The above statement, based on various earlier English
authorities, correctly encapsulates the law of promissory
estoppel with one difference – under our law, as has been seen
hereinabove, promissory estoppel can be the basis of an
independent cause of action in which detriment does not need
to be proved. It is enough that a party has acted upon the
representation made. The importance of the Australian case is
only to reiterate two fundamental concepts relating to the
doctrine of promissory estoppel – one, that the central principle
of the doctrine is that the law will not permit an unconscionable
departure by one party from the subject matter of an
assumption which has been adopted by the other party as the
basis of a course of conduct which would affect the other party
if the assumption be not adhered to. The assumption may be of
fact or law, present or future. And two, that the relief that may
be given on the facts of a given case is flexible enough to
remedy injustice wherever it is found. And this would include
the relief of acting on the basis that a future assumption either
as to fact or law will be deemed to have taken place so as to
afford relief to the wronged party.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 2480 OF 2008
M/S MANUELSONS HOTELS
PRIVATE LIMITED .
VERSUS
STATE OF KERALA & OTHERS
Dated:May 11, 2016.
1. On 11th July, 1986, the State Government, by a
Government Order (G.O.), accepted the recommendations of
the Government of India suggesting that tourism be declared an
“industry”. The fallout of this G.O. was that this would enable
those engaged in tourism promotional activities to become
automatically eligible for concessions / incentives as applicable
to the industrial sector from time to time. Apart from various
other concessions that were granted, exemption from Building
Tax levied by the Revenue Department was one such
concession. It was stated in the said G.O. that action to amend
the Kerala Building Tax Act, 1975 will be taken separately. The
G.O. went on to state that persons eligible for such concessions
will, among others, be classified hotels i.e. from 1 to 5 stars. A
Committee was set up consisting of three government officers
to oversee the aforesaid scheme.
2. Vide a letter dated 25th March, 1987, the Government of
India approved the hotel project of the appellants, being a 55
double room 3 star hotel project to be set up in the city of
Calicut.
3. Pursuant to the aforesaid G.O. dated 11th July, 1986 and
the aforesaid approval, the appellants began constructing the
hotel building, which was completed in the year 1991. Notice
for filing returns under the Kerala Buildings Tax Act was issued
to the appellants on 5th September, 1988. The appellants
replied that they relied upon the G.O. dated 11th July, 1986 and
stated that they were under no obligation to furnish any return
under the said Act as they were exempt from payment of
building tax.
4. In pursuance of the said G.O. dated 11th July, 1986, the
Kerala Buildings Tax Amendment Act of 1990 was passed with
effect from 6th November, 1990. The Objects and Reasons for
said amendment act read as follows:
“STATEMENT OF OBJECTS AND REASONS
The Government has declared tourism as an
industry with a view to develop tourism in the State
and announce various concessions to tourism
related activities as per GO (P) 224/86/GAD dated
11.07.1986. One of the concessions declared by
Government was to exempt the buildings
constructed in relation to tourism from the
provisions of the Kerala Building Tax Act, 1975.
For achieving the above said purpose the
Kerala Building Tax Act, 1975 has to be amended
suitably and the Government have decided to
amend the Kerala Building Tax Act 1975 for the
purpose.
As the above proposal had to be given effect
to immediately and as the Legislative assembly was
not in session the Kerala Building Tax (Amendment)
Ordinance, 1990 (Ordinance No.8 of 1990) was
promulgated by the Governor of Kerala on the 2nd
day of November, 1990, and published in the Kerala
Gazette Extraordinary dated 6th day of November,
1990.
The Bill seeks to replace the said ordinance
by an Act of Legislature.
3Page 4
(Published in KG Ex No.1159 dt 7.12.1990)”
5. In pursuance of the said object, Section 3A was added,
which reads as under:
“3A.(1) Power to make exemption:- The
Government may, if they consider it necessary so to
do for the promotion of tourism, by notification in the
Gazette make exemption from the payment of
building tax under the Act in respect of any building
or buildings the construction of which is completed
during such period and in such areas as may be
specified in the notification and having such
specifications as may be prescribed in the rules in
this behalf.”
Also, to effectuate the said exemption provision, Rule 14A
was added in the Kerala Buildings Tax Rules, 1974 as under:
“Rule 14A
(1) The exemption contemplated in Section 3A of
the Kerala Building Tax Act, 1975 shall be
applicable to the buildings having the following
specifications in such Tourism sector and the
construction of which is completed during such
period as may be specified in the notifications:-
(i) Classified hotels (1 to 5 stars)
(ii) Motels(which conform to the specification of the
Department of Tourism of Kerala/ Central
Government)
(iii) Restaurants (approved by Classification
committee of the Government of India)
4Page 5
(iv) Amusement parks and research centres
approved by the Government.
(v) Ropeways at tourist centres.
(vi) Construction of structures like
Koothambalam/Auditorium etc by
schools/institutions teaching Kalaripayattu and
traditional art forms of Kerala.
(vii) Institutions teaching surfing, sking, gliding,
trekking and similar activities which will promote
tourism;
(viii) Ayurvedic centres with tourism potential;
(ix) Exclusive handicrafts with emporia (approved by
the State/Central Department of Tourism)
(2) The area so notified shall be approved Tourist
Centres and such other locations certified by a
Committee consisting of Secretary to Government,
Tourism Department, Secretary to Government
Taxes Department and Director, Department of
Tourism.
(3) The period of exemption shall be 10 years or
such shorter period in respect of specific areas as
may be notified in the Gazette based on the
recommendation of the Committee.”
6. By a Writ Petition filed in 1989, the appellants challenged
the notice dated 5th September, 1988. This resulted in a
judgment of the Kerala High Court dated 30th August, 1995 by
which the appellants were relegated to the Committee set up
under the 1986 G.O. to pursue their claim. Till final orders were
passed by the Committee, the judgment stated that the
5Page 6
respondents would not take any coercive steps to recover any
building tax assessed on the building constructed by the
appellants.
7. By a letter dated 6th February, 1997, the exemption
promised by the G.O. of 1986 was denied to the appellants
stating that as Section 3A had been omitted w.e.f. 1st March,
1993, the power to grant exemption had itself gone and,
therefore, no such exemption could be given to the appellants.
8. Pursuant to the aforesaid letter dated 6th February, 1997,
a notice dated 28th April, 1997 was issued by the authorities
asking the appellants to submit the necessary statutory return
under the Kerala Buildings Tax Act. This notice was, in turn,
challenged in O.P. No. 9601 of 1997, which culminated in a
judgment dated 20th July, 1998. Vide this judgment, the High
Court allowed the original petition and directed the Committee
to consider the matter afresh in the light of the judgment of the
Supreme Court in M/S Motilal Padampat Sugar Mills v. State
Of Uttar Pradesh & Ors., (1979) 2 SCR 641 and Shrijee
Sales Corporation & Anr. v. Union of India, (1997) 3 SCC
398.
6Page 7
9. Vide an order dated 4th February, 1999, the authorities
once again rejected the appellant’s application for exemption
from property tax. This order was challenged in Writ Petition
No. 9820 of 1999 which has led to the impugned judgment
dated 5th December, 2006. The High Court essentially rejected
the aforesaid Writ Petition on two grounds. First, it stated that
as no exemption Notification had, in fact, been issued under
Section 3A when it was in existence in the statute book, no
claim for exemption from payment of building tax would be
allowed. It further held that the mere promise to amend the law
does not hold out a promise of exemption from payment of
building tax. And finally, the High Court held that the question
of now exempting the appellants from building tax would not
arise as Section 3A itself had been omitted w.e.f. 1st March,
1993.
10. Shri V. Giri, learned Senior Advocate appearing on behalf
of the appellants before us, has argued that the High Court has
failed to consider various Supreme Court judgments on
promissory estoppel in their true perspective. In his submission,
the aforesaid judgment clearly led to the conclusion that when
the Government holds out a promise which has been acted
upon, except in cases of overriding public interest, which has
not been claimed in the facts of the present case, the
Government cannot resile from the said promise and must be
held to be bound thereby. He added that there was no
necessity for the Government to be directed to actually issue a
Notification under Section 3A as that would only be a ministerial
act which would be regarded as having been performed if
Government was to be held to its promise. According to the
learned counsel, therefore, a reading of the judgments of this
Court would necessarily lead to granting of relief to his client.
11. Shri Radhakrishnan, learned senior counsel appearing on
behalf of the respondents, countered these submissions and
supported the impugned judgment of the High Court. According
to Shri Radhakrishnan, a mandamus cannot be issued to the
executive to frame or amend the law. In any event, according
to the learned counsel, Section 3A having been deleted w.e.f.
1
st March, 1993, it is clear that no relief can be granted to the
appellants as on date.
12. Having heard the learned counsel for both the sides, we
are of the view that it will first be necessary to examine the
doctrine of promissory estoppel as laid down in M/S Motilal
Padampat Sugar Mills, (1979) 2 SCR 641 and as followed in
State of Punjab v. Nestle India Ltd., (2004) 6 SCC 465.
13. In the M/S Motilal Padampat Sugar Mills case, the
appellant before this Court was primarily engaged in the
business of manufacture and sale of sugar. An assurance was
given by the State Government in that case that new Vanaspati
units in the State which go into commercial production by 30th
September,1970 would be given partial concession in sales tax
for a period of three years. The appellant having set up such
Vanaspati unit thereafter went into the production of Vanaspati
on 2nd July, 1970 and sought exemption. The Government
apparently turned around and rescinded its earlier decision of
January, 1970 in August 1970, by which time the factory of the
appellant had gone into commercial production. A Writ Petition
was filed in the High Court of Allahabad asking for a writ
directing the State Government to exempt the sales of
Vanaspati manufacturer from sales tax for a period of three
9Page 10
years commencing 2nd July, 1970 as per the promise held out.
This plea fell upon deaf ears in the High Court, as a result of
which the petitioner in that case appealed to the Supreme
Court. After discussing the authorities in detail, this Court held:
“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 promisee and, in
fact, the promisee, acting in reliance on it, alters his
position, the Government would be held bound by
the promise and the promise would be enforceable
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. It is elementary
that in a republic governed by the rule of law, no
one, howsoever high or low, is above the law.
Everyone 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. It is indeed
difficult to see on what principle can a Government,
committed to the rule of law, claim immunity from
the doctrine of promissory estoppel. Can the
Government say that it is under no obligation to act
in a manner that is fair and just or that it is not
bound by considerations of “honesty and good
faith”? Why should the Government not be held to a
high “standard of rectangular rectitude while dealing
with its citizens”? There was a time when the
doctrine of executive necessity was regarded as
10Page 11
sufficient justification for the Government to
repudiate even its contractual obligations; but, let it
be said to the eternal glory of this Court, this
doctrine was emphatically negatived in
the Indo-Afghan Agencies case and the supremacy
of the rule of law was established. It was laid down
by this Court that the Government cannot claim to
be immune from the applicability of the rule of
promissory estoppel and repudiate a promise made
by it on the ground that such promise may fetter its
future executive action. If the Government does not
want its freedom of executive action to be
hampered or restricted, the Government need not
make a promise knowing or intending that it would
be acted on by the promisee and the promisee
would alter his position relying upon it. But if the
Government makes such a promise and the
promisee acts in reliance upon it and alters his
position, there is no reason why the Government
should not be compelled to make good such
promise like any other private individual. The law
cannot acquire legitimacy and gain social
acceptance unless it accords with the moral values
of the society and the constant endeavour of the
Courts and the legislature, must, therefore, be to
close the gap between law and morality and bring
about as near an approximation between the two as
possible. The doctrine of promissory estoppel is a
significant judicial contribution in that direction. But it
is necessary to point out that since the doctrine of
promissory estoppel is an equitable doctrine, it must
yield when the equity so requires. If it can be shown
by the Government that having regard to the facts
as they have transpired, it would be inequitable to
hold the Government to the promise made by it, the
Court would not raise an equity in favour of the
promisee and enforce the promise against the
Government. The doctrine of promissory estoppel
would be displaced in such a case because, on the
facts, equity would not require that the Government
11Page 12
should be held bound by the promise made by it.
When the Government is able to show that in view
of the facts as have transpired since the making of
the promise, public interest would be prejudiced if
the Government were required to carry out the
promise, the Court would have to balance the public
interest in the Government carrying out a promise
made to a citizen which has induced the citizen to
act upon it and alter his position and the public
interest likely to suffer if the promise were required
to be carried out by the Government and determine
which way the equity lies. It would not be enough for
the Government just to say that public interest
requires that the Government should not be
compelled to carry out the promise or that the public
interest would suffer if the Government were
required to honour it. The Government cannot, as
Shah, J., pointed out in the Indo-Afghan Agencies
case, claim to be exempt from the liability to carry
out the promise “on some indefinite and undisclosed
ground of necessity or expediency”, nor can the
Government claim to be the sole Judge of its liability
and repudiate it “on an ex parte appraisement of the
circumstances”. If the Government wants to resist
the liability, it will have to disclose to the Court what
are the facts and circumstances on account of
which the Government claims to be exempt from the
liability and it would be for the Court to decide
whether those facts and circumstances are such as
to render it inequitable to enforce the liability against
the Government. Mere claim of change of policy
would not be sufficient to exonerate the
Government from the liability: the Government
would have to show what precisely is the changed
policy and also its reason and justification so that
the Court can judge for itself which way the public
interest lies and what the equity of the case
demands. It is only if the Court is satisfied, on
proper and adequate material placed by the
Government, that overriding public interest requires
12Page 13
that the Government should not be held bound by
the promise but should be free to act unfettered by
it, that the Court would refuse to enforce the
promise against the Government. The Court would
not act on the mere ipse dixit of the Government, for
it is the Court which has to decide and not the
Government whether the Government should be
held exempt from liability. This is the essence of the
rule of law. The burden would be upon the
Government to show that the public interest in the
Government acting otherwise than in accordance
with the promise is so overwhelming that it would be
inequitable to hold the Government bound by the
promise and the Court would insist on a highly
rigorous standard of proof in the discharge of this
burden. But even where there is no such overriding
public interest, it may still be competent to the
Government to resile from the promise “on giving
reasonable notice, which need not be a formal
notice, giving the promisee a reasonable
opportunity of resuming his position” provided of
course it is possible for the promisee to restore
status quo ante. If, however, the promisee cannot
resume his position, the promise would become
final and irrevocable. Vide Emmanuel Avodeji
Ajaye v. Briscoe [(1964) 3 All ER 556 : (1964) 1
WLR 1326].” [pp. 682 – 685]
14. The Court further went on to hold that it was not
necessary for the petitioner to show that it had suffered any
detriment, and it was enough that the petitioner had relied upon
the promise or representation held out, and altered its position
relying upon such assurance. Importantly, the Court held:
“Of course, it may be pointed out that if the U.P.
Sales Tax Act, 1948 did not contain a provision
13Page 14
enabling the Government to grant exemption, it
would not be possible to enforce the representation
against the Government, because the Government
cannot be compelled to act contrary to the statute,
but since Section 4 of the U.P. Sales Tax Act, 1948
confers power on the Government to grant
exemption from sales tax, the Government can
legitimately be held bound by its promise to exempt
the appellant from payment of sales tax. It is true
that taxation is a sovereign or governmental
function, but, for reasons which we have already
discussed, no distinction can be made between the
exercise of a sovereign or governmental function
and a trading or business activity of the
Government, so far as the doctrine of promissory
estoppel is concerned. Whatever be the nature of
the function which the Government is discharging,
the Government is subject to the rule of promissory
estoppel and if the essential ingredients of this rule
are satisfied, the Government can be compelled to
carry out the promise made by it. We are, therefore,
of the view that in the present case the Government
was bound to exempt the appellant from payment of
sales tax in respect of sales of vanaspati effected by
it in the State of Uttar Pradesh for a period of three
years from the date of commencement of the
production and was not entitled to recover such
sales tax from the appellant.” [pp. 696 – 697]
15. Having so held, the Court then went on to hold that since
the Government is bound to exempt the appellant from
payment of sales tax for a period of three years w.e.f. 2nd July,
1970, being the date of commencement of the production of
Vanaspati, the appellant would not be liable to pay any sales
14Page 15
tax, subject only to the State’s claim to retain any part of such
amount under any provision of law. In the absence of such
claim, the State would have to refund the amount of sales tax
collected by it from the appellant with interest thereon.
16. It is important to notice that the necessary exemption
Notification in Motilal Padampat’s case had not been issued
under Section 4 of the U.P. Sales Tax Act, 1948. Yet, this Court
held that sales tax for the period in question could not be
recovered. This was done presumably because promissory
estoppel is itself an equitable doctrine. One of the maxims of
equity is that one must regard as done that which ought to be
done. In this view of the matter, it is obvious that the High
Court judgment is incorrect when it holds that as no exemption
Notification was, in fact, issued by the Government under
Section 3A, the petitioner would have to be denied relief. This
judgment has been followed repeatedly and has been applied
to give the benefit of sales tax exemption in similar
circumstances in Pournami Oil Mills & Ors. v. State of Kerala
& Anr., (1986) Supp. SCC 728 at Paras 7 and 8.
15Page 16
17. The same result would obtain on a reading of a more
recent judgment of this Court reported in State of Punjab v.
Nestle India Ltd., (2004) 6 SCC 465. On the facts of that
case, for the period from 1.4.1996 to 4.6.1997, purchase tax on
milk was to be abolished by the State Government. An
announcement to this effect was given wide publicity in several
newspapers in the State and a speech was given to the
aforesaid effect by the Finance Minister of the State while
presenting the budget for the year 1996-1997. That was further
translated into a memorandum of the financial Commissioner,
dated 26.4.1996, which was addressed to the Excise and
Taxation Commissioner of the State. When a meeting was
held on 27th June, 1996 by the Chief Minister and the Finance
Minister with the Excise and Taxation Commissioner and
various Financial a financial notification would be issued “in a
day or two”. For the first time, on 4th June, 1998, the
Council of Ministers decided that the decision to abolish
purchase tax on milk was not accepted and, consequently, the
authorities issued notice to the respondents requiring them to
pay purchase tax on milk for the year 1996-1997.
16Page 17
18. In this background, the High Court held that the State
Government was bound by its promise and representation to
abolish purchase tax. According to the High Court, the
absence of a financial notification was no more than a
ministerial act which remained to be performed. As the
respondents had acted on the representation made, they could
not be asked to pay purchase tax for the year 1996-1997. The
Writ Petition was allowed and the demand notice of tax for the
aforesaid year was struck down.
19. This Court, after adverting to Section 30 of the Punjab
General Sales Tax Act, 1948, which gave the State Government
the power to exempt from purchase tax, by notification, any of
the goods mentioned in the Schedule, recapitulated the entire
law of promissory estoppel in great detail. It referred to M/S
Motilal Padampat Sugar Mills, (1979) 2 SCR 641 and other
judgments, and finally held:
“The appellant has been unable to establish any
overriding public interest which would make it
inequitable to enforce the estoppel against the State
Government. The representation was made by the
highest authorities including the Finance Minister in
his Budget speech after considering the financial
implications of the grant of the exemption to milk. It
17Page 18
was found that the overall benefit to the State's
economy and the public would be greater if the
exemption were allowed. The respondents have
passed on the benefit of that exemption by
providing various facilities and concessions for the
upliftment of the milk producers. This has not been
denied. It would, in the circumstances, be
inequitable to allow the State Government now to
resile from its decision to exempt milk and demand
the purchase tax with retrospective effect from
1-4-1996 so that the respondents cannot in any
event readjust the expenditure already made. The
High Court was also right when it held that the
operation of the estoppel would come to an end with
the 1997 decision of the Cabinet.
In the case before us, the power in the State
Government to grant exemption under the Act is
coupled with the word “may” — signifying the
discretionary nature of the power. We are of the
view that the State Government's refusal to exercise
its discretion to issue the necessary notification
“abolishing” or exempting the tax on milk was not
reasonably exercised for the same reasons that we
have upheld the plea of promissory estoppel raised
by the respondents. We, therefore, have no
hesitation in affirming the decision of the High Court
and dismissing the appeals without costs.” [paras
47 – 48]
20. A perusal of this judgment would also show that relief was
not denied on the ground that no exemption notification was, in
fact, issued under Section 30 of the Punjab General Sales Tax
Act, 1948. In fact, this Court emphasized the discretionary
nature of the power to grant exemption. This Court held that
the State Government’s refusal to exercise its discretion to
issue the necessary notification abolishing or exempting tax on
milk was not reasonably exercised inasmuch as it was bound
by the doctrine of promissory estoppel to do so. And the finding
of the High Court that such Notification would only be a
ministerial act which had to be performed was, therefore,
upheld by this Court. This judgment has been recently applied
and followed in Devi Multiplex & Ors. v. State of Gujarat &
Ors., (2015) 9 SCC 132 at Para 20.
21. In fact, we must never forget that the doctrine of
promissory estoppel is a doctrine whose foundation is that an
unconscionable departure by one party from the subject matter
of an assumption which may be of fact or law, present or future,
and which has been adopted by the other party as the basis of
some course of conduct, act or omission, should not be allowed
to pass muster. And the relief to be given in cases involving
the doctrine of promissory estoppels contains a
degree of flexibility which would ultimately render justice
to the aggrieved party. The entire basis of this doctrine has
been well put in a judgment of the Australian High Court
reported in The Commonwealth of Australia v. Verwayen,
170 C.L.R. 394, by Deane,J. in the following words:
1. While the ordinary operation of estoppel by
conduct is between parties to litigation, it is a
doctrine of substantive law the factual ingredients of
which fall to be pleaded and resolved like other
factual issues in a case. The persons who may be
bound by or who may take the benefit of such an
estoppel extend beyond the immediate parties to it,
to their privies, whether by blood, by estate or by
contract. That being so, an estoppel by conduct can
be the origin of primary rights of property and of
contract.
2. The central principle of the doctrine is that the law
will not permit an unconscionable - or, more
accurately, unconscientious - departure by one
party from the subject matter of an assumption
which has been adopted by the other party as the
basis of some relationship, course of conduct, act or
omission which would operate to that other party's
detriment if the assumption be not adhered to for
the purposes of the litigation.
3. Since an estoppel will not arise unless the party
claiming the benefit of it has adopted the
assumption as the basis of action or inaction and
thereby placed himself in a position of significant
disadvantage if departure from the assumption be
permitted, the resolution of an issue of estoppel by
conduct will involve an examination of the relevant
belief, actions and position of that party.
4. The question whether such a departure would be
unconscionable relates to the conduct of the
allegedly estopped party in all the circumstances.
That party must have played such a part in the
adoption of, or persistence in, the assumption that
he would be guilty of unjust and oppressive conduct
if he were now to depart from it. The cases indicate
four main, but not exhaustive, categories in which
an affirmative answer to that question may be
justified, namely, where that party: (a) has induced
the assumption by express or implied
representation; (b) has entered into contractual or
other material relations with the other party on the
conventional basis of the assumption;
(c) has exercised against the other party rights
which would exist only if the assumption were
correct; (d) knew that the other party laboured under
the assumption and refrained from correcting him
when it was his duty in conscience to do so.
Ultimately, however, the question whether departure
from the assumption would be unconscionable must
be resolved not by reference to some preconceived
formula framed to serve as a universal yardstick but
by reference to all the circumstances of the case,
including the reasonableness of the conduct of the
other party in acting upon the assumption and the
nature and extent of the detriment which he would
sustain by acting upon the assumption if departure
from the assumed state of affairs were permitted. In
cases falling within category (a), a critical
consideration will commonly be that the allegedly
estopped party knew or intended or clearly ought to
have known that the other party would be induced
by his conduct to adopt, and act on the basis of, the
assumption. Particularly in cases falling within
category (b), actual belief in the correctness of the
fact or state of affairs assumed may not be
necessary. Obviously, the facts of a particular case
may be such that it falls within more than one of the
above categories.
5. The assumption may be of fact or law, present or
future. That is to say it may be about the present or
future existence of a fact or state of affairs
(including the state of the law or the existence of a
legal right, interest or relationship or the content of
future conduct).
6. The doctrine should be seen as a unified one
which operates consistently in both law and equity.
In that regard, "equitable estoppel" should not be
seen as a separate or distinct doctrine which
operates only in equity or as restricted to certain
defined categories (e.g. acquiescence,
encouragement, promissory estoppel or proprietary
estoppel).
7. Estoppel by conduct does not of itself constitute
an independent cause of action. The assumed fact
or state of affairs (which one party is estopped from
denying) may be relied upon defensively or it may
be used aggressively as the factual foundation of an
action arising under ordinary principles with the
entitlement to ultimate relief being determined on
the basis of the existence of that fact or state of
affairs. In some cases, the estoppel may operate to
fashion an assumed state of affairs which will found
relief (under ordinary principles) which gives effect
to the assumption itself (e.g. where the defendant in
an action for a declaration of trust is estopped from
denying the existence of the trust).
8. The recognition of estoppel by conduct as a
doctrine operating consistently in law and equity
and the prevalence of equity in a Judicature Act
system combine to give the whole doctrine a degree
of flexibility which it might lack if it were an
exclusively common law doctrine. In particular, the
prima facie entitlement to relief based upon the
assumed state of affairs will be qualified in a case
where such relief would exceed what could be
justified by the requirements of good conscience
and would be unjust to the estopped party. In such a
case, relief framed on the basis of the assumed
state of affairs represents the outer limits within
which the relief appropriate to do justice between
the parties should be framed.”
22. The above statement, based on various earlier English
authorities, correctly encapsulates the law of promissory
estoppel with one difference – under our law, as has been seen
hereinabove, promissory estoppel can be the basis of an
independent cause of action in which detriment does not need
to be proved. It is enough that a party has acted upon the
representation made. The importance of the Australian case is
only to reiterate two fundamental concepts relating to the
doctrine of promissory estoppel – one, that the central principle
of the doctrine is that the law will not permit an unconscionable
departure by one party from the subject matter of an
assumption which has been adopted by the other party as the
basis of a course of conduct which would affect the other party
if the assumption be not adhered to. The assumption may be of
fact or law, present or future. And two, that the relief that may
be given on the facts of a given case is flexible enough to
remedy injustice wherever it is found. And this would include
the relief of acting on the basis that a future assumption either
as to fact or law will be deemed to have taken place so as to
afford relief to the wronged party.
23. In the circumstances, the High Court judgment when it
holds that no notification was, in fact, issued under Section 3A
of the Kerala Buildings Tax Act, 1975, (which would be sufficient
to deny the appellants relief) is, therefore, clearly incorrect in
law.
24. However, some of the judgments of this Court have held
that a Writ of Mandamus cannot be issued to the executive to
frame rules or regulations which are in the nature of
subordinate legislation. (See: State of Jammu & Kashmir v.
A.R. Zakki & Ors. 1992 Supp. (1) SCC 548 at paragraphs 10
and 15, and State of Uttar Pradesh and Ors. v. Mahindra and
Mahindra Limited (2011) 13 SCC 77 at 81). This is for the
reason that a court would then trespass into forbidden territory,
as our Constitution recognizes a broad division of powers
between legislative and judicial activity.
25. However, though the power to grant exemption under a
statutory provision may amount to subordinate legislation in a
given case, but being in the domain of exercise of discretionary
power, is subject to the same tests in administrative law, as is
executive or administrative action, as to its validity – one of
these tests being the well-known Wednesbury principle under
which a court may strike down an abuse of such discretionary
power on grounds that irrelevant circumstances have been
taken into account or relevant circumstances have not been
taken into account (for example). This is clearly exemplified in
Indian Express Newspapers (Bombay) Private Limited and
others v. Union of India and others, (1985) 1 SCC 641.
26. In that case, by a notification dated 15.7.1977 issued
under Section 25(1) of the Customs Act, a total exemption from
customs duty was granted on imported newsprint. On
1.3.1981, the said Notification was superseded by the issue of
a fresh notification which exempted customs duty beyond 15%.
The second notification was the subject matter of challenge in
the aforesaid judgment in this Court. In an instructive passage
in the judgment under Heading V entitled “Are the impugned
notifications issued under Section 25 of the Customs Act, 1962
beyond the reach of Administrative Law?” this Court proceeded
by assuming that the power to grant exemption under Section
25 of the Customs Act is a legislative power and a notification
issued by the Government thereunder would amount to a piece
of subordinate legislation. Despite this being so, this Court held:
“That subordinate legislation cannot be questioned
on the ground of violation of principles of natural
justice on which administrative action may be
questioned has been held by this Court in Tulsipur
Sugar Co. Ltd. v. Notified Area Committee,
Tulsipur [AIR 1980 SC 882 : (1980) 2 SCR 1111 :
(1980) 2 SCC 295] , Rameshchandra Kachardas
Porwal v. State of Maharashtra [(1981) 2 SCC 722 :
AIR 1981 SC 1127 : (1981) 2 SCR 866] and
in Bates v. Lord Hailsham of St. Marylebone [(1972)
1 WLR 1373 : (1972) 1 A11 ER 1019 (Ch D)] . A
distinction must be made between delegation of a
legislative function in the case of which the question
of reasonableness cannot be enquired into and the
investment by statute to exercise particular
discretionary powers. In the latter case the question
may be considered on all grounds on which
administrative action may be questioned, such as,
non-application of mind, taking irrelevant matters
into consideration, failure to take relevant matters
into consideration, etc, etc. On the facts and
circumstances of a case, a subordinate legislation
may be struck down as arbitrary or contrary to
statute if it fails to take into account very vital facts
which either expressly or by necessary implication
are required to be taken into consideration by the
statute or, say, the Constitution. This can only be
done on the ground that it does not conform to the
statutory or constitutional requirements or that it
offends Article 14 or Article 19(1)(a) of the
Constitution. It cannot, no doubt, be done merely on
the ground that it is not reasonable or that it has not
taken into account relevant circumstances which the
Court considers relevant." [para 78]
27. Shri Radhakrishnan pressed into service Kasinka
Trading and another v. Union of India and another, (1995) 1
SCC 274. This was a case in which PVC resins were
exempted from basic import duty by a notification dated
15.3.1979. The said notification was in force up to and
inclusive of 31.3.1981. However, before expiry of the time fixed
in the notification, a notification withdrawing such exemption,
dated 16.10.1980, was issued. The petitioners in that case
invoked the doctrine of promissory estoppel. This Court held
that no representation had been made on facts, and that it
could not be said that a notification could not be rescinded or
modified before the date of expiry even if the Government is
satisfied that it was necessary in the public interest to rescind it.
28. This case is clearly distinguishable in that it was held (see
paragraphs 22 and 27) that no incentive to set up any industry
to use PVC resins had been made, and secondly, it was found
necessary in public interest to rescind or withdraw such
27Page 28
notification. On the facts of the present case, it is clear that a
clear representation/promise had been made pursuant to which
the State actually amended the Kerala Building Tax Act, 1975
by inserting Section 3A. And equally, there is no claim in the
present case that there is any change in circumstance because
of overriding public interest so that the doctrine of promissory
estoppel cannot be said to apply.
29. Shri Radhakrishnan also referred to a judgment of this
Court in Shree Sidhbali Steels Limited and others v. State of
Uttar Pradesh and others, (2011) 3 SCC 193. On the facts in
that case, a new industrial policy dated 30.4.1990 was declared
by the State Government assuring the grant of 33.33% hill
development rebate on the total amount of electricity bills to
new entrepreneurs for a period of 5 years. This period was
extended by another period of 5 years to be made available to
new industrial units set up till 31.3.1997. Vide notifications
dated 18.61998 and 25.1.1999, uniform tariffs of electricity were
introduced by which the rebate so given was reduced to 17%.
Post 2000, vide a notification dated 7.8.2000, a new tariff was
announced which completely withdrew the hill development
28Page 29
rebate. A challenge to the aforesaid notifications was turned
down by this Court. This Court was concerned with an earlier
decision reported in U.P. Power Corporation Limited v. Sant
Steels and Alloys (P) Ltd., (2008) 2 SCC 777, which took a
very restrictive view of Section 49 of the Electricity Supply Act
of 1948, stating that any notification issued thereunder can only
be revoked or modified if express provision was made for such
revocation under Section 49 itself. Further, such revocation
could take place under the General Clauses Act only if such
withdrawal was in larger public interest, or if legislation was
enacted by the legislature authorizing the Government to
withdraw the benefit granted by the notification. The larger
Bench overruled the Sant Steels case stating that its view of
Section 49 of the Electricity Supply Act was plainly incorrect,
and that Sections 14 and 21 of the General Clauses Act made it
clear that a notification issued under Section 49 could be
exercised from time to time, including the power to revoke such
notification.
30. However, when it came to the applicability of the doctrine
of promissory estoppel, this Court relied upon the observations
made in State of Rajasthan and another v. J.K. Udaipur
Udyog Ltd. and another, (2004) 7 SCC 673, and Arvind
Industries and others v. State of Gujarat and others, (1995)
6 SCC 53.
31. From the State of Rajasthan case, para 25 was quoted
by this Court in order to arrive at a conclusion that the recipient
of an exemption granted by a fiscal statute would have no
legally enforceable right against the Government inasmuch as
such right is a defeasible one in the sense that it may be taken
away in exercise of the very power under which the exemption
was granted. What was missed from that case was the very
next paragraph which states as follows:-
“In this case the Scheme being notified under the
power in the State Government to grant exemptions
both under Section 15 of the RST Act and Section
8(5) of the CST Act in the public interest, the State
Government was competent to modify or revoke the
grant for the same reason. Thus what is granted
can be withdrawn unless the Government is
precluded from doing so on the ground of
promissory estoppel, which principle is itself subject
to considerations of equity and public interest. (See
STO v. Shree Durga Oil Mills). The vesting of a
defeasible right is therefore, a contradiction in
terms. There being no indefeasible right to the
continued grant of an exemption (absent the
exception of promissory estoppel), the question of
the respondent Companies having an indefeasible
right to any facet of such exemption such as the
rate, period, etc. does not arise.” (at Para 26)
32. The aforesaid paragraph 26 has been noticed by this
Court in Mahabir Vegetable Oils (P) Ltd. and another v. State
of Haryana and others, (2006) 3 SCC 620, (see paragraphs
34 and 35). It is clear, therefore, that the reliance by this Court
in the Shree Sidhbali Steels Ltd. case upon the aforesaid
judgment when it comes to non application of the principle of
promissory estoppel to exemptions granted under statute would
be wholly inappropriate.
33. Similarly, the Arvind Industries case is again a judgment
in which it is clear that the doctrine of promissory estoppel
could have no application because the appellant in that case
was not able to show that any definite promise was made by or
on behalf of the Government and that the appellant had acted
upon such promise. (see paragraph 9)
34. It is clear, therefore, that Shree Sidhbali Steels Limited
was a case which was concerned only with whether a benefit
given by a statutory notification can be withdrawn by the
Government by another statutory notification in the public
interest if circumstances change - (see paragraphs 30 and 42).
Such is not the case before us. On the facts before us, a
notification which ought to have been issued under Section 3A
after it was introduced pursuant to a promise made was not
issued at all. And change in circumstances leading to
overriding public interest displacing the doctrine of promissory
estoppel is absent in the facts of the present case. We are,
thus, satisfied that the aforesaid judgment can have no
application whatsoever to the facts of the present case. 1
35. Shri Radhakrishnan then referred us to Excise
Commissioner, U.P. v. Ram Kumar, (1976) 3 SCC 540 at para
19, for the proposition that it is now well settled by a catena of
decisions that there can be no question of estoppel against the
Government in the exercise of its legislative, sovereign, or
executive powers.
36. This very passage was referred to in M/S Motilal
Padampat Sugar Mills and was explained thus:
1 Shree Sidhbali Steels Ltd. has been applied recently in Kothari Industrial
Corporation Ltd. v. Tamil Nadu Electricity Board & Ors., (2016) 4 SCC 134.
“The next decision to which we must refer is that in
Excise Commissioner U.P. Allahabad v. Ram
Kumar [(1976) 3 SCC 540 : 1976 SCC (Tax) 360 :
1976 Supp SCR 532] . This was also a decision on
which strong reliance was placed on behalf of the
State. It is true that, in this case, the Court observed
that “it is now well settled by a catena of decisions
that there can be no question of estoppel against
the Government in the exercise of its legislative,
sovereign or executive powers,” but for reasons
which we shall presently state, we do not think this
observation can persuade us to take a different view
of the law than that enunciated in the Indo-Afghan
Agencies case. …
It will thus be seen from the decisions relied upon in
the judgment that the Court could not possibly have
intended to lay down an absolute proposition that
there can be no promissory estoppel against the
Government in the exercise of its governmental,
public or executive powers. That would have been
in complete contradiction of the decisions of this
Court in the Indo-Afghan Agencies case, Century
Spinning and Manufacturing Co. case and Turner
Morrison case and we find it difficult to believe that
the Court could have ever intended to lay down any
such proposition without expressly referring to these
earlier decisions and overruling them. We are,
therefore, of the opinion that the observation made
by the Court in Ram Kumar case does not militate
against the view we are taking on the basis of the
decisions in the Indo-Afghan Agencies
case, Century Spinning & Manufacturing Co.
case and Turner Morrison case in regard to the
applicability of the doctrine of promissory estoppel
against the Government.” [SCR at pp. 689, 691]
37. Shri Radhakrishnan then referred us to the judgment in
Sharma Transport v. Govt. of A.P., (2002) 2 SCC 188 at
paragraph 24, and Bannari Amman Sugars Ltd. v. CTO,
(2005) 1 SCC 625, at paragraph 20, for the proposition that
promissory estoppel must yield to overriding public interest.
There can be no quarrel with this proposition except that, as
has been pointed out above, this case does not contain any
such overriding public interest.
38. Shri Radhakrishnan also referred us to Avinder Singh v.
State of Punjab, (1979) 1 SCC 137, at paragraphs 11 and 17,
for the proposition that the legislature cannot delegate its
essential legislative functions. We are at a loss to understand
how this authority would at all apply to the facts of the present
case as it is not the State’s stand that there is any excessive
delegation of legislative power in the present case.
39. In the present case, it is clear that no Writ of Mandamus is
being issued to the executive to frame a body of rules or
regulations which would be subordinate legislation in the nature
of primary legislation (being general rules of conduct which
would apply to those bound by them). On the facts of the
present case, a discretionary power has to be exercised on
facts under Section 3A of the Kerala Buildings Tax Act, 1975.
The non-exercise of such discretionary power is clearly vitiated
on account of the application of the doctrine of promissory
estoppel in terms of this Court’s judgments in Motilal
Padampat and Nestle (supra). This is for the reason that
non-exercise of such power is itself an arbitrary act which is
vitiated by non-application of mind to relevant facts, namely,
the fact that a G.O. dated 11.7.1986 specifically provided for
exemption from building tax if hotels were to be set up in the
State of Kerala pursuant to the representation made in the said
G.O. True, no mandamus could issue to the legislature to
amend the Kerala Buildings Tax Act, 1975, for that would
necessarily involve the judiciary in transgressing into a
forbidden field under the constitutional scheme of separation of
powers. However, on facts, we find that Section 3A was, in
fact, enacted by the Kerala legislature by suitably amending the
Kerala Buildings Tax Act, 1975 on 6.9.1990 in order to give
effect to the representation made by the G.O. dated 11.7.1986.
We find that the said provision continued on the statute book
and was deleted only with effect from 1.3.1993. This would
make it clear that from 6.9.1990 to 1.3.1993, the power to grant
exemption from building tax was statutorily conferred by
Section 3A on the Government. And we have seen that the
statement of objects and reasons for introducing Section 3A
expressly states that the said Section was introduced in order
to fulfill one of the promises contained in the G.O. dated
11.7.1986. We find that, the appellants, having relied on the
said G.O. dated 11.7.1986, had, in fact, constructed a hotel
building by 1991. It is clear, therefore, that the non-issuance of
a notification under Section 3A was an arbitrary act of the
Government which must be remedied by application of the
doctrine of promissory estoppel, as has been held by us
hereinabove. The ministerial act of non issue of the notification
cannot possibly stand in the way of the appellants getting relief
under the said doctrine for it would be unconscionable on the
part of Government to get away without fulfilling its promise. It
is also an admitted fact that no other consideration of
overwhelming public interest exists in order that the
Government be justified in resiling from its promise. The relief
that must therefore be moulded on the facts of the present case
is that for the period that Section 3A was in force, no building
tax is payable by the appellants. However, for the period post
1.3.1993, no statutory provision for the grant of exemption
being available, it is clear that no relief can be given to the
appellants as the doctrine of promissory estoppel must yield
when it is found that it would be contrary to statute to grant
such relief. To the extent indicated above, therefore, we are of
the view that no building tax can be levied or collected from the
appellants in the facts of the present case. Consequently, we
allow the appeal to the extent indicated above and set aside the
judgment of the High Court.
..............................J.
(A.K. Sikri)
..............................J.
(R.F. Nariman)
New Delhi;
May 11, 2016.
Print Page
authorities, correctly encapsulates the law of promissory
estoppel with one difference – under our law, as has been seen
hereinabove, promissory estoppel can be the basis of an
independent cause of action in which detriment does not need
to be proved. It is enough that a party has acted upon the
representation made. The importance of the Australian case is
only to reiterate two fundamental concepts relating to the
doctrine of promissory estoppel – one, that the central principle
of the doctrine is that the law will not permit an unconscionable
departure by one party from the subject matter of an
assumption which has been adopted by the other party as the
basis of a course of conduct which would affect the other party
if the assumption be not adhered to. The assumption may be of
fact or law, present or future. And two, that the relief that may
be given on the facts of a given case is flexible enough to
remedy injustice wherever it is found. And this would include
the relief of acting on the basis that a future assumption either
as to fact or law will be deemed to have taken place so as to
afford relief to the wronged party.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 2480 OF 2008
M/S MANUELSONS HOTELS
PRIVATE LIMITED .
VERSUS
STATE OF KERALA & OTHERS
Dated:May 11, 2016.
Citation:(2016) 6 SCC766
R.F. Nariman, J.1. On 11th July, 1986, the State Government, by a
Government Order (G.O.), accepted the recommendations of
the Government of India suggesting that tourism be declared an
“industry”. The fallout of this G.O. was that this would enable
those engaged in tourism promotional activities to become
automatically eligible for concessions / incentives as applicable
to the industrial sector from time to time. Apart from various
other concessions that were granted, exemption from Building
Tax levied by the Revenue Department was one such
concession. It was stated in the said G.O. that action to amend
the Kerala Building Tax Act, 1975 will be taken separately. The
G.O. went on to state that persons eligible for such concessions
will, among others, be classified hotels i.e. from 1 to 5 stars. A
Committee was set up consisting of three government officers
to oversee the aforesaid scheme.
2. Vide a letter dated 25th March, 1987, the Government of
India approved the hotel project of the appellants, being a 55
double room 3 star hotel project to be set up in the city of
Calicut.
3. Pursuant to the aforesaid G.O. dated 11th July, 1986 and
the aforesaid approval, the appellants began constructing the
hotel building, which was completed in the year 1991. Notice
for filing returns under the Kerala Buildings Tax Act was issued
to the appellants on 5th September, 1988. The appellants
replied that they relied upon the G.O. dated 11th July, 1986 and
stated that they were under no obligation to furnish any return
under the said Act as they were exempt from payment of
building tax.
4. In pursuance of the said G.O. dated 11th July, 1986, the
Kerala Buildings Tax Amendment Act of 1990 was passed with
effect from 6th November, 1990. The Objects and Reasons for
said amendment act read as follows:
“STATEMENT OF OBJECTS AND REASONS
The Government has declared tourism as an
industry with a view to develop tourism in the State
and announce various concessions to tourism
related activities as per GO (P) 224/86/GAD dated
11.07.1986. One of the concessions declared by
Government was to exempt the buildings
constructed in relation to tourism from the
provisions of the Kerala Building Tax Act, 1975.
For achieving the above said purpose the
Kerala Building Tax Act, 1975 has to be amended
suitably and the Government have decided to
amend the Kerala Building Tax Act 1975 for the
purpose.
As the above proposal had to be given effect
to immediately and as the Legislative assembly was
not in session the Kerala Building Tax (Amendment)
Ordinance, 1990 (Ordinance No.8 of 1990) was
promulgated by the Governor of Kerala on the 2nd
day of November, 1990, and published in the Kerala
Gazette Extraordinary dated 6th day of November,
1990.
The Bill seeks to replace the said ordinance
by an Act of Legislature.
3Page 4
(Published in KG Ex No.1159 dt 7.12.1990)”
5. In pursuance of the said object, Section 3A was added,
which reads as under:
“3A.(1) Power to make exemption:- The
Government may, if they consider it necessary so to
do for the promotion of tourism, by notification in the
Gazette make exemption from the payment of
building tax under the Act in respect of any building
or buildings the construction of which is completed
during such period and in such areas as may be
specified in the notification and having such
specifications as may be prescribed in the rules in
this behalf.”
Also, to effectuate the said exemption provision, Rule 14A
was added in the Kerala Buildings Tax Rules, 1974 as under:
“Rule 14A
(1) The exemption contemplated in Section 3A of
the Kerala Building Tax Act, 1975 shall be
applicable to the buildings having the following
specifications in such Tourism sector and the
construction of which is completed during such
period as may be specified in the notifications:-
(i) Classified hotels (1 to 5 stars)
(ii) Motels(which conform to the specification of the
Department of Tourism of Kerala/ Central
Government)
(iii) Restaurants (approved by Classification
committee of the Government of India)
4Page 5
(iv) Amusement parks and research centres
approved by the Government.
(v) Ropeways at tourist centres.
(vi) Construction of structures like
Koothambalam/Auditorium etc by
schools/institutions teaching Kalaripayattu and
traditional art forms of Kerala.
(vii) Institutions teaching surfing, sking, gliding,
trekking and similar activities which will promote
tourism;
(viii) Ayurvedic centres with tourism potential;
(ix) Exclusive handicrafts with emporia (approved by
the State/Central Department of Tourism)
(2) The area so notified shall be approved Tourist
Centres and such other locations certified by a
Committee consisting of Secretary to Government,
Tourism Department, Secretary to Government
Taxes Department and Director, Department of
Tourism.
(3) The period of exemption shall be 10 years or
such shorter period in respect of specific areas as
may be notified in the Gazette based on the
recommendation of the Committee.”
6. By a Writ Petition filed in 1989, the appellants challenged
the notice dated 5th September, 1988. This resulted in a
judgment of the Kerala High Court dated 30th August, 1995 by
which the appellants were relegated to the Committee set up
under the 1986 G.O. to pursue their claim. Till final orders were
passed by the Committee, the judgment stated that the
5Page 6
respondents would not take any coercive steps to recover any
building tax assessed on the building constructed by the
appellants.
7. By a letter dated 6th February, 1997, the exemption
promised by the G.O. of 1986 was denied to the appellants
stating that as Section 3A had been omitted w.e.f. 1st March,
1993, the power to grant exemption had itself gone and,
therefore, no such exemption could be given to the appellants.
8. Pursuant to the aforesaid letter dated 6th February, 1997,
a notice dated 28th April, 1997 was issued by the authorities
asking the appellants to submit the necessary statutory return
under the Kerala Buildings Tax Act. This notice was, in turn,
challenged in O.P. No. 9601 of 1997, which culminated in a
judgment dated 20th July, 1998. Vide this judgment, the High
Court allowed the original petition and directed the Committee
to consider the matter afresh in the light of the judgment of the
Supreme Court in M/S Motilal Padampat Sugar Mills v. State
Of Uttar Pradesh & Ors., (1979) 2 SCR 641 and Shrijee
Sales Corporation & Anr. v. Union of India, (1997) 3 SCC
398.
6Page 7
9. Vide an order dated 4th February, 1999, the authorities
once again rejected the appellant’s application for exemption
from property tax. This order was challenged in Writ Petition
No. 9820 of 1999 which has led to the impugned judgment
dated 5th December, 2006. The High Court essentially rejected
the aforesaid Writ Petition on two grounds. First, it stated that
as no exemption Notification had, in fact, been issued under
Section 3A when it was in existence in the statute book, no
claim for exemption from payment of building tax would be
allowed. It further held that the mere promise to amend the law
does not hold out a promise of exemption from payment of
building tax. And finally, the High Court held that the question
of now exempting the appellants from building tax would not
arise as Section 3A itself had been omitted w.e.f. 1st March,
1993.
10. Shri V. Giri, learned Senior Advocate appearing on behalf
of the appellants before us, has argued that the High Court has
failed to consider various Supreme Court judgments on
promissory estoppel in their true perspective. In his submission,
the aforesaid judgment clearly led to the conclusion that when
the Government holds out a promise which has been acted
upon, except in cases of overriding public interest, which has
not been claimed in the facts of the present case, the
Government cannot resile from the said promise and must be
held to be bound thereby. He added that there was no
necessity for the Government to be directed to actually issue a
Notification under Section 3A as that would only be a ministerial
act which would be regarded as having been performed if
Government was to be held to its promise. According to the
learned counsel, therefore, a reading of the judgments of this
Court would necessarily lead to granting of relief to his client.
11. Shri Radhakrishnan, learned senior counsel appearing on
behalf of the respondents, countered these submissions and
supported the impugned judgment of the High Court. According
to Shri Radhakrishnan, a mandamus cannot be issued to the
executive to frame or amend the law. In any event, according
to the learned counsel, Section 3A having been deleted w.e.f.
1
st March, 1993, it is clear that no relief can be granted to the
appellants as on date.
12. Having heard the learned counsel for both the sides, we
are of the view that it will first be necessary to examine the
doctrine of promissory estoppel as laid down in M/S Motilal
Padampat Sugar Mills, (1979) 2 SCR 641 and as followed in
State of Punjab v. Nestle India Ltd., (2004) 6 SCC 465.
13. In the M/S Motilal Padampat Sugar Mills case, the
appellant before this Court was primarily engaged in the
business of manufacture and sale of sugar. An assurance was
given by the State Government in that case that new Vanaspati
units in the State which go into commercial production by 30th
September,1970 would be given partial concession in sales tax
for a period of three years. The appellant having set up such
Vanaspati unit thereafter went into the production of Vanaspati
on 2nd July, 1970 and sought exemption. The Government
apparently turned around and rescinded its earlier decision of
January, 1970 in August 1970, by which time the factory of the
appellant had gone into commercial production. A Writ Petition
was filed in the High Court of Allahabad asking for a writ
directing the State Government to exempt the sales of
Vanaspati manufacturer from sales tax for a period of three
9Page 10
years commencing 2nd July, 1970 as per the promise held out.
This plea fell upon deaf ears in the High Court, as a result of
which the petitioner in that case appealed to the Supreme
Court. After discussing the authorities in detail, this Court held:
“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 promisee and, in
fact, the promisee, acting in reliance on it, alters his
position, the Government would be held bound by
the promise and the promise would be enforceable
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. It is elementary
that in a republic governed by the rule of law, no
one, howsoever high or low, is above the law.
Everyone 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. It is indeed
difficult to see on what principle can a Government,
committed to the rule of law, claim immunity from
the doctrine of promissory estoppel. Can the
Government say that it is under no obligation to act
in a manner that is fair and just or that it is not
bound by considerations of “honesty and good
faith”? Why should the Government not be held to a
high “standard of rectangular rectitude while dealing
with its citizens”? There was a time when the
doctrine of executive necessity was regarded as
10Page 11
sufficient justification for the Government to
repudiate even its contractual obligations; but, let it
be said to the eternal glory of this Court, this
doctrine was emphatically negatived in
the Indo-Afghan Agencies case and the supremacy
of the rule of law was established. It was laid down
by this Court that the Government cannot claim to
be immune from the applicability of the rule of
promissory estoppel and repudiate a promise made
by it on the ground that such promise may fetter its
future executive action. If the Government does not
want its freedom of executive action to be
hampered or restricted, the Government need not
make a promise knowing or intending that it would
be acted on by the promisee and the promisee
would alter his position relying upon it. But if the
Government makes such a promise and the
promisee acts in reliance upon it and alters his
position, there is no reason why the Government
should not be compelled to make good such
promise like any other private individual. The law
cannot acquire legitimacy and gain social
acceptance unless it accords with the moral values
of the society and the constant endeavour of the
Courts and the legislature, must, therefore, be to
close the gap between law and morality and bring
about as near an approximation between the two as
possible. The doctrine of promissory estoppel is a
significant judicial contribution in that direction. But it
is necessary to point out that since the doctrine of
promissory estoppel is an equitable doctrine, it must
yield when the equity so requires. If it can be shown
by the Government that having regard to the facts
as they have transpired, it would be inequitable to
hold the Government to the promise made by it, the
Court would not raise an equity in favour of the
promisee and enforce the promise against the
Government. The doctrine of promissory estoppel
would be displaced in such a case because, on the
facts, equity would not require that the Government
11Page 12
should be held bound by the promise made by it.
When the Government is able to show that in view
of the facts as have transpired since the making of
the promise, public interest would be prejudiced if
the Government were required to carry out the
promise, the Court would have to balance the public
interest in the Government carrying out a promise
made to a citizen which has induced the citizen to
act upon it and alter his position and the public
interest likely to suffer if the promise were required
to be carried out by the Government and determine
which way the equity lies. It would not be enough for
the Government just to say that public interest
requires that the Government should not be
compelled to carry out the promise or that the public
interest would suffer if the Government were
required to honour it. The Government cannot, as
Shah, J., pointed out in the Indo-Afghan Agencies
case, claim to be exempt from the liability to carry
out the promise “on some indefinite and undisclosed
ground of necessity or expediency”, nor can the
Government claim to be the sole Judge of its liability
and repudiate it “on an ex parte appraisement of the
circumstances”. If the Government wants to resist
the liability, it will have to disclose to the Court what
are the facts and circumstances on account of
which the Government claims to be exempt from the
liability and it would be for the Court to decide
whether those facts and circumstances are such as
to render it inequitable to enforce the liability against
the Government. Mere claim of change of policy
would not be sufficient to exonerate the
Government from the liability: the Government
would have to show what precisely is the changed
policy and also its reason and justification so that
the Court can judge for itself which way the public
interest lies and what the equity of the case
demands. It is only if the Court is satisfied, on
proper and adequate material placed by the
Government, that overriding public interest requires
12Page 13
that the Government should not be held bound by
the promise but should be free to act unfettered by
it, that the Court would refuse to enforce the
promise against the Government. The Court would
not act on the mere ipse dixit of the Government, for
it is the Court which has to decide and not the
Government whether the Government should be
held exempt from liability. This is the essence of the
rule of law. The burden would be upon the
Government to show that the public interest in the
Government acting otherwise than in accordance
with the promise is so overwhelming that it would be
inequitable to hold the Government bound by the
promise and the Court would insist on a highly
rigorous standard of proof in the discharge of this
burden. But even where there is no such overriding
public interest, it may still be competent to the
Government to resile from the promise “on giving
reasonable notice, which need not be a formal
notice, giving the promisee a reasonable
opportunity of resuming his position” provided of
course it is possible for the promisee to restore
status quo ante. If, however, the promisee cannot
resume his position, the promise would become
final and irrevocable. Vide Emmanuel Avodeji
Ajaye v. Briscoe [(1964) 3 All ER 556 : (1964) 1
WLR 1326].” [pp. 682 – 685]
14. The Court further went on to hold that it was not
necessary for the petitioner to show that it had suffered any
detriment, and it was enough that the petitioner had relied upon
the promise or representation held out, and altered its position
relying upon such assurance. Importantly, the Court held:
“Of course, it may be pointed out that if the U.P.
Sales Tax Act, 1948 did not contain a provision
13Page 14
enabling the Government to grant exemption, it
would not be possible to enforce the representation
against the Government, because the Government
cannot be compelled to act contrary to the statute,
but since Section 4 of the U.P. Sales Tax Act, 1948
confers power on the Government to grant
exemption from sales tax, the Government can
legitimately be held bound by its promise to exempt
the appellant from payment of sales tax. It is true
that taxation is a sovereign or governmental
function, but, for reasons which we have already
discussed, no distinction can be made between the
exercise of a sovereign or governmental function
and a trading or business activity of the
Government, so far as the doctrine of promissory
estoppel is concerned. Whatever be the nature of
the function which the Government is discharging,
the Government is subject to the rule of promissory
estoppel and if the essential ingredients of this rule
are satisfied, the Government can be compelled to
carry out the promise made by it. We are, therefore,
of the view that in the present case the Government
was bound to exempt the appellant from payment of
sales tax in respect of sales of vanaspati effected by
it in the State of Uttar Pradesh for a period of three
years from the date of commencement of the
production and was not entitled to recover such
sales tax from the appellant.” [pp. 696 – 697]
15. Having so held, the Court then went on to hold that since
the Government is bound to exempt the appellant from
payment of sales tax for a period of three years w.e.f. 2nd July,
1970, being the date of commencement of the production of
Vanaspati, the appellant would not be liable to pay any sales
14Page 15
tax, subject only to the State’s claim to retain any part of such
amount under any provision of law. In the absence of such
claim, the State would have to refund the amount of sales tax
collected by it from the appellant with interest thereon.
16. It is important to notice that the necessary exemption
Notification in Motilal Padampat’s case had not been issued
under Section 4 of the U.P. Sales Tax Act, 1948. Yet, this Court
held that sales tax for the period in question could not be
recovered. This was done presumably because promissory
estoppel is itself an equitable doctrine. One of the maxims of
equity is that one must regard as done that which ought to be
done. In this view of the matter, it is obvious that the High
Court judgment is incorrect when it holds that as no exemption
Notification was, in fact, issued by the Government under
Section 3A, the petitioner would have to be denied relief. This
judgment has been followed repeatedly and has been applied
to give the benefit of sales tax exemption in similar
circumstances in Pournami Oil Mills & Ors. v. State of Kerala
& Anr., (1986) Supp. SCC 728 at Paras 7 and 8.
15Page 16
17. The same result would obtain on a reading of a more
recent judgment of this Court reported in State of Punjab v.
Nestle India Ltd., (2004) 6 SCC 465. On the facts of that
case, for the period from 1.4.1996 to 4.6.1997, purchase tax on
milk was to be abolished by the State Government. An
announcement to this effect was given wide publicity in several
newspapers in the State and a speech was given to the
aforesaid effect by the Finance Minister of the State while
presenting the budget for the year 1996-1997. That was further
translated into a memorandum of the financial Commissioner,
dated 26.4.1996, which was addressed to the Excise and
Taxation Commissioner of the State. When a meeting was
held on 27th June, 1996 by the Chief Minister and the Finance
Minister with the Excise and Taxation Commissioner and
various Financial a financial notification would be issued “in a
day or two”. For the first time, on 4th June, 1998, the
Council of Ministers decided that the decision to abolish
purchase tax on milk was not accepted and, consequently, the
authorities issued notice to the respondents requiring them to
pay purchase tax on milk for the year 1996-1997.
16Page 17
18. In this background, the High Court held that the State
Government was bound by its promise and representation to
abolish purchase tax. According to the High Court, the
absence of a financial notification was no more than a
ministerial act which remained to be performed. As the
respondents had acted on the representation made, they could
not be asked to pay purchase tax for the year 1996-1997. The
Writ Petition was allowed and the demand notice of tax for the
aforesaid year was struck down.
19. This Court, after adverting to Section 30 of the Punjab
General Sales Tax Act, 1948, which gave the State Government
the power to exempt from purchase tax, by notification, any of
the goods mentioned in the Schedule, recapitulated the entire
law of promissory estoppel in great detail. It referred to M/S
Motilal Padampat Sugar Mills, (1979) 2 SCR 641 and other
judgments, and finally held:
“The appellant has been unable to establish any
overriding public interest which would make it
inequitable to enforce the estoppel against the State
Government. The representation was made by the
highest authorities including the Finance Minister in
his Budget speech after considering the financial
implications of the grant of the exemption to milk. It
17Page 18
was found that the overall benefit to the State's
economy and the public would be greater if the
exemption were allowed. The respondents have
passed on the benefit of that exemption by
providing various facilities and concessions for the
upliftment of the milk producers. This has not been
denied. It would, in the circumstances, be
inequitable to allow the State Government now to
resile from its decision to exempt milk and demand
the purchase tax with retrospective effect from
1-4-1996 so that the respondents cannot in any
event readjust the expenditure already made. The
High Court was also right when it held that the
operation of the estoppel would come to an end with
the 1997 decision of the Cabinet.
In the case before us, the power in the State
Government to grant exemption under the Act is
coupled with the word “may” — signifying the
discretionary nature of the power. We are of the
view that the State Government's refusal to exercise
its discretion to issue the necessary notification
“abolishing” or exempting the tax on milk was not
reasonably exercised for the same reasons that we
have upheld the plea of promissory estoppel raised
by the respondents. We, therefore, have no
hesitation in affirming the decision of the High Court
and dismissing the appeals without costs.” [paras
47 – 48]
20. A perusal of this judgment would also show that relief was
not denied on the ground that no exemption notification was, in
fact, issued under Section 30 of the Punjab General Sales Tax
Act, 1948. In fact, this Court emphasized the discretionary
nature of the power to grant exemption. This Court held that
the State Government’s refusal to exercise its discretion to
issue the necessary notification abolishing or exempting tax on
milk was not reasonably exercised inasmuch as it was bound
by the doctrine of promissory estoppel to do so. And the finding
of the High Court that such Notification would only be a
ministerial act which had to be performed was, therefore,
upheld by this Court. This judgment has been recently applied
and followed in Devi Multiplex & Ors. v. State of Gujarat &
Ors., (2015) 9 SCC 132 at Para 20.
21. In fact, we must never forget that the doctrine of
promissory estoppel is a doctrine whose foundation is that an
unconscionable departure by one party from the subject matter
of an assumption which may be of fact or law, present or future,
and which has been adopted by the other party as the basis of
some course of conduct, act or omission, should not be allowed
to pass muster. And the relief to be given in cases involving
the doctrine of promissory estoppels contains a
degree of flexibility which would ultimately render justice
to the aggrieved party. The entire basis of this doctrine has
been well put in a judgment of the Australian High Court
reported in The Commonwealth of Australia v. Verwayen,
170 C.L.R. 394, by Deane,J. in the following words:
1. While the ordinary operation of estoppel by
conduct is between parties to litigation, it is a
doctrine of substantive law the factual ingredients of
which fall to be pleaded and resolved like other
factual issues in a case. The persons who may be
bound by or who may take the benefit of such an
estoppel extend beyond the immediate parties to it,
to their privies, whether by blood, by estate or by
contract. That being so, an estoppel by conduct can
be the origin of primary rights of property and of
contract.
2. The central principle of the doctrine is that the law
will not permit an unconscionable - or, more
accurately, unconscientious - departure by one
party from the subject matter of an assumption
which has been adopted by the other party as the
basis of some relationship, course of conduct, act or
omission which would operate to that other party's
detriment if the assumption be not adhered to for
the purposes of the litigation.
3. Since an estoppel will not arise unless the party
claiming the benefit of it has adopted the
assumption as the basis of action or inaction and
thereby placed himself in a position of significant
disadvantage if departure from the assumption be
permitted, the resolution of an issue of estoppel by
conduct will involve an examination of the relevant
belief, actions and position of that party.
4. The question whether such a departure would be
unconscionable relates to the conduct of the
allegedly estopped party in all the circumstances.
That party must have played such a part in the
adoption of, or persistence in, the assumption that
he would be guilty of unjust and oppressive conduct
if he were now to depart from it. The cases indicate
four main, but not exhaustive, categories in which
an affirmative answer to that question may be
justified, namely, where that party: (a) has induced
the assumption by express or implied
representation; (b) has entered into contractual or
other material relations with the other party on the
conventional basis of the assumption;
(c) has exercised against the other party rights
which would exist only if the assumption were
correct; (d) knew that the other party laboured under
the assumption and refrained from correcting him
when it was his duty in conscience to do so.
Ultimately, however, the question whether departure
from the assumption would be unconscionable must
be resolved not by reference to some preconceived
formula framed to serve as a universal yardstick but
by reference to all the circumstances of the case,
including the reasonableness of the conduct of the
other party in acting upon the assumption and the
nature and extent of the detriment which he would
sustain by acting upon the assumption if departure
from the assumed state of affairs were permitted. In
cases falling within category (a), a critical
consideration will commonly be that the allegedly
estopped party knew or intended or clearly ought to
have known that the other party would be induced
by his conduct to adopt, and act on the basis of, the
assumption. Particularly in cases falling within
category (b), actual belief in the correctness of the
fact or state of affairs assumed may not be
necessary. Obviously, the facts of a particular case
may be such that it falls within more than one of the
above categories.
5. The assumption may be of fact or law, present or
future. That is to say it may be about the present or
future existence of a fact or state of affairs
(including the state of the law or the existence of a
legal right, interest or relationship or the content of
future conduct).
6. The doctrine should be seen as a unified one
which operates consistently in both law and equity.
In that regard, "equitable estoppel" should not be
seen as a separate or distinct doctrine which
operates only in equity or as restricted to certain
defined categories (e.g. acquiescence,
encouragement, promissory estoppel or proprietary
estoppel).
7. Estoppel by conduct does not of itself constitute
an independent cause of action. The assumed fact
or state of affairs (which one party is estopped from
denying) may be relied upon defensively or it may
be used aggressively as the factual foundation of an
action arising under ordinary principles with the
entitlement to ultimate relief being determined on
the basis of the existence of that fact or state of
affairs. In some cases, the estoppel may operate to
fashion an assumed state of affairs which will found
relief (under ordinary principles) which gives effect
to the assumption itself (e.g. where the defendant in
an action for a declaration of trust is estopped from
denying the existence of the trust).
8. The recognition of estoppel by conduct as a
doctrine operating consistently in law and equity
and the prevalence of equity in a Judicature Act
system combine to give the whole doctrine a degree
of flexibility which it might lack if it were an
exclusively common law doctrine. In particular, the
prima facie entitlement to relief based upon the
assumed state of affairs will be qualified in a case
where such relief would exceed what could be
justified by the requirements of good conscience
and would be unjust to the estopped party. In such a
case, relief framed on the basis of the assumed
state of affairs represents the outer limits within
which the relief appropriate to do justice between
the parties should be framed.”
22. The above statement, based on various earlier English
authorities, correctly encapsulates the law of promissory
estoppel with one difference – under our law, as has been seen
hereinabove, promissory estoppel can be the basis of an
independent cause of action in which detriment does not need
to be proved. It is enough that a party has acted upon the
representation made. The importance of the Australian case is
only to reiterate two fundamental concepts relating to the
doctrine of promissory estoppel – one, that the central principle
of the doctrine is that the law will not permit an unconscionable
departure by one party from the subject matter of an
assumption which has been adopted by the other party as the
basis of a course of conduct which would affect the other party
if the assumption be not adhered to. The assumption may be of
fact or law, present or future. And two, that the relief that may
be given on the facts of a given case is flexible enough to
remedy injustice wherever it is found. And this would include
the relief of acting on the basis that a future assumption either
as to fact or law will be deemed to have taken place so as to
afford relief to the wronged party.
23. In the circumstances, the High Court judgment when it
holds that no notification was, in fact, issued under Section 3A
of the Kerala Buildings Tax Act, 1975, (which would be sufficient
to deny the appellants relief) is, therefore, clearly incorrect in
law.
24. However, some of the judgments of this Court have held
that a Writ of Mandamus cannot be issued to the executive to
frame rules or regulations which are in the nature of
subordinate legislation. (See: State of Jammu & Kashmir v.
A.R. Zakki & Ors. 1992 Supp. (1) SCC 548 at paragraphs 10
and 15, and State of Uttar Pradesh and Ors. v. Mahindra and
Mahindra Limited (2011) 13 SCC 77 at 81). This is for the
reason that a court would then trespass into forbidden territory,
as our Constitution recognizes a broad division of powers
between legislative and judicial activity.
25. However, though the power to grant exemption under a
statutory provision may amount to subordinate legislation in a
given case, but being in the domain of exercise of discretionary
power, is subject to the same tests in administrative law, as is
executive or administrative action, as to its validity – one of
these tests being the well-known Wednesbury principle under
which a court may strike down an abuse of such discretionary
power on grounds that irrelevant circumstances have been
taken into account or relevant circumstances have not been
taken into account (for example). This is clearly exemplified in
Indian Express Newspapers (Bombay) Private Limited and
others v. Union of India and others, (1985) 1 SCC 641.
26. In that case, by a notification dated 15.7.1977 issued
under Section 25(1) of the Customs Act, a total exemption from
customs duty was granted on imported newsprint. On
1.3.1981, the said Notification was superseded by the issue of
a fresh notification which exempted customs duty beyond 15%.
The second notification was the subject matter of challenge in
the aforesaid judgment in this Court. In an instructive passage
in the judgment under Heading V entitled “Are the impugned
notifications issued under Section 25 of the Customs Act, 1962
beyond the reach of Administrative Law?” this Court proceeded
by assuming that the power to grant exemption under Section
25 of the Customs Act is a legislative power and a notification
issued by the Government thereunder would amount to a piece
of subordinate legislation. Despite this being so, this Court held:
“That subordinate legislation cannot be questioned
on the ground of violation of principles of natural
justice on which administrative action may be
questioned has been held by this Court in Tulsipur
Sugar Co. Ltd. v. Notified Area Committee,
Tulsipur [AIR 1980 SC 882 : (1980) 2 SCR 1111 :
(1980) 2 SCC 295] , Rameshchandra Kachardas
Porwal v. State of Maharashtra [(1981) 2 SCC 722 :
AIR 1981 SC 1127 : (1981) 2 SCR 866] and
in Bates v. Lord Hailsham of St. Marylebone [(1972)
1 WLR 1373 : (1972) 1 A11 ER 1019 (Ch D)] . A
distinction must be made between delegation of a
legislative function in the case of which the question
of reasonableness cannot be enquired into and the
investment by statute to exercise particular
discretionary powers. In the latter case the question
may be considered on all grounds on which
administrative action may be questioned, such as,
non-application of mind, taking irrelevant matters
into consideration, failure to take relevant matters
into consideration, etc, etc. On the facts and
circumstances of a case, a subordinate legislation
may be struck down as arbitrary or contrary to
statute if it fails to take into account very vital facts
which either expressly or by necessary implication
are required to be taken into consideration by the
statute or, say, the Constitution. This can only be
done on the ground that it does not conform to the
statutory or constitutional requirements or that it
offends Article 14 or Article 19(1)(a) of the
Constitution. It cannot, no doubt, be done merely on
the ground that it is not reasonable or that it has not
taken into account relevant circumstances which the
Court considers relevant." [para 78]
27. Shri Radhakrishnan pressed into service Kasinka
Trading and another v. Union of India and another, (1995) 1
SCC 274. This was a case in which PVC resins were
exempted from basic import duty by a notification dated
15.3.1979. The said notification was in force up to and
inclusive of 31.3.1981. However, before expiry of the time fixed
in the notification, a notification withdrawing such exemption,
dated 16.10.1980, was issued. The petitioners in that case
invoked the doctrine of promissory estoppel. This Court held
that no representation had been made on facts, and that it
could not be said that a notification could not be rescinded or
modified before the date of expiry even if the Government is
satisfied that it was necessary in the public interest to rescind it.
28. This case is clearly distinguishable in that it was held (see
paragraphs 22 and 27) that no incentive to set up any industry
to use PVC resins had been made, and secondly, it was found
necessary in public interest to rescind or withdraw such
27Page 28
notification. On the facts of the present case, it is clear that a
clear representation/promise had been made pursuant to which
the State actually amended the Kerala Building Tax Act, 1975
by inserting Section 3A. And equally, there is no claim in the
present case that there is any change in circumstance because
of overriding public interest so that the doctrine of promissory
estoppel cannot be said to apply.
29. Shri Radhakrishnan also referred to a judgment of this
Court in Shree Sidhbali Steels Limited and others v. State of
Uttar Pradesh and others, (2011) 3 SCC 193. On the facts in
that case, a new industrial policy dated 30.4.1990 was declared
by the State Government assuring the grant of 33.33% hill
development rebate on the total amount of electricity bills to
new entrepreneurs for a period of 5 years. This period was
extended by another period of 5 years to be made available to
new industrial units set up till 31.3.1997. Vide notifications
dated 18.61998 and 25.1.1999, uniform tariffs of electricity were
introduced by which the rebate so given was reduced to 17%.
Post 2000, vide a notification dated 7.8.2000, a new tariff was
announced which completely withdrew the hill development
28Page 29
rebate. A challenge to the aforesaid notifications was turned
down by this Court. This Court was concerned with an earlier
decision reported in U.P. Power Corporation Limited v. Sant
Steels and Alloys (P) Ltd., (2008) 2 SCC 777, which took a
very restrictive view of Section 49 of the Electricity Supply Act
of 1948, stating that any notification issued thereunder can only
be revoked or modified if express provision was made for such
revocation under Section 49 itself. Further, such revocation
could take place under the General Clauses Act only if such
withdrawal was in larger public interest, or if legislation was
enacted by the legislature authorizing the Government to
withdraw the benefit granted by the notification. The larger
Bench overruled the Sant Steels case stating that its view of
Section 49 of the Electricity Supply Act was plainly incorrect,
and that Sections 14 and 21 of the General Clauses Act made it
clear that a notification issued under Section 49 could be
exercised from time to time, including the power to revoke such
notification.
30. However, when it came to the applicability of the doctrine
of promissory estoppel, this Court relied upon the observations
made in State of Rajasthan and another v. J.K. Udaipur
Udyog Ltd. and another, (2004) 7 SCC 673, and Arvind
Industries and others v. State of Gujarat and others, (1995)
6 SCC 53.
31. From the State of Rajasthan case, para 25 was quoted
by this Court in order to arrive at a conclusion that the recipient
of an exemption granted by a fiscal statute would have no
legally enforceable right against the Government inasmuch as
such right is a defeasible one in the sense that it may be taken
away in exercise of the very power under which the exemption
was granted. What was missed from that case was the very
next paragraph which states as follows:-
“In this case the Scheme being notified under the
power in the State Government to grant exemptions
both under Section 15 of the RST Act and Section
8(5) of the CST Act in the public interest, the State
Government was competent to modify or revoke the
grant for the same reason. Thus what is granted
can be withdrawn unless the Government is
precluded from doing so on the ground of
promissory estoppel, which principle is itself subject
to considerations of equity and public interest. (See
STO v. Shree Durga Oil Mills). The vesting of a
defeasible right is therefore, a contradiction in
terms. There being no indefeasible right to the
continued grant of an exemption (absent the
exception of promissory estoppel), the question of
the respondent Companies having an indefeasible
right to any facet of such exemption such as the
rate, period, etc. does not arise.” (at Para 26)
32. The aforesaid paragraph 26 has been noticed by this
Court in Mahabir Vegetable Oils (P) Ltd. and another v. State
of Haryana and others, (2006) 3 SCC 620, (see paragraphs
34 and 35). It is clear, therefore, that the reliance by this Court
in the Shree Sidhbali Steels Ltd. case upon the aforesaid
judgment when it comes to non application of the principle of
promissory estoppel to exemptions granted under statute would
be wholly inappropriate.
33. Similarly, the Arvind Industries case is again a judgment
in which it is clear that the doctrine of promissory estoppel
could have no application because the appellant in that case
was not able to show that any definite promise was made by or
on behalf of the Government and that the appellant had acted
upon such promise. (see paragraph 9)
34. It is clear, therefore, that Shree Sidhbali Steels Limited
was a case which was concerned only with whether a benefit
given by a statutory notification can be withdrawn by the
Government by another statutory notification in the public
interest if circumstances change - (see paragraphs 30 and 42).
Such is not the case before us. On the facts before us, a
notification which ought to have been issued under Section 3A
after it was introduced pursuant to a promise made was not
issued at all. And change in circumstances leading to
overriding public interest displacing the doctrine of promissory
estoppel is absent in the facts of the present case. We are,
thus, satisfied that the aforesaid judgment can have no
application whatsoever to the facts of the present case. 1
35. Shri Radhakrishnan then referred us to Excise
Commissioner, U.P. v. Ram Kumar, (1976) 3 SCC 540 at para
19, for the proposition that it is now well settled by a catena of
decisions that there can be no question of estoppel against the
Government in the exercise of its legislative, sovereign, or
executive powers.
36. This very passage was referred to in M/S Motilal
Padampat Sugar Mills and was explained thus:
1 Shree Sidhbali Steels Ltd. has been applied recently in Kothari Industrial
Corporation Ltd. v. Tamil Nadu Electricity Board & Ors., (2016) 4 SCC 134.
“The next decision to which we must refer is that in
Excise Commissioner U.P. Allahabad v. Ram
Kumar [(1976) 3 SCC 540 : 1976 SCC (Tax) 360 :
1976 Supp SCR 532] . This was also a decision on
which strong reliance was placed on behalf of the
State. It is true that, in this case, the Court observed
that “it is now well settled by a catena of decisions
that there can be no question of estoppel against
the Government in the exercise of its legislative,
sovereign or executive powers,” but for reasons
which we shall presently state, we do not think this
observation can persuade us to take a different view
of the law than that enunciated in the Indo-Afghan
Agencies case. …
It will thus be seen from the decisions relied upon in
the judgment that the Court could not possibly have
intended to lay down an absolute proposition that
there can be no promissory estoppel against the
Government in the exercise of its governmental,
public or executive powers. That would have been
in complete contradiction of the decisions of this
Court in the Indo-Afghan Agencies case, Century
Spinning and Manufacturing Co. case and Turner
Morrison case and we find it difficult to believe that
the Court could have ever intended to lay down any
such proposition without expressly referring to these
earlier decisions and overruling them. We are,
therefore, of the opinion that the observation made
by the Court in Ram Kumar case does not militate
against the view we are taking on the basis of the
decisions in the Indo-Afghan Agencies
case, Century Spinning & Manufacturing Co.
case and Turner Morrison case in regard to the
applicability of the doctrine of promissory estoppel
against the Government.” [SCR at pp. 689, 691]
37. Shri Radhakrishnan then referred us to the judgment in
Sharma Transport v. Govt. of A.P., (2002) 2 SCC 188 at
paragraph 24, and Bannari Amman Sugars Ltd. v. CTO,
(2005) 1 SCC 625, at paragraph 20, for the proposition that
promissory estoppel must yield to overriding public interest.
There can be no quarrel with this proposition except that, as
has been pointed out above, this case does not contain any
such overriding public interest.
38. Shri Radhakrishnan also referred us to Avinder Singh v.
State of Punjab, (1979) 1 SCC 137, at paragraphs 11 and 17,
for the proposition that the legislature cannot delegate its
essential legislative functions. We are at a loss to understand
how this authority would at all apply to the facts of the present
case as it is not the State’s stand that there is any excessive
delegation of legislative power in the present case.
39. In the present case, it is clear that no Writ of Mandamus is
being issued to the executive to frame a body of rules or
regulations which would be subordinate legislation in the nature
of primary legislation (being general rules of conduct which
would apply to those bound by them). On the facts of the
present case, a discretionary power has to be exercised on
facts under Section 3A of the Kerala Buildings Tax Act, 1975.
The non-exercise of such discretionary power is clearly vitiated
on account of the application of the doctrine of promissory
estoppel in terms of this Court’s judgments in Motilal
Padampat and Nestle (supra). This is for the reason that
non-exercise of such power is itself an arbitrary act which is
vitiated by non-application of mind to relevant facts, namely,
the fact that a G.O. dated 11.7.1986 specifically provided for
exemption from building tax if hotels were to be set up in the
State of Kerala pursuant to the representation made in the said
G.O. True, no mandamus could issue to the legislature to
amend the Kerala Buildings Tax Act, 1975, for that would
necessarily involve the judiciary in transgressing into a
forbidden field under the constitutional scheme of separation of
powers. However, on facts, we find that Section 3A was, in
fact, enacted by the Kerala legislature by suitably amending the
Kerala Buildings Tax Act, 1975 on 6.9.1990 in order to give
effect to the representation made by the G.O. dated 11.7.1986.
We find that the said provision continued on the statute book
and was deleted only with effect from 1.3.1993. This would
make it clear that from 6.9.1990 to 1.3.1993, the power to grant
exemption from building tax was statutorily conferred by
Section 3A on the Government. And we have seen that the
statement of objects and reasons for introducing Section 3A
expressly states that the said Section was introduced in order
to fulfill one of the promises contained in the G.O. dated
11.7.1986. We find that, the appellants, having relied on the
said G.O. dated 11.7.1986, had, in fact, constructed a hotel
building by 1991. It is clear, therefore, that the non-issuance of
a notification under Section 3A was an arbitrary act of the
Government which must be remedied by application of the
doctrine of promissory estoppel, as has been held by us
hereinabove. The ministerial act of non issue of the notification
cannot possibly stand in the way of the appellants getting relief
under the said doctrine for it would be unconscionable on the
part of Government to get away without fulfilling its promise. It
is also an admitted fact that no other consideration of
overwhelming public interest exists in order that the
Government be justified in resiling from its promise. The relief
that must therefore be moulded on the facts of the present case
is that for the period that Section 3A was in force, no building
tax is payable by the appellants. However, for the period post
1.3.1993, no statutory provision for the grant of exemption
being available, it is clear that no relief can be given to the
appellants as the doctrine of promissory estoppel must yield
when it is found that it would be contrary to statute to grant
such relief. To the extent indicated above, therefore, we are of
the view that no building tax can be levied or collected from the
appellants in the facts of the present case. Consequently, we
allow the appeal to the extent indicated above and set aside the
judgment of the High Court.
..............................J.
(A.K. Sikri)
..............................J.
(R.F. Nariman)
New Delhi;
May 11, 2016.
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