State of Punjab v Nestle India Ltd.

Facts

• The State of Punjab had made representations or assurances relating to purchase tax concessions or exemptions to encourage industries, including Nestle India, to invest and establish operations
• The state subsequently sought to withdraw or modify these concessions, prompting the affected company to invoke promissory estoppel, arguing it had altered its position in reliance on the government's clear representations

Issue

1. Whether the doctrine of promissory estoppel can bind a state government with respect to representations made to induce investment, and under what circumstances the government can be permitted to resile from such representations.

Held

• The Supreme Court held that promissory estoppel can indeed operate against the government, where the government has made a clear, unambiguous, and unequivocal promise or representation, and the affected party has altered its position in reliance on that promise, to its detriment
• However, the government is not absolutely bound; it may be permitted to resile from its promise where doing so is necessary in the larger public interest
• The burden of establishing such overriding public interest rests squarely on the government, and it must be demonstrated with cogent material, not asserted as a bare, unsubstantiated claim
• On the facts, the Court examined whether the state had discharged this burden in seeking to withdraw the tax concession earlier promised

Ratio Decidendi

Promissory estoppel applies against the government where it has made a clear promise inducing detrimental reliance by a party, but the government may resile from such a promise if it can demonstrate, with cogent material, that overriding public interest requires it; the burden of proving this public interest justification lies on the government.