Article 226 permits directing payment of admitted contractual dues despite an arbitration clause.

The petitioner, a Class-A contractor enlisted with the Himachal Pradesh Public Works Department, was awarded construction work at Civil Hospital, Sundernagar, for ₹5,55,55,500 under an award letter dated 26 February 2021.

The stipulated period for completion was 18 months, from 13 March 2021 to 12 September 2022.

The petitioner alleged that the work was delayed owing to non-availability of drawings, designs, instructions, departmental materials and funds, although permission had been granted to procure certain materials from the open market.

The petitioner submitted 11 running bills.

The 11th running bill, prepared and verified in 2024, reflected a gross amount payable of ₹3,94,38,255, against which ₹3,29,79,841 had been paid, leaving ₹64,58,414 outstanding.

The State admitted preparation of the bill and the outstanding liability but stated that payment could not be released for want of funds.

Despite an order directing the State to file a reply, no reply was filed and the amount remained unpaid.

Whether a writ petition under Article 226 of the Constitution is maintainable to seek payment of an admitted contractual liability owed by the State, notwithstanding the existence of an arbitration clause.

Whether the petitioner is entitled to a direction requiring the respondent-department to release the admitted outstanding amount of ₹64,58,414, despite the State’s plea of insufficient funds.

Whether interest should be awarded if the admitted amount is not paid within the period directed by the Court.

The Court applied Article 226 of the Constitution, holding that an appropriate writ petition arising from a contractual obligation against the State or its instrumentality is maintainable where the State’s conduct involves an obligation to act fairly, justly and reasonably under Article 14.

Relying on ABL International Ltd. v. Export Credit Guarantee Corporation of India Ltd., (2004) 3 SCC 555, the Court held that disputed facts or the contractual nature of the claim do not constitute an absolute bar to writ jurisdiction and that a writ petition seeking consequential monetary relief may be entertained in an appropriate case.

The Court also relied on Food Corporation of India v. SEIL Ltd., (2008) 3 SCC 440, for the proposition that contractual matters involving a public-law element may be examined under Article 226.

Although the agreement contemplated adjudication of disputes through arbitration, the Court held that arbitration was not an impediment where the State’s liability was admitted and no dispute remained regarding the amount payable.

The Court found that the petitioner’s claim was not a disputed or unascertained contractual claim.

The 11th running bill had been verified and approved, and the respondents expressly admitted that ₹64,58,414 remained payable.

The only explanation offered by the State was lack of funds, which did not extinguish or justify indefinite withholding of an admitted liability.

Applying ABL International and Food Corporation of India, the Court held that the existence of an arbitration clause did not require relegation of the petitioner to arbitration when no dispute existed regarding the debt.

The prolonged non-payment, including the fact that the amount had become due in 2024, justified the exercise of writ jurisdiction to provide effective relief.

If the amount was not paid within that period, the petitioner would be entitled to interest at 6% per annum from the date on which the amount had become due.

The writ petition and pending applications were disposed of accordingly.