M/S Motilal Padampat Sugar Mills Co. (P.) Ltd. Vs. State of Uttar Pradesh & Ors [1978] INSC 254 (12 December 1978)

BHAGWATI, P.N.

TULZAPURKAR, V.D.

CITATION: 1979 AIR 621 1979 SCR (2) 641 1979 SCC (2) 409

CITATOR INFO :

F 1980 SC 768 (1) O 1980 SC1285 (40) R 1983 SC 848 (8) E&R 1985 SC 941 (4) R 1986 SC 806 (9,10,11,12,13,14) RF 1986 SC 872 (181,182) F 1987 SC 590 (7) RF 1987 SC2414 (22,23) RF 1988 SC1247 (3) RF 1989 SC1933 (28) R 1989 SC2138 (64) C 1991 SC 14 (11) D 1991 SC 818 (18) RF 1992 SC1075 (3) RF 1992 SC2169 (28)

ACT:

Waiver doctrine of-Waiver is a question of fact and it must be properly pleaded and proved.

Public law-Doctrine of Promissory Estoppel, its contours and parameters, explained.

Estoppel-Estoppel in pais-Promissory Estoppel- Applicability of the doctrine against the Government and extent threre of-Doctrine of executive necessity whether could be a valid defence and if so under what circumstance.

Representations de futureo by public body if enforceable ex-contractu by a person who acts upon such representation or promise intended to be acted on-Burden of proof-Degree of standard of proof in such cases.

HEADNOTE:

The appellant is a limited company which is primarily engaged in the business of manufacture and sale of sugar and it has a cold storage plant and a steel foundry. With reference to a news item dated 10th October 1968 in the National Herald in which it was stated that the State of Uttar Pradesh had decided to give exemption from sales tax for a period of three years under section 4A of the U.P.

Sales Tax Act to all new industrial units in the State with a view to enabling them "to come on firm footing in developing stage", the appellant addressed a letter dated 11th October 1968 to the Director of Industries stating that in view of the sales tax holiday announced by the Government the appellant intended to set up a Hydrogenation plant for manufacture of Vanaspati and sought for confirmation that this industrial unit which it proposed to set up, would be entitled to sales tax holiday' for a period of three years from the date it commenced production. The Director of Industries by his letter dated 14th October 1968, confirmed that "there will be no sales tax for three years on the finished product of your proposed Vanaspati factory from the date it gets power connection for commencing production".

Thereafter when the appellant's representative met the 4th respondent, who was at that time the Chief Secretary to the Government as also Advisor to the Governor and apprised the latter that the appellant was setting up the Vanaspati factory solely on the basis of the assurance given on behalf of the Government that the appellant would be entitled to exemption from sales tax for a period of three years from the date of commencement of commercial production at the factory, the 4th respondent reiterated the assurance made.

Again the appellant, by its letter dated 13th December 1968, requested the 4th respondent "to please confirm that we shall be allowed sales tax holiday for a period of three years on the sale of Vanaspati from the date we start production". The 4th respondent replied on 22nd December 1968 that "the State Government will be willing to consider your request for grant of exemption from U.P. Sales Tax for a period of three years from the date of 642 production" and asked the appellant to obtain the requisite application form and submit a formal application to the Secretary to the Government in the Industries department, and in the meanwhile "to go ahead with the arrangements for setting up the factory". The appellant in the meantime had submitted an application dated 21st December 1968 for a formal order granting exemption from sales tax under section 4A of the U.P. Sales Tax Act. The appellant was also subsequently informed by the letter dated 23rd January 1969 of the 4th respondent categorically that the proposed Vanaspati factory of the appellant "will be entitled to exemption from U.P. Sales Tax for a period of three years from the date of going into production and that this will apply to all Vanaspati sold during that period in Uttar Pradesh itself". The appellant, on the basis of these unequivocal assurances, went ahead with the setting of the Vanaspati factory and made much progress.

By the middle of May 1969, the State Government started having second thoughts on the question of exemption and the appellant was requested to attend a meeting "to discuss the question of giving concession in Sales Tax on Vanaspati products". The appellant immediately by its letter dated 19th May 1969 pointed out to the 5th respondent that so far as the appellant was concerned, the State Government had already granted exemption from sales tax by the letter of the Chief Secretary dated 23rd January, 1969, but still, the appellant would be glad to send its representative to attend the meeting. The appellant's representative did attend the meeting held on 3rd June 69 and reiterated that so far as the appellant was concerned, it had already been granted exemption from sales tax and the State Government stood committed to it The State Government, however, went back upon the assurance and a letter dated 20th January 1970 was addressed by the 5th respondent intimating that the Government had taken a policy decision that new Vanaspati units in the State which go into commercial production by 30th September 1970, would be given only partial concession in Sales Tax at different rates on each year of production. The appellant, by its letter dated 25th June 1970, pointed out to the Secretary to the Government that the appellant proposed to start commercial production of Vanaspati with effect from 1st July 1970 and stated that, as notified in the letter of 20th January 1970, the appellant would be availing of the exemption granted by the State Government and would be charging Sales Tax at the rate of 3 1/2% instead of 7% on the sales of Vanaspati manufactured by it for the period of one year commencing from 1st July 1970. The factory of the appellant thereafter went into production from 2nd July 1970 and the appellant informed the Secretary to the Government about the same by its letter dated 3rd July 1970. The State Government, however, once again changed its decision and on 12th August 1970, a news item appeared in the 'Northern Indian Patrika' stating that the Government had decided to rescind the earlier decision i.e. the decision set out in the letter dated 20th January 1970, to allow concession in the rates of Sales Tax to new Vanaspati Units. The appellant thereupon filed a writ petition in the High Court of Allahabad asking for a writ directing the State Government to exempt the sales of Vanaspati manufactured by the appellant from Sales Tax for a period of three years commencing from 2nd January 1970 by issuing a notification under section 4A of the U.P. Sales Tax Act from the appellant for the said period of three years. The plea based on the 643 doctrine of promissory estoppel was, however rejected by the Division Bench of the High Court principally on the ground that the appellant had waived the exemption, if any, by accepting the concessional rates set out in the letter of the respondent dated 20th January 1970.

Allowing the appeal by certificate, the Court,

HELD: 1. The view taken by the High Court, namely, that even if there was an assurance given by the 4th respondent on behalf of the State Government and such assurance was binding on the State Government on the principle of promissory estoppel, the appellant had waived its right under it by a accepting the concessional rates of sales tax set out in the letter of the 5th respondent dated 20th January, 1970 is not correct. [656 D-E]

2. Waiver is a question of fact and it must be properly pleaded and proved. No plea of waiver can be allowed to be raised unless it is pleaded and the factual foundation for it is laid in the pleadings. [656 E-F] In the instant case:

(a) the plea of waiver was not taken by the State Government in the affidavit filed on its behalf in reply to the writ petition, nor was it indicated even vaguely in such affidavit. It was raised for the first time at the hearing of the writ petition. That was clearly impermissible without an amendment of the affidavit in reply or a supplementary affidavit raising such plea. [656 F] (b) It was not right for the High Court to have allowed the plea of waiver to be raised against the appellant and that plea should have been rejected in limine. If waiver were properly pleaded in the affidavit in reply, the appellant would have had an opportunity of placing on record facts showing why and in what circumstances the appellant came to address the letter dated 25th June 1970 and establishing that on those facts there was no waiver by the appellant of its right to exemption under the assurance given by the 4th respondent. But in the absence of such pleading in the affidavit in reply, this opportunity was denied to the appellant [656F-H]

3. Waiver means abandonment of a right and it may be either express or implied from conduct, but its basic requirement is that it must be "an intentional act with knowledge". There can be no waiver unless the person who is said to have waived is fully informed as to his right and with full knowledge of such right, he intentionally abandons it. [657A, B] In the instant case, on the facts, the plea of waiver could not be said to have been made out by the State Government: There was nothing to state that at the date when the appellant addressed the letter dated 25th June 1970, it had full knowledge of its right to exemption under the assurance given by the 4th respondent and that it intentionally abandoned such right. It is not possible to presume in the absence of any material placed before the Court, that the appellant had full knowledge of its right to exemption so as to warrant an inference that the appellant waived such right by addressing the letter dated 25th June 1970. It is difficult to speculate what was the reason why the appellant addressed the letter 25th June 1970 stating that it would avail of the concessional rates of sales tax granted under the letter dated 20th January 1970. [657 D-E] 644 Earl of Darnley v. London, Chathan and Dover Rly. Co.

(Proprietors etc.), [1867] L.R. 2 H.L. 43 @ 57 Craine v. Colonial Mutual Fire Insurance Co. Ltd. 28 C.L.R. 305;

Martindala v. Faulkner [1846] 2 Q.B. 706; quoted with approval.

4. The doctrine called 'promissory estoppel', 'equitable estoppel', 'quasi estoppel', and 'new estoppel' is a principle evolved by equity to avoid injustice where a promise is made by a person knowing that it would be acted on and it is person to whom it is made and in fact it is so acted on and it is inequitable to allow the party making the promise to go back upon it. Though commonly named promissory estoppel it is neither in the realm of contract nor in the realm of estoppel. The basis of the doctrine is the inter position of equity, which has always true to its form stepped in to mitigate the rigours of strict law. [658 E-G]

5. The true principle of promissory estoppel is that where one party has by his words or conduct made to the other a clear and unequivocal promise which is intended to create legal relationship effect a legal relationship to arise in the future, knowing or intending that it would be acted upon by the other party to whom the promise is made and it is in fact so acted upon by the other party, the promise would be binding on the party making it and he would not be entitled to go back upon it, if it would be inequitable to allow him to do so having regard to the dealings which have taken place between the parties, and this would be so irrespective whether there is any pre- existing relationship between the parties or not. Equity will in a given case where justice and fairness demand, prevent a person from insisting on strict legal rights even where they arise, not under any contract, but on his own title deeds or under statute. [662 B-D] To the applicability of the doctrine of promissory estoppel it is not necessary that there should be some contractual relationship between the parties. Nor can any such limitation, namely, that the doctrine of promissory estoppel is limited in its operation to cases where the parties are already contractually bound and one of the parties induces the other to believe that the strict rights under the contract would not be enforced be justifiably introduced to curtail the width and amplitude of the doctrine. The parties need not be in any kind of legal relationship before the transaction from which the promissory estoppel take its origin. The doctrine would apply even where there is no pre-existing legal relationship between the parties, but the promise is intended to create legal relations or affect a legal relationship whish will arise in future. [660 G-H, 661 A, F-G].

Jorden V. Money, [1854] 5 H.L. 185, Hughes v. Metropolitan Railway Co., [1857] 2 A.C. 439, Birmingam & District Land Co. v. London and North- Western Rail Co., ]1888] 40 Ch. D. 268; discussed and questioned.

Central London Property Trust Ltd. v. High Trees House Ltd., [1947] K.B. p. 130:: [1956] 1 All. E.R. 256;

explained.

Evenden v. Guildford City Association Football Club Ltd., [1975] 3 All. E.R. 269 @ 272 :: [1975] 3 W.L.R. 251 @ 255; Crabb v. Arun District Council. [1975] All E.R. 865 @ 875:: [1975] 8 W.L.R. 847 @ 858 CA; quoted with approval.

645

6. The doctrine of promissory estoppel cannot be inhibited by the same limitation estoppel in the strict sense of the term. It is an equitable principle evolved by the Courts for doing justice and there is no reason why it should be given only a limited application by way of defence and it should only be a shield and not a sword to found a cause of action. It can be the basis of a cause of action. [662 D-E, 663 E-F].

There is no qualitative difference between 'proprietary estoppel' and 'promissory estoppel'. Both are the off springs of equity and if equity is flexible enough to permit proprietary estoppel to be used as a cause of action, there is no reason in logic or principle why promissory estoppel should also not be available as cause of action, if necessary to satisfy the equity. [665 G-H] Central London Property Trust Ltd. v. High Trees House Ltd . [1947]1 K.B.P. 130: [1956] 1 All. E.R. 256; Combe v.

Combe [1951] 2 K.B. 215; Beesly v. Hallwood Estate Ltd.

[1960] 2 All. E.R. 314; Municipal Corporation of Bombay.v Secty. of State I.L.R. 29 Bomb. 580 @ 607; Mooregate Mercantile Co. Ltd. v. Twichings,s [1975] 3 W.L.R. 286;

referred to.

Crabb v. Arun District Council [1975] All. E.R. 865 @ 875 explained. Ramsden v. Dysen,[1866] L.R H.L. 129; Dunlop Pneuntafic Tyre Co. v. Saifridge & Co. Ltd. 1915 A.C. 847:

discussed.

7. Law is not a mausoleum. It is not an antique to be taken down, dusted admired and put back on the shelf. It is rather like an old but vigorous tree having its roots in history, yet continuously taking new grafts and putting out new sprouts and occasionally dropping dead wood. It is essentially a social process, the end product of which is justice and hence it must keep on growing and developing with changing social concepts and values. Otherwise, there will be estrangement between law and justice and law will cease to have legitimacy Though 'continuity with the past is a historical necessity', 'conformity is not to be turned into a fetish'. [668 H, 669 A-B].

Therefore, despite the fact that allowing promissory estoppel to found a cause of action would seriously dilute the principle which requires consideration to support a contractual obligation, 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 not be held in fetters but allowed to operate in all its activist magnitude. so that it may fulfill the purpose for which was conceived and born. [668 F-G].

Robertson v Minister of Pensions. [1949] 1 K. B. 227 Evenden Guldford city Association Football Club Ltd. [1975] 3 All. E.R. p. 269. Candler v. Crane Christmas & Co. [1951] 2 K. B. 164 @ 178; quoted with approval.

8. A promise may, in the United States, derive contractual enforceability if it has been made by the promisor knowing or intending that it would be acted on and the promisee has altered his position in reliance on it, notwithstanding that there is no consideration in the sense in which that word is used in English 646 and Commonwealth jurisprudence. However, the basic requirement for invoking this principle must be present namely that the fact situation should be such that injustice can be avoided only by enforcement of the promise. The doctrine of promissory estoppel has been used in the United States to reduce, if not to destroy, the prestige of consideration as an essential of valid contract and also used in diverse other situations as founding a cause of action: [670 D-E, 673 B].

Alleghany College v. National Chauteaque Country Bank 57 Am L. R. 980; Drennan v. Stat Paving Company [1958] 31 California 2nd 409; referred.

Under the English law, the judicially formed view is that the crown is not immune from liability under the doctrine of promissory estoppel and the view taken by Denning J., in [1949] 1 K. B. 227 that the crown cannot escape its obligation under the doctrine of promissory estoppel by "praying in aid the doctrine of executive necessity" still holds the field. [674 D].

Robretson v. Minister of Pensions [1949] 1 K. B.

227; quoted with approval:

Rederiaktiebolaget Amphitrities. v. The King [1921] 3 K. B. 500; referred to.

Howell v. Falmouth Boat Construction Co. Ltd. 1951 A. C. 837; explained

10. Even in the United States, the trend in the State Courts, of late, has been strongly in favour of the application of the doctrine of promissory estoppel against the Government and public bodies "where interests of justice, morality and common fairness clearly dictate that course". It is being increasingly felt that "the Government ought to set a high standard in its dealings and relationships with citizens and the word of a duly authorised Government agent, acting within the scope of his authority, ought to be as good as a Government bond". The Government would not be estopped "by the acts of its officers and agents who without authority enter into agreements to do what the law does not sanction or permit" and "these dealing with an agent of the Government must be held to have notice of limitations of his authority". But if the acts of omissions of officers of the Government are within the scope of their authority and are not otherwise impermissible under the law, they "will work estoppel against Government". [676 F-H, 677 A-D] Federal Crop Insurance Corporarion v. Maroill 332 U.S. 380: 92 L. ed. discussed and explained.

Valsonavich v. United States 335 Fed. Rep. 2nd p.

96; quoted With approval.

11. Where the Government makes a promise knowing or intending that it would be acted on by the promisee and, in fact, the promisee, acting in reliance on it, alters his position, the Government would be held bound by the promise and the promise would be enforceable against the Government at the instance of the promisee notwithstanding that there is no consideration for the promise and the promise is not recorded in the form of a formal contract as required by Article 299 of the Constitution. [682 G-H, 683-A].

647 It is elementary that in a Republic governed by the rule of law, no one, a however high or low is above the law.

Everyone is subject to the law as fully and completely as any other and the Government is no exception. It is indeed the pride of constitutional democracy and rule of law that the Government stands on the same footing as a private individual so far as the obligation of the law is concerned;

the former is equally bound as the latter. On no principle can a Government committed to the rule of law, claim immunity from the doctrine of promissory estoppel. The Government cannot be heard to say that it is under no obligation to act in a manner that is fair and just or that it is not bound by considerations of 'honesty and good faith'. In fact the Government should be held to a high "standard of rectangular rectitude while dealing with its citizens". [683 A-C].

Gangaes Manufacturing co v. Surajmull and Ors., I.L.R. 5 Cal. 669; Municipal Corporation of Bombay v. The Secretary of State, I,L.R. 29 Bomb. 588; approved.

Collector of Bombay v. Municipal Corporoaton of rlle City of Bombay and Ors. [1952] S.C.R. 43; Union of India v. Indo-Afghan Agencies, [1968] 2 S.C.R. 366;

followed.

Ransden v. Dyson,[1866] L.R. 1HL 170; referred to.

Robertson v. Minister of Pensions, [1949] 1 K. B.

227; quoted with approval as the correct law.

12. The doctrine of executive necessity, regarded as sufficient Justification for the Government to repudiate even its contractual obligations was emphatically negatived in the Indo-Afghan Agencies case and the supremacy of the laws was established, [683 C-D].

Therefore, it is not open to Government to claim immunity from the applicability of the rule of promissory estopped and thereby repudiate a promise made by it on the ground that such promise may fetter its future executive action. If the Government wants to preserve its freedom of executive action from being hampered or restricted, the Government should not make a promise knowing or intending that it would be acted on by the promisee and the promisee would alter his position relying upon it. But, if the Government makes such a promise and the promisee acts in reliance upon it and alters his position the Government would be compelled to make good such promise like any other private individual. [683 D-F].

13. The law cannot acquire legitimacy and gain social acceptance unless it accords with the moral values of the society. It should be the constant endeavor of the Courts and the legislatures to close the gap between law and morality and bring about as near an approximation between the two as possible. The doctrine of promissory estopped is a significant judicial contribution in that direction.[683 F-G].

Since the doctrine of promissory estoppel is an equitable doctrine, it must yield when the equity so requires. If it could be shown the by Government that having regard to the facts as they have transpired, it would be inequitable to hold the Government to the promise made by it, the Court would not raise an equity in favour of the promisee and enforce the promise against the Government.

648 The doctrine of promissory estoppel would be displaced in such a case because on the facts, equity would not require that the Government should be held bound by the promise made by it. [683 G-H, 684 A] When the Government is able to show that in view of the facts, as they have transpired public interest would be prejudiced if the Government were required to carry out the promise, the Court would have to balance, the public interest in the Government carrying out a promise made to a citizen which has induced the citizen to act upon it and alter his position and the public interest likely to suffer if the promise were required to be carried out by the Government and determine which way the equity lies. It would not be enough for the Government just to say that public interest requires that the Government should not be compelled to carry out the promise or that the public interest would suffer if the Government were required to honour it. The Government cannot claim to be exempt from the liability to carry out the promise 'on some indefinite and undisclosed ground of necessity or expediency', nor can the Government claim to be the sole judge of its liability and repudiate it 'on an exparte appraisement of the circumstances. [684 A-D] In order to resist its liability, the Government should disclose to the Court the various events necessitating its claim to be exempt from the liability and it would be for the Court to decide whether those events are such as to render it inequitable to enforce the liability against the Government. [684 D-E].

Mere claim of change of policy would not be sufficient to exonerate the Government from the liability: the Government would have to show precisely the changed policy with the reason and justification therefore, to enable the Court to judge for "itself which way the public interest lies and what equity of the case demands. It is only if the Court is satisfied, on proper and adequate material placed by the Government, that over-riding public interest requires that the Government should not be held bound by the promise but should be free to act unfettered by it that the Court would refuse to enforce the promise against the Government.

[684 E-F] The essence of the rule of law is that the Court would not act on the mere ipse dixit of the Government, for it is the Court which has to decide and not the Government, whether the Government should be held exempt from liability.[684 F-G] The burden would be upon the Government to show that the public interest in the Government acting otherwise than in accordance with the promise is so overwhelming that it would be inequitable to hold the Government bound by the promise and the Court would insist on a highly rigorous standard of proof in the discharge of this burden. But even where there is no such over-riding public interest, it may still be competent to the Government to resile from the promise 'on giving reasonable notice, which need not be a formal notice, giving the promisee a reasonable opportunity of resuming his position' provided of course it is possible for the promisee to restore status quo ante. If, however, the promisee cannot resume his position, the promise would become final and irrevocable. [684 G-H, 685 A].

Emmanuel Ayodeji Ajayi v. R. T. Briscoe, [1964] 3 All.

E.R. 556; referred to 649

14. So far as the doctrine of promissory estoppel is concerned, no distinction can be made between a private individual and a public body. This doctrine is also applicable against a public body like a municipal council.

However, this doctrine cannot be applied in teeth of an obligation or liability imposed by law. It cannot be invoked to compel the Government or even a private party to do an act prohibited by law. There can also be no promissory estoppel against the exercise of legislative power. The Legislature can never be precluded from exercising its legislative function by resort to the doctrine of pro- missory estoppel. [688C, G-H 689 A].

Century Spinng and Manufacturing Co. Ltd. & Anr. v. The Ulhasnagr Municipal Council and Anr. [1970] 3 SCR 854;

Turner Mossison and Co. Ltd. v. Hunngerfard Investmetn Trust Ltd.[1972] 3 S.C.R. 711; discussed & followed.

M. Ramanatha Pillai v. The Stare of Kerala & Anr. [1974] 1 SCR 51 5 @ 526; Assistant Cusrodian v. Brij Kishore Agarwala & Ors. [1975] 2 SCR 359, explained and held inapplicable.

Sate of Kerala v. Gwalior Rayon Silk Manufacturing Co. Ltd. [1974] 1 S.C.R. 671 @ 688; reiterated.

Malhortra and Sons & Ors. v. Union of India and Ors. A.I.R. 1976 J & K p. 41 approved.

Excise Commissioner U.P. Allahabad v. Ram Kumar [1976] Suppl. S.C.R. 532; Bihar Eastern Gangetic Fishermen Cooperative Society Ltd. v. Sipali Sangil and Ors. [1978] 1 S R 375; A.I.R. 1977 S.C. 2149; Radha Krishan Agarwal v. State of Bihar and Ors. [1977] 3 S.C.R. 249;: [1977] 3 S.C.C. 457; explained.

15. In order to attract the applicability of the doctrine of promissory estoppel, it is not necessary that the promisee, acting in reliance on the promise, should suffer any deteriment. What is necessary is no more than that there should be alteration of his position in reliance on the promise. If detriment were a necessary element, there would be no need for the doctrine of promissory estoppel because, in that event in quite a few cases, the detriment would form the consideration and the promise would be binding, as a contract. If by deteriment is meant injustice to the promisee which would result if the promisor were to resile from his promisee, then detriment would certainly come in as a necessary ingredient. The detriment in such a case is not some prejudice sneered by the promisee acting on the promise, put the prejudice which would be caused to the promisee, if the promisor were allowed to back on the promise. It is not necessary for the promisee to show that he has acted to his detriment. All that he has to show is that he has acted to reliance on the promise and altered his position. [694 A-B, F-G, 695 E, 694 D].

Central London Property Trust Ltd. V. High Trees House, [1947] K.B. p. 130:: [1956] 1 All. E.R.

256, W. J. Alan & Co. Ltd. v. El Nasar Export and Import Co. [1972] 2 All. E.R. p. 127, @ p. 140, Tool Metal Manufacturing Co. Ltd. v. Tunosten Electric Co. Ltd. [1955] All. E. R. 657; [1975] 1 W. L. R. 761 Emmaulel Ayodeji 650 Ajya V. R. T. Briscoe [1964] All. E. R. 556 Karnmins Ballrooms Ltd. v. Zenith Investments (Torquay) Ltd.

[1970] 2 All. E.R. 871, Grurldt v. the Boulder Pty.

Gold Mines Ltd. [1938] 59 C.L.R. 641; quoted with approval.

In the instant case.

The facts necessary for involving the doctrine of promissory estoppel were clearly resent and the Government was bound to carry out the representation and exempt the appellant from sales tax in respect of sales of Vanaspati effected by it in Uttar Pradesh for a period of three years from the date of commencement of the production. [693 F-G] (a) The letter dated 23rd January 1969 was a representation on behalf of the Government, the representation having been made by the 4th respondent in his capacity as the Chief Secretary of the Government categorically to the effect that the appellant would be entitled to exemption from sales tax in respect of the sale of vanaspati effected in Uttar Pradesh for a period of three years from the date of commencement of production. This representation was made by way of clarification in view of the suggestion in the appellant letter dated 2nd January 1969 that the financial institutions were not prep ed to regard the earlier letter of the 4th respondent dated 22nd December 1968 as a definite commitment on the part of the Government to grant exemption from sales tax. [692 H, 693 A- B] (b) The representation made by the 4th respondent was a representation within the scope of his authority and was binding on the Government in as much as the 4th respondent, who was at the material time the Chief Secretary to the Government and also Adviser to the Governor discharging the functions of the Government during the President's Rule had authority to bind the Governor. Moreover the averment to this effect in the Writ Petition was not denied by the State in the affidavit in reply filed on its behalf [693 C-D].

(c) This representation was made by the Government knowing or intending that it would be acted on by the appellant because the appellant made it clear that it was only on account of the exemption from sales tax promised by the Government that the appellant had decided to set up the factory for manufacture of Vanaspati. In fact the appellant relying on this representation of the Government, borrowed moneys from various financial institutions, purchased plant and machinery from M/s. De Smith (India) Pvt. Ltd., Bombay and set up a Vanaspati factory at Kanpur. [693 E-F]

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1597 of 1972.

Appeal from the Judgment and Order dated 25th January, 1972of the Allahabad High Court in Civil Misc. Writ No. 3788/70.

S.T. Desai, Shri Narain, J. B. Dadachanji, Ravinder Narain, S Swarup and Talat Ansari for the Appellant.

G. N. Dikshit, M. V. Goswami and O. P. Rana for RR 1-3 and 5.

Girish Chandra for Respondent No. 4.

651 A. B. Dewan, Ravinder Narain, S. Swarup and A. N.

Haksar for the Intervener (M/s. Modi Rubber Ltd.).

The Judgment of the Court was delivered by BHAGWATI, J., This appeal by certificate raises a question of considerable importance in the field of public law. How far and to what extent is the State bound by the doctrine of promissory estoppel? It is a doctrine of comparatively recent origin but it is potentially so fruitful and pregnant with such vast possibilities for growth that traditional lawyers are alarmed lest it might upset existing doctrines which are looked upon almost reverentially and which have held the field for a long number of years. The law in regard to promissory estoppel is not yet well settled though it has been the subject of considerable debate in England as well as the United States of America and it has also received consideration in some recent decisions in India and we, therefore, propose to discuss it in some detail with a view to defining its contours and demarcating its parameters. We will first state briefly the facts giving rise to this appeal. This is necessary because it is only where certain fact-situations exist that promissory estoppel can be invoked and applied.

The appellant is a limited company which is primarily engaged in the business of manufacture and sale of sugar and it has also a cold storage plant and a steel foundry. On 10th October, 1968 a news item appeared in the National Herald in which it was stated that the State of Uttar Pradesh had decided to give exemption from sales tax for a period of three years under section 4A of the U.P. Sales Tax Act to all new industrial units in the State with a view to enabling them "to come on firm footing in developing stage".

This news item was based upon a statement made by Shri M. P. Chatterjee the then Secretary in the Industries Department of the Government. The appellant, on the basis of this announcement, addressed a letter dated 11th October, 1968 to the Director of Industries stating that in view of the sales tax holiday announced by the Government, the appellant intended to set up a Hydro-genation Plant for manufacture of Vanaspati and sought for confirmation that this industrial unit, which it proposed to set up would be entitled to sales tax holiday for a period of three years from the date it commenced production. The Director of Industries replied by his letter dated 14th October, 1968 confirming that "there will be no sales tax for three years on the finished product of your proposed Vanaspati factory from the date it gets power connection for commencing production." The appellant thereupon started taking steps to contact various financiers for financing the project and also initiated negotiations with manufacturers for purchase of machinery for setting 652 up the Vanaspati factory. On 12th December, 1968 the appellant's representative met the 4th respondent who was at that time the Chief Secretary to the Government as also Advisor to the Governor and intimated to him that the appellant was setting up the Vanaspati factory solely on the basis of the assurance given on behalf of the Government that the appellant would be entitled to exemption from sales tax for a period of three years from the date of commencement of commercial production at the factory and the 4th respondent reiterated the assurance that the appellant would be entitled to sales tax holiday in case the Vanaspati factory was put up by it. The appellant by its letter dated 13th December, 1968 placed on record what had transpired at the meeting on the previous day and requested the 4th respondent "to please confirm that we shall be allowed sales tax holiday for a period of three years on the sale of Vanaspati from the date we start production." On the same day the appellant entered into an agreement with M/s. De Smith (India) Pvt. Ltd., Bombay for supply of plant and machinery for the Vanaspati factory, providing clearly that the appellant would have the option to terminate the agreement, if within 10 weeks exemption from sales tax was not granted by the State Government. The 4th respondent replied on 22nd December, 1968 confirming that "the State Government will be willing to consider your request for grant of exemption from U.P. Sales Tax for a period of three years from the date of production" and asked the appellant to obtain the requisite application form and submit a formal application to the Secretary to the Government in the Industries Department and in the meanwhile to "go ahead with the arrangements for setting up the factory". The appellant had in the meantime submitted an application dated 21st December, 1968 for a formal order granting exemption from sales tax under section 4A of the Act. It appears that the letter of the 4th respondent dated 22nd December, 1968 was not regarded as sufficient by the financial institutions which were approached by the appellant for financing the project since it merely stated that the State Government would be willing to consider the request for grant of exemption and did not convey any decision of the State Government that the exemption would be granted. The appellant, therefore, addressed a letter dated 22nd January, 1969 to the 4th respondent pointing out that the financial institutions were of the view that the letter of the 4th respondent dated 22nd December, 1968 "did not purport to commit the Government for the concession mentioned" and it was, therefore, necessary to obtain a formal order of exemption in terms of the application submitted by it. The 4th respondent, however, stated categorically in his letter in reply dated 23rd January, 1969 that the proposed Vanaspati Factory of the appellant "will be 653 entitled to exemption from U.P. Sales Tax for a period of three years from the date of going into production and that this will apply to all Vanaspati sold during that period in Uttar Pradesh itself" and expressed his surprise that "a letter from the Chief Secretary to the State Government stating this fact in clear and unambiguous words should not carry conviction with the financial institutions." In view of this unequivocal assurance given by the 4th respondent, who not only occupied the post of Chief Secretary to the Government but was also Advisor to the Governor functioning under the President's rule, the appellant went ahead with the setting up of the Vanaspati Factory. The appellant by its letter dated 25th April, 1969 advised the 4th respondent that the U.P. Finance Corporation, being convinced by the clear and categorical assurance given by the 4th respondent that the Vanaspati Factory of the appellant would be entitled to exemption from sales tax for a period of three years from the date of commencement of production, had sanctioned financial assistance to the appellant and the appellant was going ahead with the project in full speed to enable it to start production at the earliest. The appellant made considerable progress in the setting up of the Vanaspati Factory but it seems that by the middle of May 1969 the State Government started having second thoughts on the question of exemption and a letter dated 16 May, 1969 was addressed by the 5th respondent who was Deputy Secretary to the Government in the Industries Department, intimating that a meeting has been called by the Chief Minister on 23rd May, 1969 "to discuss the question of giving concession in Sales Tax on Vanaspati products" and requesting the appellant to attend the meeting. The appellant immediately by its letter dated 19th May, 1969 pointed out to the 5th respondent that so far as the appellant was concerned, the State Government had already granted exemption from Sales Tax by the letter of the Chief Secretary dated 23rd January, 1969 but still, the appellant would be glad to send its representative to attend the meeting as desired by the 5th respondent. The proposed meeting was, however, postponed and the appellant was intimated by the 5th respondent by its letter dated 23rd May, 1969 that the meeting would now be held on 3rd June, 1969. The appellant's representative attended the meeting on that day and reiterated that so far as the appellant was concerned, it had already been granted exemption from Sales Tax and the State Government stood committed to it. The appellant thereafter proceeded with the work of setting up the Vanaspati plant on the basis that in accordance with the assurance given by the 4th respondent on behalf of the State Government, the appellant would be exempt from payment of Sales Tax for a period of three years from the date of commencement of production.

654 The State Government however went back upon this assurance and a letter dated 20th January, 1970 was addressed by the 5th respondent intimating that the Government had taken a policy decision that new Vanaspati Units in the State which go into commercial production by 30th September, 1970 would be given partial concession in Sales Tax at the following rates for a period of three years:

First year of production 31/2% Second year of production 3% Third year of production 21/2% The appellant by its letter dated 25th June, 1970 pointed out to the Secretary to the Government that the appellant proposed to start commercial production of Vanaspati with effect from 1st July, 1970, and stated that, as notified in the letter dated 20th January, 1970, the appellant would be availing of the exemption granted by the State Government and would be charging sales tax at the rate of 31/2% instead of 7% on the sales of Vanaspati manufactured by it for a period of one year commencing from 1st July, 1970. The factory of the appellant thereafter went into production from 2nd July, 1970 and the appellant informed the Secretary to the Government about the same by its letter dated 3rd July, 1970. The State Government however once again changed its decision and on 12th August, 1970 a news item appeared in the Northern India Patricia stating that the Government had decided to rescind the earlier decision i.e. the decision set out in the letter dated 20th January, 1970, to allow concession in the rates of Sales Tax to new Vanaspati Units. The appellant thereupon filed a writ petition in the High Court of Allahabad asking for a writ directing the State Government to exempt the sales of Vanaspati manufactured by the appellant from sales tax for a period of three years commencing from 2nd July, 1970 by issuing a notification under section 4A and not to collect or charge sales tax from the appellant for the said period of three years. It appears that in the writ petition as originally filed, there was no plea of promissory estoppel taken against the State Government and the writ petition was, therefore, amended by obtaining leave of the High Court with a view to introducing the plea of promissory estoppel. The appellant urged in the amended writ petition that the 4th respondent acting on behalf of the State Government had given an unequivocal assurance to the appellant that the appellant would be entitled to exemption from payment of sales tax for a period of three years from the date of commencement of the production and this assurance was given by the 4th respondent intending or knowing that it would be acted on by the appellant and in fact 655 the appellant, acting in reliance on it, established the Vanaspati factory by investing a large amount and the State Government was, therefore, bound to honour the assurance and exempt the Vanaspati manufactured and sold by the appellant from payment of sales tax for a period of three years from 2nd July, 1970. This plea based on the doctrine of promissory estoppel was, however rejected by the Division Bench of the High Court principally on the ground that the appellant had waived the exemption, if any, by accepting the concessional rates set out in the letter of the Deputy Secretary dated 20th January, 1970. The appellant thereupon preferred the present appeal after obtaining a certificate of fitness from the High Court.

The principal argument advanced on behalf of the appellant in support of the appeal was that the 4th respondent had given a categorical assurance on behalf of the State Government that the appellant would be exempt from payment of sales tax for a period of three years from the date of commencement of production and such assurance was given intending or knowing that it would be acted on by the appellant and in fact the appellant, acting in reliance on it, altered its position and the State Government was, therefore, bound, on the principle of promissory estoppel, to honour the assurance and exempt the appellant from sales tax for a period of three years from 2nd July, 1970, being the date on which the factory of the appellant commenced production. The appellant assailed the view taken by the High Court that this claim of the appellant for exemption based on the doctrine of promissory estoppel was barred by waiver, because the appellant had by its letter dated 25th June, 1970 accepted that it would avail of the exemption granted under the letter of the 5th respondent dated 20th January, 1970 and charged sales tax at the concessional rate of 31/2% instead of 7% during the first year of its production. The appellant urged that waiver was a question of fact which was required to be pleaded and since no plea of waiver was raised in the affidavit filed on behalf of the State Government in opposition to the writ petition, it was not competent to the State Government to rely on the plea of waiver for the first time at the hearing of the writ petition. Even if the plea of waiver were allowed to be raised, notwithstanding that it did not find place in the pleadings, no waiver was made out, said the appellant, since there was nothing to show that were the circumstances in which the appellant had addressed the letter dated 25th June, 1970 stating that it would avail of the exemption granted under the letter dated 20th January, 1970 and it was not possible to say that the appellant, with full knowledge of its right to claim total exemption from payment of sales tax, waived that right and agreed to accept the concessional rates set out in the letter dated 20th January, 1970. The 656 State Government on the other hand strongly pressed the plea of waiver and submitted that the appellant had clearly waived its right to complete exemption from payment of Sales Tax by addressing the letter dated 25th June, 1970. The State Government also contended that, in any event, even if there was no waiver, the appellant was not entitled to enforce the assurance given by the 4th respondent, since such assurance was not binding on the State Government and more-over, in the absence of notification under section 4A, the State Government could not be prevented from enforcing the liability to sales tax imposed on the appellant under the provisions of the Act. It was urged on behalf of the State Government that there could be no promissory estoppel against the State Government so as to inhibit it from formulating and implementing its policies in public interest. These were broadly the rival contentions urged on behalf of the parties and we shall now proceed to consider them.

We shall first deal with the question of waiver since that can be disposed of in a few words. The High Court held that even if there was an assurance given by the 4th respondent on behalf of the State Government and such assurance was binding on the State Government on the principle of promissory estoppel, the appellant had waived its right under it by accepting the concessional rates of sales tax set out in the letter of the 5th respondent dated 20th January, 1970. We do not think this view taken by the High Court can be sustained. In the first place, it is elementary that waiver is a question of fact and it must be properly pleaded and proved. No plea of waiver can be allowed to be raised unless it is pleaded and the factual foundation for it is laid in the pleadings. Here it was common ground that the plea of waiver was not taken by the State Government in the affidavit filed on its behalf in reply to the writ petition, nor was it indicated even vaguely in such affidavit. It was raised for the first time at the hearing of the writ petition. That was clearly impermissible without an amendment of the affidavit in reply or a supplementary affidavit raising such plea. If waiver were properly pleaded in the affidavit in reply, the appellant would have had an opportunity of placing on record facts showing why and in what circumstances the appellant came to address the letter dated 25th June, 1970 and establishing that on these facts there was no waiver by the appellant of its right to exemption under the assurance given by the 4th respondent. But in the absence of such pleading in the affidavit in reply, this opportunity was denied to the appellant. It was, therefore, not right for the High Court to have allowed the plea of waiver to be raised against the appellant and that plea should have been rejected in limine.

657 Secondly, it is difficult to see how, on the facts, the plea of waiver could be said to have been made out by the State Government. Waiver means abandonment of a right and it may be either express or implied from conduct, but its basic requirement is that it must be "an intentional act with knowledge". Per Lord Chelmsford, L.C. in Earl of Darnley v. London, Chatham and Dover Rly. Co. There can be no waiver unless the person who is said to have waived is fully informed as to his right and with full knowledge of such right, he intentionally abandons it. It is pointed out in Halsbury's Laws of England (4 d) Volume 16 in paragraph 1472 at page 994 that for a "waiver to be effectual it is essential that the person granting it should be fully informed as to his rights" and Isaacs, J, delivering the judgment of the High Court of Australia in Craine v. Colonial Mutual Fire Insurance Co. Ltd. has also emphasised that waiver "must be with knowledge, an essential supported by many authorities". Now in the present case there is nothing to show that at the date when the appellant addressed the letter dated 25th June, 1970, it had full knowledge of its right to exemption under the assurance given by the 4th respondent and that it intentionally abandoned such right. It is difficult to speculate what was the reason why the appellant addressed the letter dated 25th June, 1970 stating that it would avail of the concessional rates of sales tax granted under the letter dated 20th January, 1970. It is possible that the appellant might have thought that since no notification exempting the appellant from sales tax had been issued by the State Government under section 4A, the appellant was legally not entitled to exemption and that is why the appellant might have chosen to accept whatever concession was being granted by the State Government. The claim of the appellant to exemption could be sustained only on the doctrine of promissory estoppel and this doctrine could not be said to be so well defined in its scope and ambit and so free from uncertainty in its application that we should be compelled to hold that the appellant must have had knowledge of its right to exemption on the basis of promissory estoppel at the time when it addressed the letter dated 25th June, 1970. In fact, in the petition as originally filed, the right to claim total exemption from sales tax was not based on the plea of promissory estoppel which was introduced only by way of amendment. Moreover, it must be remembered that there is no presumption that every person knows the law. It is often said that everyone is presumed to know the law, but that is not a correct statement: there is no such maxim known to the law. Over a hundred and thirty years ago, Maule, J., pointed out in Martindala v. Faulkner(3): "There is no presumption in this country 658 that every person knows the law: it would be contrary to common sense and reason if it were so". Scrutton, also once said: "It is impossible to know all the statutory law, and not very possible to know all the common law." But it was Lord Atkin who, as in so many other spheres, put the point in its proper context when he said in Evans v. Bartlem(1)"_____the fact is that there is not and never has been a presumption that everyone knows the law. There is the rule that ignorance of the law does not excuse a maxim of very different scope and application." It is, therefore, not possible to presume, in the absence of any material placed before the Court, that the appellant had full knowledge of its right to exemption so as to warrant an inference that the appellant waived such right by addressing the letter dated 25th June, 1970. We accordingly reject the plea of waiver raised on behalf of the State Government.

That takes us to the question whether the assurance given by the 4th respondent on behalf of the State Government that the appellant would be exempt from sales tax for a period of three years from the date of commencement of production could be enforced against the State Government by invoking the doctrine of promissory estoppel. Though the origin of the doctrine of promissory estoppel may be found in Hughes v. Metropolitan Railway Co.(2) and Birmingham & District Land Co. v. London & North-Western Rail Co.(3) authorities of old standing decided about a century ago by the House of Lords, it was only recently in 1947 that it was rediscovered by Mr. Justice Denning, as he then was, in his celebrated judgment in Central London Property Trust Ltd. v.

High Trees House Ltd.(4) This doctrine has been variously called 'promissory estoppel', 'equitable estoppel', 'quasi estoppel' and 'new estoppel'. It is a principle evolved by equity to avoid injustice and though commonly named 'promissory estoppel, it is, as we shall presently point out, neither in the realm of contract nor in the realm of estoppel. It is interesting to trace the evolution of this doctrine in England and to refer to some of the English decisions in order to appreciate the true scope and ambit of the doctrine particularly because it has been the subject of considerable recent development and is steadily expanding.

The basis of this doctrine is the inter-position of equity.

Equity has always, true to form, stepped into mitigate the rigours of strict law. The early cases did not speak of this doctrine as estoppel. They spoke of it as 'raising an equity'. Lord Cairns stated 659 the doctrine in its earliest form-it has undergone considerable development since then-in the following words in Hughes v. Metropolitan Railway Company (supra):

"It is the first principle upon which all Courts of Equity proceed, that if parties who have entered into definite and distinct terms involving certain legal results....afterwards by their own act or with their own consent enter upon a course of negotiation which has the effect of leading one of the parties to suppose that the strict rights arising under the contract will not be enforced, or will be kept in suspense, or held in abeyance, the person who otherwise might have enforced those rights will not be allowed to enforce them where it would be inequitable having regard to the dealings which have thus taken place between the parties." This principle of equity laid down by Lord Cairns made sporadic appearances in stray cases now and then but it was only in 1947 that it was disinterred and restated as a recognised doctrine by Mr. Justice Denning, as he then was, in the High Trees' case (supra). The facts in that case were as follows: The plaintiffs leased to the defendents, a subsidiary of the plaintiffs, in 1937 a block of flats for 99 years at a rent of & 2500/- a year. Early in 1940 and because of the war, the defendants were unable to find sub- tenants for the flats and unable in consequence to pay the rent. The plaintiffs agreed at the request of the defendants to reduce the rent to &. 1250/- from the beginning of the term. By the beginning of 1945 the conditions had improved and tenants had been found for all the flats and the plaintiffs, therefore, claimed the full rent of the premises from the middle of that year. The claim was allowed because the court took the view that the period for which the full rent was claimed fell out side the representation, but Mr. Justice Denning, as he then was, considered Obiter whether the plaintiffs could have recovered the covenanted rent for the whole period of the lease and observed that in equity the plaintiffs could not have been allowed to act inconsistently with their promise on which the defendants had acted. It was pressed upon the Court that according to the well settled law as laid down in Jorden y. Money(1), no estoppel could be raised against plaintiffs since the doctrine of estoppel by representation is applicable only to representations as to some state of facts alleged to be at the time actually in existence and not to promises de futuro which, if binding at all, must be binding only as contracts and here there was no representa- 660 tion of an existing state of facts by the plaintiffs but it was merely a promise or representation of intention to act in a particular manner in the future. Mr. Justice Denning, however, pointed out:

"The law has not been standing still since Jorden v. Money. There has been a series of decisions over the last fifty years which, although they are said to be cases of estoppel are not really such. They are cases in which a promise was made which was intended to create legal relations and which, to the knowledge of the person making the promise, was going to be acted on by the person to whom it was made, and which was in fact so acted on. In such cases the courts have said that the promise must be honoured." The principle formulated by Mr. Justice Denning was, to quote his own words, "that a promise intended to be binding, intended to be acted on and in fact acted on, is binding so far as its terms properly apply". Now Hughes v. Metropolitan Railway Co. (supra) and Birmingham and District Land Co. v. London & North Western Rail Co. (supra), the two decisions from which Mr. Justice Denning drew inspiration for evolving this new equitable principle, were clearly cases where the principle was applied as between parties who were already bound contractually one to the other. In Hughes v. Metropolitan Railway Co. (supra) the plaintiff and the defendant were already bound in contract and the general principle stated by Lord Cairns, L.C. was:

"If parties who have entered into definite and distinct terms involving certain legal results afterwards-enter upon a course of negotiations".

Ten years later Bowen, L. J. also used the same terminology in Birmingham and District Land Co. v. London and North Western Rail Co. (supra) that:

"If persons who have contractual rights against others induce by their conduct those against whom they have such rights to believe-----".

These two decisions might, therefore, seem to suggest that the doctrine of promissory estoppel is limited in its operation to cases where the parties are already contractually bound and one of the parties induces the other to believe that the strict rights under the contract would not be enforced. But we do not think any such limitation can justifiably be introduced to curtail the width and amplitude of this doctrine. We fail 661 to see why it should be necessary to the applicability of this doctrine that there should be some contractual relationship between the parties. In fact Donaldson, J.

pointed out in Durham Fancy Goods Ltd. v. Michael Jackson (Fancy Goods) Ltd. (1) :

"Lord Cairns in his enunciation of the principle assumed a pre-existing contractual relationship between the parties, but this does not seem to me to be essential, provided that there is a pre-existing legal relationship which could in certain circumstances give rise to liabilities and penalties." But even this limitation suggested by Donaldson, J.

that there should be-a pre-existing legal relationship which could in certain circumstances give rise to liabilities and penalties is not warranted and it is significant that the statement of the doctrine by Mr. Justice Denning in the High Trees' case does not contain any such limitation. The learned Judge has consistently refused to introduce any such limitation in the doctrine and while sitting in the Court of Appeal, he said in so many terms, in Evenden v. Guildford City Association Football Club Ltd.(2) "Counsel for the appellant referred us, however, to the second edition of Spencer Bower's book on Estoppel by Representation[(1966) pp. 340-342] by Sir Alexander Turner, a judge of the New Zealand Court of Appeal. He suggests the promissory estoppel is limited to cases where parties are already bound contractually one to the other. I do not think it is so limited : see Durham Fancy Goods Ltd. v. Michael Jackson (Fancy Goods) Ltd. It applies whenever a representation is made, whether of fact or law, present or future, which is intended to be binding, intended to induce a person to act on it and he does act on it." This observation of Lord Denning clearly suggest that the parties need not be in any kind of legal relationship before the transaction from which the promissory estoppel takes its origin. The doctrine would seem to apply even where there is no pre-existing legal relationship between the parties, but the promise is intended to create legal relations or affect a legal relationship which will arise in future. Vide Halsbury's Laws of England, 4th ed. Vol. 16 p.

1018, Note 2 para 1514. Of course it must be pointed out in fairness to Lord Denning that he made it clear 662 in the High Trees' case that the doctrine of promissory estoppel cannot found a cause of action in itself, since it can never do away with the necessity of consideration in the formation of a contract, but he totally repudiated in Evenden's case the necessity of a pre-existing relationship between the parties and pointed out in Crabb v. Arun District Council(1) that equity will in a given case where justice and fairness demand, prevent a person from insisting on strict legal rights even where they arise, not under any contract, but on his own title deeds or under statue. The true principle of promissory estoppel, therefore seems to be that where one party has by his words or conduct made to the other a clear and unequivocal promise which is intended to create legal relations or affect a legal relationship to arise in the future, knowing or intending that it would be acted upon by the other party to whom the promise is made and it is in fact so acted upon by the other party, the promise would be binding on the party making it and he would not be entitled to go back upon it, if it would be inequitable to allow him to do so having regard to the dealings which have taken place between the parties,