Promissory Estoppel Cannot Be Invoked To Claim Double Benefit Not Intended By Industrial Policy: Supreme Court

"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." Supreme Court, in a significant ruling dated May 25, 2026, held that existing industrial enterprises undertaking substantial expansion are not entitled to claim electricity concessions specifically intended for new industrial units.

A bench of Justice J.B. Pardiwala and Justice K.V. Viswanathan observed that the doctrine of promissory estoppel cannot be stretched to create an entitlement that runs contrary to the true scope and intent of a government's industrial policy.

The dispute arose when M/s Kundlas Loh Udyog, an existing industry in Himachal Pradesh established in 2006, undertook a substantial expansion in 2020. The company sought a 15% concessional rate on electricity charges under Clause 16(a) of the Industrial Policy of 2019, which was originally worded to apply to "eligible enterprises." The State Government refused, contending the benefit was only for new units and that expanding units were only entitled to a separate rebate under Clause 16(b). The High Court of Himachal Pradesh had previously ruled in favour of the company, prompting the State's appeal.

The primary question before the court was whether the 15% electricity concession under Clause 16(a) of the 2019 Policy was intended for existing enterprises undergoing expansion. The court also examined whether the 2022 amendment, which replaced "eligible" with "new" enterprises, was clarificatory and retrospective, and whether the doctrine of promissory estoppel could be applied against the State.

Policy Distinguishes Between New And Expanding Units

The Court noted that the Industrial Policy of 2019 created a clear classification between two distinct categories: new industrial enterprises and existing industrial enterprises undertaking substantial expansion. While both were "eligible" for incentives generally, the specific structure of electricity concessions was divided. Clause 16(a) offered a general 15% discount for three years, whereas Clause 16(b) provided a 15% rebate specifically for "additional power consumption" beyond the previous year's level.

Court Explains Intent Behind Categorization Of Incentives

The bench observed that Clause 16(a) was intended to attract fresh investment by lowering the entry cost for new units. In contrast, Clause 16(b) was designed to incentivise existing units to increase their production capacity by offering rebates on incremental consumption. The Court held that allowing an expanding unit to claim both would lead to an anomalous situation of "double benefit" which was never the State's intention.

"The Policy consciously contemplated separate categories of incentives for distinct classes of industries depending upon their nature and stage of industrial activity."

Drafting Error In Original Policy Corrected By Clarificatory Amendment

The Court accepted the State's argument that the use of the word "eligible" in the original Clause 16(a) was a drafting error. It noted that the State issued an amendment on April 29, 2022, to substitute "eligible" with "new." The bench found that since the amendment merely clarified the original intent and did not create or extinguish substantive rights, it was clarificatory in nature.

Amendment To Correct Drafting Error Is Retrospective

The bench held that being clarificatory in character, the 2022 amendment would necessarily relate back to and operate as part of the original 2019 policy. It rejected the respondent's contention that the amendment was prospective because it was stated to come into force with "immediate effect." The Court observed that the lack of italics or underlining in the amendment notification—standard for new substantive changes—indicated its clarificatory status.

"The substitution of the word 'eligible' with 'new' did not alter the substance of the Policy but merely clarified the true intent and scope of the provisions as they always stood."

Promissory Estoppel Cannot Compel Grant Of Unintended Benefits

Regarding the plea of promissory estoppel, the Court held that the doctrine is an equitable principle used to avoid injustice and cannot be used to force the State to provide a benefit it never promised. The bench emphasized that for the doctrine to apply, there must be a clear and unequivocal representation. Since the policy, when read as a whole, never intended Clause 16(a) for existing units, no such representation existed.

No Inequity Where Legitimate Benefit Already Received

The Court highlighted that the respondent company had already received the 15% rebate for additional consumption under Clause 16(b). Therefore, no case of inequity survived. The bench warned that any other interpretation would result in a dual benefit, which would operate against the larger public interest and fiscal discipline governing industrial incentives.

"When the respondent has already received the benefit legitimately attachable to its category under Clause 16(b), no enforceable equity survives in its favour."

COP Certificate Does Not Create Vested Right For Specific Incentives

The Court further clarified that the mere issuance of a Commencement of Production (COP) Certificate by the Department of Industries does not amount to a sanction of a specific tax or tariff benefit. Under Rule 27 of the 2019 Rules, incentives must be specifically sanctioned by a committee. Since no such approval was ever granted for the Clause 16(a) benefit, the respondent could not claim any vested or crystallised right.

The Supreme Court allowed the appeal and set aside the High Court's judgment. It concluded that Clause 16(a) was always intended only for new industrial enterprises. The Court reaffirmed the State's power to correct drafting errors in fiscal policies through clarificatory amendments and ruled that equity cannot be invoked to gain unintended financial advantages from the State.

Date of Decision: 25 May 2026