Judgement Briefs

Administrative Law

Motilal Padampat Sugar Mills v. State of U.P.

AIR 1979 SC 621

Citation
AIR 1979 SC 621
Court
Supreme Court of India
Date
1979

Facts

  • U.P. Government announced that new industrial units would get sales tax exemption for 3 years.
  • Motilal Padampat planned to set up a vanaspati factory and sought confirmation.
  • Government officials confirmed the exemption.
  • The company set up the factory relying on this promise, but later the State tried to withdraw/limit the benefit.

Issue

  • Whether the Government was bound by its promise of tax exemption, even though no formal notification had been issued.

Rule

  • Promissory estoppel applies when:
  • Government makes a clear promise;
  • the promise is intended to be acted upon;
  • the person acts on it and alters their position;
  • it would be unfair to allow Government to go back.
  • It can be used as a cause of action, not merely as a defence.
  • But it cannot compel Government to act contrary to law.

Application

  • The Court found a clear representation by the Government.
  • The promise was not vague political speech; it was a specific assurance that new industries would receive sales tax exemption.
  • Motilal acted on this assurance by setting up the vanaspati factory.
  • The company altered its position financially and commercially.
  • The State argued that there was no formal notification granting exemption.
  • The Court rejected this as a defence because the Sales Tax Act itself allowed the Government to grant exemption through notification.
  • Therefore, enforcing the promise would not require the Government to break the law.
  • The State also argued that the company did not suffer detriment because the factory was profitable.
  • The Court rejected this too.
  • For promissory estoppel, it is not necessary to prove loss or detriment in a strict sense.
  • It is enough that the party altered its position relying on the promise.
  • The State also argued waiver, saying the company accepted partial concessions later.
  • The Court held there was no waiver because waiver requires intentional abandonment of a known right.

Conclusion

  • The Supreme Court held that the Government was bound by its promise.
  • The State could not withdraw the promised exemption merely because it later changed its policy.
  • The case gave strong force to promissory estoppel against Government.
  • Use this case for: Government promises are not scraps of paper; if people act on them, fairness can bind the State.
  • MP Jain calls this a leading case that gave “new life and vigour” to promissory estoppel against administration.