CHANAKYA NATIONAL LAW UNIVERSITY

Nyayanagar, Mithapur, Patna

LAW OF CONTRACT-I

“Promissory Estoppel”

SUBMITTED BY: SUBMITTED TO:

ABHIMANYU Mrs. Sushmita Singh

ROLL NO – 1905 Teacher Associate

B.A. LLB, 2nd SEMESTER

 ACKNOWLEDGEMENT

The researcher take this opportunity to express her profound gratitude and deep regards to her
guide Mrs. Sushmita Singh for his exemplary guidance, monitoring and constant
encouragement throughout the course of this thesis. The blessing, help and guidance given by
him time to time shall carry the researcher a long way in the journey of life on which the
researcher is about to embark.
The researcher is obliged to staff members of Chanakya National Law University, for the
valuable information provided by them in their respective fields. The researcher is grateful
for their cooperation during the period of her assignment.
Lastly, the researcher would like to thank almighty, her parents, brother, sisters and friends
for their constant encouragement without which this assignment would not be possible.

THANK YOU,
Abhimanyu

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 DECLARATION

I hereby declare that the work reported in the B.A.LL.B (Hons.) Project Report
entitled “Promissory Estoppel” submitted at Chanakya National Law
University, Patna is an authentic record of my work carried under the
supervision of Mrs. Sushmita Singh. I have not submitted this work elsewhere
for any other degree or diploma. I am fully responsible for the contents of my
project report.

Abhimanyu
Chanakya National Law University, Patna

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 TABLE OF CONTENTS

ACKNOWLEDGEMENT ----------------------------------------------------------------------------------------------------- II

DECLARATION -------------------------------------------------------------------------------------------------------------- III

TABLE OF CONTENTS ----------------------------------------------------------------------------------------------------- IV

RESEARCH QUESTIONS -------------------------------------------------------------------------------------------------- V

HYPOTHESIS --------------------------------------------------------------------------------------------------------------- V

AIMS AND OBJECTIVES -------------------------------------------------------------------------------------------------- V

LIMITATIONS -------------------------------------------------------------------------------------------------------------- V

RESEARCH METHODOLOGY -------------------------------------------------------------------------------------------- V

CHAPTER-1: INTRODUCTION -------------------------------------------------------------------------------------------- 1

MEANING OF ESTOPPEL ------------------------------------------------------------------------------------------------------ 1

PROMISSORY ESTOPPEL ------------------------------------------------------------------------------------------------------ 4

CHAPTER-2:EVOLUTION OF DOCTRINE OF PROMISSORY ESTOPPEL ---------------------------------------- 6

PROMISSORY ESTOPPEL: AN OUTLINE--------------------------------------------------------------------------------------- 7

CHAPTER-3: NATURE OF PROMISSORY ESTOPPEL ---------------------------------------------------------------- 9

ESTOPPEL AGAINST A STATUTE --------------------------------------------------------------------------------------------- 10

CHAPTER-4: APPLICATION OF DOCTRINE OF PROMISSORY ESTOPPEL TO GOVERNMENT -----------11

CHAPTER-5: ESTOPPEL UNDER THE CONTRACT ACT -----------------------------------------------------------15

CAPACITY TO CONTRACT ---------------------------------------------------------------------------------------------------- 15

CHAPTER-6: CONCLUSION -----------------------------------------------------------------------------------------------19

BIBLIOGRAPHY -------------------------------------------------------------------------------------------------------------20

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 RESEARCH QUESTIONS

Existence of Estoppel when there is no promise?

Applicability of Estoppel when no formal contract is there?

HYPOTHESIS

The researcher tends to presume that there is a promissory estoppel.

AIMS AND OBJECTIVES

RESEARCHER INTENDS TO-To critically analyze all the key related to doctrine of promissory
estoppel

LIMITATIONS

The present research is confined to a time limit of one month and field work will be confined to
Patna only. The researcher people will contact people related to this project.

RESEARCH METHODOLOGY

For the project research, researcher will rely upon the doctrinal methods of Research

TENTATIVE CHAPTERISATION

CHAPTER-1: INTRODUCTION
CHAPTER-2: EVOLUTION OF DOCTRINE OF PROMISSORY ESTOPPEL
CHAPTER-3: NATURE OF PROMISSORY ESTOPPEL
CHAPTER-4: APPLICATION OF DOCTRINE OF PROMISSORY
ESTOPPEL TO GOVERNMENT
CHAPTER-5: ESTOPPEL UNDER THE CONTRACT ACT
CHAPTER-6: CONCLUSION

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 CHAPTER-1: INTRODUCTION

MEANING OF ESTOPPEL

Estoppel in simple words is a bar which prevents a party from asserting a fact or putting up
claim inconsistent with the position he previously took. It is said to be a rule which preludes a
person from saying one thing at one time and another thing, totally inconsistent with the
earlier one, at another stage.1

In Black‟s New Dictionary, “estoppel” is indicated to mean “that a party is prevented

by his own acts from claiming a right to the detriment of other party who was entitled to rely
on such conduct and has acted accordingly.”2

According to Oxford Dictionary of Law estoppel is “a rule of evidence or a rule of

law that prevents a person from denying the truth of a statement he has made or from denying
facts that he has alleged to exist, The denial must have been acted upon (probably to his
disadvantage) by the person who wishes to take advantage of the estoppel or his position
must have been altered as a result.”3

When a person has, by his declaration, act or omission, intentionally caused or

permitted another person to believe a thing to be true, and to act upon such belief, neither he
nor his representative shall be allowed in any suit or proceeding between himself and such
person or his representative, to deny the truth of the thing. The former person is thus estopped
from denying the truth of his previous statement. He, thus, cannot both approbate and
reprobate, because of invocation of rule of estoppel against him.4

In other words, estoppel is a rule, whereby a party is precluded from or to say

estopped from denying the existence of some state of facts which he had previously asserted
and on which the other party has relied or is entitled to rely upon.

According to Wade and Forsyth the basic principle of estoppel is that a person who by
some statement or representation or representation of face causes the other to act to his

1
Kumar, Narender; Nature and Concepts of Administrative Law, 1st Ed., Allahabad Law Agency, Faridabad,
2011, p. 366.
2
Quoted in Sharma Transport v. Government of Andhra Pradesh, AIR 2002 SC 322.
3
A Dictionary of Law, 5th Ed., Oxford University Press, New York, 2003, p. 95.
4
Kumar, Narender; Nature and Concepts of Administrative Law, 1 st Ed., Allahabad Law Agency, Faridabad,
2011, p. 366.
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determent in reliance on the truth of it is not allowed to deny it later, even though it is wrong.
Estoppel, thus, gives way to justice to prevail over the truth.5

In Indira Bai v. Nand Kishore,6 Sahai, J., stated “Estoppel is a rule of equity flowing
out of fairness striking on behaviour deficient in good faith. It operates as a check on spurious
conducting by preventing the inducer from taking advantage and assailing forfeiture already
accomplished. It is invoked and applied to aid the law in administration of justice. But for it
great many injustices may have been perpetrated.”

Estoppel – As a Rule of Evidence

Estoppel, as a rule of evidence, may be read in distinction to equitable principle of

promissory estoppel. While the former is more correctly described as “a principle of law.”7
The latter is known as a rule of equity. As a principle of law estoppel applies only to
representations about past or present facts.8

The basic premise of estoppel is that a person, who by some statement or

representation of facts causes another act in reliance on the truth of it, is not allowed to deny
it later, even though it is wrong.9

The principle of estoppel embodies in Section 115 of the Indian Evidence Act, 1872 is
commonly known as a rule of evidence. The Section reads as under:

When one person has by his declaration, act or omission, intentionally caused or
permitted another person to believe a thing to be true and to act on such belief, neither he nor
his representatives shall be allowed in any suit or proceeding between himself and such
person or his representative, to deny the truth of that thing.

To invoke the principle of estoppel enshrined in the Section, the following three
conditions are necessarily be satisfied:

(i) there must be a declaration, act or omission on the part of a person;

(ii) by the said declaration, etc., that person must have intentionally caused or
permitted another person to believe a thing to be true; and

5
Wade, H.W.R. & Forsyth, C.F.; Administrative Law, 9 th Ed., Oxford University Press, New Delhi, 2006, p.237.
6
1990) 4 SCC 668 (670).
7
Canada & Dominion Sugar Co. Ltd. v. Canadian National (West Indies) Steamships Ltd., (1947) AC 46.
8
Wade, H.W.R. & Forsyth, C.F.; Administrative Law, 9 th Ed., Oxford University Press, New Delhi, 2006,
p.236.
9
ibid
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(iii) he must have intentionally caused or permitted the said another person, to act
upon such belief.

Section 115 explains that a party is precluded from denying the existence of some
state of facts which he had previously asserted and on which the other party has relied or is
entitled to rely on. That, a man should keep his words, all the more so when the promise is
made with the intention that the other party should act upon it.10

As a rule of evidence, embodied in Section 115, estoppel may lie against the
Government on a representation or statement of facts, if the statement does not operate
against the statute.

In Delhi University v. Ashok Kumar,11 the respondent, a student after passing the
Secondary School Certificate Examination of the Gujarat Board was admitted provisionally
in the B.A. I year course in the Delhi University. After over a year, the University informed
him that he was in eligible to join the course because the Gujarat Board Examination had
been recognised by the appellate University as equivalent to Matric Examination while the
qualification to join B.A. I year Course was passing the Higher Secondary Examination.
However, the Statute had authorised the Academic Council of the University to grant
exemption from the admission requirements. The High Court of accepted the plea of the
estoppel raised by the student against the University.

The Court stated that estoppel was within the meaning of Section 115 of the Evidence
Act, 1872, might arise from the silence as well as words, the Court held “inaction of the
University for over a year amounted to a representation by it that it had approved his
admission” and therefore the University would now be estopped from doing that.

In Shri Krishna v. Kurukshetra University, 12 the Apex Court had ruled that the
University could not cancel the candidature of the appellant-student for the not complying
with the attendance requirement, as the respondents failed to tale the adequate care to
scrutinize his examination from at the relevant time to ascertain whether the candidate
fulfilled the necessary conditions.

10
Kumar, Narender; Nature and Concepts of Administrative Law, 1st Ed., Allahabad Law Agency, Faridabad,
2011, p. 368
11
AIR 1968 Del. 131.
12
AIR 1976 SC 376.

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 PROMISSORY ESTOPPEL

Promissory estoppel is the legal principle that a promise is enforceable by law, even if made
without formal consideration, when a promisor has made a promise to a promisee who then
relies on that promise to his subsequent detriment. Promissory estoppel is intended to stop the
promisor from arguing that an underlying promise should not be legally upheld or enforced.
The doctrine of promissory estoppel is part of the law in the United States and other
countries, although the precise legal requirements for promissory estoppel vary not only
between countries but also between different jurisdictions, such as states, within the same
country.

Breaking Down Promissory Estoppel

Promissory estoppel serves to enable an injured party to recover on a promise. There are
common legally-required elements for a person to make a claim for promissory estoppel: a
promisor, a promisee, and a detriment that the promisee has suffered. An additional
requirement is that the person making the claim - the promisee - must have reasonably relied
on the promise — in other words, the promise was one that a reasonable person would
ordinarily rely on.

Another requirement further qualifies the required detriment component; the promisee must
have suffered an actual substantial detriment in the form of an economic loss that results from
the promisor failing to deliver on his or her promise. Finally, promissory estoppel is usually
only granted if a court determines that enforcing the promise is essentially the only means by
which an injustice to the promisee can be rectified.

Example of Promissory Estoppel

Promissory estoppel might be applied in a case where an employer makes an oral promise to
an employee to pay the employee a specified monthly or annual amount of money throughout
the full duration of the employee's retirement. If the employee then subsequently retires based

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on a reliance on the employer's promise, the employer could be legally estopped from not
delivering on his promise to make the specified retirement payments.

Promissory Estoppel as a Part of Contract Law

Contract law generally requires that a person receive consideration for making a promise or
agreement. Legal consideration is a valuable asset that is exchanged between two parties to a
contract at the time of a promise or agreement. Ordinarily, some form of consideration, either
an exchange of money or a promise to refrain from some action, is required in order for a
contract to be legally enforceable. However, in attempting to ensure justice or fairness, a
court may enforce a promise even in the absence of any consideration, provided that the
promise was reasonably relied on and that reliance on the promise resulted in a detriment to
the promisee.

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 CHAPTER-2:EVOLUTION OF DOCTRINE OF PROMISSORY
ESTOPPEL

Promissory estoppel is a relatively new development. In order to trace the evolution

of the doctrine in England, we need to refer to some of the English decisions. The early cases
did not speak of this doctrine as estoppel. They spoke of it as „raising equity‟. Lord Cairns
stated the doctrine in its earliest form in the following words in Hughes v. Metropolitan
Railway Company.13

“It is the first principle upon which all courts of equity proceed, that if parties who
have entered into definite and distinct terms involving certain legal results afterwards by their
own act or with their won consent enter upon a course of negotiation which has the effect of
leading one of the parties to suppose that the strict rights arising under the contract will not be
enforced, or will be kept in suspense, or held in abeyance, the person who otherwise might
have enforced those rights will not be allowed to enforce them where it would be inequitable
having regard to the dealings which have thus taken place between the parties.”

This principle of equity made sporadic appearances but it was only in 1947 that it was
restated as a recognized doctrine by Lord Denning in Central London Properties Trust Ltd.
v. High Trees House Ltd.,14 who asserted15:

“A promise intended to be binding, intended to be acted upon, and in fact acted upon
is binding.”

In the formative period the doctrine of promissory estoppel could not be invoked by
the promisee unless he had suffered „detriment‟ or „prejudice‟. All that is required is that the
party asserting the estoppel must have acted upon the assurance given by him. The alteration
of position by the party is the only indispensable requirement of the doctrine.

In India, there are two stages in the evolution of the application of this doctrine; pre-
Anglo Afghan case and post - Anglo Afghan case. Prior to this case, the position was that
promissory estoppel did not apply against the Government. But the position altered with this
case.

13
(1877) 2 AC 439.
14
1947) KB 130.
15
See Infra 17.

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 In Union of India v. Indo Anglo Afghan Agencies Ltd.,16 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. Thereafter the courts have applied the doctrine of
promissory estoppel even against the Government.

PROMISSORY ESTOPPEL: AN OUTLINE

Lord Denning in Central London Property Trust Ltd. v. High Trees House
Ltd., expressing the doctrine stated:18
17

“Once a promise has been made by a person knowing that it would be acted upon by
the person to whom it is made and in face it is no acted upon, then it is inequitable to allow
the party making the promise to go back upon it.”

In this case, during the Second World War, people left London owing to
bombardment and as a result, a number of flats remained unoccupied. „A‟ had left out his flat
to B for 99 years at the rate of £2500 a year. He, however, due to war conditions, agreed to
reduce the rent by fifty per cent. After the war was over, the tenants returned. A demanded
full amount of rent to which B objected relying on A‟s assurance. The Court applied the
doctrine of estoppel and granted relief to B.

The doctrine of Promissory Estoppel is premised to be conduct of a party making a

representation to the other so as to enable him to arrange its affairs in such a manner as if the
said representation is acted upon.19

In Sharma Transport v. Government of Andhra Pradesh,20 Promissory Estoppel was

defined as:

“… an estoppel which arises when there is a promise which promisor should

reasonably except to induce action or forbearance of a definite and substantial character on
the part of the promise and which does induce be avoided only by enforcement of promise.”

16
AIR 1968 SC 718.
17
1947) 1 KB 130.
18
See Supra 14
19
.M.T. Limited v. State of Uttar Pradesh, AIR 2008 SC 1032.
20
AIR 2002 SC 322.
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 “… the principle of promissory estoppel is that where one party has by his words or
conduct made to the other a clear and unequivocal promise or representation which is
intended to create legal relations or affect a legal relationship to arise in the future, knowing
or intending that it would be acted upon by the other party …, the promise or representation
would be binding on the party making it and he would not be entitled to go back upon it, if it
would be inequitable to allow him to do so, having regard to the dealings which have taken
place between the parties.”

Dixon, J., an Australian Jurist in Grundt v. The Great Boulder Proprietary Gold
Miners Ltd.,21 explained:

“It is often said that the party asserting the estoppel must have been inducted to act to
his detriment. Although substantially such a statement is correct and leads to no
misunderstanding, it does not bring out clearly the basal purpose of the doctrine. That
purpose is to avoid or prevent a determent to the party asserting the estoppel by compelling
the opposite party to adhere to the assumption upon which the former acted or abstained from
acting. This means that the real detriment or harm from which the law seeks to give
protection is that which would flow from the change of position if the assumptions were
deserted that led to it.”

Sahai, J., explaining the basis of the doctrine in Indira Bai v. Nand Kishore, 22
observed “Estoppel is a rule of equity flowing out of fairness striking on behaviour deficient
in good faith. It operates as a check on the spurious conducting by preventing the intruder
from taking advantage and assailing forfeiture already accomplished. It is invoked and
applied to aid the law in administration of justice. But for it, great many injustices, may have
been perpetrated.”

21
(1938) 59 CLR 641.
22
1990) 4 SCC 668.

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 CHAPTER-3: NATURE OF PROMISSORY ESTOPPEL

It has been said that the rule of promissory estoppel cannot itself be the basis of an
action. It cannot be a cause of action; it can only be a shield and not a sword. Since the
doctrine has been usually invoked by way of defence, it has come to be identified as a
measure of defence.23

But, in the present day judicial tendency appears to be that estoppel can be used as a
sword also.24 Stating that “there are estoppels and estoppels” Lord Denning held that “some
do give rise to cause of action, some do not.” In the species of estoppel called “proprietary
estoppel”, says the learned Lord “it does give rise to cause of action.”25

Estoppel is often described as a rule of evidence, but the whole concept is more
correctly viewed as a substantive rule of law. It is necessary to make it clear that the doctrine
of promissory estoppel or equitable estoppel is not based on the principle of estoppel but it is
a doctrine evolved by equity in order to prevent injustice. Estoppel by conduct proceeds on
the rule of substantive law and equity where a promise made by a person knowing that it
would be acted on by the person to whom it is made and in fact it is so acted and it is
inequitable to allow the party making the promise to go back upon it.26

It being an equitable principle evolved for doing justice, “there is no reason,” said
Bhagwati, J., “why it should be given only limited application by way of defence. It can be
the basis of cause of action.”27

Though commonly named as “promissory estoppel”, it is neither in the realm of

contract nor in the realm of estoppel. The basis of the doctrine is the interposition of equity
which has always, true to its form, stepped in to mitigate the rigour of strict law.28

23
Motilal Padampat Sugar Mills v. State of Uttar Pradesh, AIR 1979 SC 621.
24
Moorgate Mercantile Co. v. Twichings, (1975) 3 All ER 314.
25
Crabb v. Arun DC, (1976) Ch. 179.
26
Halsbury’s Laws of England, XV, 168., Cited in Kumar, Narender; Nature and Concepts of Administrative
Law, 1st Ed., Allahabad Law Agency, Faridabad, 2011, p. 371.
27
See Supra 24.
28
Wade, H.W.R. & Forsyth, C.F.; Administrative Law, 9 th Ed., Oxford University Press, New Delhi, 2006,
p.236.

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 ESTOPPEL AGAINST A STATUTE

The doctrine of estoppel does not apply to statutes. In other words, a person who
makes a statement as to the existence of the provisions of a statute is not estopped,
subsequently, from contending that the statutory provision is different from what he has
previously stated. A person may not represent the true status of a statute or law, but the other
person who relies on such a representation is at liberty to find out the position of law on the
matter and as the maxim says, ignorance of law is no excuse.29

In Jit Ram Shiv Kumar v. State of Haryana,30 a municipality granted exemption from
octroi for developing a mandi, but subsequently is revoked the exemption. Later it again

granted the exemption in keeping with the terms of the original sale of plots, but levied taxes
again. Even so, a claim of estoppel against its legislative power was not allowed.

So is the case with the tax laws. If the law requires that a certain tax be collected, it
cannot be given up, and any assurances by the Government that the taxes would not be
collected would not bind the Government, when it chooses to collect the taxes. Thus it was
held that when there was a clear and unambiguous provision of law that entitles the plaintiff
to a relief, no question of estoppel arises.
The following conditions have been laid down as necessary to invoke no estoppel against
a statute:
The parties must bilaterally agree to contract irrespective of statutory provisions of
the applicable Act.
The agreement entered into by the parties must be expressly prohibited by the Act.
The provision of law must be made for public interest and not pertain to a particular
class of persons.
The agreement of the parties should not have been merged into an order of the court
which by the conduct of the parties had been dissuaded from performing its statutory
obligations.
So, it is a well settled catena of decision that the doctrine of promissory estoppel cannot
be invoked against the provisions of Statutes.31

29
See Upadhyaya, Dr. J.J.R.; Administrative Law, 7th Ed., Central Law Agency, Allahabad, 2011, p. 333.
30
AIR 1980 SC 1285 : 1980 SCR (3) 689 : (1981) SCC (1) 11

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 CHAPTER-4: APPLICATION OF DOCTRINE OF PROMISSORY
ESTOPPEL TO GOVERNMENT

THE OBJECTIVE OF PROMISSORY ESTOPPEL AND ITS ROLE TODAY

The original objective of promissory estoppel was to provide a substi- tute for consideration
in certain cases involving promises that were not bargained for. 32 Defining this as the
doctrine's "objective," of course, does not mean that judges and scholars consciously
designed it to fill a perceived gap in the case law. Instead, the doctrine evolved through the
common law process as a device that helped avoid results that were per- ceived to be unjust
in particular kinds of cases. 33 These cases mostly in- volved gratuitous, noncommercial
promises: charitable subscriptions, gift promises between relatives, and marriage settlements.
The accumulation of cases like these forced the drafters of the Restate- ment of Contracts to
include section 90 on reliance as an alternative to section 75 on bargain consideration.

Since the doctrine of promissory estoppel is an equitable doctrine it must yield when the
equity so requires. If it can be shown by the Government that having regard to the facts as
they have subsequently transpired, it would be inequitable to the Government to abide by the
promise made by it, the court would not raise equity in favour of the promise and enforce it
against the Government. When the Government is able to show that due to the facts which
have transpired subsequent to the promise being made, public interest would be prejudiced if
the Government were required to carry out the promise made, the court would have to
balance the public interest in the Government carrying out the promise made to a citizen

which has induced the citizen to alter his position to his prejudice and the public interest
likely to suffer if the Government were to carry out the promise, and determine which way
the equity lies.

The doctrine of promissory estoppel has also been applied against the Government and
the defence based on executive necessity has been categorically negatived. The Government

38 31
Vasant Kumar Radhakrishan Vora v. Board of Trustees, Port of Bombay, AIR 1991 SC 14; Amit
Banaspati Co. Ltd. v. State of Punjab, AIR 1992 SC 1075.

32
See John D. Calamari & Joseph M. Perillo, Contracts § 6-1 (3d ed. 1987); Promis- sory Estoppel, supra note 3,
at 679-80
33
On the idea of law as a practice, see Dennis M. Patterson, Law's Pragmatism: Law as Practice& Narrative,76
Va. L. Rev. 937 (1990).

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is not exempted from liability to carry out the representation made by it to its future conduct
and it cannot on some undefined and undisclosed grounds of necessity or expediency fail to
carry out the promise made, solemnly by it. The Supreme Court has refused to make any
distinction between a private individual and public body so far as the doctrine of promissory
estoppel is concerned. But if the promise is on behalf of the Government is unconstitutional,
against any statute or against public policy the question of promissory estoppel against
Government does not apply. Thus, the Government through its officers is bound by the
doctrine and cannot invoke any defence for their inaction, unless backed by statutory
authority. Statute imposes a public duty while the duties imposed by a promise are owed by
the Government not to the public but to private individuals. Thus estoppel does not apply to
contravention of a statute but applies to the breach of a promise by the Government.

Where the Government makes a promise knowing or intending that it would be acted upon by
the promisee and, in fact, the promisee acting in reliance of it, alters his position, the
Government will be held bound by the promise and the promise would be enforceable against
the Government at the instance of the promisee, notwithstanding that there is no
consideration for the promise and the promise is not recorded in the form of a formal contract
as required by Article 299 of the Constitution of India.

It is elementary in a republic, governed by a rule of law, no one howsoever high or low, is

above the law. Everyone is subjected to the law as fully and completely as any other and the
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
obligation under the law is concerned. The Government cannot claim immunity from the
applicability of the rule of promissory estoppel and repudiate a promise made by it on the
ground that such promise may fetter its future executive action.

Since the doctrine of promissory estoppel is an equitable doctrine it must yield when the
equity so requires. If it can be shown by the Government that having regard to the facts as
they have subsequently transpired, it would be inequitable to the Government to abide by the
promise made by it, the court would not raise an equity in favor of the promise and enforce
the it against the Government. The doctrine of promissory estoppel will be displaced is such a
case because equity would not require the Government to be bound by the promise. When the
Government is able to show that due to the facts which have transpired subsequent to the
promise being made, public interest would be prejudiced if the Government were required to
carry out the promise made, the court would have to balance the public interest in the
Government carrying out the promise made to a citizen which has induced the citizen to alter

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his position to his prejudice and the public interest likely to suffer if the Government were to
carry out the promise, and determine which way the equity lies.

The doctrine of estoppel cannot be invoked for preventing the Government from acting in
discharge of its duties under the law. The doctrine of cannot be applied in teeth of an
obligation or liability imposed by the law. It cannot be used to compel the Government or
even a private party to do an act prohibited by law. There can be no promissory estoppel
against the exercise of legislative power. The legislature can never be precluded from
exercising its legislative functions by resort to the doctrine of promissory estoppel.

An insight into judicial behaviour further indicates that estoppel cannot be applied against the
Government if it jeopardizes the constitutional powers of Government. In the case of C.
Sankaranarayanan v. State of Kerala, the court rejected the contention of estoppel and held
that the power conferred by the Constitution cannot be curtailed by any agreement.

The court also did not allow the plea of estoppel against he Government if it had the effect of
repealing any provision of the Constitution. In Mulamchand v. State of Madhya Pradesh, the
Supreme Court did not apply estoppel against the Government in cases of contracts not
entered into in accordance with the form prescribed in Article 299 of the Constitution. The
court held that if the estoppel is allowed it would mean the repeal of an important
constitutional provision, intended for the protection of the general public.

The case of Motilal Padampat Sugar Mills v. State of Uttar Pradesh,34 is a trendsetter
regarding the application of the doctrine of promissory estoppel against the Government. In
this case the Chief Secretary of the Government gave a categorical assurance that total
exemption from sales tax would be given for three years to all new industrial units in order
them to establish themselves firmly. Acting on this assurance the appellant sugar mills set up
a hydrogenation plant by raising a huge loan. Subsequently, the Government changed its
policy and announced that sales tax exemption will be given at varying rates over three years.
The appellant contended that they set up the plant and raised huge loans only due to the
assurance given by the Government. The Supreme Court held that the Government was
bound by its promise and was liable to exempt the appellants from sales tax for a period of
three years commencing from the date of production.

34
AIR 1979 SC 621

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 In Century Spinning and Manufacturing Co. v. Ulhasnagar Municipality, 35 the
municipality agreed to exempt certain existent industrial concerns in the area from octroi duty
for a period of seven years. However, later on it sought to impose duty. This was challenged
and the Supreme Court, while remanding the case to the High Court, held that where the
private party had acted upon the representation of a public authority, it could be enforced
against the authority on the grounds of equity in appropriate cases even though the
representation did not result in a contract owing to the lack of proper form.

However, the case of Jit Ram Shiv Kumar v. State of Haryana,36 cast a shadow on the
Motilal case where it was held that the doctrine of promissory estoppel is not available
against the exercise of executive functions of the State. The Supreme Court in Union of
India v. Godfrey Phillips India Ltd.,37 soon removed this doubt. The Court held that the law
laid down in Motilal case represents the correct law on promissory estoppel.

In State of Punjab v. Nestle India Ltd.,38 the Apex Court said:

“…promissory estoppel long recognised as a legitimate defence in equity was held to find
cause of action against the Government, even when, and this needs to be emphasized, the
representation sought to be enforced was legally invalid in the sense that it was made in a
manner which was not in conformity with the procedure prescribed by the statute.”

It has also been made clear that the Government could not, on some undefined and
undisclosed ground of necessity or expediency fail to carry out the promise solemnly made
by it. Nor, the Government could claim to be the Judge of its own obligation to the citizen on
an ex parte appraisement of the circumstances in which the obligation had arisen.39

The doctrine of estoppel cannot be invoked for preventing the Government from acting in
discharge of its duties under the law. The doctrine of cannot be applied in teeth of an
obligation or liability imposed by the law. It cannot be used to compel the Government or
even a private party to do an act prohibited by law. There can be no promissory estoppel
against the exercise of legislative power. The legislature can never be precluded from
exercising its legislative functions by resort to the doctrine of promissory estoppel.40

35
AIR 1971 SC 1021 : 1970 SCR (2) 854.
36
AIR 1980 SC 1285 : 1980 SCR (3) 689 : (1981) SCC (1) 11.
37
1996 (85) ELT 242 Bom.
38
AIR 2004 SC 4559.
39
Union of India v. Indo Afghan Agencies Ltd., AIR 1968 SC 718.
40
See Kumar, Narender; Nature and Concepts of Administrative Law, 1 st Ed., Allahabad Law Agency,
Faridabad, 2011, p. 381.

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 CHAPTER-5: ESTOPPEL UNDER THE CONTRACT ACT

CAPACITY TO CONTRACT

The enforceability of an agreement (Sec.2 (b) carries a pre-condition that the parties to a
contract must be competent to contract (Sec 10).

The competency/capability or capacity, has been defined in Sec 11.

‘Every person is competent to contract who is of the age of majority according to the law
to which he is subject, and who is of sound mind, and is not disqualified from contracting by
any law to which he is subject’. Persons not competent to contract
1. Minors
2. Persons of unsound mind
3. Persons disqualified by law

Minor
The term Minor is explained in sec 3 of Indian Majority Act 1875
‘A minor is a person who has not completed eighteen years of age’
Where a guardian has been appointed to take care of a minor’s person or property under
the guardian and Wards Act 1890 or where the superintendence of minor’s property is
assumed by a Court of Wards, and The person becomes major on completing the age of 21
years
Effects of minor’s contract
Sec.10 & 11 make it clear that any agreement made by a minor is void ab initio (not
existent from the very beginning) Mohri bibi V. Dharmodas Ghosh(1903)
Facts.
"A minor borrowed Rs. 20000 from B and as security executed a mortgage in his favor.
He became major a few months later and filed a suit for the declaration that the mortgage
executed by him during his minority was void and should be cancelled. It was held that a
mortgage by a minor was void and B was not entitled for recovery of money.
No ratification
An agreement with the minor is completely void. A minor cannot ratify the agreement
even on attaining majority, because a void agreement cannot be ratified.

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 A person who is not competent, an act cannot give it validity by ratifying. Butif on
becoming major, minor makes a new promise for fresh consideration, then this new promise
will be binding. Minor can be a promisee or beneficiary.
If a contract is beneficial to a minor it can be enforced by him. There is no restriction on a
minor from being a beneficiary, for example, being a payee or a promisee in a contract. Thus
a minor is capable of purchasing immovable property and he may sue to recover the
possession of the property upon tender of the purchase money. Similarly a minor in whose
favor a promissory note has been executed can enforce it.
The Indian Evidence Act, 1872 Sec.115 -Estoppel. - When one person has, by his
declaration, act or omission, intentionally caused or permitted another person to believe a
thing to be true and to act upon such belief, neither he nor his representative shall be allowed,
in any suit or proceeding between himself and such person or his representative, to deny the
truth of that thing.

No estoppel against a minor

Where a minor by misrepresenting his age has induced the other party to enter into a contract
with him, he cannot be made liable for the contract. There can be no estoppel against a minor.
It means he is not estopped from pleading his infancy in order to avoid a contract.

No Specific performance except in certain cases

A minor's contract being absolutely void, there can be no question of the specific
performance of such contract. A guardian of a minor cannot bind the minor by an agreement
for the purchase of immovable property; so the minor cannot ask for the specific performance
of the contract which the guardian had no power to enter into. But a contract entered into by
guardian or manager on minor's behalf can be specifically enforced if

(a) The contract is within the authority of the guardian or manager.

(b) It is for the benefit of the minor.

Persons of unsound mind

As per sec.12, ‘A person is said to be of sound mind for the purpose of making a contract
if, at the time when he makes it, he is capable of understanding it and of forming a rational
judgment as to its effects upon his interest’
The section requires two conditions
1. He should be capable of understanding the nature and contents of the contract.

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 2. He should be capable of forming a rational judgment about the effects of the contract
on his interest.
In otherwise situation he shall be considered as unsound mind and any contract, entered
into by him, would be void (Sec.11)
The following persons are considered as incapable of making a contract
1. Idiot. Who has completely lost his mental faculties of thinking, so is incapable of
forming a rationale judgment?
2. Lunatics, is a person whose mental faculties of thinking are deranged (disordered)
but are not completely lost and he suffers from intermittent intervals of sanity or
insanity.
3. The contracts entered during sanity are valid otherwise void(exception is even during
insanity period any contract made for necessities would be valid, like a contract made
by a minor and the property of lunatic would be liable for repayment)
4. Intoxication, as a man under the influence of intoxication cannot take a rational
decision, he would be categorized as an unsound mind person, so a contract would be
void.

Persons disqualified by law

The following persons are disqualified by law

1. Alien Enemies, an alien is a person who is a foreigner to the land, who can be alien
friend or alien enemy, the status of friend or enemy shall be determined by the
relationship between the countries of citizenship, during the war or peace or on the
declaration of the war.
An alien enemy cannot enter into a contract with an Indian national, even he cannot sue in
Indian court during the war.
Any contract made by an alien enemy during the war, without a license from the central
govt. is unenforceable.
The contracts made before the war is either cancelled or suspended during the war and/or
the govt. may impose conditions which it deem fit in the interest of the nation
2. Foreign Sovereigns, diplomatic staff and accredited representatives of foreign
states.
These persons can enter into a valid contract and also enforce them in Indian courts.
However no suit can be filed against them without prior permission of the central Govt.
3. Insolvents
When a person has been declared as insolvent, his property vests in Receiver or Official
assignee, and his power to enter into a contract is withdrawn. However his disqualification of
an insolvent can be removed when a competent court passes an order of this intent.
4. Convicts

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 A convict cannot enter into a contract during imprisonment, but when that time expires or
he is acquitted, he becomes eligible to enter into a contract again.
No Estoppel Against A Minor

Suppose that a minor by misrepresenting his age induces another to contract with him, will
there be any estoppels against him, or, in other words, will he be precluded from disclosing
his true age in a litigation resulting from the contract?

Even this question had at one time created a controversy. But it is now settled by a
preponderance of authority that there is no such estoppels against a minor.

The infant is not stopped from setting up the defense of infancy.The reason is very simple.
There can be no estoppels against a statute. The policy of the law of contract is to protect
persons below age from contractual liability and naturally the doctrine of estoppels cannot be
used to defeat that policy. Thus, in a case before the Bombay High Court, Beaumont CJ
reviewed the earlier authorities and concluded by saying:

“The Court is of the opinion that where an infant represents fraudulently or otherwise that he
is of age and thereby induces another into contract with him then in an action founded on the
contract the infant is not stopped from setting up infancy.”

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 CHAPTER-6: CONCLUSION

The Doctrine of Estoppel is necessary to maintain flexibility in the law of the land.
The Government and other parties are kept under check from making promises for which
they can be held accountable as discussed before. It is inequitable that the promisor should be
allowed to resize from the assurance or representation having regard to what the promisee has
done or refrained from doing in reliance on the assurance or representation. So the citizens
can rest assured about the lawful promises made.

In conclusion, it can be said that if the Government of India or of any State in India makes a
promise to any person and the promise is not inconsistent with the law of the land and is not
against public interest, then afterwards it cannot refuse to abide by its promise. The Supreme
Court of India has said that acting on the assurance or representations is enough and
consequent detriment, damage or prejudice caused is not to be proved. It is also immaterial
whether such representation was wholly or partially responsible for such alteration in the
position. The Supreme Court has rightly observed that the concept of detriment now is not
merely monetary loss but whether it appears unjust. It is inequitable that the promisor should
be allowed to resile from the assurance or representation having regard to what the promisee
has done or refrained from doing in reliance on the assurance or representation. Hence, one
can rely on the lawful promise of the Government of India and can safely act on the same
because the law of the land is there to protect the citizens.

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 BIBLIOGRAPHY

A Dictionary of Law, 5th Ed., Oxford University Press, New York, 2003.
Jain, M.P. & Jain, S.N.; Principles of Administrative Law, 6th Ed., Vol. II,
Wadhwa Nagpur, 2007.
Kumar, Narender; Nature and Concepts of Administrative Law, 1st Ed., Allahabad
Law Agency, Faridabad, 2011.
The Indian Evidence Act, 1872.
Upadhyaya, Dr. J.J.R.; Administrative Law, 7th Ed., Central Law Agency,
Allahabad, 2011.
Wade, H.W.R. & Forsyth, C.F.; Administrative Law, 9th Ed., Oxford University
Press, New Delhi, 2006.

Avtar Singh, Contract and Specific Relief Act, 10th ed., 2008, Eastern Book
Company, Lucknow

Pollock and Mulla, Indian Contract and Specific Relief Acts, Vol. 1, 13th ed.

http://en.wikipedia.org/wiki/Case_citation
http://www.indiankanoon.org/

http://www.hinduonnet.com/businessline/2000/06/15/stories/141519l1.htm

http://legal-dictionary.thefreedictionary.com/Promissory Estoppel

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