Srinagar: The High Court of Jammu & Kashmir and Ladakh has ruled that once the State accepts and benefits from work executed, it cannot withhold admitted payments without lawful justification, holding that such dues constitute a “clear, enforceable legal right” of the contractor and must be released promptly.
Delivering the judgment, Justice Wasim Sadiq Nargal emphasized that the liability of the State “having once crystallized, cannot be diluted or defeated” by administrative excuses such as lack of funds or pending approvals.
The court further underlined that delayed payments, especially to small-scale enterprises, violate principles of equity, justice, and good conscience, and may attract statutory interest.
The ruling came in a writ petition filed by M/s Lumber India Corporation, a Srinagar-based small-scale industrial unit, through its co-proprietor Ghulam Nabi Dar. The petitioner sought release of ₹47.47 lakh for works executed at Tourist Village Cheshma Shahi, including construction of a 2BHK duplex hut and renovation of existing infrastructure.
According to the petitioner, the works were completed between 2015 and 2016 through allotments routed via the Jammu and Kashmir Small Scale Industrial Development Corporation (SICOP), and were accepted by the concerned authorities without objection. While partial payments amounting to ₹34.80 lakh were released, the balance amount remained unpaid since 2017 despite repeated representations.
The respondents, including the Union Territory administration, Tourism Department, and SICOP, argued that payment delays were due to lack of funds and absence of direct contractual liability.
SICOP maintained that it merely acted as an intermediary and could not release funds unless received from the indenting department.
Rejecting these contentions, the court held that such defenses do not withstand judicial scrutiny. It observed that the State and its instrumentalities function as a single entity and cannot shift responsibility among departments to deny legitimate claims.
“The State cannot be permitted to derive benefit from completed works while denying corresponding financial entitlement,” the court noted.
The judgment also highlighted the broader impact of delayed payments on small enterprises, stating that such practices cause financial hardship, erode creditworthiness, and threaten business viability.
Stressing administrative accountability, the court directed authorities to ensure availability of funds before allotting works and warned that failure in this regard cannot be used as a defense later.
It further observed that pleas such as administrative delays, pendency of approvals, or alleged paucity of funds are “nothing but attempts to shift the burden of internal inefficiencies onto the shoulders of the executing parties”, which is impermissible in law.
Reiterating the State’s role as a welfare entity, the court held that compelling citizens to seek judicial intervention for enforcement of admitted dues cannot be approved and deserves to be deprecated. Such conduct, it said, violates Article 14 of the Constitution, which mandates fairness, reasonableness, and non-arbitrariness in State action.
The court directed the respondents to release the admitted amount of ₹47.47 lakh to the petitioner within four weeks, failing which interest at 6 percent per annum shall be payable from the date the amount became due.
