Jurisdiction U/Art 226 Not Confined To Administrative, Executive Actions Of State, Also Extends To Promissory Estoppel: J&K High Court

Justice Wasim Sadiq Nargal observed that jurisdiction under Article 226 can be invoked to ensure that the government abides by its promises. 

“The jurisdiction of the High Court while exercising the powers under Article 226 of the Constitution of India is not restricted only to the review of the administrative actions and executive decisions of the State but also extends to the applicability of the "doctrine of promissory estoppels" of which the whole object is to see that the Government sticks to its promise and abides by it”.

The petition was filed by a group of hotel and guesthouse owners who faced financial hardships due to the government's failure to fulfil promises made under a special tourism revival scheme.

They claimed that their establishments were duly registered and that the hotel industry, especially in the Kashmir Valley, had suffered due to the turmoil since 1990. To revive tourism in the area, the Union Government sanctioned a special package in 2003. This package included soft loans for renovation and refurbishment of hotels.

However, despite funds being allocated by the Centre for the interest subsidy, the money was diverted to other purposes, leaving the hotel owners in financial jeopardy.

The petitioners sought the release of the promised interest subsidies and requested the court to prevent any recovery actions by the lending banks. They argued that this was a violation of the principles of promissory estoppel, which holds that if one party makes a clear promise intended to create legal relations, and the other party relies on that promise to their detriment, the promising party cannot renege on the promise.

In response, the government admitted that they had not released the full interest subsidy as stipulated in the scheme due to a lack of funds. However, they did not dispute the petitioners' entitlement to the subsidy.

Justice Nargal emphasised that the doctrine of promissory estoppel applies to government actions, whether in its sovereign or business capacities. It highlighted that when the government makes a clear promise intending that it be acted upon and the promisee acts accordingly, altering their position, the government is bound by that promise.

Citing Union of India and Ors. v. Godfrey Philips India Ltd (1985), the bench asserted that the government cannot evade its obligations by invoking the doctrine of executive necessity or freedom of future executive action.

The bench also referenced Motilal Padampat Sugar Mills Co. (P) Ltd. Vs. State of U.P and Ors and reiterated that no distinction can be made between the exercise of a sovereign function and a trading or business activity of the Government.

"Whatever be the nature of the function which the Government is discharging, the Government is subject to the rule of promissory estoppel and if the essential ingredients of this rule are satisfied, the Government can be compelled to carry out the promise made by it.”

Thus, the court concluded that the government's failure to release the interest subsidy, despite the hotel owners meeting all eligibility criteria, was a breach of the principles of promissory estoppel.

Accordingly, it allowed the petition and directed the government to release the entire interest subsidy amount to the hotel owners through their respective banks within two months.

Case Title: Hotel Ashai Srinagar & Ors. Vs State of J&K

Citation: 2023 LiveLaw (JKL) 253

Counsel For Petitioners: Mr. Altaf Haqani, Sr. Advocate.

Counsel For Respondents: Mr. Ilyas Laway, GA, for R 1 -3. Mr. T.M.Shamsi, DSGI, for R-4. Ms. Izzat Fatima, Advocate, for R-

Case No: OWP No. 1518/2012 IA No. 1/2012

Click Here To Read/Download Judgment