NATIONAL UNIVERSITY OF STUDY AND RESEARCH IN LAW

RANCHI

RESEARCH PAPER
PROMISSRY ESTOPPEL

SUBMITTED BY: SUBMITTED TO:

ABHISHEK KUMAR MR. MRITYUNJAY MAYANK
ROLL NO: 666
FIRST SEMESTER
SECTION- B
INTRODUCTION:
The purpose of this project is to study the concept of promissory estoppel and its evolution,
which is a good relief for the suffered party which was not at fault at all. There is no
provision as such which clears availability of relief under this principle but it is enforceable
and based on equity, to protect the innocent party as a shield. Doctrine itself, its evolution and
jurisprudence behind this principle is dealt in this project. Various cases in which this
principal is followed and these are precedents to assure the availability of this principal in
Indian law are mentioned in this project.

DOCTRINE OF PROMISSORY ESTOPPEL:

The doctrine of promissory estoppels is based on the principles of justice, fair play and good
conscience. It was evolved by equity to prevent injustice. It neither comes under contract nor
under estoppels proper.
The principle is that when one party with the intention of creating or affecting legal
relationship makes a promise with another party and that party acts on it, 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.
In Motilal Padampat Sugar Mills v. State Of Uttar Pradesh1 , 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 based on this assurance M.P. sugar mill
started hydro generation plant taking huge amount of money as loan. Afterward govt. makes
some changes in the tax policy saying that industries will be taxed at varying rate.
Applying the doctrine of promissory estoppels the SC held that appellant took 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 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.

JURISPRUDENCE BEHIND THE DOCTRINE:

The doctrine of promissory estoppel is an equitable doctrine. Like all equitable remedies, it is
discretionary, in contrast to the common law absolute right like right to damages for breach of
contract. It is a principle evolved by equity to avoid injustice and though commonly named

1 (1979) 2 SCC 409.

promissory estoppel, it is neither in the realm of contract nor in the realm of estoppel. In
India, however, as the rule of estoppel is a rule of evidence, the ingredients of section 115 of
the Indian Evidence Act, 1872, must be satisfied for 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. The application of the doctrine would negate the constitutional provision, as
under Article 299, which affords exemption from personal liability of the person making the
promise or assurance.

EVOLUTION OF THE DOCTRINE IN INDIA:

The History of doctrine of promissory estoppels in India can be traced to the case of Ganges
Mfg Co. v. Sourajmul2 , in this case C entered into a contract to purchase a particular number
of gunny bags from the appellant for the respondent and 107,500 bags remain undelivered as
R was unable to pay for them. When C represented that arrangements had been made for the
payment for 87,500 bags, delivery orders were given to C for delivery against payment. Cs
representative took a letter from C to the appellant requesting the appellant to direct delivery
of bags to the representative of the R who went along with the representative of the C
because the R had agreed to advance the necessary money to C. The officer in charge of the
appellant did so. The A deliver 50.000 bags to the representative of R but refused to deliver
the rest because C failed to pay. Thereupon the R sued the A for delivery of the remaining
bags alleging that they had advanced the money to C on the As representation that the goods
will be delivered. HC decreed that the appellant was stopped from denying and Calcutta High
Court 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.
In Municipal Corporation of the City of Bombay v. Secretary of State3 appellant surrendered
its own land in favour of the Govt. in consideration of a lease of government lands in favour
of the appellant on a nominal rent. After getting possession, the appellant spent enormous
sums in making constructions. 27 years later, the respondent filed as suit claiming a large

2 (1880) ILR 5 Cal 669.

3 (1934) 36 BOMLR 568.

amount as arrears of rent. HC allowed the parties to redefine their rights, namely, the
appellants right to leasehold and the Rs right to reasonable rent. It was observed by the
Bombay High Court that even though there is no formal contract as required by the statute,
the Govt. should be bound by a representation made by it. The term promissory estoppel was
used for the first time by the Supreme Court in the case of Collector of Bombay v. Bombay
Municipal Corporation4. In this case the govt. of Bombay called upon the predecessor in the
name of MC of Bombay to remove old markets from a certain site and vacate it on the
application of MC in 1865. MC gave up that site and spent a sum of Rs. 17 lacks in erecting
and maintaining markets on the new site. The collector of Bombay assessed the new site to
land revenue in 1940 and the MC thereupon filed a suit for a declaration that it was entitled to
hold the land even without payment of nay assessment. SC held that C has right to hold the
land in perpetuity free of rent. Chandrasekhar Iyer J. while concurring with the majority
rested his decision on promissory estoppels that the govt. could not be allowed to go back on
its representation.
The doctrine found a complete and eloquent exposition in the cases of U.O.I v. Anglo
Afghan Agencies the Government of India5 made announcement regarding 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 were allowed and
not full concessions were extended as promised. The Supreme Court held that the
Government was estopped by its promise. And after this case the courts have applied the
doctrine of promissory estoppel and Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P.

APPLICABILTY OF THE DOCTRINE OF PROMISSORY ESTOPPEL:

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.
In Maxey Charan v. Rohilkhand Uni, Baeilly6 the petitioner appeared in examination

4 1951 AIR 469.

5 1968 AIR 718.

6 AIR 1992 AII 122.

conducted by university and declared to have passed. Subsequently she got the admission for
next year on the basis of defected mark sheet. Later the mistake was found out and her
admission got cancelled. Court held that there was no mistake of petitioner and hence she is
not responsible for such mistake. In view of the conduct of the University it was a fit case in
which the principles of promissory estoppel should be applied to the respondent university.
Areas where doctrine of promissory estoppels is not applicable:
There are no estoppels against settled principle of law.
It is not applicable in case of concluded commercial contract.
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 only requirement.

INGREDIENTS OF DOCTRINES OF PROMISSORY ESTOPPEL:

In Union Of India & Anr v. Wing Commander R.R. Hingorani 7 , where a Govt. Servant
retained accommodation 2 months after the concessional period. The liability to pay damages
equivalent to the market rent for the period of such unauthorized occupation was claimed in
the court of law. The Government having failed to serve the respondent with a notice that he
would be liable to pay market rent for the period of such unauthorized occupation, the
doctrine of promissory estoppel precluded the Government from claiming damages
equivalent to the market rent. Principle was laid down that to invoke the doctrine of
estoppels, there are three conditions which must be satisfied;
Representation by a person to another.
The other should have acted upon the said representation and
Such action should have been detrimental to the interests of the person to whom the
representation has been made.
In the case of Central London Property Trust v. High-trees House8 , High-trees leased a
block of flats from CLP at a fixed amount of rent later at the time of war it was not getting
tenants other flats were unoccupied because The defendant had difficulty in getting tenants

7 1987 AIR 808.

8 [1947] KB 130.
for all the flats during war time. CLP agreed to reduce the rent amount till the war prevails.
Then war was over, all the flats got occupied on the normal rent amount. The defendant asked
high trees for the normal rent for the present time and for the earlier time also. High trees
went to court; court held that high-trees acted upon the words of CLP that during the war time
rent will be reduced, after the end of war amount cannot be claimed after the war they should
continue with the normal rent only. In this case, Denning J established the doctrine of
promissory estoppel.

GOOD FAITH AND BAD FAITH:

In this journal good faith is defined as good faith requires the discretion-exercising party to
act fairly, in order to protect justifiable expectations arising from their agreement. Good faith
has also been associated with the legal rules related to honesty, fairness and reasonableness.
GF in contract is just and honest conduct, which should be expected of both parties in their
dealings.
Bad faith when the discretion exercising party refuses to pay expected cost of performance.
Good faith is required according to natural principles. Where the party is guilty of fraud, there
can no equity in favour for applying the principle of estoppels.

PROMISSORY ESTOPPEL- ONLY A SHIELD, NOT A SWORD:

Promissory estoppel is used as a defence only not as a course of action so in general it is
available as shield. Defence of promissory estoppel can be used by promise only against the
promiser to enforce the promise, not by promise. For using promissory estoppel as a sword
the doctrine of consideration should be followed. In Combe v. Combe9 earlier maintenance
was given Denning LJ overruled the decision stating that the estoppel could only be used as a
shield and not a sword. In the Motilal Padamat case justice Bhagwati said if the doctrine
of promissory estoppel can be used as a sword the floodgates will be opened.
In Waltons Stores (Interstate) Ltd v. Maher10, Maher owes a property, WS wanted that to
take on lease and demolish the building and erect new one. WS acted on the negotiation and
constructed new building, Maher acted that it consented for the negotiation. When WSs
solicitor prepared lease paper according to the negotiation Maher denied. Court Held that

9 [1951] 2 KB 215.

10 [1988] HCA 7.
Maher is bound by the contract. Promissory estoppel, it has been said, is a defensive equity
and the traditional notion has been that estoppel could only be relied upon defensively as a
shield and not as a sword High Trees case itself was an instance of the defensive use of
promissory estoppel.

LAW COMMISSION RECOMMENDATIONS:

In 108th report of law commission submitted in 1984 suggested Section 25(A) in ICA as
follows:
25A(1) where,
a) A person has, by his words or conduct has made to another person, an unequivocal
promise which is intended to create legal relations or to affect a legal relationship in
arise in future; and
b) Such person knows or intends that the promise would be acted upon by the person to
whom it is made; and
c) The promise is, in fact, acted upon by other person, by altering his position. When not
withstanding that promise is without consideration, if shall be binding to the person
making it. If having regards to the dealings which have taken place between the
parties, it would be unjust not to hold him to be so bound
(2)The provision of this section shall not apply:-
a) Where the events that have subsequently happened show that it would be unjust to
hold the promisor to be bound by the promise ;or,
b) Where the promisor is the government and enforcing the promise would be
inconsistent with the obligation or liability imposed on the government by the law.

LEGAL PROVISIONS:
There is no provision of promissory estoppel in Indian law. Section 25 of ICA talks about
contracts made without consideration (in other words the enforceability of promises) and sec.
115 of IEA deals with estoppels only.

CONCLUSION:
A man cannot live in isolation, when we are living in a society; everyone is dependent on
each other. It brought contractual and commercial relationship. Promise of a person, when
becomes important for another and cause for profit and loss, if it is denied it may cause harm
to other one, for their protection the doctrine of promissory estoppels is available as a shield.
Promissory estoppel is a good defence and good principle to avoid injustice. The judiciary in
India has played a very significant role in making the promise responsible and accountable
and made it abide by its promise.

BIBLIOGRAPHY:
Websites:
www.westlawindia.com
www.manupatra.com
Statutes Referred:
The Indian Evidence Act,1872
The Indian Contracts Act, 1872
108th Report of Law Commission of India.
Books referred:
Bhadbhade Nilima, Pollock and Mulla, Indian Contract and Specific relief Acts,
Reprint 12th Edn.
Singh Avtar, 11th Ed., Contract and Specific relief Acts, 1872, Eastern Book
Publication.