Case Name: STATE OF HIMACHAL PRADESH & ORS v. KUNDLAS LOH UDYOG
Petition No.: Special Leave Petition No. 26731 of 2025
Neutral Citation: 2026 INSC 534
Date of Judgement: 25th May, 2026
Coram: Honourable Mr Justice J.B. Pardiwala & Honourable Mr Justice K.V. Viswanathan
Relevant Provisions: Clause 16(a) and Clause 16(b) of the Industrial Policy, 2019; Rule 16(i)(a) and Rule 16(i)(b) of the Himachal Pradesh Industrial Policy Rules, 2019; Article 12 of the Constitution of India; Doctrine of Promissory Estoppel
INTRODUCTION
In this case, the Supreme Court delivered an important judgment on the contours of the doctrine of promissory estoppel in the context of industrial incentive policies framed by the State. The Court held that the doctrine cannot be invoked to compel the Government to grant a benefit which was never intended for a particular class of industrial units under the policy framework itself. The Bench comprising Justice J.B. Pardiwala and Justice K.V. Viswanathan set aside the Himachal Pradesh High Court judgment which had extended concessional electricity tariff benefits under the Himachal Pradesh Industrial Policy, 2019 to an existing industrial enterprise. The judgment also comprehensively summarised the governing principles of the doctrine of promissory estoppel by relying upon earlier precedents.
FACTS
The respondent company had been registered with the Department of Industries as a Small Scale Enterprise. It undertook substantial expansion by increasing its plant and machinery by 88.69%, far exceeding the minimum threshold of 25% prescribed under the Industrial Policy, 2019 for “substantial expansion”. The expansion proposal was approved by the Single Window Clearance Agency and the respondent was subsequently granted the status of a Large Scale Enterprise. The respondent also generated additional employment in compliance with the Policy requirements.
The controversy arose from Clause 16 of the Industrial Policy, 2019 dealing with electricity incentives. Clause 16(a) provided concessional electricity charges, while Clause 16(b) granted a rebate on additional power consumption to existing industrial enterprises undergoing substantial expansion. The respondent argued that since Clause 16(a) originally used the term “eligible enterprises”, the concessional tariff benefit was also available to existing industrial enterprises undertaking substantial expansion.
Thereafter, the State issued an amendment notification substituting the word “eligible” with “new” in Clause 16(a), and inserting the phrase “substantial expansion” in Clause 16(b). The respondent nevertheless claimed that its rights had crystallised prior to the amendment because it had already undertaken expansion and obtained the Certificate. The Himachal Pradesh High Court accepted the respondent’s contention and directed the State to extend concessional tariff benefits under Clause 16(a). Aggrieved by this decision, the State approached the Supreme Court.
ISSUES
1. Whether the concessional electricity tariff benefit under Clause 16(a) of the Industrial Policy, 2019 and Rule 16(i)(a) of the 2019 Rules was ever intended to apply to existing industrial enterprises undergoing substantial expansion, and what effect the amendment notification had on the interpretation of the provisions?
2. Whether the doctrine of promissory estoppel applied in favour of the respondent company?
ARGUMENTS OF THE PARTIES
The State argued that the respondent was admittedly an existing industrial enterprise and therefore could not claim incentives specifically intended for new industrial units. It was contended that the amendment notification was merely clarificatory and therefore retrospective in nature. The State further argued that the respondent had already availed the rebate incentive of 15% on additional power consumption under Clause 16(b) and could not seek an additional concessional tariff benefit under Clause 16(a), as that would amount to an impermissible double benefit.
The respondent, on the other hand, argued that the State was bound by the doctrine of promissory estoppel because it had undertaken substantial expansion relying upon the representations contained in the Industrial Policy, 2019. The respondent contended that it had altered its position by making substantial investments and therefore became entitled to the incentive. It was further argued that the amendment notification expressly stated that it would come into force with “immediate effect”, thereby indicating prospective application. Consequently, the respondent contended that the amendment could not retrospectively take away its accrued entitlement.
JUDGEMENT AND ANALYSIS
The Court examined the structure of the Industrial Policy, the contemporaneous tariff orders, and the jurisprudence of doctrine of promissory estoppel. Upon analysis of the Industrial Policy, 2019, it observed that the policy consciously recognised two distinct categories of enterprises: new industrial enterprises and existing industrial enterprises undergoing substantial expansion. While both categories were “eligible enterprises” under Clause 5(A), the incentives available to them were distinct and separately structured.
The Court held that Clause 16(a) was always intended exclusively for new industrial enterprises, whereas Clause 16(b) specifically governed existing industrial enterprises undertaking substantial expansion. The Bench looked into the tariff orders issued prior to and subsequent to the Industrial Policy, 2019 and noted that concessional lower energy charges had historically been granted only to new industrial units, while existing units undergoing expansion were incentivised through rebates.
The Court observed that accepting the respondent’s interpretation would result in an anomalous situation where existing industrial enterprises undergoing substantial expansion would receive both concessional tariff benefits under Clause 16(a) and rebate benefits under Clause 16(b). Such a construction would effectively confer dual benefits upon one class of enterprises, contrary to the scheme and object of the Policy.
The Court next examined the effect of the amendment notification. It held that the substitution of the word “eligible” with “new” in Clause 16(a), and the insertion of the phrase “substantial expansion” in Clause 16(b), were merely clarificatory amendments. They clarified what had always been the true intent of the policy. Therefore, the amendments were retrospective in operation. However, the Court held that the amendment introducing a three-year limitation period under Clause 16(b) was substantive in nature and therefore prospective in operation.
On the doctrine of promissory estoppel, the Court undertook an extensive survey of precedents. The Bench relied upon decisions such as IFGL Refractories Ltd. v. Orissa State Financial Corporation 2026 SCC OnLine SC 28, Motilal Padampat Sugar Mills Co. Ltd. v. State of U.P. (1979) 2 SCC 409, Pawan Alloys & Casting (P) Ltd. v. U.P. State Electricity Board (1997) 7 SCC 251, Gujarat State Financial Corpn. v. Lotus Hotels (P) Ltd. (1983) 3 SCC 379 etc., and laid down twelve principles governing promissory estoppel and directed that they be regarded as well-settled. The Court observed in Para 59:
(i) The doctrine of promissory estoppel is a principle evolved by equity to avoid injustice. It operates not in the realm of contract, nor within the technical confines of estoppel under the law of evidence, but upon the broader considerations of fairness, justice and good conscience;
(ii) Where one party, by words or conduct, makes to another a clear, unequivocal and unambiguous promise, intended to create legal relations or affect a legal relationship to arise in the future, knowing or intending that it would be acted upon, and it is in fact so acted upon, the promise becomes binding upon the promisor;
(iii) The doctrine of promissory estoppel is a doctrine whose foundation is that an unconscionable departure by one party from the subject matter of an assumption which may be of fact or law, present or future, and which has been adopted by the other party as the basis of some course of conduct, act or omission, should not be allowed to pass muster. And the relief to be given in cases involving the doctrine of promissory estoppels contains a degree of flexibility which would ultimately render justice to the aggrieved party;
(iv) The doctrine is not merely defensive in nature. Under Indian law, it may itself furnish a cause of action and can be affirmatively enforced where equity so requires;
(v) It is not necessary, in order to attract the doctrine, that the promisee should prove actual detriment. It is sufficient that the promisee has altered his position, acting in reliance upon the promise;
(vi) The alteration of position may consist in making substantial investments, incurring liabilities, establishing industrial infrastructure, entering into agreements, or otherwise rearranging one’s affairs on the faith of the representation;
(vii) The doctrine applies with full force against the State, its departments, statutory corporations and instrumentalities, including authorities falling within Article 12 of the Constitution, which cannot arbitrarily resile from a solemn representation upon which another has acted;
(viii) Where the State or its instrumentalities frame industrial or fiscal incentive schemes with the avowed object of attracting investment and establishing industries, the representations contained therein are intended to induce entrepreneurs to act upon them, and such representations are enforceable. Once an entrepreneur, relying upon such representation, establishes an industrial unit, commences commercial production, or otherwise satisfies the eligibility conditions during the currency of the scheme, and the State agencies recognise them as being eligible, the promise crystallises, and an enforceable equity arises in its favour. Whether a benefit has accrued or not in such cases depends on the facts and circumstances of each case;
(ix) The grant of an exemption, concession or incentive under a statutory scheme is ordinarily defeasible, and the Government is competent to modify or revoke the same in exercise of the very power under which it was granted. Thus, what is granted can ordinarily be withdrawn. However, the Government may be precluded from doing so on the ground of promissory estoppel, which principle itself remains subject to considerations of equity and public interest.
(x) Where a specific sanction or approval of incentive, or eligibility certificate has been issued in favour of an individual enterprise, and the enterprise has acted thereon by making a substantial investment, the promisor is all the more firmly bound by its representation;
(xi) The doctrine rests upon the larger constitutional principle that State action must be fair, non-arbitrary, and consistent; governmental assurances are not empty declarations, but solemn representations on the faith of which citizens regulate their affairs; and
(xii) The ultimate object of the doctrine is to prevent manifest injustice and to ensure that a party, particularly the State, does not act inconsistently to the prejudice of one who has relied upon its promise and altered his position irretrievably.
The Court held that the doctrine had no application in the facts of the present case. The respondent could not invoke promissory estoppel to create an entitlement contrary to the true scope and intent of the policy itself. Since Clause 16(a) was never intended to extend concessional tariff benefits to existing industrial enterprises undergoing substantial expansion, the requirement of a clear and unequivocal promise was absent. The Court emphasised that the respondent had already received the rebate benefit legitimately available to its category under Clause 16(b). Therefore, no enforceable equity survived in its favour.
Finally, the court summarised its findings on all the issues at Para 64. First, Clause 16(a) of the Industrial Policy, 2019, applied only to new industrial enterprises, while Clause 16(b) applied to existing enterprises undergoing substantial expansion. Second, the 2022 amendment, which replaced “eligible” with “new” and added “substantial expansion”, was clarificatory and therefore retrospective, but the newly introduced three-year limit on benefits was substantive and prospective. Third, the respondent, being an existing enterprise that underwent substantial expansion, was entitled only to the rebate benefit under Clause 16(b), which had already been granted. Fourth, the doctrine of promissory estoppel was held inapplicable because the Policy never intended concessional tariff benefits for existing enterprises undergoing expansion, and granting such benefits would amount to an impermissible double benefit contrary to public interest and fiscal discipline.
CONCLUSION
The Supreme Court, therefore, allowed the appeal and set aside the judgment of the Himachal Pradesh High Court. It ultimately held that the concessional electricity tariff benefit under Clause 16(a) of the Industrial Policy, 2019, was intended exclusively for new industrial enterprises, not for existing industrial enterprises undergoing substantial expansion. The amendment notification was clarificatory and retrospective insofar as it substituted the word “eligible” with “new” and clarified the scope of Clause 16.
