State Cannot Have 'Win-Win' Situation By Sitting Over Contractors' Dues For Years & Only Paying Principal Amount: J&K&L High Court
The Jammu and Kashmir and Ladakh High Court has held that the State cannot delay payments to contractors for years and yet seek to discharge its obligation by paying only the principal amount, without any consequence.
Tailoring its opening to this core principle a bench of Justice Wasim Sadiq Nargal categorically observed that “the State cannot have a 'win-win' situation, where it delays payment for years and still discharges only the principal amount, without any consequence or accountability.”
He added,
“… Where the delay in releasing payments is attributable to the State, and there is no legal impediment or contractual dispute, the Government must explain the cause of such delay. Each day's delay in the release of payment must be justified”
This observation came while allowing a writ petition filed by a small proprietary firm seeking release of its long-pending, admittedly verified dues from the Jal Shakti (PHE) Department.
Background of the Case:
The petitioner, M/s Krishna Engineering Works, had approached the High Court alleging arbitrary and prolonged withholding of its legitimate dues by the State authorities. The firm, had been engaged by the Jal Shakti (PHE) Department between 2015 and 2020 for execution of various electrical and mechanical works.
According to the petitioner, job orders were issued by the department, works were executed strictly as per the terms and conditions, and bills amounting to ₹7,71,224 were raised after successful completion. These bills were duly verified by the competent authorities, including the Assistant Executive Engineer, thereby acknowledging the liability. Despite this admitted position, the payment remained unpaid for years, compelling the petitioner to invoke the extraordinary jurisdiction of the High Court.
Appearing for the petitioner, Advocate Mr. Pawan Choudhary submitted that the petitioner had completed all allotted works to the satisfaction of the department and that the refusal to release the payment, despite acknowledgment of liability, amounted to a failure of statutory duty and caused severe financial hardship.
The respondents, represented by Mrs. Monika Kohli, Senior Additional Advocate General, contended that the petitioner's claim lacked codal formalities such as e-tendering, administrative approval, and technical sanction, which were mandatory prerequisites under the Financial Code. It was argued that in view of these deficiencies, the claim had been rejected by a formal order passed in November 2024, and therefore no mandamus could be issued for release of payment.
Court's Observations:
After hearing both sides and examining the record, the Court found the State's defence wholly untenable. The Bench noted that contractors execute works with a legitimate expectation that the department issuing the job orders has complied with all internal and statutory requirements. Once the work is executed, the burden of procedural compliance cannot be shifted onto the contractor, the court underscored.
The Court expressed surprise that the very authority which issued job orders and verified the bills later sought to deny payment on the ground of lack of approval, terming this stand an afterthought intended to avoid financial liability.
In a crucial observation, the Court reiterated the settled legal position that once work has been executed and liability admitted, the State cannot arbitrarily withhold payment. Relying upon a catena of pronouncements of the Supreme Court, the Court underscored that writ jurisdiction can be invoked where admitted contractual dues are withheld without justification.
Observing that state cannot delay for years its admitted liabilities and walk away scot-free the Court remarked,
“Where the delay in releasing payments is attributable to the State, and there is no legal impediment or contractual dispute, each day's delay must be explained. In the absence of such justification, the Government shall be liable to pay interest and also compensate the contractor for the financial loss and mental distress caused due to such delay.”
The Court went on to emphasize,
“The principle of fairness demands that the State cannot have a 'win-win' situation, where it delays payment for years and still discharges only the principal amount, without any consequence or accountability.”
Drawing strength from its earlier judgments, the Court held that administrative approvals and availability of funds are matters to be ensured by the department before allotting work. Once the work is executed, the State cannot raise post-facto objections relating to sanction or procedure to deny payment, the court maintained.
The Court also held that after admitting liability, the respondents were estopped in law from questioning the validity of the contract at a belated stage on grounds such as lack of e-tendering or technical sanction.
Concluding that the respondents had unjustifiably withheld the petitioner's admitted dues, the High Court allowed the writ petition and directed the authorities to release the amount of ₹7,71,224 within four weeks. The Court further ordered that in case of failure, the petitioner would be entitled to interest at the rate of 6% from the date the payment became due.
Case Title: M/s Krishna Engineering Works Industrial Estate
Citation: 2026 LiveLaw (JKL)