SC Protects Contractor Rights Against Unauthorised Recovery from Cross-Contracts
Judgment dated 30.9.2026 of the Supreme Court of India in SLP (Civil) No.10464 of 2026 of M/s Awadhesh Singh Gautam Vs. State of Chhattisgarh and others with connected civil appeals.
- The appellant had earlier, on 03.01.2023, been awarded two separate contracts for construction of two roads at 10.10% above the Schedule of Rates, at an approved cost of 2 approximately Rs.437.43 lakhs (“the earlier works”), under which a substantial part of the contract value had already been paid.
he controversy has its genesis in three works awarded to the appellant. Pursuant to notices inviting tenders issued by the Chhattisgarh Rural Road Development Agency (“CGRRDA”), the appellant was awarded three packages under the Pradhan Mantri Gram Sadak Yojana (“PMGSY”), for which work orders came to be issued on 01.09.2023 and 05.11.2024 (“the subsequent works”).
By the order dated 27.09.2025 (“the recovery order”) the amounts payable to the appellant was blocked out of amounts currently payable to the appellant, to be recovered by deduction from the three subsequent works in the sums of Rs.28,00,000/- (Rupees Twenty Eight Lakh only), Rs.38,00,000/- (Rupees Thirty Eight Lakh only) and Rs.18,17,003/- (Rupees Eighteen Lakh Seventeen Thousand and Three only) respectively.
he appellant’s representation dated 09.10.2025 to the Executive Engineer, pointing out that the deductions were being made from bills payable under contracts wholly distinct from the earlier works out of which the alleged liability arose, and seeking a refund of Rs.84,17,003/- (Rupees Eighty-Four Lakh Seventeen Thousand and Three only) within fifteen days, elicited no response.
The recovery order has never been founded on a claim, quantified or otherwise, for liquidated damages for delay; it proceeds instead from an allegation of overpayment detected on technical audit, a subject dealt with specifically, and exclusively, by Clause 4.1 of the Special Conditions of Contract. Clause 44.1, therefore, furnishes no foundation for the recovery order.
It follows that none of the clauses relied upon by the respondents, whether read singly or cumulatively, authorises either the deduction of the disputed amount from the three subsequent contracts, or the manner in which it was effected.
For the reasons set out above, neither the agreement governing the contracts consented to by the contractor nor any provision of law permits such appropriation, and that question turns entirely on the construction of the contract and compliance with its terms, not on the resolution of the disputed facts pertaining to the earlier works.
For the foregoing reasons, the recovery order dated 27.09.2025 cannot be sustained in law and is quashed and set aside. The respondents are directed to release to the appellant the sum of Rs.84,17,003/- (Rupees Eighty-Four Lakh Seventeen Thousand and Three only), together with interest thereon at the rate of 6% per annum from 27.09.2025 till the date of actual payment.
