Facts of the Case

The petitioner company was awarded a government contract for the formation of internal Cement Concrete (CC) roads in the Market Yard, Kuppam, Chittoor District through Agreement No.206/2018-19 dated 04.08.2018 following the prescribed tender process. The petitioner completed the entrusted civil work within the stipulated time and submitted the bills for payment.

Although the competent authorities acknowledged completion of the work, took over the project records, and received the bills, the admitted amounts remained unpaid for a prolonged period without assigning any valid reason. Aggrieved by the arbitrary withholding of the payment, the petitioner approached the Andhra Pradesh High Court seeking appropriate relief.

 Issues Involved

  1. Whether the respondents were justified in withholding payment of admitted contractor bills despite completion of the contractual work.
  2. Whether non-payment of admitted bills constituted arbitrary action violative of Articles 14 and 21 of the Constitution of India.
  3. Whether administrative reasons such as freezing of budgetary allocations could justify withholding admitted contractual payments.
  4. Whether non-submission of the contractor's GST invoice could delay processing of the payment.

 Petitioner's Arguments

  • The petitioner contended that the entire contractual work had been completed within the prescribed time.
  • Bills were duly submitted after execution of the work.
  • Under Clauses 68 and 69 of the Andhra Pradesh Detailed Standard Specifications, the respondents were under a statutory obligation to process and release payment within six months after completion of the work.
  • The prolonged non-payment of admitted bills was arbitrary, illegal, and without any justification.

 Respondents' Arguments

The respondents submitted that:

  • Release of payments was delayed because the R.D.F. budget had been frozen from December 2019.
  • Subsequently, alternative financial sanction under the CMF budget was obtained for clearing pending bills.
  • During verification, it was noticed that the contractor had not enclosed the required GST tax invoice.
  • The bill was therefore returned for resubmission after enclosing the GST invoice.
  • Since the GST invoice had not been furnished, the bill could not be forwarded for payment.
  • It was also contended that under the agreement conditions, the contractor was not entitled to claim interest on delayed payment.
  • The pending bills would be cleared once funds became available.

 Court Order / Findings

After considering the submissions and examining the material placed on record, the Andhra Pradesh High Court observed that:

  • The execution and completion of the work by the petitioner had not been disputed.
  • Once the respondents admitted execution of the work and finalized the bills, continued non-payment was illegal and arbitrary.
  • The Court relied upon settled legal principles laid down by the Supreme Court and various High Court decisions holding that withholding admitted contractual dues without justification violates Articles 14 and 21 of the Constitution of India.
  • The Court directed the respondents to release the admitted bill amount of ₹12,31,796/- including deposits within six weeks from the date of receipt of the order.
  • The writ petition was accordingly disposed of without any order as to costs.

 Important Clarification

  • Mere freezing of budgetary allocations cannot justify indefinite withholding of admitted contractual dues after completion of government work.
  • Once execution of work is admitted and bills are finalized, the government authorities are expected to release payment within a reasonable period.
  • Arbitrary withholding of admitted payments may amount to violation of constitutional guarantees under Articles 14 and 21.
  • The judgment reiterates the principle that government authorities must act fairly and reasonably while discharging contractual obligations.

 Sections / Legal Provisions Involved

  • Articles 14 and 21 of the Constitution of India
  • Clauses 68 & 69 of the Andhra Pradesh Detailed Standard Specifications (APDSS)
  • Agreement No.206/2018-19 relating to Government Civil Works Contract
  • Principles governing payment of admitted contractual dues by Government Authorities


Link to Download the Order:https://mytaxexpert.co.in/uploads/1783919163_4001compressed.pdf

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