Facts of the Case

The petitioner, M/s Vikas Medical Devices, had participated in a tender floated by the National Health Mission (NHM), Assam in 2013 (later amended by a corrigendum), and was awarded a contract to supply and install hospital equipment for the Mother and Child Health Hospital at Assam Medical College and Hospital, Dibrugarh, for a base price of Rs. 8,05,000, exclusive of GST. The petitioner duly supplied the equipment on 22.08.2018 and completed installation on 15.09.2018 — a fact acknowledged by the respondent authorities — making the total amount payable Rs. 9,01,600 (Rs. 8,05,000 plus Rs. 96,600 GST). Despite raising its bill, the petitioner was not paid, and filed this writ petition seeking release of the admitted amount with interest.

On notice being issued in 2022, NHM Assam produced instructions showing that the equipment (ventilators) had actually been procured at the request of the Director of Medical Education, Assam, and that the funds for payment were to be transferred to NHM by the State's Health and Family Welfare Department — a transfer that had not occurred, leaving vendors including the petitioner unpaid.

Issues Involved

  1. Whether the State could withhold an admitted contractual payment, including its GST component, to a vendor on the ground of an inter-departmental funding dispute between the Health Department and the National Health Mission.

Petitioner's Arguments

  • The equipment was supplied and installed to the satisfaction of the respondent authorities, and the amount of Rs. 9,01,600 (inclusive of GST) is an admitted, legitimate entitlement that cannot be withheld.
  • Non-payment despite acceptance and use of the equipment is arbitrary and unreasonable State action.

Respondent's Arguments

  • The procurement had been made at the instance of the Director of Medical Education, and the funds required for payment were to be transferred by the State's Health and Family Welfare Department to the National Health Mission account — a transfer that had not taken place due to non-provision of funds under the State budget, precluding payment to any vendor, including the petitioner.

Court Order / Findings

  • The Court held that the fact of supply, installation and acceptance of the equipment was not in dispute, and that the State cannot deny a vendor's legitimate entitlement merely because funds have not been internally allotted or transferred between government departments.
  • It held that withholding payment after receiving and putting the equipment to use rendered the State's inaction arbitrary and unreasonable.
  • The Court directed the respondents to sort out the inter-departmental funding issue among themselves and make budgetary provision to pay the petitioner the full sum of Rs. 9,01,600 within three months of service of the order.

Important Clarification

The GST component here was simply part of the contract price, not a matter of dispute or interpretation — the Court's real concern was that a government vendor cannot be made to wait indefinitely for payment because of funding disagreements between government departments. Vendors facing similar inter-departmental payment logjams can draw on this precedent to seek writ relief compelling payment of admitted dues, GST included.

Sections Involved

  • Constitution of India, 1950 — Article 226
  • General principles of government contract law — no substantive GST-law provision was adjudicated

Decision – In Favour of

Allowed in favour of the petitioner — the respondents were directed to pay the outstanding Rs. 9,01,600 (including the GST component) within three months.

Case Details

  • Court: Gauhati High Court (High Court of Assam, Nagaland, Mizoram and Arunachal Pradesh)
  • Case No.: WP(C)/4550/2021
  • CNR: GAHC010137862021
  • Coram: Justice Devashis Baruah
  • Date of Order: 11.08.2023

Link to Download the Order

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