![Clause 16(a) Power Tariff Concession Only for New Units, Not Expanding Ones; No Estoppel: Supreme Court in State of Himachal Pradesh v. Kundlas Loh Udyog [2026 INSC 534]](/assets/images/article-criminal.svg)
Quick Answer: The 15% lower energy charges for three years under Clause 16(a) of the Himachal Pradesh Industrial Policy, 2019 were always meant only for new industrial enterprises; existing units undertaking substantial expansion get only the 15% rebate on additional consumption under Clause 16(b). The 29.04.2022 amendment replacing "eligible" with "new" was clarificatory and retrospective, a COP Certificate is not a sanction of the incentive, and promissory estoppel cannot create a benefit never intended for that class. The High Court judgment granting Clause 16(a) benefit to an expanding unit was set aside.
In State of Himachal Pradesh & Ors. v. M/s Kundlas Loh Udyog (2026 INSC 534), the Supreme Court held that Clause 16(a) of the Industrial Policy of 2019 and Rule 16(i)(a) of the 2019 Rules were intended only for new industrial enterprises, and that reading "eligible enterprises" to include expanding units would give the same class a double benefit alongside Clause 16(b) (paras 44–48, 64(i)). The amendment dated 29.04.2022 substituting "new" for "eligible" was clarificatory and relates back to the original policy, except the new three-year limit on the Clause 16(b) rebate, which is prospective (paras 50–51, 64(ii)). A Bench of Justice J.B. Pardiwala and Justice K.V. Viswanathan held that the COP Certificate did not crystallise any right without a sanction under Rule 27, and that promissory estoppel did not apply (paras 60–63, 64(iii)–(iv)).
Status: Judgment and order dated 07.05.2025 of the High Court of Himachal Pradesh in Civil Writ Petition No. 1667 of 2021 set aside; appeal by the State allowed (paras 2, 65).
Headnote: Concessional Electricity Tariff for Expanding Industries
Himachal Pradesh Industrial Policy, 2019 – Clauses 5(A), 5(B), 5(C), 16(a) and 16(b) – Rules regarding grant of incentives, concessions, facilities for investment promotion in Himachal Pradesh, 2019 – Rules 2(XII), 2(XIII), 2(XXXIX), 4(B), 4(F), 16(i) and 27 – Concessional rate of electricity charges – New industrial enterprise versus existing enterprise undertaking substantial expansion – "Eligible enterprises" – Drafting error – Clarificatory amendment dated 29.04.2022 – Retrospective operation – COP Certificate – Promissory estoppel – Double benefit.
Held: (i) The respondent, having commenced commercial production on 11.04.2006, was an existing industrial enterprise, and with an 88.69% increase in plant and machinery it was an "eligible enterprise" having undertaken substantial expansion (para 39).
(ii) Read with the contemporaneous tariff orders and the scheme of the Policy, Clause 16(a) was intended to operate in respect of new industrial enterprises alone, while Clause 16(b) gave expanding units a rebate of 15% on additional power consumption (paras 42–45).
(iii) Reading "eligible enterprises" in Clause 16(a) to include expanding units would give the same class a dual or overlapping benefit, obliterate the distinction between new and existing enterprises, and impose an unintended fiscal burden on the State (paras 46–48).
(iv) The amendment dated 29.04.2022 to Clause 16 and Rule 16 was clarificatory and relates back to the original policy, as shown by the amendments to Clause 16 not being italicised or underlined; only the new three-year limit on the Clause 16(b) benefit is substantive and prospective (paras 50–51, 64(ii)).
(v) The COP Certificate dated 12.02.2021 only recognised the respondent as an existing enterprise having undertaken substantial expansion; it was not a sanction of the Clause 16(a) benefit, which under Rule 27 had to be sanctioned by the Director of Industries, and no such sanction was granted (paras 60–61).
(vi) Promissory estoppel cannot be invoked to compel the State to grant a benefit never intended for the class to which the respondent belonged, particularly when it has already received the Clause 16(b) benefit (paras 62–63, 64(iv)).
(paras 39–65)
Case Details: State of Himachal Pradesh v. Kundlas Loh Udyog (2026 INSC 534)
Final Outcome: Appeal allowed; High Court judgment directing an enabling notification for the Clause 16(a) incentive and setting aside Clause 5B of the Policy and Rules 4(B)(b) and 4F of the 2019 Rules set aside (paras 2, 26, 65).
Case: State of Himachal Pradesh & Ors. v. M/s Kundlas Loh Udyog
Neutral Citation: 2026 INSC 534
Case No.: Civil Appeal No. ___ of 2026 (arising out of Special Leave Petition No. 26731 of 2025)
Court: Supreme Court of India (Civil Appellate Jurisdiction) – Reportable
Date of Decision: 25 May 2026
Bench: Justice J.B. Pardiwala (author) and Justice K.V. Viswanathan
Relevant Acts & Sections: Himachal Pradesh Industrial Policy, 2019 – Clauses 5 and 16; Rules regarding grant of incentives, concessions, facilities for investment promotion in Himachal Pradesh, 2019 – Rules 2(IV), 2(XII), 2(XIII), 2(XXXIX), 4(B), 4(F), 16(i) and 27; Amendment notification dated 29.04.2022
Impugned Order: Judgment and order dated 07.05.2025 of the High Court of Himachal Pradesh in Civil Writ Petition No. 1667 of 2021 (para 2)
Counsel: Mr. P Chidambaram, Mr. Kapil Sibal and Mr. Anup Rattan, Senior Advocates, with Mr. Vaibhav Srivastava, AAG, for the appellants; Mr. Navin Pahwa, Senior Advocate, for the respondent (paras 28, 32)
Source: Supreme Court of India
Key Holdings of the Supreme Court
- The respondent is an existing industrial enterprise that undertook substantial expansion, and so is an eligible enterprise under the Policy (para 39).
- Clause 16(a) and Rule 16(i)(a) were always meant only for new industrial enterprises; expanding units are covered by the rebate under Clause 16(b) (paras 44–45, 64(i)).
- The use of "eligible enterprises" in Clause 16(a) was an inadvertent error, and the State never intended to give double benefits to the same category (paras 43, 46, 48).
- The 29.04.2022 amendment to Clause 16 and Rule 16 is clarificatory and retrospective, except the three-year limit on the Clause 16(b) rebate, which is prospective (paras 50–51, 64(ii)).
- A COP Certificate is not a sanction of an incentive; no vested right arises without sanction under Rule 27 (paras 60, 64(iii)).
- Promissory estoppel does not apply where the benefit was never meant for the claimant class and its own class benefit has already been extended (paras 62–63, 64(iv)).
Brief Facts of the Case
The State notified the Industrial Policy of 2019 and the 2019 Rules on 16.08.2019. Clause 16(a) provided that eligible enterprises would be charged energy charges 15% lower than the approved charges for three years, and Clause 16(b) gave existing industrial consumers a 15% rebate on additional power consumption beyond the preceding financial year, with incentives to be notified by the State Electricity Board in yearly tariff orders (paras 8, 11, 13).
The respondent, a metal processing and stamping unit that commenced commercial production on 11.04.2006, applied for expansion on 01.06.2020. The expansion was approved on 13.07.2020, and on 12.02.2021 it was issued a certificate of substantial expansion (COP Certificate) (paras 7, 15, 19, 21).
The tariff order for FY 2020-21 gave existing industries expanding in that year energy charges only 10% lower. The respondent complained that the State had not notified the Clause 16(a) concession, and on 15.03.2021 filed a writ petition seeking an enabling notification and the quashing of Clause 5B of the Policy and Rules 4B(b) and 4F (paras 16–17, 22–23).
While the petition was pending, the State amended the Policy and Rules on 29.04.2022, replacing "eligible enterprises" with "new enterprises" in Clause 16(a) and Rule 16(i)(a). On 07.05.2025 the High Court directed the enabling notification for the respondent and set aside Clause 5B and Rules 4(B)(b) and 4F. The State appealed (paras 25–27).
Issues Before the Supreme Court
- Whether the concessional electricity charges under Clause 16(a) of the Industrial Policy of 2019, read with Rule 16(i)(a), were ever intended for existing industrial enterprises undergoing substantial expansion, and what effect the amendment notification dated 29.04.2022 has (para 34(I)).
- Whether the doctrine of promissory estoppel applies in favour of the respondent (para 34(II)).
Court's Findings and Reasoning
Respondent an eligible existing enterprise (paras 37–39): Under Rules 2(XIII) and 2(XXXIX), an existing enterprise is one that commenced production before 16.08.2019, and substantial expansion means an increase of at least 25% in plant and machinery. The respondent began production in 2006 and expanded by 88.69%, so it was an eligible enterprise having undertaken substantial expansion.
Tariff orders show the intent (paras 42–44): Tariff orders for FY 2018-19 and FY 2019-20 gave new industries lower energy charges and existing consumers a rebate on additional consumption. Clause 16 copied that language, but inadvertently applied the new-industry benefit to all eligible enterprises. Read with these orders, Clause 16(a) was meant for new industrial enterprises alone.
Two separate incentives (paras 45, 47): Clause 16(a) was a general concessional tariff for newly established industries to attract fresh investment, while Clause 16(b) was a rebate on incremental consumption for existing units expanding capacity. The Policy consciously gave distinct incentives to distinct classes.
No double benefit (paras 46, 48): If expanding units could claim under both Clauses 16(a) and 16(b), they would get an overlapping benefit, which neither the Policy nor the tariff orders contemplated. That would disturb the scheme of Clause 16 and run against public interest and the rational distribution of incentives.
Amendment clarificatory (paras 50–51): The amendment notification marked amended provisions in italics and underlining. The changes to Clause 16 and Rule 16 were not so marked, while the new three-year limit on the Clause 16(b) benefit was. The substitution of "new" for "eligible" and the insertion of "substantial expansion" created or extinguished no right; they only clarified the original intent, and so relate back to the original policy, despite the "immediate effect" clause.
Law on promissory estoppel (paras 54–59): Relying on Shree Sidhbali Steels, J.K. Udaipur Udyog, Arvind Industries and IFGL Refractories, the Court restated that fiscal benefits are defeasible and may be withdrawn in public interest, but the State may be held to a clear and unequivocal representation on which the promisee has altered its position, subject to overriding public interest and equity. The Court set out twelve principles governing the doctrine.
COP Certificate not a sanction (paras 60–61): The COP Certificate only recognised the respondent as an existing enterprise having undertaken substantial expansion. Under Rule 27, incentives are sanctioned and disbursed by the Director of Industries on the committee’s recommendation, and no such sanction for the Clause 16(a) benefit was granted. Counsel for both sides informed the Court that the Clause 16(b) benefit had already been extended to the respondent.
Promissory estoppel fails (paras 62–63): The doctrine cannot be stretched to create an entitlement contrary to the true scope of the Policy. Since the respondent had already received the benefit available to its category, no inequity survived and there was no ground to enforce equity in its favour.
Final Outcome and Directions
- Appeal allowed (para 65).
- Impugned judgment and order dated 07.05.2025 of the High Court of Himachal Pradesh set aside (paras 2, 65).
- Pending applications, if any, disposed of (para 66).
Legal Principle Laid Down
Where an industrial policy gives separate incentives to new industrial enterprises and to existing enterprises undertaking substantial expansion, a general word such as "eligible enterprises" in a clause modelled on a new-industry benefit is to be read in light of the policy’s scheme and contemporaneous tariff orders, so that one class does not receive a double benefit. An amendment that only corrects such a drafting error is clarificatory and retrospective. Recognition of eligibility by a certificate is not sanction of an incentive, and promissory estoppel cannot compel the State to grant a benefit never intended for the claimant’s class (paras 44–51, 60–64).
Precedents Relied Upon
- Shree Sidhbali Steels Ltd. v. State of U.P., (2011) 3 SCC 193 – Relied upon – State may modify or withdraw an electricity rebate granted under statutory power in public interest. Discussed at para 54.
- State of Rajasthan v. J.K. Udaipur Udyog Ltd., (2004) 7 SCC 673 – Relied upon – a concession is defeasible, but withdrawal may be barred by promissory estoppel, subject to equity and public interest. Discussed at paras 55, 63.
- Arvind Industries v. State of Gujarat, (1995) 6 SCC 53 – Relied upon – Government is free to modify its industrial policy and fiscal benefits. Discussed at para 56.
- IFGL Refractories Ltd. v. Orissa State Financial Corporation, 2026 SCC OnLine SC 28 – Relied upon – detailed consideration of promissory estoppel. Discussed at paras 58–59.
- Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P., (1979) 2 SCC 409 – Referred to as considered in IFGL Refractories. Para 58.
- State of Jharkhand v. Brahmputra Metallics Ltd., (2023) 10 SCC 634 – Referred to as considered in IFGL Refractories. Para 58.
Important Paragraphs of the Judgment
Verbatim extracts from the judgment. For the full text, refer to the judgment PDF below.
Para 44: "On a conjoint reading of Clause 16 along with the contemporaneous tariff orders issued by the appellant no. 4, it becomes evident that Clause 16(a) was intended to operate in respect of new industrial enterprises alone, under which such enterprises were to be granted the benefit of energy charges at rates 15% lower than the approved energy charges for a period of three years from the commencement of production."
Para 46: "In our considered view, neither the scheme of the Industrial Policy of 2019 nor the contemporaneous tariff orders indicates that the State ever intended to confer such double benefits upon the same category of enterprises."
Para 51: "Being clarificatory in character, the amendment would necessarily relate back to and operate as part of the original policy."
Para 60: "The COP Certificate, by itself, did not amount to a sanction or grant of the concessional tariff benefit contemplated under Clause 16(a) read with Rule 16(i)(a)."
Para 62: "The doctrine of promissory estoppel cannot be invoked to compel the State to grant a benefit which was never intended for the class of industry to which the respondent belonged."
Para 63: "More importantly, when the respondent has already received the benefit available to its category under Clause 16(b), no case of inequity can be said to survive, warranting the invocation of the equitable doctrine of promissory estoppel."
Practical Impact of the Ruling
- For industries in Himachal Pradesh: Existing units that undertook substantial expansion cannot claim the 15% lower energy charges meant for new enterprises; their benefit is the rebate on additional consumption under Clause 16(b) (paras 61, 64(iii)).
- For incentive claimants generally: An eligibility or expansion certificate does not by itself crystallise a right to a particular incentive; a sanction under the scheme is required (para 60).
- For the State: Correcting a drafting error in an incentive policy can operate retrospectively if it only clarifies the original intent, but a genuinely new condition, such as a time limit, operates prospectively (paras 50–51, 64(ii)).
- For promissory estoppel pleas: The doctrine remains available against the State, but it cannot be used to secure a benefit outside the true scope of the policy or a double benefit (paras 59, 62–63).
FAQs on Concessional Electricity Tariff Under the HP Industrial Policy, 2019
1. What did the Supreme Court decide in State of Himachal Pradesh v. Kundlas Loh Udyog?
It set aside the High Court judgment directing the State to extend the Clause 16(a) concessional energy charges to the respondent, an existing unit that had expanded (paras 26, 65).
2. Who is entitled to the 15% lower energy charges under Clause 16(a)?
Only new industrial enterprises. Existing enterprises undertaking substantial expansion are entitled to the 15% rebate on additional consumption under Clause 16(b) (para 64(i)).
3. Was the 29.04.2022 amendment retrospective?
Its changes to Clause 16 and Rule 16 were clarificatory and retrospective, except the new three-year limit on the Clause 16(b) benefit, which is prospective (para 64(ii)).
4. Did the COP Certificate give the respondent a vested right?
No. It only recognised the respondent as an existing enterprise having undertaken substantial expansion; no sanction of the Clause 16(a) benefit was granted by the Director of Industries under Rule 27 (paras 60, 64(iii)).
5. Why did promissory estoppel not help the respondent?
It cannot compel the State to grant a benefit never meant for the respondent’s class, and since the respondent already received the Clause 16(b) benefit, no inequity survived (paras 62–63).
Keywords: 2026 INSC 534, State of Himachal Pradesh v. Kundlas Loh Udyog, Himachal Pradesh Industrial Policy 2019, Clause 16(a), Clause 16(b), Rule 16(i), concessional electricity tariff, substantial expansion, new industrial enterprise, eligible enterprise, clarificatory amendment, retrospective operation, COP Certificate, Rule 27, promissory estoppel, double benefit, IFGL Refractories, Shree Sidhbali Steels, Justice J.B. Pardiwala, Justice K.V. Viswanathan, Supreme Court judgment
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Download Judgment PDF – State of Himachal Pradesh v. Kundlas Loh Udyog
Source: Supreme Court of India (official website).