THE DOCTRINE OF PROMISSORY ESTOPPEL

THIS ARTICLE WAS WRITTEN BY SAVAN DHAMELIYA, A TRAINEE RESEARCH FELLOW AT RACOLB LEGAL AND A STUDENT OF AURO UNIVERSITY.

Introduction

This article is written to better understand the doctrine of promissory estoppel. Topics such as the meaning, jurisprudence, applicability, and evolution of the doctrine will be covered in this article. Promissory estoppel is such a doctrine which safeguards the innocent party from any damages or losses. The doctrine is a relatively new development. More about the doctrine will be explained further in this article.

Promissory estoppel

Promissory estoppel is a principle in which when one party with the intention of creating or affecting legal relationship makes a promise with another party and that party acts on it, then that promise should be binding for the party who is making it. It will not be allowed to go back from its words. Because reverting from the words will be against equity.

The Court will do what is necessary, but not more, to prevent a person who has relied upon such an assumption, promise or representation from suffering detriment. It differs from estoppels properly so called because the representation relied upon need not be one of present fact.^[21]Doctrine of promissory estoppels cannot be invoked if a change in the representation made by a government official is beyond his powers.

This principle can be further understood by the case of Motilal Padampat Sugar Mills vs State Of Uttar Pradesh And Ors. In this case, the Chief Secretary of Govt. made an assurance that in order to establish industries firmly the total tax exemption will be given to the new industrial units for next 3 years and based on this assurance M.P. sugar mill started hydro generation plant taking a huge amount of money as a loan. Afterward govt. makes some changes in the tax policy saying that industries will be taxed at a varying rate.

Applying the doctrine of promissory estoppels the SC held that appellant took a huge loan relying on the assurance made by govt. so no tax should be imposed for the period of 3 years from the date of production as the promise was made. And there is nothing like to make that promise enforceable one party should suffer harm or damages, in absence of detriment also the promise is binding. Here promissory estoppel was applied on the basis that one party had acted on the promise of another party of doing a certain act.

Jurisprudence of the doctrine

The governing law for the doctrine of promissory estoppel can be section 115 of the Indian Evidence Act. This section defines estoppel and it is used for deciding on the disputes between the parties. The ingredients of Section 115 must be satisfied with the application of the doctrine. The doctrine of promissory estoppel does not fall within the scope of Section 115 as the section talks about representations made as to existing facts whereas promissory estoppel deals with future promises.

Evolution of the Doctrine

The history of promissory estoppels can be traced back to England, derived from the principle of equity. The principle was introduced in England, and the early cases did not speak of this doctrine as an estoppel. They spoke of it as ‘raising equity’. The doctrine of promissory estoppel was first developed in Hughes v. Metropolitan Railway Co. In this case, the House of Lords ruled that with the initiation of the negotiations there was an implied promise by the landlord not to enforce their strict legal rights with respect to the time limit on the repairs and the tenant acted on this promise to their detriment, thus allowing the tenants more time to repair. Hence, the owner is estopped from claiming to the contrary.

The evolution of this principle of promissory estoppel can be traced in India to the case of Ganges Mfg Co. v. Sourajmul. Here the HC adjudged that the appellant was estopped from denying and observed that “the doctrine of estoppels was not only limited to the law of evidence but that a person may be prevented from doing any act or relying upon any particular argument or connection, which the rules of equity and good conscience prevent him from using as against the opponent.’’

Promissory estoppel and the government

In India, there are two stages in the evolution of the application of this doctrine against the government; pre-Anglo Afghan case and post- Anglo-Afghan case. Prior to this case, the doctrine of promissory estoppel could not be applied to the government.

In Union of India v. Anglo-Afghan Agencies, the Government of India announced certain concessions with regard to the import of certain raw materials in order to encourage export of woollen garments to Afghanistan. Subsequently, only partial concessions and not full concessions were extended as announced. The Supreme Court held that the Government was estopped by its promise. And after this case, in the case of Motilal Padampat Sugar Mills Co. Ltd. v. the State of U.P., the courts applied the doctrine of promissory estoppel. Thereafter the courts have applied the doctrine of promissory estoppel even against the Government. The doctrine found a complete and detailed exposition in this case.

Applicability

For the application of the doctrine of promissory estoppel, the requirement is that the party asserting the estoppels must have “changed or altered the position’’ by relying on that representation.

Ingredients

Ingredients to apply the doctrine of promissory estoppel were laid down in the case of Union Of India & Anr vs Wing Commander R.R. Hingorani. The principle laid down that to invoke the doctrine of estoppels, there are three conditions which must be satisfied;

1. Representation by a person to another
2. The other should have acted upon the said representation and
3. Such action should have been detrimental to the interests of the person to whom the representation has been made.

Only after all the three ingredients are met the doctrine of promissory estoppel can be established in a case.

Exceptions

There are some areas where the doctrine cannot be applied. Areas where the doctrine cannot be applied:

• There are no estoppels against the settled principle of law.
• It is not applicable in case of concluded commercial contract.
• The doctrine of promissory estoppels cannot be invoked if the assurance is held out but not incorporated in the agreement between parties.
• For applying the principles of promissory estoppels, alteration of the position by the plaintiff is the only requirement.

Conclusion

The doctrine is well established in India. It has helped in defending the innocent parties from any kind of injustice done by the other. When a promise is made to a person, and he acts depending on such promise, it becomes the duty of the promiser to fulfil such a promise, as not fulfilling it might cause harm or misfortune to the person. We live in a society where we have to work not only for ourselves, but for the society as a whole, and the place where we can start is at least not harming others. The doctrine is therefore essential to the better working of a society.

The doctrine is still ambiguous in a lot of ways and therefore needs proper explanation and formalization. This helps in the proper application of such a doctrine. Keeping this in mind the 108th report of law commission of India submitted in 1984 suggested Section 25A in the Indian Contract Act. It still needs more structuring and my suggestion is that the government should consider the suggestion of the law commission.

References

Authentic Websites

1. https://www.lawctopus.com/academike/promissory-estoppel/
2. https://indiankanoon.org/doc/1903729/
3. http://www.mondaq.com/india/x/262648/landlord+tenant+leases/Doctrine+Of+Estoppel+Overview
4. http://www.legalservicesindia.com/article/1135/The-Doctrine-of-Promissory-Estoppel.html

Cases as appearing in the article

1. 1979 AIR 621
2. Hughes v. Metropolitan Railway Co.
3. (1880) ILR 5 Cal 669
4. (1968) 2 S.C.R. 366
5. 1987 AIR 808