9 Feb 2010

Promissory Estoppel against Government: The latest from Supreme Court

Can the Government be stopped from changing its stand / policies even though in the face of changes societal realities? Can the Government be compelled to perforce continue to distribute largesses it ones promised? The answer seems to be yes, in the face of the jurisprudence that has grown over the seemingly innocuous Section 115 of the Indian Evidence Act which provides that a party is not allowed to resile from a promise if another has acted on such promise to its prejudice. The law on the issue was expounded in 1979 by the landmark decision in Motilal Padampat which declared that even Government was bound by its promise to those who had acted on it and since then the decisions have only added a facet to the doctrine of Promissory Estoppel of which the recent decision against the Government of Bihar is the latest. The Supreme Court directed the State Government to honour the claims of the industries for exemption which had acted on the basis of the State Industrial Policy but was sought to be withdrawn.

The Supreme Court revisited its earlier decisions on the issue to declared that in order to invoke the doctrine against Government it was required that the following ingredients be satisfied;
(a) that a party must make an unequivocal promise or representation by word or conduct to the other party (b) the representation was intended to create legal relations or affect the legal relationship, to arise in the future (c) a clear foundation has to be laid in the petition, with supporting documents (d) it has to be shown that the party invoking the doctrine has altered its position relying on the promise (e) it is possible for the Government to resile from its promise when public interest would be prejudiced if the Government were required to carry out the promise (f) the Court will not apply the doctrine in abstract.
Have a look at the decision. It is also interesting to note the paper entitled 'Hunting Promissory Estoppel' by Professor David V. Snyder which seeks to trace the doctrine of promissory estoppel in the context of the law of the United States. 

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