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Report No. 108

2.7. Century Spg. & Mfg. Co. v. Ulhasnagar Municipality.-

The facts of this case,1 are: In 1956 the appellant set up its factory in an industrial area. At that time no octroi was payable with respect to the goods imported into the industrial area. In 1960, Government constituted a municipality which included the industrial area. In 1962, the Government agreed to exclude the area but the District Municipality objected, agreeing however, to exempt the existing factories from payment of octroi for 7 years. In the 1965 the Dt. Municipality became the Ulhasnagar Municipality which decided to levy octroi duty in 1968, and the appellant objected. Holding in favour of the appellant, the Supreme Court held:

"There is undoubtedly a clear distinction between a representation of an existing fact and a representation that something will be done in future. The former may, if it amounts to a representation as to some fact alleged at the time to be actually in existence, raise an estoppel, if another person alters his position relying upon the representation. A representation that something will be done in the future may result in a contract, if another person to whom it is addressed acts upto it. A representation that something will be done in future is not a representation that it is true when made. But between a representation of a fact which is untrue and a representation, express or implied-to do something in future, there is no clear antithesis.

A representation that something will be done in future may involve an existing intention to act in future in the manner represented. If the representation is acted upon by another person it may, unless the statute governing the person making the representation provides otherwise, result in an agreement enforceable at law; if the statute requires that the agreement shall be in a certain form, no contract may result from the representation and acting therefor but the law is not powerless to raise in appropriate cases an equity against him to compel performance of the obligation arising out of his representation."

Public bodies are as much bound as private individuals to carry out representations of facts and promises made by them, relying on which other persons have not altered their position to their prejudice. The obligation 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 the statute, the obligation, if the contract be not in that form may be enforced against it in appropriate cases in equity. The Court also observed:

"If our nascent democracy is to thrive, different 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 out of representations made by it relying upon which a citizen has altered his position to his prejudice."

Three points have to be noted with respect to this case. First, the application of the principle of promissory estoppel in this case is obviously wrong. All the learned Judges who had referred to this principle, including Bhagwati and Tulzapurkar, JJ., are agreed that there can be no promissory estoppel against the legislative power. Taxation, whether by, the legislature or its delegate, is an exercise of the legislative power and octroi is nothing but tax. Secondly, the reference to a 'nascent democracy' by Shah, J. is again unfortunate.

A democracy in a developing country cannot be ineffective and the Government or a municipality, which is only an extension of the government, can be effective only if they are free to formulate and reformulate their policies and augment their revenues. Thirdly, there is absolutely no equity in favour of the appellant. When the industrial area was included in the municipality, octroi became automatically payable with respect to the goods imported into the area. It was only by way of concession that the municipality agreed to exempt. If later on the concession was withdrawn, no grievance can be made of it. It is not as if the appellant was invited into the area with a promise of favourable treatment.

1. AIR 19714 SC 1021.

Promissory Estoppel Back

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