yet  continuously taking new grafts and putting out 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 concepts  and values. Otherwise, there will be  estrangement between  law and  justice and law will cease to have legitimacy Though ’continuity with the past is a historical  necessity’, ’conformity  is not  to be  turned into a fetish’. [668 H, 669 A-B].      Therefore, despite  the fact  that allowing  promissory estoppel to  found a  cause of action would seriously dilute the principle  which requires  consideration to   support  a contractual obligation, this new principle, which is a child of equity  brought into  the world  with a view to promoting

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honesty and  good faith  and bringing, law closer to justice should not  be held in fetters but allowed to operate in all its activist  magnitude. so  that it  may fulfil the purpose for which was conceived and born. [668 F-G].      Robertson v  Minister of  Pensions. [1949]  1 K. B. 227 Evenden Guldford  city Association Football Club Ltd. [1975] 3 All.  E.R. p.  269. Candler  v. Crane      Christmas & Co. [1951] 2 K. B. 164 @ 178; quoted with approval.      8.  A   promise  may,  in  the  United  States,  derive contractual enforceability  if  it  has  been  made  by  the promisor knowing  or intending that it would be acted on and the promisee  has altered  his position  in reliance  on it, notwithstanding that  there is no consideration in the sense in which that word is used in English 646 and   Commonwealth   jurisprudence.   However,   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.  The doctrine of  promissory estoppel has been used in the United States to  reduce,  if  not  to  destroy,  the  prestige  of consideration as  an essential  of valid  contract and  also used in  diverse other  situations as  founding a  cause  of action: [670 D-E, 673 B].           Alleghany College  v. National  Chauteaque Country      Bank 57  Am L.  R. 980;  Drennan v. Stat Paving Company      [1958] 31 California 2nd 409; referred.      Under the  English law,  the judicially  formed view is that the  crown is  not  immune  from  liability  under  the doctrine of  promissory  estoppel  and  the  view  taken  by Denning J.,  in [1949]  1 K.  B. 227  that the  crown cannot escape its  obligation  under  the  doctrine  of  promissory estoppel by  "praying  in  aid  the  doctrine  of  executive necessity" still holds the field. [674 D].           Robretson v.  Minister of  Pensions [1949] 1 K. B.      227; quoted with approval:           Rederiaktiebolaget  Amphitrities.   v.  The   King      [1921] 3 K. B. 500; referred to.           Howell v. Falmouth Boat Construction Co. Ltd. 1951      A. C. 837; explained      10. Even  in the  United States, the trend in the State Courts,  of  late,  has  been  strongly  in  favour  of  the application of  the  doctrine of promissory estoppel against the  Government   and  public  bodies  "where  interests  of justice, morality  and common  fairness clearly dictate that course". It  is being increasingly felt that "the Government ought  to   set  a   high  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". The Government would  not  be  estopped  "by  the  acts  of  its officers  and   agents  who  without  authority  enter  into agreements to  do what  the law does not sanction or permit" and "these  dealing with  an agent of the Government must be held to have notice of limitations of his authority". But if the acts  of omissions  of officers  of the  Government  are within the  scope of  their authority  and are not otherwise impermissible  under  the  law,  they  "will  work  estoppel against Government". [676 F-H, 677 A-D]           Federal Crop  Insurance Corporarion v. Maroill 332      U.S. 380: 92 L. ed. discussed and explained.           Valsonavich v.  United States 335 Fed. Rep. 2nd p.      96; quoted With approval.      11. Where  the Government  makes a  promise knowing  or intending that  it would be acted on by the promisee and, in

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fact, the  promisee, acting  in reliance  on it,  alters his position, the  Government would be held bound by the promise and the  promise would be enforceable against the Government at the  instance of  the promisee notwithstanding that there is no  consideration for  the promise and the promise is not recorded in  the form  of a  formal contract  as required by Article 299 of the Constitution. [682 G-H, 683-A]. 647      It is  elementary that  in a  Republic governed  by the rule of law, no one, a however high or low is above the law. Every one  is subject  to the law as fully and completely as any other  and the  Government is no exception. It is indeed the pride  of constitutional  democracy and rule of law that the Government  stands on  the same  footing  as  a  private individual so far as the obligation of the law is concerned; the former  is equally  bound as the latter. On no principle can a  Government  committed  to  the  rule  of  law,  claim immunity   from the  doctrine of  promissory  estoppel.  The Government cannot  be heard  to say  that  it  is  under  no obligation to  act in a manner that is fair and just or that it is  not bound  by considerations  of  ’honesty  and  good faith’. In  fact the   Government  should be  held to a high "standard of  rectangular rectitude  while dealing  with its citizens". [683 A-C].           Gangaes Manufacturing  co v.   Surajmull and Ors.,      I.L.R. 5  Cal. 669; Municipal Corporation of  Bombay v.      The Secretary of State, I,L.R. 29 Bomb. 588; approved.           Collector of   Bombay  v. Municipal Corporoaton of      rlle City  of Bombay and   Ors. [1952] S.C.R. 43; Union      of India v. Indo-Afghan Agencies,  [1968] 2 S.C.R. 366;      followed.           Ransden v. Dyson,[1866] L.R. 1HL 170; referred to.           Robertson v.  Minister of Pensions, [1949] 1 K. B.      227; quoted with   approval as the correct law.      12. The  doctrine of  executive necessity,  regarded as sufficient Justification  for the  Government  to  repudiate even its  contractual obligations was emphatically negatived in the  Indo-Afghan Agencies   case and the supremacy of the laws was established, [683 C-D].      Therefore, it  is  not  open  to  Government  to  claim immunity from  the applicability  of the  rule of promissory estopped and  thereby repudiate  a promise made by it on the ground that  such promise  may fetter  its future  executive action. If  the Government  wants to preserve its freedom of executive action  from being  hampered  or  restricted,  the Government should  not   make a promise knowing 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 promisee  acts in reliance upon  it and  alters his  position  the  Government would be  compelled to make good such promise like any other private individual. [683 D-F].      13. The  law cannot  acquire legitimacy and gain social acceptance unless  it accords  with the  moral values of the society. It  should be  the constant  endeavor of the Courts and the  legislatures to  close  the  gap  between  law  and morality and  bring about  as near  an approximation between the two  as possible. The doctrine of promissory estopped is a significant  judicial contribution  in that direction.[683 F-G].      Since  the   doctrine  of  promissory  estoppel  is  an equitable  doctrine,  it  must  yield  when  the  equity  so requires. If it could be shown the by Government that having regard to  the facts  as they  have transpired,  it would be inequitable to  hold the  Government to  the promise made by

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it, the  Court would  not raise  an equity  in favour of the promisee and enforce the promise against the Government. 648 The doctrine  of promissory  estoppel would  be displaced in such a  case because  on the facts, equity would not require that the Government should be held bound by the promise made by it. [683 G-H, 684 A]      When the Government is able to show that in view of the facts, as  they have  transpired public  interest  would  be prejudiced if  the Government were required to carry out the promise,  the  Court  would  have  to  balance,  the  public interest in  the Government carrying out a promise made to a citizen which  has induced  the citizen  to act  upon it and alter his  position and the public interest likely to suffer if the  promise were  required to  be  carried  out  by  the Government and determine which way the equity lies. It would not be  enough for  the Government  just to  say that public interest  requires   that  the   Government  should  not  be compelled to  carry out  the  promise  or  that  the  public interest would  suffer if  the Government  were required  to honour it. The Government cannot claim to be exempt from the liability to  carry out  the promise ’on some indefinite and undisclosed ground  of necessity or expediency’, nor can the Government claim  to be  the sole judge of its liability and repudiate  it   ’on   an   exparte   appraisement   of   the circumstances. [684 A-D]      In order to resist its liability, the Government should disclose to  the Court  the various events necessitating its claim to  be exempt  from the  liability and it would be for the Court  to decide  whether those  events are  such as  to render it  inequitable to  enforce the liability against the Government. [684 D-E].      Mere claim  of change of policy would not be sufficient to  exonerate   the  Government   from  the  liability:  the Government would  have to  show precisely the changed policy with the  reason and  justification therefor,  to enable the Court to  judge for  "itself which  way the  public interest lies and  what equity of the case demands. It is only if the Court is  satisfied, on  proper and adequate material placed by the Government, that over-riding public interest requires that the  Government should not be held bound by the promise but should  be free  to act  unfettered by it that the Court would refuse  to enforce the promise against the Government. [684 E-F]      The essence  of the rule of law is that the Court would not act  on the mere ipse dixit of the Government, for it is the Court  which has  to  decide  and  not  the  Government, whether  the   Government  should   be  held   exempt   from liability.[684 F-G]      The burden  would be  upon the  Government to show that the public  interest in the Government acting otherwise than in accordance  with the  promise is  so overwhelming that it would be  inequitable to  hold the  Government bound  by the promise and  the Court  would insist  on a  highly  rigorous standard of  proof in the discharge of this burden. But even where there  is no  such over-riding public interest, it may still be  competent to  the Government  to resile  from  the promise ’on  giving reasonable  notice, which  need not be a formal notice,  giving the promisee a reasonable opportunity of resuming  his position’ provided of course it is possible for the  promisee to  restore status  quo ante. If, however, the promisee  cannot resume  his position, the promise would become final and irrevocable. [684 G-H, 685 A].      Emmanuel Ayodeji  Ajayi v. R. T. Briscoe, [1964] 3 All. E.R. 556; referred to

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649      14. So  far as  the doctrine  of promissory estoppel is concerned, no  distinction can  be made  between  a  private individual  and   a  public  body.  This  doctrine  is  also applicable against  a public  body like a municipal council. However, this  doctrine cannot  be applied  in teeth  of  an obligation or liability imposed by law. It cannot be invoked to compel  the Government  or even  a private party to do an act prohibited  by law.  There can  also  be  no  promissory estoppel against  the exercise  of  legislative  power.  The Legislature can  never  be  precluded  from  exercising  its legislative function  by resort  to  the  doctrine  of  pro- missory estoppel. [688C, G-H 689 A].      Century Spinng and Manufacturing Co. Ltd. & Anr. v. The Ulhasnagr    Municipal  Council and  Anr. [1970]  3 SCR 854; Turner Mossison and Co. Ltd. v. Hunngerfard Investmetn Trust Ltd.[1972] 3 S.C.R. 711; discussed &  followed.           M. Ramanatha Pillai v. The  Stare of Kerala & Anr.      [1974] 1  SCR 51 5 @   526; Assistant Cusrodian v. Brij      Kishore Agarwala & Ors. [1975] 2 SCR 359, explained and      held inapplicable.           Sate of Kerala v. Gwalior Rayon Silk Manufacturing      Co. Ltd. [1974] 1 S.C.R. 671 @ 688; reiterated.           Malhortra and  Sons &  Ors. v. Union of India  and      Ors. A.I.R. 1976 J & K p. 41 approved.           Excise Commissioner  U.P. Allahabad  v. Ram  Kumar      [1976]  Suppl.   S.C.R.  532;  Bihar  Eastern  Gangetic      Fishermen Cooperative Society Ltd. v. Sipali Sangil and      Ors. [1978]  1 S  R 375;  A.I.R. 1977  S.C. 2149; Radha      Krishan Agarwal  v. State  of Bihar  and Ors.  [1977] 3      S.C.R. 249;: [1977] 3 S.C.C. 457; explained.      15. In  order  to  attract  the  applicability  of  the doctrine of  promissory estoppel,  it is  not necessary that the promisee,  acting in  reliance on  the  promise,  should suffer any  deteriment. What  is necessary  is no  more than that there  should be alteration of his position in reliance on the promise. If detriment were a necessary element, there would be  no need  for the  doctrine of  promissory estoppel because, in  that event  in quite a few cases, the detriment would form  the  consideration  and  the  promise  would  be binding, as  a contract. If by deteriment is meant injustice to the  promisee which  would result if the promisor were to resile from  his promisee,  then detriment  would  certainly come in  as a  necessary ingredient. The detriment in such a case is not some prejudice sneered by the promisee acting on the promise,  put the prejudice which would be caused to the promisee, if  the promisor  were  allowed  to  back  on  the promise. It  is not  necessary for the promisee to show that he has  acted to  his detriment.  All that he has to show is that he has acted to reliance on the promise and altered his position. [694 A-B, F-G, 695 E, 694 D].           Central London  Property Trust  Ltd. V. High Trees      House, [1947]   K.B.  p.       130:: [1956] 1 All. E.R.      256, W.  J. Alan  & Co.  Ltd. v.  El Nasar  Export  and      Import Co.  [1972] 2  All. E.R.  p. 127, @ p. 140, Tool      Metal Manufacturing      Co.  Ltd. v. Tunosten Electric      Co. Ltd.  [1955] All.  E. R. 657; [1975] 1 W. L. R. 761      Emmaulel Ayodeji 650      Ajya V.  R. T.  Briscoe [1964] All. E. R. 556  Karnmins      Ballrooms Ltd.  v. Zenith  Investments  (Torquay)  Ltd.      [1970] 2  All. E.R.  871, Grurldt  v. the  Boulder Pty.      Gold Mines  Ltd. [1938]  59 C.L.R.  641;    quoted with      approval.      In the instant case.

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    The facts  necessary  for  involving  the  doctrine  of promissory estoppel  were clearly  resent and the Government was bound  to carry  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. [693 F-G]      (a)  The   letter  dated   23rd  January   1969  was  a representation   on    behalf   of   the   Government,   the representation having been made by the 4th respondent in his capacity  as   the  Chief   Secretary  of   the   Government categorically to  the effect  that the  appellant  would  be entitled to exemption from sales tax  in respect of the sale of vanaspati effected in Uttar Pradesh for a period of three years from  the date  of commencement  of  production.  This representation was  made by way of  clarification in view of the suggestion in the appellant   letter dated  2 nd January 1969 that  the financial  institutions were  not prep  ed to regard the  earlier letter  of the 4th respondent dated 22nd December 1968  as a  definite commitment  on the part of the Government to grant exemption from sales tax. [692 H, 693 A- B]      (b) The representation made by the 4th respondent was a representation within  the scope  of his  authority and  was binding on  the Government in as much as the 4th respondent, who was  at the  material time  the Chief  Secretary to  the Government and  also Adviser to the Governor discharging the functions of  the Government during the President’s Rule had authority to  bind the  Governor. Moreover   the averment to this effect in the Writ Petition was not denied by the State in the affidavit in reply filed on its behalf [693 C-D].      (c) This  representation was  made  by  the  Government knowing or  intending that  it would  be  acted  on  by  the appellant because  the appellant  made it  clear that it 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. In fact the appellant relying on  this representation  of the Government, borrowed moneys from  various financial institutions, purchased plant and machinery   from M/s. De Smith (India) Pvt. Ltd., Bombay and set up a Vanaspati factory at Kanpur. [693 E-F]

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil Appeal No. 1597 of 1972.      Appeal from  the Judgment and Order dated 25th January, 1972of the  Allahabad High  Court in  Civil Misc.  Writ  No. 3788/70.      S.T. Desai,  Shri Narain,  J. B.  Dadachanji,  Ravinder Narain, S  Swarup and Talat Ansari for the Appellant.      G. N.  Dikshit, M. V. Goswami and O. P. Rana for RR 1-3 and 5.      Girish Chandra for Respondent No. 4. 651      A. B.  Dewan, Ravinder  Narain, S.  Swarup  and  A.  N. Haksar for the Intervener (M/s. Modi Rubber Ltd.).      The Judgment of the Court was delivered by      BHAGWATI, J.,  This  appeal  by  certificate  raises  a question of  considerable importance  in the field of public law. How  far and  to what  extent is the State bound by the doctrine of  promissory estoppel  ?  It  is  a  doctrine  of comparatively  recent   origin  but  it  is  potentially  so fruitful and  pregnant  with  such  vast  possibilities  for growth that  traditional lawyers  are alarmed  lest it might

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upset  existing  doctrines  which  are  looked  upon  almost reverentially and  which have  held the  field  for  a  long number of years. The law in regard to promissory estoppel is not yet  well settled  though it  has been  the  subject  of considerable debate  in England as well as the United States of America  and it  has also  received consideration in some recent decisions  in India  and we,  therefore,  propose  to discuss it  in some  detail with  a  view  to  defining  its contours and demarcating its parameters. We will first state briefly the  facts giving  rise  to  this  appeal.  This  is necessary because  it is  only where certain fact-situations exist that promissory estoppel can be invoked and applied.      The appellant  is a  limited company which is primarily engaged in the business of manufacture and sale of sugar and it has  also a  cold storage  plant and  a steel foundry. On 10th October,  1968 a  news item  appeared in  the  National Herald in  which it  was stated  that  the  State  of  Uttar Pradesh had  decided to  give exemption from sales tax for a period of three years under section 4A of the U.P. Sales Tax Act to  all new industrial units in the State with a view to enabling them "to come on firm footing in developing stage". This news item was based upon a statement made by Shri M. P. Chatterjee the  then Secretary  in the Industries Department of the  Government. The  appellant, on  the  basis  of  this announcement, addressed a letter dated 11th October, 1968 to the Director of Industries stating that in view of the sales tax holiday  announced  by  the  Government,  the  appellant intended to set up a Hydro-genation Plant for manufacture of Vanaspati and  sought for  confirmation that this industrial unit, which it proposed to set up would be entitled to sales tax holiday  for a  period of  three years  from the date it commenced production.  The Director of Industries replied by his letter  dated 14th  October, 1968 confirming that "there will be no sales tax for three years on the finished product of your  proposed Vanaspati  factory from  the date  it gets power connection  for commencing  production." The appellant thereupon started taking steps to contact various financiers for financing  the project  and also  initiated negotiations with manufacturers for purchase of machinery for setting 652 up  the  Vanaspati  factory.  On  12th  December,  1968  the appellant’s representative met the 4th respondent who was at that time  the Chief  Secretary to  the Government  as  also Advisor to  the Governor  and  intimated  to  him  that  the appellant was setting up the Vanaspati factory solely on 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 commercial production at the factory and the 4th respondent  reiterated the  assurance that the appellant would be entitled to sales tax holiday in case the Vanaspati factory was  put up by it. The appellant by its letter dated 13th December,  1968 placed on record what had transpired at the meeting  on the  previous  day  and  requested  the  4th respondent "to please confirm that we shall be allowed sales tax holiday  for a  period of  three years  on the  sale  of Vanaspati from  the date  we start  production." On the same day the  appellant entered  into an  agreement with  M/s. De Smith (India)  Pvt. Ltd.,  Bombay for  supply of  plant  and machinery for  the Vanaspati factory, providing clearly that the  appellant  would  have  the  option  to  terminate  the agreement, if  within 10  weeks exemption from sales tax was not granted  by the  State Government.  The  4th  respondent replied on  22nd December,  1968 confirming  that "the State Government will  be willing  to consider  your  request  for

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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 not 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  consider  the  request  for  grant  of exemption and  did not  convey any  decision  of  the  State Government  that   the  exemption   would  be  granted.  The appellant, therefore, addressed a letter dated 22nd January, 1969 to  the 4th  respondent pointing out that the financial institutions were  of the  view that  the letter  of the 4th respondent dated  22nd December,  1968 "did  not purport  to commit the  Government for  the concession mentioned" and it was, 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 653 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 not carry conviction  with the  financial institutions." In view of this  unequivocal assurance  given by the 4th respondent, who not  only occupied  the post  of Chief  Secretary to the Government but  was also Advisor to the Governor functioning under the  President’s 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  Corporation, being  convinced by the clear and  categorical assurance given by the 4th respondent that  the  Vanaspati  Factory  of  the  appellant  would  be entitled to  exemption from  sales tax for a period of three years from  the date  of  commencement  of  production,  had sanctioned financial  assistance to  the appellant  and  the appellant was  going ahead with the project in full speed to enable it to start production at the earliest. The appellant made  considerable   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 concession 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 concerned, 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

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the appellant  was intimated  by the  5th respondent  by its letter dated  23rd May,  1969 that  the meeting would now be held on  3rd  June,  1969.  The  appellant’s  representative attended the  meeting on that day and reiterated that so far as the  appellant was concerned, 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 commencement of production. 654      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 commercial production by 30th September,  1970 would  be given  partial concession 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 commercial  production of  Vanaspati with effect from  1st July, 1970, and stated that, as notified 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  commencing 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  Northern 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 concession  in the rates of Sales Tax to new Vanaspati Units. The  appellant thereupon filed a writ petition in the High Court  of Allahabad  asking for  a writ  directing  the State  Government   to  exempt   the  sales   of   Vanaspati manufactured by the appellant from sales tax for a period of three years  commencing from  2nd July,  1970 by  issuing  a notification under  section 4A  and not to collect 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  no  plea  of  promissory  estoppel  taken against the  State Government  and the  writ  petition  was, therefore, amended by obtaining leave of the High Court 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 knowing that it would be acted on by the appellant and in fact 655 the appellant,  acting in  reliance on  it, established  the Vanaspati factory  by investing a large amount and the State

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Government was, therefore, bound to honour 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  Court principally on the ground that the appellant had waived the exemption, if any, by accepting the concessional rates  set out  in the  letter  of  the  Deputy Secretary dated  20th January, 1970. The appellant thereupon preferred the  present appeal  after obtaining a certificate of fitness from the High Court.      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  commencement of  production and  such assurance was given intending  or knowing 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 honour  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 commenced production. The  appellant assailed  the view  taken by  the High Court  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 concessional 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 no plea of waiver was raised in the affidavit filed on behalf of the State Government  in opposition to the writ petition, it was not competent 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, notwithstanding  that it  did not  find place in the pleadings, no waiver was made out, said the appellant, since there was  nothing 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 not possible  to say that the appellant, with full knowledge of its  right to claim total exemption from payment of sales tax, waived that right and agreed to accept the concessional rates set out in the letter dated 20th January, 1970. The 656 State Government on the other hand strongly pressed the plea of waiver  and submitted  that  the  appellant  had  clearly waived its right to complete exemption from payment of Sales Tax by  addressing the  letter dated  25th June,  1970.  The State Government  also contended that, in any event, even if there was  no waiver,  the appellant  was  not  entitled  to enforce the  assurance given  by the  4th respondent,  since such assurance  was not  binding on the State Government and more-over, in  the absence of notification under section 4A, the State  Government could  not 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 could be no promissory estoppel against the  State Government  so  as  to  inhibit  it  from formulating  and   implementing  its   policies  in   public

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interest. These  were broadly the rival contentions urged on behalf of  the parties  and we shall now proceed to consider them.      We shall  first deal  with the question of waiver since that can  be disposed of in a few words. The High Court 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 concessional rates of sales tax  set out in the letter of the 5th respondent dated 20th January,  1970. We  do not think this view taken by the High Court  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.  No  plea  of  waiver  can  be allowed to  be raised  unless it  is pleaded and the factual foundation for  it is  laid in  the pleadings.  Here it  was common ground  that the  plea of waiver was not taken by the State Government  in the  affidavit filed  on its  behalf in reply to  the writ  petition,  nor  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 no waiver 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, not right for the High  Court to  have allowed  the plea  of waiver  to be raised against  the appellant and that plea should have been rejected in limine. 657      Secondly, it is difficult to see how, on the facts, the plea of  waiver could  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 conduct, but its basic requirement is  that it  must be  "an intentional  act  with knowledge". Per  Lord Chelmsford, L.C. in Earl of Darnley v. London, Chatham  and Dover  Rly. Co.  There can be no waiver unless the  person who  is said  to  have  waived  is  fully informed as  to his  right and  with full  knowledge of such right, he  intentionally abandons  it. It  is pointed out in Halsbury’s 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  Court  of  Australia  in  Craine  v. Colonial Mutual  Fire Insurance Co. Ltd. has also emphasised that waiver  "must be with knowledge, an essential supported by many  authorities". Now  in the  present  case  there  is nothing  to  show  that  at  the  date  when  the  appellant addressed the  letter dated  25th June,  1970, it  had  full knowledge of  its right  to exemption  under  the  assurance given 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 concessional rates of  sales tax  granted under  the  letter  dated  20th January, 1970.  It is possible that the appellant might have thought that  since no  notification exempting the appellant

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from sales tax had been issued by the State Government under section 4A,  the  appellant  was  legally  not  entitled  to exemption and that is why the appellant might have chosen to accept whatever  concession was  being granted  by the State Government. The claim of the appellant to exemption could be sustained only  on the  doctrine of  promissory estoppel and this doctrine could not be said to be so well defined in its scope  and  ambit  and  so  free  from  uncertainty  in  its application that  we should  be compelled  to hold  that the appellant must  have had knowledge 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 not  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  knows the  law. It  is often said that every one is presumed to know the law, but that is not a correct statement: there is no such maxim known to the law. Over a hundred and thirty years ago, Maule, J., pointed out in  Martindala v.  Faulkner(3): "There is no presumption in this country 658 that every  person knows  the law:  it would  be contrary to common sense  and reason if it were so". Scrutton, also once said: "It  is impossible  to know all the statutory law, and not very  possible to  know all  the common law." But it was Lord Atkin  who, as  in so many other spheres, put the point in  its   proper  context   when  he   said  in   Evans   v. Bartlem(1)"_____the fact  is that there is not and never has been a  presumption that  every one  knows the law. There is the rule  that ignorance of the law does not excuse, a maxim of very  different scope and application." It is, therefore, not possible  to presume,  in the  absence of  any  material placed  before  the  Court,  that  the  appellant  had  full knowledge 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 commencement of production could 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 Co.(2)  and Birmingham & District Land  Co. v.  London &  North-Western  Rail  Co.(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 Ltd. v. High Trees  House Ltd.(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  commonly  named ’promissory estoppel,  it is,  as we  shall presently  point out, neither  in the  realm of  contract nor 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

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rigours of strict law. The early cases did not speak of this doctrine as  estoppel. They  spoke  of  it  as  ’raising  an equity’. Lord Cairns stated 659 the  doctrine   in  its   earliest  form-it   has  undergone considerable development  since then-in  the following words in Hughes v. Metropolitan Railway Company (supra):           "It is  the first  principle upon which all Courts      of Equity  proceed, that  if parties  who have  entered      into definite  and  distinct  terms  involving  certain      legal results....afterwards  by their  own act  or with      their own  consent enter  upon a  course of negotiation      which has  the effect  of leading one of the parties to      suppose  that  the  strict  rights  arising  under  the      contract will  not be  enforced, or  will  be  kept  in      suspense, or held in abeyance, the person who otherwise      might have enforced those rights will not be allowed to      enforce them  where  it  would  be  inequitable  having      regard to  the dealings  which have  thus  taken  place      between the parties."      This principle  of equity laid down by Lord Cairns made sporadic appearances  in stray cases now 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 consequence 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 conditions 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 court  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, considered Obiter whether the plaintiffs  could have recovered the covenanted rent for the whole  period of  the lease  and observed that in equity the  plaintiffs   could  not   have  been   allowed  to  act inconsistently with  their promise  on which  the defendants had acted.  It was  pressed upon the Court that according to the well  settled law as laid down in Jorden y. Money(1), no estoppel  could  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 not to promises de futuro which, if  binding at all, must be binding only as contracts and here there was no representa- 660 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 not been standing still since Jorden      v. Money. There has been a series of decisions over the      last fifty  years which,  although they  are said to be      cases of  estoppel are  not really such. They are cases      in which  a promise  was made  which  was  intended  to      create legal  relations and  which, to the knowledge 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 courts have said

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    that the promise must be honoured."      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". Now Hughes v. Metropolitan Railway Co.  (supra) and Birmingham and District Land Co. v. London &  North Western  Rail Co. (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  contractually   one  to   the  other.  In  Hughes  v. Metropolitan Railway  Co.  (supra)  the  plaintiff  and  the defendant were  already bound  in contract  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 course of negotiations".      Ten years  later  Bowen,  L.  J.  also  used  the  same terminology in  Birmingham and  District Land  Co. v. London and North Western Rail Co. (supra) that:           "If persons  who have  contractual rights  against      others induce  by their conduct 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 contract would not be enforced. But we do not think any such limitation can justifiably be introduced to curtail the width and amplitude of this doctrine. We fail 661 to see  why it  should be  necessary to the applicability of this  doctrine   that  there   should  be  some  contractual relationship between  the parties.  In  fact  Donaldson,  J. pointed out  in Durham  Fancy Goods  Ltd. v. Michael Jackson (Fancy Goods) Ltd. (1) :           "Lord Cairns  in his  enunciation of the principle      assumed a pre-existing contractual relationship between      the parties,  but this  does  not  seem  to  me  to  be      essential, provided  that there is a pre-existing legal      relationship which  could 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  not warranted  and it  is significant that the statement of the doctrine by Mr. Justice Denning in the High Trees’ case  does  not  contain  any  such  limitation.  The learned Judge has consistently refused to introduce any such limitation in the doctrine and while sitting in the Court of Appeal, he  said in  so many  terms, in Evenden v. Guildford City Association Football Club Ltd.(2)           "Counsel for  the appellant  referred us, however,      to the  second  edition  of  Spencer  Bower’s  book  on      Estoppel by  Representation[(1966) pp.  340-342] by Sir      Alexander Turner,  a judge  of the New Zealand Court of      Appeal. He  suggests the promissory estoppel is limited      to cases  where parties are already bound contractually      one to the other. I do not think it is so limited : see      Durham Fancy  Goods  Ltd.  v.  Michael  Jackson  (Fancy      Goods) Ltd.  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."

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    This observation  of Lord  Denning clearly suggest that the parties  need not  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 no  pre-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  Halsbury’s Laws of England, 4th ed. Vol. 16 p. 1018, Note  2 para 1514. Of course it must be pointed out in fairness to Lord Denning that he made it clear 662 in the  High Trees’  case that  the doctrine  of  promissory estoppel cannot  found a cause of action in itself, since it can never do away with the necessity of consideration in the formation of  a  contract,  but  he  totally  repudiated  in Evenden’s case  the necessity of a pre-existing relationship between the  parties  and  pointed  out  in  Crabb  v.  Arun District Council(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, not 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 conduct 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,  knowing 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 not be  entitled  to  go  back  upon  it,  if  it  would  be inequitable to  allow him  to do  so having  regard  to  the dealings which  have taken  place between  the parties,  and this  would   be  so   irrespective  whether  there  is  any preexisting relationship between the parties or not.      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  contrary  trend  to  be  found  in  recent juristic thinking  in that country, that promissory estoppel cannot itself  be the  basis of an action. It cannot found a cause of  action :  it can only be a shield and not 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 nomenclature, 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 come  to be  identified as  a measure  of defence.  The ghost of  traditional estoppel  continues 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  courts  to  be  binding  on  the  party  making  it, notwithstanding that  under the  old common  law it might be difficult to find any consideration for it. "the courts have not 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 Combe v. 663 Combe(2)  that   "Much  as  I  am  inclined  to  favour  the principles stated  in the  High Trees’ case, it is important that it  should not  be stretched too far, lest it should be endangered. That  principle does  not create  new causes  of action where  none existed  before. It only prevents a party

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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 v. Hallwood  Estates Ltd.(1)  "The  doctrine  may  afford  a defence against  the enforcement or otherwise of enforceable rights :  it cannot  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 not  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 knowing that  it would  be acted on by the person to whom it is made  and in fact it is so acted on and it is inequitable to allow  the party  making the  promise to go back upon it. 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" not 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 Corporation of Bombay v. Secretary of State  (2) that  the "doctrine is often treated as one of estoppel but  I doubt whether this is correct, though it may be a  convenient name  to apply". The doctrine of promissory estoppel need  not, therefore,  be  inhibited  by  the  same limitation as  estoppel in  the strict sense of the term. It is an  equitable principle  evolved by  the courts for doing justice and there is no reason why it should be given only a limited application by way of defence.      It may  be noted  that even  Lord Denning recognised in Crabb v.  Arun  Distric  Council  (supra)  that  "there  are estoppels and  estoppels. Some  do give  rise to  a cause of action. Some  don’t" 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   Co.   Ltd.   v. Twitchings,(3) namely  that the  effect of  estoppel on  the true owner may be that : 664           "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 conduct-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 courts and in this way give rise to a cause of action". The Court 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 conduct of the  Arun District  Council. Of course, 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 now come to be known as proprietary estoppel which, according to the learned  authors, forms  an exception  to the  rule that estoppel cannot  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  not  base  their  decision  on  any distinctive feature of proprietary estoppel but proceeded on

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the  assumption   that  there  was  no  distinction  between promissory and  proprietary estoppel  so far  as the problem before them was concerned. 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 Co.,(1)  a decision from which inspiration was drawn by him  for evolving  the doctrine of promissory estoppel in the High  Tree’s case,  observed that  "- it  is  the  first principle on which all courts of equity proceed......that it will prevent  person from  insisting  on  his  strict  legal rights-whether arising  under a  contract, 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 not 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  not 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- 665 ded  on   the  principle   of   promissory   estoppel.   The representative of  the Arun  District Council  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 Council  in fact  constructed 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 northern portion of his  land without  reserving for  himself as owner of the southern portion  any right of way over the northern portion for the  purpose of  access to  the new  road. This  was the reason why the Court 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 Council  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 consent of the landlord, and upon the faith of      such promise  or expectation, with the knowledge of the      land lord, and without objection by him, lays out money      upon the  land, a  Court  of  equity  will  compel  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 Council gave rise to a cause of action

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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 not  ? There  is no qualitative difference  between the  two. Both  are the off- springs of equity and if equity is flexible enough to permit proprietary estoppel  to be used as a cause of action, there is no  reason in  logic or principle why promissory estoppel should also  not be  available as  a  cause  of  action,  if necessary to satisfy the equity. 666      But perhaps the main reason why the English Courts 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  completely  displaced. There can  be no  doubt 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 v. Money  (supra) and  it rediscovered  an equity  which was long embedded  beneath the  crust of  the old  decisions  in Hughes v.  Metropolitan Railway  Co. (supra)  and Birmingham and District  Land Co.  v. London and North Western Rail Co. (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 constantly striving. But it is  interesting to note the Lord Denning was not prepared to go  further, as  he thought  that having  regard  to  the doctrine of  consideration which was so deeply entrenched in the jurisprudence  of the  country, 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 Combe v. Combe (supra)  that the  principle  of  promissory  estoppel "should  not  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 consideration 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  contractual force  and it is for this reason  that "a  contention that  a promissory estoppel may be  used to  found a cause of action must be regarded as an attack  on the  doctrine of  consideration." 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  contract  where consideration is  not shown" and that cannot be done because consideration "still  remains a  cardinal necessity  of  the formation of  a contract."  It can  hardly be  disputed that over the  last three  or  four  centuries  the  doctrine  of consideration has come to occupy such a predominant position in the  law of  contract that  under the  English law  it is impossible to think of a contract without consideration and, therefore, it  is understandable  that  the  English  courts should have  hesitated to  push the  doctrine of  promissory estoppel to  its logical  conclusion 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 667 not as founding a cause of action in itself but as a part of

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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 consideration in its present shape prevent the enforcement of many contracts, 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 not used  their ingenuity  to invest considerations. But the invention of  considerations, 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  no  practical purpose and ought to be abolished. Sir Federick Pollock also said in his well known work of ‘Ganius of Common Law’, p. 91 that the  application of  the doctrine  of consideration" to various unusual  but not  unknown cases has been made subtle and obscured  by excessive  dialectic  refinement".  Equally strong is  the condemnation  of this  doctrine  in  judicial pronouncements. Lord  Duned observed  in the well known case of Dunlop Pneumatic Tyre Co. v. Selfridge and Co. Ltd.(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  not 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 economic institution becomes of the  first importance  in  a  commercial  and  industrial society and  it is an expression of the moral sentiment of a civilised society  that a  man’s 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. Holdsworth’s  view and advocated that a contract should exist if it was intended to create or affect legal relations  and either consideration was present or the contract  was   reduced  to  writing.  This  recommendation, however, did  not 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 668 by eminent jurists, we need not be unduly anxious to project this doctrine  against assault  or erosion  nor 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 Commission of India in its 13th Report  adopted the same approach and recommended that, by way  of exception  to section  25 of  the Indian Contract Act, 1925, a promise, express or implied, which the promisor knows or  reasonably should know, 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 not  see any  valid reason why promissory estoppel should not be allowed to found a cause of action where, in order to satisfy the equity, it is necessary to do so.

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    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 considerably erode, if not  completely overthrow, the doctrine of consideration, have been fearful to allow promissory estoppel to be used as a  weapon  of  offence,  it  is  interesting  to  find  that promissory estoppel  has  not  been  confined  to  a  purely defensive role.  Lord Denning himself said in Combe v. Combe (supra) that  promissory estoppel  "may be a part of a cause of action",  though "not  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 Ltd.(2)  The English  courts 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  consideration  continues  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 contractual obligation, but that is no  reason 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 not allowed to operate in all the activist  magnitude, so  that it  may fulfil the purpose for which  it was  conceived and born. It must be remembered that law  is not  a mausoleum.  It is  not an  antique to be taken 669 down, dusted,  admired and  put back  on the  shelf.  It  is rather like  an old  vigorous  tree,  having  its  roots  in history, yet  continuously 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 concepts  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  continuity   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 not 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 covin 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 ignored when invoked as an      apposite analogy  in novel situations, though the novel      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  constantly      shifted to  restore the  equilibrium between  precedent

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    and justice."      Was it  not Lord  Denning who exhorted judges not 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 & Co.(1)      We may  profitably consider  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 not 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 Trees’case that  the American Law Institute’s Restatement of the  Law   of  Contract’s   came  out   with  the  following proposition in Article 90 : 670           "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 B’s      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. A’s promise is binding."      It is  true that  the  Restatement  has  not  the  same weight, as a source of law, as actual decisions of courts 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  now becoming  increasingly clear  that  a promise  may   in  the   United  States  derive  contractual 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, notwithstanding that there is no consideration in  the sense  in which  that word  is used in English and  Commonwealth jurisprudence. Of course 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 commencing  or continuing its  charitable work  after receiving promise has given good  consideration for  it, we  do not 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  consideration 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 courts  have upheld  the validity of

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    charitable subscriptions  on the  theory of  promissory      estoppel  holding   that  while   a  mere   promise  to      contribute is  unenforceable for want of consideration,      if money  has been  expended or  liabilities have  been      incurred in reliance on the promise so 671      that non  fulfillment will  cause injury  to the payee,      the  donor   is  estopped   to  assert   the  lack   of      consideration, and the promise will be enforced." Chief Justice  Cardozo, presiding  over the Court of Appeals of the  State of  New York,  explained the  ratio  of  these decisions in the same terms in Alleghany College v. National Chauteuque County Bank(1):           "The half-truths  of one  generation tend at times      to perpetuate themselves in the law as the whole truths      of another,  when constant  repetition brings  it about      that  qualifications,   taken  once  for  granted,  are      disregarded or forgotten. The doctrine of consideration      has not  escaped the  common lot.  As far back as 1881,      Judge Holmes in his lectures on the Common Law (p. 292)      separated the  detriment which  is merely a consequence      of the  promise from  the detriment,  which is in truth      the motive or inducement, and yet added that the courts      ’have gone  far in  obliterating this distinction’. The      tendency toward  effacement has  not lessened  with the      years. On  the contrary  there has  grown up  of recent      days a  doctrine that a substitute for consideration 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 consideration has been      modified accordingly,  we do  not now  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  consideration in connection with our law      of charitable subscriptions. So long as those decisions      stand,  the   question  is   not  merely   whether  the      enforcement of a charitable subscription can be squared      with the  doctrine of  consideration in all its ancient      rigor. The  question may  also be  whether  it  can  be      squared with the doctrine of consideration 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 knowledge of the promisor, and in the reasonable belief that the promise  would be  kept. We  held the  promise  binding, though 672 consideration there  was none  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 consideration as fixed by  the old doctrine were subject to a like expansion. Very likely,  conceptions 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.

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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  not  be over-ruled to  save the  symmetry of  a concept which itself came into  our law, not so much from any reasoned conviction of its justice, as from historical accidents of practice and procedure. (8  Holdsworth, History  of English  Law,  7  et. seq).  The  concept  survives  as  one  of  the  distinctive features of  our legal system. We have no thought to suggest that it is obsolete or on the way to be abandoned. As in the case of  other concepts, however, the pressure of exceptions has led to irregularities of form." It  is  also  interesting  to  note  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 notable  instances are to be found in what may be  called the  "sub-contractor bid  cases" in  which  a contractor about  to tender  for a  contract, invites a sub- contractor to  submit a  bid for  a sub-contract  and  after receiving his  bid the  contractor 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 not possible to  say that any detriment which the contractor may be able to show in these cases would amount to consideration 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  Traynor, 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  consideration is not 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 673 the  interest  of  justice,  morality  and  common  fairness clearly dictated  such a  course. 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  Commonwealth jurisdictions and in some States at  least, it  has been  used to  reduce, if  not  to destroy, the  prestige of  consideration as  an essential of valid contract.  Vide Spencer Bower and Turner’s Estoppel by Representation (2d) page 358.      We now  go on  to consider  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 cannot  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 not be  detained, was  not enforceable  against the  British Government in  a court  of law  and observed  that his  main reason for taking this view was that:           "--it is  not  competent  for  the  Government  to      fetter  its   future  executive   action,  which   must      necessarily be determined by the needs of the community      when the  question arises. It cannot by contract hamper      its freedom  of action  in matters  which  concern  the      welfare of the State."

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This observation has however not been regarded by jurists as laying down the correct law on the subject since it is "very wide and  it is  difficult to  determine its  proper scope". Anson’s English  Law of  Contract, 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  cannot escape  by saying that estoppels      do not  bind the  Crown for that doctrine has long been      exploded. Nor  can the  Crown escape  by praying in aid      the doctrine  of  executive  necessity,  that  is,  the      doctrine that  the Crown  cannot 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 not a promise      which was intended to be binding but only an expression      of  intention.   Rowlatt,  J.,   seems  to   have  been      influenced by 674      the cases  on the  right of  the Crown  to dismiss  its      servants at  pleasure, but  those cases must now 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 Co.  Ltd. (1)  but that  was on the ground that the doctrine  of promissory  estoppel cannot  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 not express any disapproval of the applicability of the doctrine of promissory estoppel against the Crown nor did it overrule the view  taken by  Denning J., that the Crown cannot 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 not immune from liability under the doctrine of promissory estoppel.      The courts  in America  for a  long time  took the view that the  doctrine of  promissory estoppel does not apply to the Government  but more  recently the  courts 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  not be  lightly invoked against the State."  Later in  the same  paragraph it is stated that "as a  general rule,  the doctrine  of estoppel  will not 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  not apply against  the government is definitely declining. There

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have been  numerous cases  in the  State courts where it has been held  that promissory  estoppel  may  be  applied  even against the Govern- 675 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 cannot apply  against the  Government or  a public authority seek to  draw inspiration  from the majority decision of the United  States  Supreme  Court  in  Federal  Crop  Insurance Corporation v. Merrill.(1) But we do not 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 County  Committee acting as the agent of the Federal Crop Insurance Corporation which was a wholly Government-owned corporation  constituted 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 County Committee to the Denver office  of the  Corporation with a recommendation for acceptance. The application did not mention that any part of the insured  crop was  reseeded and  it was  accepted by the Denver office  of the  Corporation. There  were at this time wheat crop  insurance regulations  framed by the Corporation and published  in  the  Federal  Register  which  prohibited insurance of  spring wheat  reseeded on winter wheat acreage but neither  the respondents nor the County Committees which was acting  as the  agent of  the Corporation  was aware  of them. A  few months later, most of the respondent’s crop was destroyed by  drought and  on a  claim  being  made  by  the respondents under  the policy  of insurance, the Corporation 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 Court by a majority of five to four. The majority observed:           "It is  too late  in the  day  to  urge  that  the      Government  is   just  another  private  litigant,  for      purposes of  charging it  with liability,  whenever  it      takes over  a business theretofore conducted by private      enterprises or  engages in  competitions  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- 676      rity.-"Man must turn square corners when they deal with      the Government", does not reflect a callous outlook. It      merely expresses  the duty of all courts to observe the      conditions defined  by Congress for charging the public      treasury."      It will  be seen that the Corporation was held entitled to repudiate  its liability because the wheat crop insurance regulations prohibited  insurance of  reseeded wheat and the assurance given  by the County Committee as the agent of the Corporation that  the reseeded  wheat  was  insurable  being contrary to  the wheat crop insurance regulations, could not be held  binding on  the Corporation.  It was not within the authority of  the County  Committee to  give such  assurance contrary to  the wheat  crop insurance regulations and hence

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no promissory  estoppel against  the  Corporation  could  be founded upon  it. This  decision did not say that even if an assurance given  by an  agent is  within the  scope  of  his authority and  is not  prohibited by law, it could still not create promissory  estoppel against  the Government. But, it may be  pointed out,  even this  limited holding has come in for considerable  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 corners when they deal with the Government", Maguire  and Zimet have poetically responded by saying: "It  is hard to see why the Government should not be held to  a  like  standard  of  rectangular  rectitude  when dealing with  its citizens."  (Maguire and  Zimet,  Hobson’s Choice and  Similar Practices  in Federal Taxation, 48 Harv. L. Rev. 1287 at 1299).      There has  so far  not been any decision of the Supreme Court of the United States taking the view that the doctrine of  promissory   estoppel  cannot  be  invoked  against  the Government. The trend in the State courts, 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  common fairness clearly dictate  that course." 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 course,  as pointed  out by  the United  States Court  of Appeals, Third  Circuit in Valsonavich v. United States, (1) the Government  would not  be estopped  "by the  acts of its officers and agents who without authority enter into 677 agreements to  do what  the law does not sanction or permit" and "those  dealing with  an agent of the Government must be held to have notice of limitations of his authority" as held in Merrill’s case. This is precisely what the House of Lords also held in England in Howell v. Falmouth Boat Construction Co. Ltd. (supra) where Lord Simonds stated the law to be:           "The illegality  of an  act is the same whether or      not 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 no."      But if  the acts  or omissions  of the  officers of the Government are  within the  scope of their authority and are not 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 not 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  not 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 Court applied the doctrine of  promissory estoppel  and recognised  a cause of

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action founded  upon it  in the  Ganges Manufacturing Co. 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 Court 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 constructing an arterial  road, requested  the Municipal  Commissioner to remove certain fish and vegetable 678 markets which  obstructed the  construction of  the proposed road. The  Municipal Commissioner  replied that  the markets were vested  in the  Corporation 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 nominal 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 nobble foundation to  be removed  at six  months’ notice  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 Commissioner thereafter entered into possession of  the land  and constructed  stables, workshops and chawls  on the same at considerable expense. Twenty-four years later  the Government served a notice on the Municipal Commissioner determining  the  tenancy  and  requesting  the Municipal Commissioner  to deliver  possession of  the  land within six  months and  in the  mean time to pay rent at the rate of  Rs.12,000/- per  month. The  Municipal  Corporation 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  Corporation  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. 12,000/- per month. The suit was resisted by the Municipal Corporation 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  Court and Jenkins C.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 not to be turned out until      not only  the expiration of six months notice, 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:" 679 an equity  was created  in favour  of the Municipality which entitled it "to appeal to the Court for its aid in assisting them to  resist the  Secretary of  State’s 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 Courts of Equity to

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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  Court  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 not recorded in the form of a formal contract as required by the Constitution. That is how this decision  has in fact been interpreted by this court in Union of India v. Indo-Afghan Agencies:(2)      We don’t  find any decision of importance thereafter on the subject  of promissory  estoppel until  we come  to  the decision of  this Court  in Collector 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  another   site  to   the Municipality.  The   resolution  stated  further  that  "the Government do  not consider  that any rent should be charged to the Municipality as the markets will be like other public buildings, for  the benefit  of the  whole  community".  The Municipal Corporation  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 Collector  of Bombay  assessed  the  new  site  to  land revenue and  the Municipal  Corporation 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 Court 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 Corporation and there was  thus a  limitation on the right of the Government to assess under section 8 of the Bom 680 bay City  Land Revenue  Act. On  appeal by  the Collector to this Court, the majority Judges held that the Government was not, 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  continued 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  conclusion  reached  by  the majority  but   rested  his  decision  on  the  doctrine  of promissory estoppel.  He pointed  out  that  the  Government could not  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  not  amount  to  our countenancing the  perpetration of what can be compendiously described as  legal fraud  which  a  court  of  equity  must prevent being  committed?" He  observed  that  even  if  the resolution of the Government amounted merely to "the holding out of a promise that no rent 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  Ramsden’s case  (supra) or  it is some other form of equity, is not of much importance. Courts must do  justice by the promotion of honesty and good faith,

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as far  as it  lies in  their power." This was of course the solitary view  of  Chandrasekhara  Aiyer,  J.,  but  it  was approved by  this Court in no uncertain terms in Indo-Afghan Agencies case (supra).      Then we  come to  the celebrated decision of this Court 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 Ltd.  who were  the respondents  before the  Court, 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  Commissioner  import entitlement certificate  for the  full F.O.B.  value of  the goods exported as provided in the scheme. The Scheme was not 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  contended  that, relying on  the promise  contained 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 681 certificate for  the full F.O.B. value of the goods exported on the principle of promissory estoppel. This contention 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  not competent for the Government to fetter its future executive action which must necessarily be determined by the needs of  the community  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  not reproduce  them over  again. These observation undoubtedly  supported  the  contention  of  the Government but  it was  pointed out by this Court that these observations were disapproved by Denning J., in Robertson v. Minister of  Pensions (supra)  where the  learned Judge said that "the Crown cannot escape by praying in aid the doctrine of executive  necessity, that is the doctrine that the Crown cannot 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 correct  law of  the subject. Shah, J.,  speaking on  behalf of  the Court, observed at p. 376:           "We are  unable to  accede to  the contention that      the executive  necessity releases  the Government  from      honouring its solemn promises relying on which citizens      have acted to their detriment. Under our constitutional      set-up no  person may  be  deprived  of  his  right  or      liberty except  in due  course 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 Courts  will be  competent  to  and  indeed      would be  bound to, protect the rights of the aggrieved

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    citizen."      The defence  of executive  necessity was  thus  clearly negatived by  this Court  and it was pointed out that it did not release the Government from its obligation to honour 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 could not be deteated by invoking the defence of executive necessity. 682      It was  also contended 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 contractual obligation even  though no  formal contract  in  the  manner required by  Article 299  was executed.  But this contention was negatived  and it was pointed out by this Court that the respondents "are  not seeking  to  enforce  any  contractual right: they  are seeking  to  enforce  compliance  with  the obligation which  is laid  upon the  Textile Commissioner 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 Court 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 not  in the  form of  a  formal contract as  required by  Article 299  and that Article does not militate  against the  applicability of  the doctrine of promissory estoppel against the Government.      This Court  finally, after referring to the decision in the Ganges  Manufacturing  Co.  v.  Surujmull  (supra).  The Municipal Corporation of the City of Bombay v. The Secretary of State  for India  (supra)  and  Collector  of  Bombay  v. Municipal Corporation  of the City of Bombay & Ors. (supra), summed up the position as follows:           "Under our  jurisprudence the  Government  is  not      exempt from  liability to  carry out the representation      made by  it as  to its  future conduct and it cannot on      some undefined  and undisclosed  ground of necessity or      expediency fail  to carry out the promise solemnly made      by it,  nor 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, now be taken to be settled as a result of  this decision  that where  the Government makes a promise knowing  or intending  that it  would be acted on by the 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, notwithstanding that  there  is  no  consideration  for  the promise and  the promise  is not  recorded in  the form of a formal contract 683 as required  by Article  299  of  the  Constitution.  It  is elementary that  in a  Republic governed by the rule of law, no one,  howsoever high  or low, is above the law. Every one is subject  to the  law as fully and completely as any other and the  Government is  no exception. It is indeed the pride of  constitutional  democracy  and  rule  of  law  that  the

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Government  stands   on  the   same  footing  as  a  private individual so far as the obligation of the law is concerned: the former  is equally  bound as  the latter.  It is  indeed difficult  to  see  on  what  principle  can  a  Government, committed to  the rule  of  law,  claim  immunity  from  the doctrine of promissory estoppel. Can the Government say that it is  under no  obligation to  act in a manner that is fair and just  or that  it is  not  bound  by  considerations  of "honesty and  good faith"?  Why should the Government not be held to  a high  "standard of  rectangular  rectitude  while dealing with  its citizens"?  There  was  a  time  when  the doctrine of  executive necessity  was regarded as sufficient justification for  the  Government  to  repudiate  even  its contractual obligations,  but let  it be said to the eternal glory  of   this  Court,   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 cannot claim to be immune from the applicability  of   the  rule  of  promissory  estoppel  and repudiate a  promise made  by it  on the  ground  that  such promise may  fetter its  future  executive  action.  If  the Government does  not want its freedom of executive action to be hampered  or restricted,  the Government  need not make a promise knowing  or intending  that it  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 no  reason why the Government should not be compelled  to make  good  such  promise  like  any  other private individual.  The law  cannot acquire  legitimacy and gain social  acceptance unless  it accords  with  the  moral values of  the society  and the  constant  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 contribution in that direction.      But it  is  necessary  to  point  out  that  since  the doctrine of promissory estoppel is an equitable doctrine, it must yield  when the  equity so requires. 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 Court would not raise an  equity in  favour of  the promisee and enforce the promise against the 684 Government. The  doctrine of  promissory estoppel  would  be displaced in such a case because, on the facts, equity would not require  that the Government should be held bound by the promise made by it. When the Government is able to show that in view  of the  facts as  have transpired,  public interest would be prejudiced if the Government were required to carry out the  promise, the Court would have to balance the public interest in  the Government carrying out a promise made to a citizen which  has induced  the citizen  to act  upon it and 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 not be  enough for  the Government  just to  say that public interest  requires   that  the   Government  should  not  be compelled to  carry out  the  promise  or  that  the  public interest would  suffer if  the Government  were required  to honour it.  The Government  cannot, as Shah, J., pointed out in the  Indo-Afghan Agencies  case, claim  to be exempt from the liability  to carry  out the promise "on some indefinite

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and undisclosed  ground of necessity or expediency", nor can the Government  claim to  be the sole judge of its liability and  repudiate  it  "on  an  ex-parte  appraisement  of  the circumstances".  If  the  Government  wants  to  resist  the liability, it  will have  to disclose  to the Court what are the  facts   and  circumstances  on  account  of  which  the Government claims  to be  exempt from  the liability  and it would be  for the  Court to  decide whether  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  not be  sufficient to exonerate the Government from  the liability: the Government would have to show what  precisely is  the changed  policy  and  also  its reason and  justification so  that the  Court can  judge for itself which  way the  public interest  lies  and  what  the equity of  the case  demands. It  is only  if the  Court  is satisfied, on  proper and  adequate material  placed by  the Government, the  over-riding public  interest requires  that the Government  should not  be held bound by the promise but should be free to act unfettered by it, that the Court would refuse to  enforce the  promise against  the Government. The Court  would   not  act  on  the  mere  ipse  dixit  of  the Government, for  it is the Court which has to decide and not the Government  whether the Government should be held exempt from liability.  This is the essence of the rule of law. The burden would  be upon the Government to show that the public interest  in   the  Government   acting  otherwise  than  in accordance with the promise is so overwhelming that it would be inequitable  to hold  the Government bound by the promise and the  Court would insist on a highly rigorous standard of proof in  the discharge of this burden. But even where there is no  such over-riding  public interest,  it may  still  be competent to 685 the  Government  to  resile  from  the  promise  "on  giving reasonable notice  which need not be a formal notice, giving the  promisee  a  reasonable  opportunity  of  resuming  his position" provided of course it is possible for the promisee to restore  status quo ante. If however, the promisee cannot resume his  position, the  promise would  become  final  and irrevocable. Vide 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 Co. Ltd. & Anr. v. The  Ulhasuagar Municipal  Council & Anr.(2) The question which arose  in  this  case  was  whether  the  Ulhas  Nagar Municipal Council  could be compelled 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 company,  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 council came into being and took over the administration of  the former municipality, it sight to levy octroi duty  on  appellant-company.  The  appellant  company thereupon filed  a writ  petition under  Article 226  of the Constitution in  the High  Court of  Bombay to  restrain the municipal council  from enforcing the levy of octroi duty in breach of  the promise made by the predecessor municipality. The High  Court dismissed  the petition  in limine  but,  on appeal, this  Court took the view that this was a case which required consideration  and should have been admitted by the High Court.  Shah, J.,  speaking on  behalf  of  the  Court,

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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 contracted  by a  person who  acts upon the promise:      when the  law requires  that a  contract 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 contract be not 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 686 Court that  "the Government  is not  exempt from  the equity arising out  of the acts done by citizens to their prejudice relying upon  the representations  as to  its future conduct 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 concluded by saying in words pregnant in the hope and meaning for democracy:           "If our  nascent democracy  is to thrive different      standards of  conduct for  the people  and  the  public      bodies cannot  ordinarily be  permitted. A  public body      is, in our judgment, not 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 Court  refused to  make a  distinction  between  a private individual  and a public body so far as the doctrine of promissory estoppel is concerned.      We then  come to  another important  decision  of  this Court in Turner Morrison & Co. Ltd. v. Hungerford Investment Trust Ltd. (1) where the doctrine of promissory estoppel was once again  affirmed by  this Court.  Hegde, J,  speaking on behalf of  the Court,  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 courts in this Country 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 no hesitation in accepting it.      We must  also refer to the decision of this Court 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 687 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

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promissory estoppel  was negatived and it was pointed out by the  Court  that  the  appellant  knew  that  the  post  was temporary, suggesting  clearly that  the appellant could not possibly be  led into  the belief that the post would not be abolished. If the post was temporary to the knowledge 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 could  be no  factual basis  for invoking  the doctrine  of   promissory  estoppel   for  the   purpose  of precluding the  Government from  abolishing the  post.  This view taken  by the  Court was  sufficient to  dispose of the contention based  on promissory  estoppel  and  it  was  not necessary to  say anything  more about  it,  but  the  Court proceeded to  cite a  passage from  American  Jurisprudence, Vol. 28  (2d) at  783, paragraph  123 and  observed that the High  Court  rightly  held  "that  the  courts  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 cannot 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 contention 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 no scope 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   considerable  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 not be lightly      invoked against the State" (emphasis supplied).      Even  the   truncated  passage   quoted  by  the  Court recognised in  the last  sentence that  though, as a general rule, the  doctrine of  promissory  estoppel  would  not  be applied against  the State  in its  governmental, public  or sovereign capacity, the Court 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 no doubt that the 688 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 Court citing this passage  with approval  could have possibly intended to lay down  that in  no case  can the  doctrine of  promissory estoppel be invoked against the Government. Lastly, a proper reading of  the observation  of the Court clearly shows that what the Court intended to say was that where the Government owes a  duty to  the public  to act  differently, promissory estoppel cannot  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 course of conduct enjoined by law, the doctrine of promissory estoppel cannot be  invoked for preventing the Government from acting in discharge  of its  duty under  the law.  The doctrine  of

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promissory  estoppel  cannot  be  applied  in  teeth  of  an obligation or liability imposed by law.      We may  then refer  to the  decision of  this Court  in Assistant Custodian v. Brij Kishore Agarwala & Ors.(1) It is not 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 Construction Co. Ltd. (Supra)  was preferred  by this  Court to that taken by Lord Denning in Robertson v. Minister of Pension (supra). It is true  that in  this case  the Court expressed the opinion "that the  view taken  by the  House of Lords is the correct one and  not 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 not  in Howell’s  case negative the applicability of the doctrine of promissory estoppel against the Government.  What it  laid down was merely this, namely, that no  representation or  promise made  by an  officer can preclude  the   Government  from   enforcing   a   statutory prohibition. The  doctrine of  promissory estoppel cannot be availed to  permit or condone a breach of the law. The ratio of the  decision was  succinctly put by Lord Normand when he said"- neither a minister nor any subordinate officer of the Crown can  by any  conduct or  representation bar  the Crown from  enforcing  a  statutory  prohibition  or  entitle  the subject to maintain that there has been no breach of it". It may also be noted that promissory estoppel cannot be invoked to compel  the Government  or even  a private party to do an act prohibited  by law.  There can  also  be  no  promissory estoppel against  the exercise  of  legislative  power.  The Legislature can never be precluded 689 from exercising  its legislative  function by  resort to the doctrine of  promissory estoppel.  Vide State  of Kerala  v. Gwalior Rayon Silk Manufacturing Co. Ltd.(1)      The next  decision to  which we  must refer  is that in Excise Commissioner,  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 now well settled by a catena of decisions that  there can be no question 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  not  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 Notification dated 6th  April, 1959,  issued under  section 4 of the U.P. Sales Tax  Act, 1948,  exempting sale of country liquor from payment of  sales tax.  No announcement was made at the time of the  auction whether  the exemption  from sales tax under this Notification  dated 6th  April, 1959  was  or  was  not 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 Notification  dated 2nd April, 1969 superseding  the earlier  Notification dated 6th April, 1959 and  imposing sales  tax on  the turnover in respect of country spirit  with  immediate  effect.  This  notification 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

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the State  Government did  not announce  at the  time of the aforesaid auction  that the Notification---------- 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 no sales 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 context  of this ground of challenge that the Court came to make the observation relied upon on  behalf of  the State.  Now, it  is clear that, even taking the case of the respondents at its highest, there was no representation  or promise  made by  the Government  that they would continue the exemp- 690 tion from sales tax granted under the Notification dated 6th April, 1959  and would not withdraw it, and the Notification dated 2nd  April, 1969  could not, therefore, be assailed as being in breach of any such representation or promise. There was accordingly,  no factual  basis for making good the plea of promissory estoppel and the observation made by the court in regard to the applicability of the doctrine of promissory estoppel against  the  Government  was  clear  obiter.  That perhaps was  the reason  why the  Court did  not consider it necessary to  refer to  the  earlier  decisions  in  Century Spinning &  manufacturing Co.’s  case and  Turner Morrison’s case  and  particularly  the  decision  in  the  Indo-Afghan Agencies case  where the  court in so many terms applied the doctrine of  promissory estoppel  against the  Government in the exercise  of its  executive power. It is not possible to believe that  the  Court  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 noted  that though,  standing  by itself, the observation made by the Court that "there can be no question  of estoppel  against the Government in exercise of its  legislative,  sovereign  or  executive  powers"  may appear to  be wide and unqualified, it is not so, if read in its proper  context. This  observation was made on the basis of certain decisions which the Court proceeded to discuss in the succeeding  paragraphs of  the judgment. The Court first relied on  the statement  of the  law contained in paragraph 123 at  page 783,  Volume 28  of the  American Jurisprudence (2d), but  it omitted to mention the two important sentences at the  commencement 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 not  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 Court then relied upon the decision in the Gwalior Rayon Silk Manufacturing Co.’s case, but that  decision was  confined 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 no  promissory estoppel against the legislature in the exercise of its legislative function.

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That decision does not negative the applicability of the 691 doctrine of  promissory estoppel  against the  Government in the  exercise  of  its  governmental,  public  or  executive powers. The  decision  in  Howell’s  case  was,  thereafter, relied upon by the Court, but that decision merely says that the Government  cannot be  debarred by  promissory  estoppel from  enforcing   a  statutory   prohibition.  It  does  not countenance an absolute proposition that promissory estoppel can never  be invoked against the government. The Court also cited a passage from the judgment of the High Court 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  Court  relied  was Federal Crop  Insurance Corporation  v. Morrill  (supra) but this decision  also does  not support the view contended for on behalf  of the  State. We  have already  referred to this decision earlier  and pointed  out  that  the  Federal  Crop Insurance Corporation  in this  case was  held not 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 cannot be  invoked to  compel 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  Court  could  not possibly have  intended to  lay down an absolute proposition that  there  can  be  no  promissory  estoppel  against  the Government in  the exercise  of its  governmental, public or executive  powers.   That  would   have  been   in  complete contradiction of  the decisions  of this  Court in the Indo- Afghan Agencies  Case, Century  Spinning  and  Manufacturing Co.’s case  and  Turner  Morrison’s  case  and  we  find  it difficult to believe that the Court could 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 Kumar’s case does not 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  Morrison’s case  in  regard  to  the applicability of the doctrine of promissory estoppel against the Government.      We may  then refer  to the  decision of  this Court  in Bihar Eastern  Gangetic Fishermen  Co-operative Society Ltd. v. Sipahi  Singh &  Ors.(2) It  was held  in  this  case  in paragraph 12  of the  judgment that the respondent could not invoke the  doctrine of  promissory estoppel  because he was unable to  show that,  relying on  the representation of the Govern- 692 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  no  factual foundation for establishing the plea of promissory estoppel. On this  view, it  was unnecessary  to consider  whether the doctrine of  promissory estoppel  was applicable against the Government, but  the Court  proceeded to  reiterate, without any further  discussion, the observation in Ram Kumar’s case that "there cannot 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 cannot prevail  as against the statement of law laid down in

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the Indo-Afghan  Agencies case.  Moreover, it  is clear from paragraph 14  of the judgment that this Court did not 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 not  enforcement of  contractual right but the claim was founded upon  equity arising  from the  Scheme, while in the case before  the Court, a contractual right was sought to be enforced. There  is, therefore,  nothing  in  this  decision which should compel 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 Court  approved of  the decisions  in  the  Indo-Afghan Agencies case  and Century  Spinning and  Manufacturing Co’s case and pointed out that these were cases where it could 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 no authoritative decision of the Supreme Court which has  departed from the law laid down in the celebrated decisions in  the Indo-Afghan  Agencies case and the Century Spinning &  Manufacturing Co’s  case. The  law laid  down in these decisions  as elaborated and expounded by us continues to hold the field.      We may  now 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 693 in respect  of sales  of vanaspati effected in Uttar Pradesh for a period of three years from the date of commencement of production.  This   representation  was   made  by   way  of clarification in  view of  the suggestion in the appellant’s letter  dated   22nd  January,   1969  that   the  financial institutions were  not prepared to regard the earlier letter of the  4th  respondent  dated  22nd  December,  1968  as  a definite commitment  on the  part of the Government to grant exemption from sales tax. Now 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 contended before us on behalf  of the  State that  this representation  was  not binding on  the Government,  but we  cannot countenance 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 not denied by the State in the affidavit in reply filed on its behalf, and secondly, it  is difficult to accept the contention that the 4th respondent,  who was  at the  material  time  the  Chief Secretary to the government and also advisor to the Governor 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.  Now, there can be no doubt that this representation  was made  by the  Government knowing or intending that  it would  be  acted  on  by  the  appellant,

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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. Ltd.,  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, contended  that  the  doctrine  of promissory estoppel  had no  application in the present case because the appellant did not 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 no prejudice caused to the 694 appellant.  This   contention  of   the  State   is  clearly unsustainable and  must be  rejected. We  do not 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 knowledge 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 & Co. Ltd. x. El. Nasr Export and Import Co.(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  Co.  Ltd  v. Tungsten Electric  Co. Ltd. (2) that "the gist of the equity lies in  the fact  that one party has by his conduct 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 Coheb. Then again in Emmanuel Avodeji v. Briscoe (supra) Lord Hodson said: "This equity,is 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 Ltd. v. Zenith  Investments (Torquay) Ltd. (3) What is necessary, therefore, is  no more  than that there should be alteration of position  on the  part of the promisee. The alteration of position need  not involve any detriment to the promises. If detriment were  a necessary  element, there would be no need for the  doctrine of  promissory estoppel  because  in  that event, in  quite a  few cases,  the detriment would form the consideration  and   the  promise  could  be  binding  as  a

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contract. There  is in  fact not  a single  case in  England where detriment is insisted upon as a necessary ingredient 695 of promissory estoppel. In fact, in W. J. Alan & Co. Ltd. v. El  Nasar  Export  and  Import  Co.  (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 contracted  price, thus  inducing  (his  buyer)  to      believe  that  he  will  not  enforce  payment  of  the      balance; see Central London Property Trust Ltd. v. High      Trees House  Ltd. and  D. &  C. Builders  Ltd. v.  Rees      [1956] 3 All E.R. 837]. In none of these cases does the      party who  acts on  the belief suffer any detriment. It      is not  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  conducted his affairs on the      basis that  he has had that benefit and it would not be      equitable now to deprive him of it."      We do not 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  could result if  the promisor were to recede from his promise then detriment would certainly come in as a necessary ingredient. The detriment  in such a case is not 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 Ltd. (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  no misunderstanding, it does not      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 compelling the opposite      party to adhere to the assumption upon which the former      acted or  abstained from  acting. This  means that  the      real detriment or harm from which the law seeks to give      protection is  that which would flow from the change of      position if  the assumption  were deserted  that led to      it. So  long as the assumption is adhered to, the party      who altered his situation upon the 696      faith of it cannot complain. His complaint 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 consequence  would be  to make his      original act or failure to act or source of prejudice."      If this is the kind of detriment contemplated, 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 Court would consider it inequitable  to allow  the promisor  to go  back upon his

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promise. It  would, therefore,  be correct  to say  that  in order to  invoke the  doctrine of  promissory estoppel it is enough to  show that  the promisee has acting in reliance of the promise,  altered his  position and  it is not 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. Ltd.,  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 commencement of the production. The Government  was,   therefore  bound   on  the  principle  of promissory estoppel  to make good the representation made by it. Of  course, it may be pointed out that if the U.P. Sales Tax Act,  1948 did  not contain  a  provision  enabling  the Government to  grant exemption,  it would not be possible to enforce the  representation against  the Government  because the Government  cannot be  compelled to  act contrary to the statute, but  since section 4 of the U.P.Sales Tax Act, 1948 confers power  on the  Government to  grant  exemption  from sales tax,  the Government can legitimately be held bound by its promise  to exempt  the appellant  from payment of sales tax. It is true that taxation is a sovereign or governmental function, but,  for reasons which we have already discussed, no distinction  can  be  made  between  the  exercise  of  a sovereign or governmental function and a trading or business activity of  the  Government  so  far  as  the  doctrine  of promissory estoppel  is concerned. Whatever be the nature of the  function  which  the  Government  is  discharging,  the Government is subject to the rule of promissory estoppel and if the 697 essential  ingredients  of  this  rule  are  satisfied,  the Government can be compelled to carry out the promise made by it. We  are, therefore, of the view that in the present case the Government  was  bound  to  exempt  the  appellant  from payment of  sales tax  in  respect  of  sales  of  vanaspati effected by it in the State of Uttar Pradesh for a period of three years  from the date of commencement of the production and was  not entitled  to recover  such sales  tax from  the appellant.      Now, for  the assessment  year 1970-71,  that  is,  2nd July, 1970 to 31st March, 1971, the appellant collected from its  customers   sales  tax  amounting  to  Rs.  6,81,178.95 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. 6,80,969.42. 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   concerned,  the   Court  directed  that  the assessments for  those years may proceed, but only the final order shall not be passed. The result was that the appellant had to  pay up  the further  sum of  Rs. 6,80,949.42 for the assessment year  1970-71. The  appellant collected  from the customers for  the assessment  year 1971-72 an aggregate sum of Rs. 9,91,206.17 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

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this amount  in the  Treasury. Similarly, for the assessment year 1972-73,  the appellant collected from its customers an aggregate sum of Rs. 19,36,597.23 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 continue, the appellant  collected and  paid an  aggregate sum  of Rs. 4,84,884.05 at  the rate of 7% of the sale price. It appears that surcharge  amounting to  Rs. 2,83,008.09 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, not completed in view of the stay  order granted  by this Court. Now, 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 commencement of the production, the appellant would not be liable to 698 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 no such claim is made,  or, if  made, not 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. So far as the assessment years 1971-72, 1972- 73 and 1973-74 are concerned, the Sales Tax Authorities will proceed to  complete the  Assessments for  those  assessment years in the light of the law laid down in this judgment and the amounts  of sales tax deposited by the appellant will be refunded to  the appellant  to the  extent to which they are not found  due and  payable as  a result of the assessments, subject to  any claim  which the  State may  have to  retain those amounts under any provision of law.      We accordingly allow the appeal, set aside the judgment of the  High Court  and issue  a writ, order or direction to the above effect against the respondents. The State will pay the costs of the appellant throughout. S.R.                                         Appeal allowed. 699