Doctrine of Promissory Estoppel and it’s Applicability in India
Doctrine of Promissory Estoppel and its Applicability in India
1. Introduction to Promissory Estoppel
The Doctrine of Promissory Estoppel is an equitable principle that prevents a party from going back on a promise even when a legal contract does not exist, provided the other party has relied on that promise to their detriment.
It essentially protects legitimate expectations created by one party’s promise, barring unfairness.
2. Origin and Essence
Originated in English law through the landmark case of Central London Property Trust Ltd. v. High Trees House Ltd. (1947).
It is a shield, not a sword, meaning it cannot be used to create new rights but only to prevent injustice from reneging on promises.
3. Conditions for Promissory Estoppel
A clear and unequivocal promise or representation.
Reliance on the promise by the promisee.
The reliance leads to a change of position or detriment.
It would be unjust or inequitable for the promisor to go back on the promise.
4. Applicability in Indian Law
In India, the doctrine is recognized but applied with caution. Indian courts use it mainly as a defensive doctrine to prevent injustice in administrative and contractual contexts.
5. Key Indian Cases on Promissory Estoppel
(A) Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh AIR 1979 SC 621
Facts:
The government had promised not to increase certain taxes for a period, on which the company relied. Later, the government sought to impose taxes retroactively.
Issue:
Could the government enforce the retroactive tax demand despite the earlier promise?
Held:
The Supreme Court invoked promissory estoppel against the government, holding that it could not enforce the retroactive tax if it was detrimental and contrary to the promise.
Significance:
Affirmed the application of promissory estoppel against the state.
Emphasized the doctrine’s role in public law and administrative decisions.
(B) Union of India v. Godfrey Phillips India Ltd. AIR 1989 SC 713
Facts:
The government promised a certain tax exemption, and the company acted upon it. Later, the government sought to deny the exemption.
Issue:
Whether the government could renege on its promise.
Held:
The Supreme Court held that the government was estopped from withdrawing the exemption as the company had relied on the promise.
Significance:
Reinforced promissory estoppel as a binding principle in government policy changes.
Helped stabilize business expectations.
(C) D.C. Builders v. Sukhwinder Singh (1997) 8 SCC 573
Facts:
D.C. Builders were assured by a municipal corporation that a delay in completion of construction would not attract penalty. Subsequently, a penalty was imposed.
Issue:
Whether the corporation could impose the penalty despite the assurance.
Held:
The Supreme Court ruled in favor of D.C. Builders, applying promissory estoppel to prevent the corporation from acting inconsistently.
Significance:
The doctrine was used to protect contractors against arbitrary administrative action.
Showed its importance in government contracts.
(D) Karnataka Power Corporation Ltd. v. Lanco Kondapalli Power Ltd. (2010) 9 SCC 424
Facts:
An electricity corporation assured Lanco Kondapalli that certain terms in the power purchase agreement would not be altered. The corporation later tried to change those terms.
Issue:
Whether the corporation could go back on its promise.
Held:
The court held that promissory estoppel barred the corporation from altering terms it had promised to keep unchanged.
Significance:
Underlined estoppel in commercial contracts involving government entities.
Emphasized equity and fairness over strict contractual formalities.
(E) State of Orissa v. Madanpur Coal Co. AIR 1962 SC 1047
Facts:
The state promised not to interfere with certain rights for a period. Later, it sought to alter those rights.
Issue:
Whether the state was bound by its earlier assurance.
Held:
The Supreme Court ruled that the state was estopped from reneging on its promise.
Significance:
Early recognition of the doctrine in Indian administrative law.
Affirmed that the state must act fairly and honor its promises.
6. Important Observations on Applicability
Against Government: Indian courts have extended promissory estoppel to acts of the government, requiring fairness in administrative promises.
Not for Creating New Rights: It is used defensively to prevent unfairness, not to impose new obligations.
No Formal Contract Needed: A mere promise or representation suffices if relied upon.
Commercial and Public Law: Applied in both business contracts and administrative decisions.
7. Summary Table
| Case | Year | Context | Outcome/Principle |
|---|---|---|---|
| Motilal Padampat Sugar Mills v. UP | 1979 | Tax exemption promise | Government estopped from retroactive tax |
| Union of India v. Godfrey Phillips | 1989 | Tax exemption | Estoppel against government policy change |
| D.C. Builders v. Sukhwinder Singh | 1997 | Construction contract | Estoppel protects against penalty imposition |
| Karnataka Power Corporation v. Lanco | 2010 | Power purchase contract | Estoppel bars altering promised terms |
| State of Orissa v. Madanpur Coal Co. | 1962 | State assurances | State bound by promise, estoppel applied |
8. Conclusion
The Doctrine of Promissory Estoppel in India acts as an equitable safeguard ensuring that promises made by the government or other parties, when relied upon, are honored to avoid injustice.
While it does not create enforceable contracts on its own, it prevents unfair withdrawal of promises and fosters legal certainty and fairness in both public administration and commercial relations.
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