Zenith Metaplast(P) Limited vs. The State Of Andhra Pradesh

Held

The Court held that the inaction of the respondent authorities in releasing payments due to the petitioner was not justified. While acknowledging the respondents' stated financial constraints, the Court found that these constraints could not be used to render the petitioner a non-performing asset for its bankers. The Court noted that the work completion certificates ipso facto entitled the petitioner to payments. It also observed a mismatch in the amounts admitted by different respondent departments, indicating a lack of coordination and a tendency to pass responsibility. The Court emphasized the State's responsibility to ensure timely payments to suppliers to maintain seamless operations. Therefore, the Court directed the respondent authorities to expedite the processing and clearance of all bills due and payable to the petitioner within a period of 12 weeks from the date of the order.

Facts

Zenith Metaplast (P) Limited (Petitioner) filed a writ petition against the State of Andhra Pradesh and its departments, including APEWIDC (Respondents), seeking release of outstanding payments amounting to Rs. 57,48,93,097/- for supplying and assembling furniture for government schools under various state programs. The Petitioner had participated in tenders, was awarded contracts as the lowest bidder, and completed the work to the satisfaction of the authorities, receiving work completion certificates. Despite this, payments were withheld. The Respondents, through their counters, admitted receipt of some bills and acknowledged liabilities, but cited financial constraints and procedural delays in processing the remaining amounts. The Court noted a mismatch in admitted amounts between different respondent departments.

Key Issues

1. Whether the inaction of the respondent authorities in releasing payments due to the petitioner for supplied and assembled furniture, despite work completion certificates, is illegal, arbitrary, and in violation of Articles 14, 19, and 21 of the Constitution of India? Petitioner's Arguments: The petitioner contended that the respondents' failure to release payments, despite acknowledging the supplies and the quality thereof, was illegal and arbitrary. They argued that Clause 17 of the agreement stipulated release of 90% of bills after delivery, with a further 2.5% retention for warranty. The petitioner highlighted that they had already remitted statutory taxes of Rs. 50 crores towards GST and Income Tax, which were yet to be realized from the respondents. They emphasized that the respondents were neither denying the supplies nor disputing the quality, yet were withholding payments. Respondents' Arguments: The respondents, primarily through the Finance Department, admitted receipt of some bills and acknowledged certain liabilities but cited substantial accumulated liabilities exceeding the state's fiscal capacity and financial constraints as reasons for the delay. They also pointed to a lack of timely submission of bills from the administrative department (Commissioner, School Infrastructure) to the Finance Department for processing. The respondents stated the delay was due to financial exigency, not intentional denial.