DOCTRINE OF PROMISSORY ESTOPPEL

Garvita Mishra1
ABSTRACT
The Indian Contract Act, of 1872 primarily governs contractual relationships based
on offer, acceptance, and consideration. The Doctrine of Promissory Estoppel works
on equity, fairness and moral conscience. The Doctrine of Promissory Estopped
means when an individual forms a lawful relationship makes a clear promise to
another individual and later acts on it, that promise becomes an obligation for the
individual who made the promise. It promotes justice and keeps unfair outcomes at
bay by allowing a party to enforce a promise when they have detrimentally and
reasonably relied on it, even in the absence of consideration. This analysis examines
the judicial interpretation, essential components, and doctrinal evolution of
promissory estoppel in India. Through significant cases like Motilal Padampat Sugar
Mills and Union of India v. Anglo Afghan Agencies, it charts the development of the
doctrine from its English roots to its acceptance and use in Indian courts. The study
also critically looks at the doctrine's scope of application, specifically whether it can
be used in private agreements or only against the State. The purpose of the paper is
to determine whether promissory estoppel has developed into a separate cause of
action under Indian law and its jurisprudence.
Keywords: Promissory Estoppel, Indian Contract Act, Equity, Consideration, Induced
Reliance, Public Authorities, Contract Law.

1
The author is a Student at IIULER, Goa.

2
 I. INTRODUCTION - CONSIDERATION AND PROMISSORY ESTOPPEL
Under the Indian Contract Act, of 1872, the term 'contract' has been defined as an agreement
enforceable in s. 2(h). Under s. 2(e), every promise is an agreement. But unless the agreement is
supported by ‘consideration’ the agreement would be void except in the three instances mentioned
in s. 25.
S. 2(d) defines ‘consideration’ as follows: -
“When, at the desire of the promisor, the promisee or any other person has done or abstained
from doing, or does or abstains from doing, or promises to do or to abstain from doing,
something, such act or abstinence or promise is called a consideration for the promise.”

Hence, when a person makes a promise, unless the promise does, has done or promises to
something, at the desire of the promisor, the promise would be without consideration and the
promise cannot be enforced in a court of law.
Promissory estoppel binds parties even without consideration if:
i. A clear promise is made,
ii. The promisee relies on it, and
iii. Injustice would result if the promisor retracts.
Suppose, a student is promised a scholarship by a university representative. Relying on that
assurance, she turns down offers from other colleges and takes admission. Later, the university
denies ever making that promise. While there was no formal contract signed, the student made a
life-changing decision based on a clear assurance. Should she be left without any legal protection?

Take the case of the government making an announcement relating to some relief such as a sales-
tax holiday if something is done by the citizen such as opening a new factory in a specified area.
On the faith of the announcement, a citizen may do the necessary thing and thus change his
position. The government thereafter changes its policy. Even if it is assumed that the citizen acted
at the desire of the government there cannot be a conduct enforceable against the government,

3
because, contracts, which can be enforced against should be in a particular form.2

In other words, an act shall not be a good consideration for a promise unless it is done at the desire
of the promisor. In Durga Prasad v Baldeo3
The plaintiff, on the order of the Collector of the town, built at his own expense, certain
shops in a bazaar. The shops came to be occupied by the defendants who, in consideration of the
plaintiff having expended money on the construction, promised to pay him a commission on
articles sold through their agency in the bazaar. The plaintiff’s action to recover the commission
was rejected.

On the question of whether the person promising, the subscription to the institution or the
Government, the second example, could be held to the promise and representation respectively,
that is, whether the court could compel them 'to honour their representation, one view is that the
court could do so based on the doctrine of Promissory Estoppel. The doctrine has been expressed
by a Bench of two Judges of the Supreme Court of India as follows: -

"Where one party has by his words or conduct made to the other a clear and unequivocal promise
which is intended to create legal relations or effect, a legal relationship to arise in the. future,
knowing4 or intending that it would be acted upon by the other party to whom the promise is
made and it is so acted upon by the other party, the promise would be binding on the party making
it and he would not be entitled to go back upon it if it would be inequitable to allow him to do so
having regard to the dealings which have taken place between the parties, and this would be so
irrespective whether there is any pre-existing relationship between the parties or not."5

2
Art 299 of the Constitution of India.
3
Durga Prasad v. Baldeo, (1880) 3 All. 221 (India).
4
M P Sugar Mills v. State of UP, A.I.R. 1979 S.C. 621 (Bhagwati and Totzaparlutr JJ)
5
M.P. Sugar Mills v. State of U.P., A.I.R. 1979 SC. 621, P. 631.

4
The Court will do what is necessary, but not more, to prevent a person who has relied upon such
an assumption, promise, or representation from suffering detriment.6 Promissory estoppel also
has similarities to the common law principle of waiver by which the right to performance in
accordance with the contract may be lost by a party who in effect promises (albeit without
consideration) not to insist on strict adherence to the contract.
Before turning to the requirements for the establishment of promissory estoppels it should be
noted that it is only one form of estoppels. Promissory estoppels is one strand in a broader
equitable principle whereby parties to a transaction who have conducted their dealings in reliance
on an underlying assumption as to a present, past or future state of affairs, or a promise or
representation by words or conduct by one that strict legal rights will not be insisted upon will
not be allowed to go back on that assumption, or promise, or representation when it would be
unfair or unjust to do so.
The law, thus being in a state of uncertainty, the Law Commission has, suo motu, undertaken a
study of the doctrine to define precisely its scope and ambit.

II. EVOLUTION OF THE DOCTRINE OF PROMISSORY ESTOPPEL

Estoppel is rooted in principles of equity, fairness, and justice. Over time, its scope has expanded,
leading to the recognition of Promissory Estoppel, a doctrine now firmly entrenched in Indian
jurisprudence.
The concept first emerged in 1880 in Ganges Manufacturing Co. v. Soorajmull.7, where the
Calcutta High Court held that a promise without consideration could be enforced if it induced
reliance and interest. However, in 1892, the Madras High Court in Schoulank v. Mulhunaryan
rejected this approach, reverting to the traditional rule that consideration is essential under the
Indian Contract Act.

6
Crabb v Arun D.C [1976] Ch. 179, at p. 198; Commonwealth v. Verwayen (1990) 170 C.L.R. 394, at p. 413
(Australia)
7
Ganges Mfg. Co. v. Soorajmull, (1880) 5 Cal. 669 (India).

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Initially, Promissory Estoppel could only be invoked if the promisee suffered detriment or
damage. However, the doctrine evolved to focus on:
i. Unequivocal promise,
ii. Reasonable reliance by the promisee, and
iii. Change in position (even without monetary loss).

In the landmark case of Union of India v. Anglo-Afghan Agencies (1968)8 marked a turning point
in Indian law
The Government of India announced incentives for exporters of woollen goods to
Afghanistan but later partially withdrew them.
The Supreme Court held the government estopped from retracting its promise, as exporters had
acted in reliance on it.
For the first time, Promissory Estoppel was applied against the government, even in the absence
of a formal contract.

Coming to Modern Applications, the Post-Anglo Afghan Agencies, Indian courts have fully
embraced Promissory Estoppel, disregarding the need for consideration in such cases. It is now
recognized as:
i. A valid cause of action,
ii. A shield against arbitrary state action, and
iii. A tool to enforce legitimate expectations in commercial and administrative dealings.
Hence, from its hesitant beginnings to its current robust form, Promissory Estoppel has become
a cornerstone of equity in Indian law. It ensures that promises especially those made by the
government are binding when relied upon, fostering fairness and justice in contractual and
administrative relationships.

8
Union of India v. Anglo-Afghan Agencies, (1968) 2 S.C.R. 366 (India).

6
 III. ESSENTIAL INGREDIENTS OF THE DOCTRINE

Following are the given ingredients that are very crucial for the doctrine to be enforced properly:
-

1) Lawful Relationship: There must be an existence of a lawful relationship or a relationship

anticipated to exist between the two parties.

2) Assurance: It must be displayed that a promise was made between the two parties which
ultimately led the aggrieved party to presume that some kind of action needs to be taken. Such
a promise must be reasonable and reliable.

3) Reliance: The aggrieved party's reliance on the promise made must be displayed clearly and
because of this the aggrieved party took some action.

4) Damage: The aggrieved party who relied upon the promise made by the other party must
suffer some sort of damage or loss which ultimately lands the other party in the worst position.

5) Unconscionability: It must be demonstrated that it was unjust for the promisor to break the
promise.

If all the above-mentioned components are present then most of the courts will apply the doctrine
to the situation. However, some courts may still apply the doctrine only if the situations precisely
give rise to the concept. And such an example of the precise situation is the one regarding real
property.

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 IV. JUDICIAL TRENDS IN INDIA

Sometime before the doctrine of promissory estoppel was defined, the Calcutta High Court
perceived that the principle of estoppel was not kept distinctly to the law of evidence, however,
that an individual might be estopped from doing acts or depending on specific contentions or
contention.9 In a later case, the Bombay High Court empowered the municipality to oppose the
case of the Secretary of State to be launched out starting from the earliest stage the municipality
had levelled, and raised versatile claims, in the conviction that they had a flat outright which
should not be turned out except if other reasonable ground was outfitted, a conviction which was
preferable to a desire made by the administrative authority which the legislature realized that the
municipality would act upon.10

Much later, the Supreme Court connected the standard (with one judge utilizing the term
promissory estoppel) to block the administration from evaluating land income in connection to a
market site, when it had previously settled not to charge any lease on business sectors for business
sectors would resemble other open buildings.11

The court in UOI vs Anglo-Afghan Agencies12 Ruled that the doctrine of promissory estoppel
discovered its most articulate exposition. For this situation, the writ-applicant had depended on
the fare advancement plot issued by the Central Government which had sent out woollen products,
and after that guaranteed the import qualification authentication for the full incentive under the
plan. The solicitor put together its case concerning dependence, and the administration argued
official need.

The Supreme Court negatived the protection of official need and brought up that it didn't

9
Ganges Mfg. Co. v. Soorajmull, (1880) ILR 5 Cal. 669 (India).
10
Municipal Corporation of Bombay v. Secretary of State for India, (1905) 7 Bom LR 198.
11
Collector of Bombay v. Municipal Corporation of the City of Bombay, AIR 1951 SC 469.
12
Union of India v. Anglo-Afghan Agencies, (1968) 2 S.C.R. 366 (India).

8
discharge the legislature from its commitment to respect the guarantee made by it, if the native
acting in dependence on the guarantee, had adjusted his position, and that as well, despite that the
guarantee was not recorded in the structure required by Article 29913 of the Constitution.

Afterwards, in Century spinning and manufacturing Co Ltd vs Ulhasnagar Municipality14, the

doctrine was connected to implement a guarantee of exception from the instalment of octroi
obligation given by a metropolitan organization. The court drew the refinement between the
portrayal of the current actuality and the description that something would be done in future was
spelt out, and it was thus carefully observed.

At last,, the Supreme Court managed the doctrine of promissory estoppel at an incredible length
and held that it afforded a reason for the activity. For this situation in Motilal Padampat Sugar
Mills vs. State of UP15, wherein the Government of Uttar Pradesh proclaimed a plan exempting
all new modern units from deals charged for a long time in the paper. The appealing party sugar
organization got the portrayal affirmed by the Secretary, Industries Department, the Director of
Industries, and the Chief Secretary, expressing that in perspective on the business charge
exception declared by the administration, is expected to set up a hydrogenation plant for
vanaspati. It was held that the all-out portrayal contained in the letters for the benefit of the
Government of Uttar Pradesh, based on which the appealing party acquired cash from money-
related organizations and set up a plant, conjured the doctrine of promissory estoppel and the
administration will undoubtedly complete the portrayal and excluded the litigant from the
instalment of offers charge regarding produced merchandise for a time of three years.

The Supreme Court has seen that the doctrine of promissory estoppel is a guideline developed by
value to keep away from foul play, and however generally named promissory estoppel, it is

13
India Const. Art. 299
14
Century Spg. & Mfg. Co. v. Ulhasnagar Mun. Council, AIR 1971 SC 1021 (India).
15
Motilal Padampat Sugar Mills Co. v. State of U.P., (1979) 2 S.C.R. 641 (India).

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neither in the domain of agreement nor in the realm of estoppel, yet it is a doctrine advanced by
value to avert lousy form where the guarantee is made by an individual realizing that it would be
followed up on by the individual to whom it is made, in actuality it is so followed up on and it is
inequitable to permit the gathering making the guarantee to return upon it.

V. APPLICATION AGAINST GOVERNMENT AND PUBLIC AUTHORITIES

In some cases, it has been pleaded on behalf of the Government that the doctrine of promissory
estoppel is not applicable against the Government, in so far as the State cannot bind itself to fetter
its future executive action. In other words, it was pleased that the law of estoppel is not applicable
given the "doctrine of executive necessity", which empowers the State to act according to the
needs of the community without being hampered in its freedom of executive action. The plea has
been rejected by the Supreme Court and the Government has been held bound to honour the
promises made by it. The following observation by Shah, J. in Union of India v. Anglo-Afghan
Agencies16, in this regard may be noted:

"Under our jurisprudence, the Government is not exempt from the liability to carry out the
representation made by it as to its future conduct and it cannot on some undefined and undisclosed
ground of necessity or expediency fail to carry out the promise solemnly made by it, nor claim to
be the judge of its obligation to the citizen on an ex parte appraisal of the circumstances in which
the obligation has arisen.”

The defence of executive necessity has been rejected time and again by the Supreme Court. In
the Motilal Sugar Mills Case17, it was observed:

“The law may, therefore, now be taken to be settled as a result of this decision, that where the

16
Idt. (12)
17
Moti Lal, etc. Sugar Mills v. State of U.P., A.I.R. 1979 S.C. 621 at 643.

10
Government makes a promise knowing or intending that it would be acted on by the promisee
and, in fact, the promisee, acting in reliance on it, alters his position, the Govt. would be held
bound by the promise and the promise would be enforceable against the Govt. at the instance of
the promisee, even though there is no consideration for the promise and the promise is not
recorded in the form of a formal contract as required by Article 29918 of the Constitution.”

The doctrine of promissory estoppel has been applied by the Supreme Court in Pouranami Oil
Mills v. State of Kerala19 And Union of India v. Godfrey Philips India Ltd.20

In Pouranami Oils Mills case,21 The State of Kerala issued an order dated 11.4.79, whereby new
small-scale units were invited to set up their industries in that State and to boost industrialization,
the said order announced that small-scale industries set up after 11.4.79 will be exempted from
the payment of sales tax for five years from the date of commencement and purchase tax for five
years from the date of production. The State thereafter issued another Notification dated 21.10.80
withdrawing the exemption relating to purchase tax and confined the exemption from the payment
of taxes to limits specified in the second Notification. The firms who had set up their industries
in response to the first Notification withdrew the concession retrospectively, i.e., even those
industries set up between 11.4.79 and 21.10.80 respectively. The parties who had set up their
industries in response to the order of 11.4.79 prior to 21.10.80 challenged the notification of
21.10.80. Applying the doctrine of promissory estoppel, it was held by the Supreme Court that
all industries established between 11.4.79 and 21.10.80 would be entitled to the exemption for
five years from the date they were set up. New industries set up after 21.10.80 were, however,
held to be not entitled to that benefit as they had notice of the curtailment in the exemption before
they came to set up their industries.

18
Idt. (13)
19
Pouranami Oil Mills v. State of Kerala, A.I.R. 1986 S.C. 590 (India).
20
Union of India v. Godfrey Philips India Ltd., A.I.R. 1986 S.C. 806 (India).
21
A.I.R. 1987 S.C. 590; Also see Delhi Cloth Mills v. U.O.I., 1987 S.C. 2414; Shri J.R. Flour Mill v. State of
Orissa, A.I.R. 1986 Orissa 163.

11
 VI. WHAT ARE THE LIMITATIONS ON PROMISSORY ESTOPPEL?

1) Pre-existing Legal Relationship: The doctrine of promissory estoppel applies only when
there is an existing legal relationship between the parties, and it is modified or varied.

This means a new contract must be supported by consideration.

2) Alteration of Position: The essence or beauty of a bilateral executory contract is that it comes
into existence the moment promises are exchanged forming consideration for each other.

However, the doctrine of promissory estoppel applies only when the party who wants to
enforce a promise has altered its position by relying upon it.

3) Inequitable to Retract: Since the origin of the doctrine of promissory estoppel lies in equity,
it would apply only in those cases where it would be inequitable for the promisor to go back
on his promise.

If that is not the case, the doctrine does not apply.

4) Shield not a Sword: The very nature of the doctrine of promissory estoppel is that it can be
used only to save a party from the effect of a promise which was modified by the promisor.

It cannot be used to give rise to a claim. Hence, it can only be used as a tool of defence and
not of attack.

5) Suspensory: It is considered that the doctrine can have only a suspensory effect on the
obligations created under the original contract and cannot extinguish them.

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 VII. HYPOTHETICAL CASE:

Garvita textiles v. State of Jungpur (2024)

Facts:

The State Government of Jungpur, through its official website and public notifications,
announced a textile industry subsidy scheme to attract investment in rural districts. The
government promised that any company setting up operations in the rural district of Bhangar
would receive a 50% rebate on electricity charges for five years.

Relying on this assurance, Garvita Textiles, a mid-sized garment manufacturing company,

invested ₹10 crores in setting up a plant in Bhangar, trained local women, and began operations.
However, after two years, a policy change was announced, and the promised rebate was
withdrawn retrospectively, without offering any alternative compensation.

Issue:

Whether the State of Jungpur be held bound by its public promise of providing a 50% electricity
rebate, even though no formal contract was signed, and whether Garvita Textiles can claim relief
under the doctrine of promissory estoppel?

Rule:

As per the doctrine of promissory estoppel, a party may be legally bound by a promise even in
the absence of a formal contract if:

i. An unambiguous promise was made,

ii. The other party relied on that promise reasonably,

iii. There was a change in position and consequent detriment suffered, and

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iv. It would be unjust to allow the promisor to back out.

This principle is supported by Indian case law, including Union of India v. Anglo-Afghan
Agencies22 and Motilal Padampat Sugar Mills v. State of U.P.,23 which held that the government
can also be estopped from resiling from promises that induce reliance unless there is an overriding
public interest or statutory bar.

Application:

In this case, Garvita Textiles invested ₹10 crores and set up a manufacturing plant in Bhangar
based on the government’s explicit promise of an electricity rebate. The promise was made
through an official public notification, thus satisfying the element of clarity. The company
changed its position and suffered a financial setback when the rebate was withdrawn after two
years.

There was no overriding public interest or statutory restriction cited in the government's
withdrawal. This withdrawal goes against the principle of fairness and amounts to a betrayal of
the trust placed by the company in the government's word. The company's reliance was
reasonable, and the loss is measurable and directly linked to the government's act.

Ruling:

Garvita Textiles is entitled to relief under the doctrine of promissory estoppel. The State of
Jungpur should be held accountable for its promise, and cannot arbitrarily deny the rebate after
the company has substantially altered its position. Allowing such withdrawal would violate the
principles of equity, fairness, and natural justice.

22
Idt. (8)
23
Idt. (17)

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 VIII. CONCLUSION

The Doctrine of Promissory Estoppel stands as a vital supplement to the rigid rules of contract
law under the Indian Contract Act, of 1872. It serves to enable an injured party to recover on a
promise. There are several cases where governmental bodies have been made liable based on
promissory estoppel, if the promisee has altered his position in reliance upon the promise,
irrespective of whether the promise was supported by any consideration. The intended purpose
of this doctrine is to prevent the promisor from retracting their words and stopping the promisor
from arguing that an implied promise should not be legally upheld or enforced.

It bridges the gap between strict legal requirements such as consideration and the demands of
fairness and justice in real-life dealings. As established by Indian courts, particularly in landmark
decisions like Motilal Padampat Sugar Mills and Union of India v. Anglo Afghan Agencies, this
doctrine ensures that promises that induce reliance and result in a change of position are not
rendered meaningless due to technicalities.

Over time, Indian jurisprudence has expanded the scope of the doctrine, even applying it against
the government in appropriate circumstances. However, its application remains grounded in
equity, meaning it is not absolute and must be balanced against public interest and statutory
constraints. While limitations exist, the doctrine continues to evolve as a flexible tool of justice
reaffirming that the law will not allow a party to act unconscionably after having induced trust
and reliance.

In conclusion, Promissory Estoppel has matured into a powerful equitable doctrine in Indian law,
offering both a defence and, in certain cases, a cause of action. It strengthens public trust in legal
promises and reflects the law's commitment to fairness over formality.

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 IX. BIBLIOGRAPHY

I. Primary Legal Sources

1. The Indian Contract Act, No. 9 of 1872, India Code (1872).
2. The Constitution of India, art. 299.

II. Case Law

1. Durga Prasad v. Baldeo, (1880) 3 All. 221 (India).
2. Ganges Mfg. Co. v. Soorajmull, (1880) ILR 5 Cal. 669 (India).
3. Schoulank v. Mulhunaryan, (1892) Mad. 5 (India).
4. Municipal Corp. of Bombay v. Sec’y of State for India, (1905) 7 Bom. L.R. 198 (India).
5. Collector of Bombay v. Municipal Corp. of Bombay, A.I.R. 1951 S.C. 469 (India).
6. Union of India v. Anglo Afghan Agencies, (1968) 2 S.C.R. 366 (India).
7. Century Spg. & Mfg. Co. v. Ulhasnagar Mun. Council, A.I.R. 1971 S.C. 1021 (India).
8. Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P., (1979) 2 S.C.R. 641 (India).
9. Pouranami Oil Mills v. State of Kerala, A.I.R. 1986 S.C. 590 (India).
10. Union of India v. Godfrey Philips India Ltd., A.I.R. 1986 S.C. 806 (India).
11. Delhi Cloth & General Mills Co. Ltd. v. Union of India, A.I.R. 1987 S.C. 2414 (India).
12. J.R. Flour Mill v. State of Orissa, A.I.R. 1986 Ori. 163 (India).
13. Crabb v. Arun District Council, [1976] Ch. 179 (U.K.).
14. Commonwealth v. Verwayen, (1990) 170 C.L.R. 394 (Austl.).

III. Textbooks and Treatises

1. Avtar Singh, Law of Contract and Specific Relief (13th ed. 2022).
2. M.P. Jain, Indian Constitutional Law (8th ed. LexisNexis 2018).
3. Anson, Anson's Law of Contract (30th ed. Oxford Univ. Press 2016).

IV. Web Sources

1. SCC Online, https://www.scconline.com
2. Manupatra, https://www.manupatrafast.com
3. LiveLaw.in, Doctrine of Promissory Estoppel in India, https://www.livelaw.in
4. Indian Kanoon, https://indiankanoon.org

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