State’s Duty to Pay Admitted Contractual Dues Despite Internal Sanctions or Shortage of Funds:
A Commentary on M/S Rightway Constructions Company v. Union Territory of J & K & Ors.

1. Introduction

The judgment in M/S Rightway Constructions Company v. Union Territory of J and K & Ors., decided by the High Court of Jammu & Kashmir and Ladakh at Srinagar on 04 December 2025 by Hon’ble Mr. Justice Rajesh Sekhri, concerns a familiar yet critical problem in public contracting: a contractor completes allotted public works, the government acknowledges the work and the corresponding financial liability, but the payment is withheld indefinitely on the pretext of internal approvals and lack of funds.

The case arose out of multiple work orders issued by the Public Works Department (PWD) of the Union Territory of Jammu & Kashmir (UT of J&K) in favour of M/S Rightway Constructions Company. While part payments were released, a substantial amount – Rs. 1,47,48,361/- – remained outstanding despite repeated acknowledgements of liability by the department. The respondents belatedly attempted to defend the non-payment by alleging that the contractor had executed excess work without administrative approval.

The judgment is significant because it succinctly but emphatically reaffirms a crucial principle: the State, even in its role as a contracting party, remains bound by constitutional obligations of fairness and cannot deny payment of admitted contractual dues on grounds of internal lapses (such as absence of administrative approval) or shortage of funds.

2. Factual Background and Procedural History

2.1 Parties

• Petitioner: M/S Rightway Constructions Company, a construction contractor.
• Respondents: Union Territory of Jammu & Kashmir and others, including the concerned wings of the Public Works Department.

2.2 Factual Matrix

• Various work orders were issued by the PWD in favour of the petitioner at different places/divisions in the UT of J&K. The works were executed within the prescribed timelines.
• After completion, the petitioner submitted the requisite documents (presumably bills, completion certificates, measurement books, etc.) to enable release of payment. Part payments were made, but a balance of Rs. 1,47,48,361/- remained outstanding.
• According to the petitioner, the respondents not only acknowledged but repeatedly confirmed this outstanding liability in written communications, copies of which were annexed to the writ petition.
• The petitioner had taken bank loans to finance the execution of the works and was incurring interest liability. Prolonged non-payment thus caused recurring financial loss.
• A legal notice dated 15 May 2022 was issued by the petitioner demanding clearance of dues. In reply, the department once again admitted the liability and stated that demand liability statements had been forwarded to higher authorities for release of funds, leading the petitioner to believe that payment would soon follow.
• Despite this, the dues remained unpaid, prompting the petitioner to file a writ petition seeking payment of the admitted amount.

2.3 Procedural History

• The writ petition (WP(C) 2198/2022) was instituted on 13 September 2022.
• The petition was admitted on 22 November (the judgment records the year as 2024, though this may be a typographical inconsistency in the chronology).
• Despite admission, the respondents did not file any counter affidavit within the permitted time. By a preemptive order dated 6 November 2025, the Court closed the respondents’ right to file a counter.
• At the time of hearing, the Government Advocate indicated that he had received the counter, but the Court proceeded on the basis that the right to file a counter had already been closed and evaluated the case essentially on:
  • the uncontroverted averments of the petitioner; and
  • the limited oral submissions of the Government Advocate.
• The only substantive defence put forth by the respondents was that the petitioner allegedly executed excess work beyond the sanctioned scope and without administrative approval, and therefore could not claim payment for such excess.

3. Key Legal Issues

The judgment revolves around the following core questions:

1. Whether a writ petition under Article 226 is maintainable to seek payment of contractual dues where the liability is admitted by the State.
2. Whether the State can refuse to honour admitted contractual liability on the ground that:
   • the contractor allegedly executed “excess work” without formal administrative approval; and/or
   • the department is facing a shortage of funds or is awaiting release of funds from higher authorities.
3. What is the extent of a contractor’s obligation (if any) to verify administrative approvals, technical sanctions, and codal formalities before executing allotted work.
4. What relief, including interest, should be awarded where the State’s liability is admitted but payment has been unjustifiably delayed.

4. Summary of the Judgment

The High Court allowed the writ petition and directed the respondents to pay the petitioner-company the admitted liability of Rs. 1,47,48,361/- along with interest at 6% per annum, within six weeks from the date a copy of the judgment is made available.

The Court held, in essence, that:

• The Government’s contractual obligations are not divorced from its constitutional duty to act in a just, fair and reasonable manner.
• A contractor executing work duly allotted by the Government is entitled to presume that all necessary administrative and technical approvals have been obtained by the concerned department; it is not the contractor’s job to ensure or verify these internal approvals.
• The respondents had, in multiple communications and in their reply to the legal notice, unequivocally admitted the liability and only expressed inability to pay due to lack of funds. Such a plea cannot absolve the State from its obligation to pay for work duly executed.
• The belated argument that some part of the work was “excess” and done without formal approval is untenable when the respondents themselves have:
  • confirmed and ratified the work; and
  • acknowledged the corresponding financial liability.
• The petitioner, having taken loans and incurred interest to execute public works at the State’s instance, cannot be compelled to “beg” for its lawful dues.

5. Detailed Analysis

5.1 The Court’s Approach and Tone

The judgment, although brief, is pointed and value-laden. The Court adopts a rights-centric approach, emphasising the constitutional dimension of government contracts. Two strands are prominent:

• Protection of legitimate expectations of contractors: A contractor who undertakes public works based on governmental work orders has a legitimate expectation that the State will:
  • ensure internal compliance (approvals, sanctions, codal formalities) before awarding work; and
  • timely pay for the work executed.
• Condemnation of arbitrary withholding of dues: The Court’s language — noting that a contractor should not be forced to “approach this Court, begging for his lawful claim” — implicitly characterises the State’s conduct as arbitrary and inconsistent with its public law obligations.

This approach aligns with the wider jurisprudence that the State, even when acting as a contracting party, remains subject to the discipline of Article 14 of the Constitution and cannot resort to delay, evasion or arbitrariness.

5.2 Precedents and Established Principles Underlying the Judgment

The judgment itself does not reference specific case law by name but explicitly relies on the “settled position of law” that the Government’s contractual obligations coexist with its constitutional duties. This “settled law” has been shaped by a series of Supreme Court decisions. Understanding these precedents helps place the present ruling in context.

5.2.1 Government Contracts and Article 14

The Court’s statement in para 6 that:

“contractual obligations of the Government coexist with its constitutional obligations to be just, fair and reasonable while entering into a contract with a private individual”

is directly traceable to a line of Supreme Court authorities, particularly:

• Ramana Dayaram Shetty v. International Airport Authority of India, (1979) 3 SCC 489 – the Supreme Court held that even in awarding contracts, the State and its instrumentalities are bound by Article 14 and must act non-arbitrarily.
• Shrilekha Vidyarthi v. State of U.P., (1991) 1 SCC 212 – the Court held that the State cannot claim absolute freedom of contract and that Article 14 extends to the contractual sphere. State action even in contractual matters must be informed by reason and fairness.

The present judgment’s emphasis on fairness and reasonableness in payment of admitted contractual dues is a natural extension of these principles.

5.2.2 Writ Jurisdiction in Contractual Disputes and “Admitted Liability”

Ordinarily, disputes under government contracts are relegated to civil suits or arbitration. However, the Supreme Court has consistently held that where:

• the material facts are not in serious dispute; and
• the State’s refusal to act is patently arbitrary or unfair,

a writ petition under Article 226 is maintainable. Key decisions include:

• ABL International Ltd. v. Export Credit Guarantee Corporation of India Ltd., (2004) 3 SCC 553 – the Court held that writ jurisdiction is not absolutely barred in contractual matters. If the dispute involves the State’s arbitrary refusal to honour undisputed obligations, the High Court can grant relief.
• State of Bihar v. Jain Plastics and Chemicals Ltd., (2002) 1 SCC 216 – while emphasising that complex, disputed questions of fact may be unsuited for writs, the Court implicitly recognised that where the liability is admitted, a writ may be appropriate.
• Joshi Technologies International Inc. v. Union of India, (2015) 7 SCC 728 – the Supreme Court summarised the principles governing maintainability of writs in contractual fields and reiterated that arbitrariness on the part of the State can justify intervention.

Although not expressly cited, the High Court’s reasoning is clearly consonant with this jurisprudence. The presence of admitted liability, supported by the respondents’ own communications, is the fulcrum that brings the petitioner’s claim within the permissible ambit of writ jurisdiction.

5.2.3 Financial Inability as a Defence

The Court rejects the respondents’ plea that payment could not be made due to want of funds. This is consistent with the broader principle that the State cannot escape its obligations by pleading financial constraints, especially when:

• the liability is already incurred and acknowledged; and
• the work has been executed to the satisfaction of the department.

This is a reflection of the rule of law and the idea that governmental obligations, once crystallised, cannot be negated by internal fiscal mismanagement or budgetary lapses. While there may not be a single leading case focused solely on this point, it is a recurring theme in decisions involving government liability in contracts, land acquisition, and compensation matters.

5.3 Legal Reasoning: Core Principles Applied

5.3.1 Coexistence of Contractual and Constitutional Obligations

The Court’s starting point is the recognition that:

“contractual obligations of the Government coexist with its constitutional obligations to be just, fair and reasonable while entering into a contract with a private individual.” (para 6)

This means that the State:

• cannot treat a contract purely as a private commercial bargain devoid of public law scrutiny; and
• must ensure that its conduct, including non-payment or delayed payment, satisfies the standards of fairness under Article 14.

In the present case, the arbitrary withholding of admitted dues, after multiple acknowledgments and without any lawful justification, is plainly inconsistent with this standard.

5.3.2 Allocation of Risk and Responsibility for Approvals

The respondents attempted to introduce a defence that the petitioner executed “excess work” without administrative approval. The Court deals with this point firmly:

• A contractor executing duly allotted work is not required to probe the internal administrative mechanisms of the department.
• The Court explicitly states that it is “none of the job of a contractor” to ensure administrative approval, technical sanctions, or legal formalities before undertaking the contractual obligation (para 6).
• Instead, the onus lies squarely on the department to:
  • obtain necessary approvals before ordering work; and
  • explain how the work came to be executed without such approvals, if indeed they were lacking.

In other words, internal lapses or failures in obtaining administrative/technical sanctions are a matter between different arms of the State and cannot be used as a shield against a contractor who has acted in good faith in response to departmental directions.

5.3.3 Effect of Admitted Liability and Departmental Communications

The judgment attaches critical importance to the respondents’ own communications:

• The Court notes that these communications “from time to time have not only confirmed and ratified the work done… but also admitted their liability towards it” (para 7).
• The reply to the petitioner’s legal notice is particularly telling – the respondents:
  • do not dispute execution or quality of work;
  • do not allege any breach by the contractor; and
  • acknowledge sending demand liability statements to higher authorities for release of funds.

These materials transform the dispute from a potentially complex contractual claim into a matter of enforcing an admitted and quantified liability. Once such admission is present, courts are far more willing to intervene in writ jurisdiction, treating the State’s refusal or delay as arbitrary.

5.3.4 Rejection of the “No Funds” Defence

The Court is categorical that lack of funds is not a valid justification for non-payment:

“The petitioner having expended the money after availing loan facility from the bank is entitled to be paid for the work done. He cannot be deprived of the admitted liability on the premise that department is short of funds.” (para 8)

This underscores three important ideas:

• Risk Allocation: Financial or budgetary risk is primarily that of the Government, not of a contractor who has already performed.
• Accountability: If the department has sanctioned or allowed work without ensuring arrangements for funds, that is an internal failure; the contractor should not suffer for it.
• Protection of Commercial Reliance: Contractors often finance public works through loans; delay in payment amplifies their financial burden, which the law should not incentivise or condone.

5.3.5 Interest Awarded at 6% per Annum

The Court directs payment of interest at 6% per annum on the admitted dues. While the judgment does not specify from which date the interest is to run, such an award serves multiple purposes:

• compensates the contractor for the time value of money withheld;
• partially offsets the interest the contractor is paying on bank loans taken to execute the works; and
• acts as a deterrent against prolonged, unjustified non-payment by departments.

The rate of 6% is moderate and within the broad range often adopted by courts in public law and contractual compensation cases.

5.4 Treatment of the “Excess Work Without Approval” Defence

The respondents’ sole substantive defence was that some excess work was allegedly executed by the contractor without formal orders or administrative approval. The Court does not conduct a detailed factual inquiry into the quantum or nature of excess work; instead, it adopts a more principled stance:

• Once the department has “confirmed and ratified the work” and “admitted their liability” in official communications (para 7), it is no longer open to them to fall back on a plea of lack of formal approval.
• In legal terms, the doctrine of approbation and reprobation (or a form of estoppel) is at play: the State cannot take benefit of the work and at the same time deny payment by pointing to its own internal procedural failure.
• The absence of a timely counter affidavit further weakens the respondents’ position, leaving their belated oral defence largely unsupported by evidence on record.

By focusing on the respondents’ own admissions and the equitable considerations, the Court avoids being drawn into a technical or hyper-formalistic evaluation of “excess work”, especially when the State’s conduct has, in effect, validated the work done.

5.5 Procedural Aspect: Closure of Right to File Counter

An important but subtle aspect of the judgment is procedural: the Court had already, by a preemptive order, closed the respondents’ right to file a counter affidavit due to their inaction post-admission of the petition. Even though the Government Advocate stated at the hearing that he had received the counter, the Court proceeded on the basis of the prior closure order.

This has two implications:

• Judicial discipline and docket management: Government departments are frequently lax in filing timely replies, leading to prolonged delays. The Court’s enforcement of its earlier order signals that such delays will not always be condoned.
• Consequence of non-denial: In the absence of a proper counter affidavit, the petitioner’s factual averments and annexed documents remained effectively uncontroverted, strengthening the case for granting relief on the basis of admitted and unrebutted material.

5.6 Nature and Scope of Relief

The Court grants relief in the nature of a direction akin to mandamus, compelling the State to perform its legal obligation to pay admitted dues. Key features of the relief are:

• Quantum: Limited to the admitted liability of Rs. 1,47,48,361/-, not any unsubstantiated or disputed claims.
• Interest: 6% per annum, without elaboration but clearly as compensatory relief.
• Time-bound compliance: Payment to be made within six weeks of availability of the judgment copy.

The Court thereby avoids transforming the writ into a full-fledged trial of all possible claims under the contract; it confines itself to enforcing what is clear and admitted.

6. Complex Legal Concepts Simplified

6.1 Writ Petition in Contractual Matters

A writ petition under Article 226 is primarily a public law remedy used to challenge illegal or arbitrary action of the State. Usually, purely private disputes under contracts go to civil courts or arbitration. However, where:

• the other party is the State or a governmental authority; and
• its conduct is arbitrary or in violation of constitutional norms,

the High Court can intervene even in contractual settings, especially when the liability is admitted and only the State’s unjustified inaction is at issue.

6.2 Admitted Liability

Admitted liability means that the debtor (here, the Government department) has, in writing or otherwise, accepted that a certain sum is due and payable. When liability is admitted:

• the court need not engage in complex fact-finding or interpretation of terms; and
• a writ court is far more willing to order payment, because the dispute is not about “whether” money is owed, but simply about “when” and “why not yet”.

6.3 Administrative Approval and Technical Sanction

In public works, before a project is executed, the department is supposed to obtain:

• Administrative approval: sanction from the competent authority that the project may be undertaken, including approval of estimated cost and necessity.
• Technical sanction: approval of the detailed design, estimates, and technical feasibility by the engineering authorities.

These are internal requirements of the department. The judgment clarifies that a contractor executing work on the strength of departmental orders is not responsible for ensuring these approvals are in place.

6.4 Closure of Right to File Counter Affidavit

When a respondent in a writ petition fails to file a reply (counter affidavit) within the time permitted by the court, the court may close the right to file a counter. This means the respondent can no longer formally place its version of facts on record. As a result:

• the petitioner’s assertions stand largely undisputed; and
• the court can proceed on that basis, as happened in this case.

6.5 Interest at 6% Per Annum

When courts award interest, they do so either under the terms of the contract, or under general principles of equity and fairness. Here:

• the Court does not rely on any specific contractual clause;
• it instead uses its inherent power to grant reasonable compensatory interest for the undue delay in payment.

An interest rate of 6% per annum is often treated by Indian courts as a fair, moderate rate, balancing the contractor’s loss against the public nature of State finances.

7. Impact and Future Implications

7.1 For Government Contractors

This judgment offers important reassurance to contractors dealing with the UT of J&K and, by extension, other governmental bodies:

• If the department has formally acknowledged the amount due, contractors can consider invoking writ jurisdiction instead of being relegated exclusively to lengthy civil suits or arbitration.
• Departments cannot indefinitely delay payment by pleading:
  • “we have sent the demand to higher authorities”; or
  • “funds are not yet available”.
• Contractors are not expected to bear the risk of internal administrative lapses such as missing approvals, once work orders are issued and work is executed at the department’s behest.

7.2 For Government Departments and Public Works Authorities

The judgment sends a clear caution to departments, particularly in the infrastructure and public works sectors:

• Internal discipline is essential: Sanctions, approvals, and fund availability should be ensured before awarding work, not after.
• Budgeting responsibility: Departments must align work orders with realistic budgetary allocations; inability to secure funds later will not shield them from judicial directions to pay.
• Litigation risk: Casual delay in filing replies and non-engagement with admitted claims can quickly translate into binding court orders with interest components.

7.3 Doctrinal Reinforcement Rather Than Radical Innovation

Doctrinally, the judgment does not create entirely new law; rather, it reinforces and concretely applies existing principles:

• State contracts are subject to Article 14 and must be implemented fairly.
• Writ jurisdiction can be used to enforce admitted contractual dues.
• Lack of funds or missing internal approvals are not valid defences to non-payment.

However, in the regional context of J&K and Ladakh, the decision may have a strong practical impact, especially in curbing systemic delays in paying contractors in public works projects.

7.4 Possible Increase in Writ Petitions for Admitted Dues

By explicitly directing payment of admitted liability in a writ petition, the Court may encourage similarly placed contractors to:

• document and secure written acknowledgments of dues from departments; and
• resort to the High Court under Article 226 when such dues remain unpaid without justification.

This may gradually pressure departments to improve payment discipline and reduce the practice of keeping contractors in prolonged financial limbo.

8. Critical Appreciation

While the judgment is concise and forceful, a few observations may be made from an academic perspective:

• Absence of detailed precedent citation: The Court bases itself on “settled law” without naming authorities. While not legally problematic, explicit citation of Supreme Court decisions (e.g., Shrilekha Vidyarthi, ABL International) could have strengthened the judgment’s precedential clarity.
• Interest commencement date: The judgment does not specify from which date interest at 6% p.a. is to be computed (e.g., from date of completion, date of legal notice, or date of filing the petition), which may create ambiguity at the enforcement stage.
• No discussion of costs: Given that the petitioner was driven to court to secure payment of an admitted claim, a discussion on awarding costs (or at least admonishing the department) could have emphasised accountability.

Nonetheless, these are refinements rather than flaws. For practical purposes, the judgment robustly vindicates the contractor’s rights and applies constitutional principles to an everyday commercial context involving the State.

9. Conclusion

The decision in M/S Rightway Constructions Company v. Union Territory of J & K & Ors. stands out as a clear affirmation that the State cannot shirk or delay payment of admitted contractual dues on the pretext of internal approvals or shortage of funds. The Court underscores that:

• Government contracts are not insulated from constitutional scrutiny under Article 14;
• a contractor is entitled to rely on the Government’s work orders without policing its internal sanctioning process; and
• financial constraints do not absolve the State of its duty to pay for work duly executed and acknowledged.

By directing timely payment of the admitted sum along with interest, the High Court not only provides relief to the petitioner but also reinforces a vital message for public administration: the rule of law demands that the Government be a model contracting party, honouring its commitments promptly and fairly. The case thus contributes meaningfully to the jurisprudence on government contracts, public law obligations, and the maintainability of writ petitions to enforce admitted monetary claims against the State.