JIT RAM SHIV KUMAR AND ORS. ETC. v. STA~ OF HARYANA AND ANR. ETC. April 16, 1980 [S. MURTAZA FAZAL ALI AND P. S. KAILASAM, JJ.J P1'11}11b M1111icipal Act, 1911 as amended by Punjab Act 48 of 1951, Section 62.A-Power of State Government to di'rect the ,\lunicipality to impose any tax ulllkr ~ction 61-Exemption from payment of octroi duty not within the com· pelence of the Municipality and ultra vires of its powers-.Whet/1er any suc/1 lllCI whidi is void ab initio, enforceable-Principle of Promissory Estoppel, ingrt• dienll of-Applicability to the instant case.
The Municipal Committee of Bahadurgarh, respondent No. 2 established Maadi Fateh in Bahadurgarh Town with a view to improve trade in the area. The Municipal Committ<e decided that the purchasers of the plots for sale in the Mandi would not be required to pay octroi duty 01> goods imported within the said Mandi. A resolution (No. 8) dated 2().12-1916 was passed by the Mllllicipality to this effect. Hand bills wore issued for tho sale of the plots on the basis of tpe resolution and it was proclaimed that Fateh. Mandi would remain exempt from payment of octroi. Subsequently by resolution No. dated 20-5-1917, the Municipal Committee decided that the term No. 14 to the conditions of sale, namely, that tho purchasers of plots would not be required to pay octroi, be amended to the effect that the Mandi shall remain intmuno from payment of octroi duty for ever. When the resolution was received by the
Commissioner of Ambala, in paragraph 3 of his letter datod 26-6·1917, he minuted that the undertaking by the Municipal Commissioner never to in1pose octroi duty in the Mandi was ultra vires and therefore the purchasers of the p)Qla should be informed so that they may withdraw from the purchases. on receipt of this letter the President of the Municipal Committee made represen- tations that if octroi duty was to be levied, tha-e would be no purchasers for the plota end the entire scheme would fall tllrough. On this, the Commissioner reviled his earlier view and withdrew his objection by further observing tha~ "as l!OOn es the market is established it will be necessary to consider what form of taxation is best to cover the market share of municipal expelnses". The Muni· cipal COmmittee on I().3-1919 imposed house-tax of Rs. 3·14·6 per cent per
alinum on the shopkeepers to cover the ell<penditure of tho market. This state of affairs continued till 4-9-1953 when the MunicipaJ Committee by nolification No. 9697-C.53163830 dated 4·9-1953 included Fateh Mand~
Bahadurgarh, within the Cktroi limits. The Examiner of Local Funds pointed out that the h.funicipal Committee- is under obligation to charge octroi on goods imported into Fateh Ma'1di. The President of the Municipal Committee made a repr0oentation to the Deputy Comm:ssioner on 24-2-1954. The Municipal Committee again passed another resolution No. I dated 2-3·1954 that the Fateh Mandi will remain free from octroi duty according to the terms of the procla- mation of the sale relating to the sale of plots. The matter was referred to Punjab State which after thoroughly examining the whole
matter, confirmed Resolution No. I passed by the Municipal Committee on 2·3-1954. Subs'e- Jl 'C [1980] 3 S.C.R, quently, the Municipal Committee changed its mind and by its resolution dated S-5-1954, resolved .that octroi duty should also be levied on the goods imported into Fateh Mandi.
But this resolution was annulled by the Punjab Government under s. 236 of the Punjab Municipal Act. The Examiner of Local Funds Accounts in the meantime insisted on the levy of octroi duty on the
goods imr-orted into Fateh Mondi and the Punjab Govermnent after discussing the issue on 9-4-19 56 informed the President of the Municipal Committee that the Government's action in confirming ·me resolution No. 1 of 2-3-1954 of the
Municipal Committee, Bahadurgarh exempting goods imported into Fateh Mandi from levy of ocroi duty under s. 70(2)(c) of the Municipal Act, 1911, is lluite in order ood that no ·separate notification to this effect was necessary under -the rules. Again on 21-7-1965, the Municipal Committee Bahadurgarh resolved that the Govemment be requested to cancel Resolution No. 1 dated 2-3-1954. The State of Haryanai Respondent No. 1 which came into existence on 1-11-64,wtaer the Punjab Reorganisation Act, by its memo dated 13-10-1967 approv.4 tile resolution No. 6 dated 21-7-65 of the Municipa~ Committee and cancelled the Municipal Resolution No. 1 of 2-3-1964.
As a result of the deci9ioo <It the Government, the Municipal Committee startetl charging octroi duty on ·.-the goods imported into the Mandi. On these facts, the petitioner• subml!Ml that the resolution No. 6 of the Municipal Committee dated 21-7-1965 (~ 6)
and approval granted by the Haryana State as per its order dated 30-19'1%7 (Ann. H) were illegal and ultra vires and without jurisdiction. A Full Bench of the High Court rejei:ted the petition mainly Oil three
grounds. Firstly, it found that the State Government is entitled under S. 112-A of Punjab Act, 48/1953 to direct the Municipal Committee to impose oettt>i 1duty and as such even if the municipality is found to have erred in impOBing lfle Octroi Duty, the legislative powers of the State cannot be questioned. Seconilly, it found, that it was not within the competeru:e of the Municipality to grant any exemption from payment of octroi duty and this act '"as ultra vfrts t1t·its power< and cannot be enforced. Thirdly, it found that the Court canndt gn into the question as to whether the petitioners' plea based on equity fhat the Municipality is bound, cannot be gorre into far waint of adequate faclB. · 'i'lle High Court however granted certificates to the appellants. Dismissing the appeal,. the Court
HELD : l. Under section 62-A of the Punjab Municipal Act, as amended by Punjab Act 43/1958 'the State G1>vemmen! is empowered to Im~ octroi duty and under sub clause (b) if the committee fails to canY cat ·the order of the Government, the State Government
1may impose Octroi Duty. Under S. 70{2) (c), :l Municipal Comn1ittee by a resolution pa£sed at a special meeting and confirmed by the State Government may exempt in whole or in· part from payment of any such tax any person or class of persons or any property or description of property,
Jn exercise of those powers, the State Government had by its order dated 4-5-1954 confirmed resolution No. I passed by the Muni- cipal Committee in its specia1 meeting held on 2-3-1954 regarding the eittrip- tion of goods imported into Fateh Mandi from levy of Octroi Duty. So"-'e- quently, in reply to the objection raised 'by the Examiner of Local Funds, the Government pointed out by its letter dated 9-4-1956 (Ann. F) that the Govern- ment's action confirming the resolution No. I dated 2-3-1954 of the Municipal Comn1ittee exempting Goods imported into Fateh Mandi, under s. 70(2)(c) of JIT RAM V. HARYANA
the Punjab. :rviunii:ipJl Act, 1911, was quite in order. By the impugned order dated 20-10-1967 the Government approved the resolution No. 6 of- the Muni- cipal Co1nmittte dated 21-7-1965 and permitted the Municipality to levy the
Octroi Duty. Therefore, the action taken by the State Government is strictly in conformity with the powers conferred on it under s. '70(2) (c) of the Act. lt exempted the petitioners from payment of Octroi Duty for· a partic~ar period and ultimately withdrew the exemption. The action of th~ Government cannot be q;1estione<l as it is in exercise of its statutory functions. The plea of estoppel is not:· available against the State in the exercise of its legislative or statutory functions.
The Governn1ent have powers to direct the Municipality to collecl the Octroi Tax if the Municipality fails to take action by itself under s. 60(A)- (3). Further, even on facts, this plea is' not available as against the Government as it is .not the case of the petitioners that they acted on the representation of the Government. [698 E-H, 699 A-CJ
2. The Municipality is not estopped from levying or recommending the levy of the tax to the Government even though in the proclan1ation of sale it was notified that no octroi duty would be. levied and it was only in pursuance cf such rep~sentation. the appt.Jlants purchased the property because the Municipal Committee had uo authority to exempt the Fateh Market from the levy ot · Octroi .Duty. If the l\funicipa·I Committee had passed a reSolution or issued a notification that no Octroi duty will ber levied, it will be ultra vires of the powers of the Municipal Committee. When a public authority acts beyond the scope of its authority the plea of estoppel is not available. to prevent the authority
from acting according to law. It is in public interes,t that no such plea should be allowed. Further, in the instant case, the appellants are not entitled to any enforceable legal right under the terms of the tvlunicipal Act, since non produc- tion of any sale deed executed by the Municipal Connnittee in fa,•our of the purchasers raises the only presumption that the; contract between the parties have not been proved to have been reduced in writing and exocuted in the manner prescribed under section 47 of the Municipality Act, 1911 (Act 3 of 1911). [699 C-E, 700 B-D]
3. Article 299(1) of the Constitution of India corresponding to Section 17.5(~) of t-he Government of India Act, 1935 provides that all contracts made c in the exercise of the executive powers of the Union or of a State shall be exp~etl to he made by the President or by the Governor of the State, as the case may be, and all such contracts and all assurances of property made in the exe~ of that power shall be executed on behalf of the President or the GOYemor by such persons and in such manner as, he 'may direct or authorise. The provisions of this Article is mandatory and not directory, is enacted as a.
matter . of public policy that the State should not be saddled with liability for unauthorised contracts wid is enacted in the public interest. The· provisions are e.Qlbodied on the ground of public1 policy-on the ground of protection of general public.
[700 F-H, 701 A-BJ Seth Bhikraj Jaipu1~i'a v. Union of India, [1962] 2 SCR 880; ¥ulam Chand v. State of M.P., [1968] 2 SCR 214, Karan1shi Jethabfial Sa1nrayya v. Stat~ of Bombay. r19641 6 SCR 984; referred to.
4. The scope of the plea of doctrine of pron1issory estoppel against the Government is as follows : (a). Th~ plea o.f promissory estoppel is not available against thei exeifcise of the legislative or executive functions of the State. There could not be est?ppel . against express provisiom of the Jaw nor could the State by its action waiive its rights to exerc:se powers entrusted to it for the public good. [721 F] c
Antonio Buttigieg v. Captain Stepheti H. Cross and Ors. AIR PC; Adants v. London Improved Motor Coach Builders, [1821) 1 K.B. 495, York Corporation v. Henry Lcethani ant! Sons Ltd., [1924] 1 Ch. 551; 1¥illiatn Cory and Sons Ltd. v. London Corporation, [1951] 2 K.B. 476; Howell v. Faln1outh Boat Consttuctiou Co. Ltd., [19511 A.C. 837; Comrnissioner of Crown liznds v. Page, [1960] 2 K.B. 274; South-e11d-01t-Sea Corporation v. H0<lgson (Wickford) Ltd., [1962] 1 Q.B. 416; Federal rnsurance Corpn. v. Morril, 382 U.S. 380;
quoted with approval. Robt?rtson v. Minister of Pensions, [1949] 1 K.B., 227 dissented from. Assistant Custodian of E.P. and Ors;,,_ v. Brij Kishore Agarwala, (1975] 2 SCR 359; Bihar Eastern Gangetic Fi.tltermen Cooperative Society v. Sipuhl Sing1i & Ors. AIR 1977 SC 2149; applied.
Union of India v. lndo Afghan Agencies, [1968] 2 SCR 366; Ce111ury Spin- ning cl Manufacturing Co. Ltd. and Anr. v. Ulhas Nagar Municipa~ Council and Anr., [1970] 3 SCR 854; Turner Morrison Co. Ltd. v. Hungerford Investment Trust Ltd., [1972] 3 SCR 711; explained and distinguished. Collector of Bombay v. Municipal Corporation of tire City of Bombay and Ors., [1952] SCR p. 43; E.xcise Commr. U.P., Allahabad v. Ram Ku111111', (1976] Supp. SCR 532; M. Ramanatlra Pillai v. State of Kera/a, [1974] 1 SOR 515; StQte of Kerala and Anr. v. Tire Gwalior Manufacturing
(Wvg.) Co. Ltd., [1974] 1 SCR 671; followed. (b) The doctrine cannot be invoked for preventing the Government from discharging its functions under .the law. (721 G] ( c) When an officer of the Government acts outside the scope of bis au1ho- rity, the plea of promissory estoppel is not available. The doctrine of ultra vires will come into operation and the Government cannot be held bound bt' the unauthorised acts of its officers. [721 G-HJ
(d) When the officer acts within the scope of his authority under a scheme and enters into an agreement and makes a representation and a person aCtigg on that representation puts himself in a disadvantageous position, the Court is entitled to require the officer to act according to the scheme artd the agreement or representation. The officer cannot arbitrarily act on his mere whim:
and ignore his promise on some undefined and undisclosed grounds of necessity or change the conditions to the prejudice of the person who had acted upon auch representation and put himself in a disadvantageous position. [721 G-H, 122 A·B]
· Union of .fndia v. lndo Afghan Agrncies Ltd., [1968] 2 SCR 366; diScussed "!"' and followed. (e) The officer would be justified in changing'the tertns of the agreement to the prejudice of the other party on special considerations such as difficult! foreign exchange position or other rnattdrS \Vhich have a bearing on general interest of the State. [722 B-Cl
Union of Indio v. ·Mis lndo Afgl1an Agencies Ltd., [1968] 2 SCR 366 applied. ,JIT RAM V. HARYANA 5. It is only in public interest that it is recognised that an authority acting on behalf of the Government or by virtue of statutory pow'ers cannot exceed his ~uthority. Rule of ultra vires "Will become applicable when he. exceeds his authority an<l the Government would not 'be bound by such action. Any per- son who enters into an arrangement \Vith the Government has to aticertain and satisfy himself that the authority who purports to :ict for the Government, acts within the scope of h'.s authority and cannot urge that thp Government iS in the posiiion of any other litigant liable to be charged with liability. [705 G-H, 706 A]
6. The doctrine of estoppel which burst out into sudden blaze in 1946 and ever since continuing to smoulder due to the consistent maintenance of the ori- ginal author's interest in its further development, now in this direction and nov; in that; though interesting is not relevant in administering: Indian Law. Section 63 of the Contract Act which provides that when a creditor accepts a lesser sum'.-in -satisfaction of the· whole debt, the whole1 debt becomes discharged is <11
wide departure from the E.nglish law as laid down in Jordan v. Mor1e:i. The doctrine of estoppel referred to in lligh Trees case is tO' some extent taken care of by section 65 and 70 of the Indian Contract. Section 65 provic:)es that when a contract bec~mes void, any person who has. received ainy advantage undc~ such ngreen~ent or contract is bound to restore it or to _make compensation for it, to the person from whom he received it. Under section iO of the Contract Act. an ob!igation is cast' on the person enjoyi!ng benefit of a non~gmtutious act to com· pe!l!iafe the person Who lawfully performed the Act. [707 A, 708 B, D-F] Fqake.s v. Beer, [1884] 9 A.C. 605; Jordan v. Money, [18541 5 H.L. Cas
IRS; Fenner v. Blake, [1900] 1 Q.B. 426; Woodhouse Ltd. v. Nigerian Produce Ltd., [1932] A.C. 431, IN Re. Wick/lam Will/am Porter and Co. Ltd., [1937) 2 All E.R. 361; Central London Property Trust Ltd. v. High Trees House Ltd., fl9S6l I All. E.R. 256; referred to.
7. 1"he provisions of-Section 70 of the Indian Contrac~ Act are applicable to contract '"'hich is not according to Section 175 of the Goverrunent of Iildia Act, and Article 299 of the Constitution of India.
[708 G-H] State of West Bengal v. B. K. Monda/ and Ors., [1962] Supp. SCR p. 876; New Marine Coal Co. Ltd. v. Union of illdia, [1964] 2 SCR 859; referred to. c 8._ All that the lndo-Afghan Agencies case laid down was that a public authority acting on behalf of the Government cannot on its own whim and in an arbitrary manner seek to a1ter the conditions accepted by him to the prejudice of the other side. The decision in temlS. accepts that after taking into considera .. tion the exigencies and change of circumstances the authority can modify the conditions in exercise of his powers as a public: policy. Apart from not notic .. ing Howell's Case, the Court in lndo Afghan's case did not say that the 1aw as extracted from the judizrnent in Robertson's case by Denning J. was applica.ble to India. [719 D-E, 721 Al
9. The Judgment in Mis Moti/al Padampat Sugar Mills Co. (P) Ltd. y, Star,,· of TJt(ar Pradesh, [1979] 2 SCR p. 641 is not in accordance with the view consistantly taken by the Supreme Court in following respects : [722 F] . n: The decision in the case-of Union of ln~ia v. Mis lndo Afvlian APP'1· ciea Ltd., (1968] 2 SCR 366 cannot be constructed in the manner in which it was [1980) 3 S.C.R.
done. All that the Inda Afghan case, purports to lay down is that the Court can enforce an obligation 1ncurred by an authority on which another has acted upon and put himself in ai disadvantageous position. when the authority re6iles arbitrarily or on mer'e whim or on some undefined
and undisclosed grounds of necessity. [722 F-G] (ii) 'fhe decision of this Court in Century Spinning and 1lfa1111fac:uring Co. s: Ltd and Anr. v. The Ulhasnagar Municipal Council and Anr., [1970] 3 SCR 854 was understood as refusing to make a distinction bet\Veen t·he private· lli.di- viduaJ and public body so far as the doctrine of promissory estoppel is con- cerned. !723 F]
(iii) The three decisions of this Court, two by c·onstitution Benches Ranianatha Pillai v. State of Kerala, State of Kera/ti v. The Gwalior Ril,yi;n -jl Silk Mfg. (Wvg.) Co. Ltd. and th~ third by a Bench of four judges in Eici5'' Conzmissioner, [T.P. Allahabad v. Ram Kumar cannot be ignored on the ground that the observations are in the nature of obiter dicta and that it cainnot be insisted as intending to have la-id down any proposition of law different from that enunciated in the lndo Afghan Agencies case. It was not necessary for this Court in the three cases to refer to Union of India & others v. Inda-Afghan Agencies. If properly understood it only held that the authority cannct go back on the agreement arbitrarily or on its own whim. [723 H, 724 A·B] (iv) The. case of the House of Lords in Howell v. Faflnouth Boat Construc- tion Co. Ltd. canont be read as not having overruled the view of Denning J. and as not having expressed its disapproval of the doctrine of promissory< estoppel against the crown in Robertson v. Minister of Pensions. [724 B.C] ( v) Tue Indian Constitution as a matter of high policy in public interest has enacted Article 299 so as to save the Government from liability arising out of unauthorised acts of its officers and contracts not duly executed. Sec- tions 65 and 70 of the Indian Contract Act provide for certain reliefs in void contracts and in unenforceable contracts where a person relying on a represen- tation has acted upon it and put himself in a disadvantageous position. The activist jurisprudence and the wide
implications thereof, propounded in the Motilal Padampat, Sugar case doubted. [724 E, F, G] (vii) Tue Indian Contract Act regulates the right of parties and expressly —, ins'ists on the necessity for lawful consideration which cannot be diSpe:naed with by invoking some new equitable
doctrine. Under Section 10 of the Contract Act, for a contract to be valid, it should be for a lawful COD!lid'eration and Section 25 of the Contract Act provides that an agreement made withont consideration is, void unless it satisfies one of the conditions mentioned in fhat section. [725 B-C, DJ
(viii) Sankaranarayan v. State of Kerala, [1971] 2 S.C.C. 361; Narendra chand I/em Ram and Ors. v. Lt. Governor Administration, Union Te"itory of Himac/wl Pradesh, [1972] 1 SCR 940; State of Tamil Nadu and Ors. etc. v. S. K. Kr;,;hnamurthi etc., [1972] 3 SCR
104; and M /s Andhra Industri•i Works v. Chief Controller of Imports and Ors., [1975] 1 SCR 327 indicate that the Rule of estoppel against Government cannot be invoked against the Government. [725 Fl
.JlT RAM v. HARYANA (Kai/asam, !.) 10. What are the moral values of the society is a c.omplex question becauae the cencept of moral values amongst different persons and classes of persons is not always the same. Being not a static one, it differs from time to time and from society to society.
It is hazardous for a Court to attempt to enforce what" according to it is the moral value. Before embarking on the mission of 11closing the gap between the law and morality and bring about as near an .approximation between the two as possible", it is necessary for the Court to understand clearly its limitations. The powers of the Court to legislate is strictly limited.
"Judges ought to remember that their office is jus dicere and not ju.r 4are to interpret fhc law, and not to make l~w ori give law". [727 F, G, 728 A-CJ The courts by its very nature are most ill suited to undertake the task of legislating. There is no machinery for the Court to ascertain the conditions of the people and their requirements and to make Jaws that would be mo~t apprQPriate. Further two judges may think that a particular law would be deSirable to meet the requirements whereas another two judges may most pro- foundly differ from the conclusions arrived at by two judges. 1728 G-H, 729 A] Shri Gurbaksh Singh Sibbia etc. v. State of U.P., [1908) 3 SCR p. 383 followed.
CML APPELLATE JURISDICTION: Civil Appeal Nos. 1237-1238/1970. From the Judgment and Order dated 15-12-1969 of the Punjab and Haryana High Court in Civil Writ Appeal Nos. 444/68 and 2975/ 67.
Hardayal Hardy, Mahinder Narain and Rameshwar Nath for the Appellants in both the Appeals. S. M. Ashri and M. N. Shroff for the Respondents in both the Appeals. The Judgment of the Court was delivered by
c KAILASAM, J. These two appeals are by certificate granted by the Pu,njab and Haryana High Court at Chandigarh in C. W. No.444/1968 and C. W. No. 2975 of 1967 respectively. The petitions were disposed of by a full Bench of the High Court on 15-12-1969.
The appellants who were the petitioners before the High Court prayed for a writ of certiorari or mandamus or any other appropriate writ for quashing the resolution No. 6 dated 21st July, 1965 of the Municipality and letter of the Government of Haryana to the President of the Municipal Committee Bahadurgarh dated 30-10-1967. The facts of the case briefly are as follows :-
The Municipal Committee of Bahadurgarh, Respondent No. 2, established Mandi Fateh in Bahadurgarh Town, with a view to improve trade in the area. The Municipal Committee decided that the purchasers of the plots for sale in the Mandi would not be required c
SUPREME COURT· REPORTS [1980] 3 9.C.R. to pay octroi duty on goods imported within the said Mandi. In pur-. suance of this decision, resolution No. 8 dated 20-12-1916 was passed by the Municipality. Handbills were issued for the sale of the plots on the basis of the resolution and it was proclaimed that Fateh Mandi would remain exempt from payment of octroi. Subsequently by re- solution No. 4 dated 20-5-1917, the Municipal Committee decided that the term No. 14 to the conditions of sale, namely, that the plots would not be required to pay octroi, be amended to the effect that the Mandi shall remain immune from payment of Octroi Duty for ever. When the resolution was received by the Commissioner of Ambala, in paragraph 3 of his letter dated 26-6-1917 marked as Annexure A in the writ petition, he noted :-
"I note that by its resolution No. 4 of 20-5-1917, the Municipal Committee has undertaken that Octroi shall never be imposed in the Mandi. This is ultra vires, the Municipal Committee cannot make such an undertaking and this should be explained to the purchasers of sites before they begin building so that if they wish they may withdraw from the purchase".
Of course, it is unlikely that Octroi will be imposed." On receipt of this letter, the Presid~nt of the Municipal Committee made representations that if octroi duty was to be levied, there will be no purchasers for the plots and the entire scheme will fall through. On receipt of this representation on 20-9-1917 (Annexure B), the Commissioner revised his view and stated that he was cancelling para 3 of his letter dated 26-6-1917, that is to say, "that in deference to the strong views of the Municipal Committee and to your own opini0n that the market will collapse if I insist upon it, I withdraw my objec- tion to the undertaking made by the Municipal Committee that Octroi will not be imposed on the market. As soon as the market is establish- ed it will be necessary to conside1 what form of taxation is best to cover the market share of Municipal expenses". The Municipal Committee on 10-3-1919 imposed house-tax of Rs. 3-14-6 per cent per annum on the shopkeepers to cover the expenditure of the market. This state of affairs continued till 4-9-1953 when the Municipal Committee by notification No. 9697-C-53/63830 dated 4-9-1953 in- cluded Fateh Mandi, Bahadurgarh, within the Octroi limits. The Examiner of Local Funds pointed out that the Municipal Committee is under obligation to charge octroi on goods imported into Fateh Mandi. The President of the Municipal Committee made a representa- tion to the Dep11ty Commissioner on 24-2-1954. The Municipal Com- mittee again passed another resolution No. I dated 2-3-1954 that the ·–..
le r ,. i r . ,,.,. JIT RAM v. HARYANA (Kailasam, !.) Fateh Mandi will remain free from octroi duty according to the terms of the proclamation of the sale relating to the sale of plots. The matter. was referred to the Punjab State which after thoroughly examining the whole matter, confirmed Resolution No. I passed by the Municipal Committee on 2-3-1954. Subsequently, the Municipal Committee changed its mind and by its resolution dated 8-5-1954, resolved that octroi duty should also be levied on the goods imported into Fateh Mandi. But this resolution was annulled by the Punjab Government under S. 236 of the Punjab Municipal Act. The Examiner of Local Funds Accounts in the meantime insisted on the levy of octroi duty on the goods imported into Fateh Mandi and the Punjab Government after discussing the issue on 94-1956 informed the President of the Municipal Committee that the Government's action in confirming the resolution No. I of 2-3-1954 of the Municipal Committee, Baha· durgarh exempting goods imported into Fateh Mandi from levy of octroi duty under S. 70(2) (c) of the Municipal Act, 1911, is quite in order and that no separate notification to this effect was necessary under the rules. Again on 21-7-1965, the Municipal Committee Bahadurgarh resolved that the Government be requested to cancel Resolution No. I dated 2-3-1954. The State of Haryana Respondent No. I which came into exi•tence on 1-11-1964 under the Punjab Reorganisation Act, by its memo dated 13-10-1967 approved the resolution No. 6 dated 21-7-1965 of Municipal Committee and cancelled the Municipal Re- solution No. I of 2-3-1954. As a result of the decision of the Govern- ment, tbe Municipal Committee started charging octroi duty on the goods imported into the Mandi. On these facts, the petitioners sub· milted that the resolution No. 6 of the Municipal Committee dated 21-7-1965 (Annexure G) and the approval granted by the Haryana State as per its order dated 30-10-1967 (Ann. H) are illegal and ultra vires and without jurisdiction.
A Fu!l Bench of the High Court rejected the petition mainly on three grounds, Firstly, it found that the State Government is entitled under S. 62-A of Punjab Act, 48/1953 to direct the Municipal Com- mittee to impose octroi duty and as such even if the municipality is found to have erred in imposing the Octroi Duty, the legislative powers of the State cannot be questioned. Secondly, it found, that it was not within the competence of the Municipality to grant any exemption from payment of octroi duty and this act is ultra vires of its powers and cannot be enforced. Thirdly, it found that the Court cannot go into the question as to whether the petitioners' plea based on equity that the Municipality is bound, cannot be gone into for want of ade· quate facts.
6-463SCI/80 c JI c ll Dealing with the first contention, relating to the legislative powers of the State, it will be seen that Punjab Act 48/1953, introduced s.62A which runs as follows
"62-A. (l) The State Government may, by special or general order notified in the official Gazette, require a Committee to impose any tax mentioned in S.61, not already imposed at such rate and with- in such period as may be specified in the notification and the Com- mittee shall thereupon act accordingly.
(2) The State Government may require a Committee to modify the rate of any tax already imposed and thereon the committee shall modify the tax as required within such period as the State Government may direct.
(3) If the Committee fails to carry out any order passed under Sub-section (1) or (2) the State Government, may by a suitable order notified in the official gazette, impose or modify the tax. The order so passed shall operate as if it were a resolution duly passed by the Committee and as if the proposal was sanctioned in accordance with the procedure contained in S.62."
It is admitted that the State Government is empowered under S. 62A to require the ,Municipal Committee to impose Octroi Duty and under sub-s. (3) if the Committee fails to carry out the order of the Government, the State Government may impose Octroi Duty. Under S. 70(2) (c), a Municipal Committee by a resolution passed at a special meeting and confirmed by the State Government may exempt in whole or in part from the payment of any such tax any per- son or class of persons or any property or description of property. In exercise of these powers, the State Government had by its order dated 4-5-1954 confirmed resolution No. 1 passed by the ,Municipal Com- mittee in its special meeting held on 2-3-1954 regarding the exemp- tion of goods imported into Fateh ;Mandi from levy of Octroi Duty. Subsequently, in reply to the objection raised by the Examiner of Local Funds, the Government pointed out by it' letter dated 9-4-1956 (Ann. F) that the Government's action confirming the resolution No. I dated 2-3-1954 of the Municipal Committee exempting Goods im- ported into Patch Mandi, under S. 70(2) (c) of the Punjab ,Municipal Act, 1911, is quite in order. By the impugned order dated 20-10-1967 the Government approved the re.solution No. 6 of the Municipal Committee dated 21-7-1965 and permitted the Municipality to levy the Octroi Duty. The action taken by the State Government is strictly in conformity with the powers conferred on it under S. 70(2) (c) of the ·y-
JIT RAM v. HARYANA (Kailasam, !. ) Act. It exempted the petitioners from payment of Octroi Duty for a particular period and ultimatelyjwithdrew the exemption. The action of the Goverment cannot be questioned as it is in exercise of its sta- tutory functions. The plea of estoppel is not available against the State in the exercise of its legislative or statutory functions. The Govern- ment have powers to direct the Municipality to,· collect the Octroi Tax if the Municipality fails to take action by itself under S. 60(A) (3). Further, even on facts, this plea is not available as against the Govern- ment as it is not the case of the petitioners tha*hey acted on the re- presentation of the Government. We, 'therefore, agree with the view of the Full Bench that the plea of estoppel is not available against the Government for questioning the validity of the impugned Government order.
The second contention is that the Municipality is estopped from levying or recommending the levy of the tax to the Government as in the proclamation of sale it was notified that no Octroi Duty will be II
c levied and it was [only in pursuance of such representation, the petitioners purchased the property. We feel this plea should also fail . o because the Municipal Committee had no authority to exempt the Fateh Market from the levy of Octroi Duty. If the Municipal Com- mittee had passed a resolution or issued a notification that no Octroi Duty will be levied, it will be ultra vires of the powers of the Muni- cipal Committee. When a public authority acts beyond the scope of its authority the plea of estoppel is not available to prevent the authority from acting according to law. It is in public interest that no such plea should be allowed.
The third contention that was raised by the learned counsel for the appellants before the High Court and reiterated before us, is that the Municipality and its successors are bound by the doctrine of pro- missory estoppel and as such are estopped from levying the Octroi Duty. The High Court rejected the plea on the following grounds :- 1. The Petitioners are not the original purchasers of the plots in Fateh Mandi. They are either descendants of or transferees from the original purchasers of the plots.
2. No sale-deed was executed by the Municipal Committee in favour of the original purchasers undertaking that no octroi duty will be levied. 3. No allegation has been made that the original purchasers would not have purchased the plots, if condition no. 14 about im- munity from payment of Octroi had not been there.
The learned counsel by reference to the names of the list of the purchasers was able to satisfy us that some of the appellants are the [1980) 3 S.C.R. original purchasers and as such the first objection raised before the •High Court is not sustainable. Again, regarding the third objection, that there is no allegation that the original purchasers would not have: purchased the plots if condition 14 about immunity from payment of Octroi had not been there, it was .submitted as erroneous as in the affidavit filed in support of the writ petition, the petitioners had pleaded in paragraph 2 that on the faith of the representation, the petitioners purchased the plots and constructed establishments. The learned coun- sel is, therefore, right in his submission that the third objection raised before the High Court is without substance. But the High Court was right in pointing out that none of the sale deeds executed by the Muni- cipal Committee in favour of the purchasers was produced before the Court. These circumstances would show that the contract between the parties have not been proved to have been reduced in writing and executed in the manner prescribed under S. 47 of the Act. Strictly, therefore, under the terms of the Municipal Act, the appellants are not entitled to any enforceable legal right. But it was submitted that even though the contract had not been executed in due form, the ap- pellants would be entitled to relief under, the doctrine of promissory estoppel.
The question that arises for consideration'.in these cases is whether the proclamation of sale which notified that there would be''no octroi levy in the market relying on which statement the petitioners bid at the auction, would estop the Municipality by operation of the doctrine of promiss9ry estoppel from recommending to the Government and the Government levying octroi duty under S. 61 of the Punjab Muni- cipal Act.
To answer this question it is necessary to examine at some length the rights and liabilities of the State upder a contract entered into by it with third parties and in transactions carried on by it in exercise of its executive and statutory, functions.
Art. 299 (1) of the Constitution of India provides that all contracts made in the exercise of the executive power of the Union or of a State shall be expressed · to be made by the President, or by the Governor of the State, as the case may be, and all such contracts and all assurances of property made in the exercise of that power shall be executed on behalf of the President tor the Governor by such persons and in such manner as he may
direct or authorise. This Article in the Constitution corresponds to S. 175(3) of the Government of India Act, 1935. In cases, that arose out of S. 175(3) of the Government of India Act, 1935, this Court starting from Seth Bikhraj Jaipuria v. Union of India,(I) has (!) [1962] 2 S.C.R. 880.
JIT RAM v. HARYANA (Kailasam, J.) repeatedly held that the provision is mandatory and not directory, that the provision is enacted as a matter of public policy, that the State should not be saddled with liability for unauthorised contracts and that the provision is enacted in the public interest. In Mulamchand v. State of M. P.,(1) the earlier decisions of this;court were relied on and it was held that the reasons for enacting the provision is not for the sake of some form but for safeguarding the Government against un- authorised contracts. The provisions are embodied on the ground of public policy-on the ground of protection \)f general public-and these formalities cannot be waived or dispensed with. The Court clear- ly observed that if the plea of the respondent regarding estoppel or ratification is admitted that would mean, in effect, the repeal of an important constitutional provision intended for the protection of the general public. That is why the plea of estoppel or ratification cannot be permitted in such a case." (emphasis Ours)
It was contended before this Court in Karamshi Jethabhai Somayya v. State of Bombay,(2) that in an agreement entered into:under the Act by statutory authority in pursuance of a statutory power, that conse- quences provided under the statute would follow and would uot fall within the ambit of S. 175(3) of the Government of India Act. ),This Court after examining the terms of the contract found that it did not fall within the provisions of the Act and, found it unnecessary to deal with the contention.
The scope of the doctrine of equitable estoppel arose for consi- deration before this Court in Collector of Bombay v. Municipal Cor- poration of the City of Bombay and Ors.(l) In 1865, the Government of Bombay called upon the predecessor in title of the Corporation of Bombay to remove some markets from a certain'.site andlvacate it, and on the application of the then Municipal Commissioner the Go- vernment passed a resolution approving and authorising the grant of another site to the Municipality. The resolution rtated further that "the Government do not consider that any rent should be charged to the Municipality as the markets will be, like other public buildings, for the benefit of the whole community". The Corporation gave up the sites on which the old markets were situated and speut a sum of over 17 lacs. in erecting and maintaining markets on the new site. In 1940, the Collector of Bombay, overruling the objection of the Cor- poration, assessed the new site under S.8 of the Bombay City Land Revenue Act to land revenue rising from Rs. 7,500/- to Rs. 30,000/- (1) [1968] 3 S.C.R. 214.
(2) [1964] 6 S.C.R. 984. (3) [1952] S.C.R. 43. c II c 'H in 50 years. The Corporation sued for a declaration that the order of assessment was ultra vires and that it was entitled to hold the land for ever without payment of assessment. The Supreme Court held by a majority of four Judges to one that the Government was not entitled to assess land revenue for the land in question. Three of the Judges who were parties to the majority judgment found that the Corporation had taken possession of the land in terms of the Government resolu- tion and continued in such possession openly, uninterruptedly and as of right for over 70 years and acquired limited title it had been pre- scribing for during the period, that is to say, the right to hold the land in perpetuity free of rent, but only for the purpose of a market and for no other purposes. The right acquired included as part of it an immunity from payment of rent which constituted a right in limitation of the Government's right to assess in excess of the specific limit es- tablished and preserved by the Government Resolution within the meaning of S.8 of the Bombay City Land Revenue Act. Before the Court there was considerable discussion as to the scope and effect of the principle of equity enunciated in Ramsden v. Dyson,(l)f as· to whether such principle should be extended to the facts of the case and as to whet)l.er the facts of the case attract the application of the equity established in Ramsden v. Dyson or attract the equity established in Maddison v. Alderson,(2) and Walsh v. Lonsdale, (l) and finally as to whether the decision of the Privy Council in Arif} v. Jadunath(4) the equity in Ramsden v. Dyson can prevail against t)le requirement of formalities laid down in the Victorian Statute referred to above any more than the equity in Maddison v. Alderson can do against the requirements of the Trans- fer of Property Act. The majority of the judges did not express any opinion on this question but decided the appeal on a narrower and shorter ground stated above. One of the judges, Chandrasekhara Aiyar, J. constituting the majority expressed his view thus :- "Whether it is the equity recognised in Ramsden's case, or it is some other form of equity, is not of much importance.
Courts must do justice by the promotion of honesty and good faith so far as it lies in their power. As pointed out by Jenkins C. J. in Dadoba Janardhan's case a different conclusion would be opposed to what is reasonable, to what is probable and what is fair.'' The other judges of the Court who spoke for the Court refrained from going into this question. The view of Chandrasekhara Aiyer, J. (I) [1866] L. R. I. H. L. 129.
(2) [1883] L. R. 8 App, Cas. 417. (3) [1882[ L. R. 21 Ch. D. 9. (4) [1931] L. R. 58 I. A. 91. … ,.. JIT RAM v. HARYANA (Kailasam, J.) being the view of one of the judges of the majority, cannot be taken as the view of the Court. Patanjali Sastri, J. as he then was, dissented with the majority and stated :-
"The principle of Ramsden v. Dyson cannot prevail against statutory requirements regarding disposition of property or mak- ing of contract by Government * • *The right to levy land revenue is no part of the Government's right to property but a prerogative of the Crown and adverse possession of the land could not destroy the Crown's prerogative to impose assessment on the land." A Bench of four judges of this Court in a decision Excise Com- missioner. U. P. Allahabadv. Rarn)Kumar(!), after examining the case law on the subject observed that "it is now well-settled by a catena of decisions that there can be no question of estoppel against the Go- vernment in exercise of its legislative, sovereign or executive powers." The earlier decisions of this Court in M. Ramanathan Pillai v. State of Kera/a('), and State of Kera/a and Anr. v. The Gwalior Rayon Silk Manufacturing (Wvg.) Co. Ltd.(3) were followed. It may, thci'efore, be stated that the view of this Court has been that the principle of estoppel is not available against the Government in exercise of legislative, sovereign or executive power.
On behalf of the petitioners, it was submitted that a liberal view was taken by this Court in the decision Union of India v. M/s. lndo- Afghan Agencies Ltd.(4)which recognised the principle of promissory estoppel and held that whether the agreement is executive or adminis- trative in character, the courts have power in appropriate cases to compel performance of the obligations imposed by the schemes upon the departmental authorities. At this decision is relied on as the sheet anchor of the doctrine of promissory estoppel, the facts of the case and the decision rendered therein, have to be examined carefully. Mfs. lndo-Afghan Agencies Ltd., the respondents before this Court exported woollen goods to Afghanistan and were issued an Import Entitlement Certificate by the Textile Commissions not for the full F. 0. B. value of the goods exported, but for a reduced amount. By virtue of the powers conferred under S.3 of the Imports and Exports (Control) Act, 1947, the Central Government issued the Imports (Control) Order, 1955 setting out the policy governing the grant of import and export licence. During the relevant period, it provided for the grant to an exporter, certificates to import raw materials of a (I) [1976] Suppl. S.C.R . .532.
(2) !1974] 1 S.C.R. 515. (3) [1974] 1 S.C.R. 671. (4) [1968] 2 S.C.R. 366. c c SUPRl!ME COURT REPORTS total amount equal to 100 % of the F. 0. B. value of his exports. Cl. 10 of the Scheme provided that the Textile Commissioner could grant an import certificate for a lesser amount if he is satisfied after holding an enquiry that the declared value of the goods is higher than the real value of the goods. It was contended, amongst other grounds, that the Government on grounds of executive necessity was the sole judge of the validity of its action in matters relating to import and export policy, because the policy depended upon the economic climate and other related matters and had to be in its very nature flexible with power in the Government to modify or adjust it as the altered circumstances necessitate. It was pleaded that if the Government was held bound by every representation made by it regarding its intentions, it would amount to holding the Government as being bound by contractual obligations even though no formal contract iu the manner required by Art. 299 of the Constitution was executed. Regarding the objection on the ground of rontravention of Art. 299 of the Constitution, the Court held that the respondents were not seeking to enforce any con- tractual right but were seeking to enforce compliance of the obligation which is laid 11pon the Textile Commissioner by the terms of the Scheme and the claim of the respondents was founded upon the equity which arose in their favour as a result of the repesentation made on behalf of the Government in the Export Promotion Scheme. (emphasis sup- plied). It may be noted that no finding was recorded by the Textile Commissioner, that there was any infringement which entitled him to reduce the quota under Cl. 10 of the scheme.
The facts of the case disclose that the defence of the executive necessity was not relied upon in the affidavit filed on hehalf of the Union of India. It was also not pleaded that the representation in the Scheme was subject to an implied term that the Union of India will not be bound to grant the import certificate for the full value of the goods if they deem it inexpedient to grant the certificate. The Court after referring to earlier decisions of this Court accepted the view expressed in those decisions that reduction in the amount of import certificate may be justified on the ground of misconduct of the expor- ters in relation to goods exported or on such considerations as the diffi- cult foreign exchange position or other matters which have a bearing on the general interest of the State (emphasis supplied). Summing up the law laid down by the earlier cases, the Court found that in each of the three cases this Court held that it was competent to grant reli9f in appropriate cases, if, contrary to the Scheme, the authority declined to grant a licence or import certificate or the authority acted arbitrarily and that the Union Bf India and its Officers are not entitled at their mere whim to ignore the promises made by the Government (emphasis JIT RAM v. HARYANA (Kai/asam, J.)
supplied). It rejected the plea on behalf of the Government that the Textile Commissioner is the sole judge of the quantum of the import licence to be granted to an exporter and that the Courts were power- less to grant relief if the promised import licence is not given to an exporter who has acted in his prejudice relying upon therepresenta- tion. The decision is, therefore, an authority for the.proposition that in the absence of a plea of executive necessity, the Court in appropriate cases is entitled to compel performance of the obligations~imposed by the Scheme on the departmental authority. The right of the Govern- ment on relevant considerations such as difficult foreign exchange position or other matters which have a bearing on the general interest of the State, to reduce the amount of import certificate was recognised. But the authorities have to act according to the terms of the scheme and not arbitrarily or at their mere whim to ignore the promises made by the Government (emphasis supplied). On the facts of the case, the Court gave relief as the authorities declined to act according to the terms of the Scheme and acted arbitrarily and at their mere whim ignoring the promises made by the Government. The question as to the applicability of the 1doctrine of promissory estoppel against the legislative or executive acts of the Government did not strictly arise in the case. The decision was thus generally understood as stated above is seen from the view expressed by Mr. H.M. Seervai on Constitution .of India, 2nd Edn. Vol. I, paragraph 11 at para 146-B, p. 433 : x
"The authorities considered by the Supreme Court, and~the conclusions drawn from them, by Shah, J. in the present case, merely affirm the proposition that the Government could not go back upon promises made in the exercise of discretionary power as embodied in a scheme,'merely on·a whim (emphasis by Mr. Seer- vai)
x x x x x c A promissory estoppel cannot stand on a higher footing than a contract entered into between a citizen or subject and a public authority and it is settled by numerous decisions that no public authority entrusted with discretionary power to be exercised for the public can bind itself by a contract not to exercise that dis- cretion when the public good demands its exercise".
It is only in public interest that it is recognised that an authority acting on behalf of the Government or by virtue of statutory powers cannot exceed his authority. Rule of ultra vires will become applicable II
wihen he exceeds his authority and the Government would uot be bound by such action. Any person who enters into a" arrangement with the Government has to ascertain and satisfy himself that the authority who purports to act for the Government, acts within the scope of his authority and cannot urge that the Government is in the position of any other litigant liable to be charged with liability. c
In refuting the contention that the contract is nnenforceable on the· ground that there had been no strict compliance of the require- ment of Art. 299 of the Constitution, the Court observed that the respondents were not seeking to enforce any contractual rights but were seeking to enforce compliance with the obligation which was laid upon the Textile Commissioner by the terms of the Scheme. Thus, the relief that was granted by the Court was by enforcing the comp- liance of the obligation which was laid npon the Textile Commissioner by the terms of the Scheme. The Court proceeded to state that the claim of the respondents is appropriately founded upon the equity (em· phasis ours) which arises in their favour as a result of the representation made on behalf of the Union oflndia in the Export Promotion Scheme, and the action taken by the respondents acting upon that representa- tion under the belief that the Government would carry out the re- presentation made by it. Thus the equity which the Court was enforc- ing was to direct compliance of the obligation which is laid upon the Textile Commissioner by the terms of the scheme. The equitylcannot be understood as barring tbe authority from modifying the scheme on special considerations such as difficult foreign exchange position or other matters which have a bearing on the general interest of the State (vide p. 380). The purport of the judgment is made clear by its own observation:-
"Under our jurisprudence the Government is not exempt from liability to carry out the representation made by it as to its future conduct and it cannot be .some undefined and un- disclosed ground of necessity or expediency fail to carry out the promise solemnly made by it, nor claim to be the judge of its own obligation to the citizen on an ex: parte appraisement of the circumstances in which the obligation has arisen."
The observations of the Court that the claim of the respondents is properly founded on the equity should be understood on the facts and findings of the Court in the case. The Court relying on the ob- servations of Chief Justice Jenkins, observed that even though the case does not fall within the terms of S.115 of the Evidence Act, it is still open to a party who has acted on a representation made by the Govern- ment to claim that the Government shall be bound to carry out the promise made by it, even though the promise is not recorded iil'~he form of a formal contract as required by the Constitution. The Ctiilrt i
JIT RAM 1. llARYANA (Kailasam, !.) would be bound when the officer made the promise within the scope of his authority and failed to act upon it at his mere whim and acted arbitrarily on some undefined and undisclosed grounds of necessity. Before proceeding further with the case, we will refer briefly to the purport of the doctrine of promissory estoppel. The doctrine of promissory estoppel burst into sudden blaze in 1946 when Denning. J. sitting in the Court of Kings Bench delivered the judgment in Central London Property Trust Ltd. v. High Trees House Ltd.( I) which has now become famous as the High Trees Case. The facts of the case are: During the war many people left London owing to bombing. Flats were empty. In one block, where the flats were let on 99 years leases at £ 2,500/- a year, the landlord agreed to reduce it by half and to accept £ 1,250/- a year. When the bombing was over, and the tenants came back, the landlord sought to recover the full rent at £ 2,500/- a year. Denning, J. held that the landlord could not recover the full amount for the time when the flats were empty. The lease was a !_ease under seal which according to English Common Law, could not be varied by an agreement by parol, but only by deed. The learned judge invoked equity to his aid and said that if there has been a variation of a deed by simple contract the courts may give effect to it. The counsel for the lessee pleaded that the lessor had agreed though without considera- tion to accept the rent at a reduced rate, and set up a plea of estoppel by way of defence io the claim for arrears of rental calculated at the full rate. Faced with Foakes v. Beer,(2) if the defence was raised as a matter of contract and Jorden v. Money,(3) if it was raised as estoppel, Denning. J. held that the estoppel sustained although based on an assurance as to the future, because the prornisor intended to be legally bound and intended his promise to be acted upon, with the result that it was so acted upon. In Jordan v. Money (supra), the House of Lords held that a promise to pay a smalicr sum of money in discharge of larger amount which was due, was void since such a promise was with- out consideration. Denning, J. relying on Fenner v. Blake, (4)Re: Wickhem William Porter & Co. Ltd. (')and Buttery v. Pickard(6) observ- ed that they were cases of estoppel in the strict sense. Theyiare really promises-promises intended to;be binding-intended to· be acted upon, aad_in fact acted on and in the circumstances the plaintiff company will be bound by the arrangement in its letter. Though the observations of (I) [1956] l All. E. R. 256.
(2) [1884] 9 A. C. 605. (3) [1854] 5 H. L. Cas. 185. (4) [1900] 1 Q. B. 426. (5) [1937] 2 All. E. R. 361. (6) 11946] W. N. 25. c II c [1980] 3 S.C.ll. Denning, J. in High Trees case were in the nature of obiter dicta, the decision became the starting point of the several shades of opinion regarding the scope of promissory estoppel. It is unnecessary for our purpose to go into the development of law of promissory estoppel starting from High Trees case. It is sufficient to state that since the High Trees decision was rendered, many elaborations and glosses have appeared in the reports. Turner in his book Estoppel by Re· presentation, has a separate chapter dealing with promissory estoppel. The doctrine, as observed by the author at the conclusion of the chap- ter, "burst out into sudden blaze in 1946 has ever since continued to smoulder, and that its original author has constantly maintained his interest in its further development, now in this direction, now in that''. But there has been high places counselling conservatism *** Lord Hailsham of St. Marylebone, has expressed his views in Woodhouse Ltd. v. Nigerian Produce Ltd.(I) as follows :-
"I desire to add that the time may soon come when the whole sequence of cases basec\ on promissory estoppel since the war*** systematically explored", This subject though interesting may uot be relevant in administer· ing Indian Law. S. 63 of the Contract Act provides that wheu a creditor accepts a lesser sum in satisfaction of the whole debt, the whole debt become discharged. This provision is a wide departure from the English Law and the discussion about Jordan v. Money wherein it was held that a promise to accept a smaller sum is devoid of consideration, becomes pointless. So also the doctrine of estoppel referred to in the High Trees case is, to some extent taken care of by Ss. 65 and 70 of the Indian contract Act. S.65 provides that when a contract becomes void, any person who bas received any advantage under such agree· ment or contract is bound to restore it or to make compensation for it, to the person from whom be received it. Under S. 70 oftbe Contract Act, an obligation is cast on the person enjoying benefit of a non- gratuitous act to compensate the person who lawfully performed the act. As to whether the provisions of S. 65 and 70 of the Indian Con- tract Act, are applicable to contract which is not according to S. 175 of the Government of India Act and Art. 299 of the Constitution of India, there is a difference of opinion. Sir Maurice Gwyer expressed his view that when a contract is void, recourse to S.70 cannot be had. Later, the Supreme Court held in State of West Bengal v. B. K. Monda! & Sons,(2) that S.70 was applicable to;such a case. This decision was (I) [1932] A C. 431.
(2) [1962] Suppl I S.C.R. 876. JIT RAM v. HARYASA (Kailasam, J.) followed in New Marine Coal Co. Ltd. v. Union(I), and in later cases by the Supreme Court. In discussing the scope of the doctrine of promissory estoppel, and its applicability against the Government and Government Officers in their dealings with the subject, Lord Denning J. in Robertson v. Minister of Pensions(2) observed :-
"The Crown cannot escape by saying that estoppels do not bind the Crown for that doctrine has long been exploded. Nor can the Crown escape by praying in aid the doctrine of exe- cutive necessity, that is, the doctrine that the Crown cannot bind itself so as to fetter its future executive action. That doctrine was propounded by Rowlett J., in Redariaktiebolaget Amphtrite v. The King but it was uunecessary for the decision because the statement there was not a promise which was intended to be binding but only an expression of intention. Rowlett, J., seems c have been influenced by the cases on the right of the Crown c dismiss its servants at pleasure, but those cases must uow all be read in the light of the judgment of Lord Atkin in Reilly v. The King-(1954) A. C. 176, 179) ••• In my opinion the de-
fence of executive necessity is of limited scope. It only avails the Crown where there is an implied term to that effect or that is the true meaning of the contract." Lord Denning was dealing with a case of a serving army officer who wrote to the War Office regarding a disability and received a reply that his disability had been accepted as attributable to "military service". Relying on that assurance, he forebore to obtain an indepen- c
dent medical opinion. The Minister of Pensions took the view that appellant's disability could not be attributed to war services. Lord Denning held that between the subjects such an assurance would be enforceable because it was intended to be binding, intended to be acted upon, and it was in fact acted upon; and the assurance was also binding on the Crown because no term could be implied that the Crown was at liberty to revoke it.
The decision in Robertson's case is quoted with approval in the Jndo-Afghan case but before we revert to the lndo-Afghan case, we will follow the course which Robertson's case took. The correctness of the case came up for consideration before the House of Lords in Howell v. Falmouth Boat Constructi01i Co. Ltd.(l) The appeal_was'.preferred)o the (1) [1964] 2 S.C.R. 859.
(2) [194911 K. B. 227. (3) [1951] A. C. 837. House of Lords from the Court of Appeal against the judgment of Bucknil, Singhleton and Denning, L.JJ. In his judgment in the Court of Appeal, Denning L. JJ. pressed the principle in the following terms:- c
"Whenever Government Officers, in their dealings with a sub· ject, take c n themselves to assume authority in a matter with which he is concerned, the subject is entitled to rely on their hav- ing the authority which they assume. He does not know and
cannot be expected to know the limits of their authority, and he ought not to suffer if they exceed it. That was the principle which I applied to Robertson v. Minister of' Pensions, and it is applicable in this case also."
Commenting on the view taken by Denning, L. J. Lord Simonds observed :- "My Lords, I know of no such principle in our law nor was any authority for it cited. The illegality of act is the same whether or not the actor has been misled by an assumption of authority on the part of a government officer however high or low in the hierarchy.*** The question is whether the character of an
act done in face of statutory prohibition is affected by the fact that it has been induced by a misleading assumption of authority. In my opinion.the answer is clearly "no". Such an answer may make more difficult the task of the citizen who is anxious to walk in the narrow way, but that does not justify a different ans- wer being given."
Lord Normand referred to the principle laid down by Denning L. J. and observed :- "As J understand this statement, the respondents were in the opinion of the learned Lord Justice, entitled to say that the Crown was barred by representations made by Mr. Thompson and
acted on by them from alleging against them a breach of the s'.atutory order, and further that the respondents were equally entitled to say in a question with the appellant that there had been no breach. But it is certain that neither a Minister nor any subordinate officer of the Crown cm by any conduct or re- presentation bar the crown enforcing a statutory prohibition or entitle the subject to maintain that there has been no breach of the contract."
The view expressed by the House of Lords and the Privy Counoil has been followed in English cases. · JIT RAM v. HARYANA (Kai/asam, !.) The Privy Council in Antonio Buttigieg v. Captain Stephen H. Cross .11nd Ors,(1) has ruled that it is not competent for the Government to fetter its future executive action, which must necessarily be determined b)i tl:e needs of the community when the quesrion arises, that it can- n-0t by contract hamper its freedom of action in matters which concern the welfare of the State. The ccrnretent Military Authority approach- ed the appellant for opening a club for officers serving in his Majesty's forces. The <JHelknt stated his willingness to take on lease certain premises and asked tt.e Military authcrities to procure him a licence to continue the club after the termination of the war. The military authorities failed to obtain a licence and the appellant was informed of their inability to obtain the licence '-nd an officer on behalf of the military authorities stated that the appellant should have a guarantee seeing that the war was not likely to come to an end quickly and that the club would be kept open throughout the war. The rules for the con- duct of the club were drawn up and were approved by the Military Authorities. Rule 18 provided that the club should endure during the time when the said hostilities existed. The club was placed out of bounds fox service members by order of the Military Authorities because the club was being mismanaged by the sale of liquor long after permitted h-Onrs. As the club was a purely Service Club, it" was subsequently wound up. The appellant complained of the loss to which he had been put by placing the club out of bounds and sought to hold the Military Authorities responsible for such loss" The Court of Appeal while giving judgment in favou,r of the Military Authorities observed :- "It is a 'ettled principle and it has been constantly held by this Court and in local case-law, that those two functions of the civil or the military Government are totally distinct. The Military Authorities could not have renounced those rights, inasmuch as it would have been immoral and against every
fundamental principle of Constitutional Law if the Authorities, in order to open a club, which is "a purely administrative act- were to sacrifice interests whicl~are far more important and therefore of a much higher order, whether political, moral or affecting public order. Consequently when, within the adminis- trative sphere, the Government enters into a contract with a private individual, the Government is bound to respect that contract, but it does not thereby deprive itself of its political power to issue orders that may become necessary by reason of public order, jure imperii-even though, in consequence of such orders, the contract itself becomes impossible of fulftlment." (1) .\LR. 1947 P. C. 29.
c (1980] 3 S.C.R. During the arguments before the Privy Council, it was conceded on behalf of the appellant taking into consideration the decision iii Adams v.'London'.Jmproved~Motor,Coach.Builders(lXand Redariaktiebo- laget Amphtrite v .. The King, (2) that it was not open to the Crown to bind itself not to close the club if that course became necessary in the public interest and the order placing the club out of bounds was justified in the circumstances which existed. Havini thus observ~d the Privy Council quoted the following passage from the Judgment of Rowlatt, J. in Rederiaktiebolaget Amphtrite case that "it is not competent for the Government to fetter its future executive action, which must necessarily be determined by the needs of the community when the question arises. It cannot by contract hamper the freedoin of action in matters which concern the welfare of the State" and stated that these words appear to their Lordships to cover that aspect of the present case. While House of Lords in Howell's case disagreed with the observations of Lord Denning J. in Robertson's case, the Privy Council approved the law laid down by Rowlatt, J. in Rederiaktie- bo/aget 'Amphtrite case which was dissented to by Denning, J. in Roberston's case. It may be noted that in Indo-Afghan case, the Court quoted the passage from.Denning's judgment which did not approve the view of Rowlatt, J. The Privy Council approved the view taken by Rowlatt, J. in Rederiaktiabolaget Amphtrita case.
In W11/iam Cory & Son"Ltd. v. London Corporation,(3) London Cor- poration acting as sanitary authority under the Public Health (Lon- don) Act, 1936 made a contract with the claimants, barge and lighter owners, for the removal of refuse from a wharf in:the City of Horn- church, Essex, where it was to be dumped. In April, 1948, the Cor- poration acting as port health authority for the Port of London, sealed by-laws concerning the disposal of refuse in the area of the port one of which relating to co-amings and coverings~of barges, was far more onerous on the claimants than the requirements in the contract of 1936. It was'.provided that this by-law was not to come into effect until November I, 1950. It was contended by the'claimants that by the pro- visions of the contract of 1936, there was an implied or an express term that the corporation should not impose more onerous burden on the claimants as to the coamings and coverings of their barges than those contained in the contract of 1936. The plea of the claimants was rejected and the Court held relying on a,decision'.in York' Corporation v. Henry Leethem & Sons Ltd.(4) that the Corporation peingundera (I) [1921] 1 K. B. 495.
(2) (1921] 3 K. B. 500. (3) [1951] 2 K. B. 476. (4) [19241 1 Ch. 557. f • JIT RAM v. HARYANA (Kailasam, !.) dtt;' under the Act of 1936, expressed in imperative language, to make by-laws for the disposal of refuse within the area of the port, the term for which the claimants contended, whether express or implied was ultra vit'es the corporation.
In York Corporationv. Henry Leetham & Sons (supra), the Cor- poration made two contracts with the defendants to which they agreed to accept, in consideration of the right to navigate the Oues, a regular annual payment of£ 600/- per annum, in place of the authorised tolls. It was held that the contracts were ultra vires and void because under them the corporation had disabled itself whatever emergency might arise, from exercising its statutory powers to increase tolls as from time to time might be necessary. The decision was based on the incapacity of a body charged with statutory powers for public purpose to divest itself of such powers or to fetter itself in the use of such powers. In Commissioner of Crown Lands v. Page,(!) in 1945, the Minister of'Works, acting on behalf of the Crown and in exercise of powers conferred by the Defence (General) Regulations, 1939 requisitioned premises which had been demised in 1937 by the Commissioners of Crown Lands for a term ofl25 years. The premises were derequisitioned on September 5, 1945 until July 5, 1955 and the landlord brought proceedings claiming arrears of rent. The lessee alleged that she had been evicted by the requisitioning and that, accordingly, payment of rent has been suspended. It was conceded that the: Crown was orie "and indivisible as lessor and requisitioning authority. I( was held that since the entry was by the Crown in the proper exercise of its executive a11thority, it did not amount to an eviction and rent, accordingly, continued to be payable. ~The view expressed by Lord Denning, J. in Robertson v. Minister of Pensions (supra) that in the present day age no distinction should be drawn as to the legal effect of its or their actions between the Crown and the ordinary subjects, so that the effect ofa representation made by the Crown could no longer be qualified so a11 to be subject to the future exercise by the Crown of its Executive authorily, was relied on. Lord Evershet M. R. while observing that the facts of the case were different held that the general proposition laid down by Denning L. J. was not accepted by the House of Lords in [{owe// v. Falmouth Boat Construction Co. Ltd. (supra). Devlin, J. stakd the principle in the following terms :-
"When the Crown, or any other person, is entrusted, whether . by virtue of the prerogative or by statute, with discretionary powers to be exercised for the public good, it does not when ; making a private contract in general terms, undertake (and (I) [1960]2 KB. 274.
t-463 SC!/80 c c IL [1989] 3 s.c.Jt. it may be that it could not even with the use of specific language validly undertake) to fetter itself in the use of those powers, and , in the exercise of the discretion."
Referring to the view of Denning, L. J. in Robertson v. Minister of Pension (supra), the learned Judge observed :- "The observations of Denning, L. J. in Robertson v. MinisJer of Pensions on the doctrine of 'executive necessity', were I think, directed to a case of that sort. Here we are dealing with an act done for a general executive purpose, and not done for the pur- pose of achieving a partkular result under the contract in ques- tion."
In Southend-on-Sea Corporation v. Hodgson (Wickford) Ltd.(I) a company wished to establish a builder's yard and found suitable premises. They wrote to the borough engineer, a Chief Official emplo- , yed by the· local planning authority asking for a lease of the premises !'for 20 years for the purpose of establishing a builders yard. The en- , gineer replied that the premises had an existing user right as a builders' . yard and that no planning permission was, therefore, necessary. Re- lying on the borough engineer's letter, the company bought the pre- mises and started to use them as builder's yard. They would not have ·.done so if, as a consequence of the letter, they had not thought that no further planning permission was required. Later, the local planning authority notified the company that a considerable amount of evi- dence had been presented to them showing that the premises had not been used as a builder's yard and had no existing user as such; that . they had decided that the premises could not be used without planning , permission, The Court on the above facts held that assuming that the statement that the premises had an existing user right as a builder's yard was a pure representation of fact, estoppel could not operate to 'hinder or prevent the exercise by the local planning authority of their statutory discretion under S. 23 of the Act in deciding whether to serve an enforcement notice, since this discretion was intended to be 'exercised for the benefit of the public or section thereof. 'The decisions of the English Courts referred to above clearly indi- cate that the English Courts did not accept the view of Denning, J. in Robertson v. Minister of Pensions (supra). The house of Lords in Howe// v. Falmouth Boat Construction Co. Ltd. disagreed with the view of Lord Denning, J holding that there could not be an estoppel against express provisions of the law nor could the State by its action waive its rights to exerise powers entrusted to it for the public good. The (2) [1962] 1 Q. B. 416.
f •• I;'µ f J!T RAM v. HARYANA (Kailasam, J.) Privy Council in Antonio Buttigieg's case approved the view of Rowlatt. J. in Raderiaktiabo/aget Amphtrits's case with which Denning, J. did not agree.
We may noV( revert back to Indo-Afghan Agencies case. The Court after quoting a passage from Rowlatt, J. in Rederiakiabo/aget Amphtrite v. The King (supra) agreed that the view expressed by An- son's English Law of Contract 22nd Ed. p. 174 that the observation is clearly very wide and it is difficult to determine its proper scope. The
Court quotec,1 the ,passage of Denning, J. at p. 231 wherein the learned Judge expressed the disagreement with the view of Rowlatt, J :- "The Crown cannot escape by saying tjiat estoppel do not
bind the Crown for that doctrine has long been exploded. Nor can the Crown escape by praying in aid the doctrine of executive necessity, that is, the doctine that the Crown cannot bind itself so as to fetter its future executive action. The doctrine was pro- pounded by Rowlatt, J. in ~ederiaktiebolaget Amphitrite v. The King but it was unnecessary for the decision because the state- ment there was not a promise which was intended to be binding but only an expression of intention. Rowlatt, J., seems to have been influenced by the cases on the right of the Crown to dis- miss its servants at pleasure, but those cases must now all be read in the light of the judgment of Lord Atkin in Reilly v. The King- (1954) A. C. 176, 179).
. . In my opinion the defence of executive necessity is oflimi- ted scope. It only avails the Crown where there is an implied term to that effect or that is the true meaning of the contract." After quoting the above passage, the Court summarised the facts and decision render.ed by Denning, J. The decision of the House of Lords in Howell's case or that of the Privy Council was not brought to the notice of the Court .
The law laid down by the House of Lords in Howell's case has been accepted as correct by this Court in recent decision of this Court by a Bench of four Judges in Excise Commissioner, U. P. Allahabad v. Ram Kumar.(1) The respondents before this Court were the highest ?idders in an auction for exclusive manufacture and selling of liquor m the State of U. P. Before boding the auction, the rates of excise duty and prices of different varieties of country liquor and also the eonditions of licence were announced. No announcement was made ~s to whether the exemption from sales tax in respect of sale of country liquor granted by the notification dated 6-4-1959 was or was not likely (I) .[1976] Suppl. S.C. R. 532.
e· [1980) 3 S.C.lt. to be withdrawn. On the day following the day when the licences were granted, the Government of U. P. issued a notification under S. 3A and 4 of U. P. Sales Tax Act, 1948 superceding the earlier notification exempting the payment of sales tax and imposing sales tax on the turnover in respect of country liquor at the rate of 10 paise per rupee. The respondents challenged the validity of the notification issued under the Sales Tax Act on the ground that the State Government did not announce at the time of the earlier auction that the earlier notification was likely to be withdrawn. This Court on a consideration of the question whether the State Government is estopped from levying the Sales Tax, after referring to the earlier decisions of this Court held. that the State Government is not estopped or precluded from subject- ing the sales of liquor to tax if it felt impelled to do so in the interest of revenue of the State. The Court followed two earlier decisions of this Court viz. M. Ramanathan Pillai v. State of Kera/a (supra) and State of Kera/a v. The Gwalior Rayon Silk Manufacturing (Wvg.) Co. Ltd. (supra). In Ramanathan Pillai's case, Ray, Chief Justice while dealing with the question whether the Government has a right to abo- lish a post in the service, observed tha(the power to create or abolish a post is not related to the doctrine of pleasure. It is a matter of govern- mental policy. Every sovereign Government has this power in the interest and necessity or internal adminiStration. The creation or abo- lition of a post is dictated by policy decision, exigencies of circum· stances and administrative necessity. The creation, the continuance and the abolition of post are all decided by the Government in the interest of administration and general public. The learned Chief Justice after quoting a passage in American Jurisprudence 2d. at p. 783, para- graph 123, observed that the estoppel alleged by the appellant Rama- nathan Pillai was on the ground that he entered into an agreement. and thereby changed his position to his detriment. The High Court rightly held that the Courts exclude the operation of the doctrine of. e&toppel, when it is found that the authority against whom estoppel is pleaded has owed a duty to the public against whom the estoppel cannot fairly operate.
In State of Kera/a v. Gwalior Rayon Silk Manufacturing (Wvg.) Co. Ltd. (supra), Palekar, J. who delivered the opinion with which Krishna Iyer, J. and Bhagwati, J. agreed, rejected the contention that. an agreement entered into by the Government with the parties, exclud- · ed the leg_islation on the subject .. The plea of equitable estoppel was. put forward on the ground that the company established itself in Kerala for the production of rayon cloth pulp on an understanding that the Government would bind itself to supply the raw material. Later Go- vernment was unable to supply the raw material and by · an JIT RAM v. HARYANA (Kailasam, !.)
agreement undertook not to legislate for the acquisition of private forests for a period of 60 years if the company purchased forest lands j- for the purpose of its supply of raw-materials. Accordingly, the com- pany purchased 30,000/- acres of private forests from the Nilabhuri Kovila Kanna Estate for Rs. 75 lacs and, therefore, it was argued that the agreement would operate as equitable estoppel against the State. This Court agreed with the High Court that the surrender by the Government of its legislative powers to be used for public good cannot avail the company or operate against the Government as equitable estoppel.
In Assistant Custodian of E. P. and Ors. v. Brjj Kishore Agarwala, (1) c it was pleaded that the first respondent made an enquiry from the Assistant Custodian whether the property was evacuee property and was told that it was not. As the first respondent acted on this represen- tation, it was pleaded that the Assistant Custodian was estopped from contending that the property was evacuee property. Thus, dismissing this plea, the Court observed :
,d "We do not consider that the fact that the !st respondent had. made an enquiry from the Assistant Custodian whether the property in question was an evacuee property and was told that it would not make any difference to the question."
")I- Reliance was placed on the observations of Denning L. J. in Robert- son v. Minister of Pensions (supra), holding that the letter by the war office which assured that the appellant's disability had been accepted as attributable to the military service, was binding on the Crown and through the Crown the Minister of Pensions. The Court pointed out that the decision in Robertson v. Minister of Pensions had been dis- approved by the House of Lords in Howell's case. After referring to II'
the passage from the judgment of Lord Denning, Lord Simonds and Lord Normand which have been extracted earlier, this Court expressed its opinion that the view taken by the House of Lords it correct and not that is taken by Lord Denning.
In Excise Commissioner U. P., Allahabad v. Ram Kumar (supra), the Court after consideration of the case law on the subject, held that "f it was settled by a catena of cases that there could be no question ·Of estoppel against the legislative and sovereign functions. A passage in American Jurisprudence 2d. at page 783 paragraph 123 was extracted by Ray C. J, in Ramanathan Pil/ai's case and Jaswant (I) [1975] 2 S.C.R. 359.
[1980] 3 S.C.lt. Siagh J. in:Excise Commissioner's c~;: The passage at p. 123 is as follows :- c c "Generally, a State is not subject to an estoppel to the same extent as an individual or a private corporation. Otherwise, it might be rendered helpless to assert its powers in Government. Therefore, as a general rule the doctrine of estoppel will not be applied against the State in its Governmental, Public or sovereign capacity. An exception however arises in the application of estoppel to the State where it is necessary to prevent fraud or manifest injustice."
But the learned Judges did not include the last sentence : "An exception however arises in the application of estoppel to the State where it is necessary to prevent fraud or manifest injustice."
In Bihar Eastern Gangetic Fisherman Co-operative Society Ltd., v. Sipahi Singh & Ors.(l)Jthis'.Courtlheldfthalfthe respondent could not invoke the doctrine of promissory estoppel because he was unable to show that relying on the representation of the Government, he ha<l altered his position to his prejudice. The· Court accepted the view of this Court expressed in Ram Kumar's case and held that there cannot be any estoppel against the Government in the exercise of its sovereiga, legislative or executive functions.
The leading case of the Supreme Court of the United States citeci and relied upon in Ram Kumar's case (supra), is Federal Crop Insurance Corporation v. Marril,(~ in which the United States Supreme Court observed as follows :-
"It is too late in the day to urge that the Government is just another private litigant, for the purposes of charging it with lia- bility, whenever it takes over a business theretofore conducted by private enterprises or engages in competition with private ventures • * • Whatever the form in which the Government fun- ctions, anyone entering into an arrangement with the Govern- ment takes the risk of having accurately ascertained that he who purports to act for the Government stays within the bounds of his authority;• • *And this is so even though, as here, the agent himself may have been unaware of the limitations upon his , authority** • 'Men must turn square corners when they deal with the Government' does not reflect a callous outlook. It merely (I) A. I. R. 1977 S.C. 2149.
(2) 332 u. s. 380. JIT RAM v. HARYANA (Kailasam, !.) expresses the duty of all courts to: observe the conditions defined by congress for charging the public treasury". The Court also relied on the views of the te~t book writer Melville M. Bigelow and concluded that the plea of estoppel does not operate against therGovemment or its assignees.
The extract from the American Jurisprudence which summarises the American Law, and[the decision in Federal Crop Insurance Cor- -poration case, make it clear that the plea of estoppel is not available againsf the Government and its legislative or executive functions except for preventing fraud or manifest injustice.
It was submitted that the cases cited above cannot be relied on as an authority for the proposition tthat the do_ctrine of promissory estoppel is not applicable agains(the Government in the"exercise of its legislative and statutory functions as they were in the nature of obiter dicta and that on the facts the present case could be distinguished. The Inda-Afghan Agencies, Century Spinning and Manufacturing Co. and Turner Morisson Co.'Ltd. v. Hungerford Investment/Trust Ltd.(1), were strongly relied on. We have pointed out that all that the Indo- Afghan Agencies case laid down was, that a public authority acting an behalf of the Gove=ent cannot on its own whim and in an arbi- trary manner seek to alter the conditions accepted by him to the prejudice of the other side. : The decision in terms accepts the view expressed in earlier cases that after taking into consideration the exigencies and change of circumstances, the authority can modify t.Jte conditions in exercise of his powers as a public ~ "thority. Jn Century Spinning and Manufacturing Co. Ltd. und Anr. v. The Ulhasnagar Municipal Council and Anr.(2), the facts of the case is set out in the head note and may be briefly stated. The State of Maharashtra on the representation made by certain manufacturers proclaimed th~ exclusion of the Industrial Area from the Municipal Jurisdiction. The Municipality made representations to the State requesting that the proclamation be withdrawn, agreeing to exempt the factories in the industrial area from payment of octroi from the date of levy. The State . acceded to the request of the' Municipality. The appellants expanded their activities relying on the Municipality's assurance. The Maha- rashtra Municipalities Act was enacted and the municipality took over the administration. Thereafter, the Municipality sought to levy octroi duty on the appellant amounting to about Rs. 15 lacs per· (11 [1972] 3 S.C.R. 711.
(2) [1970] 3 S.CR. 854. c I f' c .o .., • (1980] 3 s.e.It. annum. The High Court dismissed the petition in limini filed by the Industrialists against the levy of octroi. In an appeal to this Cotirt it was held that the High Court had not given any reason for dismissing the petition in limini and that on a consideration of the averments in the petition and the materials placed before the High Court,. the appellants were entitled to have its grievance heard against the action of the Municipality which was prima facie unjust. In remanding the matter to the High Court, this Court observed :-
"A representation that something will be done in future may involve an existing intention to act in future in the manner re- presented. If the representation is acted upon by another per<nn it may, unless the statute governing the person making the re- presentation provides otherwise, result in an agreement enforce- able at law; if the statute requires that the agreement shall be in a certain form, no contract may result from the representation and acting thereupon but the law is not powerless to rnise in appropriate cases an enquiry against him to compel performance of the obligation arising out of his representation".
In dealing with the question as to how far the public bodies are bOilnd by representation made by them on which other persons have altered their position to their prejudice, the Court held that the obliga- tion arising against an individual out of his representation amounting to a promise may be enforced ex contractu by a person 'who acts upon the promise; when the law requires that a contract enforceable at law against a public body shall be in certain form or be executed in the manner prescribed by statute, the obligation may be if the con- tract be not in that form be enforced against it in appropriate case in equity. The Court read the decision in Union of India and Ors. v. Indo- Afghan Agencies (supra) as holding that the Government is not exempt from the equity arising out of the acts done by citizens to their pre- judices, relying upon the representations as to its future co~duct made by the Government. This observation will have to be read alongwith the conditions that were laid down in the Jndo-Afghan case and cannot be read as holding that the rule of estoppel will be applicable against the Government in the exercise of its legislative and statutory powers. The Court quoted the following passage from Denning J. :-
"Crown cannot escape by saying that estoppel do not bind the Crown for that doctrine has long been exploded. Nor can the Crown escape by praying in aid the doctrine of executive neces- sity, that is, the doctrine that the Crown cannot bind itself so as to fetter its future executive action".
JIT RAM v. HARYANA (Kai/asam, J.) an.d observed that the Court in Indo-Afghan case held that it was applicable to India. It may be noted that apart from not noticing Howell's case, the Court in Indo-Afghan case did not say that the law as extracted from Denning J's. judgment was applicable to llndia. Tlle Court after considering the Indo-Afghan case and Howell's case, ·expressed thus :-
"If our nascent democracy is to thrive diff~rent standards of conduct for the people and the public bodies cannot ordinarily be permitted. A public body is, in our judgment, not exempt from liability to carry out its obligation arising 04t of represen- tation made by it relying upon which a citizen has altered his position to his prejudice".
The third decision on which reliance was placed, for the proposi- ti.in that doctrine of promissory estoppel is applicable against the State acting in exercise of its legislative or executive function is Turner Morrison and Co. Ltd. v. Hungerford Investment Trust Ltd. t(supra). The case related to the payment of tax due from Hungerford by Turner Morrison. The Court observed that if for any reason Turner Morrison had not undertaken any responsibility to discharge the liability of Hungerford, the latter could have taken recourse to voluntary liquida- tion. Hence there could be no doubt that acting on the basis of the representation made by Turner Morrison, Hungerford placed itself jn a disadvantageous position. Hungerford raised the plea that the resolution was of the company, afforded a good basis for raising a plea of promissory estoppel. This plea was accepted by the Court relying on the observations of Denning J. in High Trees case (supra) . . ·The later decision of the House of Lords in Howell's case which dis- approved Lord Denning's judgment was not brought to its notice. The scope of the plea of doctrine of promissory estoppel against the Government may be summed up as follows :-
(1) The plea of promissory estoppel is not available against the exercise of the legislative functions of the State . (2) The doctrine cannot be invoked for preventing the Government from discharging its functions under the law.
(3) When the officer of the Government acts outside the scope of his authority, the plea of promissory estoppel is not available. The <tloctrine of ultra vires will come into operation and the Government <:annot be held bound by the unauthorised acts of its officers. (4) When the officer acts within the scope of his authority under ~ scheme and enters into an agreement and makes a representation c
— ;;r' c and a person acting on that representation puts himself in a disadvan- tageous position, the Court is entitled to require the officer to act according _to the scheme and the agreement or representation. The · Officer cannot arbitrarily act on his mere whim and ignore his promise on some undefined and undisclosed grounds of necessity or change the conditions to the prejudice of the person who had acted upon such representation and put himself in a disadvantageous position. (5) The officer would be justified in changing the terms of the agree· ment to the prejudice of the other party on special considerations. such as difficult foreign exchange position or other matters which have a bearing on general interest of the State.
Before we conclude, we would r~fer to a recent decision of this Court in M/s. Moti Lal Padampat Sugar Mills Co. (P.) Ltd. v. State of Uttar Pradesh and Ors.(1). It has beenlheld that there can be no promiss- ory estoppel against the exercise of legislative power and the legislature cannot be precluded from exercising its legislative functions by resort to the doctrine of promissory estoppel. It has also held that when the Government owes a duty to the public to act differently, promissory estoppel could not be invoked to prevent the Government from d<Jing so. The doctrine cannot be invoked for preventing the Government from acting in discharge of its duty under the law. The Government would not be bound by the acts of its officers and agents, who act beyond the scope of their aµthority. A person dealing with an agent of the Government must be held to have noticed all the limitations. of his authority.
With respect, we are in complete agreement with the law as stated above but we find the judgment is not in accordance with the view consistently taken by this Court in some respects. We have read the Judgment of Bhagwati, J. with considerable care and attention which jt deserves. Firstly, . with great respect we are unable to construe 'the decision in Union of India & Ors, v. Mfs. Indo·Afghan Agew:ies Ltd. case in the manner. in which it has been done. As pointed out by us, all that the case purports to Jay down is that the court can enforce· an obligation incurred by an authority on which another has acted npon and put himself in a disadvantageous position, when the autho- rity resiles arbitrarily or on mere whim or on some un-defined and un-disclosed grounds of necessity.
With respect, we feel we are unable to agre<withthe~nterpretation. put by Bhagwati, J. Bhagwati, J. states "The defence of executive necessity was thus clearly negatived by this Court and it was pointed (I) 11979] 2 S.C.R. 641.
J1T RAM v. HARYANA (Kailasam, J.) out that it did;not release the Government from its obligation tojhonour the promise made by it, ifthe citizen acting in reliance on the promise, had altered his position. The doctrine of promissory estoppel was in 1uch a case applicable agaimt the Government and it could not be defeated by invoking the defence of executive necessity." The same view has again been reiterated at page 682 where it is stated" The law may, therefore, now be taken to be settled as a result of this decision tb.at where the Government makes a promise knowing or intending that it would be acted on by the promises and in fact, the promisee, acting in reliance on it, alters his position, the Goverrurent would be held bound by the promise and the promise would be enforceable against the Government at the instance of the promisee, notwithstand- ing that there is no consideration for the promise and the premise is not recorded in the form of a formal contract as required by Article 299 of the Constitution." These observations would be right if they are read with the qualifications, laid down in the Indo Afghan-Agencies case and other cases.
c The further observations of the learned Judge that: "Every one is subject to the law as fully and completely as any other and the Go- vernment is no exception. It is indeed the pride'.of constitutional demo- cracy and rule of law that the Government stands on the same footing as a private individual so far as the obligation of the law is concerned, the former is equally bound as the latter." Again "but if the Govern· ment makes such a promise and the promises acts in relience upon it and alters his position, there is no reason why the 'Government should not be compelled to make good such promise like any other private individual do not appear to convey the true effect of the decision." The decision of this Court in Century Spinning and Manufacturing Ce. Ltd. and Anr. v. The Ulhashagar Municipal Council and Anr. (supra) was understood by Justice Bhagwati as refusing to make a distinction between the private individual and public body so far as the doctrine of promissory estoppel is concerned. These observations would be correct only if they are read with the exceptions recognised by Justice Bbagwati himself elsewhere in his judgment along with other restric- tions imposed by Judgments of this Court.
We find ourselves unable to ignore the three decisions of this Court, two by Constitution· Benches M. Ramanatha Pillai v. The State of Kera/a and Anr. (supra) and State of Kera/a and Anr. v. The Gwafior Rayon Silk Manufacturing (Wvg.) Co. Ltd. etc. (supra) and the third by a Bench of four Judges of this Court in Excise Commissioner, U. P. H. Allahabad v. Ram Kumar (Supra) on the ground that the observations are in the nature of obiter dicta and that it cannot be insisted as intend- c
ng, to have laid down any proposition of law different from that en- unciated in the lndo Afghan Agencies case. It was not necessary for this Court in the cases referred to above to refer to Union of India and Ors. v. M/s. lndo Afghan Agencies Ltd., or if properly ;understood it only held that the authority cannot go back on the agreement arbi- trarily or on its mere whim. We feel we are bound to follow the deci- sions of the three Benches of this Court which in our respectful opinion have correctly stated the law. We are also unable to read the case of the House of Lords in Howell v. Falmouth Boat Construction Co. Ltd. (supra) as not having overruled the view of Denning, J and as not having expressed its disapproval of the doctrine of promissory estoppel against the Crown nor overruled the view taken by Denning, J in Robertson v. Minister of Pensions that "the Crown cannot escape the obligation under the doctrine of promissory estoppel."
We find ourselves unable to share the view of the learned Judge that the Constitution Bench of this Court in Ramanathan Pil/ai's case (supra) heavily relied upon the quotation from the American juris- prudence para 123 p. 873 of Vol. 28. Again we feel to remark that "unfortunately this quotation was incomplete and had overlooked perhaps inadvertantly" is unjustified (emphasis supplied). We feel we are in duty bound to express our reservations regarding the "activist" jurisprudence and the wide implications thereof which the learned Judge has propounded in his judgment. The first part of the judgment relates to the development of law relating to promissory estoppel in England following the High Trees case. As pointed out by us earlier tbe doftrine of promissory estoppel is not very helpful as we are governed by the various provisions of the Indian Contract Act Sections 65 and 70 provide for certain reliefs in void contracts and in . unenforceable contracts where a person relying on a representation has acted upon it and put himself in a disadvantageous position . . Apart from the case in Robertson v. Minister of Pensions, the House of Lords in Howell's case and the Privy Council in Antonio Buttigieg's case and the other English Authorities do not agree with the view that . the plea of promissory estoppel is available against the Government. Further we have to bear in mind that the Indian Constitution as a matter of high policy in public interest, has enacted Article 299 so as to save the Government liability arising out of unathorised acts of its officers and contracts not duly executed.
The learned Judge has considered at some length the doctrine of consideration and how it has thwarted the full development of the new equitable principle of promissory estoppel. After discussing the Ameri- can Law on the subject, he has observed that the leading text book JIT RAM v. HARYANA (Kailasam, J.)
writers view with disfavour the importance giveu to "consideration". The leamed Judge proceeds to observe that : "having regard to the general opprobrium to which the doctrine of consideration has been subjected to by eminent jurists, we need not he unduly anxious to pro- ject this doctrine against assault of erosion nor allow it to dwarf or stultify the full development of the equity of promissory estoppel or illhibit or curtail its operational efficacy as a justice device for pre- venting injustice." Here again we have to bear in mind that the Indian Contract Act regulates the right of parties, an.d expressly insists on the necessity for lawful consideration which
cannot be dispensed with by invoking some equitable doctrine. Section 10 of the Contract Act provides :- "All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful con- sideration and with a lawful object, and are not hereby expressly declared to be void."
c It will be seen that for a contract to be valid, it should be for a lawful consideration. Section 25 of the Contract Act provides that an agreement made without consideration is void unless it satisfies one of the conditions mentioned in this section.
The learned Judge has held that if the Government is to resist its liability it will have to disclose to the Court what are the facts and circumstances on account of which the Government claims to be exemp. ted from the liability and it would be for the Court to decide whether these facts and circumstances are such as to render it inequitable to enforce the liability against the Government. This statement will have to be read with the exceptions stated by the Learned Judge himself and those recognised by the:decisions of this Court. In C. Sankaranara- yanan;v. State of Kera/a(') it was held that the-power of the Government under Article 309 to make rules regulating the conditions of service of Government employees or of teachers of aided schools cannot in any way be effected by any agreement. Rule of estoppel against Govern- ment cannot be iIJ,VOked in such cases. In Narendra Chand Hem Ram and Ors. v. Lt. Governor Administrator Union Territory, Himachal Pradesh and Ors.,(2) this Court has laid down that the power to impose tax is undoubtedly a legislative power and that no Court can issue mandate to a legislature to enact a particular law and similarly no Court can direct a subordinate:legislative;body to enact or not to enact a law which it may be competent to enact. Again in State of Tamil (I) [1971] 2 s.c.c. 361.
(2) [1972] I S.C.R. 940. II c 726. [1980] 3 5.6.R.. Nadu and Ors. etc. v. S. K. Krishnamurthi etc. etc.(lfthis Court held tllat the policy of State to nationalise text books cannot be challenged bY the publishers on the ground that the rules were in derogation of their rights. It was held that the rules were in the nature of Departmental instructions and do not confer any right on the publishers nor are they designed to safeguard the interest of publishers and that the poliey of nationalisation was conceived in public interest and as the Govern- ment is at liberty to change the text books and delete from and add to the list of approved text books and the publishers can have no grie- vance. In M/s. Andhra Industrial Works v. Chief Control/er of Imports and Ors.,(2) alfourtiudges Bench of this Court)held that an applicant for a permit under Import Trade Policy has no absolute right to the grant of import licence and that the applicant cannot complain that the existing instructions or orders made in pursuance of the Import and Export Control Act place "unreasonable restrictions" on the peti- tioners' right to carry on trade or business. These restrictions obviously have been imposed in. the interests of the general public and national economy and with the development of imports, regulating foreign exchange have necessarily to be appropriately controlled and:regulated. Professor S. A. De Smith in his Judicial Review on Administrative Action, 3rd Edn. p. 279 sums up the position thus: "Contracts and Covenants entered into by the Crown are not to be construed as being subject to implied terms that would exclude the exercise of general discretionary powers for the public good: On the contrary they are to be construed as incorporating an implied term that such powers re- main exercisable. This is broadly true of other public authorities also. But the status and functions of the Crown in this regard are of a higher order. The Crown cannot be allowed to tie its hands completely by prior undertakings is as clear as the proposition that the Courts cannot allow the Crown to evade compliance with ostensibly binding obligations whenever it thinks fit: If a public authority lawfully re- pudiates or departs from the terms of a binding contract in order to · exercise its overriding discretionary powers, or if it is held never to have been bound in law by an ostensibly binding contract because the undertakings would improperly fetter its general discretionary powers, the other party to the agreement has no right whatsoever to damages or compensation under the general law, no matter how serious the damages that party may have suffered." Professor H. W. R. Wade in Administrative Law Fourth Edn. pp. 329-330 has pointed out that the doctrine of estoppel cannot be allowed to impede the proper exercise (I) [1972] 3 S.C.R. 104.
(2) [1975] I S.C.R. 327. ,,,, JIT RAM v. HARYANA (Kailasam, J.) eJ public and statutory functions by the State and public authorities. In Public Law the most obvious limitation on the doctrine of estoppel is that it cannot be invoked so as to give an authority powers which it does not in law possess. In other words, no estoppel can legitimate action which is ultra vires. As has been amply illustrated the Court is normally extremely careful to prevent any legal doctrine from im- peding the exercise of statutory discretion in the public interest. On a consideration of the decisions of this Court it is clear that there can be no promissory estoppel against the exercise of legislative power of the State. So also the doctrine cannot be invoked for preven- ting the Government from acting in discharge of its duty under the law. The Government would not be bound by the act of its officers and agents who act beyond the scope of their authority and a person dealing with the agent of the Government must be held to have notice ()f the limitations of his authority. The Court can enforce compliance .by a public authorityoftheobligationlaid on him if he arbitrarily or ()D his mere whim ignores the promises made by him on behalf of the 6overnment. It would be open to the authority to plead and prove that there were special considerations which necessitated his not being able to comply with his obligations in public interest.
In a fervent plea for the doctrine to speak in all its activ isl magni- tude the learned Judge observes "that is no reason why this new princi- ple, which is a child of equity brought into the world with a view to promoting honesty and good faith and bringing law closer to jus- tice should be held in fetters and not allowed to operate in all the activist magnitude, so. that it may fulfil the purpose for which it was conceived and born". It is no doubt desirable that in a civilised society man's word should be as good as his bond and his fellow men should be able to rely on his promise. It may be an improvement if a cause of action would be based on a mere promise without consideration. Jhe law should as far as possible accord with the moral values of the society, and efforts should be made to bring the law in conformity with the moral values. What are the moral values of the Society? This is a very complex question because the concept of moral values .amongst different persons and classes of persons is not always the same. The concept of moral values is not static one. It differs from time to .time and from society to society. It is hazardous for a Court to attem- pt to,enforce what according to it is the moral value. As pointed out by Roscoe Pound ; "It leads to an attempt to enforce overhigh ethi- .cal standards and to make legal duties out of moral duties which are not sufficiently, tangible to be made effective by the. machinery of the legal order. A more serious.difficulty is that the attempt to identify c
c law and morals gives too wide a scope to judicial discretion". Thr question is how should it be brought about. The learned Judge says that it should be the constant endeavour of the Courts and the legislature to close the gap between the law and morality and bnng about as near an approximation between the two as possible. LOrd Denning might have exhorted the Judges not to be timorous sours but to be bold spirits, ready to. allow a new cause of action if justice so requires. These are lofty ideals which one should steadfastly pursue. But before embarking on this mission, it is necessary for the Court t!) understand clearly its limitations. The powers of the Court to legislate is strictly limited. "Judges ought to remember that their office is jus dicere and not jus dare to interpret law, and not to make law or give law." Chandrachud, C. J. Speaking for a Constitution Bench. in Shri Gurbaksh Singh Sibbia etc. v. State of Punjab,(1) has clearly pointed out the limited powers of the Courts to make laws in · construingthe provisions of the statutes. The Learned Chief Justicj! has observed :-
"The true question is whether by a process'.of constructiom, the amplitude of judicial discretion which is given' to the High Court and the Court of Session, to impose such'.conditions as they may think fit while granting anticipatory bail, should be cnt down by reading into the statute coilditiotls which ate not to be found therein ***Our answer, clearly and emphatically · is in the negative."
Again the Learned Chief Justice warned "Judges'.have to decide cases as they come before them, mindful:of the need to keep passions and prejudices out of their decisions. AndJi(will be strange if, by en,i- ployiug judicial artifices and techniques, we cut down the'.discretion. so wisely conferred upon the Courts, by devising a formula which will confine the power to grant anticipatory bail within a strait-jacket.'.'- "Therefore, even if we were to frame a 'code fof,thegrant'.of anticipl!7 tory bail', which really is the business of the:legislature, it can at best furnish broad guide-lines and cannot compel blind adherence". The Courts by its very nature are most ill-snited to undertake the task of legislating. There is no:machiuery for the Court to ascertain tli'.e conditions of the people and their requirements and to make law~ that would be most appropriate. Further two Judges may think that :a particular law would be desirable to meet the requirements whel-eas another two Judges may most profoundly differ from the conclusio~s arrived at by two Judges. Conscious of these handicaps, the law re~' quires that even an amendment of the Supreme Court Rule.s wltich (I) [1980! 3 S.C.R. 383.
.. r r JIT RAM v. HARYANA (Kailasam, 1.) govern the proced11r~ to l;>e adopted by it fo~ re~Iating its work, can -0nly be effected by·the whole Court sitting and deciding. The result is that so far as !]le recommendation of the Municipal Committee to the Government to levy octroi duty, is concerned though H is contrary to the. representation it made to the buyers of the sites in the Mundi, the Municipality is not estopped as the representation made by it was beyond the scope of its authority. The levy of tax being for a public purpose i.e. for augmenting the revenues of the Muni- cipality as laid down in Ram Kumar's case, the plea of estoppel is not available. The order of the Government directing the levy of octroi in pursuance of the resolution elf the Municipality cannot also be challenged as it is in the exercise of its statutory duty. The result is both the appeals fail and are dismissed with costs of one set to be borne equally by the two appellants .
c S.R. Appeals dismissed. .Q 8-463SCI/80