SC Sets Aside Orissa High Court Decision, Directs State to Disburse Capital Investment and DG Set Subsidies to IFGL Refractories Ltd., Affirming Doctrine of Promissory Estoppel Against State Authorities
In a landmark judgment delivered on January 6, 2026, the Supreme Court of India allowed the appeal filed by IFGL Refractories Ltd., setting aside the Orissa High Court’s 2018 decision that had denied capital investment and DG Set subsidies to the company under the Orissa Industrial Policy of 1989. The apex court held that the Magneco Metrel Plant ("MM Plant") unit, originally set up by Indo Flogates Ltd. but later amalgamated into IFGL Refractories Ltd., qualifies as a "new industrial unit" under Clause 2.7 of the Industrial Policy of 1989, entitling it to full subsidy benefits.
The Court’s detailed analysis clarified that the MM Plant unit was physically and functionally distinct from the erstwhile Indo Flogates unit, possessing independent registration, location, electricity connection, and separate commercial production commencing in 1992. Citing precedent from Textile Machinery Corpn. Ltd. v. CIT and related rulings, the bench concluded that the MM Plant was not an expansion, modernisation, or diversification of the existing unit but a separate industrial undertaking.
A critical point of contention was the State authorities’ rejection of the subsidy disbursal on grounds that Indo Flogates and IFGL had exhausted their overall subsidy limits under previous policies. The Supreme Court noted that the retrospective instructions dated October 28, 1994, and the amendment notification of October 30, 2008, limiting subsidies only applied to expansions or modernisations of existing units and not to new industrial units like MM Plant, which under Clause 4.1 are entitled to all incentives.
Further, the Court invoked the doctrine of promissory estoppel, emphasizing that the State authorities had made clear and unequivocal representations through official communications between 1998 and 2007 recognizing the MM Plant unit as a new industrial unit and sanctioning subsidies. IFGL Refractories Ltd. had acted on these assurances by continuing production and incurring expenses, thereby creating a legitimate expectation of subsidy disbursal.
Rejecting the State’s contention that the amalgamation of Indo Flogates with IFGL was undisclosed and thus a ground for denial, the Court held that all rights and benefits, including subsidies, passed to IFGL post-amalgamation as per the High Court’s order dated August 3, 2000. The Court reprimanded the bureaucratic lethargy that delayed disbursal for over a decade, underscoring that policy promises must be honored to maintain trust and promote industrial growth.
The Supreme Court directed the respondents to disburse Rs. 11,14,750/- along with 9% interest from the date of sanction within three months. This decision reaffirms the principle that State instrumentalities cannot renege on their clear promises, especially where parties have relied on them to their detriment, and that new industrial units are entitled to full incentives under the 1989 policy irrespective of prior subsidies availed by related entities.
Bottom Line:
MM Plant unit qualifies as a new industrial unit under the Industrial Policy of 1989 and is entitled to capital investment subsidy and DG Set subsidy despite prior subsidies availed by Indo Flogates and appellant company; respondents are estopped from denying disbursal of sanctioned subsidies.
Statutory provision(s): Constitution of India, 1950, Article 14; Industrial Policy of Orissa, 1989 Clauses 2.2, 2.3, 2.5, 2.7, 3, 4.1, 4.4, 5.1, 11.4.4, 20.1; State Financial Corporations Act, 1951; Companies Act, 1956
IFGL Refractories Ltd. v. Orissa State Financial Corporation, (SC) : Law Finder Doc id # 2833574
