Holding

When a government makes a clear promise of tax exemption that is acted upon, and a statutory provision exists conferring the power to grant such exemption, the doctrine of promissory estoppel binds the government, obliging it to honour the exemption for the period the provision was in force.

Summary

The State of Kerala issued a Government Order on 11 July 1986 promising exemption from building tax for hotels set up in the state, and subsequently amended the Kerala Buildings Tax Act, 1975 by inserting Section 3A on 6 November 1990 to give effect to that promise. M/s Manuelsons Hotels Private Limited relied on the promise, constructed a hotel by 1991 and sought the exemption, but the government later refused, arguing that no notification under Section 3A had been issued and that the provision was deleted on 1 March 1993. The appellant contended that the doctrine of promissory estoppel should bind the government to honour its promise. The Supreme Court held that Section 3A conferred a statutory power to grant exemption, the government's failure to issue a notification was an arbitrary act, and no overriding public interest existed to defeat the estoppel. Consequently, the exemption applied for the period during which Section 3A was in force (6 November 1990 to 1 March 1993), but could not be granted thereafter. The appeal was partly allowed, relieving the appellant from building tax for the said period and setting aside the High Court judgment.

Issues considered

The doctrine of promissory estoppel can be invoked to enforce a tax exemption promise made by the government.
Whether the existence of a statutory provision (Section 3A) creates an enforceable right despite the absence of a notification.
Whether the government's refusal to issue the exemption notification constitutes an arbitrary act amenable to judicial intervention.
Whether promissory estoppel yields when the statutory provision granting the exemption has been repealed.

Legislation cited

Subjects

promissory estoppeltax exemptionadministrative lawdiscretionary powergovernment orderKerala Buildings Tax Actarbitrary actionpublic intereststatutory interpretation

Judgment

(2016] 3 S.C.R. 718

A M/S MANUELSONS HOTELS
PRIVATE LIMITED
v.
STATE OF KERALA & OTHERS

B (Civil Appeal No. 2480 of2008)
MAY 11, 2016
[A.K. SIKRI AND R.F. NARIMAN, JJ.J
Administrative law: Promissory estoppel - By way of
government order datecf 11.7.1986, exemption from building tax
c granted if hotels set up in the State of Kera/a - Pursuant to
government order, s.3A added to the Kera/a Building Tax Act, 1975
granting exemption from payment of building tax - Pursuant thereto,
appellant constructed hotel building -. However, on 6.2.1997,
concession promised by way of government order denied ·to the
D ·appellant stating that as s.3A had been omitted w.ej 1.3.1993, the
power ro grant exemption had· itself gone; that no exemption
notification was issued u/s. 3A when it was in· existence in the statute
book; and that mere promise to amend the law does not hold out a
promise of exemption - Held:. s.3A was enacted by the Kera/a
legislature by suitably amending the Kera/a Buildings Tax Act, 1975
E
on 6.11.1990 - The said provision continued on the statute book
and was de'/eted only w.e.f 1.3.1993 - This shows that from
6.11.1990 to 1.-3.1993. the power to grant exemption from building
tax was statutorily conferred by s.3A on the Government - s.3A was
introduced in order to fulfill one of the promises contained in the
F GO. dated 11. 7.1986 - Appellants, having relied on the said G 0.,
had,, in fact, constructed a hotel building by 1991 - Therefore, non-
issuance of a notifh:ation u/s. 3A was an arbitrary act of the
Government which must be remedied by application of the doctrine
of promissory estoppel - The ministerial act of non-issue of the
notification cannot possibly stand in the way of the appellants getting
G
relief under the said doctrine for it would be unconscionable on
the part of the Government to get away without fi1lfilling its promise
-Admittedly, no other consideration of overwhelming public interest
existed in order that the Government be justified in resiting from its
promise - The relief that inust therefore be moulded on the facts of
r
H
718
M/S MANUELSONS HOTELS PRIVATE LIMITED v. STATE OF · 719
KERALA

the present case is that for the period that s.3A was in force, no A
building tax was payable by the app~llants - However, for the period
post 1. 3.1993, no statutory provision for the grant of exemption
being available, no relief can be given to the appellants as the
doctrine of promissory estoppel must yield when it is found that it
' would be contrary to statute to grant such relief - Kera!a.Buildirig
B
Tax Act, 1975 - s.3A.
Partly ~llowing the appeal, the Court
HELD: In the present Cl)se, no Writ of Mandamus is being.
issued to the executive to frame a body of rules or regula!ions
which would be subordinate legislation in the nature. of primary c
legislation (being general rules of conduct which would apply to
those bound by them). On the facts of the present case, a
discretionary power has to be exercised on facts under S~ction
3A of the Kerala Buildings Tax Act, 1975. The non-exercise of
such discretionary power is clearly vitiated on account of the
application of the doctrine of promissory· estoppel in terms of D
this Court's judgments in 'Motjlal Padampat'and Nestle. Thjs is
for the reason that non-exercise of such power is itself an arbitrary
act which is vit.iated by non-application of mind to relevant .facts,
namely, tb.e fact that a GO. dated 11.7.1986 specific-ally provided
for exemption from build fog tax if hotels were t.O be set- up in the E
State of Kera la pursuant to the representation· mad(in the said
GO. True, no mandamus. could.issue to the legislature to alJ!end
the Kerala Buildings Tax Ac~, 1975, for that would necessarily
involve the judiciary in transgressing into a forbidden field under
the constitutional scheme of separation of powers. However, o'n
facts, Section 3A was, in fact, enacted by the Kerala legislature F
by suitably amending the Ke,rala .Buildings Tax Act, 1975 oit
6.11.1990 in oi:_der to give effect to the representation made by
the G.O. dated 11.7.1986. The said prowsion continued_ on the
statute book and was deleted only ~ith effect from 1.3.19.93. This
would make it clear that from 6.11.1990 to 1.3.1993, the power er
to grant exemption from building tax was statutorily conferred
by Section 3A on the Government. And the statement of objects
and reasons for introducing Section 3A expressly states that the
said Section was i~troduced in order to folfill one of the promises
contained in the G.O. dated 1L7.1986. The appellants;.haviilg
H
720 SUPREME COURT REPORTS [2016] 3 S.C.R.

A relied on the said G.O. dated 11.7.1986, ·had, in fact, constructed
a hotel building by 1991. It is clear, therefore, that the non-
issuance of a notification under s·ection 3A was an arbitrary act of
the Government which must be .remedied by application of the
doctrine of promissory estoppels. The ministerial act of non issue
of the notification cannot possibly stand in the way of the appellants
B
getting relief under the said doctrine for it would be
unconscionable on the part of Government to get away without
fulfilling its promise. It is also an admitted fact that no other
consideration of overwhelming public interest exists in order that
the Government be justified in resiling from its promise. The
c relief that must therefore be moulded on the facts of the present
case is that for the period that Section 3A was in force, no building
tax is payable by the appellants. However, for the period post
1.3.1993, no statutory provision for the grant of exemption being
available, no relief can be given to the appellants as the doctrine
of promissory estoppel must yield when it is found that it would
D
be contrary to statute to grant such relief. [Para 39) [741-H;
742-A-H; 743-A]
MIS Motilal Padampat Sugar Mills v. State Of Uttar
Pradesh & Ors. (1979) 2 SCR 641; Shrijee Sales
Corporation & Anr. v. Union of India (1997) 3
E SCC:l996 (10) Suppl. SCR 888; State of Punjab v.
Nestle India Ltd. (2004) 6 SCC 465: 2004 (2) Suppl.
SCR 135 - relied on.
Shree Sidhbali Steels Limited and others v. State of Uttar
Pradesh and others (2011) 3 SCC 193: 2011 (3) SCR
F 134; Sharma Transport v. Govt. of A.P. (2002) 2 SCC
188: 2001 (5) Suppl. SCR 390; Bannari Amman
Sugars Ltd. v. CTO (2005) 1 SCC 625: 2004 (6) Suppl.
SCR 264;Avinder Siilgh v. State of Punjab (1979) 1
.sec 137: 1979 (1) SCR 845 - distinguished.
G Pournami Oil Mills & Ors. v. State of Kera/a & Am:
(1986) Supp. sec 728: 1987 SCR 654; State of
Jammu & Kashmir v. A.R. Zakki & Ors. 1992 Supp. (1)
SCC 548; 1991 (3) Suppl. SCR 216 State of Uttar
Pradesh and Ors. v. Mahindra and Mahindra Limited
(2011) 13 SCC 77: 2011 (5) SCR 509; Indian Express
H
MIS MANUELSONS HOTELS PRIVATE LIMITED v. STATE OF 721
KERALA

Newspapers (Bombay) Private Limited and others v. A
Union of India and others (1985) 1 SCC 641:1985 (2)
SCR 287; Kasinka Trading and Am: v. Union of India
and Am: (1995) 1 SCC 274: 1994 (4) Suppl. SCR 448;
Shree Sidhbali Steels Limited and others v. State of Uttar
Pradesh and others (2011) 3 SCC 193: 2011 (3) SCR
B.
134; UP. Power C01poration Limited v. Sant Steels and
Alloys (P) Ltd. (2008) 2 sec 777: 2007 (12) SCR 1160;
State of Rajasthan and another v. .J.K. Udaipur Udyog
Ltd. and another (2004) 7 SCC 673: 2004 (4) Suppl.
SCR 812; Arvind Industries and others v. State of
Gujarat and others (1995) 6 SCC 53: 1995 (3) Suppl. c
SCR 16; Mahabir Vegetable Oils (P) Ltd. And Am: v.
State of Haryana and Ors. (2006) 3 SCC 620: 2006
(2) SCR 1172; Excise Co111111issio11er. U.P. v. Ram Kumar
(1976) 3 SCC 540:1976 (0) Suppl. SCR 535; State of
Punjab v. Nestle India Ltd. (2004) 6 SCC 465: 2004
D
(2) Suppl. SCR135; Devi Multiplex & Ors. v. State of
Gujarat (2015) 9 SCC 132: 2015 (6) SCR 1 - referred
to.
The. Co111111011wealth ofAustralia v. Verwayen 170 C.L.R.
394 - referred to.
Case Law Reference .E

(1979) 2 SCR 641 relied on Paras
1996 (10) Suppl. SCR 888 relied on Paras
2004 (2) Suppl. SCR 135 relied on Para12
F
1987 SCR 654 referred to Para 16
2004 (2) Suppl. SCR 135 referred to Para 17
2015 (6) SCR 1 referred to Para 20
1991 (3) Suppl. SCR 216 referred to Para24
G
2011 (5) SCR 509 referred to Para 24
1985 (2) SCR 287 referred to Para 25
1994 (4) Suppl. SCR 448 referred to Para 27
2011 (3) SCR 134 referred to Para29 ·
H
722 SUPREME COURT REPORTS [2016] 3 S.C.R.

A 2007 (12) SCR 1160 referred to Para29
2004 (4) Suppl. SCR 812 referred to Para30
1995 (3). Suppl. SCR . 16 referred to Para30
2006 (2) SCR·1172 referred to Para 32
B 2011 (3) SCR 134 referred to Para34
1976 (0) Suppl; SCR 535 referred to Para35
2001 (5) Suppl. SCR 390 distinguished Para37
2004 (6) Suppl. SCR 264 distinguished Para 37
c 1979 (l)' SCR 845 distinguished Para38
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2480 of
2008.
From the Judgment and Order dated 05.12.2006 of the High Court
D ofKe1:ala at Ernakulum, in WA No. 2123 of2005.
V. Giri, Sr. Adv., Reghenth Basant, Ms. Aanchal Tikmani, Senthil
-.Jagadeesan, Advs. for the Appellant.
K. Radhakrishnan, Sr. Adv., Jogy Scaria, Ms. Beena Victor, Advs.
for the Respondents ..
E
The Judgment of the Court was delivered by
R.F. NARIMA'N, J. I. 0111 l'h July, 1986, the State Government,
by a Government Order (GO.); accepted the recommendations of the
Government oflndia suggesting that tourism be declared an "industry'.'.
The fallout of this G.0. was that this would enable those engaged in
F
tourism promotional activities to become automatically eligible for con-
cessions/ incentives as applicable to the industrial sector from time to
time. Apart from various other concessions that were granted, exemp-
tion from Building Tax levied by the Revenue Department was one such
concession. It was stated in the said G.O. that action to amend the
G Kerala Building Tax Act, 1975 will be taken separately. The G.0. went
on to state that persons eligible for such concessions will, among others,
be classified hotels i.e: from I to 5 stars. A Committee was set up con-
sistfog.of three government .officers_ to oversee the af9resaid scheme.
2.Vide a letter dated 25'h March, 1987, the Government oflndia
H
MIS MANUELSONS HOTELS PRIVATE LIMITED v. STATE OF 723
KERALA [R.F. NARIMAN, J .)

approved the hotel projei:t of the appellants, being a 55 double room 3 A
star hotel project to be set up in the city of Calicut.
3. Pursuant to the aforesaid G.O. dated I J1h July, 1986 and the
aforesaid approval, the appellants began constructing the hotel building,
which was completed in the year 1991. Notice for fi Iing returns under
the Kerala Buildings Tax Ai:t was issued to the appellants on 5•h Sep- B
tember, 1988. The appellants replied that they relied upon the G.O.
dated I J1h July, 1986 and stated that they were under no obligation to
furnish any retUrn under the said Act as they ~ere exempt from pay-
ment of building tax.
4. In pursuance of the said G.O. dated JI •h July, 1986, the Kera la c
Buildings Tax Amendment Act of 1990 was passed with effect from 61h
November, 1990. The Objects and Reasons for said amendment act
read as follows: ··
"STATEMENT OF OBJECTS AND REASONS
TheGovernJ'tte)lt has declared touris1'n as an industry with a view D
to develop tourism in the State and announce various concessions
to tourism related activities as per GO (P) 224/86/GAD dated
11.07.1986. One of the concess_ions declared by Government was
to exempt the buildings constructed in relation to tourism from the
provisions of, the Kerala Bui Iding Tax Act, 1975.
E
For ~chieving the above said purpose the Kerala- Building Tax
Act, 1975 has to be amended-suitably and the Government have
decided to amend the" Kerala Bui.lding Tax Act 1975 for'the
purpose.
As the above proposal had to be given effect to immediately and F
as the Legislative assembly was not in session the Kerala Buildiqg
Tax (Amendment) Ordinance, 1990 (Ordinance No.8 of 1990)
was promulgated by the Governor of Kerala on the 2nd day of
November, 1990, and published in the Kerala Gazette Extraordinary
dated 6th day of November, 1990.
G
Tile Bill seeks to replace the said ordinance by an Act of
Legislature. . · ·

(Published in KG Ex No.1159 dt 7.12.1990)" {

5. In pursuance of the said object, Section 3A was added, which·
H
724 SUPREME COURT REPORTS [2016] 3 S.C.R.

A reads as under:
''3A.( 1) Power to make exemption:- The Government may, if they
consider it necessary so to do for the promotion of tourism, by
notification in the Gazette make exemption from the payment of
building tax under the Act in respect of any building or buildings
B the construction of which is completed during such period and in
such areas as may be specified in the notification and having such
specifications as may be prescribed in the rules in this behalf."

Also, to effectuate the said exemption provision, Rule 14A was
added in the Kerala Bui I.dings Tax Rules, 1974 as under:
c
"Rule 14A
( 1) The exemption contemplated in Section 3A of the Kerala
Building Tax Act, 1975 shall be applicabk J the buildings having
the following specifications in such Tourism sector and the
D
construction of which is completed c: .ring such period as may be
specified in the notifications:-
(i) Classified hotels (I to 5 stars)
(ii) Motels(which conform to the specification of the Department
of Tourism of Kera la/ Central Government)
E (iii) Restaurants (approved by Classification committee of the
Government of India)
(iv) Amusement parks and research centres approved by the
Government.
F (v) Ropeways at tourist centres.
(vi) Construction of structures like Koothambalam/ Auditorium etc
by schools/institutions teaching Kalaripayattu and traditional art
forms of Kerala.
(vii) Institutions teaching surfing, sking, gliding, trekkingand similar
G activities which will promote tourism;
(viii) Ayurvedic centres with tourism potential;
(ix) Exclusive handicrafts with emporia (approved by the State/
Central Department of Tourism)
H (2) The area so notified shall be approved Tourist Centres and
M/S MANUELSONS HOTELS PRIVATE LIMITED v. STATE OF 725
KERALA [R.F. NARIMAN, J.]

such other locations certified by a Committee consisting of A
Secretary to Government, Tourism Department, Secretary to
Government Taxes Department and Director, Department of
Tourism.
(3) The period of exemption shall be 10 years or such shorter
period in respect of specific areas as may be notified in the Gazette B
based on the recommendation of the Committee."
6. By a Writ Petition filed in 1989, the appellants challenged the
notice dated S'h September, 1988. This resulted in a judgn1ent of the
Kerala High Court dated JO•h August, 1995 by ·which the appellants
were relegated to the Committee set up under the 1986 G.O. to pursue · c
their claim. Till final orders were passed by the Committee, the judg-
ment stated that the respondents would not take any coercive steps to
recover any building tax assessed on the building constructed by the
appellants. ·
7. By a letter dated 61hfebruary, 1997, the exemption promised by D
the (J.O. of 1986 was denied to the appellants stating that as Section 3A
had been omitted w.e.f. 1" March, 1993, the power to grant exemption
had itself gone and, therefore, no such exemption could be given to the
appellants. ·
8. Pursuant to the aforesaid letter dated 61h February, 1997, a no- E
tice dated 2811t April, 1997 was issued by the authorities asking the ap-
pellants to submit the necessary statutory return under the Kera la Build-
ings Tax Act. This notice was, in turn, challenged in O.P. No. 960 I of
1997, which culminated in a judgment dated 20•h July, 1998. Vide this
judgment, the High Court allowed the original petition and directed the
Committee to consider the matter afresh in the light of the judgment of F
the Supreme Court in MIS Motilal Padampat Sugar Mills v. State
Of Uttar Pradesh & Ors., ( 1979) 2 SCR 641 and Shrijee Sales
Corporation & Anr. v. Union of India, ( 1997) 3 SCC 398.
9. Vide·an order dated 4•1t February, 1999, the authorities once again
rejected the appellant's application for exemptio1i from property tax. G
This order was challenged in Writ Petition No. 9820of1999 which has
led to the impugned judgment dated s•h December, 2006. The High Co mt
essentially rejected the aforesaid Writ Petition on two grounds. First, it
stated that as no exemption Notification had, in fact, been issued under
Section 3A when it was in existence in the statute book, no claim for
H
726 SUPREME COURT REPORTS [2016]3 S.C.R.

A exemption from payment of building tax would be allowed. It further
held that the mere promise to amend the law doe~ not hold out a promise
of exemption from payment ofbuilding tax. And finally, the High Court
held that the question ofnow exempting the appellants from building tax
would not arise as Section 3A itself had been omitted w.e.f. I st March,
1993.
B
10. ShriV. Giri, learned Senior Advocate appearing on behalf of
the appellants before us, has argued that the High C~urt has failed to
consider various Supreme Court judgments on promissory estoppel in
their true perspective. In his submission, the aforesaid judgment clearly
led to the cot!clusion that when the Government holds out a promise
c which has been acted upon, except in cases of overriding public interest,
which has not been claimed inthe facts of the present case, the Govern-
ment cannot resile from the said promise and must be held to be bound
thereby. He added that there was no necessity for the Govern11,1ent to
be directed to actually issue a Notification under Section 3A as that
D wpuld only be a ministerial act which would be regarded as having been
performed if Government was to be held to its promise. According to
the learned counsel, therefore, a reading ofth.e judgments of this Court
would necessarily lead to granting ofreliefto his client.
11. Shri Radhakrishnan, learned senior counsel appearing on behalf
E of the respondents, countered these submissions and supported the im:
pugnedjudgment of the High Court. Aceording to Shri Radhakrishnan,
a mandamus cannot be issued to the executive to frame or amend the
law. In any event, according to the learned counsel, Section 3A having
been deleted w.e.f. I st March, 1993, it is clear that no relief can be
granted to the appellants as on date.
F
12. Having heard the learned counsel for both the sides, we are of
the view that it will first be necessary to examine the d-octrine of prom-
issory estoppel as laid down in M/S Motilal Padampat Sugar Mills,
( 1979) 2 SCR 641 and as followed in State of Punjab v. Nestle India
Ltd., (2004) 6 sec 465.
G
13. In the MIS Motilal Padampat Sugar Mills ease, the appel-
·1ant before this Court was primarily engaged in the business of manu-
facture and sale of sugar. An assurance was given by the State Gov-
ernment in tirnt case that new Vanaspati units in the State which go into
commercial production by 30th September, 1970 would be given partial
H concession in sales tax for a period of three years. The-appellant having
M/S MANUELSONS HOTELS PRIVATE LIMITED v. STATE OF 727
KERALA [R.F. NARIMAN, J.]

set up such Vanaspati unit thereafter went into the production ofVanaspati A
on 2"d July, I 970 and sought exemption. The Government apparently
turned around and rescinded its earlier decision of January, 1970 in Au-
gust 1970, by which time the factory of the appellant had gone into
commercial production. A Writ Petition was filed in the High Court of
Allahabad asking for a writ directing the State Government to exempt
B
the sales ofVanaspati manufacturer from sales tax for a period of three
years con1mencing 2"d July, 1970 as per the promise held out. This plea
fell upon deaf ears in the High Court, as a result of which the petitioner
in that case appealed to the Supreme Com1. After discussing the au-
thorities in detail, this Court held:
"The law may, therefore, now be taken to be settled as a result of
c
this decision, that where the Government makes a promise knowing
or intending that it would be acted on by the promisee and, in fact,
the promisee, acting in reliance on it, alters his position, the
Government would be held bound by the promise and the promise
would be enforceable against the Government at the instance of D
the promisee, notwithstanding that there is no consideration for
the promise and the promise is not recorded in the form of a
formal contract as required by Article 299 of the Constitution. It
is elementary that in a republic governed by the rule of law, no
one, howsoever high or low, is above the law. Everyone is subject
to the law as fully and completely as any other and the Government E
is no exception. It is indeed the pride of constitutional democracy
and rule of law that the Government stands on the same footing
a
as private individual so far as the obligation of the law is
concerned: the former is equally bound as the latter. It is indeed
difficult to see on what principle can a Government, committed to F
the rule of law, claim immunity from the doctrine of promissory
estoppel. Can the Government say that it is under no obligation to
act in a manner that is fair and just or that it is not bound by
consider.ations of "honesty and good faith''? Why should the
Government not be held to a high "standard of rectangular
rectitude while dealing with its citizens"? There was a time when G
the doctrine of executive necessity was regarded as sufficient
justification for the Government to repudiate even its contractual
obligations; but, let it be said to the eternal glory oftl!is Court, this
doctrine was emphatically negatived in the !11do-Afgha11 Agencies
case and the supremacy of the rule of law was established. It H

....
728 SUPREME COURT REPORTS [2016] 3 S.C.R.

A was laid down by this Court that the Government cannot claim to
be immune from the applicability of the rule of promissory estoppel
and repudiate a promise made by it on the ground that such promise
may fetter its future executive action. If the Government does
not want its freedom of executive action to be hampered or
restricted, the Government need not make a promise knowing or
B
intending that it wo.uld be acted on by the promisee and the
promisee would alter his position relying upon it. But if the
Government makes such a promise and the promisee acts in
reliance upon it and alters his position, there is no reason why the
Government should not be compelled to make good such promise
c like any other private individual. The law cannot acquire legitimacy
and gain social acceptance unless It accords with the moral values
of the society and the constant endeavour of the Courts and the
legislature, must, therefore, be to close the gap between law and
morality and. bring about as near an approximation between the
two as possible. The doctrine of promissory estoppel is a significant
D
judicial contribution in that direction. But it is necessary to point
out that since the doctrine of promissory estoppel is an equitable
doctrine, it must yield when the equity so requires .. lf it can be
shown by the Government that having regard to the facts as they
have transpired, it would be inequitable to hold the Government to
E the promise made by it, the Court would not raise an equity in
favour of the promisee and enforce the promise against the
Government. The doctrine of promissory estoppel would be
displaced in such a case because, on the facts, equity would not
require that the Government should be held bound by the promise
made by it. _When the Government is able to show that in view of
F the facts as have transpired since the making of the promise,
public interest would be prejudiced if the Government were required
to carry out the promise, the Court would have to balance the
public interest in the Government carrying out a promise made to
a citizen which has induced the citizen to act upon it and alter his
G position and the public interest likely to suffer if the promise were
required to be carried out by the Government and determine which
way the equity lies. It would not be enough for the Government
just to say that public interest requires thatthe Government should
not be compelled to carry out the promise or that the public intexest
would suffer if the Government were required to honour it. The
H
MIS MANUELSONS HOTELS PRIVATE LIMITED v. STATE OF 729
KERALA [R.F. NARIMAN, J.]

Government cannot, as Shah, J., pointed out in the Indo-Afghan A
Agencies case, claim to be exempt from the liability to carry out
the promise "on some indefinite and undisclosed ground of
necessity or expediency", nor can the Government claim to be
the sole Judge of its liability and repudiate it "on an ex parte
appraisement of the circumstances". If the Government wants to
B
resist the liability, it will have to disclose to the Court what are the
facts and circumstances on account of which the Government
claims to be exempt from the liability and it would be for the
Court to decide whether those facts and circumstances are such
as to render it inequitable to enforce the liability against the
Government. Mere claim of change of policy would not be c
sufficient to exonerate the Government from the liability: the
Government would have to show what precisely is the changed
policy and also its reason and justification so that the Court can
judge for itself which way the public interest lies and what the
equity of the case demands. It is only ifthe Court is satisfied, on
D
proper and adequate material placed by the Government, that
overriding public interest requires that the Government should not
be held bound by the promise but should be free to act unfettered
by it, that the Court would refuse to enforce the promise against
the Government. The Court would not act on the mere ipse dixit
of the Government, for it is the Court which has to decide and not E
the Government whether the Government should be held exempt
from liability. This is the essence of the rule of law. The burden
would be upon the Government to show that the public interest in
· the Government acting otherwise than in accordance with the
promise is so overwhelming that it would be inequitable to hold
the Government bound by the promise and the Court would insist
F
on a highly rigorous standard of proof in the discharge of this
burden. But even where there is no such overriding public interest,
it may still be competent to the Government to resile from the
promise "on giving reasonable notice, which need not be a formal
notice, giving the promisee a reasonable opportunity of resuming G
his position" provided of course it is possible for the promisee to
restore status quo ante. If, however, the promisee cannot resume
his position, the promise would become final and irrevocable. Vide
E111111a11ue!AvodejiAjaye v. Briscoe [( 1964) 3 All ER 556: (1964)
I WLR 1326]." [pp. 682- 685]
H
730 SUPREME COURT REPORTS [2016] 3 S.C.R.

A 14. The Court further went on to hold that it was not necessary for
the petsitioner to show that it had suffered any detriment, and it was
enough that the petitioner had relied upon the promise or representation
held out, and altered its position relying upon such assurance. Impor-
tantly, the Court held:
B "Of course, it may be pointed out that ifthe U.P. Sales Tax Act,
1948 did not contain a provision enabling the Government to grant
exemption, it would not be possible to enforce the representation
against the Government, because the Government cannot be
compelled to act contrary to the statute, but since Section 4 of the
U.P. Sales Tax Act, 1948 confers power on the Government to
c grant exemption from sales tax, the Government can legitimately
be held bound by its promise to exempt the appellant from payment
of sales tax. It is true that taxation is a sovereign or governmental
function, but, for reasons which we have already discussed, no
distinction can be made between the exercise of a sovereign or
D governmental function and a trading or business activitv of the
Government, so far as the doctrine of promissory estoppel is
concerned. Whatever be the nature of the function which the
Government is discharging, the Government is subject to the rule
of promissory estoppel and ifthe essential ingredients of this rule
are satisfied, the Government can be compelled to carry out the
E promise made by it: We are, therefore, of the view that in the
present case the Government was bound to exempt the appellant
from payment of sales tax in respect of sales ofvanaspati effected
by it in the State ofUttar Pradesh for a period of three years from
the date of commencement of the production and was not entitled
F to recover such sales tax from the appellant." [pp. 696 - 697]
15. Having so held, the Court then went on to hold that since the
Government is bound to exempt the appel Iant from payment of sales tax
for a· period of three years w.e.f. 2°d July, 1970, being the date of com-
mencement of the production ofVanaspati, the appellant would not be
G liable to pay any sales tax, subject only to the State's claim to retain any
part of such amount under any provision of law. In the absence of such
claim, the State would have to refund the amount of sales tax collected
by it from the appellant with interest thereon.
16. It is important to notice that the necessary exemption Notifica-
H tion in Motilal Padam pat's case had not been issued under Section 4
MIS MANUELSONS HOTELS PRIVATE LIMITED v. STATE OF 731
KERALA [R.F. NARIMAN, J.]

of the U.P. Sales Tax Act, 1948. Yet, this Court held that sales tax for A
the period in question could not be recovered. This was done presum-
ably because promissory estoppel is itself an equitable doctrine. One of
the maxims of equity is that one must regard as done that which ought to
be done. In this view of the matter; it is obvious that the High Court
judgment is incorrect when it holds that as no exemption Notification
8
was, in fact, issued by the Government under Section 3A, the petitioner
would have to be denied relief. This judgment has been followed repeat-
edly and has been applied to give the benefit of sales tax exemption in
similar circumstances in Pournami Oil Mills & Ors. v. State ofKerala
& Anr., (1986) Supp. SCC 728 at Paras 7 and 8.
17. The same result would obtain on a reading of a more recent
c
judgment of this Court reported in State of Punjab v. Nestle India
Ltd., (2004) 6 SCC 465 .. On the facts of that case, for the period from
l.4.1996 to 4.6. I 997, purchase tax on milk was to be abolished by the
State Government. An announcement to th is effect was given wide pub-
licity in several newspapers in the State and a speech was given to the D
aforesaid effect by the Finance Minister of the State while presenting
the budget for the year 1996-1997. That was further translated into a
memorandum of the financial Commissioner, dated 26.4.1996, which
was addressed to the Excise and Taxation Commissioner of the State.
When a meeting was held on 27 1hJune, 1996 by the Chief Minister and
the Finance. Minister with the Excise and Taxation Commissioner and E
various Financial a financial notification would be issued "in a day or
two".· For the first time, on 4'h June, 1998, the Council of Ministers
decided that the decision to a_bolish purchase tax on milk was not ac-
cepted and, consequently, the authorities issued notice to the respon-
dents requiring them to pay purchase tax on milk for the year 1996- F
1997.
18. In this background, the High Court held that the State Govern-
ment was bound by its promise and representation to abolish purchase
tax. According to the High Court, the absence of a financial notification
was no more than a ministerial act which remained to be perfonned. As G
the respondents had acted on the representation made, they could not be
asked to pay purchase tax for the year 1996-1997. The Writ Petition
was allowed and the demand notice of tax for the aforesaid year was
struck down.
19. This Court, after adverting to Section 30 of the Punjab General
B
732 SUPREME COURT REPORTS [2016] 3 S.C.R.

A Sales Tax Act, 1948, which gave the State Government the power to
exempt from purchase tax, by notification, any of the goods mentioned
in the Schedule, recapitulated the entire law of promissory estoppel in
great detail. It referred to MIS Motilal Pad am pat Sugar Mills, ( 1979)
2 SCR 641 and other judgments, and finally held:
B ' "The appellant has been unable to establish any overriding public
interest which would make it inequitable to enforce the estoppel
against the State Government. The representation was made by
the highest authorities including the Finance Minister in his Budget
speech after considering the financial implications of the grant of
the exemption to milk. It was found that the overall benefit to the
c State's economy and the public would be greater ifthe exemption
were allowed. The respondents have passed on the benefit of
that exemption by providing various facilities and concessions for
the upliftment of the milk producers. This has not been denied. It
would, in the circumstances, be inequitable to allow the State
D Government now to resile from its decision to exempt milk and
demand the purchase tax with retrospective effect from 1-4-1996
so that the respondents cannot in any event readjust the expenditure
already_11rnde. The High Court was also right when it held that
the operation of the estoppel would come to an end with the 1997
decision of the Cabinet.
E
In the case before us, the power in the State Government to grant
exemption under the Act is coupled with the word "may" -
signifying the discretionary nature of the power. We are of the
view that the State Government's refusal to exercise its discretion
to issue the necessary notification "abolishing" or exempting the
F tax on milk was not reasonably exercised for the same reasons
that we have upheld the plea of promissory estoppel raised by the
respondents. We, therefore, have no hesitation in affirming the
decision of the High Court and dismissing the appeals without
costs." [paras 47 - 48]
G 20. A perusal of this judgment would also show that relief was not
denied on the ground that no exemption notification was, in fact, issued
under Section 30 of the Punjab General Sales Tax Act, 1948. In fact, this
Court emphasized the discretionary nature of the power to grant ex-
emption. This Court held that the State Government's refusal to exer-
H cise its discretion to issue the necessary notification abolishing or ex-
MIS MANUELSONS HOTELS PRIVATE;_ LIMITED v. STATE OF 733
KERALA [R.F. NARIMAN, J.]

empting tax on milk was not reasonably exercised inasmuch as it was A
bound by the doctrine of promissory estoppel to do so. And the finding of
the High Court that such Notification would only be a ministerial act
which had t~ be performed was, therefore, upheld by this Court. This
judgment has been recently applied and followed in Devi Multiplex &
Ors. v. State of Gujarat & Ors .. (2015) 9 SCC 132 at Para 20.
8
21. In fact, we must never forget that the doctrine of promissory
estoppel is a doctrine whose foundation is that an unconscionable
departure by one party from the subject matter of an assumption which
may be offact or law, present or future, and which.has been adopted by
the other party as the basis of sorrie course of conduct, act or omission,
should not be allowed to pass muster. And the relief to be given in cases
c
involving the doctrine of promissory estoppels contains a degree of
flexibility which would ultimately render justice to the aggrieved party.
The entire basis of this doctrine has been well put in a judgment of the
Australian High Court reported in The Commo11wealth of Australia
v. Verwayen, 170 C.L.R. 394, by Deane,J. in the following words: D
I. While the ordinary operation of estoppel by conduct is between
parties to litigation, it is a doctrine of substantive law the factual
ingredients of which fall to be pleaded and resolved like other
'factual issues in a case. The persons who may be bound by or
who may take the benefit of such an estoppel extend beyond the E
immediate parties to it, to their privies, whether by blood, by estate
or by contract. That being so, an estoppel by conduct can be the
origin of primary rights.of prope11y and of contract.
2. The central principle of the doctrine is that the law will not
permit an unconscionable - or. more accurately, unconscientious - F
depar1ure by one party from the subject matter of an assumption
which has been adopted by the other party as the basis of some
relationship, course of conduct, act or omission which would operate
to that other party's detriment ifthe assumption be not adhered to
for the purposes of the litigation.
G
3. Since an estoppel will not arise unless the party claiming the
benefit of it has adopted the assumption as the basis of action or
inaction and thereby placed himself in a position of significant
disadvantage if departure from the assumption be permitted, the
resolution of an issue of estoppel by conduct will involve an
H
734 SVPREME COURT REPORTS [2016] 3 S.C.R.

A examination of the relevant belief, ac.tions and position of that ·
party.
4. The question whether such a departure would be unconscionable
relates to the conduct of the allegedly estopped party in all the
circumstances. That party must have played such a part in the
B adoption of, or persistence in, the assumption that he would be
guilty of unjust and oppressive conduct ifhe were now to depart
from it. The cases indicate four main, but not exhaustive, categories
in which an affinhative answer to that question may be justified,
namely, where that party: (a) has induced the assumption by
express or implied representation; (b) has entered into contractual
c or other material relations with the other party on the conventional
basis of the assumption; (c) has exercised against the other party
rights which would exist only ifthe assumption were correct; (d)
knew that the other party laboured under the assumption and
refrained from correcting him when it was his duty in c.onscience
D to do so. Ultimately, however, the question whether departure
from the assumption would be unconscionable must be resolved
not by reference to some preconceived formula framed to serve
as a universal yardstick but by reference to all the circumstances
of the case, including the reasonableness of the conduct of the
other party in acting upon the assumption and the nature and extent
of the detriment which he would sustain by acting upon the
assumption if departure frqm the assumed state of affairs were
permitted. In cases falling within category (a}, a critical
consideration will commonly be that the allegedly estopped party
knew or intended or clearly ought to have known that the other
F party would be induced by his conduct to iidopt, and act on the
basis of, the assumption. Particularly in cases falling within
category (b ), actual belief in the correctness of the fact or state
of affairs assumed may not be_ necessary. "Obviously, the facts of
a particular case may be such that it falls within more than one of
the above categories.
G
5. The assumption may be of fact or law, present or future. That
is to say it may be about the present or future existence of a fact
or state of affairs (including the state of the law or the existence
of a legal right, interest or relationship or the content of future
conduct).
H
M/S MANUELSONS HOTELS PRIVATE LIMITED v. STATE OF 735
KERALA [R.F. NARIMAN, J.]

6. The doctrine should be seen as a unified one which operates A
consistently in both law and equity. In that regard, ."equitable
estoppel" should not be seen as a separate or distinct doctrine
which operates only in equity or as restricted to certain defined
categories (e.g. acquiescence, encouragement", promissory
estoppel or proprietary estoppel ).
B
7. Estoppel by conduct does not of itself constitute an ind_ependent
cause of action. The assumed fact or state 6f affairs (which one·
party is estopped from denying) may be relied upon d~fensively
or it may be used aggressively as the factual foundation of an
action arising under.ordinary principles with the entitlement to
ultimate relief being detennined on the basis of the existence of
c
that fact or state of affairs. In some cases, the estoppel may
operate to fashion an assumed state of affairs which will found
relief (under ordinary principles) which gives effect to the
assumption itself (e.g. where the defendant in an action for a
declaration of trust is estopped from denying the existence of the D
trust). ·
8. The recognition of estoppel by conduct as a doctrine operating
consistently in law and equity and the prevalence of equity in a
Judicature Act system combine to give the whole doctrine-a degree
of flexibi 1ity which it might lack if it were ati exclusively common E·
law doctrine. In particular, the prima facie entitle1i1ent to relief
based upon the assumed state ofaffairs will be qualified in a case ·
where such relief would exceed what co,uld be justified by the
requirements of good conscience and would be unjust to the
estopped party.· In such a case, relief framed on the basis of the
assumed state of affairs represents the outer limits within which F
the relief appropriate to do justice between the parties should be
framed."
22. The above statement, based on various earlier English authorities,
·correctly encapsulates the law of promissory estoppel with one difference
- under our law, as has been seen hereinabove, promissory estoppel can G
be the basis of an independent cause of action in' which detriment does
not need to be proved. It is enough that a party has acted upon the
representation made. The importai1ce of the Australiai1 case-is only to
reiterate two fundamental concepts relating to the doctrine of promissory . ,
est_oppef- one, that the central principle of the doctrine is that the raw·. H
736 SUPREME COURT REPORTS [2016] 3 S.C.R.

A will not permit an unconscionable departur.e by one party from the subject
matter of an assumption which has been adopted by the other party as
the basis of a course of conduct which would affect the other party if
the assumption be not adhered to. The assumption may be of fact or
law, present or future. And two, that the relief that may be given on the
facts of a given case is flexible enough to remedy injustice wherever it is
B
found. And this would include the relief of acting on the basis that a
future assumption either as to fact or law will be deemed to have taken
place so as to afford relief to the wronged party.
23. In the circumstances, the High Court judgment when it holds
that no not!fication was, in fact, issued under Section 3A of the Kerala
c Buildings Tax Act, 1975, (which would be sufficient to deny the appel-.
!ants relief) is, therefore, clearly incorrect in law.
~

24. However, some of the judgments of this Court have held that a
Writ of Mandamus cannot be issued to the executive to fraine rules or
regulations which are in the nature of subordinate legislation. (See: State
D
of Jammu & Kashmir v. A.R. Zakki & Ors. 1992 Supp. (I) SCC
548 at paragraphs I 0 and 15, and State of Uttar Pradesh and Ors. v.
Mahindra and Mahindra Limited (2011) 13 SCC 77 at 81 ). This is
for the reason that a court would then trespass into forbidden territory,
as .our Constitution recognizes a broad division of powers between
E legislative and judicial activity.
25. However, though the power to grant exemption under a statutory
provision may amount to subordinate legislation in a given case, but being
in the domain of exercise of discretionary power, is subject to the same
tests in administrative law, as is executive or administrative action, as to
F ·its validity-one of these tests being the well-known Wednesbury principle
under which a court may strike down an abuse of such discretionary
power on grounds that irrelevant circumstances have been taken into
account or relevant circumstances have not been taken into account
(for example). This is clearly exemplified in Indian Express
Newspapers (Bombay) Private Limited and others v. Union of
G India and others, ( t985) I SCC 641.
26. In that case, by a notification dated 15.7.1977 issued under
Section 25( I) of the Customs Act, a total exemption from customs duty
was granted on imported newsprint. On 1.3.J 981, the said Notification
was superseded by the issue of a fresh notification which exempted
H
M/S MANUELSONS HOTELS PRIVATE LIMITED v. STATE OF 737
KERALA [R.F. NARIMAN, J.]

customs duty beyond 15%. The second notification was the subject A
matter of challenge in the aforesaid judgment in this Court. In an
instructive passage in the judgment under Heading V entitled '"Are the
impugned notifications issued under Section 25 of the Customs Act,
1962 beyond the reach ofAdministrative Law?" this Cou1t proceeded
by assuming that the power to grant exemption under Section 25 of the
8
Customs Act is a legislative power and a notification issued by the
Government thereunder would amount to a piece of subordinate
legislation: Despite this being so, this Court held:
"That subordinate legislation cannot be questioned on the ground
of violation of principles ofnaturaljustice on which administrative
action may be questioned has been held by this Court in Tulsipur
c
Sugar Co. Ltd. v. Notified Area Committee, Tulsipur [AIR 1980
SC 882 : ( 1980) 2 SCR 1111.: ( 1980) 2 SCC 295] , Rameshchandra
Kachardas Porwal v. State of Maharashtra [( 1981) 2 SCC
722: AIR 1981 SC 1127: ( 1981) 2 SCR 866] and in Bates v. Lord
Hails ham ~!St. Marylebone [( 1972) I WLR 13 73 : ( 1972) I D
A 11 ER I 019 (Ch D)] . A distinction must be made between
delegation of a legislative function in the case of which the question
of reasonableness cannot be enquired into and the investment by
statute to exercise particular discretionary powers. In the latter
case the question may be considered on all grounds on which
administrative action may be questioned, such as, non-application E
of mind, taking irrelevant matters into consideration, failure to take
relevant matters into· consideration, etc, etc. On the facts and
circumstances of a case, a subordinate legislation may be struck
down as arbitrary or contrary to statute if it fails to take into
·account very vital facts which either expressly or by necessary F
implication are required to be taken into consideration by the statute
or, say, tl'ie Constitution. This can only be done on the ground that
it does not conform to tlie statutory or constitutional requirements
or that it offends A1ticle 14 or A1iicle 19( I )(a) of the Constitution.
It cannot, no doubt, be done merely on the ground that it is not
reasonable or that it has not taken into account relevant G
circumstances which the Court considers relevant." [para 78]
· 27. Shri Radhakrishnan pressed into service Kaslnka Tradi-;.g and
another v. Union of India and another, ( 1995) I SCC 274. This was
a case in which PVC resins were exempted from basic import duty by a ·. -

,.
... ·:
..
.~
738 SUPREME COURT REPORTS [2016) 3 S.C.R.

A notification dated 15.3.1979. The said notification was· in force up to and
inclusive of 31.3 .1981. However, before expiry of the time fixed in the
notification, a notification withdrawing such exemption, dated 16.10.1980,
was issued. The petitioners in that case invoked the doctrine of promissory
estoppel. This Court held that no representation had been made on facts,
and thafit could not be said that a notification could not be rescinded or
8
modified before the date of expiry even if the Government is satisfied
that it was necessary in the public interest to rescind it.
28. This case is clearly distinguishable in that it was held (see
. paragraphs 22 and 27) that no incentive to set up any industry to use

c PVC resins had been made, and secondly, it was found necessary in
public interest to rescind or withdraw such notification. On the facts of
the present case, it is clear that a clear representation/promise had been
made pursuant to which the State actually amended the Kerala Building
Tax Act, 1975 by inserting Section 3A. And equally, there is no claim in
the present case that there is any change in circumstance because of
D overriding public interest so that the doctrine of promissory estoppel
cannot be said to apply.
29. Shri Radhakrishnan also referred to a judgment of this Court in
Shree Sidhbali Steels Limited and others v. State of Uttar Pradesh
and others, (2011) 3 SCC 193. On the facts in that case, a new industrial
E policy dated 30.4.1990 was declared by the State Government assuring
the grant of 33.33% hill development rebate on the total amount of
electricity bills to new entrepreneurs for a period of5 years. This period
was extended by another period of 5 years to be made available to new
industrial units set up till 31.3.1997. Vide notifications dated 18.61998
and 25.1:1999, uniform tariffs of electricity were introduced by which
F the rebate so given was reduced to 17%. Post 2000, vide a notification
dated 7.8.2000, a new tariff was announced which completely withdrew
the hill development rebate. A challenge to the aforesaid notifications
was turned down by this Court. This Court was concerned with an
earlier decision reported in U.P. Power Corporation Limited v. Sant
G Steels and Alloys (P) Ltd., (2008) 2 SCC 777, which took a very
restrictive view of Section 49 of the Electricity Supply Act of 1948,
stating that any notification issued thereunder can only be revoked or
modified if express provision was made for such revocation under Section
49 itself. Further, sm~h revocation could take place under the General
Clauses Act only if such withdrawal was in larger public interest, or if
H
MIS MANUELSONS HOTELS PRIVATE LIMITED v. STATE OF 739
KERALA [R.F. NARIMAN, J.]

legislation was enacted by the legislature a·uthorizing the Government to A
withdraw the be11efit granted by the notification. The larger Bench
overruled the Sant Steels case stating that its view of Section 49 of the
Electricity Supply Act was plainly incorrect, and that Sections 14 and 21
of the General Clauses Act made it clear that a notification issued under
Section 49 could be exercised from·time to time, including the power to
B
revoke such notification.
30. However, when it came to the applicability of the doctrine of
promissory estoppel, this Court relied upon the observations made in
State of Rajasthan and another v. J.K. Udaipur Udyog Ltd. and
another, (2004) 7 SCC 673, and Arvind Industries and others v.
State of Gujarat and others, (1995) 6 SCC 53.
c
31. From the State ofRa.iasthan case, para 25 was quoted by this
Court in order to arrive at a conclusion that the recipient of an exemption
granted by a fiscal statute would have no legally enforceable right against
the Government inasmuch as such right is a defeasible one in the sense
that it may be taken away in exercise of the very power under which the D
exemption was granted. What was missed from that case was the very
next paragraph which states as follows:-
"ln this case the Scheme being notified under the power in the
State Government to grant exemptions both under Section 15 of
the RST Act and Section 8(5) of the CST Act in the public interest, E
the State Government was competent to modify or ·revoke the
grant for the same reason. Thus what is granted can be withdrawn
unless the Government is precluded from doing so on the ground
of promissory estoppel, whidl principle is itself subject to
considerations of equity and public interest. (S.ee STO v. Shree F
Durga Oil Mills). The vesting of a defeasible right is therefore, a
contradiction in terms. There being no indefeasible right to the
continued grant of an exemption (absent the exception of
promissory estoppel), the question of the respondent Companies
having an indefeasible right to any facet of such exemption such
as the rate, period, etc. does not arise." (at Para 26) G
32. The aforesaid paragraph 26 has been noticed by this Court in
Mahabir Vegetable Oils (P) Ltd. and another v. State of Haryana
and others, (2006) 3 sec 620, (see paragraphs 34 and 35). It is clear,
therefore, that the reliance by this. Court in the Shree Sidhbali Steels
H
740 SUPREME COURT REPORTS [2016] 3 S.C.R.

A Ltd. case upon the aforesaid judgment when it comes to non application
of the principle of promissory estoppel to exemptions granted under
statute would be wholly inappropriate.
33. Similarly, the Arvind Industries case is again a judgment in
which it is clear that the doctrine of promissory estoppel could have no
B application because the appellant in that case was not able to show that
any definite promise was made by or on behalf of the Government and
that the. appellant had acted upon such promise. (see paragraph 9)
34. It is clear, therefore, that Shree Sidhbali Steels Limited was
a case which was concerned only with whether a benefit given by a
c statutory notification can be withdrawn by the Government by another
statutory notification in the public interest if circumstances change -
(see paragraphs 30 and 42). Such is not the case &efore us. On the
facts before us, a notification which ought to have been issued under
Section 3A after it was introduced pursuant to a promise made was not
issued at all. And change in circumstances leading to overriding public
D interest displacing the doctrine of promissory estoppel is absent in the
facts of the present case. We are, thus, satisfied that the aforesaid
judgment can have no application whatsoever to the facts of the present
case.'
35. Shri Radhakrishnan then referred us to Excise Commissioner,
E U.P. v. Ram Kumar, ( 1976) 3 SCC 540 at para 1.9, for the proposition
that it is now well settled by a catena of decisions that there can be no
question of estoppel agaii1st the Government in the exercise of its
legislative, sovereign, or executive powers. ·
36. This very passage was referred to in M/S Motilal Padampat
F Sugar Mills and was explained thus:
"The next decision to which we must refer is that in Excise
Commissioner U.P. Allahabad v. Ram Kumar [( 1976) 3 SCC
540: 1976 SCC (Tax) 360: 1976 Supp SCR 532]. This was also
a decision on which strong reliance was placed on behalf of the
G State. It is true that, in this case, the Court observed that "it is
now well settled by a catena of decisions that there can be no
question of estoppel against the Government in the exercise of its
legislative, sovereign or executive powers," but for reasons wl;lch
' Shree Sidhba'ii Steels Ltd. has been applied recently in Kothari Industrial
H Corporation Ltd. v. Tamil Nadu Electricity Board & Ors., (2016) 4 SCC 134. ·
MIS MANUELSONS HOTELS PRIVATE LIMITED v. STATE OF 741
KERALA [R.F. NARIMAN, J.]

we shall presently state, we do not think this observation can A
persuade us to take a different view of the law than that enunciated
in the lndo-Afghan Agencies case . ...
It will thus be seen from the decisions relied upon in the judgment
that the Court could not possibly have intended to lay down an
absolute proposition that there can be no promissory estoppel B
against the Government in the exercise of its governinental, pub! ic
or executive powers. That would have been in complete
_contradiction of the decisions of this Court in the bido~Afghan ·
Agencies case, Centuiy Spinning and M.amifacturing Co. case
and Turner Morrison case and we find it difficult io believe that
. . c
. · the Court could. have ever intended to lay down any such: .
. proposition without expressly referring to these earlier decisions .•
and overruling them. We are, therefore, of the opinion that the
observation made by" the Court in Ram Kumar case does not
militate against the view we are taking on the basis of the dec_isions
in the lndo-Afghan Agencies ca.ff, Century Spimiing & D
Manufacturing Co. case and Turner ·Morrison case in regard
to the applicability of the doctrine of promissory estoppel against
the Government." [SCR at pp. 689, 691]
3 7. Shri Radhakrishnan then referred us to the judgment in Sharma_
J:ransport v. Govt. of A.P., (2002) 2 SCC 188 at paragraph 24, and E
Bannari Amman Sugars Ltd. v. CTO, (2005) I SCC 625, at paragraph
20, for the proposition that promissory estoppel must yield to overriding
public interest. There can be no quarrel with this proposition except
that, as has been pointed out above, this case does not contain any such
overriding public; interest. .
F
38. Shri Radhakrishnan also referred us to Avinder Singh v. State
of Punjab, ( 1979) I SCC 13 7, at paragraphs 11 and I 7, for the proposition
that the legislature cannot delegate its essential legislative functions. We
are at a loss to understand how this authority would at all apply to the
facts of the present case as it is not the State's stand that there is any
excessive delegation of legislative power in the present case. G

39. In the present case, ~t is clear that no Writ of Mandamus is .
being issued to the executive to frame a body of rules or regulatiocs
which would be subordinate legislation in the nature of primary legislation ·
(being general rules of conduct which would apply to those bound by
H
742 SUPREME COURT REPORTS [2016] 3 S.C.R.

A them). On the facts of the present case, a discretionary power has to be
exercised on facts under Section 3A of the Kera la Buildings Tax Act,
1975. The non-exercise of such discretionary power is clearly vitiated
on account of the application of the doctrine of promissory estoppel in
terms of this Court's judgments in Motilal Padampat and Nestle (supra).
This is for the reason that non-exercise of such power is itself an arbitrary
B
act which is vitiated by non-application of mind to relevant facts, namely,
the fact that a G.O. dated 11. 7.1986 specifically provided for exemption
from building tax if hotels were to be set up in the State ofKerala pursuant
to the representation made in the said G.O. True, no mandamus could
issue to the legislature to amend the Kerala Buildings Tax Act, 1975, for
c that would necessarily involve the judiciary in transgressing into a
forbidden field under the constitutional scheme of separation of power~.
However, on facts, we find that Section 3A was, in fact, enacted by the
Kerala legislature by suitably amending the Kerala IJuildings Tax Act,
1975 on 6.9.1990 in order to give effect to the representation made by
the G.O. dated 11. 7.1986. We find that the said provision continued on
D
the statute book and was deleted only with effect from 1.3.1993. This
would make it clear that from 6.9.1990 to 1.3.1993, the power to grant
exemption from building tax was statutorily conferred by Section 3A on
the Government. And we have seen that the statement of objects and .
reasons for introducing Section 3A expressly states that the said Section
E was introduced in order to fulfill one of the promises contained in the
G.O. dated 11.7.1986. We find that, the appellants, having relied on the
said G.O. dated 11. 7.1986, had, in fact, constructed a hotel building by
1991. It is clear, therefore, that the non-issuance of a notification under
Section 3A was an arbitrary act of the Government which must be
remedied by application of the doctrine of promissory estoppel, as has
F
been held by us hereinabove. The ministerial act of non issue of the
notification cannot possibly stand in the way of the appellants getting
reliefunder the said doctrine for it would be unconscionable on the part
of Government to get away without fulfilling its promise. It is also an
·' admitted· fact that no other consideration of overwhelming public interest
G exists in orderthatthe Governmerit be justified in resiting from its promise.
The relief that must therefore be moulded on the facts of the present
case is that for the period that Section 3A was in force, no building tax is
payable by the appellants. However, for the period post 1.3.1993, no
statutory provision for the grant of exemption being available, it is clear
that no relief can be given to the appellants as the doctrine of promissory
H
MIS MANUELSONS HOTELS PRIVATflJMITED v. STATE OF 743
KERALA [R.F. NARIMAN, J.)

estoppel must yield when it is found that it would be contrary to statute A
to grant such relief. To the extent indicated above, therefore, we are of
_the view that no building tax can be levied or collected from the appellants·
in the facts of the present case. Consequently, we allow the appeal to
the extent indicated above and set aside the judgment of the High Court.
Devika Gujral Appeal pa11ly allowed. B