Let’s understand Doctrine of Estoppel in Law with the story of a girl named Mona, who completed her graduation in Business Management and wants to do business related to the distribution of seeds, agriculture extension and composite fertilizers. The aim was to accomplish a better agriculture economy for her village by providing qualified seeds and machinery at low-cost to the farmers in her hometown, Rampur, a village in Bihar, India. To set up her business, she was in search of a piece of land. For starters, she contacted the Village Sarpanch. The Sarpanch promised her to lease a piece of land for 3 years for consideration. She immediately nodded and started working on constructing a shop and collecting equipment and materials to run a shop.
After a month, the Sarpanch’s son came to that village and told his father to sell the said piece of land which was granted to Mona for better consideration. Upon agreeing with his son, the Sarpanch gave notice to Mona to vacate land within a month. Mona, who had already invested so much investment on that land, suddenly visualized her shattered dreams. Her mind was running with millions of thoughts. How can a person do this to her, even after making a promise? To get clarity on this issue, she contacted her Lawyer friend for legal advice. After listening whole story of Mona, her lawyer suggested that there is a Doctrine of Estoppel, which can prevent the Sarpanch from going back on his words or conduct. Based upon that, she could proceed to file a suit or petition before the Court.
What is the Doctrine of Estoppel?
The principle of estoppel is incorporated in Section 121 of the Bharatiya Sakshya Adhiniyam, 2023 (earlier, Section 115 of the Indian Evidence Act, 1872). This principle binds a person for representation or conduct based on which another person has acted. It prevents a person from reversing their prior statement, act or omission.
BSA Section 121: “When one person has, by his declaration, act or omission, intentionally caused or permitted another person to believe a thing to be true and to act upon such belief, neither he nor his representative shall be allowed, in any suit or proceeding between himself and such person or his representative, to deny the truth of that thing.”
Illustration: A person who sold some property to another person pretending to be the actual owner cannot claim ownership over the land after he became the actual owner on the ground of lack of title at the time of sale.
When a landlord makes a promise to a tenant to reduce the rent, and the tenant has been acting on it, then the landlord will not be permitted to say that he can withdraw the concession in the future.
Thus, the principle of estoppel prevents a person from denying their words said when she or he represents it in oral, written or through conduct, based on which another person has acted.
Requisites of Estoppel
Firstly, there needs to be a representation of facts or a certain state of things that is true; and
Secondly, the person to whom the representation has been made should have acted on the belief of it and altered his position by so acting, and the alteration is such that it would be grossly unfair to require him to revert to his original position.
Representation in Doctrine of Estoppel
According to Section 121 of BSA, representation may arise from a declaration, act, or omission. Any statement written or oral, conduct active or passive, may amount to representation in the circumstances of the case. Representation is the statement of fact or things, which may be written or oral, and includes conduct which may be active or passive, creating an impression in the mind of people concerning the things. And another person acted on these things, believing the fact represented to him in good faith.
In the Mercantile Bank of India v. Central Bank of India (1935), the Madras High Court held that “Negligence to have the effect of estopping the party must he the neglect of some duty cast upon the person guilty of it”.
Reliance and alteration of position
The second requirement is that the Plaintiff has altered his position based on the representation and would suffer a loss if the representative reverts to his statement. Damages are necessary for actionable estoppel. For example, if a government grant is given to set up a cotton textile unit and a person, based on this, invests a huge sum of money, and after some time, the government decides to withdraw the subsidy, in such a situation, the government is bound to grant such a subsidy, though the policy may be revised for future.
Promissory Estoppel
Whenever a person holds out a promise of a favour or concession to another, and later changes his position by relying upon his words, he is not permitted afterwards to say that his promise was without consideration. In Motilal Padmapat Sugar Mills v. State of U.P., the petitioner applied for an order that the State government should be estopped from going back upon the declared exemption. There was news that the State government would grant an exemption from sales tax for three years to a new industrial unit. The petitioner wanted to build a Vanaspati plant. Based on the availability of the exemption, he proceeded with the plans, but the State government abrogated its policy of exemption. The Supreme Court, after hearing the appeal, held that the State government was bound by its declared intention. The Court clarified that “For applicability of the doctrine of promissory estoppel it is not necessary that there should be some contractual relationship between the parties”.
The doctrine of promissory estoppel can be invoked even where a case does not satisfy the strict criteria of estoppel under Section 121. It would be open to a party that has acted upon the representative presented by the government, where the government is held bound to provide whatever it promised, even if the promise was not recorded in the form of a formal contract.
Exceptions to Doctrine of Estoppel
- Estoppel cannot be used to override or contradict any statute or law. For example, where a minor has contracted by misrepresenting his age, he still can afterwards disclose his real age. It is a rule of contract that a minor is not competent to contract, and that rule would be defeated if a minor were not permitted to disclose his real age. Hence, there can be no estoppel against the provision of a statute.
- Estoppel is not allowed where both parties know the truth. It does not permit one party to appeal under this section based on not knowing the fact of representation or the fact presented to him or her by the representative.
- In case of fraud or negligence, the principle of estoppel is not entertained. When a person with due diligence or ordinary care can detect the fraud, but he acted in negligence, in such a case, doctrine of estoppel does not apply.
- No estoppel on the ground of representation of law. A person cannot claim that based on a certain law, he or she has acted upon it. A person can invoke the principle of estoppel based on the fact of representation.
Section 122 of BSA: Estoppel of tenant and of license of person in possession
No tenant can rule out the ownership or possession of the immovable property by the landlord at the time of commencement of tenancy. A tenant cannot proclaim that the landlord did not own the property at the time of tenancy. Similarly, a person who enters any immovable property with the license of a person in possession is not permitted to say afterwards that his licensor had no right to the possession of the property.
Section 123 of BSA: Estoppel of the acceptor of a bill of exchange, bailee or licensee
No acceptor of a bill of exchange shall be permitted to deny that the drawer had authority to draw such a bill or endorse it. For example, if A signs a bill saying that A will pay the dues, A cannot later say that the person who presented the bill was not authorized.
Similarly, a bailee or licensee shall not be permitted to deny bailor or licensor had at the time when the bailment or license commenced, authority to make such bailment or grant license. A bailee is someone who has been given the goods to take care of them for a specific period. For example, if a person has given his car to his friend to hold it for a week, his friend shall not be permitted to say that the car does not belong to that person.
Conclusion
The doctrine of estoppel provides fair and equitable justice. It prevents a person from going back on their word or acting in a way that contradicts their previous statement, act, or representation in such a way that may cause damage to a person. This principle also protects the promises given by a person or a government, preventing them from denying the promises made to the people in future. This principle holds bound the liability of a person’s conduct, act or omission or representation presented to another person and relied upon, which a person altered his or her position, causing some damages. This principle protects a person from exploitation due to another person’s fraudulent conduct or any misrepresentation, thereby protecting the trust, reliance and fairness in legal system.
The doctrine of estoppel in law has been simplified by our intern, Ms Neha Patidar. She has been assisting the team in bringing informational legal blogs.
