Withholding Admitted Contractual Dues is Arbitrary

Source: Allahabad High Court

Why in News? 

A bench of Justice J.J. Munir and Justice Indrajeet Shukla of the Allahabad High Court decided M/s Vikas Constructions v. State of U.P. & Ors. (2026). The Court held that non-payment of contractual dues admitted by a State authority is arbitrary, and such dues can be recovered through a writ petition under Article 226 of the Constitution of India. The Court directed the Nagar Panchayat to pay the admitted dues with simple interest at 6% per annum. 

What was the Background of M/s Vikas Constructions v. State of U.P. & Ors. (2026) Case? 

• The petitioner, a civil contractor, carried out construction work for the Nagar Panchayat, Chandauli under two work orders. 
• It claimed that bills amounting to Rs. 28,43,443 remained unpaid despite an application and reminders. 
• The petitioner approached the High Court under Article 226 seeking recovery of the outstanding dues. 
• The High Court directed the Executive Officer, Nagar Panchayat, Chandauli to state on personal affidavit whether the claim was admitted. 
• Respondents’ stand in the affidavit:  
  • Rs. 7,92,580 remained unpaid against the first work order, and the respondents were ready to consider its payment. 
  • The balance of Rs. 6,31,890 under the second work order could not be released because the petitioner had submitted an incomplete Form No. 26 instead of a bill in the prescribed format, and certification by the engineers was pending. 
  • Completion of the work was not disputed. 

What were the Court’s Observations? 

On maintainability of a writ for money claims: 

• The bar on deciding money claims in writ jurisdiction is not absolute. 
• Relying on Utkal Highways Engineers and Contractors v. Chief General Manager (2025), the Court noted that money claims can be decided under Article 226 where non-payment of admitted dues is arbitrary. 
• Under State of U.P. v. Bridge & Roof Co. (India) Ltd. (1996), seriously disputed contractual claims must be decided in a civil suit, but admitted claims withheld on grounds such as lack of funds can be enforced in writ jurisdiction. 

On the admitted dues: 

• The dues were clear and categorical, and the respondent had admitted them in a personal affidavit. 
• There was no dispute that the work had been done and that the respondents were obliged to clear the outstanding amount. 
• Withholding admitted dues for an uncertain period is arbitrary and cannot be sustained in law. 
• Refusing to interfere would result in undue enrichment of the respondents at the cost of the petitioner’s legitimate claim. 

On the two amounts: 

• Rs. 7,92,580 under the first work order was an absolute admission and had to be paid. 
• Rs. 6,31,890 under the second work order would be paid once the petitioner completed the formalities indicated in the affidavit. 

On interest: 

• Relying on Dr. Poornima Advani & Anr. v. Government of NCT of Delhi (2025), the Court held that a person deprived of money legitimately due to him is entitled to be compensated by way of interest. 

Conclusion: 

• The Court allowed the writ petition.  
• The petitioner was directed to raise a fresh bill for the second work order within a fortnight, and the respondents were directed to pay the entire admitted dues within four weeks with simple interest at 6% per annum from the date the dues fell due until payment.

What is Article 226 of the Constitution of India? 

About: 

• Article 226 empowers every High Court to issue directions, orders or writs to any person or authority, including the Government, within its territorial jurisdiction. 
• Writs may be issued in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari. 

Provisions: 

• Article 226(1): High Courts may issue writs for the enforcement of Fundamental Rights and “for any other purpose”, which makes their writ jurisdiction wider than that of the Supreme Court under Article 32. 
• Article 226(2): A High Court may issue writs even to an authority outside its territory if the cause of action, wholly or in part, arises within its territorial jurisdiction. 
• Article 226(3): Where an interim order is passed without hearing the other party, that party may apply for its vacation, and the application must be disposed of within two weeks. 
• Article 226(4): The power under Article 226 does not derogate from the Supreme Court’s power under Article 32. 

Nature of the jurisdiction: 

• The remedy under Article 226 is discretionary. 
• The High Court ordinarily declines to interfere where an equally efficacious alternative remedy is available, though this is a rule of self-restraint and not a bar on jurisdiction.