Facts of the Case

The petitioner, M/s Astha and Saumya Construction, is a partnership firm engaged in infrastructure development. The firm successfully completed road construction work under Agreement No. 10-F2/12-13 SCP (4515) for the stretch from Nadail Ghaigo Mahadalit Tola to the satisfaction of the state authorities. The scope of work also included a mandatory maintenance period spanning five years.

Upon successful completion, the petitioner raised bills for the work executed. Additionally, the petitioner sought an upward adjustment in the contract value to account for the statutory increase in the Goods and Services Tax (GST) rate, which had escalated from 12% to 18% pursuant to a policy decision enacted by the Central Government. Despite submitting formal, repeated written representations—including a final reminder dated September 15, 2022—the respondent authorities failed to release the outstanding payments, cite lack of funds, or provide any administrative response, thereby compelling the petitioner to approach the High Court.

Issues Involved

  1. Whether the respondent state authorities were justified in withholding legitimate contractual payments for successfully completed public works on administrative pretexts such as a paucity of funds.
  2. Whether the state government is under a legal and constitutional obligation to invoke its own "Bihar State Litigation Policy, 2011" and Section 89 of the CPC to settle clear contractual dues rather than forcing citizens into protracted litigation.
  3. Whether the regulatory enhancement of GST rates from 12% to 18% by the Central Government entitles a contractor to revised disbursements covering the tax differential for public works.

Petitioner’s Arguments

  • Completion of Contractual Obligations: The petitioner argued that the road construction work was executed to the complete satisfaction of the Rural Works Department, and there was no default on their part regarding the execution or the five-year maintenance obligation.
  • Arbitrary Administrative Silence: The petitioner contended that the state's total inaction and failure to respond to formal representations constituted gross arbitrariness and a violation of the principles of natural justice.
  • Statutory Tax Escalation: It was argued that since the GST rate was statutorily hiked from 12% to 18% by a Central Government mandate, the financial burden of this regulatory change must be factored into the final clearance of dues.
  • Parity with Settled Law: The petitioner prayed for the application of the legal principles and directions established by the Co-ordinate Bench in M/s. Raghoji House of Distribution Vs. The State of Bihar & Ors. (CWJC No. 13024 of 2022), seeking an identical time-bound disposal mechanism.

Respondent’s Arguments

  • Consent to Parity: The learned Government Pleader appearing for the State of Bihar did not contest the facts on accountability and raised no objection to the petitioner’s prayer for disposing of the writ petition in identical terms to the judgment delivered in M/s. Raghoji House of Distribution.
  • Submission to Court’s Directions: The respondents conceded to the court's jurisdiction to refer the outstanding bills and tax adjustment claims to the competent executive authority for an expedited, objective review in accordance with the state’s internal litigation guidelines.

Court Order / Findings

The Division Bench of the Patna High Court, led by the Hon'ble Chief Justice, observed with concern that state officials regularly fail to adhere to the Bihar State Litigation Policy, 2011, forcing individuals to litigate endlessly despite clear statutory and policy frameworks designed to resolve disputes out of court.

  • Application of Precedent: The Court disposed of the writ petition mutatis mutandis in terms of the landmark judgment in M/s. Raghoji House of Distribution, holding that the dispute should have been settled internally by the state as a "responsible litigant".
  • Mandate to Executive Engineer: The Court directed Respondent No. 6 (The Executive Engineer, Rural Works Department, Work Division, Manjhaul, Bakhri) to examine the petitioner's claims thoroughly and ensure an early decision and disbursement of all legitimate dues within two months.
  • Personal Penalty for Delay: The Court ordered that a failure to comply within the two-month window would attract a cost of Rs. 5,000/-, which shall be recovered directly from the personal salary of the defaulting officer.
  • Digital Redressal Infrastructure: The Principal Secretary of the Rural Works Department (Respondent No. 1) was directed to establish an effective grievance redressal mechanism on a digital platform (Web Portal) within three months to allow contractors and employees to log complaints, thereby preventing the clogging of judicial machinery. An affidavit of compliance must be filed by the state within three months, failing which the matter will be listed on the judicial side for consequential enforcement action.

Important Clarification

Adjudication on Merits Left Open: The High Court explicitly clarified that it did not adjudicate the underlying financial claims or the specific GST rate enhancement dispute on their absolute merits. Instead, the Court left all questions of fact, law, and merit completely open for the competent decision-making authority to determine, provided that such administrative review strictly complies with the principles of natural justice. Liberty was also reserved for both parties to initiate fresh legal action if a new cause of action arises from the executive determination.

Sections Involved

  • Section 89 of the Code of Civil Procedure, 1908 (CPC): Pertains to the settlement of disputes outside the Court through alternative dispute resolution (ADR) mechanisms.
  • Article 39-A of the Constitution of India: Obligates the State to promote equal justice and provide free legal aid, which underlies the objective of minimizing unnecessary state litigation.
  • Bihar State Litigation Policy, 2011: The administrative policy framework adopted by the State of Bihar aimed at preventing, controlling, and resolving avoidable government-induced litigation through internal grievance redressal mechanisms.

Link to download the order - https://mytaxexpert.co.in/uploads/1783073220_482compressed.pdf

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