BHAGWATI - (1.) THIS appeal by certificate raises a question of considerable importance in the field of public law. How far and to what extent is the State bound by the doctrine of promissory estoppel? It is a doctrine of comparatively recent origin but it is potentially so fruitful and pregnant with such vast possibilities for growth that traditional lawyers are alarmed lest it might upset existing doctrines which are looked upon almost reverentially and which have held the field for a long number of years. The law in regard to promissory estoppel is not yet well settled though it has been the subject of considerable debate in England as well as the United States of America and it has also received consideration in some recent decisions in India and we, therefore, propose to discuss it in some detail with a view to defining its contours and demarcating its parameters. We will first state briefly the facts giving rise to this appeal. THIS is necessary because it is only where certain factsituations exist that promissiory estoppel can be invoked and applied.
(2.) THE appellant is a limited company which is primarily engaged in the business of manufacture and sale of sugar and it has also a cold storage plant and a steel foundry. On 10/10/1968 a news item appeared in the National Herald in which it was stated that the State of Uttar Pradesh had decided to give exemption from sales tax for a period of three years under Section 4A of the U. P. Sales Tax Act to all new industrial units in the State with a view to enabling them "to come on firm footing in developing stage". This news item was based upon a statement made by Shri M. P. Chatterjee the then Secretary in the Industries Department of the Government. THE appellant, on the basis of this announcement, addressed a letter dated 11/10/1968 to the Director of Industries stating that in view of the Sales Tax Holiday announced by the Government, the appellant intended to set up a Hydrogenation Plant for manufacture of Vanaspati and sought for confirmation that this industrial unit, which they proposed to set up, would be entitled to Sales Tax Holiday for a period of three years from the date it commences production. THE Director of Industries replied by his letter dated 14th Oct., 1968 confirming that "there will be no sales tax for three years on the finished product of your proposed Vanaspati factory from the date it gets power connection for commencing production." THE appellant thereupon started taking steps to contact various financiers for financing the project and also initiated negotiations with manufacturers for purchase of machinery for setting up the Vanaspati factory. On 12/12/1968 the appellant's representative met the 4th respondent who was at that time the Chief Secretary to the Government as also Advisor to the Governor and intimated to him that the appellant was setting up the Vanaspati factory solely on the basis of the assurance given on behalf of the Government that the appellant would be entitled to exemption from sales tax for a period of three years from the date of commencement of commercial production at the factory and the 4th respondent reiterated the assurance that the appellant would be entitled to sales tax holiday in case the Vanaspati factory was put up by it. THE appellant by its letter dated 13/12/1968 placed on record what had transpired at the meeting on the previous day and requested the 4th respondent "to please confirm that we shall be allowed sales tax holiday for a period of three years on the sale of Vanaspati from the date we start production". On the same day the appellant entered into an agreement with M/s. De Smet (India) Pvt. Ltd., Bombay for supply of plant and machinery for the Vanaspati factory, providing clearly that the appellant would have to (sic) option to terminate the agreement, if within 10 weeks exemption from sales tax was not granted by the State Government. THE 4th respondent replied on 22/12/1968 confirming the "the State Government will be willing to consider your request for grate of exemption from U. P. sales tax for a period of three years from the date of production" and asked the appellant to obtain the requisite application form and submit a formal application to the Secretary to the Government in the Industries Department and in the Industries Department and in the meanwhile to 'go ahead with the arrangements for setting up the factory'. THE appellant had in the meantime submitted an application dated 21/12/1968 for a formal order granting exemption from sales tax under Section 4A of the Act. It appears that the letter of the 4th respondent dated 22/12/1968 was not regarded as sufficient by the financial institutions which were approached by the appellant for financing the project since it merely stated that the State Government would be willing to consider the request for grant of exemption and did not convey any decision of the State Government that the exemption would be granted. THE appellant, therefore, addressed a letter dated 22/01/1969 to the 4th respondent pointing out that the financial institutions were of the view that the letter of the 4th respondent dated 22/12/1968 "did not purport to commit the Government for the concession mentioned" and it was, therefore, necessary to obtain a formal order of exemption in terms of the application submitted by it. THE 4th respondent, however, stated categorically in his letter in reply dated 23/01/1969 that the proposed Vanaspati factory of the appellant "will be entitled to exemption from U. P. sales tax for a period of three years from the date of going into production and that this will apply to all Vansapati sold during that period in Uttar Pradesh itself" and expressed his surprise that 'a letter from the Chief Secretary to the State Government stating this fact in clear and unambiguous words should not carry conviction with the financial institutions'. In view of this unequivocal assurance given by the 4th respondent, who not only occupied that post of Chief Secretary to the Govt. but was also Advisor to the Governor functioning under the President's rule, the appellant went ahead with the setting up of the Vanaspati factory. THE appellant by its letter dated 25/04/1969 advised the 4th respondent that the U. P. Finance Corporation, being convinced by the clear and categorical assurance given by the 4th respondent that the Vanaspati factory of the appellant would be entitled to exemption from sales tax for a period of three years from the date of commencement of production, had sanctioned financial assistance to the appellant and the appellant was going ahead with the project in full speed to enable it to start production at the earliest. THE appellant made considerable progress in the setting up of the Vanaspati factory but it seems that by the middle of May 1969 the State Government started having second thoughts on the question of exemption and a letter dated 16/05/1969 was addressed by the 5th respondent who was Deputy Secretary to the Government in the Industries Department, intimating that a meeting has been called by the Chief Minister on 23/05/1969 'to discuss the question of giving concession in sales tax on Vanaspati products' and requesting the appellant to attend the metting. THE appellant immediately by its letter dated 19/05/1969 pointed out to the 5th respondent that so far as the appellant was concerned, that State Government had already granted exemption from sales tax by the letter of the Chief Secretary dated 23/01/1969, but still, the appellant would be glad to send its representative to attend the meeting as desired by the 5th respondent. THE proposed meeting was, however, postponed and the appellant was intimated by the 5th respondent by its letter dated 23/05/1969 that the meeting would now be held on 3/06/1969. THE appellant's representative attended the meeting on that day and reiterated that so far as the appellant was concerned, it had already been granted exemption from sales tax and the State Government stood committed to it. THE appellant thereafter proceeded with the work of setting up the Vanaspati plant on the basis that in accordance with the assurance given by the 4th respondent on behalf of the State Government, the appellant would be exempted from payment of sales tax for a period of three years from the date of commencement of production. The State Government however went back upon this assurance and a letter dated 20th Jan., 1970 was addressed by the 5th respondent intimating that the Government had taken a policy decision that new Vanaspeti Units in the State which go into commercial production by 30th Sept., 1970 would be given partial concession in Sales Tax at the following rates for a period of three years JUDGEMENT_409_2_1979Html1.htm The appellant by its letter dated 25/06/1970 pointed out to the Secretary to the Government that the appellant proposed to start commercial production of Vanaspati with effect from 1/07/1970 and stated that, as notified in the letter dated 20th Jan., 1970, the appellant would be availing of the exemption granted by the State Government and would be charging Sales Tax at the rate of 31/2% instead of 7 % on the sales of Vanaspati manufactured by it for a period of one year commencing from 1/07/1970. The factory of the appellant thereafter went into production from 2/07/1970 and the appellant informed the Secretary to the Government about the same by its letter dated 3/07/1970. The State Government however once again changed its decision and on 12th Aug., 1970, a news item appeared in the Northern India Patrika stating that the Government had decided to rescind the earlier decision i.e. the decision set out in the letter dated 20th Jan., 1970, to allow concession in the rate of Sales Tax to new Vanaspati Units. The appellant thereupon filed a writ petition in the High Court of Allahabad asking for a writ directing the State Government to exempt the sales of Vanaspati manufactured by the appellant from Sales Tax for a period of three years commencing from 2/07/1970 by issuing a notification under Section 4A and not to collect or charge Sales Tax from the appellant for the said period of three years. It appears that in the writ petition as originally filed, there was no plea of promissory estoppel taken against the State Government and the writ petition was, therefore, amended by obtaining leave of the High Court with a view to introducing the plea of promissory estoppel. The appellant urged in the amended writ petition that the 4th respondent actiong on behalf of the State Government had given an unequivocal assurance to the appellant that the appellant would be entitled to exemption from payment of Sales Tax for a period of three years from the date of commencement of the production and this assurance was given by the 4th respondent intending or knowing that it would be acted on the appellant and in fact the appellant, actiong in reliance on it, established the Vanaspati factory by investing a large amount and the State Government was, therefore, bound to honour the assurance and exempt the Vanaspati manufactured and sold by the appellant from payment of Sales Tax for a period of three years from 2/07/1970. This plea based on the doctrine of promissory estoppel was, however, rejected by the Division Bench of the High Court principally on the ground that the appellant had waived the exemption, if any, by accepting the concessional rates set out in the letter of the Deputy Secretary dated 20th Jan., 1970. The appellant thereupon preferred the present appeal after obtaining a certificate of fitness from the High Court. The principal argument advanced on behalf of the appellant in support of the appeal was that the 4th respondent had given a categorical assurance on behalf of the State Government that the appellant would be exempt from payment of sales tax for a period of three years from the date of commencement of production and such assurance was given intending or knowing that it would be acted on by the appellant and in fact the appellant, actiong in reliance on it, altered its position and the State Government was, therefore, bound, on the principle of promissory estoppel, to honour the assurance and exempt the appellant from sales tax for a period of three years from 2/07/1970, being the date on which the factory of the appellant commenced production. The appellant assailed the view taken by the High Court that this claim of the appellant for exemption based on the doctrine of promissory estoppel was barred by waiver, because the appellant had by its letter dated 25/06/1970 accepted that it would avail of the exemption granted under the letter of the 5th respondent dated 20/01/1970 and charged sales tax at the concessional rate of 31/2% instead of 7% during the first year of its production. The appellant urged that waiver was a question of fact which was required to be pleaded and since no plea of waiver was raised in the affidavit filed on behalf of the State Government in opposition to the writ petition, it was not competent to the State Government to rely on the plea of waiver for the first time at the hearing of the writ petition. Even if the plea of waiver were allowed to be raised, notwithstanding that it did not find place in the pleadings, no waiver was made out, said the appellant, since there was nothing to show what were the circumstances in which the appellant had addressed the letter dated 25/06/1970 stating that it would avail of the exemption granted under the letter dated 20/01/1970 and it was not possible to say that the appellant, with full knowledge of its right to claim total exemption from payment of Sales Tax, waived that right and agreed to accept the concessional rates set out in the letter dated 20/01/1970. The State Government on the other hand strongly pressed the plea of waiver and submitted that the appellant had clearly waived its right to complete exemption form payment of Sales Tax by addressing the letter dated 25/06/1970. The State Government also contended that, in any event, even if there was no waiver, the appellant was not entitled to enforce the assurance given by the 4th respondent, since such assurance was not binding on the State Government and moreover, in the absence of notification under S. 4A, the State Government could not be prevented from enforcing the liability to sales tax imposed on the appellant under the provisions of the Act. It was urged on behalf of the State Government that there could be no promissory estoppel against the State Government so as to inhibit it from formulating and implementing its policies in public interest. These were broadly the rival contentions urged on behalf of the parties and we shall now proceed to consider them.
(3.) WE shall first deal with the question of waiver since that can be disposed of in a few words. The High Court held that even if there was an assurance given by the 4th respondent on behalf of the State Government and such assurance was binding on the State Government on the principle of promissory estoppel, the appellant had waived its right under it by accepting the concessional rates of sales tax set out in the letter of the 5th respondent dated 20th Jan., 1970. WE do not think this view taken by the High Court can be sustained. In the first place, it is elementary that waiver is a question of fact and it must be properly pleaded and proved. No plea of waiver can be allowed to be raised unless it is pleaded and the factual foundation for it is laid in the pleadings. Here it was common ground that the plea of waiver was not taken by the State Government in the affidavit filed on its behalf in reply to the writ petition, nor was it indicated even vaguely in such affidavit. It was raised for the first time at the hearing of the writ petition. That was clearly impermissible without an amendment of the affidavit in reply or a supplementary affidavit raising such plea. If waiver were properly pleaded in the affidavit in reply, the appellant would have had an opportunity of placing on record facts showing why and in what circumstances the appellant came to address the letter dated 25/06/1970 and establishing that on these facts there was no waiver by the appellant of its right to exemption under the assurance given by the 4th respondent. But in the absence of such pleading in the affidavit in reply, this opportunity was denied to the appellant. It was, therefore, not right for the High Court to have allowed the plea of waiver to be raised against the appellant and that plea should have been rejected in limine. Secondly, it is difficult to see how, on the facts, the plea of waiver could be said to have been made out by the State Government. Waiver means abandonment of a right and it may be either express or implied from conduct, but its basic requirement is that it must be "an intentional act with knowledge," per Lord Chelmsford, L. C. in Earl of Darnley v. London, Chatham and Dover Rly. Co., (1867) 2 HL 43 at p. 57. There can be no waiver unless the person who is said to have waived is fully informed as to his right and with full knowledge of such right, he intentionally abondons it. It is pointed out in Halsbury's Laws of England (4th ed) Vol. 16 in papa. 1472 at p. 994 that for a "waiver to be effectual it is essential that the person granting it should be fully informed as to his rights" and Isaacs, J. delivering the judgment of the High Court of Australia in Craine v. Colonial Mutual Fire Insurance Co. Ltd. (1920) 28 CLR 305 has also emphasised that waiver "must be with knowledge, an essential supported by many authorities." Now in the present case there is nothing to show that at the date when the appellant addressed the letter dated 25/06/1970, it had full knowledge of its right to exemption under the assurance given by the 4th respondent and that it intentionally abandoned such right. It is difficult to speculate what was the reason why the appellant addressed the letter dated 25/06/1970 stating that it would avail of the concessional rates of sales tax granted under the letter dated 20th Jan., 1970. It is possible that the appellant might have thought that since no notification exempting the appellant from sales tax had been issued by the State Government under Sec, 4A, the appellant was legally not entitled to exemption and that is why the appellant might have chosen to accept whatever concession was being granted by the State Government. The claim of the appellant to exemption could be sustained only on the doctrine of promissory estoppel and this doctrine could not be said to be so well defined in its scope and ambit and so free from uncertainty in its application that we should be compelled to hold that the appellant must have had knowledge of its right to exemption on the basis of promissory estoppel at the time when it addressed the letter dated 25/06/1970. In fact in the petition as originally filed, the right to claim total exemption from sales tax was not based on the plea of promissory estoppel which was introduced only by way of amendment. Moreover, it must be remembered that there is no presumption that every person knows the law. It is often said that every one is presumed to know the law, but that is not a correct statement: there is no such maxim known to the law. Over a hundred and thirty years ago, Maule J., pointed out in Martindale v. Falkner, (1846) 2 CB 706 "There is no presumption in this country that every person knows the law: it would be contrary to common sense and reason if it were so". Scrutton, L. J., also once said: "It is impossible to know all the statutory law, and not very possible to know all the common law." But it was Lord Atkin who, as in so many other spheres, put the point in its proper context when he said in Evans v. Bartlam, 1937 AC 473"... .... the fact is that there is not and never has been a presumption that every one knows the law. There is the rule that ignorance of the law does not excuse, a maxim of very different scope and application." It is, therefore, not possible to presume, in the absence of any material placed before the Court, that the appellant had full knowledge of its right to exemption so as to warrant an inference that the appellant waived such right by addressing the letter dtd. 25/06/1970. We accordingly reject the plea of waiver raised on behalf of the State Government.;