Facts of the Case

The petitioner, a registered civil contractor, was awarded the work of construction of "Sampradayam Kala Gurukulam at Kallepalli Village" through the e-tender process pursuant to Agreement No. 01/JNTUK/ED/Sampradayam/Srikakulam/2016-17 dated 06.02.2017.

The estimated contract value was Rs.4,51,65,521/-, whereas the petitioner's successful bid amounted to Rs.4,07,88,892/-, being the lowest tender.

The petitioner completed the entire work within the extended contractual period. The competent authorities inspected the work, verified its quality, issued a completion certificate, and accepted the completed project.

Although substantial payments were released, the respondents failed to release the balance amount comprising:

  • Final Bill
  • Further Security Deposit (FSD)
  • GST Component

The total unpaid amount came to Rs.1,19,12,476/- (later processed as Rs.1,20,69,031/-).

Repeated representations made by the petitioner failed to yield payment, compelling him to invoke the writ jurisdiction of the High Court seeking release of the admitted dues together with interest.

Issues Involved

  1. Whether Government authorities can indefinitely withhold admitted contractual dues merely because funds are unavailable.
  2. Whether non-payment of admitted bills after completion and acceptance of contractual work violates Articles 14 and 21 of the Constitution.
  3. Whether a contractor is entitled to interest on delayed payment of admitted bills.

Petitioner's Arguments

The petitioner contended that:

  • The contractual work had been fully completed.
  • The work was duly inspected, certified, and accepted by the respondents.
  • The completion certificate had already been issued.
  • The respondents had already released major portions of the contract amount, thereby admitting execution of the work.
  • Only the final bill, FSD, and GST component remained unpaid.
  • There existed no contractual dispute regarding execution or quality of work.
  • Non-payment despite repeated requests was arbitrary, illegal, and contrary to the contractual terms.
  • The petitioner was entitled to the balance amount along with interest at 24% per annum from the date of completion of work.

Respondents' Arguments

The respondents did not dispute:

  • Award of the contract.
  • Completion of the work.
  • Acceptance of the completed construction.
  • Submission of the sixth and final bill.

Their sole defence was that:

  • The balance amount could not be released because the Project Deposit (P.D.) Account maintained for the scheme had become nil.
  • A proposal had already been forwarded to the Principal Secretary requesting release of additional funds.
  • Upon receipt of funds from the Government, payment would immediately be released to the petitioner.
  • Therefore, there was no deliberate or illegal withholding by the University authorities.

Court Findings

The Andhra Pradesh High Court observed that:

  • Completion of the work was never disputed.
  • The respondents themselves had verified and accepted the construction.
  • The pending amount represented an admitted liability.
  • Mere non-availability of Government funds could not become a valid defence for withholding admitted contractual dues.
  • Failure to release payment despite acceptance of the work amounted to arbitrary State action.

The Court further held that:

  • Withholding admitted payments payable to contractors violates the constitutional guarantee under Articles 14 and 21.
  • A contractor cannot be deprived of legitimate dues because of internal administrative or financial difficulties of the Government.

The Court relied upon several judicial precedents, including:

  • ABL International Ltd. v. Export Credit Guarantee Corporation of India Ltd. (2004) 3 SCC 553
  • Secretary, Irrigation Department, Government of Orissa v. G.C. Roy (AIR 1992 SC 732)
  • J. Devendar Reddy v. Kakatiya University (2015 (3) ALD 97)
  • S. Srinivas v. State of Andhra Pradesh (2021) 5 ALT 267

These decisions consistently recognize that delayed payment of admitted contractual dues entitles the contractor to reasonable interest as compensation.

Court Order / Decision

The High Court disposed of the writ petition with the following directions:

  • The respondents shall release the admitted amount of Rs.1,20,69,031/- to the petitioner.
  • The petitioner shall also receive interest at 12% per annum.
  • Interest shall be calculated from 26.11.2018, being the date of submission of the sixth and final bill.
  • The entire payment shall be completed within eight weeks from receipt of the Court's order.

Important Clarification

This judgment reiterates the settled legal principle that:

  • Government authorities cannot avoid payment of admitted contractual dues merely on the ground of shortage or non-availability of funds.
  • Once contractual work is completed, verified, and accepted, the contractor acquires a legal right to timely payment.
  • Administrative delays and financial constraints cannot defeat constitutional protections against arbitrary State action.
  • Delayed payment of admitted dues attracts reasonable interest as compensation.

Sections / Provisions Involved

  • Article 226 of the Constitution of India
  • Article 14 of the Constitution of India
  • Article 21 of the Constitution of India
  • Clauses 68 & 69 of Andhra Pradesh Standard Specifications (APSS)
  • Principles governing payment of contractual dues by Government authorities.

Important Case Laws Referred

  • ABL International Ltd. & Another vs Export Credit Guarantee Corporation of India Ltd. (2004) 3 SCC 553
  • Secretary, Irrigation Department, Government of Orissa vs G.C. Roy, AIR 1992 SC 732
  • J. Devendar Reddy vs Kakatiya University & Others, 2015 (3) ALD 97
  • S. Srinivas vs State of Andhra Pradesh & Others, (2021) 5 ALT 267


Link to download the order -https://www.mytaxexpert.co.in/uploads/1783941333_934compressed.pdf

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