Estoppel

Estoppel: (With illustrative cases)

The Principle of estoppel is often described as rule of evidence, but more correctly it is a principle or law. This principle applies to the Government, public authorities as well to private individuals. Executive agency must be rigorously held to the standards by which it professes its action to be judged. Whatever its activity may be, the government is still the Government and will be subject to certain restraints.

Appreciating estoppel, there must be a representation by a person or his authorized agent to another in any form, declaration, act or commission. Representation must have been of existence of a fact and not of promise de-future or intention that might or might not be enforceable in contract. The representation must have been taken to be relied upon and there must have been belief on the part of the other party in its truth. There must have been action on the faith of that declaration, act or omission, that is to say, the declaration; act or omission must have been acted upon. The misrepresentation of conduct or omission must have been the proximate cause of leading the other party to act to his prejudice. The person claiming the benefit of an estoppel must show that other side was aware of the true state of thing. If the other side was not aware of the true state of thing there can be no estoppel. Only the person to whom representation was made or from whom it was designed can avail himself of it. A person is entitled to plead estoppel in his own individual character and not as a representative of assignee. The Government claimed immunity from estoppel on different grounds that were considered by the Courts in various Judgments gradually rendered.

By now the law on this point is fully developed. Promissory estoppel is considered by the Courts to safeguard the equity and that Court would not hear the truth over justice. That Principle will bind the Government by its promises to prevent manifest injustice or fraud and will not make the Government a slave of its policy for all times to come when the Government acts in its Governmental, public or sovereign capacity. Principle does not apply when promise is ultra vires the statute or is in derogation of the legislative instrument. Plea of executive necessity was considered for some time in past, but the Government is obliged to disclose the executive necessity. They cannot simply plead and go away. Public bodies are as much bound as private individuals to carry out representations of facts and promises made by them, relying on which other persons have altered their position of their prejudice. Estoppel is a rule of equity. That rule has gained now dimensions in recent years. A new class of estoppel i.e. promissory estoppel has come to be recognized by the Courts in this country as well as in England.

Lord Denning observed that the Crown cannot escape by praying in aid the doctrine of executive necessity that is, the doctrine that the Crown cannot bind himself so as to fetters its future executive necessity. It only avails the Crown where there is an implied term to that effect or that is the true meaning of the contract. Thus the Crown cannot disown the pensioner’s benefits. In popular Anglo Afghan case the Supreme Court evolved the principle of estoppel against Government and executive necessity discarded. The Textile Commissioner published a scheme. The exporters were invited to be registered with Textile Commissioner for exporting the woolen goods. Under the Scheme the Commission had authority to reduce import and export certificate, if it appears to him to be fraudulent to secure an import certificate in excess of true value of the goods. The contention was taken by the Union of India that the Scheme was merely administrative in character and not enforceable at law and Government can be released from the promises made.

Court held that granting that it was executive in character, the Courts have the power in appropriate cases to compel performance of the obligations imposed by the Scheme upon the departmental authorities. It could not be said that the executive necessity releases the Government from honouring its solemn promises relying on which citizens have acted to their detriment. Under the Constitutional set up, no person can be deprived of his right or liberty except in due course of and by authority of law; if a member of the executive seeks to deprive a citizen of his right or liberty otherwise than in exercise of powers derived from the law-common or statute-the courts will be competent to, and indeed would be bound to protect the rights of the aggrieved citizens. Even assuming that the provisions relating to the issue of trade notification offering inducement to the prospective exporters were in character administrative, the Union Government and its officers were not entitled at their mere whim to ignore the promises made by the Government. It could not be said that Textile commissioner was the sole judge of the quantum of import license to be granted to an exporter, and that the Courts would not be powerless to grant relief, if the promised import license was not given to an exporter who acted to his prejudice relying upon the representation.

In Century case the Municipality by a resolution allowed the Company to be exempted from paying the Octroi for a period of seven years, under the directions of the Government, if the Company gears up the business in a particular area. Accordingly, the Company set up the plant and machinery. But, the District Municipality took over the affairs and by a subsequent resolution the benefit conferred upon the Company was withdrawn and directed to pay the Octroi Tax. The Municipality had entered into a solemn arrangement seeking to develop the area. The Supreme Court held that there is undoubtedly a clear distinction between a representation of an existing fact and a representation that something will be done in future. The former will be done in further. The former may, if it amounts to a representation as alleged at the time to be actually in existence, raise an estoppel, if another person alters his position relying upon that representation. A representation that something will be done in future may result in contract, if another person to whom it is truly made. But between a representation of a fact that is untrue and a representation express or implied- to do something in further, there are no clear antitheses. A representation that something will be done in future may involve an existing intention to act in further in the manner represented. If the representation is acted upon by another person it may, unless the statute governing the person making the representation provides otherwise, result in an agreement enforceable at law; if the statute requires that the agreement shall be in certain form no contract may result from the representation and acting therefore but the law is not powerless to raise in appropriate case in equity against him to compel performance of the obligation arising out of his representation. If our nascent democracy is to thrive different standards of conduct for the people and the public bodies cannot ordinarily be permitted. A public body is not exempt from the liability to carry out its obligation arising out of representation made by it relying upon which a citizen has altered his position to his prejudice.

In Lotus Hotels Private limited the Respondent before the Supreme Court was contesting the claim against the Gujarat State Financial Corporation for a grant of loan to construct the Hotel. The Respondent acted on the representation made by the Corporation. The Corporation, in fact, sanctioned the loan, but on certain complaints the same was postponed.

The Supreme Court held that instrumentality covered within the meaning of Article 12 cannot fall back on the promise held out upon which the Respondent had acted.

The Supreme Court of India approvingly quoted the observations of Lord Denning in various English cases and according to Lord Denning the parties need not be in any kind of legal relationship before the transaction from which the promissory estoppel takes its origin. The doctrine would seem to apply even where there is no pre-existing legal relationship between the parties, but the promise is intended to create legal relations or affect a legal relationship that will arise in future. Vide Halsbury's Laws of England 4th Edition at page 1018 Para 1514. Motilal Padampat's case (Supra) completely settled the law on the issue. The Courts observed that it is elementary that in a republic governed by the rule of law, no one, howsoever high or low, is above the law. Government is no exception. It is indeed the pride of constitutional democracy and the 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. Thus the Government committed to the rule of law cannot claim any immunity from the doctrine of estoppel. The Government must be fair to its citizens irrespective of any consideration and legal relationship. The Supreme Court said that the doctrine of estoppel could be used as a shield or a sword, the Government could not claim any immunity from such principle in contract, and executive necessity is mitigated.

In Jit Ram Shivkumar another bench of the Supreme court differed in view and observed that the ratio in Motilal Padampat is not correctly decided and the bench distinguished the view of Lord Denning, but the Jit Ram Shiv Kumar case itself was overruled in subsequent decision of the Supreme court.

Of Course there can be no promissory estoppel against the legislature in the exercise of its legislative functions nor can the government or public authority be debarred by promissory estoppel from enforcing the statutory prohibition. It is equally true that promissory estoppel cannot be used to compel the Government to or a public which is contrary to law or which was outside the authority or power of the officer of the Government or of the public authority to make. The doctrine of promissory estoppel being an equitable doctrine, it must yield when the equity so requires.

In Express Newspaper case the Delhi Development authority approved the plan submitted by the Newspaper Industry, but subsequently a notice was issued under the provisions of the Act. The adverse notice came to be challenged before the Supreme Court. The power that was exercised by the authority was malicious and politically motivated to harass the paper industry to subdue the voice of the newspaper industry. The Supreme Court checked the administrative action on the principle of estoppel and its specifically observed that this is fraud on power. The action was never bonafide as the notice was designed to abuse and misuse the power.

No estoppel against Statute:

In case of Amar Singhji V/s State of Rajasthan, the Petitioner Rajmata of the Ruler was granted monthly allowances by the State by a Resolution that was called Jagir. Subsequently a statute came to be enacted and by virtue of the provisions contained under Rajasthan Land Reforms and Resumption of Jagir Act, 1952, the assurance given to her was withdrawn by the State. The plea of estoppel was discarded by the Supreme Court holding that even if assurance not to resume an estate had been given, it would certainly not have been binding on the Government because its powers of resumption are regulated by the Statute, and must be exercised in accordance with its provisions. The Act confers no authority on the Government to grant exemption or undertaking against a statute. Pleading estoppel against the Statute was not held to be lawfully practicable.

In this connection Professor H.R.W.Wade says in this administrative Law that "in public law, the most obvious limitation on the doctrine of estoppel is that it cannot be invoked so as to give an authority powers which it does not in law possess"

Author: Hemang D. Rana, Advocate

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