FACTS

In this case the appellant was a limited company. On October 10, 1968, a news item appeared stating that the respondent-State of Uttar Pradesh had decided to give exemption from sales tax for a period of three years under Section 4-A, Uttar Pradesh Sales Tax Act, 1948 to all new industrial units in the State of Uttar Pradesh.

On October 11, 1968 the appellant wrote to the Director of Industries stating that in view of the sales tax holiday announced by the government, the appellant desired to set up a plant for manufacture of vanaspati and sought confirmation of the exemption. The Director of Industries confirmed the position. An assurance to the same effect was given by the Chief Secretary, Government of Uttar Pradesh.

In view of these assurances the appellant went ahead with the setting up of the factory. In May 1969, the State government of Uttar Pradesh had second thoughts on the question of exemption and requested the appellant to attend a meeting. At the meeting the appellant’s representative reiterated that the respondent- government of Uttar Pradesh of the assurance, the appellant had proceeded with the work of setting up the factory.

The State Government of Uttar Pradesh, however, on January 20, 1970, took a policy decision that new vanaspati units which went into commercial production by September 30, 1970, would be given partial concession of sales tax.

The appellant’s factor went into production on July 2, 1970 but the State Government once again changed its policy and on August 12, 1970 intimated its decision to rescind the concessions.

The basic requirement for invoking the principle must be present, namely, that the factual situation should be such that “injustice can be avoided only by the enforcement of the promise”.

JUDGMENT

The High Court of Uttar Pradesh dismissed the writ and rejected the plea of promissory estoppel against the government of Uttar Pradesh.

The Supreme Court of India, allowing the appeal, held that where one party has by his words or conduct made to the other a clear and unequivocal promise 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 to whom the promise is made, and it is in fact so acted upon by the other party, the promise would be a 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, and this would be so irrespective of whether there is any pre-existing relationship between the parties or not. Of course, the basic requirement for invoking the principle must be present, namely, that the factual situation should be such that “injustice can be avoided only by the enforcement of the promise”.

The doctrine of promissory estoppel is not really based on the principle of estoppel, but it is a doctrine evolved by equity in order to prevent injustice. There is no reason why it should be given only a limited application by way of defence. It can be the basis of cause of action.

LawZ Bureau