2007 (8) TMI 732 - SC - Indian Laws

Whether the finding that the appellants are estopped from claiming the Kist amounts in terms of the contracts between the parties is found to be wholly unsustainable?

Summary

Issues Involved:
1. Promissory Estoppel
2. Rectification of Contract
3. Breach of Contract
4. Government Policy and Enforcement

Detailed Analysis:

1. Promissory Estoppel:
The plaintiffs, excise contractors, claimed that the State of Karnataka was estopped from collecting higher Kist amounts based on a budget speech by the Finance Minister proposing a ban on toddy sales. They argued that they bid higher amounts for the right to vend arrack based on this promise. The courts below upheld this plea, but the Supreme Court found it unsustainable. The Supreme Court noted that a minister's speech in the Assembly does not constitute a promise or representation that can attract the principle of promissory estoppel. The court cited previous rulings, including *Express Newspapers Pvt. Ltd. vs. Union of India* and *Union of India vs. Ganesh Rice Mills*, which established that government policy statements do not create enforceable promises.

2. Rectification of Contract:
The plaintiffs sought rectification of the contract to reflect the Kist amounts of the previous year (1989-90), arguing that the government's failure to enforce the toddy ban constituted a mutual mistake. The Supreme Court held that rectification under Section 26 of the Specific Relief Act requires proof of fraud or mutual mistake, neither of which was present. The written contracts did not include any terms about the toddy ban, and the plaintiffs entered the contracts with full knowledge of the ongoing toddy tappers' agitation. The court emphasized that the plaintiffs had no basis for rectification since the contracts were clear and unambiguous.

3. Breach of Contract:
The plaintiffs argued that the government's failure to enforce the toddy ban rendered the contract impossible to perform, excusing them from paying the higher Kist amounts. The Supreme Court rejected this argument, stating that the plaintiffs had not demonstrated any detriment or loss due to the government's actions. The court noted that the plaintiffs continued to vend arrack and pay the Kist amounts for July and August 1990, indicating their acceptance of the contract terms. The court also pointed out that the plaintiffs had not proven any direct connection between toddy sales and arrack sales.

4. Government Policy and Enforcement:
The plaintiffs contended that the government's failure to enforce the toddy ban violated the policy announced in the budget speech. The Supreme Court found that the government had not resiled from its policy objective but faced practical difficulties in enforcement. The court held that the plaintiffs' remedy, if any, lay in claiming damages for any losses suffered due to the government's failure to enforce the policy, not in seeking rectification or estoppel. The court emphasized that government policies are subject to change and do not create enforceable contractual obligations.

Conclusion:
The Supreme Court allowed the appeals, set aside the judgments and decrees of the lower courts, and dismissed the suits filed by the plaintiffs. The court found no basis for promissory estoppel, rectification of the contract, or breach of contract. The plaintiffs were ordered to pay costs of Rs. 50,000/- in each appeal.