Vedanta wanted bauxite at the price promised in a 2003 MoU. The Orissa High Court holds promissory estoppel does not reach the pricing of a national asset
Chief Justice Harish Tandon and Justice Murahari Sri Raman dismiss a challenge to the statutory average sale price, holding the doctrine cannot bind the Government as custodian of natural resources.
Vedanta Limited, which runs an alumina refinery at Lanjigarh in Kalahandi, asked the Orissa High Court to hold the Odisha Mining Corporation to assurances about bauxite pricing given in memoranda of understanding signed from 2003 onwards, and to strike down the demand raised on it under the statutory formula. A Division Bench of Chief Justice Harish Tandon and Justice Murahari Sri Raman has dismissed the petition. The judgment accepts that promissory estoppel binds the Government and public authorities as much as private parties, and then marks out the territory the doctrine cannot enter: it does not apply to the utilisation of natural resources, which are the wealth of the nation and which the Government holds as custodian.
A refinery, a joint venture, and a statute that changed
The dispute runs back more than two decades. The original memorandum of understanding was executed on 7 June 2003. It was superseded by a further memorandum of 4 April 2007, which on the respondents' case ceased to exist by efflux of time after two years, no extension ever having been granted by the State Government. Alongside those instruments were joint venture company agreements of 5 October 2004 and 18 February 2009 between the Corporation and the company then known as Sterlite Industries, later Vedanta.
Then the statute changed. With effect from 12 January 2015 the Mines and Minerals (Development and Regulation) Act, 1957 was amended. Relying on Section 17-A(2-B) of the amended Act and on the company's non-fulfilment of its obligations, the Corporation terminated the joint venture agreements by a letter of 29 and 30 September 2015, after giving the company an opportunity to be heard. That letter recorded in express words, with representatives of the company present, that the joint venture agreement stood terminated.
What happened next is the hinge of the case. The termination was never challenged. Representations were pursued afterwards, but nothing came of them. And in 2018 the company agreed to receive bauxite under the Long Term Linkage Policy of that year — the regime that had replaced the arrangements it was now trying to revive.
The demand under challenge was computed under the statutory machinery. Section 17-A of the MMDR Act read with Rule 45 of the Minerals (Other than Atomic and Hydro Carbons Energy Minerals) Concession Rules, 2016 prescribes how the average sale price is arrived at. For metallurgical grade bauxite used in alumina and aluminium extraction, the formula substituted by notification in September 2019 requires the State Government to take 52.90 per cent, multiplied by the percentage of alumina in the bauxite on a dry basis, multiplied by the average aluminium price in rupees for the month as published by the Indian Bureau of Mines, multiplied by a conversion factor notified by the Central Government and fixed at 6.40 per cent.
The company's position, as the Bench summarised it, was that having agreed in 2018 to take bauxite under the new policy, it nonetheless sought to revive its rights under the initial assurances given before the 2015 amendment, and had been representing to the Government of Odisha for resurrection of the joint venture company so as to obtain supply at the old price.
The company's case, and the Corporation's answer
The petitioner's case rested on the assurances. Its position was that the memoranda and the joint venture agreements had induced it to establish and operate an alumina refinery of a particular scale at Lanjigarh on the understanding that bauxite would be made available on the terms then agreed, and that having altered its position on the strength of those assurances it was entitled to hold the State and the Corporation to them. The doctrine of promissory estoppel, on that argument, is not confined to private dealings but binds public authorities, and can be used affirmatively rather than merely as a shield.
The respondents met it on three fronts, and each was accepted. The original memorandum of June 2003 stood superseded by the memorandum of April 2007. That later memorandum itself became non-existent by lapse of two years, no extension having been granted by the State Government. And the joint venture agreements were lawfully terminated in September 2015 under Section 17-A(2-B) of the amended MMDR Act for non-fulfilment of obligations by the petitioner, after due opportunity to it and its representatives.
Those three propositions, if correct, leave nothing on which an estoppel could rest: no subsisting promise, and no instrument capable of being enforced. The company's response was not to challenge the termination but to seek the revival of the joint venture company by representation to the Government — which is the conduct the Bench went on to characterise as inconsistent.
What promissory estoppel can and cannot do
The judgment devotes its central section to the doctrine itself, working through Union of India v. Godfrey Philips India, Hero Moto Corp Limited v. Union of India, a Division Bench decision of the same Court, Manuelsons Hotels Private Limited v. State of Kerala and the recent decision in Rupesh R. Gaonkar v. State of Goa.
From Manuelsons Hotels the Bench set out the propositions on estoppel by conduct at length — among them that the central principle is that the party raising the estoppel must have been induced to assume a state of affairs; that an estoppel will not arise unless the assumption was adopted as the basis of action or inaction; that the assumption may be of fact or of law, present or future; that the doctrine should be seen as a unified one rather than a set of disconnected rules; and that estoppel by conduct does not of itself constitute a cause of action.
The cumulative effect, the Bench held, leaves no ambiguity that promissory estoppel is a valid doctrine whose applicability is not confined to private individuals but extends to the Government and public authorities, and that as a sound principle of law it can be used as a sword and may form an integral part of a cause of action.
The exceptions are where the case turned. The doctrine is founded on the conduct of a party who was induced to alter its position to its prejudice, but it does not apply where the object is to prevent fraud or misrepresentation. It loses its applicability where the promise is contrary to statutory provisions, or where an overwhelming larger public interest is at stake. And then the proposition that decides this petition: it would not be applicable in relation to the utilisation of natural resources, which are the wealth and asset of the nation, the Government acting as custodian.
The authorities the Bench worked through pull in both directions, which is why the exercise occupies so much of the judgment. Godfrey Philips belongs to the line establishing that the doctrine runs against the Government. Hero Moto Corp is treated separately, the Bench noting that a common thread runs through these decisions notwithstanding their different outcomes. A Division Bench decision of the same Court is cited for the observation that what was being sought there was, indirectly and subtly, the very relief the prayers could not openly claim — a characterisation that maps closely onto the present petitioner's attempt to reach the old price by way of reviving a terminated joint venture.
The structure of the doctrine as set out in Manuelsons Hotels also matters to the result. If an estoppel does not arise unless the assumption was adopted as the basis of action or inaction, then a party that has demonstrably acted on a different basis — here, on the 2018 policy — has difficulty establishing the foundation. And if estoppel by conduct does not of itself constitute a cause of action, a petition framed as an enforcement of assurances needs some other legal footing, which the Bench found absent once the instruments had gone.
Two independent answers on the facts
Having stated the principle, the Bench examined whether, on the conduct of the parties and the statutory provisions on pricing, the plea of promissory estoppel had any leg to stand upon. It found two independent reasons why not.
The first is acquiescence. The company admitted in its written note of submissions that in 2018 it agreed to receive bauxite under the Long Term Linkage Policy. By participating in the later process laid down by the amended provisions, the Bench held, it acquiesced by its own conduct. That is particularly so because the termination of the joint venture company was decided in the presence of the company's own representatives, and its validity in 2015 was never questioned.
The second is finality. The termination letter of September 2015 said in unambiguous terms that the agreement stood terminated. Representations followed but nothing tangible occurred to reverse the position. In the absence of any prayer seeking indulgence against that termination, the Court declined to exercise its power under Articles 226 and 227 of the Constitution. After a long lapse of time, the Bench held, the company cannot seek revival or indirect enforcement of the agreements and memoranda.
For that proposition the judgment draws on Jaya Chandra Mohapatra v. Land Acquisition Officer, where the Supreme Court held that an order allowed to attain finality cannot be reagitated collaterally, and that in a case of that nature the principle of estoppel by records comes into play. The Bench described the company's position as an inconsistent stand — taking supply under the new regime while asking to be restored to the old price.
On the demand itself the conclusion was short. In terms of Section 17-A of the MMDR Act read with Rule 45 of the 2016 Concession Rules, which supply the modality for computing the average sale price, the respondents were justified in raising it.
That brevity is itself the point. Once the Bench had held that the pre-2015 instruments were gone and that the statutory formula governed, there was no room left for argument about quantum, because the formula leaves none. Each of its inputs is externally fixed — the alumina content of the bauxite on a dry basis, the monthly average aluminium price as published by the Indian Bureau of Mines, and a conversion factor notified by the Central Government. The State Government does not price the mineral; it applies a calculation. A demand computed that way can be challenged for arithmetic or for the use of a wrong input, but not on the footing that a different price had once been promised.
Why the custodian point matters to the result
It is worth being precise about the work the natural-resources exception does here, because the Bench did not rest on it alone.
Even without it, the petition would have failed on acquiescence and on the finality of an unchallenged termination. What the exception adds is a reason of a different order: that the subject matter of the alleged promise — the price at which a mineral is made available — is not something the State can bargain away by assurance, because the mineral is not the State's to give on terms of its own choosing. Pricing under Section 17-A and Rule 45 is a statutory computation, and a promise contrary to statutory provisions is one of the recognised situations in which the doctrine does not operate.
That framing is what converts a long-running contractual grievance into a question about the limits of a public authority's power to commit itself. The Bench's answer is that where the asset is the nation's wealth and the Government is its custodian, an inducement to alter position cannot be converted into an entitlement to a price the statute no longer permits.
Order
Finding no merit in the writ petition, the Division Bench dismissed it. The interim orders passed in the matter stand vacated — which matters, because interim protection in a pricing dispute of this kind is what keeps a demand from being enforced while the petition is heard, and the petition had been pending since 2023.
The respondents are at liberty to take follow-up action in accordance with law — which, read with the finding on the demand, leaves the Corporation free to proceed on the average sale price computed under the statutory formula. Pending interlocutory applications were disposed of.
For long-term mineral supply arrangements entered into before the 2015 amendment, the judgment marks out what cannot be recovered through Article 226. A terminated joint venture that was allowed to attain finality cannot be revived indirectly by representation; participation in a successor policy forecloses an argument that the earlier regime still governs; and an assurance about price, however clearly given and however substantially acted upon, cannot displace a statutory formula where the subject matter is a mineral the Government holds in trust. The company's remedy, if it has one, lies in the correctness of the computation rather than in the history of the promises.