[Commercial Law Monologues] “Waiver by election” – A species of Election invoked less frequently in India

Election can be broadly categorised into four categories – (1) election between rights, (2) election between estates, (3) election between remedies, and (4) election in procedure.

Election between rights applies where the elector has inconsistent rights available to her and she chooses one out of these inconsistent rights. Election between estates, is a form of equitable election, which applies when a person receives property by way of an instrument which purports to dispose of some property in her favour [recognised in Section 35 of the Transfer of Property Act, 1882, as amended (“Transfer of Property Act”)]. Election between remedies occurs when a person chooses one out of several inconsistent remedies available to her under law for the same cause of action. Lastly, election in procedure occurs when a choice is made during proceedings before a final award or judgment is returned [See Chapter 14, Election, Estoppel by Conduct and Election by Justice Handley at page 229, placitum 14-001].

Lord Goff of Chievely observed in Motor Oil Hellas (Corinth) Refineries SA v. Shipping Corpn of India (The Kanchenjunga), reported at [1990] Lloyd’s Rep 391 (“The Kanchenjunga”) at page 398, that election is a concept that may be relevant in more than one context.

The Supreme Court of India, in Nagubai Ammal v. Shama Rao, reported at (1956) 1 SCC 698, at paragraph 9.15, also recognised that “approbate and reprobate” is not the only form of election. Yet, Indian jurisprudence appears to place great emphasis on the concept of the elector having taken a benefit out of an election, restricting the concept largely to cases of “approbate and reprobate.”

The principle of “approbate and reprobate”, which is just one species of estoppel, operates in the following manner: (a) a person who has a choice between two courses of conduct, is considered to have made an election from which she cannot resile, but (b) she will not be regarded to have made such an election unless she has taken a benefit under or arising out of the course of conduct, which she has pursued, with which her subsequent conduct is inconsistent [See Prashant Ramachandra Deshpande v. Maruti Balaram Haibatti, reported at 1995 Supp (2) SCC 539 (“Prashant Ramachandra Case”),  at paragraph 2].

In Kammins Ballrooms Co. Ltd. v. Zenith Investments (Torquay) Ltd., reported at [1970] 2 All ER 871 (“Kammins Ballrooms Case”), at page 894, placitum d, e, f, Lord Diplock explained that waiver operates as election in a situation where a person is entitled to alternative rights inconsistent with one another, and operates when a person “has knowledge of the facts which give rise in law to these alternative rights and acts in a manner which is consistent only with his having chosen to rely on one of them.”

Election in this form is not based on the principle of equity or on the principle of the elector having taken any benefit, based on “approbate and reprobate. 

This principle was further affirmed by the House of Lords in 1990 by Lord Goff of Chievely in The Kanchenjunga at pages 397 to 399, and in 2008 by Rix LJ, in Kosmar Villa Holidays Plc v. Trustees of Syndicate, reported at [2008] Bus LR 931, at paragraphs 36, 37, 38.

A Constitution Bench of the Supreme Court of India, in Supdt. of Taxes v. Onkarmal Nathmal Trust, reported at (1976) 1 SCC 766 (“Supdt. Of Taxes Case”), at paragraphs 26, 27, recognised the principle of waiver by election in India by taking note of the decision of the House of Lords in the Kammins Ballrooms Case.

Recently, in Kanchan Udyog Ltd. v. United Spirits Ltd., reported at (2017) 8 SCC 237 (“Kanchan Udyog Case”), at paragraph 23, the Supreme Court re-iterated that “waiver sometimes partakes of the nature of an election.”

However, an examination of case law on the subject reveals that despite the recognition of waiver by election under Indian law, courts have generally restricted the application of the doctrine of election to cases of “approbate and reprobate” even in cases where waiver by election was attracted in the facts of a case.

For example, in Cauvery Coffee Traders, Mangalore v. Hornor Resources (International) Company Limited, reported at (2010) 11 SCC 420, at paragraphs 34, 35, the Supreme Court of India applied the equitable principle of approbate and reprobate to hold that a party was not allowed to accept and reject an agreement of price adjustment between the parties. It held that “………the doctrine of election is based on the rule of estoppel, the principle that one cannot approbate and reprobate inheres in it. The doctrine of estoppel by election is one of the species of estoppel in pais (or equitable estoppel), which is a rule in equity. Taking inconsistent pleas by a party makes its conduct far from satisfactory. Further, the parties should not blow hot and cold by taking inconsistent stands and prolong proceedings unnecessarily.”

The application of the principle of waiver by election instead of “approbate and reprobate” in this case would result in the same conclusion. The undue emphasis on taking a benefit as an ingredient of election is a result of the jurisprudence underlying Section 35 of the Transfer of Property Act [See Prashant Ramchandra Case at paragraph 2]. However, the principle of election cannot be restricted to such cases alone.

The jurisprudential basis for holding that parties in a purely commercial transaction are not entitled to choose inconsistent courses of action, is based on the principle of waiver by election and is not dependent on the elector having taken any benefit from the election alone.

When election operates as a form of waiver, the only ingredients required are (a) unequivocal conduct, and (b) requisite knowledge.

Even in English law, the principle that election can take place even without a clear benefit was recently re-iterated by the High Court of England and Wales in MPB v. LGK, reported at [2020] EWHC 90 (TCC), at paragraph 58, which has been noted by the Supreme Court of India in Adani Gas Ltd. v. Union of India, reported at (2022) 5 SCC 210, at paragraph 124 (“Adani Gas Case”).

It is likely that in an appropriate case, the Supreme Court of India will apply the principle of waiver by election, which appears to be a natural progression from the decisions in the Supdt. Of Taxes Case, Kanchan Udyog Case and Adani Gas Case. In addition to the principles recognised in English law, Supreme Court of India will develop its own jurisprudence on waiver by election, specific to the Indian context.

Gaurav Pachnanda is a Senior Advocate, based in New Delhi, whose practice is focussed on a wide range of commercial litigation.