In Priyadarshi Rameshwar Construction Company (P) Ltd. vs. State of Bihar & Ors. (2026), Justice Ramesh Chand Malviya of Patna High Court delivered a 24-page long judgement dated April 8, 2026, wherein, he concluded:" this Court finds that it is an admitted and undisputed position that the appellant/plaintiff had duly executed and completed the contractual work entrusted to him in the year 2016 within the stipulated time and had thereafter raised the requisite bills in accordance with the terms of the contract. It is further not in dispute that the respondents failed to release the admitted dues within a reasonable period and ultimately made payment only in the year 2023, i.e., after an inordinate and unexplained delay of nearly seven years. The sole defence sought to be advanced by the respondents, both before the court below and in the present proceedings, is that the agreement does not contain any specific clause providing for payment of interest on delayed disbursement. However, such a contention cannot be countenanced in law, inasmuch as it is well settled that the State and its instrumentalities are under a constitutional obligation to act fairly, reasonably and in a non-arbitrary manner in all contractual dealings. The failure to release legitimate dues for an unduly prolonged period, without any cogent justification, amounts to arbitrary withholding of money lawfully due and payable, thereby entitling the claimant to reasonable compensation by way of interest." Notably, Rameshwar Tiwary, the Director of the company in question argued the case in person.
Justice Malviya observed: "In the present case, the appellant has discharged his initial burden, whereas the respondents have failed to adduce any evidence in rebuttal. The learned Trial Court has thus erred in law in placing undue emphasis on technical deficiencies while ignoring substantive evidence on record. The findings recorded by the learned Trial Court are therefore perverse, being based on non-consideration of material evidence and misapplication of legal principles. 25. The appellant, having established execution of work and corresponding liability of the respondents, is also legally entitled to interest on the decretal amount, both on equitable and statutory considerations. It is well settled that where a party is deprived of the use of money lawfully due to him, interest is payable by way of compensation for such deprivation."
This First Appeal was filed under Section 96 of the Code of Civil Procedure (CPC) against the judgment and decree dated April 3, 2010 passed by the Sub-Judge II, Bhojpur, Ara (Trial Court) in Money Suit No. 04 of 1999 wherein the plaintiff/appellant’s suit for money claim arose out of contract/agreement was dismissed by the Trial Court. The High Court's judgement does not mention the name of the judge of the trial court in question.
In pursuance of tenders invited by the State Government the plaintiff/appellant, Priyadarshi Constructions Company Pvt. Ltd., the appellant, which registered Companies Act, 1956 was awarded 15 separate works for which independent agreements were executed with the concerned departments.
The plaintiff/appellant duly executed the works with due diligence and in accordance with contractual stipulations to the satisfaction of the competent authorities, whereupon the works were measured, verified, and recorded in the departmental records and part payments were released from time to time. However, certain works were discontinued midway by the defendants on account of administrative constraints, including non-availability of funds, though the works already executed were duly accepted; nevertheless, despite completion and acceptance of the works, a substantial amount remained outstanding and payable to the plaintiff, and notwithstanding repeated demands and representations, including those made pursuant to directions issued in earlier writ proceedings, the defendants failed and neglected to release the admitted dues and rejected the claims on arbitrary and untenable grounds; consequently, the plaintiff was constrained to serve a statutory notice under Section 80 of the CPC and, upon expiry of the prescribed period without compliance, had instituted the suit for recovery of Rs. 17,40,989/- towards the outstanding dues.
The Trial Court had framed following issues for determination:
I. Whether the suit of plaintiff is maintainable as framed?
II. Have the plaintiff got valid cause of action for the suit?
III. Whether the plaintiff has served the notice under Section 80 of the CPC to the defendants.
IV. Whether plaintiff is entitle for the decree of of amount claimed by him?
V. Whether the plaintiff is entitle to get the relief and other reliefs as claimed under plaint?
The other eighteen respondents in the High Court were: Secretary/Commissioner, Water Resource Department, Engineer-In-Chief, Water Resource Department, Managing Director, Bihar State Construction Corporation Ltd., Anishabad, Patna, Chief Engineer, Water Resource Department, Dehri-On-Sone, Rohtas, Chief Engineer Water Resource Department, Aurangabad, Superintending Engineer, Sone Canal Circle, Ara, Bhojpur, Superintending Engineer Flood Control Circle, Buxar, Superintending Engineer, North Koal Canal Circle, Gaya, Executive Engineer, Flood Control Division No. 2, Ara, Bhojpur, Executive Engineer, Sone Canal Division, Ara, Bhojpur, Executive Engineer, Flood Control Division, Buxar, Executive Engineer, North Koal Canal Division Goh, Aurangabad, Commissioner/Secretary, Minor Irrigation Department, Patna, Co-Ordinator/Chief Engineer, Tube-Well Project, Patna, 16. Superintending Engineer, Tube Well Circle, Patna, Superintending Engineer, Tube Well Circle, Ara, Bhojpur, Executive Engineer, Tube Well Division, Patna West Bihta, Patna and Executive Engineer, Tube Well Division Ara, Bhojpur.
Justice Malviya added:"30. This Court is of the considered opinion that the absence of an express stipulation in the contract for payment of interest does not ipso facto disentitle the appellant from claiming the same, particularly where the delay is wholly attributable to the respondents and is neither justified nor explained by any acceptable material. A contractor entering into an agreement with the Government legitimately expects that payments for completed works would be made within a reasonable time, and while some administrative delay may be anticipated, a delay extending to seven years is per se unreasonable, arbitrary, and violative of settled principles of fairness in State action. The appellant cannot be made to suffer for lapses on the part of the authorities, and the retention of his dues for such a prolonged period confers an unjust enrichment upon the respondents. Accordingly, this Court holds that the appellant is entitled to be compensated for the delayed payment by way of reasonable interest, notwithstanding the absence of a contractual clause, and the contrary finding, if any, recorded by the learned court below cannot be sustained in the eye of law."
The judgement reads:"31. Accordingly, the point for determination framed by this Court is answered in favour of the plaintiffs/appellants and against the defendants/respondents. In view of the aforesaid discussion and the settled legal position, this Court holds that the appellant is entitled to interest on the decretal amount. The impugned Judgment and Decree passed by the learned Trial Court, to the extent it denies such interest, is unsustainable in law and is hereby set aside."
Justice Malviya pointed out that the Appellate Court has the discretionary power to admit the additional evidence, primarily to prevent the miscarriage of justice and when the evidence is crucial for a just judgment. Notably, it is well settled law that a First Appellate Court has wide powers to re-appreciate evidence provided under Order XLI Rule 27 of the CPC. He noted that the entire Trial Court record it was apparent that the document proposed to include as additional evidence under Order XLI Rule 27 was on record before the Trial Court but the same was not exhibited by the Trial Court. So, the documents are fit to be exhibited as additional evidence under Order XLI Rule 27(1) of the CPC.
In this regard, Justice Malviya relied on t he judgment of the Supreme Court in K. Venkataramiah vs. A. Seetharama Reddy & Ors., reported in AIR 1963 SC 1526. It held: “The Appellate Court has the power to allow additional evidence, not only if it requires such evidence 'to enable it to pronounce judgment, but also for 'any other substantial cause'. There may be cases where the Court finds that it is able to pronounce a judgment on record as it is, and cannot strictly say that it requires additional evidence to enable it to pronounce judgment, it still considers that, in the interests of justice, something which remains obscure should be filled up, so that it can pronounce its judgment in a more satisfactory manner, Such a case will be one for allowing additional evidence for only substantial cause under Rule 27.”
The High Court observed: "19. It is also well settled that once execution of work is established and the same has been accepted by the department, the liability to make payment necessarily follows. It would be unreasonable to deny payment for the work actually done. The State cannot take advantage of its own wrong and refuse to pay for work executed."
In State of West Bengal vs. B.K. Mondal & Sons, reported in AIR 1962 SC 779 observed:“if a person lawfully does anything for another person, or delivers anything to him, not intending to do so gratuitously, and such other person enjoys the benefit thereof, the latter is bound to make compensation”.
The High Court observed that "the aforesaid principle, embodied under Section 70 of the Indian Contract Act, 1872, clearly applies where the State derives benefit from work executed."
In A.T. Brij Paul Singh vs. State of Gujarat, reported in AIR 1984 SC 1703, the Supreme Court held: “11. Now if it is well-established that the respondent was guilty of breach of contract in as much as the recission of contract by the respondent is held to be unjustified, and the plaintiff-contractor had executed a part of the works contract, the contractor would be entitled to damages by way of loss of profit, Adopting the measure accepted by the High Court in the facts and circumstances of the case between the same parties and for the same type of work at 15% of the value of the remaining parts of the work contract, the damages for loss of profit can be measured.”
In State of Rajasthan and Anr. vs. Ferro Concrete Construction Pvt. Ltd., reported in (2009) 12 SCC 1 the Supreme Court observed that once execution of work is established and accepted, the contractor becomes entitled to payment in accordance with law. In the present case, the M.B. entries, duly verified by competent authorities, clearly establish execution of work and corresponding liability. The respondents, having failed to rebut such evidence, cannot deny payment, as the same would amount to unjust enrichment. In furtherance thereto, it is well settled that though the plaintiff must succeed on the strength of his own case, once prima facie evidence is adduced, the burden shifts upon the defendant.
Justice Malviya referred to the Supreme Court's decision in Ibrahim Uddin and Anr., reported (2012) 8 SCC 148, wherein, it observed that a party cannot succeed on the weakness of the defence; however, once sufficient evidence is produced, the burden shifts on the opposite party to rebut the same.
In this regard, the Supreme Court in Secretary, Irrigation Department, Government of Orissa vs. G.C. Roy, reported in (1992) 1 SCC 508 “33. In the case before us, admittedly the contract does not provide that no interest is payable on the amount that may be found due to any one of them. If so, it follows that the seller, namely, the firm is entitled to claim interest from the date on which the price became due and payable. The finding of the arbitrator in this case is that the price became payable on June 7, 1958. As held by this Court in Union of India v. A.L. Rallia Ram which related to an arbitration proceeding, under Sub-section (2) of Section 61, in the absence of a contract to the contrary, the seller is eligible to be awarded interest on the amount of the price for the goods sold. On this principle it follows that the award of interest from June 7, 1958 is justified.”
In Alok Shanker Pandey vs. Union of India and Ors., reported in AIR 2007 SC 1198, the Supreme Court observed: “9. It may be mentioned that there is misconception about interest. Interest is not a penalty or punishment at all, but it is the normal accretion on capital. For example if A had to pay B a certain amount, say 10 years ago, but he offers that amount to him today, then he has pocketed the interest on the principal amount. Had A paid that amount to B 10 years ago, B would have invested that amount somewhere and earned interest thereon, but instead of that A has kept that amount with himself and earned
interest on it for this period. Hence, equity demands that A should not only pay back the principal amount but also the interest thereon to B.
Justice Malviya observed: "28. Applying the aforesaid principles to the facts of the present case, it is evident that the appellant had executed the work and the same was duly recorded in official documents; however, despite such execution and acknowledgment, the respondents failed to release the admitted dues, thereby unjustly retaining the amount and depriving the appellant of its lawful use. Such retention of money by the State amounts to unjust enrichment and warrants compensation by way of interest. Further, under Section 34 of the CPC, the Court is empowered to award reasonable interest on the principal sum adjudged from the date of institution of the suit till realization. The grant of interest, therefore, is not only equitable but also statutorily recognized."
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