The High Court of Judicature at Allahabad has directed the Nagar Panchayat, Chandauli to settle outstanding construction dues owed to M/s Vikas Constructions, reaffirming that the state and its instrumentalities cannot arbitrarily withhold legitimate payments. In a significant ruling, the bench of Justice J.J. Munir and Justice Indrajeet Shukla held that when contractual liabilities are admitted by the state authorities, non-payment for an indefinite period constitutes arbitrary action that necessitates judicial intervention under Article 226 of the Constitution of India.

The court’s decision settles a dispute involving construction work executed during the financial years 2018-19 and 2021-22. The petitioner had approached the court seeking a writ of mandamus to compel the release of Rs. 28,43,443 in unpaid dues, alleging that despite multiple formal reminders, the local body failed to liquidate the outstanding amounts. During the proceedings, the court issued an ad interim mandamus requiring the Executive Officer of the Nagar Panchayat to file a personal affidavit clarifying the status of the admitted dues.

Resolving Disputed and Admitted Liabilities

In the subsequent affidavit, the Executive Officer acknowledged that a sum of Rs. 7,92,580 remained unpaid against the first work order issued in 2018. While the local body initially contested the release of an additional Rs. 6,31,890 relating to a second work order, the opposition was based purely on procedural technicalities rather than a denial of the work's completion. The respondent argued that the petitioner had submitted an incomplete Form No. 26 and failed to provide the necessary certification from the Junior Engineer and Assistant Engineer, which are prerequisites for official billing.

The High Court observed that the respondent authorities did not dispute the actual completion of the work or the quality of the services rendered. Addressing this, the court emphasized that administrative delays in formalizing paperwork should not be used as a pretext to deny a contractor their rightful compensation. The judgment underscores the court's view that state instrumentalities have a constitutional obligation to act fairly and transparently in their contractual dealings, as noted by the bench: “The contractual dues in the instant case are fair and categorical regarding which there is an admission in the personal affidavit of respondent no. 4. There is no dispute with regard to work having been done and the respondent being under an obligation to liquidate the outstanding dues.”

Scope of Writ Jurisdiction in Money Claims

The legal discourse during the hearing centered on the maintainability of writ petitions for monetary claims. The High Court relied upon established Supreme Court precedents, specifically highlighting the principles laid down in M/s Utkal Highways Engineer and Contractors v. Chief General Manager . The court distinguished this case from those involving complex, disputed factual questions, which are typically relegated to civil suits. It clarified that while the court will not transform into a court of first instance for evaluating contested bills or technical field measurements, it maintains the authority to direct payments when the state itself admits the liability.

The ruling reinforces the principle that when the state is in a position to pay and refuses to do so without a valid legal basis, the resulting undue enrichment at the expense of the contractor is legally unsustainable. Justice Shukla, writing for the bench, underscored that the judiciary is not precluded from entertaining such claims if the non-payment is arbitrary and involves no serious questions of fact requiring a trial. The court’s judgment stated: “Non-payment of even the admitted dues/contractual dues for an uncertain period amount to arbitrary in action and cannot be countenanced in law.”

Directives for Payment and Compensation

Beyond the principal amount, the High Court addressed the harm caused by the long delay in releasing payments. Invoking the logic that a party deprived of their funds is entitled to be compensated for that deprivation, the bench applied the rationale found in the Supreme Court’s decision in Dr. Poornima Advani and Another v. Government of NCT of Delhi . The court observed that the entitlement to interest is inherent when a party is kept away from money that was legitimately due to them for a significant period.

Consequently, the court issued specific operational directives to bring the dispute to an end. It mandated that the petitioner must raise a fresh, properly formatted bill for the second work order within two weeks. Upon submission, the authorities are required to process and release the entire admitted amount within four weeks. To account for the period of delay, the court ordered that the petitioner be paid simple interest at the rate of 6% per annum on the total admitted dues, calculated from the date they became due until the actual realization of the funds.

The Registrar (Compliance) has been directed to communicate this order to the Executive Officer of the Nagar Panchayat, Chandauli, through the Chief Judicial Magistrate, Chandauli, to ensure immediate compliance. This ruling serves as a strong reminder that state-run municipal bodies are bound by the same standards of fairness and contractual responsibility as any other entity, and that administrative hurdles cannot be weaponized to indefinitely delay the payment of earned contractual dues. The petitioner, having successfully demonstrated the arbitrariness of the withholding, is now entitled to both the principal sum and the prescribed interest, effectively concluding the litigation.