Case Details

  • Case Name: State of Himachal Pradesh & Ors. vs. M/S Kundlas Loh Udyog
  • Court/Authority: Supreme Court of India, Civil Appeal No. 2026 (arising out of SLP No. 26731 of 2025)
  • Date of Judgment: 25 May 2026 (New Delhi)
  • Period of Dispute: Incentive provisions under Himachal Pradesh Industrial Policy 2019, amendment dated 29 April 2022, and the respondent’s expansion undertaken in 2020‑2021.

Parties Involved

  • Appellants:

1. State of Himachal Pradesh – Director, Department of Industries (implementation of Industrial Policy 2019).

2. State of Himachal Pradesh – Additional Chief Secretary, Department of MP & Power (energy policy and notification of electricity concessions).

3. State of Himachal Pradesh – Chief Secretary, Shimla.

4. Himachal Pradesh State Electricity Board (HPEB) – statutory body responsible for tariff orders and electricity concessions.

  • Respondent: M/S Kundlas Loh Udyog – a manufacturer of industrial metal processing and stamping, established in 2006, expanded substantially in 2020‑2021.
  • Counsel:
  • For appellants: Senior Counsel Mr. P Chidambaram, Mr. Kapil Sibal, Mr. Anup Rattan and AAG Mr. Vaibhav Srivastava.
  • For respondent: Senior Counsel Mr. Navin Pahwa.
  • Judges: J.B. Pardiwala, J.; K.V. Viswanathan, J.

Issues / Allegations / Violations

1. Issue (I): Whether the concessional electricity‑rate incentive under Clause 16(a) of the Industrial Policy 2019 (read with Rule 16(i)(a) of the 2019 Rules) was intended for existing industrial enterprises undergoing substantial expansion, and what effect the amendment notification dated 29 April 2022 has on its applicability.

2. Issue (II): Whether the doctrine of promissory estoppel can be invoked in favour of the respondent to enforce the claimed incentive.

Findings & Observations

  • Eligibility Definitions:
  • Existing industrial enterprise – an enterprise registered with the Department of Industries and having commenced commercial production before the “appointed date” (16 Aug 2019).
  • Substantial expansion – increase of at least 25 % in plant‑and‑machinery value, recorded by the Department.
  • Eligible enterprise – an enterprise satisfying the criteria of Clause 5(A) of the Industrial Policy and Rule 4 of the 2019 Rules.
  • Respondent’s Status:
  • Commenced commercial production on 11 Apr 2006 (well before the appointed date).
  • Registered as a Small Enterprise since 17 Nov 2008.
  • Expansion approved on 13 July 2020; COP Certificate issued on 12 Feb 2021 confirming expansion of 88.69 % (well above the 25 % threshold).
  • Employment generated: 342 persons, 275 (≈80 %) bonafide Himachalis; additional 21 persons hired for expansion, 17 Himachalis.
  • Hence, the respondent qualifies as an existing industrial enterprise undertaking substantial expansion and therefore as an eligible enterprise under Clause 5(A).
  • Interpretation of Clause 16:
  • Clause 16(a) (pre‑amendment) provided a 15 % discount on approved energy charges for eligible enterprises for three years.
  • Clause 16(b) provided a 15 % rebate on additional consumption for existing industrial consumers.
  • The contemporaneous tariff orders (FY 2018‑19, 2019‑20, 2020‑21) show that the 15 % discount was intended for new industrial units, while the rebate was for existing units expanding.
  • The Court concluded that Clause 16(a) was always meant exclusively for new industrial enterprises; existing enterprises were to rely on Clause 16(b).
  • Effect of the 29 April 2022 Amendment:
  • The amendment replaced the word “eligible” with “new” in Clause 16(a) and Rule 16(i)(a) and inserted “substantial expansion” in Clause 16(b) and Rule 16(i)(b).
  • The amendment was clarificatory, not substantive, for Clause 16 and Rule 16, and therefore operates retrospectively.
  • The only substantive change was the introduction of a three‑year limitation on the benefit under Clause 16(b); this part is prospective.
  • Promissory Estoppel Analysis:
  • The Court examined precedent (Shree Sidhbali Steels, J.K. Udaipur Udyog, Arvind Industries, IFGL Refractories) and reiterated that the State may modify or withdraw fiscal incentives unless a clear, unequivocal promise creates an enforceable equity.
  • The respondent’s COP Certificate recognized it as an existing enterprise with expansion but did not sanction the concessional tariff benefit under Clause 16(a).
  • Since the respondent had already received the rebate under Clause 16(b), there was no inequity warranting the application of promissory estoppel.

Penalties / Settlements / Directions

  • No monetary penalty was imposed.
  • The Supreme Court set aside the High Court’s judgment and order directing the issuance of an enabling notification for Clause 16(a).
  • The respondent is not entitled to the additional 15 % electricity discount; only the rebate under Clause 16(b) remains applicable.

Corrective Actions & Future Obligations

  • The amendment’s clarificatory provisions (substitution of “eligible” with “new”) are deemed retrospective; no further action is required to grant the disputed concession.
  • The substantive amendment limiting the duration of the rebate under Clause 16(b) will apply prospectively from the date of notification.

Final Ruling & Enforcement

  • Outcome: Appeal allowed; the impugned High Court judgment and order are set aside.
  • Effect: Kundlas Loh Udyog cannot claim the 15 % concessional electricity rate under Clause 16(a); its entitlement is limited to the rebate already granted under Clause 16(b).
  • Pending Applications: Any pending applications are disposed of.
  • Date of Order: 25 May 2026.