IFGL Refractories Ltd. Vs Orissa State Financial Corporation & Ors. (Supreme Court of India)
MM Plant Qualifies as a New Industrial Unit: Subsidy Once Sanctioned Cannot Be Denied on Subsequent Executive Instructions or Prior Policy Limits
The Supreme Court held that the MM Plant unit set up by Indo Flogates qualified as a “new industrial unit” under the Industrial Policy of 1989, as its fixed capital investment was made after the effective date (01.12.1989) and it satisfied the statutory definitions under the policy. The Court emphasised that a new industrial unit is distinct from expansion, modernisation, or diversification, and once it falls within the definition of a new unit, it becomes entitled to all incentives provided under the policy, subject only to the express terms of the policy itself.
The Court rejected the State’s contention that subsidies could be denied on the ground that Indo Flogates and the appellant company had already exhausted subsidy limits under earlier industrial policies. It held that executive instructions dated 28.10.1994 and the subsequent amendment of Clause 4.4 in 2008 could not be applied retrospectively to defeat vested rights that had already accrued to the MM Plant unit. Once the authorities had categorically classified the MM Plant as a new industrial unit, sanctioned capital investment subsidy and DG Set subsidy, and repeatedly acknowledged such entitlement, they were estopped from refusing disbursement at a later stage.
The Court further ruled that amalgamation does not extinguish accrued statutory benefits, and that upon amalgamation, the successor company steps into the shoes of the transferor, inheriting its rights, entitlements, and subsidies. Denial of disbursement after formal sanction was held to be arbitrary, contrary to the doctrine of legitimate expectation, and violative of Article 14. Accordingly, the Supreme Court set aside the High Court judgment and directed disbursement of the sanctioned capital investment subsidy and DG Set subsidy in favour of the appellant company.
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
1. Leave Granted.
