Recently, the Jammu and Kashmir High Court reiterated that arbitrary withholding of payment for completed work amounts to an unreasonable and unfair act, violative of Article 14 of the Constitution. The decision came in a writ petition filed by a small-scale industrial unit challenging the non-payment of dues for work executed under a government supply order. The Court firmly held that once the work is completed in accordance with the contractual terms, the concerned authority is duty-bound to release the payment. Importantly, the Court observed, “Arbitrary denial of due payment after completion of work is not only illegal but hits at the root of fairness enshrined in Article 14.”
Brief facts:
The petitioner, a proprietor of a Small Scale Industrial Unit registered with J&K SICOP, was assigned a government contract to fabricate and install a syphon made of mild steel pipe measuring 5 mm thick, 250 mm in diameter, and 860 meters in length, including priming of approved brand and shade. The Divisional Manager (Respondent No. 5), upon request from the Irrigation & Flood Control Department, submitted a proforma bill. Acting upon this, Respondent No. 4 placed a supply order for the total work valued at ₹30,40,960.
After completion of the assigned work, the petitioner was paid ₹24,00,000, leaving a balance of ₹6,40,960 unpaid. Aggrieved by the withholding of this amount, the petitioner filed a writ petition under Article 226 of the Constitution seeking direction for release of the pending dues.
Contentions of the Petitioner:
The petitioner’s counsel argued that the entire contractual work was executed in compliance with the specifications laid down in the supply order. It was submitted that the respondents were unjustly withholding the balance amount, despite the fact that no deficiencies or breaches had been formally communicated, and no objections were raised at the time of delivery or installation. Therefore, withholding the remaining payment was arbitrary and unfair.
Contentions of the Respondent:
The respondents argued that the petitioner had failed to fulfill the installation and testing conditions as specified in the contract. Due to this non-compliance, it became necessary to engage alternative contractors to complete the job. The counsel contended that this course of action was essential to safeguard public interest and avoid potential financial loss to the exchequer. Hence, the payment was withheld to account for the losses or deficiencies caused due to the petitioner's alleged breach.
Observations of the Court:
After a careful review of the records and submissions, the Court found merit in the petitioner’s case and concluded that the petitioner had, in fact, carried out the contractual obligations as per the terms of the supply order. The Court strongly disapproved of the respondent’s arbitrary action of withholding payment without adequate justification or due process.
The Court observed, “The respondents have failed to substantiate any breach on the part of the petitioner with credible records. Once the work is completed and accepted without objection, denial of payment becomes wholly arbitrary.”
The Court emphasized that such arbitrary withholding of legitimate dues constitutes a violation of Article 14 of the Constitution. It relied upon precedents such as Mukhtar Ahmad Andrabi v. UT of J&K & Ors. and Karamat Ullah Malik v. Union Territory of Jammu and Kashmir, wherein it was held that failure to release certified payments despite completion of work invites judicial interference.
It was further held that, “Where the respondents have withheld the petitioner’s legitimate dues despite certification of completion, this Court finds that the exercise of writ jurisdiction is warranted to secure the ends of justice.”
The Court clarified that contractual disputes involving public bodies must still adhere to principles of fairness and reasonableness. Arbitrary financial decisions, even in contractual matters, are subject to constitutional scrutiny where fundamental rights such as equality and fair treatment are compromised.
The decision of the Court:
The Court allowed the writ petition and directed the respondents to release the withheld amount of ₹6,40,960 to the petitioner. It also directed the authorities to ensure that such arbitrary actions are avoided in the future, reaffirming the need for governmental bodies to act within the bounds of fairness and constitutional mandates.
Case Title: M/S PMT Industries V. UT of Jammu & Kashmir
Coram: Justice Wasim sadiq Nargal
Case No.: WP(C) 2966/2024
Advocates for the Petitioner: M.M. Khan, Advocate, N.H. Khuroo, Advocate
Advocates for the Respondents: Jehangir Ahmad Dar, Government Advocate, Waseem Gul, Government Advocate
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