In a significant ruling on industrial incentives, the Supreme Court of India has set aside a long-standing denial of subsidies to IFGL Refractories Ltd, holding that its Magneco Metrel (MM) Plant qualifies as a new industrial unit under Odisha’s Industrial Policy of 1989. The judgment ends nearly two decades of uncertainty over capital investment and DG set subsidies linked to the unit.
Background of the Case
The dispute traces back to incentives promised under Odisha’s Industrial Policy, 1989, which aimed to encourage new industrial units through capital investment subsidies and additional support for captive power generation. IFGL’s predecessor, Indo Flogates Ltd., had set up the MM Plant at Kalunga Industrial Estate after the policy came into force and applied for eligible subsidies.
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Although the authorities initially treated the MM Plant as a new unit and sanctioned subsidies, the disbursement was later blocked. The Orissa State Financial Corporation and other state bodies argued that both Indo Flogates and IFGL had already exhausted the maximum subsidy limits under earlier industrial policies. This reasoning led to a rejection of payment in 2008, a decision later upheld by the Odisha High Court.
The Supreme Court examined three central questions:
- Whether the MM Plant could be treated as a new industrial unit under the 1989 policy.
- Whether the State was justified in denying subsidies on the ground of earlier benefits availed by the companies.
- Whether the authorities were barred from reversing their stand after having sanctioned the subsidies.
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Court’s Observations
A Bench led by Justice J.B. Pardiwala took a close look at the definitions in the 1989 policy. The Court noted that a new industrial unit is one where fixed capital investment is made after the policy’s effective date. The MM Plant met this requirement, having separate registration, independent infrastructure, and a distinct commencement of commercial production.
“The policy draws a clear distinction between a new industrial unit and an expansion of an existing one,” the Bench observed, adding that incentives restricted to ‘only once’ applied to expansion or modernisation, not to a new unit that independently satisfied eligibility conditions.
The Court was also critical of the State’s shifting position. After repeatedly recognizing the MM Plant as a new unit and formally sanctioning subsidies, the authorities could not later deny disbursement by relying on executive instructions or overall subsidy ceilings that were not part of the original policy framework.
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On the issue of amalgamation, the Bench clarified that when Indo Flogates merged into IFGL, all rights-including sanctioned subsidies-lawfully vested in the successor company. “An amalgamation does not erase accrued entitlements,” the Court noted.
The Decision
Allowing IFGL’s appeal, the Supreme Court overturned the Odisha High Court’s 2018 judgment and quashed the rejection of subsidy disbursement. The Court held that the MM Plant was a new industrial unit under the 1989 policy and that IFGL was entitled to receive the sanctioned capital investment subsidy and DG set subsidy.
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With this ruling, the Court directed the concerned authorities to release the approved amounts, bringing a prolonged subsidy dispute to a close.
Case Title: IFGL Refractories Ltd. v. Orissa State Financial Corporation & Ors.
Case No.: Civil Appeal No. 66 of 2026 (arising out of SLP (C) No. 7013 of 2019)
Case Type: Civil Appeal
Decision Date: 6 January 2026
