Case: Jit Ram Shiv Kumar and Others Etc Vs. State of Haryana and Another Etc

The appellants who were the petitioners before the High Court prayed for a writ of certiorari or mandamus o r any other appropriate writ for quashing the resolution No. 6 dated 21st July, 1965 of the Municipality and letter of the Government of Haryana to the President of the Municipal Committee Bahadurgarh dated. The facts of the case briefly are as follows:The Municipal Committee of Bahadurgarh, Respondent No. 2, established Mandi Fateh in Bahadurgarh Town, with a view to improve trade in the area. The Municipal Committee decided that the purchasers of the plots for sale in the Mandi would not be required to pay octroi duty on goods imported within the said Mandi. In pursuance of this decision, resolution No. 8 dated6 was passed by the Municipality. Handbills were issued for the sale of the plots on the basis of the resolution and it was proclaimed that Fateh Mandi would remain exempt from payment of octroi. Subsequently by resolution No. 4 dated, the Municipal Committee decided that the term No. 14 to the conditions of sale, namely, that the plots would not be required to pay octroi, be amended to the effect that the Mandi shall remain immune from payment of Octroi Duty for ever. When the resolution was received by the Commissioner of Ambala, in para graph 3 of his letter dated7 marked as Annexure A in the writ petition, he noted:"I note that by its resolution No. 4 of, the Municipal Committee has undertaken that Octroi shall never be imposed in the Mandi. This is ultra vires, the Municipal Committee cannot make such an undertaking and this should be explained to the purchasers of sites before they begin building so that if they wish they may withdraw from the purchase".Of course, it is unlikely that Octroi will be imposed."On receipt of this letter, the President of the Municipal Committee made representations that if octroi duty was to be levied, there will be no purchasers for the plots and th e entire scheme will fall through. On receipt of this representation on7 (Annexure B), the Commissioner revised his view and stated that he was cancelling para 3 of his letter dated, that is to say, "that in deference to the strong views of the Municipal Committee and to your own opinion that the market will collapse if I insist upon it, I withdraw my objection to the undertaking made by the Municipal Committee that Octroi will not be imposed on the market. As soon as the market is established it will be necessary to consider what form of taxation is best to cover the market share of Municipal expenses". The Municipal Committee on9 imposedx of Rs.6 per cent per annum on the shopkeepers to cover the expenditure of the marketThis state of affairs continued till3 when the Municipal Committee by notification No.0 dated3 included Fateh Mandi, Bahadurgarh, within the Octroi limits. The Examine r of Local Funds pointed out that the Municipal Committee is under obligation to charge octroi on goods imported into Fateh Mandi. The President of the Municipal Committee made a representation to the Deputy Commissioner on. The Municipal Committee again passed another resolution No. 1 dated4 that the Fateh Mandi will remain free from octroi duty according to the terms of the proclamation of the sale relating to the sale of plots. The matter was referred to the Punjab State which after thoroughly examining the whole matter, confirmed Resolution No. 1 passed by the Municipal Committee on. Subsequently, the Municipal Committee changed its mind and by its resolution dated, resolved that octroi duty should also be levied on the goods imported into Fateh Mandi. But this resolution was annulled by the Punjab Government under S. 236 of the Punjab Municipal Act. The Examiner of Local Funds Accounts in the meantime insisted on the levy of octroi duty on the goods imported into Fateh Mandi and the Punjab Government after discussing the issue on

Court's reasoning:
It is admitted that the State Government is empowered under S.62Ato require the Municipal Committee to impose octroi Duty and under. (3) if the Committee fails to carry out the order of the Government, the State Government may impose octroi Duty. Under S. 70(2) (c), a Municipal Committee by a resolution passed at a special meeting and confirmed by the State Government may exempt in whole or in part from the payment of any such tax any person or class of persons or any property or description of property. In exercise of these powers, the State Government had by its order dated4 confirmed resolution No. 1 passed by the Municipal Committee i n its special meeting held on231954 regarding the exemption of goods imported into Fateh Mandi from levy of Octroi Duty. Subsequently, in reply to the objection raised by the Examiner of Local Funds, the Government pointed out by its letter d ated6 (Ann. F) that the Governments action confirming the resolution No. 1 dated4 of the Municipal Committee exempting Goods imported into Fateh Mandi, under S. 70(2) (c) of the Punjab Municipal Act, 1911, is quite in order. By the impugned order dated7 the Government approved the resolution No. 6 of the Municipal Committee dated5 and permitted the Municipality to levy the Octroi Duty. The action taken by the State Government is strictly in conformity with the powers conferred on it under S. 70(2) (c) of the Act. It exempted the petitioners from payment of Octroi Duty for a particular period and ultimately withdrew the exemption. The action of the Government cannot be questioned as it is in exercise of its statutory functions. The plea of estoppel is not available against the State in the exercise of its legislative or statutory functions. The Government have powers to direct the Municipality to collect the Octroi Tax if the Municipality fails to take action by itself under S. 60(A) (3). Further, even on facts, this plea is not available as against the Government as it is not the case of the petitioners that they acted on the representation of the Government. We, there fore, agree with the view of the Full Bench that the plea of estoppel is not available against the Government for questioning the validity of the impugned Government orderWe feel this plea should also fail, because the Municipal Committee had no authority to exempt the Fateh Market from the levy of Octroi Duty. If the Municipal Committee had passed a resolution or issued a notification that no Octroi Duty will b e levied, it will be ultra vires of the powers of the Municipal Committee. When a public authority acts beyond the scope of its authority the plea of estoppel is not available to prevent the authority from acting according to law. It is in public interest that no such plea should be allowedThe High Court rejected the plea on the following grounds:1. The Petitioners are not the original purchasers of the plots in Fateh Mandi. They are either descendants of or transferees from the original purchasers of the plots2. Nod was executed by the Municipal Committee in favour of the original purchasers undertaking that no octroi duty will be levied3. No allegation has been made that the original purchasers would not have purchased the plots, if condition no. 14 about immunity from payment of Octroi had not been thereThe learned counsel is, therefore, ri ght in his submission that the third objection raised before the High Court is without substance. But the High Court was right in pointing out that none of the sale deeds executed by the Municipal Committee in favour of the purchasers was produced before the Court. These circumstances would show that the contract between the parties have not been proved to have been reduced in writing and executed in the manner prescribed under S. 47 of the Act. Strictly, therefore, under the terms of the Municipal Act, the appellants are not entitled to any enforceable legal right. But it was submitted that even though the contract had not been executed in due form, the appellants would be entitled to relief under, the doctrine of promissory estoppelIt is only in public interest that it is recognised that an authority acting on behalf of the Government or by virtue of statutory powers cannot exceed his authority. Rule of ultra vires will become applicable when he exceeds his authority and the Government would not be bound by such action. Any person who enters into an arrangement with the Government has to ascertain and satisfy himself that the authority who purports to act for the Government, acts within the scope of his authority and cannot urge that the Government is in the position of any other litigant liable to be charged with liabilityThis subject though interesting may not be relevant in administering Indian Law. S. 63 of the Contract Act provides that when a creditor accepts a lesser sum in satisfaction of the whole debt, the whole debt become discharged. This provision is a wide departure from the English Law and the discussion about Jordan v. Money wherein it was held that a promise to accept a smaller sum is devoid of consideration, becomes pointless. So also the doctrine of estoppel referred to in the High Trees case is, to some extent taken care of by Ss. 65 and 70 of the Indian contract Act. S.65 provides that when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it or to make compensation for it, to the person from whom he received it. Under S. 70 of the Contract Act, an obligation is cast on the person enjoying benefit of a non gratuitous act to compensate the person who lawfully performed the act. As to whether the provisions of S. 65 and 70 of the Indian Contract Act, are applicable to contract which is not according to S. 175 of the Government of India Act and Art. 299 of the Constitution of India, there is a difference of opinion. Sir Maurice Gwyer expressed his view that when a contract is void, recourse to S.70 cannot be had. Later, the Supreme Court held in State of West Bengal v. B. K. Mondal &Sons, that S.70 was applicable to such a case. This decision was followed in New Marine Coal Co. Ltd. v. Union, and in later cases by the Supreme CourtIt was submitted that the cases cited above cannot be relied on as an authority for the proposition that the doctrine of promissory estoppel is not applicable against the Government in the exercise of its legislative and statutory functions as they were in the nature of obiter dicta and that on the facts the present case could be distinguished. Then Agencies, Century Spinning and Manufacturing Co. and Turner Morisson Co. Ltd. v. Hungerford Investment Trust Ltd., were strongly relied on. We have point ed out that all that then Agencies case laid down was, that a public authority acting on behalf of the Government cannot on its own whim and in an arbitrary manner seek to alter the conditions accepted by him to the prejudice of the other side. The decision in terms accepts the view expressed in earlier cases that after taking into consideration the exigencies and change of circumstances, the authority can modify the conditions in exercise of his powers as a public authorityIn dealing with the question as to how far the public bodies are bound by representation made by them on which other persons have altered their position to their prejudice, the Court held that the obligation arising against an individual out of his representation amounting to a promise may be enforced ex contractu by a person who acts upon the promise; when the law requires that a contract enforceable at law against a public body shall be in certain form or be executed in the manner prescribed by statute, the obligation may be if the contract be not in that form be enforced against it in appropriate case in equity. The Court read the decision in Union of India and Ors. v.n Agencies (supra) as holding that the Government is not exempt from the equity arising out of the acts done by citizens to their prejudices, relying upon the representations as to its future conduct made by the Government. This observation will have to be read alongwith the conditions that were laid down in then case and cannot be read as holding that the rule of estoppel will be applicable against the Government in the exercise of its legislative and statutory powersThe third decision on which reliance was placed, for the proposition that doctrine of promissory estoppel is applicable against the State acting in exercise of its legislative or executive function is Turner Morrison and Co. Ltd. v. Hungerford Investment Trust Ltd. (supra). The case related to the payment of tax due from Hungerford by Turner Morrison. The Court observed that if for any reason Turner Morrison had not undertaken any responsibility to discharge the liability of Hungerford, the latter could have taken recourse to voluntary liquidation. Hence there could be no doubt that acting on the basis of the representation made by Turner Morrison, Hungerford placed itself in a disadvantageous position. Hungerford raised the plea that the resolution was of the company, afforded a good basis for raising a plea of promissory estoppel. This plea was accepted by the Court relying on the observations of Denning J. in High Trees case (supra). The later decision of the House of Lords in Howells case which disapproved Lord Dennings judgment was not brought to its notice.The scope of the plea of doctrine of promissory estoppel against the Government may be summed up as follows:(1) The plea of promissory estoppel is not available against the exercise of the legislative functions of the State(2) The doctrine cannot be invoked for preventing the Government from discharging its functions under the law(3) When the officer of the Government acts outside the scope of his authority, the plea of promissory estoppel is not available. The doctrine of ultra vires will come into operation and the Government cannot be held bound by the unauthorised acts of its officers(4) When the officer acts within the scope of his authority under a scheme and enters into an agreement and makes a representation and a person acting on that representation puts himself in a disadvantageous position, the Court is entitled to require the officer to act according to the scheme and the agreement or representation. The Officer cannot arbitrarily act on his mere whim and ignore his promise on some undefined and undisclosed grounds of necessity or change the conditions to the prejudice of the person who had acted upon such representation and put himself in a disadvantageous position(5) The officer would be justified in changing the terms of the agreement to the prejudice of the other party on special considerations such as difficult foreign exchange position or other matters which have a bearing on general interest of the StateBefore we conclude, we would reBefore we conclude, we wouldrefer toa recent decision of this Court in M/s. Moti Lal Padampat Sugar Mills Co. (P.) Ltd. v . State of Uttar Pradesh and Ors. It has been held that there can be no promissory estoppel against the exercise of legislative power and the legislature cannot be precluded from exercising its legislative functions by resort to the doc trine of promissory estoppel. It has also held that when the Government owes a duty to the public to act differently, promissory estoppel could not be invoked to prevent the Government from doing so. The doctrine cannot be invoked for preventing the Government from acting in discharge of its duty under the law. The Government would not be bound by the acts of its officers and agents, who act beyond the scope of their authority. A person dealing with an agent of the Government must be held to have noticed all the limitations of his authorityWith respect, we are in complete agreement with the law as stated above but we find the judgment is not in accordance with the view consistently taken by this Court in some respects. We have read the Judgment of Bhagwati, J. with considerable care and attention which it deserves. Firstly, with great respect we are unable to construe the decision in Union of India &Ors. v. M/s.n Agencies Ltd. case in the manner in which it has been done. As pointed out by us, all that the case purports to lay down is that the court can enforce an obligation incurred by an authority on which another has acted upon and put himself in a disadvantageous position, when the authority resiles arbitrarily or on mere whim or on some undefined and undisclosed grounds of necessityWe find ourselves unable to ignore the three decisions of this Court, two by Constitution Benches M. Ramanatha Pillai v. The State of Kerala and Anr. (supra) and State of Kerala and Anr. v. The Gwalior Rayon Silk Manufacturing (Wvg.) Co. Ltd. etc. (supra) and the third by a Bench of four Judges of this Court in Excise Commissioner, U. P. Allahabad v. Ram Kumar (Supra) on the ground that the observations are in the nature of obiter dicta and that it cannot be insisted as intendng to have laid down any proposition of law different from that enunciated in the Indo Afghan Agencies case. It was not necessary for this Court in the cases referred to above torefer toUnion of India and Ors. v. M/s. Indo Afghan Agencies Lt d., or if properly understood it only held that the authority cannot go back on the agreement arbitrarily or on its mere whim. We feel we are bound to follow the decisions of the three Benches of this Court which in our respectful opinion have correctly stated the law. We are also unable to read the case of the House of Lords in Howell v. Falmouth Boat Construction Co. Ltd. (supra) as not having overruled the view of Denning, J and as not having expressed its disapproval of the doctrine of promissory estoppel against the Crown nor overruled the view taken by Denning, J in Robertson v. Minister of Pensions that "the Crown cannot escape the obligation under the doctrine of promissory estoppel."We find ourselves unable to s hare the view of the learned Judge that the Constitution Bench of this Court in Ramanathan Pillais case (supra) heavily relied upon the quotation from the American jurisprudence parap. 873 Vol. 28. Again we feel to remark that "unfortunately this quotation was incomplete and had overlooked perhaps inadvertently" is unjustified (emphasis supplied)We feel we are in duty bound to express our reservations regarding the "activist" jurisprudence and the wide implications thereof which the learned Judge has propounded in his judgment. The first part of the judgment relates to the development of law relating to promissory estoppel in England following the High Trees case. As pointed out by us earlier the doctrine of promissory estoppel is not very helpful as we are governed by the various provisions of the Indian Contract Act Sections 65 and 70 provide for certain reliefs in void contracts and in unenforceable contracts where a person relying on a representation has acted upon it and put himself in a disadvantageous position. Apart from the case in Robertson v. Minister of Pensions, the House of Lords in Howells case and the Privy Council in Antonio Buttigieg s case and the other English Authorities do not agree with the view that the plea of promissory estoppel is available against the Government. Further we have to bear in mind that the Indian Constitution as a matter of high policy in public interest, has enacted Article 299 so as to save the Government liability arising out of unathorised acts of its officers and contracts not duly executedOn a consideration of the decisions of this Court it is clear that there can b e no promissory estoppel against the exercise of legislative power of the State. So also the doctrine cannot be invoked for preventing the Government from acting in discharge of its duty under the law. The Government would not be bound by the act of its officers and agents who act beyond the scope of their authority and a person dealing with the agent of the Government must be held to have notice of the limitations of his authority. The Court can enforce compliance by a public authority of the obligation laid on him if he arbitrarily or on his mere whim ignores the promises made by him on behalf of the Government. It would be open to the authority to plead and prove that there were special considerations which necessitated his not being able to comply with his obligations in public interestIn a fervent plea for the doctrine to speak in all its activist magnitude the learned Judge observes "that is no reason why this new principle, which is a child of equity brought into the world with a view to promoting honesty and good faith and bringing law closer to justice should be held in fetters and not allowed to operate in all the activist magnitude, so that it may fulfill the purpose for which it was conceived and born". It is no doubt desirable that in a civilised society mans word should be as good as his bond and his fellow men should be able to rely on his promise. It may be an improvement if a cause of action would be based on a m ere promise without consideration. The law should as far as possible accord with the moral values of the society, and efforts should be made to bring the law in conformity with the moral values. What are the moral values of the Society ? This is a very complex question because the concept of moral values amongst different persons and classes of persons is not always the same. The concept of moral values is not static one. It differs from time to time and from society to society. It is hazardous for a Court to attempte what according to it is the moral value. As pointed out by Roscoe Pound: "It leads to an attempt to enforce overhigh ethical standards and to make legal duties out of moral duties which are not sufficiently, tangible to be made effective by the machinery of the legal order. A more serious difficulty is that the attempt to identify law and morals gives too wide a scope to judicial discretion". The question is how should it be brought about. The learned Judge says that it should be the constant endeavour of the Courts and the legislature to close the gap between the law and morality and bring about as near an approximation between the two as possible. Lord Denning might have exhorted the Judges not to be timorous sours but to be bold spirits, ready to allow a new cause of action if justice so requires. These are lofty ideals which one should steadfastly pursue. But before embarking on this mission, it is necessary for the Court to understand clearly its limitations. The powers of the Court to legislate is strictly limited. "Judges ought to remember that their office is jusdicere and not jus dare to interpret law, and not to make law or give law." Chandrachud, C. J. Speaking for a Constitution Bench in Shri Gurbaksh Singh Sibbia etc. v. State of Punjab, has clearly pointed out the limited powers of the Courts to make laws in construing the provisions of the statutesThe result is that so far as the recommendation of the Municipal Committee to the Government to levy octroi duty, is concerned though it is contrary to the representation it ma de to the buyers of the sites in the Mundi, the Municipality is not estopped as the representation made by it was beyond the scope of its authority. The levy of tax being for a public purpose i.e. for augmenting the revenues of the Municipality as laid down in Ram Kumars case, the plea of estoppel is not available. The order of the Government directing the levy of octroi in pursuance of the resolution of the Municipality cannot also be challenged as it is in the exercise of its statutory duty.