Facts of the Case

The petitioner, a contractor, had entered into various agreements with the respondent authorities for execution of works in Kurnool District. The petitioner completed the works as per the terms of the agreements, and execution of the works was entered into measurement books prepared by the respondent authorities without any defects being noticed. While the amount for execution of the works was paid, the respondents did not release the Earnest Money Deposit, Withheld Amounts, and GST component relating to the works, even after completion of the defect liability period. Despite repeated approaches by the petitioner for payment, the respondents failed to release the amounts, compelling the petitioner to file this writ petition before the High Court of Andhra Pradesh for release of the Earnest Money Deposit, Withheld Amounts, and GST component.

Issues Involved

  1. Whether the respondents were justified in withholding the Earnest Money Deposit, Withheld Amounts, and GST component relating to works duly executed by the petitioner, even after completion of the defect liability period.
  2. Whether the petitioner was entitled to a direction for release of the said amounts, absent any justification shown by the respondents.

Petitioner's Arguments

  • The petitioner had entered into various agreements with the respondents for works in Kurnool District and duly completed them as per the terms agreed.
  • Execution of the works was recorded in measurement books prepared by the respondent authorities, and no defects were noticed.
  • The Earnest Money Deposit, Withheld Amounts, and GST component were not released even after completion of the defect liability period, despite the work amount itself having been paid.
  • Repeated representations to the respondents for release of these amounts went unheeded, leaving the petitioner with no option but to approach the Court.

Respondent's Arguments

  • The learned Government Pleader submitted that the respondents were ready to pay the amounts due to the petitioner.
  • No specific justification was placed on record for withholding the Earnest Money Deposit, Withheld Amounts, and GST component beyond completion of the defect liability period.

Court Order / Findings

  • The Court heard the counsel for both sides and perused the material on record.
  • The Court found that there was no justification in withholding the Earnest Money Deposit, Withheld Amounts, and GST component even after completion of the defect liability period.
  • Considering the facts, circumstances, and submissions of both parties, the Court deemed it appropriate to direct the respondents to release the amounts within a reasonable period.
  • The Writ Petition was disposed of, directing release of the Withheld Earnest Money Deposit, Withheld Amounts, and GST component within four (04) weeks from receipt of a copy of the order, with no order as to costs, and pending miscellaneous petitions, if any, closed.

Important Clarification

  • Where works are completed without defects being noted in the measurement books, and the defect liability period has since expired, retention of the Earnest Money Deposit, Withheld Amounts, or GST component without justification is unsustainable.
  • The GST component payable to a contractor for government works must be released along with other contractual retention amounts once the defect liability period is over, absent any demonstrated justification for continued withholding.
  • Government departments cannot indefinitely withhold such dues once liability is otherwise undisputed — as reflected here by the Government Pleader's own submission that the respondents were ready to pay.

Sections Involved

  • Article 226 of the Constitution of India, 1950 – invoked by the petitioner to seek a writ direction for release of the withheld contractual and GST amounts.
  • No specific provision of the Central Goods and Services Tax Act, 2017 is recorded in the order; the dispute concerned the GST component of the works contract consideration, withheld along with the Earnest Money Deposit and Withheld Amounts.

Decision – In Favour of

The Writ Petition was disposed of in favour of the petitioner (the contractor), with the Court directing release of the Earnest Money Deposit, Withheld Amounts, and GST component within four weeks from receipt of a copy of the order, with no order as to costs.

Related Case Laws

  • No closely on-point case notes from this site are available to link at the time of publishing; readers may refer to other posts dealing with delayed release of GST components and contractual retention amounts to works contractors under writ jurisdiction.

Case Details

  • Court: High Court of Andhra Pradesh
  • Case No.: Writ Petition No. 26115 of 2023
  • Coram: Hon'ble Sri Justice Venkateswarlu Nimmagadda
  • Date of Order: 03.11.2023
  • Parties: The petitioner (a works contractor) vs. the respondent State authorities (as described in the order)

Link to Download the Order

Download the full judgment (PDF)

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