‘Fund crunch, approval delays can’t justify non-payment’
Flags systemic lapses in financial planning, governance
Mohinder Verma
JAMMU, Apr 15: Coming down heavily on the practice of forcing citizens to approach courts for rightful payments, the High Court of Jammu & Kashmir and Ladakh has held that withholding admitted dues on grounds like administrative delays, pendency of approvals or alleged paucity of funds is wholly untenable in law and such pleas are nothing but attempts to shift the burden of internal inefficiencies onto the shoulders of the executing parties.
Moreover, the High Court said that the State, being a welfare entity, is expected to act fairly, reasonably and in a responsible manner in all its dealings, and the practice of compelling citizens to seek judicial intervention for enforcement of admitted claims deserves to be deprecated.
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These observations were made by Justice Wasim Sadiq Nargal in a petition titled Lumber India Corporation through its co-proprietor Ghulam Nabi Dar (senior citizen) versus Union Territory of J&K through Commissioner/Secretary, Tourism Department and others.
The petitioner had executed construction and renovation works for Government departments through SICOP. Despite completion of works to the satisfaction of authorities and partial payments, an admitted amount of Rs 47.47 lakh has remained unpaid since 2017.
The respondents contended that SICOP acts merely as a facilitating agency between the indenting department and SSI units, with payments to be released by the department and then disbursed by SICOP, and since no funds were received, no liability can be fastened upon it.
They further argued that there was no privity of contract with the petitioner as the work was allotted to SICOP, making any engagement of the petitioner an independent arrangement, thereby absolving them of liability. While admitting that the work was executed, handed over and Rs 34.80 lakh was released, they attributed the non-payment of the balance to non-availability of funds from the indenting department, maintaining that in the absence of such funds, no enforceable liability arises against them.
After hearing counsel for both sides and perusing the material on record, Justice Wasim Sadiq Nargal observed that the State and its instrumentalities in law constitute a single entity, and the petitioner cannot be made to suffer on account of lack of coordination or financial mismanagement between its departments.
“Once the State has availed the benefit of work executed, it is under a corresponding legal and constitutional obligation to ensure timely payment. Any failure in this regard strikes at the very core of Article 14 of the Constitution, which mandates fairness, reasonableness and non-arbitrariness in State action”, the High Court said.
The High Court further observed that the State is expected to function as a model litigant and cannot take advantage of its dominant position to delay payment of admitted dues and then seek to absolve itself by raising technical pleas.
“If the State seeks to rely upon procedural safeguards and limitation against a citizen, it must equally be held accountable for its own delays. Each day’s delay in release of payment, where liability is admitted, must be supported by a cogent explanation. In the absence thereof, the delay must be held to be unjustified”, the Court said.
“It is trite and well settled through a catena of judgments that the State and its instrumentalities cannot shirk their financial obligations on the ground of paucity of funds, particularly after having accepted and utilized the work executed for their benefit,” Justice Nargal said, adding that “the obligation to make payment, in such circumstances, attains a binding character and cannot be rendered illusory by internal administrative deficiencies or financial constraints”.
Emphasizing the need for administrative accountability, the High Court said that recurrent instances of delayed payments point towards systemic deficiencies in financial planning and governance. “Authorities must ensure that funds are duly earmarked prior to issuance of work orders and that payments are released without delay once the work is completed and accepted” the High Court added.
Allowing the writ petition, the High Court directed the respondents to release the admitted amount of Rs 47.47 lakh within four weeks. “It is well settled that where payment is wrongfully withheld, the aggrieved party is entitled to compensation by way of interest. The grant of interest in such cases is not merely discretionary but is founded upon principles of equity, justice and good conscience”, the High Court added.
“In cases involving Micro and Small Enterprises, the statutory framework further mandates timely payment and provides for enhanced liability in case of delay. The object of such provisions is to ensure that small units are not subjected to financial hardship on account of delayed payments by State entities”, the High Court said and ruled that failure to release the admitted amount within the stipulated period would attract interest at the rate of 6% per annum from the date the amount became due.
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