According to contract law, a promise has to be exchanged for something in order for it to be binding. Normally, promises are not meant to be binding unless there is an agreement of some kind. There are many promises in the everyday dealings of people that are not binding, examples include promises made by employers about promotions or pay increases, promises by landlords not to increase rent, and informal agreements between people for the sale or transfer of land. These promises may be legally binding if a court deems it just.
Promissory estoppel is a doctrine that allows a person to go against the promise they made and still be held accountable for breaking a promise even if the other party didn't give anything in exchange for it.
This article explores the history of this doctrine in both the common law and public law of India, the elements of the cause of action required for it, the judicial limits placed on it, and the various controversies it has caused especially in regard to the enforcement of personal and private promises..
Origins: Equity Fills a Gap Left by Consideration
The doctrine developed from the English case, Central London Property Trust Ltd. v. High Trees House Ltd. (1947). In that case, a Judge of the King’s Bench, Denning J., held that a landlord who had agreed to accept a reduced rent during wartime, could not at a later date refuse to accept that reduced rent. Denning J. relied on an old case, Hughes v. Metropolitan Railway Co. (1877), for his ruling. The High Trees case not only revived the principle stated in Hughes, but also named this principle after itself. Since High Trees, English courts have limited the doctrine to a defense. In Combe v. Combe (1951), (the “rule in Combe”) an English court held that a party could not use this principle as an independent cause of action to create a new right against a party.
The Indian Departure: A Sword as Well as a Shield
Indian courts relaxed the English rule of precedent. The Supreme Court was the first court to consider an important case against the government, Union of India v. Indo-Afghan Agencies (1968). In this case, exporters’ claims to import licenses were denied after the Textile Commissioner, an officer in the Central government, announced an export promotion scheme. The exporters relied upon the commissioner’s scheme and became entitled to import licenses. The court held that the Central government was estopped from reneging on its representation.
A more detailed discussion on this doctrine was undertaken by Justice Bhagwati in Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh (1979). According to Justice Bhagwati, in order for a promise to estop a government from denying a right, it is not necessary to prove consideration. Furthermore, it is not necessary to show the existence of a legal relationship between the parties. Justice Bhagwati observed that a government, in the exercise of its powers, may make a representation which it subsequently decides not to honor. Such representation is binding upon the government in the absence of evidence to show that the representation was given in error. In Motilal Padampat’s case, the Court also held that if a government representation is not made in accordance with a procedure prescribed by Article 299 of the Constitution of India, and if a government represents that it will enter into a contract with a person, then such a representation would bind the government. This was a landmark judgment, and showed that the court was inclined to enforce equitable claims in the absence of a formal contract.
The Essential Ingredients
- The judgments when read in combination with subsequent judgments and authorities, identify a number of elements which must be proved by a person seeking to enforce a promise. These elements are:-
- The promise must be unequivocal and must not be vague and Open to more than one interpretation.
- There must be an intention by the person making the promise to be bound by it.
- There must be reliance by the person to whom the promise is made and as a consequence the person to whom the promise is made has altered his position.
- In the circumstances it would not be right and equitable to permit the person making the promise to not be bound by it.
- There must not be any law which prohibits or bars the making of such a promise.
Application Against the State - and Its Limits
The greatest impact of the Doctrine of Proportionality in India is likely to be in public law. Most of the government assurances in India, whether in the form of notifications, policy statements, or concessions, are of an informal character. Therefore, this doctrine gets fully operative to such informal assurances. The Indian courts have, however, consistently upheld that this doctrine must not restrain the executive from the performance of its function of governing the state. In Kasinka Trading Co. v. Union of India, the Apex Court held that the Government need not act on a statement made by a government servant which is contrary to the law. The Court has held on several occasions that it is well settled that the law of the land cannot be invoked to compel the government to act in a manner which is prohibited by the law. Enforcing a government promise may be justified if the government does not act in the interest of the community. However, the Government must produce sufficient evidence to show that enforcing the government promise would cause grave harm to the community.
The Supreme Court of India reviewed its case law on promissory estoppel in State of Himachal Pradesh v. M/s Kundlas Loh Udyog (2026). In that case, the appellant manufacturing company was given an industrial policy by the State of Himachal Pradesh that offered an industrial unit a concession on the sale of electricity. The appellant availed that policy and opened a unit in 2012. The appellant further claimed that it was entitled to the concessional rate, as defined in the policy, because the rate was offered to newly established industrial units. The respondent, the state government, contended that as the appellant had earlier availed of the policy, the Court cannot read into the state policy to construct an entitlement to the rate offered to newly established industries. The Apex Court agreed to the contentions of the state government. The Court further stated that policy rates cannot be construed as an assurance to an industrial unit of a double or an unintended benefit, and that equitable considerations do not mandate providing a double benefit to an industrial unit. The Court held that where a policy of a state government offers an incentive to industrial units, the entitlement of such units to the state's fiscal incentive must be balanced against the state's interest in maintaining fiscal discipline. The State's incentive policy and the discretion vested in state authorities to determine the units entitled to fiscal incentives, must, however, be strictly interpreted.
Enforcing Informal Promises Between Private Parties
Promissory estoppel can be used in the business world to enforce contracts where one party has assured the other that it will not exercise a contractual right. For example, a promise to waive a contractual notice period may be enforced, as may an understanding to vary payment terms during the term of the contract. Promises of this nature are routinely enforced in India by defending a party's breach of contract claim on the basis that the defending party is estopped from reneging on its promise, which caused the other party to act to its detriment. In doing so, the Indian courts are relying on Section 63 of the Indian Contract Act, 1872, which allows a party to a contract the right to refuse or waive performance of the contractual promise.
Indian law has gone beyond the English 'shield, not sword' principle in that it allows for the creation of a right to sue based on an informal representation made by a public authority. In accordance with the principle of promissory estoppel, an individual cannot be allowed to rest on a representations made by a public authority and be permitted to sue only on a representation, while in the remaining circumstances estoppel would apply against the individual. There must be a valid consideration to support an agreement. There can be no agreement to nullify a public authority's obligation to act in a certain way towards an individual. A public authority is free to act in a certain way towards an individual without being estopped from acting in a certain way towards another individual. In dealing with an individual the public authority has to act in a certain way and cannot act in a way that is contradictory to the true representation made. The Kundlas Loh Udyog judgment of 2026 re-affirmed and emphasized the need to keep the two doctrines separate.
A Doctrine of Equity, Not of Licence
Promissory estoppel is a doctrine based on the idea that it is unconscionable for a party to withdraw from a Position or representation that another party has reasonably relied on and changed her position based upon. Though an equity doctrine, Indian courts have applied this doctrine most commonly in the context of Reliance on the representations of public authorities. While doing so, courts have applied the doctrine in a more flexible manner than English courts. However, there have been restraining principles as well. It has been repeatedly held that estoppel will not apply to prevent a statute from being implemented, if it is in the public interest to implement the statute. Further, the supreme court has held that estoppel will not apply if the public authority has not assumed or taken upon itself a obligation, and moreover, there is no intention, on the part of the public authority, to confer the benefit.
Key Authorities Referred To
- Hughes v. Metropolitan Railway Co. (1877) 2 App Cas 439
- Central London Property Trust Ltd. v. High Trees House Ltd. [1947] KB 130
- Combe v. Combe [1951] 2 KB 215
- Union of India v. Indo-Afghan Agencies Ltd., AIR 1968 SC 718
- Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh, (1979) 2 SCC 409
- Kasinka Trading v. Union of India, (1995) 1 SCC 274
- Shree Sidhbali Steels Ltd. v. State of U.P., (2011) 3 SCC 193
- State of Himachal Pradesh v. M/s Kundlas Loh Udyog, 2026 INSC 534
- Indian Contract Act, 1872, s. 63
- Constitution of India, Article 299