Writ Maintainable For Contractual Dues If Liability Is Admitted; Paucity Of Funds No Ground To Withhold Payment: Allahabad High Court

"Paucity of funds, financial constraints or internal administrative difficulties cannot constitute a legally sustainable defence for withholding admitted contractual dues." Allahabad High Court, in a significant ruling dated October 13, 2026, held that a writ petition under Article 226 of the Constitution of India seeking payment of contractual dues against the State or its instrumentalities is both maintainable and entertainable where the liability is unequivocally admitted and requires no roving factual inquiry.

A Division Bench comprising Justice Prakash Padia and Justice Indrajeet Shukla observed that "the writ petition against contractual dues is maintainable as well as entertainable only when the contractual dues are admitted and the factual foundation are not so disputed that any roving inquiry is expedient," clarifying that public authorities cannot shirk their crystallized financial obligations by pleading budgetary deficits.

The petitioner, M/s Purv Sainik Security Service, provided security personnel to Firozabad Dugdha Utpadak Sahkari Sangh Limited, a cooperative society functioning under the pervasive control of the Pradeshik Co-operative Dairy Federation Limited, from October 1, 2018, to May 31, 2021. After the contract ended, the respondent authority withheld outstanding contractual dues amounting to Rs. 18,59,197/- along with a security deposit of Rs. 20,000/- deposited as a fixed deposit receipt. Facing non-payment despite repeated representations, the petitioner approached the High Court seeking a writ of mandamus commanding the respondents to clear the admitted dues.

The primary question before the court was whether a writ petition under Article 226 of the Constitution is maintainable and entertainable for the liquidation of contractual monetary dues against a State instrumentality. The court was also called upon to determine whether the respondents could legally withhold admitted dues on the grounds of financial constraints, administrative difficulties, or paucity of funds.

Maintainability And Entertainability Are Distinct Concepts Under Article 226

Addressing the respondent's preliminary objection regarding the maintainability of a writ petition arising out of a commercial contract, the Bench emphasized the jurisprudential distinction between "maintainability" and "entertainability". Relying on the Supreme Court's ruling in Godrej Sara Lee Ltd. v. Excise and Taxation Officer-cum-Assessing Authority (2023 SCC OnLine SC 95), the court observed that maintainability goes to the root of the court's jurisdiction to receive the lis, whereas entertainability falls squarely within the court's discretion.

The court reiterated that the existence of an alternative statutory or civil remedy does not oust the plenary jurisdiction of the High Court under Article 226 of the Constitution of India. Quoting the landmark decisions in Whirlpool Corporation v. Registrar of Trade Marks (1998) 8 SCC 1 and M/s Radha Krishan Industries v. State of Himachal Pradesh (2021) 6 SCC 771, the Bench noted that the rule requiring exhaustion of alternative remedies is a rule of policy, convenience, and discretion, rather than an absolute rule of law.

Writ Jurisdiction Amenable To Contractual Money Claims Absent Factual Disputes

The Bench acknowledged the traditional restraint applied in contractual disputes, noting decisions such as State of U.P. v. Bridge & Roof Co. (India) Ltd. (1996) 6 SCC 22 and Kerala State Electricity Board v. Kurien E. Kalathil (2000) 6 SCC 293, which hold that disputed questions of fact requiring oral evidence belong to the civil courts. The Bench also noted earlier Division Bench rulings of the High Court, including M/s Alaska Tech v. State of U.P. (2014 SCC OnLine All 6484), which held that summary remedies under Order 37 CPC provide ordinary civil recourses for non-statutory contract disputes.

However, the Bench pointed out that the legal position regarding monetary claims evolved decisively through ABL International Ltd. v. Export Credit Guarantee Corporation of India Ltd. (2004) 3 SCC 553. Under ABL International, a writ petition against the State or its instrumentality arising out of a contractual obligation is maintainable, and even a consequential relief of a monetary claim can be entertained where the claim does not require complex oral evidence.

Non-Payment Of Admitted Dues By State Violates Article 14 Guarantee

Reaffirming the recent Supreme Court ruling in M/s Utkal Highways Engineer and Contractors v. Chief General Manager (2025 SCC OnLine SC 1400), the Bench held that non-payment of admitted dues by a State authority constitutes arbitrary action under Article 14 of the Constitution. Drawing support from Kanika Construction v. State of U.P. (2022 SCC OnLine All 30), the court stated that State instrumentalities are duty-bound to act reasonably and justly even in the contractual sphere.

The Bench distinguished contested monetary claims from admitted claims, citing M/s Jaiswal Foods v. State of U.P. (2026 SCC OnLine All 27098), which cautioned that writ courts will not sit as courts of first instance to conduct roving inquiries into bills or measurement books. Conversely, where liability is acknowledged on record and requires no evidentiary adjudication, closing the doors of the writ court would be an abdication of extraordinary constitutional jurisdiction.

"The least that is expected of a State in a democracy is that it honours its obligations and commitments, arising from a legislation or judicial decisions, for such obligations are not discretionary in any way, shape or form."

Paucity Of Funds Cannot Defeat Crystallized Monetary Liabilities

Examining the respondent's counter-affidavit, the Bench noted that the outstanding liability of Rs. 18,59,197/- along with the Rs. 20,000/- fixed deposit receipt was explicitly admitted, with the respondent merely seeking to defer payment due to financial stringency. The court rejected this stance, holding that lack of budget or financial hardship cannot constitute an excuse in law to shirk contractual liabilities for services already rendered and accepted.

Relying on the Supreme Court's pronouncement in State of West Bengal v. Confederation of State Government Employees, West Bengal (2026) 6 SCC 641, the court stressed that financial constraints cannot defeat a vested right. The Bench also endorsed the decision of the Jammu & Kashmir and Ladakh High Court in M/s Lumber India Corporation v. UT of J&K (2026 SCC OnLine J&K 236) and its Division Bench ruling in UT of J&K v. Mohammad Afzal Reshi, which termed the withholding of undisputed dues on grounds of paucity of funds as "abominable and condemnable in the strongest words".

State Instrumentalities Cannot Rely On Unjust Enrichment At Citizen's Cost

The Bench observed that withholding the petitioner's legitimate payments for nearly five years amounted to unjust enrichment by the State instrumentality. Invoking the restitutionary principles established in State of Madhya Pradesh v. Vyankatlal (1985) 2 SCC 544 and Mafatlal Industries Ltd. v. Union of India (1997) 5 SCC 536, the court reiterated that no authority can retain an unfair benefit at the expense of a contracting party who has fulfilled its contractual duties.

The court synthesized the governing principles, holding that where the existence and quantum of debt are undisputed on pleadings, the writ court is fully empowered to order liquidation of dues with interest. Concluding that the respondent had enjoyed the benefit of the security personnel, the court directed respondent No. 5 to liquidate the entire outstanding amount of Rs. 18,79,197/- along with simple interest at 6% per annum within three months.

Allowing the writ petition, the High Court directed that the admitted liability be cleared with 6% interest per annum within three months, affirming that the availability of civil remedies cannot bar writ relief against arbitrary non-payment of undisputed dues. The ruling sets a vital precedent precluding public sector instrumentalities from taking refuge behind budgetary deficits to delay admitted contractual payments.

Date of Decision: 13 October 2026