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M/S Manuelsons Hotels Private Limited v. State of Kerala

Civil Appeal · Neutral citation not assigned (Civil Appeal No. 2480 of 2008)Decided 11 May 2016
Civil Appeal No. 2480 of 2008
Justice A.K. Sikri · Justice Rohinton Fali Nariman

Background

In 1986, the Kerala Government issued an order declaring tourism an "industry" and promising tax concessions, including exemption from Building Tax, to hotels set up in reliance on it. The appellant built a 3-star hotel in Calicut relying on this promise, completing construction in 1991. The Kerala Buildings Tax Act was amended in 1990 to allow such exemptions, but the Government never actually issued the notification granting the appellant's hotel the promised exemption, and the exemption provision was later deleted from the statute in 1993.

Decision Breakdown

The Supreme Court held that the Government's failure to issue the exemption notification was an arbitrary, unconscionable act, since the hotel had been built in genuine reliance on the Government's own promise. Applying the doctrine of promissory estoppel (as laid down in Motilal Padampat and Nestle), the Court ruled that the appellant could not be made to pay building tax for the period the exemption provision (Section 3A) remained on the statute book, i.e., from 6 September 1990 to 1 March 1993. However, for the period after the provision was deleted in 1993, no relief could be granted since promissory estoppel cannot override a valid statute. The appeal was allowed to this limited extent and the High Court's judgment set aside.

Lesson Learnt

A citizen or business that builds investments in genuine reliance on an official government promise can hold the government to that promise through the doctrine of promissory estoppel, but only for as long as the law actually permits that relief; once a statute removes the basis for it, the promise cannot be enforced beyond that point.

Official source (sci.gov.in)View Judgment (PDF)

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