HP High court: Investor rights upheld as Himachal Industrial policy amendment quashed

Shimla, May 14,

The High Court has allowed a petition filed by M/s Kundlas Loh Udyog, directing the State to honour its commitments under the Himachal Pradesh Industrial Investment Policy, 2019. The judgment is being witnessed as a set back for the State government.

The court has quashed a key clause of the policy’s 2019 amendment, terming it inconsistent with the state’s own promises and unlawful in its retrospective denial of benefits.

The Division Bench of Justice Tarlok Singh Chauhan and Justice Sushil Kukreja delivered a 43-page verdict, observing that the state cannot withdraw or withhold concessions assured under an industrial policy after inviting investment.

The ruling emphasized that such policy benefits create a “legitimate expectation” in investors and must be upheld.

Relying on a precedent set by the Supreme Court in a case related to Bihar’s industrial policy, the High Court clarified that benefits promised for industrial expansion—such as power subsidies and SGST exemptions—cannot be arbitrarily rescinded or delayed by subsequent amendments or tariff orders. “The State is expected to speak in one voice. Any contradictory provisions between the policy and implementing rules undermine investor confidence,” the court stated.

The petitioner, Kundlas Loh Udyog, had undertaken substantial expansion of its manufacturing unit based on the promise of incentives mentioned in the 2019 policy. Despite securing approvals and completing expansion as per norms, the firm was denied promised benefits, citing amended provisions and tariff orders issued in 2020–2022 that failed to reflect the original policy concessions.

The court, therefore, set aside Clause 5B of the 2019 Industrial Policy and Rules 4B(b) and 4F that contradicted the parent policy. It directed the state government to issue enabling notifications within a stipulated period to extend promised benefits, including reduced electricity tariffs and other financial concessions, to the petitioner.

This verdict is likely to have broader implications, as it reinforces investor rights against policy rollbacks. It also adds to the mounting challenges for the Sukhvinder Singh Sukhu-led government, already under criticism for policy inconsistencies and economic mismanagement. The ruling could pave the way for similar claims by other industrial units denied promised incentives.

Advocate General Anup Rattan represented the state, while Senior Advocate Shrawan Dogra appeared for the petitioner.

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The HimachalScape Bureau comprises seasoned journalists from Himachal Pradesh with over 25 years of experience in leading media conglomerates such as The Times of India and United News of India. Known for their in-depth regional insights, the team brings credible, research-driven, and balanced reportage on Himachal’s socio-political and developmental landscape.

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Himachalscape bureau

The HimachalScape Bureau comprises seasoned journalists from Himachal Pradesh with over 25 years of experience in leading media conglomerates such as The Times of India and United News of India. Known for their in-depth regional insights, the team brings credible, research-driven, and balanced reportage on Himachal’s socio-political and developmental landscape.