Estoppel and Waiver against the Government

Against applying it: the Government holds its powers in trust for the public and cannot bargain them away. An officer's promise cannot make lawful what a statute forbids, and cannot bind the Government to a course that later proves contrary to the public interest. This is the fettering of discretion problem in [Grounds of Judicial Review: Failure to Exercise Discretion].

The law reconciles them by applying the doctrine, and then limiting it.

The rules, stated as propositions

1. Promissory estoppel applies to the Government. In its administrative, executive and business dealings the Government is bound by its promises in the same way as a private person, and the old rule that there is no estoppel against the Crown does not represent Indian law.

2. Consideration is not necessary, and neither is a contract. This matters because a government assurance will very often fail Article 299, and an estoppel does not depend on there being a valid contract.

3. There is no estoppel against a statute. This is the largest limit. The Government cannot be estopped from performing a statutory duty, and no promise can authorise what the law forbids or dispense with what the law requires. If an officer promises an exemption the statute does not permit, the promise is unenforceable however completely it was relied on.

4. There is no estoppel against the exercise of legislative power. Nobody can be promised that a law will not be changed.

5. There is no estoppel against the Constitution. A promise cannot make valid a contract void under Article 299, which is the point made in [Contractual Liability of the State].

6. The public interest may override it. The Government may resile from a promise where the public interest genuinely requires it, but it must place the material before the court and satisfy it that the public interest so required. A bare plea of public interest is not enough, and the burden is on the Government.

7. The promise must be within the officer's authority. A promise made by an officer with no power to make it does not bind, though the citizen's ignorance of the limits of that authority may be relevant to the equity.

The constitutional dimension

Facts. Maneka Gandhi v. Union of India, AIR 1978 SC 597, concerned a passport impounded under section 10(3)(c) of the Passports Act 1967 by an order reciting only that it was "in public interest", with no hearing and with reasons refused.

Held. Article 14 strikes at arbitrariness in State action and ensures fairness and equality of treatment: equality and arbitrariness are sworn enemies, one belonging to the rule of law in a republic and the other to the whim and caprice of an absolute monarch. The principle of reasonableness pervades Article 14, and the procedure contemplated by Article 21 must satisfy the test of reasonableness, being right and just and fair and not arbitrary, fanciful or oppressive. Natural justice may be implied where the statute is silent, and there is no distinction between quasi-judicial and administrative functions for this purpose.

Why it matters here. In India the doctrine is reinforced by Article 14. A government which resiles from its own promise in one case, without explanation, while honouring it in others, is acting arbitrarily. So a citizen who cannot make out all the elements of promissory estoppel may still succeed on the constitutional ground.

The leading Indian decisions on promissory estoppel against the Government are identified in authorities/cases.json and have not yet been read in a session, so they are named there and are not worked here. A student should look up the sugar mill case on promissory estoppel and the case on the export promotion scheme, both of which are the standard authorities.

Waiver

Waiver appears in administrative law in two places, and they should be kept apart.

Waiver by the citizen. A person entitled to a procedural protection may lose it by not asserting it. A party who knows of a disqualifying interest and takes part without objecting may be held to have waived the objection: [The Rule Against Bias]. A person who knows of a defect in notice and argues the merits without complaint may be held to have waived it: [The Effect of a Failure of Natural Justice]. Waiver requires knowledge, so a person who did not know of the defect has not waived anything.

Waiver by the Government. Much more limited. The Government cannot waive a statutory requirement imposed in the public interest, because the requirement is not its to give up. It may waive a benefit conferred for its own protection, such as a contractual term in its favour.

Fundamental rights cannot be waived. A person cannot contract out of a fundamental right, because those rights are conferred in the public interest and not merely for the benefit of the individual.

A worked example

The State announces a scheme: any industry established in a notified backward taluka before 31 March will be exempt from State sales tax for five years. Prakash Sawant reads the notification, invests, and begins production in February.

Case 1. The State refuses the exemption, saying the scheme was only a policy announcement and not a contract. Promissory estoppel applies. There was a clear promise, made to be acted on, Prakash altered his position by investing, and it would be inequitable to allow the State to resile. No contract and no consideration are needed.

Case 2. The State says the assurance did not comply with Article 299. That is no answer. Estoppel does not depend on a valid contract, which is precisely why the doctrine matters in this field.

Case 3. It turns out that the Sales Tax Act permits exemptions only by notification under a particular section, and no such notification was issued. Now the State succeeds. There is no estoppel against a statute, and the promise cannot compel the Government to do what the Act does not authorise. Prakash's remedy, if any, lies elsewhere.

Case 4. The State withdraws the scheme for future units and pleads public interest, filing material showing the exemption was causing a revenue loss disproportionate to the industrial development achieved. The withdrawal is prospective, the material is before the court, and the plea is likely to succeed for future units, though Prakash, who has already acted, is in a stronger position.

Case 5. The State withdraws the exemption for Prakash alone and continues it for the four other units in the taluka. This is not a public interest departure but discrimination, and it is arbitrary under Article 14 on the reasoning of Maneka Gandhi v. Union of India, AIR 1978 SC 597.

Case 6. Prakash read the notification but had already built his factory before it was issued. The element of reliance fails. He did not alter his position on the faith of the promise, and estoppel does not arise, though he might argue legitimate expectation of consistent treatment.

Distinctions worth having straight

What it does NOT mean

It does not mean the Government is bound by every statement an official makes. The promise must be clear, must be within the officer's authority, and must have been acted on.

It does not mean estoppel can override the law. There is no estoppel against a statute, against legislation, or against the Constitution.

It does not mean the public interest is a magic word. The Government must place the material before the court.

It does not mean a citizen can waive a fundamental right. He cannot.

Quick revision

1. Promissory estoppel: a clear and unequivocal promise, intended to be acted on, actually acted on with an alteration of position, where it would be inequitable to allow resiling. No consideration is needed.
2. It applies to the Government in its administrative and executive dealings; the old rule that there is no estoppel against the Crown is not Indian law.
3. Limits: no estoppel against a statute; none against the exercise of legislative power; none against the Constitution, so it cannot validate a contract void under Article 299; and the public interest may override it, but the Government must prove it with material.
4. The promise must be within the authority of the officer who made it.
5. Article 14 reinforces the doctrine: an arbitrary departure from an assurance is unequal treatment, on the reasoning of Maneka Gandhi v. Union of India, AIR 1978 SC 597.
6. Waiver by a citizen requires knowledge of the right; waiver by the Government of a statutory requirement imposed in the public interest is not possible; fundamental rights cannot be waived.
7. Distinguish estoppel, which needs reliance and yields the promise, from legitimate expectation, which needs none and yields a hearing.

Test yourself

1. Does the doctrine of promissory estoppel apply against the Government in India? Yes, in its administrative, executive and business dealings. Where the Government makes a clear and unequivocal promise, intending it to be acted upon, and a citizen acts on it and alters his position, the Government may be held to the promise even in the absence of consideration and even where no valid contract exists. The old English rule that there is no estoppel against the Crown does not represent Indian law, and the doctrine is reinforced by Article 14, since a State which resiles arbitrarily from its own assurance is acting unequally, and Maneka Gandhi v. Union of India, AIR 1978 SC 597, holds that Article 14 strikes at arbitrariness in State action and that equality and arbitrariness are sworn enemies.

2. What are the limits of promissory estoppel against the Government? There is no estoppel against a statute, so the Government cannot be compelled by a promise to do what the law does not permit or to refrain from performing a statutory duty. There is no estoppel against the exercise of legislative power, so nobody can be promised that the law will not be changed. There is no estoppel against the Constitution, so a promise cannot validate a contract void for non-compliance with Article 299. The promise must be within the authority of the officer who made it. And the Government may resile where the public interest genuinely requires it, though it must place the material before the court and satisfy it that this was so; a bare plea of public interest is not enough and the burden lies on the Government.

3. Distinguish promissory estoppel from legitimate expectation. Promissory estoppel requires a clear and unequivocal promise and requires the promisee to have altered his position in reliance on it, and its ordinary effect is that the promise is enforced. Legitimate expectation may arise either from a promise or from a settled and consistent past practice, does not require proof of reliance, and ordinarily entitles the person only to be heard and to receive a rational and public interest reason for any departure, rather than to the benefit itself. Neither can operate against a statute.

4. What is waiver, and can the Government waive a statutory requirement? Waiver is the intentional relinquishment of a known right, so it requires knowledge of the right given up. A citizen may waive a procedural protection, for example by taking part in a proceeding with knowledge of a disqualifying interest or of a defect in notice, and will then not be heard to complain later. The Government's position is narrower: it cannot waive a statutory requirement imposed in the public interest, since the requirement is not its own to surrender, though it may waive a term or benefit inserted purely for its own protection. Fundamental rights cannot be waived at all, because they are conferred in the public interest and not merely for the benefit of the individual.

5. The Government promises a tax exemption which the taxing statute does not authorise, and a manufacturer sets up a factory in reliance. Advise. The manufacturer cannot enforce the promise. All the elements of promissory estoppel may be present, a clear promise, an intention that it be acted on, actual reliance and an alteration of position, but the doctrine cannot operate against a statute. The Government cannot be compelled to grant an exemption the Act does not permit, since that would require the executive to act contrary to law, and no estoppel can produce that result. If the exemption was within the Act but the required notification was simply not issued, the position is different and the manufacturer's case is much stronger. He may also consider whether a departure from a published scheme in his case alone is arbitrary under Article 14, and whether any restitutionary claim arises.