What is the core legal rule from this case?

Promissory estoppel can bind the Government when it makes a clear promise intending reliance, the promisee relies and changes position, and it would be inequitable to resile.

Does Article 299 block promissory estoppel?

No. Even without a formal contract under Article 299, a clear promise with reliance may estop the Government if equity demands.

Did accepting a partial concession waive the exemption?

No waiver. The company never abandoned the promise-based claim; it acted under pressure and kept asserting full exemption.

What did the Court finally grant?

Relief based on promissory estoppel—entitlement to the sales tax exemption promised for the new plant established in Uttar Pradesh.

mp-sugar-mills-v-state-of-uttar-pradesh

M.P. Sugar Mills v. State of U.P.

AIR 1979 SC 621 — Promissory Estoppel • Government Promise • Sales Tax

Supreme Court of India 1979 AIR 1979 SC 621 Administrative • Contract ~7 min India

Author: Gulzar Hashmi • Published: 26 Oct 2025

Quick Summary

Uttar Pradesh promised sales tax exemption for new industries. Trusting this, M.P. Sugar Mills invested heavily and set up a plant. The State later cut the benefit and then withdrew it. The Supreme Court said: promissory estoppel stops the Government from going back on such a clear promise when the company reasonably relied and changed its position.

Issues

Can the company rely on promissory estoppel against the Government?
Did accepting partial concession mean the company waived full exemption?

Rules

When Government makes a clear promise intending reliance, and the promisee relies and alters position, the Government may be estopped from resiling, if equity so demands—even without consideration or a formal Article 299 contract.
Mere acceptance of a temporary, partial benefit does not automatically waive the right to the promised exemption.

Equity controls: court asks what is fair in light of reliance and change of position.

Facts — Timeline

Promise → Reliance → Partial Relief → Withdrawal → Suit

10 Oct 1968: News reports U.P. Govt policy: 3-year sales tax exemption for new units.

11 Oct 1968: Company seeks confirmation; Director of Industries and later Chief Secretary give clear assurances.

Reliance: Company borrows funds, buys machinery, sets up new Vanaspati plant in U.P.

May 1969: Govt rethinks; company stresses it relied on the assurances.

20 Jan 1970: Govt grants only partial concession; company starts production (2 Jul 1970).

12 Aug 1970: Govt withdraws concessions. Company files; High Court dismisses writ.

Supreme Court: Allows appeal; promissory estoppel applies; exemption must stand.

Timeline of government promise, reliance, partial concession and withdrawal

Arguments

Appellant (M.P. Sugar Mills)

Clear Govt promise; intended reliance; heavy investment made.
Equity forbids withdrawal; Article 299 formality not needed for estoppel.
Partial concession taken under compulsion; no waiver of full rights.

Respondent (State of U.P.)

Policy-level statements; no binding contract under Article 299.
Public interest allows change of policy.
Acceptance of partial relief amounts to waiver.

Judgment

For the Appellant

The Supreme Court applied promissory estoppel. The Government’s categorical promise led the company to alter its position. It would be unfair to let the State retract. The company was entitled to the sales tax exemption for its new unit. Accepting a partial concession did not waive the full benefit.

Judgment concept image: government bound by promise due to reliance

Ratio (Legal Principle)

Governmental Promissory Estoppel: A clear promise made with intent to induce action, in fact relied upon to the promisee’s detriment, can bind the State in equity—even absent consideration or a formal Article 299 contract.

Why It Matters

Protects investors who act on official assurances.
Holds the State to fair dealing; boosts policy credibility.
Clarifies that Article 299 formalities do not kill equitable relief.

Key Takeaways

Clear promise + intended reliance + change of position → Estoppel.
Equity may bind Government without consideration.
Partial acceptance ≠ waiver, if protest and claim persist.

Mnemonic + 3-Step Hook

Mnemonic: “PROMISE → RELY → BIND.”

Promise: Govt makes a clear assurance.
Rely: Promisee invests/acts and cannot be put back.
Bind: Equity stops Govt from resiling if unfair.

IRAC Outline

Issue

Can the State be estopped from withdrawing sales tax exemption promised to a new unit?

Rule

Promissory estoppel binds Govt where reliance and inequity are shown, despite lack of Article 299 contract.

Application

Assurances led to loans, machinery purchase, and a new plant; withdrawal would be unfair and harmful.

Conclusion

Estoppel applies; company entitled to the exemption promised.

Glossary

Promissory Estoppel: A promise enforced by equity when reliance makes it unfair for the promisor to back out.
Article 299: Constitutional provision on formal government contracts; absence of form does not defeat equitable estoppel.
Waiver: Intentional giving up of a right; taking partial relief does not by itself prove waiver.