No Acts & Articles mentioned in this case
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PETITIONER:
JIT RAM SHIV KUMAR AND ORS. ETC.
Vs.
RESPONDENT:
STATE OF HARYANA AND ANR. ETC.
DATE OF JUDGMENT16/04/1980
BENCH:
KAILASAM, P.S.
BENCH:
KAILASAM, P.S.
FAZALALI, SYED MURTAZA
CITATION:
1980 AIR 1285 1980 SCR (3) 689
1981 SCC (1) 11
CITATOR INFO :
R 1983 SC 848 (10)
O 1986 SC 806 (12,13)
RF 1986 SC 872 (181)
E 1991 SC 14 (11)
ACT:
Punjab Municipal Act, 1911 as amended by Punjab Act 48
of 1953, Section 62A-Power of State Government to direct the
Municipality to impose any tax under section 61-Exemption
from payment of octroi duty not within the competence of the
Municipality and ultra vires of its powers-Whether any such
act which is void ab initio, enforceable-Principle of
Promissory Estoppel, ingredients of-Applicability to the
instant case.
HEADNOTE:
The Municipal Committee of Bahadurgarh, respondent No.
2 established Mandi Fateh in Bahadurgarh Town with a view to
improve trade in the area. The Municipal Committee decided
that the purchasers of the plots for sale in the Mandi would
not be required to pay octroi duty on goods imported within
the said Mandi. A resolution (No. 8) dated 20-12-1916 was
passed by the Municipality to this effect. Hand bills were
issued for the sale of the plots on the basis of the
resolution and it was proclaimed that Fateh Mandi would
remain exempt from payment of octroi. Subsequently by
resolution No. 4 dated 20-5-1917, the Municipal Committee
decided that the term No. 14 to the conditions of sale,
namely, that the purchasers of plots would not be required
to pay octroi, be amended to the effect that the Mandi shall
remain immune from payment of octroi duty for ever. When the
resolution was received by the Commissioner of Ambala, in
paragraph 3 of his letter dated 26-6-1917, he minuted that
the undertaking by the Municipal Commissioner never to
impose octroi duty in the Mandi was ultra vires and
therefore the purchasers of the plots should be informed so
that they may withdraw from the purchases. On receipt of
this letter the President of the Municipal Committee made
representations that if octroi duty was to be levied, there
would be no purchasers for the plots and the entire scheme
would fall through. On this, the Commissioner revised his
earlier view and withdrew his objection by further observing
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that "as soon as the market is established it will be
necessary to consider what form of taxation is best to cover
the market share of municipal expenses". The Municipal
Committee on 10-3-1919 imposed house-tax of Rs. 3-14-6 per
cent per annum on the shopkeepers to cover the expenditure
of the market.
This state of affairs continued till 4-9-1953 when the
Municipal Committee by notification No. 9697-C-53/63830
dated 4-9-1953 included Fateh Mandi, Bahadurgarh, within the
octroi limits. The Examiner of Local Funds pointed out that
the Municipal Committee is under obligation to charge octroi
on goods imported into Fateh Mandi. The President of the
Municipal Committee made a representation to the Deputy
Commissioner on 24-2-1954. The Municipal Committee again
passed another resolution No. 1 dated 2-3-1954 that the
Fateh Mandi will remain free from octroi duty according to
the terms of the proclamation of the sale relating to the
sale of plots. The matter was referred to Punjab State which
after thoroughly examining the whole matter, confirmed
Resolution No. 1 passed by the Municipal Committee on
2-3-1954, Subse-
690
quently, the Municipal Committee changed its mind and by its
resolution dated 8-5-1954, resolved that octroi duty should
also be levied on the goods imported into Fateh Mandi. But
this resolution was annulled by the Punjab Government under
s. 236 of the Punjab Municipal Act. The Examiner of Local
Funds Accounts in the meantime insisted on the levy of
octroi duty on the goods imported into Fateh Mandi and the
Punjab Government after discussing the issue on 9-4-1956
informed the President of the Municipal Committee that the
Government's action in confirming the resolution No. 1 of 2-
3-1954 of the Municipal Committee, Bahadurgarh exempting
goods imported into Fateh Mandi from levy of octroi duty
under s. 70(2)(c) of the Municipal Act, 1911, is quite in
order and that no separate notification to this effect was
necessary under the rules. Again on 21-7-1965, the Municipal
Committee Bahadurgarh resolved that the Government be
requested to cancel Resolution No. 1 dated 2-3-1954. The
State of Haryana Respondent No. 1 which came into existence
on 1-11-64 under the Punjab Reorganisation Act, by its memo
dated 13-10-1967 approved the resolution No. 6 dated 21-7-65
of the Municipal Committee and cancelled the Municipal
Resolution No. 1 of 2-3-1964. As a result of the decision of
the Government, the Municipal Committee started charging
octroi duty on the goods imported into the Mandi. On these
facts, the petitioners submitted that the resolution No. 6
of the Municipal Committee dated 21-7-1965 (Annexure 6) and
approval granted by the Haryana State as per its order dated
30-10-1967 (Ann. H) were illegal and ultra vires and without
jurisdiction.
A Full Bench of the High Court rejected the petition
mainly on three grounds. Firstly, it found that the State
Government is entitled under S. 62-A of Punjab Act, 48/1953
to direct the Municipal Committee to impose octroi duty and
as such even if the municipality is found to have erred in
imposing the Octroi Duty, the legislative powers of the
State cannot be questioned. Secondly, it found, that it was
not within the competence of the Municipality to grant any
exemption from payment of octroi duty and this act was ultra
vires of its powers and cannot be enforced. Thirdly, it
found that the Court cannot go into the question as to
whether the petitioners' plea based on equity that the
Municipality is bound, cannot be gone into far want of
adequate facts. The High Court however granted certificates
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to the appellants.
Dismissing the appeal, the Court
^
HELD: 1. Under section 62-A of the Punjab Municipal
Act. 1911 as amended by Punjab Act 43/1958 the State
Government is empowered to impose octroi duty and under sub
clause (b) if the committee fails to carry cut the order of
the Government, the State Government may impose octroi Duty.
Under S. 70(2)(c), a Municipal Committee by a resolution
passed at a special meeting and confirmed by the State
Government may exempt in whole or in part from payment of
any such tax any person or class of persons or any property
or description of property. In exercise of those powers, the
State Government had by its order dated 4-5-1954 confirmed
resolution No. 1 passed by the Municipal Committee in its
special meeting held on 2-3-1954 regarding the exemption of
goods imported into Fateh Mandi from levy of octroi Duty.
Subsequently, in reply to the objection raised by the
Examiner of Local Funds, the Government pointed out by its
letter dated 9-4-1956 (Ann. F) that the Government's action
confirming the resolution No. 1 dated 2-3-1954 of the
Municipal Committee exempting Goods imported into Fateh
Mandi, under s. 70(2)(c) of
691
the Punjab Municipal Act, 1911, was quite in order. By the
impugned order dated 20-10-1967 the Government approved the
resolution No. 6 of the Municipal Committee dated 21-7-1965
and permitted the Municipality to levy the octroi Duty.
Therefore, the action taken by the State Government is
strictly in conformity with the powers conferred on it under
s. 70(2)(c) of the Act. It exempted the petitioners from
payment of octroi Duty for a particular period and
ultimately withdrew the exemption. The action of the
Government cannot be questioned as it is in exercise of its
statutory functions. The plea of estoppel is not available
against the State in the exercise of its legislative or
statutory functions. The Government have power to direct the
Municipality to collect the octroi Tax if the Municipality
fails to take action by itself under s. 60(A)-(3). Further,
even on facts, this plea is not available as against the
Government as it is not the case of the petitioners that
they acted on the representation of the Government. [698 E-
H, 699 A-C]
2. The Municipality is not estopped from levying or
recommending the levy of the tax to the Government even
though in the proclamation of sale it was notified that no
octroi duty would be levied and it was only in pursuance of
such representation the appellants purchased the property
because the Municipal Committee had no authority to exempt
the Fateh Market from the levy of Octroi duty. If the
Municipal Committee had passed a resolution or issued a
notification that no octroi duty will be levied, it will be
ultra vires of the powers of the Municipal Committee. When a
public authority acts beyond the scope of its authority the
plea of estoppel is not available to prevent the authority
from-acting according to law. It is in public interest that
no such plea should be allowed. Further, in the instant
case, the appellants are not entitled to any enforceable
legal right under the terms of the Municipal Act, since non
production of any sale deed executed by the Municipal
Committee in favour of the purchasers raises the only
presumption that the contract between the parties have not
been proved to have been reduced in writing and executed in
the manner prescribed under section 47 of the Municipality
Act, 1911 (Act 3 of 1911). [699 C-E 700 B-D]
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3. Article 299(1) of the Constitution of India
corresponding to Section 175 (3) of the Government of India
Act, 1935 provides that all contracts made in the exercise
of executive powers of the Union or of a State shall be
expressed to be made by the President or by the Governor of
the State, as the case may be, and all such contracts and
assurances of property made in the exercise of that power
shall be executed on behalf of the President or the Governor
by such persons and in such manner as he may direct or
authorise. The provisions of this Article is mandatory and
not directory, is enacted as a matter of public policy that
the State should not be saddled with liability for
unauthorised contracts and is enacted in the public
interest. The provisions are embodied on the ground of
public policy-on the ground of protection of general public.
[700 F-H, 701 A-B]
Seth Bhikraj Jaipuria v. Union of India, [1962] 2 SCR
880; Mulam Chand v. State of M.P., [1968] 2 SCR 214.
Karamshi Jethabhiai Samrayya v. State of Bombay, [1964] 6
SCR 984; referred to.
4. The scope of the plea of doctrine of promissory
estoppel against the Government is as follows:
(a) The plea of promissory estoppel is not available
against the exercise of the legislative or executive
functions of the State. There could not be estoppel
692
against express provisions of the law nor could the State by
its action waive its rights to exercise powers entrusted to
it for the public good. [721 F]
Antonio Buttigieg v. Captain Stephen H. Cross and ors.
AIR 1907 PC; Adants v. London Improved Motor Coach Builders,
[821] 1 K.B. 495, York Corporation v. Henry Leethan and Sons
Ltd., [1924] 1 Ch. 557; William Cory and Sons Ltd. v. London
Corporation, [1951] 2 K.B. 476; Howell v. Falmouth Boat
Construction Co. Ltd., [1951] A.C. 837; Commissioner of
Crown Lands v. Page, [1960] 2 K.B. 274; South-end-on-Sea
Corporation v. Hodgson (Wickrord) Ltd., [1962] 1 Q.B. 416;
Federal Insurance Corpn. v. Marril, 382 U.S. 380; quoted
with approval.
Robertson v. Minister of Pensions, [1949] 1 K.B., 227
dissented from.
Assistant Custodian of E.P. and ors. v. Brij Kishore
Agarwala, [1975] 2 SCR 359; Bihar Eastern Gangetic Fishermen
Cooperative Society v. Sipahi Singh & ors. AIR 1977 SC 2149;
applied.
Union of India v. Indo Afghan Agencies, [1968] 2 SCR
366; Century Spinning & Manufacturing Co. Ltd. and Anr. v.
Ulhas Nagar Municipal Council and anr., [1970] 3 SCR 854;
Turner Morrison Co. Ltd. v. Hungerford Investment Trust
Ltd., [1972] 3 SCR 711; explained and distinguished.
Collector of Bombay v. Municipal Corporation of the
City of Bombay and ors.,[1952] SCR p. 43; Excise Commr.
U.P., Allahabad v. Ram Kumar, [1976] Supp. SCR 532; M.
Ramanatha Pillai v. State of Kerala, [1974] 1 SCR 515; State
of Kerala and Anr. v. The Gwalior Manufacturing (Wvg.) Co.
Ltd., [1974] 1 SCR 671; followed.
(b) The doctrine cannot be invoked for preventing the
Government from discharging its functions under the law.
[721 G]
(c) When an officer of the Government acts outside the
scope of his authority, the plea of promissory estoppel is
not available. The doctrine of ultra vires will come into
operation and the Government cannot be held bound by the
unauthorised acts of its officers. [721 G-H]
(d) When the officer acts within the scope of his
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authority under a scheme and enters into an agreement and
makes a representation and a person acting on that
representation puts himself in a disadvantageous position,
the Courts is entitled to require the officer to act
according to the scheme and the agreement or representation.
The officer cannot arbitrarily act on his mere whim and
ignore his promise on some undefined and undisclosed grounds
of necessity or change the conditions to the prejudice of
the person who had acted upon such representation and put
himself in a disadvantageous position. [721 G-H, 722 A-B]
Union of India v. Indo Afghan Agencies Ltd., [1968] 2
SCR 366; discussed and followed.
(e) The officer would be justified in changing the
terms of the agreement to the prejudice of the other party
on special considerations such as difficult foreign exchange
position or other matters which have a bearing on general
interest of the State. [722 B-C]
Union of India v. M/s Indo Afghan Agencies Ltd., [1968]
2 SCR 366 applied.
693
5. It is only in public interest that it is recognised
that an authority acting on behalf of the Government or by
virtue of statutory powers cannot exceed his authority. Rule
of ultra vires will become applicable when he exceeds his
authority and the Government would not be bound by such
action. Any person who enters into an arrangement with the
Government has to ascertain and satisfy himself that the
authority who purports to act for the Government, acts
within the scope of his authority and cannot urge that the
Government is in the position of any other litigant liable
to be charged with liability. [705 G-H, 706 A]
6. The doctrine of estoppel which burst out into sudden
blaze in 1946 and ever since continuing to smoulder due to
the consistent maintenance of the original author's interest
in its further development, now in this direction and now in
that, though interesting is not relevant in administering
Indian Law. Section 63 of the Contract Act which provides
that when a creditor accepts a lesser sum in satisfaction of
the whole debt, the whole debt becomes discharged is a wide
departure from the English law as laid down in Jordan v.
Monye. The doctrine of estoppel referred to in High Trees
case is to some extent taken care of by section 65 and 70 of
the Indian Contract. Section 65 provides that when a
contract becomes void, any person who has received any
advantage under such agreement or contract is bound to
restore it or to make compensation for it, to the person
from whom he received it. Under section 70 of the Contract
Act. an obligation is cast on the person enjoying benefit of
a non-gratutious act to compensate the person who lawfully
performed the Act. [707 A, 708 B, D-F]
Foakes v. Beer, [1884] 9 A.C. 605; Jordan v. Money,
[1854] 5 H.L. Cas 185; Fenner v. Blake, [1900] 1 Q.B. 426;
Woodhouse Ltd. v. Nigerian Produce Ltd., [1932] A.C. 431, In
Re. Wickham William Porter and Co. Ltd., [1937] 2 All. E.R.
361; Central London Property Trust Ltd. v. High Trees House
Ltd., [1956] 1 All. E.R. 256; referred to.
7. The provisions of Section 70 of the Indian Contract
Act are applicable to contract which is not according to
Section 175 of the Government of India Act and Article 299
of the Constitution of India. [708 G-H]
State of West Bengal v. B. K. Mondal and Ors., [1962
Supp. SCR p. 876; New Marine Coal Co. Ltd. v. Union of
India. [1964] 2 SCR 859; referred to.
8. All that the Indo-Afghan Agencies case laid down was
that a public authority acting on behalf of the Government
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cannot on its own whim and in an arbitrary manner seek to
alter the conditions accepted by him to the prejudice of the
other side. The decision in terms accepts that after taking
into consideration the exigencies and change of
circumstances the authority can modify the conditions in
exercise of his powers as a public policy. Apart from not
noticing Howell's case, the Court in Indo Afghan's case did
not say that the law as extracted from the judgment in
Robertson's case by Denning J. was applicable to India. [719
D-E, 721 A]
9. The Judgment in M/s Motilal Padampat Sugar Mills Co.
(P) Ltd. v. State of Uttar Pradesh, [1979] 2 SCR p. 641 is
not in accordance with the view consistently taken by the
Supreme Court in following respects : [722 F]
(i) The decision in the case of Union of Indian v. M/s
Indo Afghan Agencies Ltd., [1968] 2 SCR 366 cannot be
constructed in the manner in which it was
694
done. All that the Indo Afghan case purports to lay down is
that the Court can enforce an obligation incurred by an
authority on which another has acted upon and put himself in
a disadvantageous position, when the authority resiles
arbitrarily or on mere whim or on some undefined and
undisclosed grounds of necessity. [722 F-G]
(ii) The decision of this Court in Century Spinning and
Manufacturing Co. Ltd and Anr. v. The Ulhasnagar Municipal
Council and Anr., [1970] 3 SCR 854 was understood as
refusing to make a distinction between the private
individual and public body so far as the doctrine of
promissory estoppel is concerned. [723 F]
(iii) The three decisions of this Court, two by
Constitution Benches M. Ramanatha Pillai v. State of Kerala,
State of Kerala v. The Gwalior Rayon Silk Mfg. (Wvg.) Co.
Ltd. and the third by a Bench of four judges in Excise
Commissioner, U.P. Allahabad v. Ram Kumar cannot be ignored
on the ground that the observations are in the nature of
obiter dicta and that it cannot be insisted as intending to
have laid down any proposition of law different from that
enunciated in the Indo Afghan Agencies case. It was not
necessary for this Court in the three cases to refer to
Union of India & others v. Indo-Afghan Agencies. If properly
understood it only held that the authority cannot go back on
the agreement arbitrarily or on its own whim. [723 H, 724 A-
B]
(iv) The case of the House of Lords in Howell v.
Falmouth Boat Construction Co. Ltd. cannot be read as not
having overruled the view of Denning J. and as not having
expressed its disapproval of the doctrine of promissory
estoppel against the crown in Robertson v. Minister of
Pensions. [724 B-C]
(v) The Indian Constitution as a matter of high policy
in public interest has enacted Article 299 so as to save the
Government from liability arising out of unauthorised acts
of its officers and contracts not duly executed. Sections 65
and 70 of the Indian Contract Act provide for certain
reliefs in void contracts and in unenforceable contracts
where a person relying on a representation has acted upon it
and put himself in a disadvantageous position. The activist
jurisprudence and the wide implications thereof, propounded
in the Motilal Padampat, Sugar case doubted. [724 E, F, G]
(vii) The Indian Contract Act regulates the right of
parties and expressly insists on the necessity for lawful
consideration which cannot be dispensed with by invoking
some new equitable doctrine. Under Section 10 of the
Contract Act, for a contract to be valid, it should be for a
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lawful consideration and Section 25 of the Contract Act
provides that an agreement made without consideration is
void unless it satisfies one of the conditions mentioned in
that section. [725 B-C, D]
(viii) Sankaranarayan v. State of Kerala, [1971] 2
S.C.C. 361; Narendra Chand Hem Ram and Ors. v. Lt. Governor
Administration, Union Territory of Himachal Pradesh, [1972]
1 SCR 940; State of Tamil Nadu and Ors. etc. v. S. K.
Krishnamurthi etc., [1972] 3 SCR 104; and M/s Andhra
Industrial Works v. Chief Controller of Imports and Ors.,
[1975] 1 SCR 327 indicate that the Rule of estoppel against
Government cannot be invoked against the Government. [725 F]
695
10. What are the moral values of the society is a
complex question because the concept of moral values
amongst different persons and classes of persons is not
always the same. Being not a state one, it differs from time
to time and from society to society. It is hazardous for a
Court to attempt to enforce what according to it is the
moral value. Before embarking on the mission of "closing the
gap between the law and morality and bring about as near an
approximation between the two as possible", it is necessary
for the Court to understand clearly its limitations. The
powers of the Court to legislate is strictly limited.
"Judges ought to remember that their office is jus dicere
and not jus dare to interpret the law, and not to make law
or give law". [727 F, G, 728 A-C]
The courts by its very nature are most ill suited to
undertake the task of legislating. There is no machinery for
the Court to ascertain the condition of the people and
their requirements and to make laws that would be most
appropriate. Further two judges may think that a particular
law would, be desirable to meet the requirements whereas
another two judges may most profoundly differ from the
conclusions arrived at by two judges. [728 G-H, 729 A]
Shri Gurbaksh Singh Sibbia etc. v. State of U.P.,
[1908] 3 SCR p. 383 followed.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 1237-
1238/1970.
From the Judgment and Order dated 15-12-1969 of the
Punjab and Haryana High Court in Civil Writ Appeal Nos.
444/68 and 2975/67.
Hardayal Hardy, Mahinder Narain and Rameshwar Nath for
the Appellants in both the Appeals.
S. M. Ashri and M. N. Shroff for the Respondents in
both the Appeals.
The Judgment of the Court was delivered by
KAILASAM, J. These two appeals are by certificate
granted by the Punjab and Haryana High Court at Chandigarh
in C. W. No.444/1968 and C. W. No. 2975 of 1967
respectively. The petitions were disposed of by a full Bench
of the High Court on 15-12-1969.
The appellants who were the petitioners before the High
Court prayed for a writ of certiorari or mandamus or any
other appropriate writ for quashing the resolution No. 6
dated 21st July, 1965 of the Municipality and letter of the
Government of Haryana to the President of the Municipal
Committee Bahadurgarh dated 30-10-1967. The facts of the
case briefly are as follows:-
The Municipal Committee of Bahadurgarh, Respondent No.
2, established Mandi Fateh in Bahadurgarh Town, with a view
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to improve trade in the area. The Municipal Committee
decided that the purchasers of the plots for sale in the
Mandi would not be required
696
to pay octroi duty on goods imported within the said Mandi.
In pursuance of this decision, resolution No. 8 dated
20-12-1916 was passed by the Municipality. Handbills were
issued for the sale of the plots on the basis of the
resolution and it was proclaimed that Fateh Mandi would
remain exempt from payment of octroi. Subsequently by
resolution No. 4 dated 20-5-1917, the Municipal Committee
decided that the term No. 14 to the conditions of sale,
namely, that the plots would not be required to pay octroi,
be amended to the effect that the Mandi shall remain immune
from payment of Octroi Duty for ever. When the resolution
was received by the Commissioner of Ambala, in paragraph 3
of his letter dated 26-6-1917 marked as Annexure A in the
writ petition, he noted:-
"I note that by its resolution No. 4 of 20-5-1917,
the Municipal Committee has undertaken that Octroi
shall never be imposed in the Mandi. This is ultra
vires, the Municipal Committee cannot make such an
undertaking and this should be explained to the
purchasers of sites before they begin building so that
if they wish they may withdraw from the purchase".
Of course, it is unlikely that Octroi will be imposed."
On receipt of this letter, the President of the
Municipal Committee made representations that if octroi duty
was to be levied, there will be no purchasers for the plots
and the entire scheme will fall through. On receipt of this
representation on 20-9-1917 (Annexure B), the Commissioner
revised his view and stated that he was cancelling para 3 of
his letter dated 26-6-1917, that is to say, "that in
deference to the strong views of the Municipal Committee and
to your own opinion that the market will collapse if I
insist upon it, I withdraw my objection to the undertaking
made by the Municipal Committee that Octroi will not be
imposed on the market. As soon as the market is established
it will be necessary to consider what form of taxation is
best to cover the market share of Municipal expenses". The
Municipal Committee on 10-3-1919 imposed house-tax of Rs. 3-
14-6 per cent per annum on the shopkeepers to cover the
expenditure of the market.
This state of affairs continued till 4-9-1953 when the
Municipal Committee by notification No. 9697-C-53/63830
dated 4-9-1953 included Fateh Mandi, Bahadurgarh, within the
Octroi limits. The Examiner of Local Funds pointed out that
the Municipal Committee is under obligation to charge octroi
on goods imported into Fateh Mandi. The President of the
Municipal Committee made a representation to the Deputy
Commissioner on 24-2-1954. The Municipal Committee again
passed another resolution No. 1 dated 2-3-1954 that the
697
Fateh Mandi will remain free from octroi duty according to
the terms of the proclamation of the sale relating to the
sale of plots. The matter was referred to the Punjab State
which after thoroughly examining the whole matter, confirmed
Resolution No. 1 passed by the Municipal Committee on 2-3-
1954. Subsequently, the Municipal Committee changed its mind
and by its resolution dated 8-5-1954, resolved that octroi
duty should also be levied on the goods imported into Fateh
Mandi. But this resolution was annulled by the Punjab
Government under S. 236 of the Punjab Municipal Act. The
Examiner of Local Funds Accounts in the meantime insisted on
the levy of octroi duty on the goods imported into Fateh
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Mandi and the Punjab Government after discussing the issue
on 9-4-1956 informed the President of the Municipal
Committee that the Government's action in confirming the
resolution No. 1 of 2-3-1954 of the Municipal Committee,
Bahadurgarh exempting goods imported into Fateh Mandi from
levy of octroi duty under S. 70(2) (c) of the Municipal Act,
1911, is quite in order and that no separate notification to
this effect was necessary under the rules. Again on 21-7-
1965, the Municipal Committee Bahadurgarh resolved that the
Government be requested to cancel Resolution No. 1 dated 2-
3-1954. The State of Haryana Respondent No. 1 which came
into existence on 1-11-1964 under the Punjab Reorganisation
Act, by its memo dated 13-10-1967 approved the resolution
No. 6 dated 21-7-1965 of Municipal Committee and cancelled
the Municipal Resolution No. 1 of 2-3-1954. As a result of
the decision of the Government, the Municipal Committee
started charging octroi duty on the goods imported into the
Mandi. On these facts, the petitioners submitted that the
resolution No. 6 of the Municipal Committee dated 21-7-1965
(Annexure G) and the approval granted by the Haryana State
as per its order dated 30-10-1967 (Ann. H) are illegal and
ultra vires and without jurisdiction.
A Full Bench of the High Court rejected the petition
mainly on three grounds, Firstly, it found that the State
Government is entitled under S. 62-A of Punjab Act, 48/1953
to direct the Municipal Committee to impose octroi duty and
as such even if the municipality is found to have erred in
imposing the Octroi Duty, the legislative powers of the
State cannot be questioned. Secondly, it found, that it was
not within the competence of the Municipality to grant any
exemption from payment of octroi duty and this act is ultra
vires of its powers and cannot be enforced. Thirdly, it
found that the Court cannot go into the question as to
whether the petitioners' plea based on equity that the
Municipality is bound, cannot be gone into for want of
adequate facts.
698
Dealing with the first contention, relating to the
legislative powers of the State, it will be seen that Punjab
Act 48/1953, introduced s.62A which runs as follows:-
"62-A.
(1) The State Government may, by special or
general order notified in the official Gazette, require
a Committee to impose any tax mentioned in S.61, not
already imposed at such rate and within such period as
may be specified in the notification and the Committee
shall thereupon act accordingly.
(2) The State Government may require a Committee
to modify the rate of any tax already imposed and
thereon the committee shall modify the tax as required
within such period as the State Government may direct.
(3) If the Committee fails to carry out any order
passed under Sub-section (1) or (2) the State
Government, may by a suitable order notified in the
official gazette, impose or modify the tax. The order
so passed shall operate as if it were a resolution duly
passed by the Committee and as if the proposal was
sanctioned in accordance with the procedure contained
in S.62."
It is admitted that the State Government is empowered
under S. 62A to require the Municipal Committee to impose
octroi Duty and under sub-s. (3) if the Committee fails to
carry out the order of the Government, the State Government
may impose octroi Duty. Under S. 70(2) (c), a Municipal
Committee by a resolution passed at a special meeting and
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confirmed by the State Government may exempt in whole or in
part from the payment of any such tax any person or class of
persons or any property or description of property. In
exercise of these powers, the State Government had by its
order dated 4-5-1954 confirmed resolution No. 1 passed by
the Municipal Committee in its special meeting held on 2-3-
1954 regarding the exemption of goods imported into Fateh
Mandi from levy of Octroi Duty. Subsequently, in reply to
the objection raised by the Examiner of Local Funds, the
Government pointed out by its letter dated 9-4-1956 (Ann. F)
that the Government's action confirming the resolution No. 1
dated 2-3-1954 of the Municipal Committee exempting Goods
imported into Fateh Mandi, under S. 70(2) (c) of the Punjab
Municipal Act, 1911, is quite in order. By the impugned
order dated 20-10-1967 the Government approved the
resolution No. 6 of the Municipal Committee dated 21-7-1965
and permitted the Municipality to levy the Octroi Duty. The
action taken by the State Government is strictly in
conformity with the powers conferred on it under S. 70(2)
(c) of the
699
Act. It exempted the petitioners from payment of Octroi Duty
for a particular period and ultimately withdrew the
exemption. The action of the Government cannot be questioned
as it is in exercise of its statutory functions. The plea of
estoppel is not available against the State in the exercise
of its legislative or statutory functions. The Government
have powers to direct the Municipality to collect the Octroi
Tax if the Municipality fails to take action by itself under
S. 60(A) (3). Further, even on facts, this plea is not
available as against the Government as it is not the case of
the petitioners that they acted on the representation of the
Government. We, therefore, agree with the view of the Full
Bench that the plea of estoppel is not available against the
Government for questioning the validity of the impugned
Government order.
The second contention is that the Municipality is
estopped from levying or recommending the levy of the tax to
the Government as in the proclamation of sale it was
notified that no Octroi Duty will be levied and it was only
in pursuance of such representation, the petitioners
purchased the property. We feel this plea should also fail,
because the Municipal Committee had no authority to exempt
the Fateh Market from the levy of Octroi Duty. If the
Municipal Committee had passed a resolution or issued a
notification that no Octroi Duty will be levied, it will be
ultra vires of the powers of the Municipal Committee. When a
public authority acts beyond the scope of its authority the
plea of estoppel is not available to prevent the authority
from acting according to law. It is in public interest that
no such plea should be allowed.
The third contention that was raised by the learned
counsel for the appellants before the High Court and
reiterated before us, is that the Municipality and its
successors are bound by the doctrine of promissory estoppel
and as such are estopped from levying the Octroi Duty. The
High Court rejected the plea on the following grounds:-
1. The Petitioners are not the original purchasers of
the plots in Fateh Mandi. They are either
descendants of or transferees from the original
purchasers of the plots.
2. No sale-deed was executed by the Municipal
Committee in favour of the original purchasers
undertaking that no octroi duty will be levied.
3. No allegation has been made that the original
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purchasers would not have purchased the plots, if
condition no. 14 about immunity from payment of
Octroi had not been there.
The learned counsel by reference to the names of the
list of the purchasers was able to satisfy us that some of
the appellants are the
700
original purchasers and as such the first objection raised
before the High Court is not sustainable. Again, regarding
the third objection, that there is no allegation that the
original purchasers would not have purchased the plots if
condition 14 about immunity from payment of Octroi had not
been there, it was submitted as erroneous as in the
affidavit filed in support of the writ petition, the
petitioners had pleaded in paragraph 2 that on the faith of
the representation, the petitioners purchased the plots and
constructed establishments. The learned counsel is,
therefore, right in his submission that the third objection
raised before the High Court is without substance. But the
High Court was right in pointing out that none of the sale
deeds executed by the Municipal Committee in favour of the
purchasers was produced before the Court. These
circumstances would show that the contract between the
parties have not been proved to have been reduced in writing
and executed in the manner prescribed under S. 47 of the
Act. Strictly, therefore, under the terms of the Municipal
Act, the appellants are not entitled to any enforceable
legal right. But it was submitted that even though the
contract had not been executed in due form, the appellants
would be entitled to relief under, the doctrine of
promissory estoppel.
The question that arises for consideration in these
cases is whether the proclamation of sale which notified
that there would be no octroi levy in the market relying on
which statement the petitioners bid at the auction, would
estop the Municipality by operation of the doctrine of
promissory estoppel from recommending to the Government and
the Government levying octroi duty under S. 61 of the Punjab
Municipal Act. To answer this question it is necessary to
examine at some length the rights and liabilities of the
State under a contract entered into by it with third parties
and in transactions carried on by it in exercise of its
executive and statutory functions.
Art. 299 (1) of the Constitution of India provides that
all contracts made in the exercise of the executive power of
the Union or of a State shall be expressed to be made by the
President, or by the Governor of the State, as the case may
be, and all such contracts and all assurances of property
made in the exercise of that power shall be executed on
behalf of the President or the Governor by such persons and
in such manner as he may direct or authorise. This Article
in the Constitution corresponds to S. 175(3) of the
Government of India Act, 1935. In cases, that arose out of
S. 175(3) of the Government of India Act, 1935, this Court
starting from Seth Bikhraj Jaipuria v. Union of India, has
701
repeatedly held that the provision is mandatory and not
directory, that the provision is enacted as a matter of
public policy, that the State should not be saddled with
liability for unauthorised contracts and that the provision
is enacted in the public interest. In Mulamchand v. State of
M. P., the earlier decisions of this Court were relied on
and it was held that the reasons for enacting the provision
is not for the sake of some form but for safeguarding the
Government against unauthorised contracts. The provisions
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are embodied on the ground of public policy-on the ground of
protection of general public-and these formalities cannot be
waived or dispensed with. The Court clearly observed that if
the plea of the respondent regarding estoppel or
ratification is admitted that would mean, in effect, the
repeal of an important constitutional provision intended for
the protection of the general public. That is why the plea
of estoppel or ratification cannot be permitted in such a
case." (emphasis Ours)
It was contended before this Court in Karamshi
Jethabhai Somayya v. State of Bombay, that in an agreement
entered into under the Act by statutory authority in
pursuance of a statutory power, that consequences provided
under the statute would follow and would not fall within the
ambit of S. 175(3) of the Government of India Act. This
Court after examining the terms of the contract found that
it did not fall within the provisions of the Act and, found
it unnecessary to deal with the contention.
The scope of the doctrine of equitable estoppel arose
for consideration before this Court in Collector of Bombay
v. Municipal Corporation of the City of Bombay and Ors. In
1865, the Government of Bombay called upon the predecessor
in title of the Corporation of Bombay to remove some markets
from a certain site and vacate it, and on the application of
the then Municipal Commissioner the Government passed a
resolution approving and authorising 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 Corporation gave up the sites on which the
old markets were situated and spent a sum of over 17 lacs in
erecting and maintaining markets on the new site. In 1940,
the Collector of Bombay, overruling the objection of the
Corporation, assessed the new site under S.8 of the Bombay
City Land Revenue Act to land revenue rising from Rs.
7,500/- to Rs. 30,000/-
702
in 50 years. The Corporation sued for a declaration that the
order of assessment was ultra vires and that it was entitled
to hold the land for ever without payment of assessment. The
Supreme Court held by a majority of four Judges to one that
the Government was not entitled to assess land revenue for
the land in question. Three of the Judges who were parties
to the majority judgment found that the Corporation had
taken possession of the land in terms of the Government
resolution and continued in such possession openly,
uninterruptedly and as of right for over 70 years and
acquired 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, but only for the purpose of a
market and for no other purposes. The right acquired
included as part of it an immunity from payment of rent
which constituted a right in limitation of the Government's
right to assess in excess of the specific limit established
and preserved by the Government Resolution within the
meaning of S.8 of the Bombay City Land Revenue Act. Before
the Court there was considerable discussion as to the scope
and effect of the principle of equity enunciated in Ramsden
v. Dyson, as to whether such principle should be extended to
the facts of the case and as to whether the facts of the
case attract the application of the equity established in
Ramsden v. Dyson or attract the equity established in
Maddison v. Alderson, and Walsh v. Lonsdale, and finally as
to whether the decision of the Privy Council in Ariff v.
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Jadunath the equity in Ramsden v. Dyson can prevail against
the requirement of formalities laid down in the Victorian
Statute referred to above any more than the equity in
Maddison v. Alderson can do against the requirements of the
Transfer of Property Act. The majority of the judges did not
express any opinion on this question but decided the appeal
on a narrower and shorter ground stated above. One of the
judges, Chandrasekhara Aiyar, J. constituting the majority
expressed his view thus:-
"Whether it is the equity recognised in Ramsden's
case, 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 so far as it lies
in their power. As pointed out by Jenkins C. J. in
Dadoba Janardhan's case a different conclusion would be
opposed to what is reasonable, to what is probable and
what is fair."
The other judges of the Court who spoke for the Court
refrained from going into this question. The view of
Chandrasekhara Aiyer, J.
703
being the view of one of the judges of the majority, cannot
be taken as the view of the Court. Patanjali Sastri, J. as
he then was dissented with the majority and stated:-
"The principle of Ramsden v. Dyson cannot prevail
against statutory requirements regarding disposition of
property or making of contract by Government * * *The
right to levy land revenue is no part of the
Government's right to property but a prerogative of the
Crown and adverse possession of the land could not
destroy the Crown's prerogative to impose assessment on
the land."
A Bench of four judges of this Court in a decision
Excise Commissioner. U. P. Allahabad v. Ram Kumar, after
examining the case law on the subject observed that "it is
now well-settled by a catena of decisions that there can be
no question of estoppel against the Government in exercise
of its legislative, sovereign or executive powers." The
earlier decisions of this Court in M. Ramanathan Pillai v.
State of Kerala, and State of Kerala and Anr. v. The Gwalior
Rayon Silk Manufacturing (Wvg.) Co. Ltd. were followed. It
may, therefore, be stated that the view of this Court has
been that the principle of estoppel is not available against
the Government in exercise of legislative, sovereign or
executive power.
On behalf of the petitioners, it was submitted that a
liberal view was taken by this Court in the decision Union
of India v. M/s. Indo-Afghan Agencies Ltd. which recognised
the principle of promissory estoppel and held that whether
the agreement is executive or administrative in character,
the courts have power in appropriate cases to compel
performance of the obligations imposed by the schemes upon
the departmental authorities. At this decision is relied on
as the sheet anchor of the doctrine of promissory estoppel,
the facts of the case and the decision rendered therein,
have to be examined carefully. M/s. Indo-Afghan Agencies
Ltd. the respondents before this Court exported woollen
goods to Afghanistan and were issued an Import Entitlement
Certificate by the Textile Commissions not for the full F.
O. B. value of the goods exported, but for a reduced amount.
By virtue of the powers conferred under S.3 of the Imports
and Exports (Control) Act, 1947, the Central Government
issued the Imports (Control) Order, 1955 setting out the
policy governing the grant of import and export licence.
During the relevant period, it provided for the grant to an
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exporter, certificates to import raw materials of a
704
total amount equal to 100% of the F. O. B. value of his
exports. Cl.10 of the Scheme provided that the Textile
Commissioner could grant an import certificate for a lesser
amount if he is satisfied after holding an enquiry that the
declared value of the goods is higher than the real value of
the goods. It was contended, amongst other grounds, that the
Government on grounds of executive necessity was the sole
judge of the validity of its action in matters relating to
import and export policy, because the policy depended upon
the economic climate and other related matters and had to be
in its very nature flexible with power in the Government to
modify or adjust it as the altered circumstances
necessitate. It was pleaded that if the Government was held
bound by every representation made by it regarding its
intentions, it would amount to holding the Government as
being bound by contractual obligations even though no formal
contract in the manner required by Art. 299 of the
Constitution was executed. Regarding the objection on the
ground of contravention of Art. 299 of the Constitution, the
Court held that the respondents were not seeking to enforce
any contractual right but were seeking to enforce compliance
of the obligation which is laid upon the Textile
Commissioner by the terms of the Scheme and the claim of the
respondents was founded upon the equity which arose in their
favour as a result of the representation made on behalf of
the Government in the Export Promotion Scheme. (emphasis
supplied). It may be noted that no finding was recorded by
the Textile Commissioner, that there was any infringement
which entitled him to reduce the quota under Cl. 10 of the
scheme.
The facts of the case disclose that the defence of the
executive necessity was not relied upon in the affidavit
filed on behalf of the Union of India. It was also not
pleaded that the representation in the Scheme was subject to
an implied term that the Union of India will not be bound to
grant the import certificate for the full value of the goods
if they deem it inexpedient to grant the certificate. The
Court after referring to earlier decisions of this Court
accepted the view expressed in those decisions that
reduction in the amount of import certificate may be
justified on the ground of misconduct of the exporters in
relation to goods exported or on such considerations as the
difficult foreign exchange position or other matters which
have a bearing on the general interest of the State
(emphasis supplied). Summing up the law laid down by the
earlier cases, the Court found that in each of the three
cases this Court held that it was competent to grant relief
in appropriate cases, if, contrary to the Scheme, the
authority declined to grant a licence or import certificate
or the authority acted arbitrarily and that the Union of
India and its Officers are not entitled at their mere whim
to ignore the promises made by the Government (emphasis
705
supplied). It rejected the plea on behalf of the Government
that the Textile Commissioner is the sole judge of the
quantum of the import licence to be granted to an exporter
and that the Courts were powerless to grant relief if the
promised import licence is not given to an exporter who has
acted in his prejudice relying upon the representation. The
decision is, therefore, an authority for the proposition
that in the absence of a plea of executive necessity, the
Court in appropriate cases is entitled to compel performance
of the obligations imposed by the Scheme on the departmental
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authority. The right of the Government on relevant
considerations such as difficult foreign exchange position
or other matters which have a bearing on the general
interest of the State, to reduce the amount of import
certificate was recognised. But the authorities have to act
according to the terms of the scheme and not arbitrarily or
at their mere whim to ignore the promises made by the
Government (emphasis supplied). On the facts of the case,
the Court gave relief as the authorities declined to act
according to the terms of the Scheme and acted arbitrarily
and at their mere whim ignoring the promises made by the
Government. The question as to the applicability of the
doctrine of promissory estoppel against the legislative or
executive acts of the Government did not strictly arise in
the case. The decision was thus generally understood as
stated above is seen from the view expressed by Mr. H.M.
Seervai on Constitution of India, 2nd Edn. Vol. I, paragraph
11 at para 146-B, p. 433:
"The authorities considered by the Supreme Court,
and the conclusions drawn from them, by Shah, J. in the
present case, merely affirm the proposition that the
Government could not go back upon promises made in the
exercise of discretionary power as embodied in a
scheme, merely on a whim (emphasis by Mr. Seervai)
x x x x x X
A promissory estoppel cannot stand on a higher
footing than a contract entered into between a citizen
or subject and a public authority and it is settled by
numerous decisions that no public authority entrusted
with discretionary power to be exercised for the public
can bind itself by a contract not to exercise that
discretion when the public good demands its exercise".
It is only in public interest that it is recognised
that an authority acting on behalf of the Government or by
virtue of statutory powers cannot exceed his authority. Rule
of ultra vires will become applicable when he exceeds his
authority and the Government would not be bound by such
action. Any person who enters into an arrangement
706
with the Government has to ascertain and satisfy himself
that the authority who purports to act for the Government,
acts within the scope of his authority and cannot urge that
the Government is in the position of any other litigant
liable to be charged with liability.
In refuting the contention that the contract is
unenforceable on the ground that there had been no strict
compliance of the requirement of Art. 299 of the
Constitution, the Court observed that the respondents were
not seeking to enforce any contractual rights but were
seeking to enforce compliance with the obligation which was
laid upon the Textile Commissioner by the terms of the
Scheme. Thus, the relief that was granted by the Court was
by enforcing the compliance of the obligation which was laid
upon the Textile Commissioner by the terms of the Scheme.
The Court proceeded to state that the claim of the
respondents is appropriately founded upon the equity
(emphasis ours) which arises in their favour as a result of
the representation made on behalf of the Union of India in
the Export Promotion Scheme, and the action taken by the
respondents acting upon that representation under the belief
that the Government would carry out the representation made
by it. Thus the equity which the Court was enforcing was to
direct compliance of the obligation which is laid upon the
Textile Commissioner by the terms of the scheme. The equity
cannot be understood as barring the authority from modifying
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the scheme on special considerations such as difficult
foreign exchange position or other matters which have a
bearing on the general interest of the State (vide p. 380).
The purport of the judgment is made clear by its own
observation:-
"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 be
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 observations of the Court that the claim of the
respondents is properly founded on the equity should be
understood on the facts and findings of the Court in the
case. The Court relying on the observations of Chief Justice
Jenkins, observed that even though the case does not fall
within the terms of S.115 of the Evidence Act, it is still
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 from of a formal contract as required
by the Constitution. The Court
707
would be bound when the officer made the promise within the
scope of his authority and failed to act upon it at his mere
whim and acted arbitrarily on some undefined and undisclosed
grounds of necessity.
Before proceeding further with the case, we will refer
briefly to the purport of the doctrine of promissory
estoppel. The doctrine of promissory estoppel burst into
sudden blaze in 1946 when Denning. J. sitting in the Court
of Kings Bench delivered the judgment in Central London
Property Trust Ltd. v. High Trees House Ltd. which has now
become famous as the High Trees Case. The facts of the case
are: During the war many people left London owing to
bombing. Flats were empty. In one block, where the flats
were let on 99 years leases at $ 2,500/- a year, the
landlord agreed to reduce it by half and to accept $ 1,250/-
a year. When the bombing was over, and the tenants came
back, the landlord sought to recover the full rent at $
2,500/- a year. Denning, J. held that the landlord could not
recover the full amount for the time when the flats were
empty. The lease was a lease under seal which according to
English Common Law, could not be varied by an agreement by
parole, but only by deed. The learned judge invoked equity
to his aid and said that if there has been a variation of a
deed by simple contract the courts may give effect to it.
The counsel for the lessee pleaded that the lessor had
agreed though without consideration to accept the rent at a
reduced rate, and set up a plea of estoppel by way of
defence to the claim for arrears of rental calculated at the
full rate. Faced with Foakes v. Beer, if the defence was
raised as a matter of contract and Jorden v. Money, if it
was raised as estoppel. Denning. J. held that the estoppel
sustained although based on an assurance as to the future,
because the promisor intended to be legally bound and
intended his promise to be acted upon, with the result that
it was so acted upon. In Jordan v. Money (supra), the House
of Lords held that a promise to pay a smaller sum of money
in discharge of larger amount which was due, was void since
such a promise was without consideration. Denning, J.
relying on Fenner v. Blake, Re: Wickhem William Porter & Co.
Ltd. and Buttery v. Pickard observed that they were cases
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of estoppel in the strict sense. They are really promises-
promises intended to be binding-intended to be acted upon,
and in fact acted on and in the circumstances the plaintiff
company will be bound by the arrangement in its letter.
Though the observations of
708
Denning, J. in High Trees case were in the nature of obiter
dicta, the decision became the starting point of the several
shades of opinion regarding the scope of promissory
estoppel. It is unnecessary for our purpose to go into the
development of law of promissory estoppel starting from High
Trees case. It is sufficient to state that since the High
Trees decision was rendered, many elaborations and glosses
have appeared in the reports. Turner in his book Estoppel by
Representation, has a separate chapter dealing with
promissory estoppel. The doctrine, as observed by the author
at the conclusion of the chapter, "burst out into sudden
blaze in 1946 has ever since continued to smoulder, and that
its original author has constantly maintained his interest
in its further development, now in this direction, now in
that". But there has been high places counselling
conservatism *** Lord Hailsham of St. Marylebone, has
expressed his views in Woodhouse Ltd. v. Nigerian Produce
Ltd. as follows:-
"I desire to add that the time may soon come when
the whole sequence of cases based on promissory
estoppel since the war *** systematically explored".
This subject though interesting may not be relevant in
administering Indian Law. S. 63 of the Contract Act provides
that when a creditor accepts a lesser sum in satisfaction of
the whole debt, the whole debt become discharged. This
provision is a wide departure from the English Law and the
discussion about Jordan v. Money wherein it was held that a
promise to accept a smaller sum is devoid of consideration,
becomes pointless. So also the doctrine of estoppel referred
to in the High Trees case is, to some extent taken care of
by Ss. 65 and 70 of the Indian contract Act. S.65 provides
that when a contract becomes void, any person who has
received any advantage under such agreement or contract is
bound to restore it or to make compensation for it, to the
person from whom he received it. Under S. 70 of the Contract
Act, an obligation is cast on the person enjoying benefit of
a non gratuitous act to compensate the person who lawfully
performed the act. As to whether the provisions of S. 65 and
70 of the Indian Contract Act, are applicable to contract
which is not according to S. 175 of the Government of India
Act and Art. 299 of the Constitution of India, there is a
difference of opinion. Sir Maurice Gwyer expressed his view
that when a contract is void, recourse to S.70 cannot be
had. Later, the Supreme Court held in State of West Bengal
v. B. K. Mondal & Sons, that S.70 was applicable to such a
case. This decision was
709
followed in New Marine Coal Co. Ltd. v. Union, and in later
cases by the Supreme Court.
In discussing the scope of the doctrine of promissory
estoppel, and its applicability against the Government and
Government Officers in their dealings with the subject, Lord
Denning J. in Robertson v. Minister of Pensions observed :-
"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
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propounded by Rowlett J., in Redariaktiebolaget
Amphtrite 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. Rowlett, J., seems have been influenced
by the cases on the right of the Crown dismiss its
servants at pleasure, but those cases must now all be
read in the light of the judgment of Lord Atkin in
Reilly v. The King-(1954) A. C. 176, 179) *** 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."
Lord Denning was dealing with a case of a serving army
officer who wrote to the War Office regarding a disability
and received a reply that his disability had been accepted
as attributable to "military service". Relying on that
assurance, he forbore to obtain an independent medical
opinion. The Minister of Pensions took the view that
appellant's disability could not be attributed to war
services. Lord Denning held that between the subjects such
an assurance would be enforceable because it was intended to
be binding, intended to be acted upon, and it was in fact
acted upon; and the assurance was also binding on the Crown
because no term could be implied that the Crown was at
liberty to revoke it.
The decision in Robertson's case is quoted with
approval in the Indo-Afghan case but before we revert to the
Indo-Afghan case, we will follow the course which
Robertson's case took. The correctness of the case came up
for consideration before the House of Lords in Howell v.
Falmouth Boat Construction Co. Ltd. The appeal was preferred
to the
710
House of Lords from the Court of Appeal against the judgment
of Bucknil, Singhleton and Denning, L.JJ. In his judgment in
the Court of Appeal, Denning L. JJ. pressed the principle in
the following terms:-
"Whenever Government Officers, in their dealings
with a subject, take on themselves to assume authority
in a matter with which he is concerned, the subject is
entitled to rely on their having the authority which
they assume. He does not know and cannot be expected to
know the limits of their authority, and he ought not to
suffer if they exceed it. That was the principle which
I applied to Robertson v. Minister of Pensions, and it
is applicable in this case also."
Commenting on the view taken by Denning, L. J. Lord
Simonds observed :-
"My Lords, I know of no such principle in our law
nor was any authority for it cited. The illegality of
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
hierarchy.*** The question is whether the character of
an act done in face of 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". Such an answer may make more
difficult the task of the citizen who is anxious to
walk in the narrow way, but that does not justify a
different answer being given."
Lord Normand referred to the principle laid down by
Denning L. J. and observed :-
"As I understand this statement, the respondents
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were in the opinion of the learned Lord Justice,
entitled to say that the Crown was barred by
representations made by Mr. Thompson and acted on by
them from alleging against them a breach of the
statutory order, and further that the respondents were
equally entitled to say in a question with the
appellant that there had been no breach. But it is
certain that neither a Minister nor any subordinate
officer of the Crown can by any conduct or
representation bar the crown enforcing a statutory
prohibition or entitle the subject to maintain that
there has been no breach of the contract."
The view expressed by the House of Lords and the Privy
Council has been followed in English cases.
711
The Privy Council in Antonio Buttigieg v. Captain
Stephen H. Cross and Ors, has ruled 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, that it cannot by
contract hamper its freedom of action in matters which
concern the welfare of the State. The competent Military
Authority approached the appellant for opening a club for
officers serving in his Majesty's forces. The appellant
stated his willingness to take on lease certain premises and
asked the Military authorities to procure him a licence to
continue the club after the termination of the war. The
military authorities failed to obtain a licence and the
appellant was informed of their inability to obtain the
licence and an officer on behalf of the military authorities
stated that the appellant should have a guarantee seeing
that the war was not likely to come to an end quickly and
that the club would be kept open throughout the war. The
rules for the conduct of the club were drawn up and were
approved by the Military Authorities. Rule 18 provided that
the club should endure during the time when the said
hostilities existed. The club was placed out of bounds for
service members by order of the Military Authorities because
the club was being mismanaged by the sale of liquor long
after permitted hours. As the club was a purely Service
Club, it was subsequently wound up. The appellant complained
of the loss to which he had been put by placing the club out
of bounds and sought to hold the Military Authorities
responsible for such loss. The Court of Appeal while giving
judgment in favour of the Military Authorities observed :-
"It is a settled principle and it has been
constantly held by this Court and in local case-law,
that those two functions of the civil or the military
Government are totally distinct. The Military
Authorities could not have renounced those rights, in
as much as it would have been immoral and against every
fundamental principle of Constitutional Law if the
Authorities, in order to open a club, which is a purely
administrative act-were to sacrifice interests which
are far more important and therefore of a much higher
order, whether political, moral or affecting public
order. Consequently when, within the administrative
sphere, the Government enters into a contract with a
private individual, the Government is bound to respect
that contract, but it does not thereby deprive itself
of its political power to issue orders that may become
necessary by reason of public order, jure imperii-even
though, in consequence of such orders, the contract
itself becomes impossible of fulfilment."
712
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During the arguments before the Privy Council, it was
conceded on behalf of the appellant taking into
consideration the decision in Adams v. London Improved Motor
Coach Builders and Redariaktiebolaget Amphtrite v. The King,
that it was not open to the Crown to bind itself not to
close the club if that course became necessary in the public
interest and the order placing the club out of bounds was
justified in the circumstances which existed. Having thus
observed the Privy Council quoted the following passage from
the Judgment of Rowlatt, J. in Rederiaktiebolaget Amphtrite
case 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 the freedom of action
in matters which concern the welfare of the State" and
stated that these words appear to their Lordships to cover
that aspect of the present case. While House of Lords in
Howell's case disagreed with the observations of Lord
Denning J. in Robertson's case, the Privy Council approved
the law laid down by Rowlatt, J. in Rederiaktiebolaget
Amphtrite case which was dissented to by Denning, J. in
Roberston's case. It may be noted that in Indo-Afghan case,
the Court quoted the passage from Denning's judgment which
did not approve the view of Rowlatt, J. The Privy Council
approved the view taken by Rowlatt, J. in Rederiaktiabolaget
Amphtrita case.
In William Cory & Son Ltd. v. London Corporation,
London Corporation acting as sanitary authority under the
Public Health (London) Act, 1936 made a contract with the
claimants, barge and lighter owners, for the removal of
refuse from a wharf in the City of Horn church, Essex, where
it was to be dumped. In April, 1948, the Corporation acting
as port health authority for the Port of London, sealed by-
laws concerning the disposal of refuse in the area of the
port one of which relating to co-amings and coverings of
barges, was far more onerous on the claimants than the
requirements in the contract of 1936. It was provided that
this by-law was not to come into effect until November 1,
1950. It was contended by the claimants that by the
provisions of the contract of 1936, there was an implied or
an express term that the corporation should not impose more
onerous burden on the claimants as to the coamings and
coverings of their barges than those contained in the
contract of 1936. The plea of the claimants was rejected and
the Court held relying on a decision in York Corporation v.
Henry Leethem & Sons Ltd. that the Corporation being under a
713
duty under the Act of 1936, expressed in imperative
language, to make by-laws for the disposal of refuse within
the area of the port, the term for which the claimants
contended, whether express or implied was ultra vires the
corporation.
In York Corporation v. Henry Leetham & Sons (supra),
the Corporation made two contracts with the defendants to
which they agreed to accept, in consideration of the right
to navigate the Oues, a regular annual payment of $ 600/-
per annum, in place of the authorised tolls. It was held
that the contracts were ultra vires and void because under
them the corporation had disabled itself whatever emergency
might arise, from exercising its statutory powers to
increase tolls as from time to time might be necessary. The
decision was based on the incapacity of a body charged with
statutory powers for public purpose to divest itself of such
powers or to fetter itself in the use of such powers.
In Commissioner of Crown Lands v. Page, in 1945, the
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Minister of Works, acting on behalf of the Crown and in
exercise of powers conferred by the Defence (General)
Regulations, 1939 requisitioned premises which had been
demised in 1937 by the Commissioners of Crown Lands for a
term of 25 years. The premises were derequisitioned on
September 5, 1945 until July 5, 1955 and the landlord
brought proceedings claiming arrears of rent. The lessee
alleged that she had been evicted by the requisitioning and
that, accordingly, payment of rent has been suspended. It
was conceded that the Crown was one and indivisible as
lessor and requisitioning authority. It was held that since
the entry was by the Crown in the proper exercise of its
executive authority, it did not amount to an eviction and
rent, accordingly, continued to be payable. The view
expressed by Lord Denning, J. in Robertson v. Minister of
Pensions (supra) that in the present day age no distinction
should be drawn as to the legal effect of its or their
actions between the Crown and the ordinary subjects, so that
the effect of a representation made by the Crown could no
longer be qualified so as to be subject to the future
exercise by the Crown of its Executive authority, was relied
on. Lord Evershet M. R. while observing that the facts of
the case were different held that the general proposition
laid down by Denning L. J. was not accepted by the House of
Lords in Howell v. Falmouth Boat Construction Co. Ltd.
(supra). Devlin, J. stated the principle in the following
terms :-
"When the Crown, or any other person, is
entrusted, whether by virtue of the prerogative or by
statute, with discretionary powers to be exercised for
the public good, it does not when making a private
contract in general terms, undertake (and
714
it may be that it could not even with the use of
specific language validly undertake) to fetter itself
in the use of those powers, and in the exercise of the
discretion."
Referring to the view of Denning, L. J. in Robertson v.
Minister of Pension (supra), the learned Judge observed :-
"The observations of Denning, L. J. in Robertson
v. Minister of Pensions on the doctrine of `executive
necessity', were I think, directed to a case of that
sort. Here we are dealing with an act done for a
general executive purpose, and not done for the purpose
of achieving a particular result under the contract in
question."
In Southend-on-Sea Corporation v. Hodgson (Wickford)
Ltd. a company wished to establish a builder's yard and
found suitable premises. They wrote to the borough engineer,
a Chief Official employed by the local planning authority
asking for a lease of the premises for 20 years for the
purpose of establishing a builders yard. The engineer
replied that the premises had an existing user right as a
builders' yard and that no planning permission was,
therefore, necessary. Relying on the borough engineer's
letter, the company bought the premises and started to use
them as builder's yard. They would not have done so if, as a
consequence of the letter, they had not thought that no
further planning permission was required. Later, the local
planning authority notified the company that a considerable
amount of evidence had been presented to them showing that
the premises had not been used as a builder's yard and had
no existing user as such; that they had decided that the
premises could not be used without planning permission. The
Court on the above facts held that assuming that the
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statement that the premises had an existing user right as a
builder's yard was a pure representation of fact, estoppel
could not operate to hinder or prevent the exercise by the
local planning authority of their statutory discretion under
S. 23 of the Act in deciding whether to serve an enforcement
notice, since this discretion was intended to be exercised
for the benefit of the public or section thereof.
The decisions of the English Courts referred to above
clearly indicate that the English Courts did not accept the
view of Denning, J. in Robertson v. Minister of Pensions
(supra). The house of Lords in Howell v. Falmouth Boat
Construction Co. Ltd. disagreed with the view of Lord
Denning, J holding that there could not be an estoppel
against express provisions of the law nor could the State by
its action waive its rights to exercise powers entrusted to
it for the public good. The
715
Privy Council in Antonio Buttigieg's case approved the view
of Rowlatt. J. in Raderiaktiabolaget Amphtrits's case with
which Denning, J. did not agree.
We may now revert back to Indo-Afghan Agencies case.
The Court after quoting a passage from Rowlatt, J. in
Rederiakiabolaget Amphtrte v. The King (supra) agreed that
the view expressed by Anson's English Law of Contract 22nd
Ed. p. 174 that the observation is clearly very wide and it
is difficult to determine its proper scope. The Court quoted
the passage of Denning, J. at p. 231 wherein the learned
Judge expressed the disagreement with the view of Rowlatt, J
:-
"The Crown cannot escape by saying that estoppel
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. The doctrine was
propounded by Rowlatt, J. in Rederiaktiebolaget
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 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 Reilly v. The King- (1954) A.C. 176, 179).
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."
After quoting the above passage, the Court summarised
the facts and decision rendered by Denning, J. The decision
of the House of Lords in Howell's case or that of the Privy
Council was not brought to the notice of the Court.
The law laid down by the House of Lords in Howell's
case has been accepted as correct by this Court in recent
decision of this Court by a Bench of four Judges in Excise
Commissioner, U. P. Allahabad v. Ram Kumar. The respondents
before this Court were the highest bidders in an auction for
exclusive manufacture and selling of liquor in the State of
U. P. Before holding the auction, the rates of excise duty
and prices of different varieties of country liquor and also
the conditions of licence were announced. No announcement
was made as to whether the exemption from sales tax in
respect of sale of country liquor granted by the
notification dated 6-4-1959 was or was not likely
716
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to be withdrawn. On the day following the day when the
licences were granted, the Government of U. P. issued a
notification under S. 3A and 4 of U. P. Sales Tax Act, 1948
superseding the earlier notification exempting the payment
of sales tax and imposing sales tax on the turnover in
respect of country liquor at the rate of 10 paise per rupee.
The respondents challenged the validity of the notification
issued under the Sales Tax Act on the ground that the State
Government did not announce at the time of the earlier
auction that the earlier notification was likely to be
withdrawn. This Court on a consideration of the question
whether the State Government is estopped from levying the
Sales Tax, after referring to the earlier decisions of this
Court held that the State Government is not estopped or
precluded from subjecting the sales of liquor to tax if it
felt impelled to do so in the interest of revenue of the
State. The Court followed two earlier decisions of this
Court viz. M. Ramanathan Pillai v. State of Kerala (supra)
and State of Kerala v. The Gwalior Rayon Silk Manufacturing
(Wvg.) Co. Ltd. (supra). In Ramanathan Pillai's case, Ray,
Chief Justice while dealing with the question whether the
Government has a right to abolish a post in the service,
observed that the power to create or abolish a post is not
related to the doctrine of pleasure. It is a matter of
governmental policy. Every sovereign Government has this
power in the interest and necessity or internal
administration. The creation or abolition of a post is
dictated by policy decision, exigencies of circumstances and
administrative necessity. The creation, the continuance and
the abolition of post are all decided by the Government in
the interest of administration and general public. The
learned Chief Justice after quoting a passage in American
Jurisprudence 2d. at p. 783, paragraph 123, observed that
the estoppel alleged by the appellant Ramanathan Pillai was
on the ground that he entered into an agreement and thereby
changed his position to his detriment. 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.
In State of Kerala v. Gwalior Rayon Silk Manufacturing
(Wvg.) Co. Ltd. (supra), Palekar, J. who delivered the
opinion with which Krishna Iyer, J. and Bhagwati, J. agreed,
rejected the contention that an agreement entered into by
the Government with the parties, excluded the legislation on
the subject. The plea of equitable estoppel was put forward
on the ground that the company established itself in Kerala
for the production of rayon cloth pulp on an understanding
that the Government would bind itself to supply the raw
material. Later Government was unable to supply the raw
material and by an
717
agreement undertook not to legislate for the acquisition of
private forests for a period of 60 years if the company
purchased forest lands for the purpose of its supply of raw-
materials. Accordingly, the company purchased 30,000/- acres
of private forests from the Nilabhuri Kovila Kanna Estate
for Rs. 75 lacs and, therefore, it was argued that the
agreement would operate as equitable estoppel against the
State. This Court agreed with the High Court that the
surrender by the Government of its legislative powers to be
used for public good cannot avail the company or operate
against the Government as equitable estoppel.
In Assistant Custodian of E. P. and Ors. v. Brij
Kishore Agarwala, it was pleaded that the first respondent
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made an enquiry from the Assistant Custodian whether the
property was evacuee property and was told that it was not.
As the first respondent acted on this representation, it was
pleaded that the Assistant Custodian was estopped from
contending that the property was evacuee property. Thus,
dismissing this plea, the Court observed :
"We do not consider that the fact that the 1st
respondent had made an enquiry from the Assistant
Custodian whether the property in question was an
evacuee property and was told that it would not make
any difference to the question."
Reliance was placed on the observations of Denning L.
J. in Robertson v. Minister of Pensions (supra), holding
that the letter by the war office which assured that the
appellant's disability had been accepted as attributable to
the military service, was binding on the Crown and through
the Crown the Minister of Pensions. The Court pointed out
that the decision in Robertson v. Minister of Pensions had
been disapproved by the House of Lords in Howell's case.
After referring to the passage from the judgment of Lord
Denning, Lord Simonds and Lord Normand which have been
extracted earlier, this Court expressed its opinion that the
view taken by the House of Lords it correct and not that is
taken by Lord Denning.
In Excise Commissioner U. P., Allahabad v. Ram Kumar
(supra), the Court after consideration of the case law on
the subject, held that it was settled by a catena of cases
that there could be no question of estoppel against the
legislative and sovereign functions.
A passage in American Jurisprudence 2d. at page 783
paragraph 123 was extracted by Ray C. J. in Ramanathan
Pillai's case and Jaswant
718
Singh J. in Excise Commissioner's case. The passage at p.
123 is as follows :-
"Generally, a State is not subject to an estoppel
to the same extent as an individual or a private
corporation. Otherwise, it might be rendered helpless
to assert its powers in Government. Therefore, as a
general rule the doctrine of estoppel will not be
applied against the State in its Governmental, Public
or sovereign capacity. An exception however arises in
the application of estoppel to the State where it is
necessary to prevent fraud or manifest injustice."
But the learned Judges did not include the last
sentence :
"An exception however arises in the application of
estoppel to the State where it is necessary to prevent
fraud or manifest injustice."
In Bihar Eastern Gangetic Fisherman Co-operative
Society Ltd., v. Sipahi Singh & Ors. this Court held that
the respondent could not invoke the doctrine of promissory
estoppel because he was unable to show that relying on the
representation of the Government, he had altered his
position to his prejudice. The Court accepted the view of
this Court expressed in Ram Kumar's case and held that there
cannot be any estoppel against the Government in the
exercise of its sovereign, legislative or executive
functions.
The leading case of the Supreme Court of the United
States cited and relied upon in Ram Kumar's case (supra), is
Federal Crop Insurance Corporation v. Marril, in which the
United States Supreme Court observed as follows :-
"It is too late in the day to urge that the
Government is just another private litigant, for the
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purposes of charging it with liability, whenever it
takes over a business theretofore conducted by private
enterprises or engages in competition 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 he 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 authority* * * `Men must turn
square corners when they deal with the Government' does
not reflect a callous outlook. It merely
719
expresses the duty of all courts to observe the
conditions defined by congress for charging the public
treasury".
The Court also relied on the views of the text book writer
Melville M. Bigelow and concluded that the plea of estoppel
does not operate against the Government or its assignees.
The extract from the American Jurisprudence which
summarises the American Law, and the decision in Federal
Crop Insurance Corporation case, make it clear that the plea
of estoppel is not available against the Government and its
legislative or executive functions except for preventing
fraud or manifest injustice.
It was submitted that the cases cited above cannot be
relied on as an authority for the proposition that the
doctrine of promissory estoppel is not applicable against
the Government in the exercise of its legislative and
statutory functions as they were in the nature of obiter
dicta and that on the facts the present case could be
distinguished. The Indo-Afghan Agencies, Century Spinning
and Manufacturing Co. and Turner Morisson Co. Ltd. v.
Hungerford Investment Trust Ltd., were strongly relied on.
We have pointed out that all that the Indo-Afghan Agencies
case laid down was, that a public authority acting on behalf
of the Government cannot on its own whim and in an arbitrary
manner seek to alter the conditions accepted by him to the
prejudice of the other side. The decision in terms accepts
the view expressed in earlier cases that after taking into
consideration the exigencies and change of circumstances,
the authority can modify the conditions in exercise of his
powers as a public authority.
In Century Spinning and Manufacturing Co. Ltd. and Anr.
v. The Ulhasnagar Municipal Council and Anr., the facts of
the case is set out in the head note and may be briefly
stated. The State of Maharashtra on the representation made
by certain manufacturers proclaimed the exclusion of the
Industrial Area from the Municipal Jurisdiction. The
Municipality made representations to the State requesting
that the proclamation be withdrawn, agreeing to exempt the
factories in the industrial area from payment of octroi from
the date of levy. The State acceded to the request of the
Municipality. The appellants expanded their activities
relying on the Municipality's assurance. The Maharashtra
Municipalities Act was enacted and the municipality took
over the administration. Thereafter, the Municipality sought
to levy octroi duty on the appellant amounting to about Rs.
15 lacs per
720
annum. The High Court dismissed the petition in limini filed
by the Industrialists against the levy of octroi. In an
appeal to this Court it was held that the High Court had not
given any reason for dismissing the petition in limini and
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that on a consideration of the averments in the petition and
the materials placed before the High Court, the appellants
were entitled to have its grievance heard against the action
of the Municipality which was prima facie unjust. In
remanding the matter to the High Court, this Court observed
:-
"A representation that something will be done in
future may involve an existing intention to act in
future in the manner represented. If the representation
is acted upon by another person it may, unless the
statute governing the person making the representation
provides otherwise, result in an agreement enforceable
at law; if the statute requires that the agreement
shall be in a certain form, no contract may result from
the representation and acting thereupon but the law is
not powerless to raise in appropriate cases an enquiry
against him to compel performance of the obligation
arising out of his representation".
In dealing with the question as to how far the public bodies
are bound by representation made by them on which other
persons have altered their position to their prejudice, the
Court held that the obligation arising against an individual
out of his representation amounting to a promise may be
enforced ex contractu 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 form 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 case in equity. The Court read the
decision in Union of India and Ors. v. Indo-Afghan Agencies
(supra) as holding that the Government is not exempt from
the equity arising out of the acts done by citizens to their
prejudices, relying upon the representations as to its
future conduct made by the Government. This observation will
have to be read alongwith the conditions that were laid down
in the Indo-Afghan case and cannot be read as holding that
the rule of estoppel will be applicable against the
Government in the exercise of its legislative and statutory
powers. The Court quoted the following passage from Denning
J. :-
"Crown cannot escape by saying that estoppel 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".
721
and observed that the Court in Indo-Afghan case held that it
was applicable to India. It may be noted that apart from not
noticing Howell's case, the Court in Indo-Afghan case did
not say that the law as extracted from Denning J's. judgment
was applicable to India. The Court after considering the
Indo-Afghan case and Howell's case, expressed thus :-
"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 representation made
by it relying upon which a citizen has altered his
position to his prejudice".
The third decision on which reliance was placed, for
the proposition that doctrine of promissory estoppel is
applicable against the State acting in exercise of its
legislative or executive function is Turner Morrison and Co.
Ltd. v. Hungerford Investment Trust Ltd. (supra). The case
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related to the payment of tax due from Hungerford by Turner
Morrison. The Court observed that if for any reason Turner
Morrison had not undertaken any responsibility to discharge
the liability of Hungerford, the latter could have taken
recourse to voluntary liquidation. Hence there could be no
doubt that acting on the basis of the representation made by
Turner Morrison, Hungerford placed itself in a
disadvantageous position. Hungerford raised the plea that
the resolution was of the company, afforded a good basis for
raising a plea of promissory estoppel. This plea was
accepted by the Court relying on the observations of Denning
J. in High Trees case (supra). The later decision of the
House of Lords in Howell's case which disapproved Lord
Denning's judgment was not brought to its notice.
The scope of the plea of doctrine of promissory
estoppel against the Government may be summed up as follows
:-
(1) The plea of promissory estoppel is not available
against the exercise of the legislative functions of the
State.
(2) The doctrine cannot be invoked for preventing the
Government from discharging its functions under the law.
(3) When the officer of the Government acts outside the
scope of his authority, the plea of promissory estoppel is
not available. The doctrine of ultra vires will come into
operation and the Government cannot be held bound by the
unauthorised acts of its officers.
(4) When the officer acts within the scope of his
authority under a scheme and enters into an agreement and
makes a representation
722
and a person acting on that representation puts himself in a
disadvantageous position, the Court is entitled to require
the officer to act according to the scheme and the agreement
or representation. The Officer cannot arbitrarily act on his
mere whim and ignore his promise on some undefined and
undisclosed grounds of necessity or change the conditions to
the prejudice of the person who had acted upon such
representation and put himself in a disadvantageous
position.
(5) The officer would be justified in changing the
terms of the agreement to the prejudice of the other party
on special considerations such as difficult foreign exchange
position or other matters which have a bearing on general
interest of the State.
Before we conclude, we would refer to a recent decision
of this Court in M/s. Moti Lal Padampat Sugar Mills Co. (P.)
Ltd. v. State of Uttar Pradesh and Ors. It has been held
that there can be no promissory estoppel against the
exercise of legislative power and the legislature cannot be
precluded from exercising its legislative functions by
resort to the doctrine of promissory estoppel. It has also
held that when the Government owes a duty to the public to
act differently, promissory estoppel could not be invoked to
prevent the Government from doing so. The doctrine cannot be
invoked for preventing the Government from acting in
discharge of its duty under the law. The Government would
not be bound by the acts of its officers and agents, who act
beyond the scope of their authority. A person dealing with
an agent of the Government must be held to have noticed all
the limitations of his authority.
With respect, we are in complete agreement with the law
as stated above but we find the judgment is not in
accordance with the view consistently taken by this Court in
some respects. We have read the Judgment of Bhagwati, J.
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with considerable care and attention which it deserves.
Firstly, with great respect we are unable to construe the
decision in Union of India & Ors. v. M/s. Indo-Afghan
Agencies Ltd. case in the manner in which it has been done.
As pointed out by us, all that the case purports to lay down
is that the court can enforce an obligation incurred by an
authority on which another has acted upon and put himself in
a disadvantageous position, when the authority resiles
arbitrarily or on mere whim or on some undefined and
undisclosed grounds of necessity.
With respect, we feel we are unable to agree with the
interpretation put by Bhagwati, J. Bhagwati, J. states "The
defence of executive necessity was thus clearly negatived by
this Court and it was pointed
723
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
defeated by invoking the defence of executive necessity."
The same view has again been reiterated at page 682 where it
is stated" 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 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." These observations would
be right if they are read with the qualifications, laid down
in the Indo Afghan-Agencies case and other cases.
The further observations of the learned Judge that:
"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." Again "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 do not appear to
convey the true effect of the decision." The decision of
this Court in Century Spinning and Manufacturing Co. Ltd.
and Anr. v. The Ulhashagar Municipal Council and Anr.
(supra) was understood by Justice Bhagwati as refusing to
make a distinction between the private individual and public
body so far as the doctrine of promissory estoppel is
concerned. These observations would be correct only if they
are read with the exceptions recognised by Justice Bhagwati
himself elsewhere in his judgment along with other
restrictions imposed by Judgments of this Court.
We find ourselves unable to ignore the three decisions
of this Court, two by Constitution Benches M. Ramanatha
Pillai v. The State of Kerala and Anr. (supra) and State of
Kerala and Anr. v. The Gwalior Rayon Silk Manufacturing
(Wvg.) Co. Ltd. etc. (supra) and the third by a Bench of
four Judges of this Court in Excise Commissioner, U. P.
Allahabad v. Ram Kumar (Supra) on the ground that the
observations are in the nature of obiter dicta and that it
cannot be insisted as intend-
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724
ng to have laid down any proposition of law different from
that enunciated in the Indo Afghan Agencies case. It was not
necessary for this Court in the cases referred to above to
refer to Union of India and Ors. v. M/s. Indo Afghan
Agencies Ltd., or if properly understood it only held that
the authority cannot go back on the agreement arbitrarily or
on its mere whim. We feel we are bound to follow the
decisions of the three Benches of this Court which in our
respectful opinion have correctly stated the law. We are
also unable to read the case of the House of Lords in Howell
v. Falmouth Boat Construction Co. Ltd. (supra) as not having
overruled the view of Denning, J and as not having expressed
its disapproval of the doctrine of promissory estoppel
against the Crown nor overruled the view taken by Denning, J
in Robertson v. Minister of Pensions that "the Crown cannot
escape the obligation under the doctrine of promissory
estoppel."
We find ourselves unable to share the view of the
learned Judge that the Constitution Bench of this Court in
Ramanathan Pillai's case (supra) heavily relied upon the
quotation from the American jurisprudence para 123 p. 873
Vol. 28. Again we feel to remark that "unfortunately this
quotation was incomplete and had overlooked perhaps
inadvertently" is unjustified (emphasis supplied).
We feel we are in duty bound to express our
reservations regarding the "activist" jurisprudence and the
wide implications thereof which the learned Judge has
propounded in his judgment. The first part of the judgment
relates to the development of law relating to promissory
estoppel in England following the High Trees case. As
pointed out by us earlier the doctrine of promissory
estoppel is not very helpful as we are governed by the
various provisions of the Indian Contract Act Sections 65
and 70 provide for certain reliefs in void contracts and in
unenforceable contracts where a person relying on a
representation has acted upon it and put himself in a
disadvantageous position. Apart from the case in Robertson
v. Minister of Pensions, the House of Lords in Howell's case
and the Privy Council in Antonio Buttigieg's case and the
other English Authorities do not agree with the view that
the plea of promissory estoppel is available against the
Government. Further we have to bear in mind that the Indian
Constitution as a matter of high policy in public interest,
has enacted Article 299 so as to save the Government
liability arising out of unathorised acts of its officers
and contracts not duly executed.
The learned Judge has considered at some length the
doctrine of consideration and how it has thwarted the full
development of the new equitable principle of promissory
estoppel. After discussing the American Law on the subject,
he has observed that the leading text book
725
writers view with disfavour the importance given to
"consideration". The learned Judge proceeds to observe that
: "having regard to the general opprobrium to which the
doctrine of consideration has been subjected to by eminent
jurists, we need not be unduly anxious to project this
doctrine against assault of 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." Here again we have
to bear in mind that the Indian Contract Act regulates the
right of parties, and expressly insists on the necessity for
lawful consideration which cannot be dispensed with by
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invoking some equitable doctrine. Section 10 of the Contract
Act provides :-
"All agreements are contracts if they are made by
the free consent of parties competent to contract, for
a lawful consideration and with a lawful object, and
are not hereby expressly declared to be void."
It will be seen that for a contract to be valid, it
should be for a lawful consideration. Section 25 of the
Contract Act provides that an agreement made without
consideration is void unless it satisfies one of the
conditions mentioned in this section.
The learned Judge has held that if the Government is to
resist its liability it will have to disclose to the Court
what are the facts and circumstances on account of which the
Government claims to be exempted 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. This statement
will have to be read with the exceptions stated by the
Learned Judge himself and those recognised by the decisions
of this Court. In C. Sankaranarayanan v. State of Kerala it
was held that the power of the Government under Article 309
to make rules regulating the conditions of service of
Government employees or of teachers of aided schools cannot
in any way be effected by any agreement. Rule of estoppel
against Government cannot be invoked in such cases. In
Narendra Chand Hem Ram and Ors. v. Lt. Governor
Administrator Union Territory, Himachal Pradesh and Ors.,
this Court has laid down that the power to impose tax is
undoubtedly a legislative power and that no Court can issue
mandate to a legislature to enact a particular law and
similarly no Court can direct a subordinate legislative body
to enact or not to enact a law which it may be competent to
enact. Again in State of Tamil
726
Nadu and Ors. etc. v. S. K. Krishnamurthi etc. etc. this
Court held that the policy of State to nationalise text
books cannot be challenged by the publishers on the ground
that the rules were in derogation of their rights. It was
held that the rules were in the nature of Departmental
instructions and do not confer any right on the publishers
nor are they designed to safeguard the interest of
publishers and that the policy of nationalisation was
conceived in public interest and as the Government is at
liberty to change the text books and delete from and add to
the list of approved text books and the publishers can have
no grievance. In M/s. Andhra Industrial Works v. Chief
Controller of Imports and Ors., a four judges Bench of this
Court held that an applicant for a permit under Import Trade
Policy has no absolute right to the grant of import licence
and that the applicant cannot complain that the existing
instructions or orders made in pursuance of the Import and
Export Control Act place "unreasonable restrictions" on the
petitioners' right to carry on trade or business. These
restrictions obviously have been imposed in the interests of
the general public and national economy and with the
development of imports, regulating foreign exchange have
necessarily to be appropriately controlled and regulated.
Professor S. A. De Smith in his Judicial Review on
Administrative Action, 3rd Edn. p. 279 sums up the position
thus: "Contracts and Covenants entered into by the Crown are
not to be construed as being subject to implied terms that
would exclude the exercise of general discretionary powers
for the public good: On the contrary they are to be
construed as incorporating an implied term that such powers
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remain exercisable. This is broadly true of other public
authorities also. But the status and functions of the Crown
in this regard are of a higher order. The Crown cannot be
allowed to tie its hands completely by prior undertakings is
as clear as the proposition that the Courts cannot allow the
Crown to evade compliance with ostensibly binding
obligations whenever it thinks fit: If a public authority
lawfully repudiates or departs from the terms of a binding
contract in order to exercise its overriding discretionary
powers, or if it is held never to have been bound in law by
an ostensibly binding contract because the undertakings
would improperly fetter its general discretionary powers,
the other party to the agreement has no right whatsoever to
damages or compensation under the general law, no matter how
serious the damages that party may have suffered." Professor
H. W. R. Wade in Administrative Law Fourth Edn. pp. 329-330
has pointed out that the doctrine of estoppel cannot be
allowed to impede the proper exercise
727
of public and statutory functions by the State and public
authorities. In Public Law the most obvious limitation on
the doctrine of estoppel is that it cannot be invoked so as
to give an authority powers which it does not in law
possess. In other words, no estoppel can legitimate action
which is ultra vires. As has been amply illustrated the
Court is normally extremely careful to prevent any legal
doctrine from impeding the exercise of statutory discretion
in the public interest.
On a consideration of the decisions of this Court it is
clear that there can be no promissory estoppel against the
exercise of legislative power of the State. So also the
doctrine cannot be invoked for preventing the Government
from acting in discharge of its duty under the law. The
Government would not be bound by the act of its officers and
agents who act beyond the scope of their authority and a
person dealing with the agent of the Government must be held
to have notice of the limitations of his authority. The
Court can enforce compliance by a public authority of the
obligation laid on him if he arbitrarily or on his mere whim
ignores the promises made by him on behalf of the
Government. It would be open to the authority to plead and
prove that there were special considerations which
necessitated his not being able to comply with his
obligations in public interest.
In a fervent plea for the doctrine to speak in all its
activist magnitude the learned Judge observes "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 is no doubt desirable that in a
civilised society man's word should be as good as his bond
and his fellow men should be able to rely on his promise. It
may be an improvement if a cause of action would be based on
a mere promise without consideration. The law should as far
as possible accord with the moral values of the society, and
efforts should be made to bring the law in conformity with
the moral values. What are the moral values of the Society ?
This is a very complex question because the concept of moral
values amongst different persons and classes of persons is
not always the same. The concept of moral values is not
static one. It differs from time to time and from society to
society. It is hazardous for a Court to attempt to-enforce
what according to it is the moral value. As pointed out by
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Roscoe Pound: "It leads to an attempt to enforce overhigh
ethical standards and to make legal duties out of moral
duties which are not sufficiently, tangible to be made
effective by the machinery of the legal order. A more
serious difficulty is that the attempt to identify
728
law and morals gives too wide a scope to judicial
discretion". The question is how should it be brought about.
The learned Judge says that it should be the constant
endeavour of the Courts and the legislature to close the gap
between the law and morality and bring about as near an
approximation between the two as possible. Lord Denning
might have exhorted the Judges not to be timorous sours but
to be bold spirits, ready to allow a new cause of action if
justice so requires. These are lofty ideals which one should
steadfastly pursue. But before embarking on this mission, it
is necessary for the Court to understand clearly its
limitations. The powers of the Court to legislate is
strictly limited. "Judges ought to remember that their
office is jus dicere and not jus dare to interpret law, and
not to make law or give law." Chandrachud, C. J. Speaking
for a Constitution Bench in Shri Gurbaksh Singh Sibbia etc.
v. State of Punjab, has clearly pointed out the limited
powers of the Courts to make laws in construing the
provisions of the statutes. The Learned Chief Justice has
observed:-
"The true question is whether by a process of
construction, the amplitude of judicial discretion
which is given to the High Court and the Court of
Session, to impose such conditions as they may think
fit while granting anticipatory bail, should be cut
down by reading into the statute conditions which are
not to be found therein *** Our answer, clearly and
emphatically is in the negative."
Again the Learned Chief Justice warned "Judges have to
decide cases as they come before them, mindful of the need
to keep passions and prejudices out of their decisions. And
it will be strange if, by employing judicial artifices and
techniques, we cut down the discretion so wisely conferred
upon the Courts, by devising a formula which will confine
the power to grant anticipatory bail within a strait-
jacket."-"Therefore, even if we were to frame a 'code for
the grant of anticipatory bail', which really is the
business of the legislature, it can at best furnish broad
guide-lines and cannot compel blind adherence".
The Courts by its very nature are most ill-suited to
undertake the task of legislating. There is no machinery for
the Court to ascertain the conditions of the people and
their requirements and to make laws that would be most
appropriate. Further two Judges may think that a particular
law would be desirable to meet the requirements whereas
another two Judges may most profoundly differ from the
conclusions arrived at by two Judges. Conscious of these
handicaps, the law requires that even an amendment of the
Supreme Court Rules which
729
govern the procedure to be adopted by it for regulating its
work, can only be effected by the whole Court sitting and
deciding.
The result is that so far as the recommendation of the
Municipal Committee to the Government to levy octroi duty,
is concerned though it is contrary to the representation it
made to the buyers of the sites in the Mundi, the
Municipality is not estopped as the representation made by
it was beyond the scope of its authority. The levy of tax
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being for a public purpose i.e. for augmenting the revenues
of the Municipality as laid down in Ram Kumar's case, the
plea of estoppel is not available. The order of the
Government directing the levy of octroi in pursuance of the
resolution of the Municipality cannot also be challenged as
it is in the exercise of its statutory duty.
The result is both the appeals fail and are dismissed
with costs of one set to be borne equally by the two
appellants.
S. R. Appeals dismissed.
730
The doctrine of Promissory Estoppel and its applicability to state actions is a cornerstone of Indian administrative law, defining the boundaries of Government Liability when promises are made to citizens. The landmark judgment of Jit Ram Shiv Kumar and Ors. Etc. vs. State of Haryana and Anr. Etc., extensively covered on platforms like CaseOn, provides a definitive analysis of this principle. This case meticulously examines whether the government can be legally bound by a promise that contradicts its statutory duties, setting a crucial precedent on the limits of holding the state accountable to its word.
The case originated from a commercial development scheme in the early 20th century. The Municipal Committee of Bahadurgarh, aiming to boost trade, established a new market (Mandi) and decided to sell plots to traders. To attract buyers, the Committee passed resolutions in 1916 and 1917, and widely advertised through handbills, making a significant promise: purchasers of the plots would be exempt from paying octroi duty (a local tax on goods entering the town) not just for a limited time, but forever.
Relying on this explicit assurance, numerous traders, including the petitioners' ancestors, purchased plots and established their businesses. For several decades, the promise was honored. However, the situation changed in 1953 when the Mandi was officially included within the octroi limits. Following a series of administrative back-and-forths, the Municipal Committee, in 1965, passed a new resolution to start levying octroi duty in the Mandi. This was approved by the State of Haryana in 1967, effectively nullifying the decades-old promise. The traders challenged this decision, arguing that the government was “estopped” from going back on its promise, which had formed the very basis of their investment.
The central legal question before the Supreme Court was whether the Municipal Committee and the State Government were bound by the doctrine of promissory estoppel, thereby preventing them from levying a tax they had once promised to waive in perpetuity.
The Court's decision hinged on the interplay of several key legal principles:
The Supreme Court conducted a deep-dive analysis, ultimately siding with the government. Its reasoning was methodical and layered:
The Court first examined the actions of the Municipal Committee. It concluded that the promise to grant a permanent exemption from octroi duty was beyond the Committee's legal powers. A municipality, as a creature of statute, has the authority to levy taxes as prescribed by law to fund its public functions. It does not have the authority to permanently surrender this statutory power through a promise. Therefore, the original promise was ultra vires and legally void from the moment it was made. An estoppel cannot arise against a promise that was never legally valid.
The Court firmly established that the imposition of a tax is a legislative or sovereign function of the State. The doctrine of promissory estoppel, which is based on equity, cannot be invoked to prevent the government from exercising its legislative powers. If the government determines that levying a tax is necessary for public good or revenue, it cannot be stopped from doing so because of a past promise made by one of its officials or subordinate bodies. Public duty overrides private promises in this context.
Analyzing nuanced judicial distinctions, such as the court's detailed critique of the Motilal Padampat ruling in this very case, is crucial for legal professionals. This is where tools like CaseOn.in's 2-minute audio case briefs become invaluable, providing quick, focused insights into complex judgments, helping lawyers and students grasp the core reasoning on the go.
Significantly, the bench in Jit Ram undertook a critical review of previous judgments, including the oft-cited Union of India v. Indo-Afghan Agencies Ltd. The Court clarified that while Indo-Afghan Agencies rightly prevents the government from acting arbitrarily or on a whim, it does not bar the government from changing its policy for valid reasons in the public interest. The Court expressed strong reservations about the broader interpretation given to the doctrine in Motilal Padampat Sugar Mills Co. v. State of U.P., and chose to reaffirm a more constrained and traditional view: estoppel is not an absolute rule against the government.
The Supreme Court dismissed the appeal. It held that the Municipal Committee was not estopped from recommending the levy of octroi, and the State Government was not estopped from approving it. The original promise was unenforceable as it was ultra vires, and the doctrine of promissory estoppel could not be used to impede the exercise of the state's statutory and legislative functions.
The judgment in Jit Ram Shiv Kumar vs. State of Haryana is a definitive pronouncement on the limitations of promissory estoppel against the state. It establishes that the doctrine cannot be used to compel a public authority to carry out a promise that is beyond its legal powers (ultra vires). Furthermore, it reaffirms the principle that estoppel cannot prevent the government from performing its essential legislative and statutory duties, including the power to tax. The government can only be held to a promise if the promise was made within the scope of its authority and does not conflict with its public duties or statutory obligations.
Disclaimer: The information provided in this article is for informational purposes only and does not constitute legal advice. For any legal issues, it is essential to consult with a qualified legal professional.
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