Doctrine Of Promissory Etoppel: Applications And Limitations

Introduction.                                                                                                                                                           
Over the years, the doctrine of promissory estoppel has been a subject of extensive perusal and scrutiny among the legal fraternity worldwide. The doctrine is a widely used legal principle that enforces a promise delivered by a party even if it is not executed as a contract. It provides a new facet for looking at redressal in case the defendant, retracts from his obligations but is 'estopped' from doing so in order to maintain the principles of equity and justice. It is a new branch of contract law and as such it creates no contract, so no consideration is needed, therefore[1].  In modern times this doctrine is of crucial importance as it allows for the discharge of promises even when the standard elements of contracts like offer, acceptance, consideration, etc are not strictly present and hence provide for a feasible remedy in case of non-definite contractual relationship between parties.This research would help us understand how the doctrine evolved in India and elsewhere, the compatibility of promissory estoppel with Indian Constitutional provisions, discuss its real-life applications and limitations at length, and answer the research questions.                                       

Research Questions.                                                                                                                            

• What is the scope of application of the doctrine against the Government.                                            
• What have been the different English and Indian cases that contributed to the emergence of the doctrine.                                                                                                                                                                                  

Understanding the doctrine.                                                                                                                          
To put simply the doctrine states that once a party by its actions conveys to another party an intelligible and unambiguous promise which under normal circumstances being intentional in nature creates new legal obligations or gives effect to any legal relationship arising in the future,  and has a reason to believe that the other party to whom the promise is made would act on it then the said promise binds the party making it and as such it will not be allowed by legal means to go back on it or in other words would be 'estopped' from doing so. Hence, we can say that a person may become bound by a promise, not because of a contract but based on promissory estoppel. The objective of the doctrine as clear from the abstract above is to uphold the principles of uprightness, equity, and righteous conscience, and therefore it is often referred to as an "equitable doctrine". As such the doctrine falls in the sphere of neither contract nor estoppel[2] because it relates to representations of the future and not to existing facts hence it does not fall within the scope and the reading of Section 115 of the Indian Evidence Act,1872. Also, there is no 'consideration' as defined by section 2, cl. (d) of the Indian Contract Act, 1872, hence it cannot be characterized as a contract[3]. Hence the doctrine is an exception to the doctrine of consideration. However, the fundamental principles of both the Indian Contract Act and the Indian Evidence Act are to be dealt with in case of promissory estoppel. The full inferences of promissory estoppel remain to be elucidated and resolved, for this reason, we shall delve into the case laws that defined and evolved the doctrine:

Inception and development of the doctrine.                                                                                      

A noteworthy international case law that saw the birth of the doctrine was the famous English case law Central London Property Trust Ltd. v High Trees House Ltd[4]. The brief facts of the case were that during the Second World War a certain landlord, the claimant leased out some flats called High Trees House to the lessee, the defendant. However, due to the ongoing war crisis, people were facing a housing shortage which resulted in the claimant's flats being partially occupied, resulting in financial losses. Sympathising with the defendant, the claimant reduced the rent by half but the agreement to do so was made orally and without documentation. After normalcy, people returned to the cities and now the landlord demanded the deficit of the previous rent from the lessee i.e. half the total rent.                                                                                       Lord Denning, presiding over the case held that the landlord was not allowed to go back on his earlier promise of accepting the half rent when the flats were partially housed however, the claimant shall be allowed to claim the full rent after normalcy i.e. when the war ended. The judge gave the following reasoning:                                                                                                                               
“I am satisfied that such a promise is binding in law and the only question is the scope of the promise in the present case. The principle does not create new causes of action where none existed before. Promise intended to be binding, intended acted on, and in fact acted on, is binding so far, its terms properly apply.”   *Central London Property Trust Ltd. v High Trees House Ltd*1947) KB 130 (KB) Denning J at 134.                                                                                                                                                                                                                    
A landmark case in the Indian context in which the doctrine found a comprehensive exposition was the case of U.O.I v. Anglo-Afghan Agencies [5]. In this case, the Indian government decided that certain concessions were to be given to import selected raw materials to enhance the export of garments to a foreign country. Hence, only partial concessions were given and all the concessions as promised were not issued. The government denied the rights of the respondents under the scheme and owing to the denial they approached the Punjab High Court filing a writ of mandamus. The Court allowed the petition, asking for the issuance of import-related entitlement certificates.                                                                                               However, when the matter went to the Supreme Court, it said that the government is not exempted from acting out future commitments made by it. Hence the State was prevented from escaping liability from the representations made by it that led to the specific conduct of the promise i.e. the Anglo-Afghan Agencies.     Similarly, M.C. Chockalingam v. V.R. S.N. Swami, (1953), K.K Verma v. Union of India, and M.P. Sugar Mills v. State of Uttar Pradesh were some pivotal cases that articulated and laid out the concept of promissory estoppel in the Indian legal sphere.                                                                                                                       

Applications of the Doctrine.                                    

Private Entities-                                                                                                                                      
1) Contractual relationships:                                                              
Contract formation: The doctrine of promissory estoppel is often applied in private transactions as is the case with contractual agreements. It enforces promises which have a lack of formal consideration in case a party has by way of reason relied on the promise made to their detriment. For instance, in the case of D & C Builders v. Rees (1996), the court used the doctrine and enforced the original promise made by Rees who had not paid his full debt citing financial crisis while D & C Builders accepted under the promise that this would settle the debt.  Moreover, the concept of promissory estoppel allows for the fulfilment of promises even without consideration which makes it relevant in modern-day contracts where there is no formal communique                                                                                                                                                                                              
2)Private enterprise & commercial dealings:                                                                                                    
When it comes to business and commercial dealings, promissory estoppel is applied in various scenarios for instance in settings, assurances or commitments made during the course of contractual and business negotiations can be binding if the other parties rely on them and suffers any unjust harm as a result.               The case of Hoffman v. Red Owl Stores, Inc. (1965) is a perfect example where Hoffman was promised by Red Owl franchisers that if he was successful in meeting certain conditions then he would be five opening a Red Owl Store that would give him the franchise to open a Red Owl Store. However, later they refused even when Hoffman had incurred heavy costs. However, the franchisers were directed to compensate him for the losses suffered.                                     

Public entities-                                                                                                                                                  
When it comes to public entities, the doctrine of "promissory estoppel" is widely practiced and often used against the Government in case of Contracts, Tender promises, public policy, and administrative decisions. For this purpose, the executive must function inside the set-up of the legal system. Supreme Court has refused to make any distinction between a private individual and a public body as far as the doctrine of promissory estoppel is concerned [6]. Where the government makes a promise knowing or intending that it would be acted on by the promisee(representee) and, in fact, the promisee, acting in reliance on it, alters its position(representation), the Government would be held bound by the promise and the promise would be enforceable against the government[7]. This can be applied even if there exists no 'consideration' or the promise is not communicated in the praxis of a formal contract specifying the needs of Article 299 of the Constitution.

The case of Motilal Padampat Sugar Mills v. State of U.P [8] was a bellwether when it comes to the application of the doctrine against the government in the Indian context. The facts of the case were that the Chief Secretary of the Government granted an unqualified promise that total immunity from sales tax would be given for three straight years to the newly established industrial units so that they could establish themselves firmly. The appellant sugar mills, relying and acting on this assurance set up a hydrogenation plant with the help of a massive loan. Later the Government brought about a change in its policy and declared that the sales tax exclusion was now to be given at different tariffs over the next three years. The litigant asserted that they made the decision to establish the plant and took significant loans solely because of the assurance(promise). It was observed by the apex Court that the government was obligated by its earlier promise and that it was now liable to spare the litigant parties from sales tax for three consecutive years starting from the day of production.                  

Justice P.N Bhagwati one of the two judges of the division bench of the S.C. scrutinized the English cases that were on the subject. The Hon'ble Judge said :                           
“It is, however, necessary to make it clear that though the doctrine has been called in various judgments and textbooks as promissory estoppel, but it is a doctrine evolved by equity in order to prevent injustice”[9]                                                                                                                
Similarly, The State of Rajasthan v. Mahavir Oil Mills, Jit Ram Shiv Kumar v. State of Haryana, and Express Newspaper Pvt. Ltd. v. Union of India demonstrated how the doctrine can be used as a tool to reprimand the Government once it goes against the principles of equity.             

Limitations of promissory estoppel.                                                                                                    

1) Government sovereign functions:                                                                                            
Promissory estoppel cannot be used in case the representation or promise is contrary to law as there exists no promissory estoppel against law. As such the doctrine cannot hold if there is an obligation imposed by law as highlighted in Kasinka Trading v. Union of India by the S.C. of India where the Government acted in its governmental, public, or sovereign capacity.[10]          

                                               
2) Public interest:                                                                                                                          

The doctrine stands null against the Government if it is in contravention of larger public interests. The case of Shrijee Sales Corporation v. Union of India underlined that in certain situations if larger public interest is concerned, then the Government would be permitted to alter its stance and go back on the representation made by it.                                                                                                                                                             

3)The doctrine is not supposed to create a new course of action:                                                                   The central thrust of estoppel at common law is that it operates as a defensive mechanism. It is not seen as creating rights of action where none existed[11]. Also, promissory estoppel never creates new contractual obligations as it bases itself on the pre-existence of a promise and its reliance and hence does not give rise to a new contract. It is therefore rightly asserted that promissory estoppel is a 'Shield' and not a 'Sword'.     

4) Foreseeability of promise:                                                                                                                

If promissory estoppel is to be invoked then, the promise has to be well-grounded and realistic. There must be a promise rather than just an intention or opinion. An objective test of reasonable foreseeability must be met before liability will be imposed on the promisor through action in reliance on his promise[12].           

5)Detrimental reliance:                                                                                                                      

The doctrine of promissory estoppel would only apply if the person making the promise making the promise able to show that they had relied on the promise to their detriment i.e. must have performed a specific conduct or refrained from taking any action based on the promise. Additionally, acting on the reliance must have led to a change in their position.

CONCLUSION.                                                                                     
The doctrine of promissory estoppel is rightly called an 'equitable' doctrine as the very motive of this doctrine is to provide justice to a party who has suffered any detriment as a result of its reliance on a promise made by the other party who later reverts on the promise made by it. The party who made the promise is held liable for the damages incurred by the other party. The doctrine is extensively applied in real-life Public and Private affairs where there exists no formal contract between the parties but there is some kind of dependence of one party on the other. In the case of Private entities, it establishes accountability for promises made, and as far as the public domain is concerned, there exist various nuances and complexities in its application, and is generally used to prevent abuse of power and protect larger public interests. However, there do exist limitations. It creates no new cause of action and is only used as a shield, not a sword. The use of the doctrine varies across jurisdictions and the Courts have the difficult task of balancing the essence of equitable justice with contractual rights of the parties.