The word ‘estoppel’ owes its origin to an ancient English word ‘estop’ which originally bore precisely the same signification as the equally ancient word ‘stop’ whereof it is merely a variant. The latter, however, of the two forms has alone survived in general use; while the former, has been exclusively employed in English jurisprudence which has assigned to it a special and technical connotation of its own.[1] Estoppel may be described as a rule by which a person in some cases will not be allowed to plead the contrary of a fact or state of things which he has formerly asserted by words or conduct. In other words, a person shall not be allowed to say one thing at one time and the opposite of it at another time. Ancient writers preferred to call estoppels as ‘Conclusions’ as under the rule a man was concluded from pleading a state of things contrary to what he had said or done before. It means that a man is estopped from denying or withdrawing his previous assertion or from going upon his own actions, even if it be to tell the truth.
Ever since the 19th century not only many jurists but also judges have expounded, their definitions of the word ‘estoppel’. Of all the expositions by the eminent jurists and judges, Owen Dixon C.J. of the High Court of Australia in Thomson v. Palmer[2] achieved a measure of completeness when he observed “The object of estoppel is to prevent an unjust departure by one person from an assumption adopted by another as the basis of some act or omission, which unless the assumption be adhered to, would operate to that other’s detriment. Whether a departure by a party from the assumption should be considered unjust and inadmissible depends on the part taken by him in occasioning its adoption by the other party…but in each case he is not bound to adhere to the assumption unless as a result of adopting it as the basis of action or inaction, the other party will have placed himself in a position of material disadvantage if departure from the assumption is permitted.”
Wade has expressed the following views regarding the principle of estoppel: “the basic principle of estoppel is that who by some statement or representation of fact causes another to act to his detriment in reliance on the truth of it is not allowed to deny it later, even though is it wrong. Justice here prevails over truth.”[3]
Estoppel is thus a disability by reason whereof a party is precluded from alleging or proving in a legal proceeding that a certain statement of fact is untrue or is otherwise than it has been made to appear by such statement which gave rise to such disability.
The underlying principle is that it would promote fraud and litigation if a man is allowed to speak against his own act or representation on the faith of which other person was induced to alter his position. The rule of estoppel is, thus, based on equity and good conscience, viz. that it would be most inequitable and unjust to a person that if another by a representation made or by conduct amounting to representation has induced him to act as he would not otherwise have done, the person who made the representation should be allowed to deny or repudiate the effect of his former statement, to the loss or injury of the person who acted on it. The object of estoppel is to prevent fraud and secure justice between the parties by the promotion of honesty and good faith.
The estoppel as a rule of evidence has been founded upon the doctrine as laid down in Pickard v. Sears[4] in which the rule was thus stated:
“Where one by his conduct or willfully causes another to believe in the existence of certain state of things and induces him to act on that behalf so as to alter his own previous position, the former is concluded from averring against the latter a different state of things as existing at the same time”.
In India, estoppel as a rule of evidence, as incorporated in Sec 115 of the Evidence Act[5] is based on the principle as laid down in the above case. It would be beneficial here for further discussion to point out the essential ingredients of the section, as laid down in a Supreme Court case,[6] which are as follows:
- The Representation must be of an existing fact as against a mere promise de Futuro.
- Inducement to the representee who acts on its faith.
- A detriment to him.
Since the concept of estoppel as discussed above forms part of the law of evidence, both in the U.K. and India, it has no operation or efficacy whatsoever except as a bar to testimony. It being a rule of evidence is not a cause of action in itself nor does it create one.
It has been held that the rule of evidence as contained Section 115 of the Evidence Act is exhaustive of those rules of estoppel, which are rules of evidence. But, is the Act exhaustive of the rules of estoppel? In other words, whether the rules and principles of estoppel confined to estoppel as a rule of evidence, as the term is strictly understood.
Ever since the principle of estoppel has been expounded and applied in judicial proceedings, there has been a debate on whether the rule of estoppel is a rule of evidence or a rule of substantive law. Opinions of the jurists on this aspect differ widely. The judicial pronouncements on this subject are equally at variance.
At one time, Lord Viscount Haldane, Lord Wright, Lord Maugham were of the view that the rule of estoppel was the only rule of evidence, which under certain circumstances can be invoked by a party to an action. In a subsequent decision, however, Lord Wright described the rule as “a complete legal notion involving a combination of several essential elements, the statement to be acted on, action on the faith of it, resulting in detriment to the actor.”[7] Thus Lord Wright came to view the entire concept of estoppel as a rule of substantive law.
In this connection, it may be pointed out that in a House of Lords case[8] it was said that there is no estoppel except that of estoppel by representation as to the existing facts and did not extend to promises de Futuro. Promises de Futuro were kept outside the purview of estoppel because it was said that there could be no fraud in respect of future intentions. Future promises were held enforceable only on the theory of a contract. Likewise, in a Supreme Court case[9], the defendant has failed to satisfy the requirements of Section 115 of the Indian Evidence Act, 1872 wanted the Court to apply “equitable estoppel” as evolved by English Judges. The Court while doubting the contention of the defendant observed that ‘in some decisions of the High Courts reference has been made to equitable estoppel, but we doubt whether the Court while determining whether the conduct of a particular party amounts to an estoppel, could travel beyond the provisions of Section 115 of the Evidence Act.”
The question squarely came up before the Court in England in High Trees Case in which it was pressed upon the Court that according to the well-settled law as laid down in Jorden v. Money, as said earlier, no estoppel could be raised against the plaintiff since the doctrine of estoppel by representation is applicable only to representations as to some state of facts alleged to be actually in existence and not to promise de Futuro which if binding at all, must be binding only as contract and here there was no representation of an existing state of facts by the plaintiff but it was merely a promise or representation of intention to act in a particular manner in the future.
In reply to the above argument, Denning J. pointed out that “the law has not been standing still since Jorden v. Money. There has been a series of decisions over the last fifty years, which although they are said to be cases of estoppel, are not really such. They are cases in which a promise was made which was intended to create legal relations and which to the knowledge of the person making the promise was going to be acted on by the person to whom it was made, and which was in fact so acted on. In such cases, the courts have said that the promise must be honoured.”
It may be noted that much before the decision of Denning J. in the above case in which the principle of promissory estoppel was rediscovered transcending beyond the limits of estoppel as a rule of evidence, the Calcutta High Court in 1880 in Ganges Manufacturing Co. v. Saurujmull[10] answered the contention that no estoppel could arise in the case, because Section 115 of the Evidence Act was not applicable, speaking through Garth C.J., the Court said that “the fallacy of the argument is in supporting that all rules of estoppel are also rules of evidence. The enactment in Sec 115 is no doubt in one sense rules of evidence. But the estoppel in the sense in which the term is used in English phraseology are matters of infinite variety and are by no means confined to subjects dealt with in Chapter VII of Evidence Act.”
Jenkin C.J. went to the extent of saying, referring to the doctrine of promissory estoppel that “the doctrine is often treated as one of the estoppels, but I doubt whether this is correct, though it may be a convenient name to apply.” He further added that “this equity essentially differs from the doctrine embodied in Section 115 of the Evidence Act which is not a rule of equity, but it is a rule of evidence that was formulated and applied in course of law.”[11]
Following this view, the Supreme Court in Anglo-Afghan case[12] recognizes the presence of equity where a party acts to his prejudice relying upon another’s representation although it makes no pronouncement as to whether estoppels are rules of equity or rules of evidence.
In this way, the Courts in India made a gradual departure from their earlier stand that estoppel as a rule of evidence is exhaustive of the principle of estoppel. On this premise, equity in the form of a new kind of estoppel commonly known as promissory estoppel found recognition beyond the purview of common law estoppel, which binds the promisor with respect to his representations as to his future intention. This obviously falls outside the scope of Section 115 of the Evidence Act and stands independent of it.
In this connection, it is pertinent to point out that the principle under discussion has found clear, bold and broad exposition through the landmark law making pronouncement in the M.P.Sugar Mills case[13] giving a new dimension and direction to the principle, where Bhagwati J. went to the extent of saying that though the doctrine “has been variously described as ‘equitable estoppel’, ‘quasi estoppel’, and ‘new estoppel’ it is not really based on the principle of estoppel, but it is a doctrine evolved by the equity in order to prevent injustice.” The learned judge has further added that “the doctrine of promissory estoppel need not, therefore be inhibited by the same limitation as an estoppel in the strict sense of the term.”
The concept of promissory estoppel has been defined by various eminent legal scholars including Halsbury which is as follows:
“When one party by his words or conduct, made to the other a promise or assurance which was intended to affect the legal relations between them and to be acted on accordingly, then, once the other party has taken him at his word and acted on it, the one who gave the promise or assurance cannot be allowed afterwards to revert to their previous legal relations, as if no such promise or assurance had been made by him, but he must accept their legal relations subject to the qualification which he himself has so introduced”[14]
The above definition has been followed in a Supreme Court case.[15] In a slightly modified form, the same definition is reflected in the following observation of Bhagwati J. in M.P.Sugar Mills Case in which the law on the subject has crystallized in India.
“Where one party has by his words or conduct made to the other a clear and unequivocal promise which is intended to create a legal relations or affect a legal relationship to arise in future, knowing or intending that it would be acted upon by the other party to whom the promise is made and it is in fact so acted upon by the other party, the promise would be binding on the party making it and he would not be entitled to go back upon if, it would be inequitable to allow him to do so having regard to the dealings which have taken place between the parties, and this would be so irrespective of whether there is any pre-existing relationship between the parties or not.”
Though the origin of the doctrine of promissory estoppel can be traced to the concept of estoppel it has distinctive features of its own. The following are the chief features of promissory estoppel distinguishing it from the common law principle of estoppel. First, whereas the common law doctrine of estoppel is founded on a representation as to the existing fact, the doctrine of promissory estoppel also covers promises as to the future, or representation with regard to assurance as to future conduct.[16] Secondly, estoppel is merely a rule of evidence whereas promissory estoppel has the effect of creating substantive rights against the representee, thus being viewed as a rule of substantive law. The latter is much wider and flexible than the former. A case may not fall under the former but may still come within the scope of the equitable doctrine. It subsumes within its ambit not merely statements of fact but also promises. Thirdly, the requirement of detriment to the representee is less stringent in the case of promissory estoppel. Financial loss or other detriment is of course sufficient but it appears that it is not necessary to show more than that the representee committed himself to a particular course of action as a result of the representation.[17] Fourthly, estoppel as a rule of evidence is used to prevent a person from alleging or denying a fact in consequence of his own previous allegation or denial. It is a shield for defense and not a sword for attack and so it does not furnish a cause of action. On the other hand, the rule of promissory estoppel creates substantive rights in favor of the person to whom the representation is made intended to be acted upon, and consequently, it gives rise to cause of action in his favor. Lastly, the doctrine of promissory estoppel is susceptible of generating enforceable promises and binding legal obligations even where there is no consideration.[18]
Thus, the basis of the doctrine of promissory estoppel is equity. It “is the child of equity brought into the world with a view to promoting honesty and good faith and bringing law closer to justice.” The Law Commission of India in its report on promissory estoppel has said that the doctrine of promissory estoppel is a beneficial doctrine based on equity. It is now well established by judicial pronouncements that the doctrine has evolved from equity developed inequity and as such promissory estoppel is termed an equitable doctrine.[19]
On final analysis, we find that promissory estoppel draws its force neither from a promise, as it is understood in the law of contract, nor from evidentiary estoppel. This new concept of estoppel emerging as a rule of substantive law, unlike codified law on estoppel, is entirely judge-made both in India and England. It creates legal obligation by its own force without taking any aid of the doctrine of consideration. Traveling beyond the restrictions of evidentiary estoppel it derives force for its existence from equity with the sole object of doing justice by preventing fraud and promoting morality and good faith so that the law may not be devoid of justice and morality and may not lose its credibility. This doctrine has been evolved by the courts in India through a gradual process and has now reached the stage when it has relieved itself of the age-old shackles of evidentiary estoppel and has come of age to stand on its own strength, least concerned with the element of consideration.
The Authors of this article, Sanjeev Kumar is a Partner and Anshul Sehgal is a Managing Associate in the Litigation & Dispute Resolution Team at L&L Partners Law Offices, New Delhi. They can be reached out at sanjeevk@luthra.com and asehgal@luthra.com. The views expressed are personal.
[1] Spencer, Bower and Turner, The law relating to Estoppel by Representation, Butterworth and Co. Ltd., London, 1977, 3rd edition.
[2] (1933) 49 C.L.R. 507 (High Court of Australia).
[3] Wade and Forsyth, Administrative Law, Oxford University Press, London, 2000, 8th edition at p. 232.
[4] (1837) 6 Ad. & El. 469 at p. 474.
[5] The Section reads as follows: “When one person has by his declaration, act or omission, intentionally caused or permitted another person to believe a thing to be true and to act upon such belief, neither he nor his representative shall be allowed, in any suit or proceeding between himself and such person or his representatives, to deny the truth of that thing”.
[6] Dhiyan Singh v. Jugal Kishore, (1952) SCR 478 at p. 483.
[7] Canada & Dominion Sugar Co. Ltd. v. Canadian National [West Indies] Steamship Ltd., [1937] 2 All E.R. 646.
[8] Jordan v. Money, (1854) 5 H.L. Cas. 185.
[9] Maddanappa v. Chandramma, AIR 1965 SC 1812 at p. 1815.
[10] (1880) ILR 5 Cal 670 at p. 679.
[11] Municipla Corporation of Bombay v. Secy. of State, (1995) ILR 29 Bom 580.
[12] Union of India v. Anglo-Afghan case, AIR 1968 SC 718.
[13] M.P.Sugar Mills v. State of U.P., AIR 1979 SC 621 at p. 635.
[14] Halsbury’s Laws of England, vol. 15, 1969, 3rd edition at p.175.
[15] Turnner Morrison & Co. v. Hungerford Investment Trust Ltd., AIR 1979 SC 1331.
[16] Jethabhai v. Nathabhai, (1903) 28 ILR Bom 339; Parshotham v. Secretary of State for India, (1937) 45 RR 538.
[17] Law Commission of India, 108th Report, 1984, p. 20.
[18] R.K.Kawatra v. D.S.I.D.C., AIR 1992 Del. 28.
[19] Law Commission of India, 108th Report, 1984, p. 16.
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