Gauhati HC directs Assam’s PHE Department to verify and pay outstanding dues to Charu Engineering Industries under the MSMED Act 2006

News Citation : 2026 LN (HC) 339

May 4, 2026 : In a significant ruling for small businesses navigating government contract disputes, the Gauhati High Court has ordered the Public Health Engineering (PHE) Department of Assam to conduct a comprehensive review of outstanding payments and interest claims owed to Charu Engineering Industries. The judgment, delivered by Justice Devashis Baruah, emphasizes the statutory protections provided under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006.

The case arose after the petitioners, a registered proprietorship firm and its proprietor Lakshmi Ram Thakuria, sought judicial intervention to recover dues for the supply of UPVC pipes. Despite a 2018 court order and a subsequent Memorandum of Understanding (MoU) that initially settled a portion of the debt at approximately ₹49.99 lakh, the petitioners alleged that further supplies made in 2020 and 2021 remained unpaid. The firm argued that as a registered small enterprise, they were entitled not only to the principal amount but also to compound interest at three times the bank rate, as mandated by Section 16 of the MSMED Act.

During the proceedings, the PHE Department contended that the petitioners had an alternative remedy through the MSME Facilitation Council. However, the Court observed that while certain factual disputes—such as the exact timing of supplies and acceptance—cannot be adjudicated in a writ petition, the statutory obligation of the buyer to pay interest remains a clear mandate. Justice Baruah cited a precedent from the Calcutta High Court to clarify that interest under the Act must be calculated via “monthly rests,” meaning it compounds every 30 days based on the prevailing RBI rates.

The High Court has now granted Charu Engineering Industries 60 days to submit a detailed representation to the Special Chief Secretary of the PHE Department. This submission must include a precise calculation of interest and supporting materials for the work orders and deliveries. In turn, the State authorities have been directed to verify these claims and make the necessary payments within four months.

Crucially, the Court noted that if the parties cannot reach an agreement through this administrative process, they retain the right to approach the MSME Facilitation Council for formal arbitration or conciliation. To encourage a timely resolution, the Court ordered that interest on the claims will be “frozen” during this four-month verification period, provided a resolution is reached.

Case Reference : WP(C)/1509/2026, Charu Engineering Industries & Anr. v. State of Assam & 4 Ors., represented by Ms. M. Hazarika, Sr. Adv. & Mr. D. Khan for Petitioners, and Mr. P.N. Goswami, Sr. Adv., Mr. B. Gogoi, Addl. A.G. & Mr. I. Kalita for Respondents.