Facts of the Case

The petitioner, City Steels, was issued multiple supply orders dated 10 July 2017 by the concerned Forest Department authorities for supply of specified materials. The supply orders included items such as tub-raised plants, plastic mesh wire (Tuflex), and binding G.I. wire at the rates and quantities stipulated in the respective orders.

The petitioner claimed that the required materials had been supplied in accordance with the supply orders. However, the respondent authorities did not honour the bills submitted by the petitioner.

Aggrieved by the non-payment, the petitioner instituted the writ petition seeking a direction for disbursement of its contractor’s bill amounting to Rs. 48,61,246/-, along with applicable interest.

The respondent authorities, through the Divisional Forest Officer, Guwahati Social Forestry Division, filed an affidavit referring to a committee report. According to the stand taken, the works had been executed without obtaining technical sanction from the competent authority. It was further stated that verification had taken place almost one year after execution and that cases of damage and theft had occurred, due to which the committee could not ascertain the exact number of certain plantation items. The committee nevertheless assessed expenditure and ascertained certain quantities on the basis of field verification.

Issues Involved

  1. Whether the respondent authorities could refuse payment of the petitioner’s contractor/supply bills merely on the ground that technical sanction had not been obtained from the competent authority.
  2. Whether delayed departmental verification, conducted approximately one year after execution or supply, could constitute a valid ground for withholding payment.
  3. Whether subsequent damage, misplacement, or theft of supplied articles could justify refusal to honour the petitioner’s bills when the fact of supply was not specifically denied.
  4. Whether the respondents’ affidavit amounted to a denial of the petitioner’s claim or merely disclosed reasons for refusing payment.
  5. Whether the High Court, in exercise of writ jurisdiction under Article 226 of the Constitution of India, could direct the competent authority to examine the supporting materials and pass appropriate orders for payment of admitted bill amounts.

Petitioner’s Arguments

The petitioner contended that:

  • Valid supply orders had been issued by the departmental authority on 10 July 2017.
  • The materials required under those supply orders had actually been supplied.
  • Despite completion of the supplies, the respondents failed to honour the submitted bills.
  • The outstanding contractor’s bill amounted to Rs. 48,61,246/-.
  • The petitioner was therefore entitled to a direction for disbursement of the outstanding amount along with applicable interest.

The petitioner’s grievance was fundamentally based on the failure of the departmental authorities to make payment despite supplies having been made pursuant to official supply orders.

Respondent’s Arguments

The respondents relied upon the committee report and contended, in substance, that:

  • The works had been executed without obtaining technical sanction from the competent authority.
  • Verification was carried out almost one year after execution.
  • There had been cases of damage and theft.
  • Due to the lapse of time and intervening circumstances, the committee could not ascertain the exact number of certain plantation items.
  • The committee nevertheless assessed expenditure for individual plantation items, RCC flower tubs, and plastic tubs and ascertained quantities on the basis of field verification.

Court’s Findings

The Gauhati High Court examined whether the respondents had actually admitted or denied the petitioner’s claim for unpaid contractor bills.

The Court found that the affidavit filed by the respondents did not amount to a denial of the petitioner’s claim. Rather, the respondents were refusing payment principally on the ground that technical sanction had not been obtained from the competent authorities.

The Court further observed that if the petitioner had actually made supplies pursuant to the supply orders and departmental verification was conducted only after one year, such delayed verification was more in the nature of laches on the part of the department. The department could not rely upon its own delayed verification as a reason for not honouring the contractor’s bills.

The Court also considered the stand concerning theft or misplacement of supplied articles during the intervening period. It found that the core fact remained that the supplies made by the petitioner were not denied by the respondents.

Accordingly, the Court held that the following grounds were not acceptable reasons capable of being construed as non-admission of the petitioner’s contractor bill claim:

  • absence of technical sanction;
  • verification conducted after one year; and
  • possible misplacement or theft of supplied articles during the intervening period.

Court Order / Final Directions

The High Court directed the petitioner to submit an application before the Principal Chief Conservator, providing:

  • complete details of the supply orders;
  • particulars of the supplies made; and
  • all supporting material capable of substantiating that the ordered items had actually been supplied.

Upon receipt of the application, the Principal Chief Conservator was directed to:

  • provide the petitioner an opportunity of hearing;
  • permit the petitioner to produce materials substantiating issuance of the supply orders and actual supplies;
  • examine whether the supply orders were in fact issued and whether supplies were actually made; and
  • if such facts were established, pass orders for payment of all admitted bill amounts.

The Court directed that the required order be passed within two months from the date of submission of the petitioner’s application.

The writ petition was disposed of accordingly.

Important Clarification

This judgment does not lay down that every disputed contractor bill must automatically be paid through writ proceedings. The significant factual and legal feature of the case was that the respondent authorities did not deny the core fact of supplies in a manner sufficient to constitute a genuine non-admission of the claim.

The Court distinguished between:

  • a genuine denial of the underlying supply or liability; and
  • a refusal to make payment based on departmental or administrative grounds such as absence of technical sanction, delayed verification, and subsequent theft or misplacement.

The judgment is particularly important for the principle that departmental delay in verification cannot ordinarily be used by the department itself as a justification to defeat an otherwise admitted contractor or supplier claim.

It further clarifies that where supply orders and actual supplies are established, the competent authority must consider and pass orders for payment of admitted bill amounts rather than reject the claim solely on internal administrative deficiencies.

Sections / Legal Provisions Involved

Article 226 of the Constitution of India – Writ jurisdiction of the High Court.

The dispute also concerned administrative and contractual payment obligations arising from departmental supply orders and the treatment of admitted contractor/supplier bills.

Concerned Case-Law Principle

City Steels vs State of Assam & Ors. establishes that where supplies pursuant to departmental supply orders are not denied, the Government department cannot treat the claim as genuinely disputed merely by relying upon:

  • absence of technical sanction;
  • verification conducted after a substantial delay attributable to the department; or
  • subsequent theft, damage, or misplacement of supplied articles.

The decision further recognises that departmental laches in conducting timely verification should not become a ground to refuse payment of an otherwise admitted contractor or supplier bill.

Link to Download the Order

https://www.mytaxexpert.co.in/uploads/1783319095_1203compressed.pdf

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