A Factory Built Under The Old Policy, Registered Under The New One
A drug maker that began setting up in Sikkim in 2008 claimed Rs 13.66 crore in capital subsidy under the old North-East policy. It received Rs 5 crore, and the High Court has refused the rest.
The Court held that a scheme's ten-year window for starting production does not by itself create a vested right. The decisive question is whether the unit had met the mandatory conditions before the policy changed. It applied for registration only in February 2017, after the November 2016 cap of Rs 5 crore. Without that condition met, no vested right accrued to the balance, and the petition was dismissed.
- Investment is not entitlement. Substantial spending before the change did not secure the old terms.
- Registration was the missing step — and it came after the cap was already in force.
- Promissory estoppel cannot create a right that had not otherwise accrued.
- Incentives are defeasible concessions, which the government may modify.
- Court
- High Court of Sikkim at Gangtok
- Bench
- Justice HON'BLE THE CHIEF JUSTICE MR. A. MUHAMED MUSTAQUE
- Citation
- WP(C) No. 23 of 2025
- Case
- WP(C) No. 23 of 2025
- Decided
- 10 September 2026
- Outcome
- Writ petition dismissed; claim to balance subsidy rejected
The policy and the change
The North-East Industrial and Investment Promotion Policy of 2007 offered a central capital investment subsidy of 30 per cent on plant and machinery to new units and to substantial expansions, on conditions that included starting commercial production within the stipulated period. It ran from April 2007 to March 2017.
The scheme was suspended in December 2014. A notification of 22 November 2016 then capped the subsidy for new manufacturing units at Rs 5 crore.
The company took a 99-year lease in May 2008 and set up its factory at Rangpo. It began commercial production on 10 February 2017, applied for registration with the District Industries Centre on 23 February 2017, and was registered in March 2017. It was credited Rs 5 crore in May 2024 against its claim of Rs 13,65,75,271.
Why the claim failed
The company relied on legitimate expectation, promissory estoppel and Article 14, arguing that it had spent heavily on land and machinery before the cap on the strength of the old policy.
The Court held that a vested right is fixed and not dependent on a future contingency; a mere expectation of future benefits under an existing scheme is not one. The ten-year window for production did not dispense with the policy's other eligibility conditions.
The decisive question was whether, before the November 2016 notification, the company had acquired an accrued right to the specific amount claimed. Its registration came only after the notification was in force. Relying on the Gauhati High Court's view in Manjushree Extrusions, promissory estoppel cannot be used to create a right that had not otherwise accrued.
The result
Without the mandatory registration condition fulfilled, the company could not claim an absolute vested right under the unamended policy merely because investment began earlier or production started within the original period.
It had not shown that a vested right to Rs 13,65,75,271 accrued and was then taken away. The writ petition was dismissed.
Who argued it
Appearances as recorded in the judgment of the Court.
Frequently asked
Does investing under an incentive policy guarantee its benefits?
No. The Court held no vested right accrues until the policy's mandatory conditions are met.
Can promissory estoppel secure a subsidy that was later capped?
Not where the underlying entitlement had not accrued before the change.
Securing an industrial incentive before a policy changes
- Complete every eligibility step — especially registration — as early as the policy allows, not when production starts.
- Keep dated proof of each condition met under the old policy.
- Treat investment alone as insufficient; courts look for an accrued right.
- If the government pays a reduced sum, ask in writing for reasons straight away.
Source. High Court of Sikkim at Gangtok, WP(C) No. 23 of 2025, decided 10 September 2026 by Justice HON'BLE THE CHIEF JUSTICE MR. A. MUHAMED MUSTAQUE. This explainer is written from the judgment text as reported.
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