Promissory estoppel and mandamus can enforce a sanctioned loan where a State instrumentality's promise was relied upon.

A loan sanction is not conditional merely because refinance may affect interest rate and commitment charge; where the agreement contemplates non-refinance and its consequences, the obligation to advance the loan remains binding. A State financial corporation, acting within statutory powers, may be held to its clear and unequivocal promise where the borrower altered position in reliance on it, because promissory estoppel applies and Article 226 can enforce a non-arbitrary statutory duty by mandamus. The corporation was therefore bound to honour the sanctioned loan and could not withdraw from the undertaking arbitrarily.

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Issues: (i) Whether the sanction of the loan was conditional upon the Industrial Development Bank of India agreeing to refinance it. (ii) Whether a writ of mandamus could issue to compel a State Financial Corporation, as a State instrumentality, to disburse the sanctioned loan.

Issue (i): Whether the sanction of the loan was conditional upon the Industrial Development Bank of India agreeing to refinance it.

Analysis: The terms of sanction showed that refinance affected only the rate of interest and the commitment charge. The agreement itself contemplated the contingency of non-refinance and provided the consequences for that event. The obligation to advance the loan was therefore not dependent on refinance being available.

Conclusion: The loan sanction was not conditional upon refinance by the Industrial Development Bank of India.

Issue (ii): Whether a writ of mandamus could issue to compel a State Financial Corporation, as a State instrumentality, to disburse the sanctioned loan.

Analysis: The Corporation had made a clear and solemn promise in exercise of its statutory role, and the respondent had acted upon it and altered its position by incurring expenditure and liabilities. In such circumstances, promissory estoppel applied. Being an instrumentality of the State within Article 12, the Corporation was also bound by the requirement of non-arbitrariness, and its statutory duty could be enforced under Article 226 by mandamus.

Conclusion: A writ of mandamus was maintainable and could be issued to enforce disbursement of the loan.

Final Conclusion: The Corporation was bound to honour its sanction and could not withdraw arbitrarily from its undertaking; the respondent was entitled to enforcement of the promised loan.

Ratio Decidendi: Where a State instrumentality makes a clear and unequivocal promise within its statutory powers and the promisee acts upon it to its detriment, the promise is enforceable by promissory estoppel and may be compelled by mandamus if refusal would be arbitrary and contrary to statutory duty.

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