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Court Reaffirms Commitment to Industrial Policies
The Supreme Court has declared that state governments cannot renege on promises of industrial incentives after companies have invested capital, invoking critical legal doctrines to protect business commitments. This landmark ruling aims to ensure stability and predictability in investment policies across India.
The apex court allowed an appeal by IFGL Refractories Ltd., overturning a 2018 Orissa High Court judgment. The High Court had previously supported the state's refusal to disburse subsidies sanctioned under the Odisha Industrial Policy of 1989. The Supreme Court underscored that a clear representation made by state authorities creates a legitimate expectation that must be honored.
Legal Precedents Guiding the Decision
Justices JB Pardiwala and R Mahadevan relied on the established principles of legitimate expectation and promissory estoppel. These doctrines prevent governmental or other authorities from acting in a manner that contradicts their prior assurances, especially when individuals or entities have acted upon those assurances to their detriment or significant investment.
The court asserted that policies formulated and representations made by the state create legitimate expectations. Refusal to disburse sanctioned subsidies was deemed a violation of Article 14 of the Constitution, which guarantees equality before the law.