Paucity of funds or internal procedural irregularities cannot justify withholding payment for admittedly completed contractual works.

The petitioner, a registered partnership firm, was awarded four road projects under the PMGSY Scheme involving construction and a five-year maintenance period.

The petitioner completed the construction and maintenance works to the satisfaction of the authorities.

Despite the Executive Engineer recommending payment and requesting fund allotments via communications dated 09.06.2018 and 08.10.2020, the dues remained unpaid.

The respondents contended that payment was withheld due to non-allotment of funds and subsequent discovery of procedural irregularities in the Measurement Book (consolidated entries instead of periodic ones), which triggered a preliminary enquiry.

1. Whether the respondents can withhold payment for admittedly completed maintenance work on the grounds of "paucity of funds" or "technical/procedural irregularities" in internal departmental records?

2. Whether the continued withholding of admitted dues for nearly eight years amounts to arbitrary action and unjust enrichment?

The Court applied the constitutional principle of Equality under Article 14 of the Constitution of India, which prohibits arbitrary and unreasonable State action.

It relied on the doctrine of "Admitted Liability," holding that once a contractual obligation is verified and acknowledged by the State through its officials, it must be honored within a reasonable timeframe.

Furthermore, the Court recognized the principle of "Unjust Enrichment," asserting that the State cannot enjoy the benefits of a contractor's work without making the stipulated payment.

The Court observed that the respondents did not dispute the quality or execution of the work.

The pivotal evidence was Letter No. 781 (2018) and Letter No. 1270 (2020), where the Executive Engineer sought fund allotments, effectively acknowledging the debt.

The Court rejected the respondents' defense regarding irregularities in the Measurement Book, reasoning that since the book is a departmental record maintained by state officials, a contractor cannot be penalized for internal procedural lapses or administrative delays.

It found that the "verification process" and "departmental enquiry" cited by the State were afterthoughts raised years after the maintenance period had expired (2016-2017) to delay legitimate payment.

The Court characterized the eight-year delay as arbitrary and unjustified.

It directed the Executive Engineer to ensure the release of admitted dues for the four packages (BR-35R-021, BR-35R-028, BR-35R-033, and BR-35R-035) within two months.

The Executive Engineer was further ordered to immediately pursue any necessary administrative approvals or fund allotments to comply with this timeline.