Union of India v. Anglo Afghan Agencies

Case Title: Union of India v. Anglo Afghan Agencies[1]
Citation: AIR 1968 SC 718
Court: Supreme Court of India
Bench: J.C. Shah, V. Ramaswami & A.N. Grover, JJ.
Date of Judgment: 26 March 1968
Area of Law: Administrative Law / Contract Law (Doctrine of Promissory Estoppel)

Parties Involved:

Petitioner / Appellant:
Union of India

The Government of India, representing its administrative authorities responsible for implementing the Export Promotion Scheme. The Union was the appellant in this case, challenging the decision to grant full import entitlements to the exporter.

Respondent / Defendant:
Anglo Afghan Agencies

A private firm engaged in the export of woollen goods from India. The firm had participated in the government’s Export Promotion Scheme and claimed full import entitlements based on its export performance.

Facts of the Case:

• In 1962, the Government of India launched the Export Promotion Scheme under the Import Control Order, 1955[2], which promised incentives to exporters of woollen textiles to Afghanistan.
• The scheme was officially published in the Import and Export Trade Policy (1962–63)[3], stating that exporters would be granted import licenses for raw materials equal to 100% of the FOB (Free On Board) value of goods exported.
• Anglo Afghan Agencies, a private export firm, participated in this scheme and exported woollen goods worth 5,03,167 to Afghanistan.
• Relying on the assurance of full import entitlements, the firm applied for import licenses of raw materials worth the entire value of exports.
• However, the Government granted import licenses worth only 1,87,000, far below the promised entitlement, and provided no reasonable explanation for this reduction.
• The exporter argued that the promise made in the trade policy created a legitimate expectation, and by acting on that promise, they had altered their position to their detriment[4].
• Feeling unjustly treated, the firm filed a writ petition under Article 226 before the High Court. The matter eventually reached the Supreme Court of India, where the Union of India appealed against the High Court’s decision which favoured the exporter.

Issues Raised

The key legal questions before the Hon’ble Supreme Court were:

• Whether the Government of India was legally bound to honour the promise made under the Export Promotion Scheme regarding full import entitlement?[5]
• Can a representation made by the government in an official policy be enforced through the doctrine of promissory estoppel?[6]
• Does the failure to grant full import licenses, as promised in the scheme, amount to arbitrary and unfair administrative action?[7]

Arguments of the Parties

Petitioner / Appellant – Union of India:

• The Government argued that the Export Promotion Scheme was not a statutory contract, but merely a policy directive. Hence, it was not legally enforceable.
• It was argued that, in the absence of a formal contract executed in accordance with Article 299 of the Constitution[8], no legally binding agreement existed between the government and the respondent.
• The government claimed discretion in granting import licenses based on administrative and economic considerations, and that policy matters could not bind the State as a contract.
• Article 298[9] and Article 299[10] were referred to argue that governmental contracts must be in writing and executed in the name of the President to be enforceable.

Respondent / Defendant – Anglo Afghan Agencies:

• The firm argued that the Export Promotion Scheme created a clear and specific promise of granting import licenses equivalent to the value of exports.
• They invoked the doctrine of promissory estoppel, stating that they relied on the government’s promise, incurred expenses, and fulfilled export obligations based on it.
• The respondent contended that it would be unjust and arbitrary if the government were allowed to go back on its promise after inducing action from the exporter.
• Cited earlier judgments that established legitimate expectation and binding nature of representations made by the government to the public.

Judgment / Final Decision

• The Supreme Court rejected the Union of India’s appeal and affirmed the judgment in favour of Anglo Afghan Agencies, thereby upholding their entitlement under the scheme.
• The Court held that even though no formal contract under Article 299 of the Constitution was executed, the government was bound by its promise made through the Export Promotion Scheme.
• The Court applied the doctrine of promissory estoppel[11], stating that the government cannot refuse to carry out a promise when a party has relied on it and acted to its detriment.
• It ruled that executive actions must not be arbitrary, and even non-statutory representations made in official policies can be enforceable when they induce action.
• The Court instructed the government to fulfil its assurance by granting the respondent the complete import entitlement as per the original terms of the Export Promotion Scheme.

Legal Reasoning / Ratio Decidendi

• The Supreme Court held that even in the absence of a formal contract under Article 299 of the Constitution, a clear and definite representation made by the government, which induces action by a party, creates an obligation in law.
• The Court invoked the Doctrine of Promissory Estoppel, holding that when a person makes a definite promise intending legal consequences, and the other party relies on it and alters their position accordingly, the one making the promise is legally obligated to fulfil it.
• It ruled that government authorities cannot act arbitrarily, and non-statutory promises or policies published officially can still give rise to legitimate expectations.
• The Court emphasized that administrative discretion must be exercised fairly and reasonably, especially when public policies influence private decisions.
• Significant Principle Evolved:
  The Government is not above the law and can be held accountable for its promises, even in the absence of a formal contract.
• Important Precedents Cited:
  While this case itself became a foundational precedent, the Court referred to earlier English and Indian decisions supporting equitable principles, although specific case names were not elaborately mentioned.

Conclusion / Observations

The Union of India v. Anglo Afghan Agencies case marked a landmark moment in Indian administrative and contract law by affirming that the Government is bound by its promises, even in the absence of a formal contract. By applying the principle of promissory estoppel, the Supreme Court reinforced the idea that government bodies must uphold their assurances and conduct themselves with integrity and responsibility.

This judgment strengthened the trust between citizens and the State, establishing that arbitrary withdrawal from policy commitments would not be tolerated by courts. It also laid a foundational precedent for the evolving principle of legitimate expectation in Indian jurisprudence.

Reference(S):

[1] Union of India v Anglo Afghan Agencies AIR 1968 SC 718.

[2] Import and Export Control Order, 1955 (India).

[3] Import and Export Trade Policy, 1962–63 (India).

[4] Ridge v Baldwin [1964] AC 40 (HL)

[5] Union of India v Anglo Afghan Agencies AIR 1968 SC 718.

[6] Doctrine of Promissory Estoppel, see Hughes v Metropolitan Railway Co (1877) 2 App Cas 439 (HL).

[7] Central Inland Water Transport Corporation Ltd v Brojo Nath Ganguly AIR 1986 SC 1571 (fair administrative action).

[8] Article 299, Constitution of India, 1950.

[9] Article 298, Constitution of India, 1950.

[10] Article 299, Constitution of India, 1950.

[11] Doctrine of Promissory Estoppel, see Hughes v Metropolitan Railway Co (1877) 2 App Cas 439 (HL).