The Allahabad High Court held that a writ petition under Article 226 of the Constitution seeking payment of admitted contractual dues is both maintainable and entertainable where the liability is undisputed and no question of fact requires detailed adjudication. The Court rejected the defence of paucity of funds, directed the respondent to liquidate the dues within three months with interest at six percent per annum, and affirmed that financial constraints cannot override a settled legal obligation.
Background & Facts
The Dispute
The petitioner, M/s Purv Sainik Security Service, a registered partnership firm, was awarded a tender by respondent No.5, Firozabad Dugdha Utpadak Sahkari Sangh Limited, a state instrumentality, to provide security services from 16.10.2018 to 30.09.2019, which was subsequently renewed and continued up to 31.05.2021. After termination, the petitioner claimed outstanding dues for services rendered and the security deposit of Rs.20,000/-.
Key Facts
- The petitioner performed its contractual obligations and received payments through the Government Treasury until 09.01.2022, after which no further payments were made despite admitted liability.
- A demand letter dated 06.08.2021 sought Rs.5 lakhs; a further request dated 15.07.2022 sought Rs.19 lakhs.
- Respondent No.5’s counter-affidavit admitted that Rs.18,59,197.02/- remains payable to the petitioner for services rendered, attributing non-payment to financial difficulties.
- The petitioner also claimed the security deposit of Rs.20,000/- held as a fixed deposit receipt in the name of respondent No.5.
- Instructions dated 13.08.2026 from the respondent acknowledged the liability of Rs.18,59,197.02/- and the security deposit, bringing the total outstanding amount to Rs.18,79,197/-.
- The petitioner filed the present writ petition (WRIT-C No.-28222 of 2022) seeking a mandamus for payment of the admitted dues and the security deposit with interest.
Procedural History
- 09.01.2022: Dispute arose after payments ceased.
- 06.08.2021: First demand letter for Rs.5 lakhs.
- 15.07.2022: Second request for Rs.19 lakhs.
- 18.07.2022: Letter from Pradeshik Co-operative Dairy Federation Limited directing respondent No.5 to ensure payment.
- 13.08.2026: Instructions admitting liability of Rs.18,59,197.02/- and security deposit.
- 05.10.2026: Judgment reserved.
- 13.10.2026: Judgment delivered.
Relief Sought
The petitioner sought a writ of mandamus directing respondent No.5 to pay the admitted contractual dues of Rs.18,59,197.02/-, the security deposit of Rs.20,000/- and interest thereon from the date of non-payment.
The Legal Issue
The central question was whether a writ petition under Article 226 of the Constitution is maintainable and entertainable for the recovery of admitted contractual dues where the liability is undisputed and no disputed question of fact requires detailed adjudication, and whether the defence of paucity of funds or financial constraints can defeat such a claim.
Arguments Presented
For the Appellant/Petitioner
The petitioner relied on the Supreme Court’s decisions in ABL International Ltd. v. Export Credit Guarantee Corporation of India Ltd., (2004) 3 SCC 553, and State of West Bengal v. Confederation of State Government Employees, (2026) 6 SCC 641, to argue that once a contractual liability is admitted, the State cannot refuse payment on the ground of paucity of funds. It further cited Godrej Sara Lee Ltd. vs. Excise and Taxation Officer-cum-Assessing Authority to maintain that the mere availability of an alternative remedy does not oust writ jurisdiction. The petitioner contended that the alternative remedy of a civil suit was not a bar because the dispute involved no contested questions of fact and the amount was admitted, thus satisfying the exception to the rule of alternate remedy.
For the Respondent/State
The respondents argued that an alternative remedy - namely, a civil suit for recovery of dues - was available and that the petitioner ought to have exhausted that remedy before invoking writ jurisdiction. They emphasized that the claim arose from a pure contractual obligation and that the High Court should not entertain the writ where an efficacious alternative remedy exists. The respondents also pleaded financial constraints and lack of funds as justification for non-payment, asserting that the State could not be compelled to pay when resources were unavailable.
The Court's Analysis
The Court began by distinguishing between maintainability and entertainability, noting that maintainability concerns the Court’s jurisdiction to receive the lis, while entertainability involves the exercise of discretionary writ jurisdiction. It relied on the catena of Supreme Court authorities - Godrej Sara Lee Ltd., Whirlpool Corporation v. Registrar of Trade Marks, ABL International Ltd. - to hold that the rule requiring exhaustion of alternative remedies is a rule of policy, convenience and discretion, not a rule of law.
The Court observed that the liability of Rs.18,59,197.02/- was unequivocally admitted by the respondent in its counter-affidavit and reinforced by the instructions dated 13.08.2026. No disputed question of fact existed regarding the quantum of dues; the controversy was limited to the respondent’s unwillingness to pay despite admission. Consequently, the case fell within the exception where the writ jurisdiction could be entertained even though an alternative remedy was available.
Regarding the defence of paucity of funds, the Court followed State of West Bengal v. Confederation of State Government Employees and M/s Lumber India Corporation v. Union Territory of J&K & Others to hold that once a legal right is established, the State cannot refuse to discharge its obligation on the ground of financial inability. Such a defence is untenable in law and would permit unjust enrichment of the State at the expense of the petitioner.
The Court further noted that the security deposit of Rs.20,000/- was admitted and held as a fixed deposit receipt in the name of respondent No.5, thus forming part of the recoverable amount. Interest was awarded under the principle that a person deprived of the use of money is entitled to interest, with the rate fixed at six percent per annum, accruing from the date of judgment until payment.
The Court emphasized that allowing the writ in these circumstances would prevent the State from unjustly enriching itself and would uphold the constitutional guarantee of fairness under Article 14. It concluded that the petition was both maintainable and entertainable, and that the respondent was bound to liquidate the dues promptly.
The Verdict
The Allahabad High Court allowed the writ petition. It directed respondent No.5, Firozabad Dugdha Utpadak Sahkari Sangh Limited, to pay the admitted contractual dues of Rs.18,59,197.02/- and the security deposit of Rs.20,000/- (total Rs.18,79,197/-) with interest at the rate of six percent per annum from the date of judgment until realization, within a maximum period of three months from the date of the judgment. No order as to costs was passed.
What This Means For Similar Cases
Admitted Liability Trumps Alternative Remedy
Where the amount due under a contract is admitted by the respondent and no disputed question of fact exists, a writ petition under Article 226 is maintainable and entertainable despite the availability of an alternative civil remedy. Practitioners may therefore invoke writ jurisdiction to secure prompt payment without first exhausting the civil suit route.
Financial Constraints Are Not a Defence
The defence of paucity of funds, financial constraints or administrative difficulties cannot defeat a claim for admitted contractual dues. Once liability is established, the State is bound to honour its obligation, and any refusal on financial grounds constitutes unjust enrichment and is liable to be struck down by the Court.
Interest Accrues on Admitted Dues
Interest at six percent per annum is payable on the admitted amount from the date of judgment until payment, reinforcing the petitioner’s right to compensation for delayed payment. This rate aligns with the Court’s application of the principle that a person deprived of the use of money is entitled to interest.
