What is the core rule from this case?

The Supreme Court applied promissory estoppel against the government. If people act on a clear policy promise, the government must act fairly and cannot go back on it without lawful reason.

Is a formal contract needed to claim promissory estoppel?

No. The Court held that even without a formal contract, a clear representation in a policy can bind the government when exporters rely on it.

How did natural justice apply here?

The Textile Commissioner relied on an ex-parte report and did not hear the exporter. The Court said such action is arbitrary and violates fair hearing.

What is the citation and year of the decision?

AIR 1968 SC 718, decided by the Supreme Court of India.

Why is this case taught in administrative law?

It is an early and leading Indian case on promissory estoppel and legitimate expectation in government schemes.

Union of India v. Anglo-Afghan Agencies

Supreme Court of India

1968

Bench: 3-Judge

AIR 1968 SC 718

Admin Law • Contracts

~7 min read

promissory estoppel natural justice legitimate expectation export promotion scheme

Author: Gulzar Hashmi LOCATION: India PUBLISH_DATE: 23 Oct 2025 Slug: union-of-india-v-anglo-afghan-agencies

Union of India v. Anglo-Afghan Agencies hero image

Quick Summary

This case protects honest reliance on government policy. The Export Promotion Scheme promised full import entitlement for exports. The officer cut the entitlement using a report that was never shown to the exporter. The Supreme Court said this was unfair. The State cannot back out of a clear promise when people relied on it. Fair hearing is a must.

PRIMARY_KEYWORDS: promissory estoppel
SECONDARY_KEYWORDS: natural justice, legitimate expectation
PUBLISH_DATE: 23-10-2025
AUTHOR_NAME: Gulzar Hashmi
LOCATION: India

Issues

Does the Export Promotion Scheme create enforceable duties, or is it only administrative?
Was the Textile Commissioner arbitrary in cutting entitlement without fair hearing?
Is the government bound by its policy promise under promissory estoppel without a formal contract?

Rules

Promissory Estoppel: A clear promise in a policy, relied upon by citizens, can bind the State. The State should not go back without lawful cause.
Natural Justice: Hear the party. Show the material used against them. Decide fairly.
Legitimate Expectation: A consistent policy practice raises a fair expectation that must be respected unless justified.

Admin Law Fair Procedure

Facts (Timeline)

1962: Government launches Export Promotion Scheme for woolens. Promise: import entitlement = 100% of FOB value.

Jan 1963: Scheme extended to exports to Afghanistan with effect from 1 Oct 1962.

Sep 1963: M/s Indo-Afghan Agencies exports goods worth ₹5,03,471.73.

Later: Textile Commissioner issues entitlement of only ₹1,99,459 citing value doubts, based on an ex-parte report.

Afterwards: No notice. No hearing. Repeated representations fail.

High Court: Allows writ. Says government must honor the promise unless proper inquiry shows reason to reduce.

Supreme Court: Appeal by Union of India is dismissed.

Timeline of key facts in Union of India v. Anglo-Afghan Agencies

Arguments

Appellant: Union of India

Scheme is administrative; not enforceable as a contract.
Import entitlement can be reduced if values appear inflated.
No estoppel against the State in policy matters.

Respondent: Indo-Afghan Agencies

Clear promise: 100% entitlement of FOB value.
They relied on the scheme and exported goods.
Reduction relied on secret material; no hearing.
Promissory estoppel and natural justice bind the State.

Judgment

Appeal dismissed. The Supreme Court upheld the High Court. The government’s promise in the scheme is binding when exporters act on it. Even an executive scheme can create enforceable obligations. The Commissioner’s action was arbitrary. He must follow fair procedure and disclose the material.

Ratio (Key Rule)

Promissory estoppel applies against the government when there is a clear policy representation, reliance by citizens, and unfair withdrawal without lawful reason. Natural justice requires disclosure and hearing before cutting benefits under a scheme.

Why It Matters

Protects trust in government schemes.
Builds the base for legitimate expectation in India.
Sets due process for cutting policy benefits.

Key Takeaways

Policy promises can be enforceable.
State must act fairly and give a hearing.
Secret reports cannot decide rights.
No formal contract needed for estoppel.

Mnemonic + 3-Step Hook

Mnemonic: “PROMISE FAIRLY, PROVE OPENLY.”

Promise: Clear scheme promise = duty.
Fairly: Give notice + hearing.
Openly: Share the material relied on.

IRAC Outline

Issue

Is the government bound by its Export Promotion Scheme promise, and was the reduction without hearing valid?

Rule

Promissory estoppel + natural justice; legitimate expectation from consistent policy.

Application

Exporter relied on a clear 100% entitlement promise. Officer used an ex-parte report and gave no hearing. This is arbitrary and unfair.

Conclusion

Appeal dismissed. Promise enforced. Duty to follow fair procedure reaffirmed.

Glossary

Promissory Estoppel: Rule that stops a promisor from going back on a promise when the other party relied on it.
Natural Justice: Basic fairness: hear both sides and avoid secret material.
Legitimate Expectation: A fair expectation from consistent past practice or policy.