Whether the 15% concessional electricity charge incentive under Clause 16(a) of the Himachal Pradesh Industrial Policy, 2019 was intended for existing industrial units undergoing substantial expansion.
Whether the amendment notification dated April 29, 2022 (substituting “eligible enterprises” with “new enterprises”) applied retrospectively.
Whether the doctrine of promissory estoppel prevents the State from denying this concession to an expanding existing enterprise.
Decision: The Supreme Court allowed the appeal filed by the State of Himachal Pradesh, setting aside the judgment of the Himachal Pradesh High Court. The Court ruled that the expanding existing unit was only entitled to the power-consumption rebate under Clause 16(b), not the general tariff concession under Clause 16(a).
- Factual Matrix & Background
The State of Himachal Pradesh notified the Industrial Policy of 2019 and the corresponding 2019 Rules to attract industrial investment by offering various incentives.
Under Clause 16 of the unamended Policy, electricity incentives were divided into two categories:
- Clause 16(a): Provided that “eligible enterprises” would be charged energy charges 15% lower than the approved rate for a period of 3 years.
- Clause 16(b): Provided existing industrial consumers a rebate of 15% on energy charges specifically for additional power consumption beyond the level of the preceding financial year.
The Respondent (M/s Kundlas Loh Udyog), an existing industrial unit established in 2006, undertook a massive, government-approved expansion in 2020. The State issued a Commencement of Commercial Production (COP) Certificate on February 12, 2021, verifying that the expansion satisfied the necessary guidelines.
The Respondent claimed that as an “eligible enterprise” under the overall policy definitions, it was entitled to both the general 15% concession under Clause 16(a) and the incremental rebate under Clause 16(b). When the State electricity board resisted giving the Clause 16(a) concession, the Respondent approached the High Court. During the pendency of the writ petition, the State issued an amendment notification on April 29, 2022, replacing the phrase “eligible enterprises” with “new enterprises” in Clause 16(a) to clear any ambiguity. The High Court ruled in favor of the industry, striking down restrictive clauses and holding the amendment to be prospective. The State appealed to the Supreme Court.
- Arguments of the Parties
- The Appellants (State of Himachal Pradesh): Argued that the word “eligible” in the unamended Clause 16(a) was a typographical/drafting error that should have read “new”. The policy explicitly compartmentalized benefits for “new units” (general tariff reduction to help them launch) and “existing expanding units” (rebates on additional power consumption to encourage capacity upgrades). They contended the 2022 amendment was purely clarificatory and retrospective. Granting both benefits would result in an unintended, double fiscal concession.
- The Respondent (M/s Kundlas Loh Udyog): Argued that its rights had crystallized on February 12, 2021, when the COP Certificate was issued, long before the 2022 amendment. Because the amendment notification explicitly stated it would come into force with “immediate effect,” it must operate prospectively. Furthermore, they claimed the State was bound by the doctrine of promissory estoppel, as the company had irretrievably altered its position by investing heavily based on the clear text of the unamended 2019 Policy.
- Court’s Observations and Analysis
- True Scope of the Industrial Policy and Intent of Clause 16
The Supreme Court analyzed the structure of the policy alongside historical and contemporaneous tariff orders passed by the State Electricity Board. The Court observed that the scheme built a clear wall of separation between new and existing enterprises:
- Clause 16(a) was meant to act as a launchpad for fresh investments by granting a flat reduction on power charges.
- Clause 16(b) was structured around incremental consumption linked directly to expanded operations.
If the respondent’s interpretation were accepted, expanding units would reap a dual, overlapping financial windfall. The Court noted that the policy never intended to place an excessive and disproportionate fiscal burden on the State by letting a single class of industrial enterprise double-dip into cumulative electricity concessions.
- Nature and Effect of the 2022 Amendment
The Court held that the substitution of “eligible” with “new” in Clause 16(a) was purely clarificatory and did not create or destroy any substantive rights.
Key Distinction on Retrospectivity: While the overarching notification stated it had “immediate effect” (making some changes prospective), the correction in Clause 16 merely refined what the state had originally intended from day one. Because it was clarificatory, it naturally related back to the inception of the original 2019 policy. However, the Court marked a caveat that the specific 2022 amendment limiting the duration of Clause 16(b) benefits to three years for the first time was a substantive change and would apply prospectively.
- Inapplicability of Promissory Estoppel
The Court meticulously laid down 12 structural principles governing the doctrine of promissory estoppel against state entities. It reaffirmed that while governments can be bound to unequivocal promises if a citizen acts on them to their detriment, the doctrine cannot be weaponized to force the State into executing an interpretation that runs completely contrary to the text’s actual purpose.
Furthermore, the COP Certificate merely recognized the respondent as an expanded enterprise; it did not equal an official sanction or disbursement of a Clause 16(a) benefit, which requires distinct approvals under Rule 27 of the 2019 Rules. Since the respondent had already successfully received its legitimate expansion rebates under Clause 16(b), no inequity survived.
- Conclusion
The Supreme Court concluded that:
- Clause 16(a) benefits were always reserved exclusively for new enterprises.
- The 2022 amendment to Clause 16 was clarificatory and retrospective.
- The COP certificate did not create a vested right to a double benefit, and the plea of promissory estoppel failed.
The appeal by the State of Himachal Pradesh was allowed, and the judgment of the High Court was set aside.
2026 INSC 534
State of Himachal Pradesh & Ors. V. M/S Kundlas Loh Udyog (D.O.J. 25.05.2026)
