Financial Emergency? HP High Court Mulls Observations Against State For Citing Lack Of Funds To Withhold Contractor's Dues

The Court asked the Deputy Advocate General of the State to have instructions as to why the appropriate observations be not made by the Court on the next hearing in light of the provisions of Article 360 of the Constitution of India (Provisions as to financial emergency).

A bench of Justice Ajay Mohan Goel was essentially dealing with a writ petition wherein the petitioner (a contractor) had prayed for the release of payment of the final bill amounting to over ₹15 lacs for the work executed under the Himachal Pradesh Public Works Department (HPPWD) (along with interest accruing since 2022).

During the hearing, the Deputy Advocate General referred to a communication received from the concerned Executive Engineer in which it was admitted that though the payment claimed by the petitioner was due, it could not be disbursed due to a lack of funds in the State Exchequer.

The instructions received read thus:

"It is humbly submitted that during the financial year 2022-231 No. work has been awarded to petitioner against under head of account 3054-Repair/ Maintenance amounting to Rs. 15.16 lacs. During the financial year 2022-23 under head 3054-Repair/ Maintenance tender amounting to Rs.2376.00 lacs has been awarded to various contractors against budget provision amounting to Rs. 357.96 lacs. The petitioner has executed one No. work against above mention head of account. Due to paucity of funds with state of H.P. exchequer, the payment amounting to Rs.15.16 lacs cannot be disbursed to the petitioner till date".

Taking serious note of the State's own admission of liability and its justification for non-payment on grounds of lack of funds, the HC observed thus:

"It is evident and apparent from the instructions imparted that on one hand the State has admitted the factum of payment, as is being claimed by the petitioner due to him, but on the other hand, non-payment thereof is being attributed to paucity of funds with the State Exchequer".

Therefore, the Court asked the Deputy Advocate General to obtain specific instructions on the next hearing date (August 1) on why the Court should not record appropriate observations under Article 360 of the Constitution, a provision dealing with financial emergencies.

It may be noted that Article 360 empowers the President of India to proclaim a financial emergency if she is satisfied that the financial stability or credit of India or of any part of its territory is threatened.

Advocate Vishwa Bhushan appeared for the petitioner (Sashi Thakur). Deputy Advocate General, Rahul Thakur appeared for the state government.