LiveLaw Explainer | What Are Principles Of Promissory Estoppel

The Supreme Court has comprehensively restated the principles governing the doctrine of promissory estoppel, holding that governmental assurances are not empty declarations and that the State cannot arbitrarily withdraw promises on which citizens have acted to their detriment.In a judgment concerning the withdrawal of industrial incentives, the Court observed that promissory estoppel is an equitable doctrine evolved to prevent injustice and operates beyond the confines of contract law or the technical rules of estoppel under the law of evidence.A bench comprising Justice JB Pardiwala and Justice KV Viswanathan, in State of Himachal Pradesh & Ors. v. M/s Kundlas Loh Udyog 2026 LiveLaw (SC) 541, culled out the following principles after surveying various precedents.(i) The doctrine of promissory estoppel is a principle evolved by equity to avoid injustice. It operates not in the realm of contract, nor within the technical confines of estoppel under the law of evidence, but upon the broader considerations of fairness, justice and good conscience;(ii) Where one party, by words or conduct, makes to another a clear, unequivocal and unambiguous promise, intended to create legal relations or affect a legal relationship to arise in the future, knowing or intending that it would be acted upon, and it is in fact so acted upon, the promise becomes binding upon the promisor;(iii) The doctrine of promissory estoppel is a doctrine whose foundation is that an unconscionable departure by one party from the subject matter of an assumption which may be of fact or law, present or future, and which has been adopted by the other party as the basis of some course of conduct, act or omission, should not be allowed to pass muster. And the relief to be given in cases involving the doctrine of promissory estoppels contains a degree of flexibility which would ultimately render justice to the aggrieved party;(iv) The doctrine is not merely defensive in nature. Under Indian law, it may itself furnish a cause of action and can be affirmatively enforced where equity so requires;(v) It is not necessary, in order to attract the doctrine, that the promisee should prove actual detriment. It is sufficient that the promisee has altered his position, acting in reliance upon the promise;(vi) The alteration of position may consist in making substantial investments, incurring liabilities, establishing industrial infrastructure, entering into agreements, or otherwise rearranging one's affairs on the faith of the representation;(vii) The doctrine applies with full force against the State, its departments, statutory corporations and instrumentalities, including authorities falling within Article 12 of the Constitution, which cannot arbitrarily resile from a solemn representation upon which another has acted;(viii) Where the State or its instrumentalities frame industrial or fiscal incentive schemes with the avowed object of attracting investment and establishing industries, the representations contained therein are intended to induce entrepreneurs to act upon them, and such representations are enforceable. Once an entrepreneur, relying upon such representation, establishes an industrial unit, commences commercial production, or otherwise satisfies the eligibility conditions during the currency of the scheme, and the State agencies recognise them as being eligible, the promise crystallises, and an enforceable equity arises in its favour. Whether a benefit has accrued or not in such cases depends on the facts and circumstances of each case;(ix) The grant of an exemption, concession or incentive under a statutory scheme is ordinarily defeasible, and the Government is competent to modify or revoke the same in exercise of the very power under which it was granted. Thus, what is granted can ordinarily be withdrawn. However, the Government may be precluded from doing so on the ground of promissory estoppel, which principle itself remains subject to considerations of equity and public interest.(x) Where a specific sanction or approval of incentive, or eligibility certificate has been issued in favour of an individual enterprise, and the enterprise has acted thereon by making a substantial investment, the promisor is all the more firmly bound by its representation;(xi) The doctrine rests upon the larger constitutional principle that State action must be fair, non-arbitrary, and consistent; governmental assurances are not empty declarations, but solemn representations on the faith of which citizens regulate their affairs; and(xii) The ultimate object of the doctrine is to prevent manifest injustice and to ensure that a party, particularly the State, does not act inconsistently to the prejudice of one who has relied upon its promise and altered his position irretrievably

LiveLaw Explainer | What Are Principles Of Promissory Estoppel

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LiveLaw Explainer | What Are Principles Of Promissory Estoppel

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