State of Himachal Pradesh & Orsv.M/s Kundlas Loh Udyog

Legal Analysis: State of Himachal Pradesh & Ors. v. M/s Kundlas Loh Udyog

Citation: 2026 INSC 534
Court: Supreme Court of India
Bench: A Division Bench comprising Justice B. Pardiwala and another judge
Date of Decision: May 25, 2026
Nature of Judgment: Civil Appeal arising out of Special Leave Petition No. 26731 of 2025 against the judgment of the Himachal Pradesh High Court.

Synopsis of the Judgment

The respondent, an existing industrial enterprise that undertook substantial expansion, claimed the benefit of a 15% concession on energy charges under Clause 16(a) of the Himachal Pradesh Industrial Policy, 2019, which promised “eligible enterprises” a 15% discount for three years. The State argued that Clause 16(a) was meant only for new industrial enterprises, whereas existing enterprises undergoing expansion were entitled only to a rebate on additional consumption under Clause 16(b). A subsequent amendment notification dated 29.04.2022 substituted the word “eligible” with “new” in Clause 16(a). The High Court allowed the respondent’s writ petition, directing the State to issue the enabling notification and struck down certain provisions. The Supreme Court reversed, holding that (i) Clause 16(a) was always intended to apply only to new industrial enterprises; (ii) the 2022 amendment was clarificatory and retrospective; (iii) the respondent, being an existing enterprise undergoing expansion, was entitled only to the rebate under Clause 16(b), which it had already received; and (iv) the doctrine of promissory estoppel did not apply as no vested right had accrued and the COP certificate did not grant the specific incentive.

1. Basic Information of the Judgment

• Case Title: State of Himachal Pradesh & Ors. v. M/s Kundlas Loh Udyog

• Citation: 2026 INSC 534

• Civil Appeal No.: Arising out of SLP No. 26731 of 2025

• Bench: Division Bench (Justice B. Pardiwala and a co‑judge)

• Date of Decision: May 25, 2026

• Court: Supreme Court of India (Civil Appellate Jurisdiction)

• Impugned Order: Judgment dated 07.05.2025 of the Himachal Pradesh High Court in Civil Writ Petition No. 1667 of 2021.

2. Legal Framework

Major Laws and Provisions Involved

• Himachal Pradesh Industrial Policy, 2019 – Clause 5 (eligible enterprises), Clause 16 (concessional rate of electricity charges), Clause 5B (admissibility of incentives), Clause 5C (duration of incentives).

• Rules regarding Grant of Incentives, Concessions & Facilities for Investment Promotion in Himachal Pradesh, 2019 – Rule 4 (eligibility), Rule 16(i) (concessional rate of electricity charges), Rule 27 (sanction and disbursement of incentives), definitions of “eligible enterprise”, “existing industrial enterprise”, “substantial expansion”.

• Tariff orders issued by Himachal Pradesh State Electricity Board (appellant no. 4) for FY 2018-19 to FY 2022-23.

• Amendment notification dated 29.04.2022 – Substituted “eligible” with “new” in Clause 16(a) and Rule 16(i)(a); inserted “substantial expansion” in Clause 16(b) and Rule 16(i)(b).

Key Precedents Cited

• Shree Sidhbali Steels Ltd. v. State of U.P. (2011) 3 SCC 193 – Government has power to modify or withdraw fiscal benefits in public interest; such benefits do not create vested rights.

• J.K. Udaipur Udyog Ltd. v. State of Rajasthan (2004) (referred) – Recipient of concession acquires no enforceable right except during currency; right is defeasible, but promissory estoppel may apply.

• Arvind Industries v. State of Gujarat (1995) (referred) – Government is free to modify industrial policy; promissory estoppel not attracted if benefit was never intended.

• IFGL Refractories Ltd. v. Orissa State Financial Corporation, 2026 SCC OnLine SC 28 – Recent decision summarising the principles of promissory estoppel after reviewing Motilal Padampat, Pawan Alloys, Gujarat State Financial Corpn., etc.

• Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P. (1979) 2 SCC 409 – Classic case on promissory estoppel against the State.

3. Relevant Facts

• The Industrial Policy of 2019 was notified on 16.08.2019 to attract industrial investment. Clause 5(A) provided that both “new industrial enterprises” and “existing industrial enterprises undertaking substantial expansion” were eligible for incentives. Clause 16(a) stated: “Eligible enterprises would be charged energy charges 15% lower than the approved energy charges for the respective category for a period of 3 years.” Clause 16(b) gave existing industrial consumers a rebate of 15% on energy charges for additional consumption beyond the preceding year.

• The respondent (M/s Kundlas Loh Udyog) was an existing industrial enterprise established in 2006 and registered as a Small Scale Enterprise since 2008. It undertook substantial expansion in 2020, increasing plant and machinery by 88.69% (well above the 25% threshold), and employed 80% bonafide Himachalis.

• On 13.07.2020, the State Single Window Clearance & Monitoring Authority approved the expansion proposal. On 12.02.2021, a Certificate of Commercial Production (COP Certificate) was issued certifying the expansion and promotion to a Large & Medium Scale unit.

• Tariff orders issued by the Electricity Board for FY 2019-20, 2020-21, 2021-22 and 2022-23 consistently provided that for new industries coming into production after specified dates, the energy charges would be 15% lower for three years; for existing industries undergoing expansion, the benefit was a 10% or 15% rebate on additional consumption (depending on the period).

• The respondent filed a writ petition in 2021 seeking issuance of an enabling notification for the 15% concession under Clause 16(a) and seeking quashing of Clause 5B (which made incentives admissible from the later of commercial production or enabling notification) and Rules 4B(b) and 4F (which gave the State discretionary power to amend or withdraw incentives).

• Pending the writ petition, on 29.04.2022, the State issued an amendment notification substituting “eligible” with “new” in Clause 16(a) and inserting “substantial expansion” in Clause 16(b), and also added a three‑year duration for the rebate.

• The High Court allowed the writ petition, directing the State to issue the enabling notification for Clause 16(a) in favour of the respondent, and set aside Clause 5B, Rule 4B(b) and Rule 4F. The State appealed.

4. Issues

• Issue No. 1: Whether the incentive of concessional electricity charges under Clause 16(a) of the Industrial Policy of 2019 (read with Rule 16(i)(a) of the 2019 Rules) was intended to be provided to existing industrial enterprises undergoing substantial expansion, or only to new industrial enterprises. What is the effect of the amendment notification dated 29.04.2022?

• Issue No. 2: Whether the doctrine of promissory estoppel applies in favour of the respondent to compel the State to grant the benefit under Clause 16(a).

5. Ratio Decidendi

A. Clause 16(a) was always intended to apply only to new industrial enterprises, not to existing enterprises undergoing substantial expansion (Paras 35-48).
The Court examined the overall scheme of the Policy. Clause 5 clearly distinguishes between “new industrial enterprises” and “existing industrial enterprises undertaking substantial expansion”. The tariff orders issued by the Electricity Board both before and after the Policy consistently separated the benefits: new industries received a concessional lower energy charge; expanding industries received a rebate on additional consumption. The use of the word “eligible” in Clause 16(a) was an inadvertent drafting error. If “eligible enterprises” were read to include both categories, then expanding units would be entitled to both the concession under Clause 16(a) and the rebate under Clause 16(b) – a double benefit that was never intended. The internal scheme, the contemporaneous tariff orders, and the object of attracting fresh investment all indicate that Clause 16(a) was meant only for new industrial enterprises.

B. The amendment dated 29.04.2022, insofar as it substituted “eligible” with “new” in Clause 16(a) and inserted “substantial expansion” in Clause 16(b), was clarificatory and therefore retrospective (Paras 49-51).
The amendment notification did not italicise or underline these changes (unlike other substantive amendments, such as the introduction of a three‑year duration for the rebate), indicating that the State regarded them as clarifications of the original intent. Being clarificatory, they relate back to the date of the original Policy. Consequently, the respondent cannot claim the benefit under Clause 16(a).

C. The respondent, being an existing industrial enterprise undertaking substantial expansion, was entitled only to the rebate under Clause 16(b), which it has already received (Para 63).
The respondent has not disputed that it has been receiving the rebate on additional power consumption. Having received the benefit intended for its category, it cannot simultaneously claim the concession meant for new enterprises.

D. The issuance of the COP Certificate did not create a vested right to the Clause 16(a) concession (Para 60-61).
The COP Certificate merely certified the fact of expansion and the respondent’s status as an eligible enterprise under the Policy. It did not sanction or approve the specific incentive of concessional energy charges. Under Rule 27 of the 2019 Rules, such incentives are to be sanctioned by the Director of Industries upon recommendation of a committee. No such sanction was ever granted. Therefore, no enforceable right crystallised.

E. The doctrine of promissory estoppel does not apply (Paras 52-63).
The Court, relying on IFGL Refractories Ltd. and earlier authorities, held that while the doctrine may apply against the State, its foundation is equity and justice. Here, the State never made a clear, unequivocal representation that existing expanding enterprises would receive the Clause 16(a) concession. The representation in the Policy was ambiguous, and the contemporaneous tariff orders and the State’s consistent practice showed otherwise. Moreover, the respondent had already received the benefit under Clause 16(b). To extend the Clause 16(a) benefit would create a double benefit and upset the fiscal discipline and public interest underlying the Policy. The doctrine cannot be invoked to compel the State to grant a benefit never intended.

6. New Legal Principles Established / Reiterated

• First, industrial policy clauses must be read harmoniously with contemporaneous tariff orders and the overall scheme. A court cannot interpret an isolated clause in a manner that leads to double benefits or an absurd fiscal burden.

• Second, a clarificatory amendment that corrects a drafting error by substituting a word (e.g., “eligible” to “new”) is retrospective in operation, even if the amendment notification states “immediate effect” for other substantive changes. The Court distinguished between substantive amendments (which are prospective) and clarificatory amendments (which relate back).

• Third, a Certificate of Commercial Production (COP Certificate) issued under an industrial policy does not, by itself, confer a vested right to every incentive mentioned in the policy. Specific incentives require separate sanction or approval in accordance with the rules.

• Fourth, the doctrine of promissory estoppel cannot be used to create a right that the policy never intended to give. Where the representation is ambiguous and the State’s consistent practice contradicts the claimant’s interpretation, no equitable estoppel arises.

7. Court’s Examination and Analysis of Concepts

The Court first traced the evolution of the Policy and the tariff orders. It noted that the Electricity Board’s tariff orders for FY 2018-19 and 2019-20 (issued before the Policy) already provided a 15% lower energy charge for new industries coming into production after certain dates, and a rebate for existing industries on additional consumption. The Policy of 2019 merely codified these benefits. The use of the word “eligible” in Clause 16(a) was a carryover from the tariff order language but was mistakenly applied to the broader category of “eligible enterprises” under Clause 5. The Court held that this was a clear drafting error.

The Court then examined the amendment notification of 29.04.2022. It observed that the notification contained a “Note” stating that provisions amended have been highlighted in italics and underlined. The changes in Clause 16(a) and (b) (substituting “eligible” with “new” and inserting “substantial expansion”) were not italicised, whereas the introduction of a three‑year duration for the rebate was italicised. This indicated that the former were clarificatory (hence retrospective) and the latter was substantive (hence prospective).

The Court then analysed the High Court’s error: the High Court had struck down Clause 5B and Rules 4B(b) and 4F on the ground that they made the incentives discretionary and non‑enforceable. The Supreme Court held that those provisions were not necessary to decide the case because the respondent was not even eligible under Clause 16(a) as a matter of interpretation. However, the Court noted that even if the respondent were eligible, the State’s power to modify or withdraw incentives is well‑established, subject only to promissory estoppel.

Finally, the Court applied the doctrine of promissory estoppel. It held that the respondent had not proved a clear and unequivocal promise. The Policy itself was ambiguous; the tariff orders and the State’s subsequent clarifications showed the true intent. The respondent did not alter its position to its detriment because it had already received the rebate under Clause 16(b). The Court distinguished Motilal Padampat and other cases on facts.

8. Critical Analysis

Strengths: The judgment is a masterclass in statutory interpretation, harmonising the text of a policy with contemporaneous administrative orders and the overall scheme. It correctly identifies the unintended consequence of double benefit that would arise if the respondent’s interpretation were accepted. The distinction between clarificatory and substantive amendments is principled and practical. The Court’s refusal to apply promissory estoppel where the representation was ambiguous and the claimant had already received the intended benefit is sound.

Potential concerns: The State’s drafting error caused legitimate confusion. The respondent made a substantial investment (over Rs. 8 crores) partly in reliance on the Policy as originally worded. While the Court held that the respondent had already received the rebate under Clause 16(b), the rebate is on additional consumption, not a flat 15% reduction on energy charges. The difference may be significant. The judgment could have been more sympathetic to the respondent by ordering a limited application of the Policy as originally drafted for those who had already acted, while prospective application of the clarification. However, the Court’s reasoning that the Policy never intended the benefit for expanding units is consistent with the evidence of tariff orders.

Practical impact: This judgment will be cited in industrial incentive disputes across India. Governments will use it to clarify drafting errors without being held to promises they never made. Entrepreneurs will be more cautious in relying on ambiguous policy clauses and will seek specific sanctions or approvals before investing. The judgment also reinforces that COP certificates do not guarantee every incentive listed in a policy.

9. Final Outcome

• The appeal was allowed.

• The impugned judgment and order of the Himachal Pradesh High Court dated 07.05.2025 was set aside.

• It was held that the respondent is not entitled to the benefit under Clause 16(a) of the Industrial Policy, 2019, and has correctly received the rebate under Clause 16(b).

• The writ petition filed by the respondent was dismissed.

• No order as to costs.

10. Practical Application

First, a State government defending an industrial incentive dispute can rely on this judgment to argue that ambiguous clauses must be interpreted in light of contemporaneous administrative practices (e.g., tariff orders, board resolutions) and that a clarificatory amendment correcting a drafting error operates retrospectively.

Second, an industrial enterprise seeking a specific incentive cannot rely solely on a generic eligibility certificate or a COP certificate. It must obtain a separate sanction or approval for that specific incentive under the relevant rules (e.g., Rule 27). Without such sanction, no vested right accrues.

Third, the doctrine of promissory estoppel will not be applied where the representation is ambiguous and the claimant has already received an alternate benefit intended for its category. The claimant must show a clear, unequivocal promise and detrimental reliance to the exclusion of other benefits.

11.  Court Lines

Line 1 (Clarificatory amendment retrospective – Para 51):
“Being clarificatory in character, the amendment would necessarily relate back to and operate as part of the original policy.”

Line 2 (Double benefit not intended – Para 46):
“Such an interpretation would necessarily result in a situation where the same class of industrial enterprises undergoing substantial expansion would receive a dual or overlapping benefit in respect of electricity charges. 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.”

Line 3 (COP certificate does not create vested right – 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). … No such sanction or approval in respect of the concessional tariff benefit under Clause 16(a) was ever granted in favour of the respondent.”

Line 4 (Promissory estoppel not available – 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. Once it is held that Clause 16(a) was never meant to extend the concessional tariff benefit to existing industrial enterprises undergoing substantial expansion, the very foundation of the respondent’s plea substantially falls.”

Line 5 (Public interest overrides – Para 63):
“Any interpretation to the contrary would not only run contrary to the true intent of the Policy, but would also operate against the larger public interest and fiscal discipline governing the grant of industrial incentives by the State.”

12. Legal Strategy Insight

For the State (Government) framing industrial policies:

• Ensure that the policy document is internally consistent. Avoid using broad words like “eligible enterprises” if different categories are entitled to different benefits.

• Issue contemporaneous administrative orders (e.g., tariff orders, departmental circulars) that clarify the classification of beneficiaries. These will be used as extrinsic aids to interpretation.

• If a drafting error is discovered, issue a clarificatory amendment promptly. The judgment holds that such amendments relate back, but to avoid litigation, make the clarification before any investments are made.

• In the rules, clearly provide that specific incentives require separate sanction (like Rule 27). This prevents entrepreneurs from claiming that a generic eligibility certificate gives them all benefits.

For an industrial enterprise (investor):

• Do not rely on ambiguous policy language. If the policy distinguishes between “new” and “existing” units, and you are an existing unit, do not assume that clauses referring to “eligible enterprises” apply to you if the surrounding scheme indicates otherwise.

• Before making substantial investments, obtain a written sanction or approval for each specific incentive you intend to claim. A COP certificate or eligibility certificate is not sufficient.

• If you are an existing unit undergoing expansion, clearly understand the difference between a concessional tariff (lower rate on all consumption) and a rebate on additional consumption. The latter is likely what you are entitled to.

• If the State issues a clarificatory amendment, challenge it only if you can show that the original policy was unambiguous and that you acted in reliance to your detriment. This judgment shows that courts will interpret policies holistically, not by isolated words.

For a lawyer drafting a writ petition challenging a denial of incentive:

• Lead evidence of the State’s specific representations (e.g., brochures, official communications) that clearly promise the incentive to your category.

• Obtain a specific approval or sanction for the incentive before filing the petition.

• If the State issues a clarificatory amendment, argue that it is substantive, not clarificatory. Show that the original policy was unambiguous and that the amendment changes the law, not merely explains it. The Court in this case noted that the amendment was not italicised, but that may be a fact‑specific indicator.