The decision in Shree Sidhbali Steels carves out the ‘public interest’ exception in cases of promissory estoppel against Government. To which kind of cases have courts routinely applied this exception in favour of Governments?

Question

Indeed, in England, in the celebrated Sea Angel case, 2013 (1) Lloyds Law Report 569, the modern approach to frustration is well put, and the same reads as under: “In my judgment, the application of the doctrine of frustration requires a multi-factorial approach. Among the factors that have to be considered are the terms of the contract itself, its matrix or context, the parties’ knowledge, expectations, assumptions and contemplations, in particular as to risk, as at the time of the contract, at any rate so far as these can be ascribed mutually and objectively, and then the nature of the supervening event, and the parties’ reasonable and objectively ascertainable calculations as to the possibilities of future performance in the new circumstances. Since the subject matter of the doctrine of frustration is contract, and contracts are about the allocation of risk, and since the allocation and assumption of risk is not simply a matter of express or implied provision but may also depend on less easily defined matters such as “the contemplation of the parties”, the application of the doctrine can often be a difficult one. In such circumstances, the test of “radically different” is important: it tells us that the doctrine is not to be lightly invoked; that mere incidence of expense or delay or onerousness is not sufficient; and that there has to be as it were a break in identity between the contract as provided for and contemplated and its performance in the new circumstances.”
“… It is clear from the above that the doctrine of frustration cannot apply to these cases as the fundamental basis of the PPAs remains unaltered. Nowhere do the PPAs state that coal is to be procured only from Indonesia at a particular price. In fact, it is clear on a reading of the PPA as a whole that the price payable for the supply of coal is entirely for the person who sets up the power plant to bear. The fact that the fuel supply agreement has to be appended to the PPA is only to indicate that the raw material for the working of the plant is there and is in order. It is clear that an unexpected rise in the price of coal will not absolve the generating companies from performing their part of the contract for the very good reason that when they submitted their bids, this was a risk they knowingly took. We are of the view that the mere fact that the bid may be non-escalable does not mean that the respondents are precluded from raising the plea of frustration, if otherwise it is available in law and can be pleaded by them. But the fact that a non-escalable tariff has been paid for, for example, in the Adani case, is a factor which may be taken into account only to show that the risk of supplying electricity at the tariff indicated was upon the generating company”.
[Extracted from Energy Watchdog v. Central Electricity Regulatory Commission (2017) 14 SCC 80].

Answer 1

Courts often use the public interest exception for financial issues. This allows governments to break promises if public welfare or financial stability is threatened.
The correct answer is (A): Fiscal matters

Answer 2

The Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P. case is a key ruling regarding promissory estoppel. It established a legal precedent for holding governments to their word under specific circumstances.
The correct answer is (B): Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P., (1979) 2 SCC 409

Answer 3

Legally, the government must uphold its commitments through promissory estoppel, even without a formal contract or payment, if it's fair and legal.
Therefore, option (B) is correct: The government is bound by its promise, which can be enforced by the promisee, even without the usual requirements of consideration or a formal contract as per Article 299 of the Constitution.

Answer 4

Promissory estoppel allows the government to retract a promise if doing so serves the public interest, acknowledging that public good can outweigh individual claims.
The correct answer is (A): Promissory estoppel is weakened when the Government argues that reneging on its promise or actions is in the public interest.

Answer 5

Promissory estoppel is invalid when it contradicts statutes or laws, regardless of governmental representations. The doctrine yields to existing law.
The correct choice is (B): Estoppel cannot be used to invalidate a law, even if the government made the representation.

The decision in Shree Sidhbali Steels carves out the ‘public interest’ exception in cases of promissory estoppel against Government. To which kind of cases have courts routinely applied this exception in favour of Governments?

The Correct Option is A

Solution and Explanation

Which of the following is a landmark decision governing the law on promissory estoppel against Governments?

The Correct Option is B

Solution and Explanation

Which of the following statements reflect the correct position of law for promissory estoppel against Governments?

The Correct Option is B

Solution and Explanation

Which of the following statements is accurate in light of the passage?

The Correct Option is A

Solution and Explanation

Which of the following statements does not reflect the correct position of law?

The Correct Option is B

Solution and Explanation

Top Questions on Contract Law

Questions Asked in CLAT PG exam