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PROMISSORY ESTOPPEL AND GOVERNMENT AGENCIES

Author: Sakshi Sharma, I year of B.A.,LL.B.(Hons.) from National Law Institute University, Bhopal


INTRODUCTION The term “Promissory Estoppel and Government Agencies” deals with the sphere of Prom- issory Estoppel and its principles which affects GA and their conduct. Promissory Estoppel is a doctrine that relies on the principle that one who does or omit any act or promises to do or omit any act with an intention to establish or changing legal relationship with other party, cannot withdraw its promise provided that the other party, on the assurance of promise, alters his position or does some act. The promise would be binding on the party who made it. The promisor is obliged to perform his duties in accordance with the promise.

This is based on the principles of equity, fair play and justice. This doctrine tends to shield the interests of the aggrieved party who may have suffered some losses and detriment on the account of the promise. It is pertinent to keep in mind here that any loss or detriment is no pre-condition for the applicability of this doctrine. The mere instances that that party has changed his position by assuming that the promise will be performed.

This doctrine comes in the ambit of neither contract or estoppel. It is relevant in case of a breach of a contract and invoked against government in common law. According to this principle in context of GA, if any government representative, be it a government executive or any other authority whom the public or omit any act, becomes bound and obliged to perform it if the public/other party acts on it and thus alters his position. GA cannot change its stance or withdraw it. It is bound to perform its obligation as per the promise made. It is immaterial in such cases whether the representation was wholly or partially as it makes no difference to the status of the case if it has made alteration to the other party.

In circumstances when there is no formal contract, it is also utilized by the courts to preventpeople from breaking promises, assurances, or behaviors that persuaded the otherparty to believe something was true and act on that belief. It becomes pertinent here to go through consideration, evolution of the doctrine of estoppel inIndia, Jurisprudence behind this doctrine with reference to the cases decided. THE DOCTRINE OF PROMISSORY ESTOPPEL Promissory estoppel is a just and equitable doctrine. It is discretionary, like all equitable remedies, as opposed to a common law absolute right, such as the right to damages for breach of contract. The doctrine has been referred to as "promissory estoppel," "equitable estoppel," "quasi estoppel," and "new estoppel," among other terms. It is a principle developed by equity to avoid injustice, and while it is usually referred to as 'promissory estoppel' it is neither a contract nor an estoppel.

The true principle of promissory estoppel is that if one party makes a clear and unequivocal promise to the other, knowing or intending that the other party would act on the promise, the promise will be binding on the party making it, and he will not be entitled to go back on his word. It is not essential for the promisee acting in reliance on the promise to suffer any harm in order for the law of promissory estoppel to be applicable.

Estoppel is a rule of equity that is used by the Courts of Equity in England. The doctrine's applicability would nullify a constitutional provision of Article 299 which states: “All contracts made in the exercise of the executive power of the Union or of a State shall be expressed to be made by the President, or by the Governor of the State and all such contracts and all assurances of property made in the exercise of that power shall be executed on behalf of the President or the Governor by such persons and in such manner as he may direct or authorise. The President, the Governor or any other person authorised to do so, shall not be liable for such executed contracts or assurance.”[1]

As a result, because the concept is an equity principle, the courts have exercised their discretion to emphasize equity and justice in explaining the idea of promissory estoppel in India. The following elements are required for the doctrine to be applied:[2] 1. There should be an act or omission showing intention to make a promise or any future commitments. 2. Such act or omission should be intended to affect legal relationship of the parties and to be acted upon accordingly. 3. The other party has altered its legal stance.

It is inequitable for the promisor to be able to back out of the assurance or representation because of what the promisee has done or refrained from doing in reliance on it.

As a result, one can rely on the Government of India's lawful commitment and act safely on it because the law of the land protects citizens.It can be claimed that if the Indian government makes a promise to a person that is not contrary to the law of the land or against the public interest, the government cannot refuse to keep that promise.

CONSIDERATION AND PROMISSORY ESTOPPEL The term 'contract' is defined as an agreement enforceable by law under section 2 of the ICA, 1872 (h). Every promise is an agreement under art. 2(e). However, unless the agreement is supported by 'consideration,' it will be null and void, except in the three cases listed in section 25.As a result, unless a promise is backed up with 'consideration,' it will not be legally enforceable.

The term 'consideration' is defined as follows in Section 2(d): When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do, or abstain from doing, something, such act or abstinence or promise is called a consideration for the promise.”[3]

As a result, when someone makes a promise, unless the promisee does, has done, or promises to do something at the promisor's request, the promise is worthless and cannot be enforced in a court of law.

According to the Supreme Court of India, acting on assurances or representations is sufficient, and the resulting harm, damage, or prejudice does not need to be proven. It also makes no difference whether the representation was entirely or partially responsible for the change in position. The Supreme Court correctly observed that disadvantage now encompasses not only monetary loss but also whether it appears unjust. EVOLUTION OF THE DOCTRINE OF PROMISSORY ESTOPPEL It is crucial to trace the evolution of the doctrine of promissory estoppels in order to grasp its full breadth. Estoppel is an equity rule. In recent years, this regulation has taken on additional dimensions. The traces of the Doctrine of Promissory Estoppel could be found way before but it was in 1947 that it was asserted and recognized as a doctrine by Lord Denning in Central London Propertied Ltd v High Trees House.


There are two stages in the evolution of application of this doctrine in India: pre-Anglo Afghan case and post-Anglo Afghan case. The position prior to this decision was that promissory estoppel did not apply to the Government. With this example, however, the situation changed. In Union of India v Anglo Afghan Agencies,[4] the Government of India granted some exemptions on the import of certain raw materials to boost the export ofwoolengarments to Afghanistan. As a result, only partial concessions, rather than full concessions, were granted as promised. The Government was estopped by its pledge by the Supreme Court. The idea of promissory estoppel has since been invoked even against the government by the courts. Another important case to mention is Jit Ram Shiv Kumar v State of Haryana.[5]


Earlier, the promisee cannot challenge the doctrine of promissory estoppel throughout the developing period unless the party has suffered any harm. One thing that is required is the other party's reliance on the promise and action based on the promisor's guarantee.


In India, the idea of promissory estoppel was widely recognized without regard for consideration, and it became well-known as a cause of action for the persons to whom the promise was made.


UNION OF INDIA V ANGLO AFGHAN AGENCIES[vi]

Background

The case of Union of India v Indo Afghan Agencies[vii] is the first significant case in India to establish the doctrine of promissory estoppel as a legal doctrine. It was re-stated emphatically that no one's right or liberty may be taken away unless in accordance with and under the authority of the law.


Facts

On October 10, 1962, the Textile Commissioner released the Export Promotion Scheme, which provided incentives to woolen goods exporters. It was extended to woolen goods exports to Afghanistan by a Trade Notice dated 1 January1963. M/s Indo-Afghan Agencies (hereinafter called the respondents), an Amritsar-based corporation that specialized in woolen goods, exported woolen goods to Afghanistan in September 1963.


The respondents exported woolen items to Afghanistan, and the Textile Commissioner issued an Import Entitlement Certificate for a lower sum rather than the full F.O.B. value of the products exported. In doing so, the Textile Commissioner gathered evidence ex parte and, based on the report of a committee he created, issued orders without telling or giving the respondents an opportunity to clarify the materials on the basis of which the respondents' 'import entitlement' was decreased.


Some of the exporters testified before the Committee, explaining the circumstances behind their exports, but they were not given access to the Committee's report. The respondents made representations to the CG, but the directives were confirmed.


Following that, the respondents filed writ petitions in the High Court. The High Court overturned the Textile Commissioner's and Government's orders, holding that the respondents were entitled under the Scheme to obtain import licences for an amount equal to 100 percent of the F.O.B. value of their exports unless it was determined on a duly conducted inquiry under clause 10 of the Scheme that the respondents had disentitled themselves to full value import licences by 'over-invoicing' the goods.


Without making any such inquiry to the Textile Commissioner proceeded on the basis of his subjective belief that the respondents had 'over invoiced' the commodities exported, and that the government had acted similarly in dealing with the respondents' representation.


Issues

Whether the Export Promotion Scheme is purely administrative in nature, containing only executive orders from the CG to the Textile Commissioner or that it gives exporters no enforceable rights to export their goods in accordance with the Scheme, and that it puts no requirements on the government to issue import certifications.


Whether the textile Commissioner is the sole arbiter of the reasons for limiting the import entitlement, and the Scheme does not compel him to explain why the import entitlement was reduced.Whether the Government, on the basis of executive necessity, is the sole arbiter of the legality of its actions in matters relating to import and export policy, because the policy is dependent on the economic climate and other related factors and has to be flexible by its very nature, with the power to modify or adjust it as circumstances changed;


Even if no formal contract in the manner required by Art. 299 of the Constitution was executed, whether the Government would be bound by a contractual duty if every representation made by it on its intentions is held to be binding.


Judgement

  • When a person has exported goods based on representations made in an Export Promotion Scheme that an import permit up to the value of the items shipped will be provided, his claim for the maximum amount permissible by the Scheme cannot be arbitrarily denied.


  • In this situation, a reduction in the amount of the import certificate may be justified on the basis of the exporter's misconduct in regard to the items exported, or specific circumstances such as a difficult foreign exchange position, or other matters affecting the State's public interests.

  • In the ordinary course, the Textile Commissioner should grant an import certificate for the full value of the goods exported; he may reduce that amount only after the inquiry contemplated by clause 10 of the Scheme, that is, an inquiry conducted after giving the respondents an opportunity to respond and conducted in accordance with natural justice rules and basic concepts of justice and fairness.

  • If there is any executive necessity, it does not absolve the government of its solemn promise, on which citizens have relied to their detriment, especially when the representation in the Scheme was not subject to any implied term that the government would not be obligated to grant the import certificate for the full value of the goods exported if they deem it inconvenient.

  • The Government is obligated to keep the promise it made, and if the citizen who relied on the promise changed his mind, the doctrine of promissory estoppel would apply against the Government, and the Government could not be released from its obligation on the basis of executive necessity or the lack of a formal contract executed after all statutory requirements were met.

  • The respondents were not attempting to enforce any contractual rights; rather, they were attempting to enforce the Textile Commissioner's compliance with the Scheme's obligations. The respondents' claim was based on the equity that accrued in their favour as a result of the government's representation in the Export Promotion Scheme and the respondents' actions in response to that representation.

  • It was also not argued that the representation in the Scheme was subject to an implied stipulation that the Union of India would not be obligated to give an import certificate for the entire amount of the items shipped if it was deemed inconvenient to do so. The Court cannot accept the argument that executive necessity absolves the government of its solemn pledges, on which citizens have relied to their cost.

  • If a member of the administration seeks to deprive a citizen of his right or liberty other than in the exercise of power derived from the law – common or statute – the Courts will be competent to, and indeed would be bound to, preserve the rights of the aggrieved citizen.


PROMISSORY ESTOPPEL ON GOVERNMENT AGENCIES

In Union of India v Anglo Afghan Agencies[viii], the court determined that the notion of promissory estoppel had found its most clear expression. The writ-applicant had relied on the fare advancement plot issued by the CG, which had sent out woolen products, and then guaranteed the import qualification authentication for the entire benefit under the plan. The solicitor built a case for dependency, while the administration argued for official need.


Finally, in, the Supreme Court dealt with the doctrine of promissory estoppel at great length, concluding that it provided a justification for the conduct in the case of Motilal Padampat Sugar Mills vs. State of Uttar Pradesh.[ix]


The court decided that the all-out portrayal contained in the letters for the benefit of the Government of Uttar Pradesh, based on which the appealing party obtained cash from money related organizations and established a plant, invoked the doctrine of promissory estoppel, and that the administration will undoubtedly finish the portrayal and exclude the litigant from the instalment of offers charge in regard to the appeal.


The Supreme Court has recognized that the doctrine of promissory estoppel is a guideline developed by value to avoid foul play, and while it is not in the domain of agreement nor in the realm of estoppel, it is a doctrine advanced by value to avoid bad form where a guarantee is made by an individual knowing that it will be followed up on by the individual to whom it is made, and it is actually followed up on.There are characteristics required for a commitment to be legally binding on the government.


The following are the requirements for any promise to be enforceable by the government:

1. Within the bounds of the law, the state makes the commitment.

2. There is a desire to have a legally binding relationship.

3. The other party is required to perform an act in support of that promise or is prohibited from doing so.


SOME EXCEPTIONS OF PROMISSORY ESTOPPEL

  • There is no estoppel against a statute or a rule of law.

Statutes are not covered by the doctrine of estoppel. In other words, a person who makes a declaration about the existence of statutory provisions is not estopped from later claiming that the statutory provision differs from what he previously asserted. It is illegal for a person to misrepresent the genuine status of a statute or law.


The opposing party/partiesrelying on such a representation is free to research the legal position on the issue, and ignorance of the law is no excuse, as the maxim goes. As a result, a person cannot use the defence of estoppel to claim that a false representation about the contents of a statute or law was made. The concepts of estoppel cannot overrule statutory provisions. Estoppel cannot preclude a responsibility imposed by a legislation through positive conduct. The theory cannot be used to impede the government's legislative and executive branches from carrying out their responsibilities.


A statute imposes a public responsibility, whereas a promise imposes duties on the government that are owed to private persons rather than the public. Estoppel does not apply to a violation of a statute, but it does apply to the Government's breach of a commitment.


To invoke the maxim of 'no estoppel against a statute,' the following requirements have been established-

1. Regardless of the statutory provisions of any appropriate act, the parties must agree to contract bilaterally.

2. The Act must specifically prevent the parties from entering into an agreement.

3. The law must be made in the public interest and not for the benefit of a specific group of people.

4. The parties' agreement should not have been combined into a court order dissuading the court from exercising its statutory duty due to the parties' conduct.


  • There is no estoppel in regard to public policy.

If there is any representation or promise by any government executive which is in contrast to public policy and any person acts on it, then there will be no obligation on government to fulfil it. It is assumed that citizens must be cognizant and informative enough to figure out the non-enforceability of such promise. Government cannot make any move that tends to harms the public harmony and welfare. Salus Populi Suprema lex is assumption here which negates any promise against public policy.


For instances, Government Officials made a representation that industrial enterprises set up in a particular area will be exempted from tax for a particular caste and all other castes have to pay the tax. Such promise is groundless as it is against public policy.


  • Negation of defence of executive necessity

The doctrine of promissory estoppel has also been used against the government, and the executive necessity defence has been ruled out. The government is not immune from accountability for failing to carry out its representations about future action, and it cannot do so solemnly on the basis of some undefined and secret necessity or expediency. In terms of the law of promissory estoppel, the Supreme Court has declined to distinguish between a private individual and a public body.


  • Rule of law in promissory estoppel

It is fundamental in a republic regulated by the rule of law that no one, no matter how powerful or powerful, is above the law. Everyone, even the government, is subject to the law in the same way that everyone else is. The fact that the government is on the same footing as a private individual in terms of legal obligations is a source of great pride for constitutional democracy and the rule of law. The government cannot claim protection from the rule of promissory estoppel and reject a promise made on the grounds that it could stifle future executive activity.The equitable notion of promissory estoppel must yield when the equity requires it.


  • Rule of equity

If the Government can establish that, given the facts as they have since changed, it would be inequitable for the Government to keep the promise it made, the court will not raise an equity in favor of the promise and will not enforce it against the Government. Because equity does not require the government to be bound by the promise, the doctrine of promissory estoppel will be substituted in this case.


  • Legal responsibilities and promissory estoppel

The notion of estoppel cannot be used to hinder the government from carrying out its legal responsibilities. The notion of cannot be used in the face of a legal obligation or liability. It can't be used to force the government, or even a private party, to do something that's against the law. There can be no promissory estoppel that prevents legislative power from being exercised. The notion of promissory estoppel can never be used to prevent the legislature from exercising its legislative powers.


An understanding of judicial action also shows that estoppel cannot be used against the government if it jeopardizes the government's constitutional powers.The court also refused to accept the Government's claim of estoppel if it had the effect of removing any article of the Constitution.


THE ROLE PLAYED BY DOCTRINE IN INDIA

To summarize, if the Government of India or any State in India makes a promise to a person that is not contrary to the law of the land or against the public interest, the Government of India or any State in India cannot refuse to follow through on that promise. According to the Supreme Court of India, acting on assurances or representations is sufficient, and the resulting harm, damage, or prejudice does not need to be proven.


It also makes little difference whether such representation was entirely or partially responsible for the change in position. The Supreme Court correctly observed that disadvantage now encompasses not only monetary loss but also whether it appears unjust.


It is inequitable for the promisor to be able to back out of the assurance or representation because of what the promisee has done or refrained from doing in reliance on it. As a result, one can rely on the Government of India's lawful commitment and act safely on it because the law of the land protects citizen.

  • Estoppel of licensee

The doctrine of Promissory Estoppel doesn’t deprive the Government of its power to regulate activities. The granting of License by Government doesn’t provide the other party a carte blanche. Government has its rights to regulate or restricts activities for public interest even after giving license or making any representation.The party that was granted a liquor licence was barred from later claiming that certain of the limits placed on his trade freedom, particularly the one under which the government reserved the right to change issue pricing, were unfair. Unreasonability must be assessed in the context of all circumstances, including the public interest.


Liquor consumption must be reduced, hence unrestricted trading in this item is not possible. The ability to change issue pricing is one way to exert influence over this market. Only a brutal application of this power will be allowed by the courts. Its unjust use can always be stopped by writ jurisdiction.


  • No estoppel against a minor

It is very much pertinent to reflect on a situation where a minor has entered into a contract by misrepresenting the age. It is relevant to know whether estoppel can be enforced against such person.However, a preponderance of authority presently holds that there are no such estoppels against a minor. The infant is not prevented from establishing his or her infancy defence. The reason is straightforward. Estoppels cannot be used against a statute. The objective of contract law is to protect minors from contractual liability, and the doctrine of estoppels can't be used to undermine that policy. Promissory Estoppel cannot be used for undermining the rules laid down in Acts and Statues.


SUBSTANTIVE DISCUSSION AND ANALYSISON PROMISSORY ESTOPPEL

Nothing in this world runs perfectly without a hiccup. Promissory estoppel serves as a shield for the promisee on the one hand, but it also creates financial issues on the other. Even if a country has a well-established administration, individuals have certain expectations of specific departments to operate in accordance with the pledges they have made and procedures they have established. Some of the issues that have arisen as a result of this doctrineAs a general defence, promissory estoppel is thought to operate as a shield. This defence allows Promisor to collect damages incurred as a result of his reliance on the promise. Even if there is no consideration, promissory estoppel will protect you since it is an exception to the norm that consideration is necessary.

On the other hand, there is a different side of view as well. Citizens expect departments and agencies to perform in accordance with the procedures they have created for themselves or the pledges they have made in all civilized administration systems.


Departure from that procedure or promise, whether it is a simple norm of practise, undermines legitimate expectations, and citizens seek recourse in the courts. The courts will then determine whether the procedure or promise is enforceable against the body that adopted or made it.To what degree may the private law principle of persons being held liable for statements made by them and relied on by others to their harm is pertinent to answer in order to establish harmony between different stances.


According to one point of view, a public entity entrusted with powers and obligations for public purposes cannot abdicate such powers and duties by entering into contracts or making statements that are incompatible with the discharge of those powers and duties. If a departmental official makes a representation that is relied on by a private party to their detriment, the department can nonetheless retract the representations if it is in the public interest.Another viewpoint is that the department can be held to the representation unless the court is convinced that a departure is justified by overriding public interest considerations.


Though Government Executives and Agencies are seen by the public with trusted lens. The actions and promises made by them while in office generations considerable faith and expectations in common ones about the future conduct of the Government. Their actions when modified by the these promises and it is justifiable that it should bear the losses in such situation keeping in consideration some exceptions, which are necessary to prevent its misuse. It may be financially unviable for the it but it is in public interest. It also acts as a shield and control over Government Executives to communicate things which are relevant and necessary.


On the other hand, it is undeniable that there must be some exception in order to ensure its fair use. One must not be given chance to use such promises for its personal interest and stripped of the large public interest.


CONCLUSIONS

After critically analyzing the project topic and insights presented, it is right to be concluded that our hypothesis was right. Taking into consideration all the facts and circumstances where this doctrine can be enforced against the Government, it is clear and precise that Government should be held liable for representation or promise made by its representatives, officials, executives, if any person alters his position on the basis of such promise.


It is often believed that if the Government of India or any State in India makes a promise to an individual that is not in conflict with the law and regulation that must be followed and is not against public interest, it cannot refuse to keep that promise a short time later. The Indian Supreme Court has ruled that following up on affirmations or portrayals is sufficient, and that the hardship, harm, or bias generated as a result does not need to be shown.

[1] Law Commission of India, 108th Report on Promissory Estoppel. [2]ibid. [3]Avatar Singh, “Contract and Specific Relief”(12th edn, EBC Explorer, 2012). 8(1968) AIR 718. 9AIR (1980) SC 1283. [vi](1968) AIR 718. [vii]ibid. [viii]ibid. [ix] AIR (1979) SC 621.