Estoppel in Indian Law – Meaning and Legal Relevance

Estoppel Meaning

The term 'estoppel' is derived from the French term 'estoup' which means 'Shut the mouth’.

In law the doctrine of estoppel means that where a person makes a statement to another and the other believes it to be true and acts on that belief and suffers loss or detriment, the former shall be prevented from going back on his statement.

1. In Indian Evidence Act rule of estoppel has been discussed from Section 115-117.
2. In Bhartiya Sakshya Adhiniyam it has been dealt from Section 121-123.

Rationale of Estoppel :

1. The doctrine of "estoppel” is based on the maxim 'allegans contraria non audiendus est’ which means a person alleging contradictory facts shall not be heard.
2. According to Lord Denning, it is a principle of justice and of equity.
3. A person shall not be allowed to approbate and reprobate or blow hot and cold at the same time.
4. The law of consistency requires that one should be consistent in word and conduct when it affects somebody else.

Object of the principle of estoppel:

To prevent fraud and to manifest good faith amongst the parties.

The Principle of Estoppel Was Laid Down in Pickard V. Sears (1832):

“Where one by his words or conduct willfully Causes another to believe in the existence of Certain State of things, and induces him to act on that belief, or to alter his position, the former is precluded from averring against the latter a different state of things as existing at that time.”

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Kinds of Estoppel

1 . Estoppel by Record

Under English law, estoppel by record is estoppel of the parties from reopening and relitigating the matter which has been finally settled between them by a Court of competent jurisdiction.

In India estoppel by record is covered by res judicata under Section 11 CPC, Section 300 of CrPC (now Section 337 of BNSS).

2. Estoppel by Deed

Where parties entered into a deed on the basis of facts stated therein, they and persons claiming through them are bound by it.

3. Estoppel in Pais or by Conduct

Estoppel by conduct can arise either from a contract, or by unilateral statements, act or omissions which induces another party to believe and act on that belief.

Estoppel by conduct may arise from silence, acquiescence, connivance, negligence, Laches etc.

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 intentionally and falsely leads B to believe that certain land belongs to A, and thereby induces B to buy and pay for it.

The land afterwards becomes the property of A, and A seeks to set aside the sale on the ground that, at the time of the sale, he had no title. He must not be allowed to prove his want of a title.

Essential Ingredients of Estoppel:

1. There Must Be a Representation Made by One Person to Another Person

The representation need not be expressed, it may be implied also. The representation can be made by statement, act or omission.

Sarat Chander Dey v. Gopal Chander Laha (1892), court held that estoppel binds not only the parties but also their successors in interest.

Facts of the case were that one Arju Bibi, a Muslim widow, was holding certain property which included the shares of her son and a daughter. She mortgaged the whole of the property, and her son acted on her behalf under the power of an attorney. The mortgagee's interest in the property was purchased by Sarat Chander, the Appellant/defendant in the case. Subsequently, the son and the daughter sold their shares in the property to Gopal Chander, the Respondent/plaintiff and the latter filed a suit to recover the property from Sarat Chander. The defendant contended that though the mother had no right to mortgage the shares of her son and daughter, the son allowed her to hold the property and acted on her behalf in executing the mortgage of the property and induced the mortgagee to believe that she was, indeed, the owner of the property. Hence, the defendant set up the plea of estoppel against the son so that he could be precluded from asserting a claim to his share in the property. The Privy Council upheld the plea of estoppel as against the son but held that as the daughter did not at any time conduct herself in any manner so as to mislead the defendant, the plea of estoppel was not sustainable against her.

2. The Representation Must Be Intended to Cause a Belief in Another

In Mercantile Bank of India Ltd v Central Bank of India Ltd (1938), a firm of merchants had with them railway receipts for a consignment of groundnuts and pledged those receipts with Central Bank of India, the plaintiff/respondent. Later the firm took back the receipts from that bank and pledged the same with the defendant/appellant Mercantile Bank. The receipts returned by the Central Bank did not bear any stamp to indicate that the goods were already pledged with them. When the Mercantile Bank sought to take delivery of the goods and sell them on account of the pledge, the Central Bank sued them for conversion and contended that it had the priority in point of time. The defendant Bank contended that the Central Bank should be estopped from doing so as it has misled the defendant Bank into thinking that the goods were free from encumbrances because of its negligent failure to affix its stamp on the receipts to indicate that the goods were already pledged to that Bank.

The Privy Council held that there was no intention in the part of Central Bank to cause the Mercantile Bank to belief that goods were not pledged to them, while estoppel could be pleaded for even negligent acts or omissions, in the present case the Central Bank could not be held to have been negligent towards the Mercantile Bank as the former owed no legal duty to take care vis-a-vis the latter Bank.

3. The Representation Must Be Made as to an Existing Fact

The representation must be a statement of existing fact not something about what the person will do in the future. The requirement that the representation must be as to an existing fact ensures fairness and clarity. It prevents people from misrepresenting present situations to mislead others and then going back on their word after the other party has suffered some loss.

Example - A says to B, “I have transferred the ownership of this house to you.” B spends money renovating the house, believing it to be his. Later, A cannot deny the transfer, because he made a representation of an existing fact (that the house already belongs to B).

4. The Person to Whom the Representation Is Made Must Have Acted Upon That Belief to His Detriment and Altered His Position

Estoppel applies only when the other person believes the representation to be true and acts on that belief so as to "alter his position".

In University of Madras v Sundara Shetty, 1956, the petitioner appeared for SSLC examination in 1952 and received the SSLC record book from the University of Madras which showed that he passed the examination. Therecord book also carried an endorsement that he was eligible to undertake the study ofIntermediate Course. On the basis of the endorsement, Shetty got admitted in theIntermediate course and passed the first year and was about to take the second-year examination. At that time, the University of Madras served him with a notice that he did not in fact pass the SSLC examination and got his admission cancelled in the college where he was studying. The Court held that estoppel applied against the University as:

1. the University by its statement informed that Shetty passed SSLC and was eligible for Intermediate,
2. Shetty believed it to be true and
3. acted on that belief to his detriment (he spent time and money on Intermediate Course) and, hence
4. the University and College are estopped from doing back on their statements.
5. The court granted the writ of mandamus directing the college and the University to permit him to take the intermediate final examination.

Proof of Detriment is Necessary

Estoppel will be applied only where the representee suffered detriment in consequence to the representation made to him. "Detriment" in this context would mean any injury, harm, loss or deprivation.

In SA Manjunath v University of Bangalore (1967), Manjunath was given a seat in Bangalore MedicalCollege in 1965 on the basis of the memorandum of marks issued by the University of Bangalore wherein it was shown that he obtained 190 marks in the Optionals Group at PUC examination. He paid his fees on 21 August 1965 and started attending the classes from 27 August 1965. On 28 August 1965, he received a communication to the effect that his admission was cancelled as it was detected that he obtained only 130 and 190 marks in the optional group and his admission was given because of mistake or inadvertence. Manjunath, relying on Sundara Shetty's case discussed above contended, inter alia, that the University of Bangalore should be estopped from revisingthe marks and cancelling the admission as the university made a statement of marks which he believed to be true and acted on that belief to his detriment.

The Court referring to the judgment in Sundara Shetty's case observed that it may be noted that in that case, the petitioner had not only passed the next higher examination after the S.S.L.C., but was also nearing completion of the second year course in the Intermediate Examination. Their Lordships therefore thought under the circumstances of the case that it would be inequitable to cancel the admission of the petitioner as the additional qualifications that he had acquired after his admission in the College at considerable expense could not be rectified.

However, in the present case Manjunath did not suffer any real detriment and pointed out that he started to attend the college from 27-8-1965, and on the very next day he was informed that the marks card produced by him was not correct and that his admission had been cancelled.

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"Estoppel Acts as a Shield and Not as a Sword”

This phrase is a legal maxim used to describe the limited scope and defensive nature of the doctrine of estoppel in most legal systems, including Indian law.

Estoppel can be used to prevent someone from making a claim or taking a position that contradicts what they previously stated or did, if someone else relied on it. Estoppel cannot be used to create a new cause of action or enforce a right.

This provision prevents a party from going back on their word in a legal proceeding. It does not create a cause of action, it only stops a person from taking a contradictory stand.

Suppose A sells land to B, saying that he owns it. B builds a house on it. Later, A files a suit saying he was not the owner and the sale was invalid. B can use estoppel as a defense, arguing that A cannot now deny ownership because he earlier represented that he was the owner.

Now, suppose A promises B that he will gift him some land, and B incurs expenses in the hope of receiving the land. B cannot sue A to enforce the gift based solely on estoppel, because estoppel cannot create a cause of action where there is no legal right in the first place.

In J. P. Builders v. A. Ramadas Rao, (2011)  "Estoppel is not a cause of action; it is a rule of evidence. It does not create or extinguish a right.”

The doctrine of estoppel prevents injustice by stopping people from going back on their word when others have relied on it. But it does not allow a party to sue and demand rights just because someone made a promise or statement. Thus, it protects existing rights, it does not create new ones.

Exceptions to the Doctrine of Estoppel

1. No Estoppel Against State

In B.E.G. Fisherman Cooperative Souety v. Sipahi Singh (1977), the Supreme Court held that the estoppel cannot be applied as against the government for its exercise of sovereign legislative and executive functions.

2. No Estoppel Against a Statute or Law

In PV Narsimha Rao v State (1998), there cannot be an estoppel to defeat the provisions of a valid law. It cannot override the law of the land.

In Mohori Bibi v Dharmodas Ghose (1903), a minor's contract is void under the Contract Act, 1872, and even if the minor misrepresented his age the contract cannot be enforced against him on the basis of estoppel.

1. No estoppel applies if true facts are known to both the parties
2. No estoppel when fraud committed by other party - Shri Krishan v Kurukshetra University (1975).

Promissory Estoppel (From Shield to Sword)

The rule embodied in Section 121 of the Bharatiya Sakshya Adhiniyam pertains to representations made in regard to the existing facts. It does not refer to future promises.

Originally, it had its moorings in the law of evidence as a rule relating to representation of existing facts and not as to statement of future intentions and promises. In that sense, it was considered as a rule of evidence. With emergence of the doctrine of promissory estoppel that would hold a party to his promises to the other party, the doctrine extended into the law of contracts also. From a rule of evidence or procedural law, it grew also into a rule of substantive law providing a cause of action to the promisee. As a rule of evidence, estoppel could be used only as a "shield" but as a rule of substantive law it could be used also as a "sword".

 

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