Existing Industry Cannot Claim New-Industry Electricity Concession Under HP Industrial Policy 2019, Supreme Court Holds
A Division Bench of Justices J.B. Pardiwala and K.V. Viswanathan rules that Clause 16(a) electricity concessions were always confined to new enterprises, barring promissory estoppel claims by expanding units.
The Supreme Court has set aside a Himachal Pradesh High Court direction that would have entitled an existing industrial unit to a 15% flat concession on electricity charges meant for new enterprises under the Himachal Pradesh Industrial Policy, 2019. A Division Bench of Justice J.B. Pardiwala and Justice K.V. Viswanathan held on 25 May 2026 that Clause 16(a) of the Industrial Policy of 2019, which provided for energy charges 15% lower than approved rates for a period of three years, was always intended exclusively for new industrial enterprises. Existing enterprises undergoing substantial expansion were separately covered by the rebate mechanism under Clause 16(b). The Court further held that a 2022 amendment substituting the word “eligible” with “new” in Clause 16(a) was clarificatory and therefore retrospective, and that the doctrine of promissory estoppel could not be invoked to create an entitlement that the Policy never contemplated.
How the Dispute Reached the Court
The respondent, M/s Kundlas Loh Udyog, is a manufacturer engaged in industrial metal processing and stamping. The enterprise had commenced commercial production on 11 April 2006 and had been registered as a Small Scale Enterprise with the Himachal Pradesh Department of Industries since 17 November 2008.
When the State notified the Industrial Policy of 2019 on 16 August 2019, the respondent applied on 1 June 2020 for approval of a substantial expansion of its manufacturing unit. The State Single Window Clearance and Monitoring Authority approved the expansion proposal on 13 July 2020. By 12 February 2021, the Department of Industries issued a certificate of substantial expansion, recognising that the respondent had expanded its plant and machinery by 88.69% — well above the 25% threshold required under Rule 2(XXXIX) of the 2019 Rules — and had been promoted to a Large and Medium Scale unit. The total cost of additions was Rs. 807.80 lakh.
The respondent's grievance was that the State had not issued an enabling notification to operationalise the 15% flat concession on energy charges under Clause 16(a) of the Industrial Policy of 2019. The tariff orders issued by the Himachal Pradesh State Electricity Board (HPEB) for FY 2020-21 had fixed energy charges for existing industries undergoing expansion at only 10% lower than approved rates, not 15%. The respondent wrote to the Chief Minister in June 2020 and to the Chief Secretary in February 2021, contending that the State was failing to honour its policy commitment.
On 15 March 2021, the respondent filed Civil Writ Petition No. 1667 of 2021 before the High Court of Himachal Pradesh, seeking a direction to issue the enabling notification under Clause 16(a) and challenging Clause 5B of the Industrial Policy of 2019 along with Rules 4(B)(b) and 4(F) of the 2019 Rules.
During the pendency of the writ petition, the State on 29 April 2022 amended the Industrial Policy of 2019 and the 2019 Rules. The amendment substituted the expression “eligible enterprises” in Clause 16(a) and Rule 16(i)(a) with “new enterprises”, and inserted the phrase “substantial expansion” in Clause 16(b) and Rule 16(i)(b). Clause 4 of the amendment notification stated that the amended provisions would come into force with immediate effect.
The High Court, by its judgment dated 7 May 2025, ruled in favour of the respondent. It directed the appellants to issue the enabling notification under Clause 16(a) with effect from the date of commercial qualification of the respondent, and set aside Clause 5B of the Industrial Policy of 2019 as well as Rules 4(B) and 4(F) of the 2019 Rules to the extent of their inconsistency with the Policy. The State of Himachal Pradesh and HPEB challenged that judgment before the Supreme Court.
The Competing Interpretations of Clause 16
Before the Supreme Court, the appellants were represented by senior counsel Mr. P. Chidambaram, Mr. Kapil Sibal, and Mr. Anup Rattan, along with Mr. Vaibhav Srivastava, learned Additional Advocate General. The respondent was represented by senior counsel Mr. Navin Pahwa.
The appellants argued that the use of the word “eligible” in Clause 16(a) was a drafting error. The Industrial Policy of 2019 drew a clear distinction between two categories of enterprises: new industrial enterprises and existing industrial enterprises undertaking substantial expansion. Clause 16(a) was always meant to give new enterprises a flat 15% concession on energy charges for three years to attract fresh investment. Clause 16(b) was separately designed for existing enterprises undergoing expansion, giving them a 15% rebate on additional power consumption beyond the preceding year's level. The 2022 amendment merely corrected the inadvertent use of “eligible” and was clarificatory, hence retrospective. Since the respondent was an existing enterprise, it could only claim under Clause 16(b), which benefit had already been extended to it.
The respondent countered that the word “eligible” in the original Clause 16(a) plainly covered all eligible enterprises, including existing ones undergoing substantial expansion. Its rights had crystallised on 12 February 2021 when the COP Certificate was issued, well before the 2022 amendment. Since Clause 4 of the amendment notification expressly stated that the amended provisions would come into force with “immediate effect”, the amendment operated prospectively and could not affect rights already accrued. Separately, the respondent invoked the doctrine of promissory estoppel, arguing that it had made substantial investments in reliance on the State's representations in the Policy and in official communications.
The Court's Reading of Clause 16 and the Tariff Orders
The Court examined the structure of Clause 16 alongside the series of tariff orders issued by HPEB before and after the Industrial Policy of 2019 came into force.
The tariff order for FY 2018-19 had provided a 10% rebate on additional power consumption for existing industrial consumers and a 10% reduction in energy charges for new industries coming into production after 1 April 2018. The tariff order for FY 2019-20 provided a 15% rebate on additional consumption for existing consumers and a 15% reduction for new industries coming into production after 1 July 2019. The Industrial Policy of 2019 was notified on 16 August 2019, after these tariff orders, and Clause 16 carried language that tracked the tariff orders — but with what the Court found to be an inadvertent error in Clause 16(a), which used “eligible enterprises” instead of “new enterprises”.
The Court held that on a conjoint reading of Clause 16 with the contemporaneous tariff orders, Clause 16(a) was intended to operate in respect of new industrial enterprises alone, granting them energy charges 15% lower than approved rates for three years from commencement of production. Clause 16(b) was intended to incentivise existing enterprises undertaking substantial expansion through an incremental consumption-linked rebate.
The Court reasoned that accepting the respondent's interpretation would produce a dual or overlapping benefit for the same class of enterprises. An existing enterprise undergoing expansion would receive both the flat 15% concession under Clause 16(a) and the rebate on additional consumption under Clause 16(b). The Court found that neither the scheme of the Policy nor the contemporaneous tariff orders indicated any intention to confer such double benefits. It held that the Policy consciously contemplated separate incentives for distinct classes of industries: new enterprises were to be attracted by concessional energy charges, while existing enterprises were to be encouraged to expand through a rebate on incremental consumption.
On the 2022 amendment, the Court took note of a significant internal indicator. The amendment notification contained a note stating that provisions that were substantively amended had been highlighted in italics and underlined. The substitution of “eligible” with “new” in Clause 16(a) and Rule 16(i)(a), and the insertion of “substantial expansion” in Clause 16(b) and Rule 16(i)(b), were not italicised or underlined. By contrast, the provision introducing for the first time a three-year duration limit on the benefit under Clause 16(b) and Rule 16(i)(b) was specifically italicised and underlined. The Court held that this internal distinction confirmed that the changes to Clause 16(a) and Rule 16(i)(a) were regarded by the appellants themselves as clarificatory, while the duration limit was a substantive new addition.
The Court therefore concluded that the amendment to Clause 16 and Rule 16 — except for the newly introduced three-year duration limit on the Clause 16(b) benefit, which was prospective — was clarificatory in nature and retrospective in operation. The substitution of “eligible” with “new” did not introduce any new class of beneficiaries, nor did it create or extinguish any substantive right. It merely clarified what was always intended.
Promissory Estoppel: Principles and Their Application
Having resolved the first issue against the respondent, the Court proceeded to examine the doctrine of promissory estoppel, stating that it did so for the definitive settlement of all questions arising in the case.
The Court drew on its earlier decisions in Shree Sidhbali Steels Ltd. v. State of U.P., reported in (2011) 3 SCC 193, State of Rajasthan v. J.K. Udaipur Udyog Ltd., reported in (2004) 7 SCC 673, and Arvind Industries v. State of Gujarat, reported in (1995) 6 SCC 53, as well as its recent decision in IFGL Refractories Ltd. v. Orissa State Financial Corporation, reported in 2026 SCC OnLine SC 28, in which Justice Pardiwala had been part of the Bench.
From these authorities, the Court distilled twelve governing principles. Among them: the doctrine operates on broader considerations of fairness and good conscience, not within the technical confines of the law of evidence; it may itself furnish a cause of action under Indian law and can be affirmatively enforced; it is not necessary to prove actual detriment, only that the promisee altered its position in reliance on the promise; it applies with full force against the State and its instrumentalities; and where a specific sanction or eligibility certificate has been issued and the enterprise has acted on it by making substantial investment, the promisor is all the more firmly bound.
However, the Court also restated the limits of the doctrine. The Government retains the power to modify or withdraw fiscal benefits in public interest, and such benefits are by their nature defeasible. 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 claimant belongs.
Applying these principles to the facts, the Court held that the COP Certificate dated 12 February 2021 merely recognised the respondent as an existing industrial enterprise having undertaken substantial expansion. It did not amount to a sanction or grant of the concessional tariff benefit under Clause 16(a). Under Rule 27 of the 2019 Rules, incentives were to be sanctioned and disbursed by the Director of Industries upon the recommendation of a notified committee. No such sanction had ever been granted to the respondent in respect of the Clause 16(a) benefit.
The Court held that the COP Certificate could at best have constituted recognition that the respondent belonged to the category of existing enterprises undergoing substantial expansion, and was therefore entitled to such incentives as were lawfully available to that class — which was the rebate under Clause 16(b), not the concession under Clause 16(a). Since the respondent had already received the Clause 16(b) benefit, no case of inequity survived to warrant the invocation of promissory estoppel. Extending the doctrine to cover Clause 16(a) would result in conferring a dual benefit that the Policy never contemplated, contrary to public interest and fiscal discipline.
Outcome
The Supreme Court allowed the appeal and set aside the judgment and order of the High Court of Himachal Pradesh dated 7 May 2025. The direction to issue an enabling notification under Clause 16(a) of the Industrial Policy of 2019 in favour of the respondent was set aside. The Court's conclusions were fourfold: Clause 16(a) was always intended for new industrial enterprises only; the 2022 amendment to Clause 16 and Rule 16 was clarificatory and retrospective, except for the newly introduced three-year duration limit on the Clause 16(b) benefit which was prospective; the respondent, as an existing enterprise that had undergone substantial expansion, was entitled only to the Clause 16(b) rebate, which had already been extended to it; and the doctrine of promissory estoppel had no application on these facts. Pending applications, if any, were disposed of.