Works Contract Dues: Writ Petition Dismissed for Disputed Facts and Lack of Completion Certificate.
Issue:
Whether a writ petition under Article 226 of the Constitution of India is maintainable for the recovery of outstanding dues from a works contract, along with the release of earnest money and security deposit, when the Municipal Corporation disputes the liability, citing the absence of a completion certificate and other documentary evidence, thereby involving disputed questions of fact.
Facts:
The contractors (assessee) sought payment of outstanding dues amounting to Rs. 15,44,914/- (excluding GST and Labour Welfare Cess), along with the release of earnest money and a security deposit of Rs. 37,046/-, for work completed under a specific work order. The Municipal Corporation, however, contended that this amount was not an admitted liability. Their primary argument was that no completion certificate had been submitted for the construction work, and there was a lack of other documentary evidence to establish that the work was indeed completed. This led to disputed questions of fact regarding the execution and quantification of the alleged dues.
Decision:
In favor of the revenue: The court declined to exercise its extraordinary jurisdiction under Article 226 of the Constitution of India. The decision was based on the absence of a completion certificate or any other documentary evidence to establish that the construction work was completed, and in view of the disputed questions of fact pertaining to the execution and quantification of the alleged dues. The assessee was explicitly given liberty to seek redressal before an appropriate forum (e.g., a civil court or an arbitration tribunal). The writ petition was accordingly disposed of.
Key Takeaways:
- Writ Jurisdiction for Contractual Disputes: High Courts generally refrain from exercising their extraordinary writ jurisdiction under Article 226 for the enforcement of purely contractual obligations, especially when those obligations involve disputed questions of fact that require detailed evidence, cross-examination, and complex factual findings. Writ jurisdiction is typically reserved for public law matters or where fundamental rights are violated, or where the action of a public authority is manifestly arbitrary or without jurisdiction.
- Disputed Questions of Fact: The presence of “disputed questions of fact pertaining to execution and quantification of alleged dues” is a critical factor for a High Court to decline writ jurisdiction. Determining whether a construction work was completed, its quality, or the exact amount due often requires evidence, expert opinions, and detailed examination, which are not typically handled in summary writ proceedings.
- Completion Certificate as Crucial Evidence: In works contracts, a completion certificate is often a vital piece of documentary evidence confirming the satisfactory execution of the work. Its absence significantly weakens a contractor’s claim for payment.
- Alternate Remedy: The court explicitly directed the assessee to seek redressal before an “appropriate forum.” This usually means a civil court (for breach of contract claims) or an arbitration tribunal (if the contract has an arbitration clause), which are equipped to handle complex factual and contractual disputes.
- Section 2(119) of CGST Act (Works Contract Definition): While Section 2(119) defines “works contract” under GST, the core dispute in this case was not about GST taxability but about the underlying contractual payment for the work itself. The court’s decision is on the maintainability of the writ petition for contractual recovery, not on GST implications.
- No Mandamus for Disputed Contractual Dues: Courts typically do not issue a writ of mandamus (a direction to a public authority to perform a duty) for payment of disputed contractual dues, as it would amount to entering into a fact-finding exercise akin to a civil suit.