Introduction to Principle of Estoppel
Estoppel is a legal principle, mainly seen in common law countries.
The Principle lays down that, when one party, intending to create a legal binding relation, makes a promise with another party, and on making such promise, the other party acting accordingly, changes their position, then, in this case, the party making promise cannot revert his promise and such promise is binding on the party.
A form of estoppel in contract law is promissory estoppel, which means that when one party makes a promise to another party and the other party on acting, the promisee suffers loss then the promisor cannot revert the promise. The doctrine of estoppel is an equitable doctrine that for avoiding injustice and is also named Equitable Estoppel, Quasi Estoppel, New Estoppel.
Tracing back the evolution of the doctrine, in the English law the doctrine of promissory estoppel was put forward in the case of Hughes v. Metropolitan Railway Co, 1877, however, the judgment was restored by J. Denning, who stated and invoked the doctrine in the case of Central London Property Trust Ltd. v. High trees case, when one party with their words, conduct, makes a promise to another party, with an intension of entering into legal relations, and on such promise, the other party acts on such promise, then the party who made promise cannot go back or revert the promise. However, if the promise is made without consideration, then it not enforceable. The essentials for Promissory estoppel are –
- There should be a promise made by words or conduct.
- That there is a change in the position of the promisee, after acting on the promise.
- Inequity, if promisor to go back on the promise
Evolution of Promissory Estoppel in India
Estoppel in English law covers an infinite variety and are not confined like the subject matter of Chapter VII of the Indian Evidence Act 1872.
Section 115 of the Indian Evidence Act 1872 lays down the principles of estoppel, as a rule of evidence. It states that when a person by his act or omission, intentionally permits another person to believe a thing to be true and to act upon such belief, then neither he nor his representative shall be allowed to deny the truth.
The history of the doctrine in India can be seen in the case of Ganges Mfg. Co. v. Sourajmul, wherein the Calcutta High court observed that the “doctrine of estoppel was not only limited to rule of law, but also to the person who may be prevented from doing any act, which the rule of equity and good conscience prevent him from using as against the opponent”
Supreme Court for the first time, used the doctrine of estoppel, in the case of Motilal Padampat Sugar Mills v. State of UP and Ors, wherein it held that the appellant took a huge loan on the ground that the government promised, not to levy tax for the period of three years. So, no tax should be imposed for three years and stated that one party does not need to suffer loss for making promise binding. In absence of detriment, the promise is binding.
In India, the doctrine has two stages, the first being, Pre-Anglo-Afghan case and the second being Post Anglo-Afghan Case. Before these cases, the doctrine of estoppel did not apply against the government. However, later this position was changed in the case of Union of India v. Afghan Agencies. The Supreme Court held that Government was too estopped by the promise. Thereafter the doctrine applies against the government as well.
Debate over Estoppel: a rule of evidence or Rule of Substantive law?
There is an ongoing debate whether estoppel is a rule of evidence or is substantive law. Lord Maugham, Lord Viscount Haldane and Lord Wright were of the view that the estoppel is a rule of evidence because under certain situation it can be invoked by a party to an action. The difference between the rule of evidence and the rule of substantive law is that the rule of evidence only applies or can be invoked, for present and past facts. Also, the rule of evidence can only be invoked, when the parties have a pre-existing contract or legal relationship. However, the rule of substantive rule can invoke the future conduct of the promisor and can be invoked even if the parties are not in a legal relationship. However, the party seeking the rule must fulfil other pre-conditions of the rule. The doctrine of estoppel, as a rule of law, is codified in India. According to Sir Edward Coke, in the rule of evidence, there are three kinds of estoppel–
- By matter of record or judgment
- Estoppel by deed
- Estoppel by conduct
However, the rule of substantive law is a judgments-based (non-codified) rule in India as well as in England. It was developed on the fact that the judge’s interpretation and was the result of the need felt by the judges to adjudicate cases on the principle of equity and good conscience. Subsequently, the emergence of a new principle called promissory estoppel gained recognition all over the courts and jurisdictions. However, this principle, like many others, as opinions of courts differ, the law is uncertain.
In the ongoing debate whether estoppel belongs to the rules of evidence or substantive law, it should be clear that the purpose of enacting this principle is securing justice between parties and is based on equity and good conscience.
Estoppel in law, is made to protect people from unjust practices done by one party over another party. The promise made by one party to another changing his position, and thus also causing harm or loss to him and subsequently the person who made promise reverts his promise, then for such situation, the protection available to promisee is the doctrine of estoppel. The doctrine comes to rescue the promisee.
The principle is evolved on the principles of equity and to prevent injustice.
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