Calcutta High Court Sets Aside Denial Of Interest Subsidy To MSME Despite Grant Of Power Subsidy Under WBIS 2013

The Calcutta High Court has set aside the West Bengal government's decision denying interest subsidy to Hooghly Extrusions Ltd., an MSME holding that once a unit is found eligible under the West Bengal Incentive Scheme, 2013 and granted one component of benefit, denial of another on technical grounds defeats the scheme's object.

Allowing the writ petition, Justice Rai Chattopadhyay quashed the State's order dated February 22, 2019 and directed authorities to disburse the interest subsidy within eight weeks.

“Doctrine of harmonious construction is defeated by the interpretation applied by the respondent that the petitioners would be eligible for the 'Power Subsidy' but not the 'Interest Subsidy',” the Court said, noting that the scheme contemplates multiple incentives for units obtaining financial assistance for their projects.

The dispute arose after the company commenced production on February 10, 2015, while its term loan from SIDBI was sanctioned on April 24, 2015 and disbursed in June 2015. Authorities treated the unit as an “own financed unit” and denied interest subsidy despite the loan being subsequently availed and utilised for the project.

Rejecting this approach, the Court held that the project “has never been an 'own financed' one” as machinery had been procured on credit and later reimbursed through the term loan. It also noted that the State had relaxed eligibility conditions and granted power subsidy, and could not deny interest subsidy under the same scheme on such interpretation.

Holding the denial unsustainable in law, the Court said the scheme had been interpreted in an overly strict and technical manner that defeats its beneficial object, and directed disbursal of the interest subsidy within eight weeks.