Sukumar Mukhopadhyay: Promissory estoppel is all but dead

EXPERT EYE

Some of the recent Sup-reme Court judgments have confirmed the generally defensive position to which the concept of promissory estoppel has been relegated. Promissory estoppel is one of the fields in the business law that has developed without a statute.

It is all based on judgments, which is why it has a fairly chequered career. The principle simply stated is that a promise made by a proper authority "estopps" the authority from acting otherwise. It is a rule of equity and is also called equitable estoppel.

Time was when promissory estoppel had a more strong foundation. In the hey days of this principle it was held in a series of judgments like the Indo-Afghan, (AIR 1968 SC 718), Motilal Padampat Sugar Mills (1979, vol 2, SCC409), Godfrey Philips (1985 vol 4 SCC369) and Bakul Oil Industries (1987, vol 64 STC304SC) that promissory estoppel applied in the case of the exercise of executive power by the government.

The rule of interpretation that emerged from the plethora of judgments was that if the government promised something like benefit of import to a citizen, the doctrine of promissory estoppel would apply provided the promise made was not against the statute, and the person promising was competent to promise. But it was also well settled that the principle did not apply in the case of legislative power of the government. (The Gwalior Rayon Silk case (1973 vol 2 SCC713, 730)).

The concept fell in bad days when the Supreme Court in the first judgement of its kind in the Kasinka Trading vs Union of India case, 1994 (74) ELT 782 (SC), held that a time-bound notification could be withdrawn before the time period expired in the public interest.

In this case, the court discussed how it became necessary to withdraw the exemption since there was fall in the international prices and if the exemption was allowed to continue the importer would have made a killing.This judgement allows us to draw three conclusions-- that a time-bound exemption is no promise, that in any case the promise can be withdrawn in public interest, and that the delegated legislation is an exercise of legislative power by the executive.

In the next judgement in the Srijee Sales Corporation case, 1997(97) ELT 452 SC, the Supreme Court confirmed the same view. All these judgements have upheld the doctrine of "public interest" or in other words, "executive necessity" precisely, which had been enunciated by the Indo-Afghan judgment, the sheet anchor of the concept of promissory estoppel.

Now the position is that the finance minister can declare a concession in Parliament and it does not stop him from doing precisely the opposite. The latest judgment in the Union of India vs Chogule case, 2003 (154) ELT 13 (SC), also confirms that a licence promised need not be given in public interest. It is no promise, says the Supreme Court.

What really is then a promise? For all practical purposes, the concept of promissory estoppel is inoperative. Hardly any case has been won recently after the Kasinka and Srijee judgments even after they were won at the high court level.

The latest pronouncements have resulted in a situation where even the statement of the Finance Minister in Parliament is held to be not a promise. And any notification even time-bound, which gives a specific time of validity, can be withdrawn any time in public interest. This principle is, therefore, all but dead.

Smukher2000@yahoo.com