Srinagar, Aug 26: The High Court of Jammu & Kashmir and Ladakh has upheld an order directing the J&K Lake Conservation and Management Authority (LCMA) to release a ₹2.24 lakh Call Deposit Receipt (CDR) to a contractor, ruling that security furnished for one contract cannot be withheld to recover an alleged liability arising from another.

A Division Bench of Justice Sindhu Sharma and Justice Shahzad Azeem dismissed LPA No. 132/2023 filed by the Union Territory administration and senior LCMA officials against the Single Judge’s July 13, 2023 order.
The case concerns contractor Gulzar Ahmad Wagra, who had furnished a CDR of ₹2,24,750 after securing a contract for construction of a sewer line at Nigeen under an NIT issued in 2008.
The project could not be completed following repeated objections and access-related disputes involving Tourism Department land, private property owners and houseboat owners.
Wagra told the court that he had already excavated around 320 metres of trench, reaching a depth of six metres, before the work was obstructed. He maintained that the difficulties were brought to the Authority’s notice and that the contract was subsequently proposed for termination with compensation for the work executed. He had sought ₹11.80 lakh towards the work besides release of his CDR.
The LCMA, however, alleged that Wagra failed to commence and complete the work despite repeated communications and eventually declined to resume it.
The Authority later retained the Nigeen CDR over a separate dispute arising from Wagra’s contract at Habbak, where two workers engaged by him died during employment.
Their legal heirs were awarded compensation of ₹4,33,820 each under the Workmen’s Compensation Act. The LCMA claimed that, after paying the compensation, it had incurred a liability of ₹8,67,640 and was entitled to recover the amount from Wagra.
The High Court rejected the method adopted by the Authority.
The Division Bench held that Section 12(2) of the Workmen’s Compensation Act may give a principal employer a right to seek indemnification from a contractor, but such a right has to be enforced through due legal process.
“The right of indemnity contemplated under Section 12(2) is required to be enforced in accordance with law before the Competent Forum,” the Bench observed.
The court noted that there was no specific provision in the Nigeen contract authorising the LCMA to adjust the alleged Habbak liability against the CDR furnished for the Nigeen project.
Relying on Supreme Court rulings, including Union of India v. Raman Iron Foundry and M/S Gangotri Enterprises Limited v. Union of India, the Bench held that an unadjudicated claim cannot simply be treated as an enforceable debt and recovered by withholding security furnished under an unrelated contract.
The court said the LCMA was free to pursue any lawful claim against the contractor for the alleged ₹8,67,640 liability, but could not bypass the prescribed legal process by retaining the CDR.
Finding no error in the Single Judge’s decision, the Division Bench dismissed the appeal, quashed the LCMA’s refusal to release the security and affirmed the direction to return the ₹2,24,750 CDR to Wagra.
The ruling, pronounced on August 18, 2026, leaves the Authority free to pursue any independent recovery proceedings available to it under law.