Union of India v. Anglo Afghan Agencies

Facts

Under the Export Promotion Scheme for woollen goods, the Textile Commissioner promised import entitlements equal to the f.o.b. value of exports. The respondent exported goods relying on the scheme but was granted import certificates far below the promised entitlement on the basis of an internal cut. The respondent challenged the curtailment.

Issues

• Whether the Government can resile from a representation/promise made in an executive scheme on which a party has acted to its detriment.
• Whether the doctrine of promissory estoppel operates against the Government in the exercise of its executive functions.

Arguments

The exporter argued it had altered its position by exporting in reliance on the assured entitlement, so the Government was bound to honour the scheme. The Union argued the scheme was administrative/executive and conferred no enforceable rights, and that it retained discretion to reduce entitlements.

Held

The Supreme Court held the Government bound by the terms of its own scheme. Having held out a representation that exporters would receive entitlements equal to the f.o.b. value, and the exporters having acted on it, the Government could not arbitrarily curtail the entitlement. The Court rejected the contention that executive action is immune from equitable obligations, holding the State is not exempt from the operation of the doctrine that a party acting on a representation may enforce it. The arbitrary cut was therefore set aside.

Ratio decidendi

An equitable obligation analogous to promissory estoppel binds the Government to representations made in executive schemes upon which a party has acted to its prejudice; the executive cannot claim immunity from such obligations.

Significance

First major Indian decision applying the principle of holding Government to its promises in the executive sphere; laid the foundation later developed into a full doctrine of promissory estoppel against the State in Motilal Padampat Sugar Mills.

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