Ch Chandrasekhar vs. The State Of Andhra Pradesh

Held

The Court held that there was no justification in withholding the deposit amounts from the petitioner. This conclusion was reached after considering the facts, the submissions of both parties, and the material on record. The Court noted that the work had been completed, the defect liability period had expired, and no defects were recorded. The respondents' reason for withholding payments, i.e., lack of LOC and pending budget release, was not considered a valid justification for prolonged withholding of deposits. The Court directed the respondents to release the deposit amounts (Withheld + EMD, FSD, EMD) due to the petitioner within four weeks of receiving the order. The ratio decidendi is that government authorities cannot arbitrarily withhold contractor deposits after the completion of work and expiry of the defect liability period without valid justification.

Facts

The petitioner, a contractor, filed a writ petition challenging the respondents' action of not releasing deposits (Withheld + EMD, FSD, EMD) related to Agreement No. 87/2022 dated 12.08.2022. The petitioner claimed to have completed works in Nandyal District as per agreements, with measurements recorded without defects. While the work execution amount was paid, the deposit amounts remained unreleased even after the defect liability period concluded. The petitioner had repeatedly approached the respondents for reimbursement. The respondents, through the Executive Engineer, Drainage Division, Gudivada, submitted instructions stating that the bill was not uploaded in CFMS due to a lack of LOC and that bills could not be paid as the budget had not been released by the Government. They assured payment upon budget release.

Key Issues

1. Whether the respondents are justified in withholding the deposit amounts from the petitioner despite the completion of the work and the defect liability period, and in the absence of any recorded defects or justification for withholding. Petitioner's contention: The petitioner argued that the work was completed as per the agreements, measurements were taken without defects, and the defect liability period had expired. Therefore, the deposit amounts should be released. The petitioner sought a direction for the release of these deposits. Respondents' contention: The respondents, through instructions submitted by the Executive Engineer, stated that the bill could not be processed due to a lack of LOC and that payment was contingent on the release of the budget by the Government. They assured payment once the budget was released.