Andhra Pradesh HC: State Cannot Withhold Admitted Dues for Completed Infrastructure Works

The High Court of Andhra Pradesh has reinforced the principle of executive accountability by directing the immediate release of unpaid contract dues, ruling that the arbitrary non-payment for completed public infrastructure projects violates fundamental constitutional guarantees. The court clarified that contractors are entitled to interest on delayed payments even if not explicitly admitted by the state, providing a robust remedy against administrative inertia in government procurement.

In a matter concerning the non-payment for infrastructure works under the 'Navartnalu' scheme, a Single Judge Bench comprising Justice Venkateswarlu Nimmagadda adjudicated upon the petitioner's grievance regarding withheld final bills. The Court addressed the recurring issue of state authorities admitting liabilities while failing to discharge financial obligations for works completed as per agreement.

Key Takeaways

Curbing Arbitrary Withholding

State authorities cannot indefinitely withhold payments for completed works without valid justification, as such inaction is deemed arbitrary and high-handed under Constitution of India.

Entitlement to Interest

Even in the absence of an explicit admission of interest liability by the State, contractors are entitled to interest on delayed payments as per judicial precedents and agreement terms.

Right to Procedural Hearing

If the State intends to reject or reduce a claim for interest, it is mandatorily required to provide the claimant with an opportunity for a hearing before passing final orders.

Court's Observations on Non-Payment and Interest

The Court took note of the petitioner's contention that despite the execution of works and preparation of final bills, the respondents failed to release the sanctioned amount. The State, while admitting a specific net amount was payable, cited technical delays in 'uploading the bill' as the reason for non-payment.

The Court, in its reasoning, observed: "This Court, in various orders... had taken the view that such non-payment of dues is arbitrary and that such dues need to be cleared by the respondents at the earliest... the Petitioner is entitled for interest component as per the terms of Agreement if permits and also in the case of delayed payments, as per the ratio laid down by the Division Bench of this Court."

The Court has the following directions:

"...this Writ Petition is disposed of with a direction to the respondents to release the net amount of Rs.2,67,938/- to the petitioner within a period of three (03) months. It would also be open to the petitioner to agitate his claim for differential amount, if any payable by the respondents, in an appropriate forum... the respondents are hereby directed to pay admitted amount within a period of four months from the date of receipt of copy of this order. As far as interest is concerned, if both parties have agreed regarding the quantum of amount towards interest, the same should be paid along with admitted amount, if not, petitioner is at liberty to submit a representation or a Memo of Statement requesting for payment of interest. If petitioner is entitled for the same, after such submission of representation or Memo, the concerned respondent authorities shall consider and pass appropriate orders after providing opportunity of hearing to both parties in case of rejection or reduction of interest amount claimed by the petitioner, within a period of four (04) weeks thereafter."

Ratio

The State's failure to release payments for completed contractual works, despite admitting the liability, constitutes arbitrary administrative action violating Article 14 of the Constitution. Furthermore, a contractor possesses a legal right to claim interest on delayed payments, and any determination regarding the quantum of such interest must adhere to the principles of natural justice, including the right to a hearing if the claim is contested.

Background

The petitioner was awarded a contract for providing an approach road for the Jagananna Housing Colony at Royyuru Village under the Non-OTS Critical Infrastructure Grant. Following the successful completion of the works, a final bill for Rs.3,34,885/- was prepared. However, the State authorities failed to release the funds, leading the petitioner to approach the High Court under Article 226 of the Constitution of India, alleging violations of Articles 14, 16, and 21 of the Constitution of India.

During the proceedings, the respondents admitted to a net payable amount of Rs.2,67,938/- but remained silent on the interest component. The Court relied on its earlier findings in W.P.No.10038 of 2021 and batch to establish that withholding such dues is legally untenable. Consequently, the petition was disposed of with specific timelines for payment and a mechanism for resolving the interest dispute.

Case Details:
Case No.: WRIT PETITION NO: 19164/2026
Neutral Citation: 2026:APHC:47972
Case Title: Jonnala Satish Chandra Reddy V. The State Of Andhra Pradesh And Others
Appearances:
For the Petitioner(s): PAMARTHI KAMESWARA RAO
For the Respondent(s): GP For Panchayat Raj Rural Dev, Mallikharjuna Moorthy K (SC For A.P Housing Corporation Limited), GP For Housing, GP For Finance Planning

Source: 2026 CaseBase(AP) 19903