Work at the new Day Case Unit at St Luke’s Hospital in Market Harborough ground to a halt earlier this month.

Health chiefs from NHS Leicestershire County are taking legal action against UAE based ModCon over delays to the endoscopy unit.

The firm has been served with a legal notice giving it 14 days to rectify problems on site after damage was discovered to prefabricated units shipped over from the UAE.

The award of the contract to is now being called into question by councillors.

District councillor Phil Knowles is questioning why the contract was not advertised through the Official Journal of the European Union.

Cllr Sarah Hill, a county councillor for Harborough and the deputy chairman of the health scrutiny committee, told the Harborough Mail: “The people served by this hospital deserve to know why so much has gone wrong.”

Cllr Blake Pain, a fellow county councillor for the town, said: “I am extremely disappointed that this much-needed hospital improvement has stopped half-completed and descended into a potentially lengthy and costly legal dispute. Full public scrutiny is required.”

Harborough MP Edward Garnier has written to Government health secretary Andrew Lansley asking him to hold an inquiry.

A trust spokesman said: “We followed EU procurement legislation but were not required to advertise for tenders in OJEU as the total value of the construction contract falls below the threshold.

“We followed our own formal tendering process. The trust undertook a competitive tendering process to secure best value for the taxpayer.”

The paper said ModCon did not return requests for a comment.