NEW DELHI (Reuters) - India’s top court told tobacco companies on Wednesday they must adhere to a new federal rule requiring much larger health warnings on cigarette packs, in a major setback for the $11 billion industry that opposes the new policy.

A man lights a cigarette in front of a kiosk in Kolkata, India, April 7, 2016. REUTERS/Rupak De Chowdhuri

The Supreme Court turned down a plea to stay implementation of the new rules introduced from April 1, which require health warnings to cover 85 percent of a cigarette pack’s surface, up from 20 percent earlier.

In a packed court room in New Delhi, a two-judge bench rejected the industry’s plea to extend a stay it had obtained from a court in the southern Karnataka state but agreed to a request to move the rest of the appeals to the Karnataka court.

“You have duty towards the society,” the judges told a team of industry lawyers, which included some of the most expensive advocates in the country.

The industry “should not violate any rule prevailing as of today”, they said.

The Supreme Court also directed the high court of Karnataka state to hear dozens of pleas filed against the new rules in several Indian courts and decide on the matter within six weeks.

Shares in India's biggest cigarette maker ITC Ltd ITC.NS, part-owned by British American Tobacco BATS.L, pared gains after the court ruling and ended with losses of 1 percent.

U.S.-based Philip Morris International's PM.N India partner Godfrey Phillips GDFR.NS ended down marginally.

ITC, Godfrey and the industry lobby group Tobacco Institute of India did not respond to requests seeking comment.

BATTLE IN COURTS

The Supreme Court’s ruling can leave the industry in limbo. It was not immediately clear whether it will start complying with the new rules or sell old stock while it waits for the Karnataka court to decide.

When the rules came into force last month, the industry shut down factories in protest for days. India’s traditional hand-rolled cigarette makers also joined in the protest.

The rules were initially supposed to come into force on April 1, 2015 but were delayed.

The rules make India’s health warnings on tobacco products among the world’s most stringent, along with Thailand. Smoking kills more than 1 million people a year in India, according to BMJ Global Health. The World Health Organization says tobacco-related diseases cost India $16 billion annually.

The tobacco industry filed 27 cases against the federal rule in several courts around the country, according to lawyers involved in the case. ITC has said it had obtained at least one judgment that allowed it to resume production with older warnings, and one that allowed it to sell old stock, which it then tried to use to circumvent the federal government’s orders.

In a letter, dated April 26, seen by Reuters, ITC cited the two rulings to press a regulator who had seized its cigarette stock worth billions of rupees.

Ranjit Kumar, solicitor general of India, told the court that the federal government was committed to the new rules and opposes any stay on their implementation.

(This version of the story has been refiled to correct paragraph 13 to read ‘among the most stringent’, not ‘the most stringent’)