Supreme Court Holds MM Plant Is A New Industrial Unit; Directs Disbursal of Sanctioned Subsidies With Interest

A bench of Justices J.B. Pardiwala and R. Mahadevan heard the appeal by IFGL Refractories Ltd. challenging the Orissa High Court’s refusal to direct payment of a capital investment subsidy and a diesel generator (DG) set subsidy claimed for a newly set up Magneco Metrel (MM) Plant unit. The petition arose from orders of the State authorities and a sub‑committee that refused disbursement on the ground that overall subsidy limits had been exhausted by the predecessor and successor companies.

The Court allowed the appeal, set aside the High Court judgment, and directed payment of Rs. 11,14,750 along with interest at 9% per annum from the date of sanction within three months. The Court held that the MM Plant satisfied the statutory definition of a “new industrial unit” under the Orissa Industrial Policy, 1989 and that the operative restriction on overall limits (introduced by internal instruction dated 28.10.1994 and later by amendment dated 30.10.2008) applied to expansion/modernisation/diversification of existing units and not to genuinely new units established after 01.12.1989. The Court further held that the State authorities had made clear and unequivocal communications sanctioning the subsidies and were estopped from resiling; the judgment also recorded judicial displeasure at administrative delay. The Court, in its reasoning, observed: "In view of the foregoing and considering the totality of the circumstances, our conclusion on each issue is as follows: (i) The MM Plant unit fulfils the definition of a 'new industrial unit' under Clause 2.7 of the industrial policy of 1989... (ii) The MM Plant is not an expansion/modernisation/diversification of an existing unit as defined under Clause 2.2... (iii) The concept of overall financial limit under the amended Clause 4.4 ... applies only to expansion/modernisation/diversification of an existing unit. It has no application to new industrial units... (iv) The appellant company is entitled to the disbursement of sanctioned subsidies. We have held that a clear and unequivocal representation was made by the respondent authorities ... and the appellant company having legitimate expectation that sanctioned subsidies would be disbursed, and acting upon the same set up and continued the production in the MM Plant unit by incurring substantial expenses ... rendering the subsequent volte‑face not only unfair but also untenable." The Court also observed that "This litigation is a fine specimen of the bureaucratic lethargy."

Background The dispute concerned Indo Flogates’ MM Plant (fixed capital investment from 01.02.1992; commercial production from 21.11.1992) and later amalgamation with IFGL Refractories Ltd. Applications for DG set subsidy (Clause 11.4.4) and capital investment subsidy (Clause 5.1) under the Orissa Industrial Policy, 1989 were filed in 1993. Respondent officials initially certified the unit as a separate new industrial unit (letter dated 05.11.1998) and the sub‑committee later sanctioned Rs. 1,14,750 and Rs. 10,00,000 in 2003. After repeated follow‑ups and a site visit, the disbursing agency recommended release, but a subsequent sub‑committee meeting in 2008 rejected disbursement on the basis that earlier subsidies received by Indo Flogates and IFGL together exhausted the overall caps and in light of an executive instruction (28.10.1994) and a later retrospective amendment (30.10.2008). IFGL challenged the rejection by writ; the High Court dismissed the petition holding the committee’s interpretation — that incentives could be allowed only once — correct. On appeal the Supreme Court applied settled tests from precedents (Textile Machinery Corpn., Indian Aluminium, Motilal Padampat and subsequent authorities) to distinguish a new industrial unit from mere expansion, reviewed Clause 2.7 (definition of new unit), Clause 2.2 (expansion), and Clause 4.4, and found the MM Plant to be a distinct, separately located, separately licensed unit with independent fixed capital and production. The Court also applied promissory‑estoppel/legitimate‑expectation principles to hold the State authorities estopped from denying disbursement after clear sanctions and repeated assurances. Result: appeal allowed, High Court order set aside; direction to disburse Rs. 11,14,750 with 9% interest within three months.

Case Details: Case No.: Civil Appeal No. 66 of 2026 (2026 INSC 18; arising out of SLP (C) No. 7013 of 2019) Case Title: IFGL Refractories Ltd. v. Orissa State Financial Corporation & Ors. Appearances: For the Petitioner(s): Mr. Nakul Dewan, Senior Counsel (for IFGL Refractories Ltd.) For the Respondent(s): Mr. Soumyajit Pani (for Orissa State Financial Corporation); Mr. Gaurav Khanna (for Director of Industries/IPICOL and Sub‑Committee)