“Can't Cry Foul After Engaging Services”: AP High Court Reprimands State For Withholding Contractor's Dues Citing Financial Crunch
Saahas Arora
5 Feb 2026 11:45 AM IST
The Andhra Pradesh High Court has reprimanded the Naidupeta Municipality authorities (Respondent 3) for withholding payments due to a contractor (petitioner) against completion of public works on account of financial constraints, observing that the Municipality cannot employ the services of third parties and then evade payment obligations on the pretext of financial hardship.
The Municipality had engaged the petitioner for construction purposes, however, bills amounting to Rs.7,89,724 towards the completion of the projects remained unpaid. Aggrieved, the petitioner approached the High Court, arguing that the respondents' failure in releasing the payment was illegal, malafide, and violative of Article 14 and 19(1)(g) of the Constitution.
While the State expressed financial incapacity to clear the due amount, Justice Gannamaneni Ramakrishna Prasad observed,
“… this Court is constrained to observe that it is rather dismayed with regard to the response given by the Commissioner that the Financial condition of the Municipality is very critical and unable to pay the monthly wages etc.,. If the Municipality is in such critical financial constraints, this Court is unable to countenance as to why the Municipality has undertaken this kind of work and got it executed by undertaking the services and financial resources of third parties like that of the Writ Petitioner and then cry foul as regards the financial crunch.”
The Single-Judge referred to the decisions of the Delhi High Court in Mr. S.S. Meena, EE (Project Narela) v. Amit Tanwar [2018 SCC OnLine Del 8035], and the Jammu and Kashmir High Court in Kashmir Wood Products vs Verinag Development Authority and Others [2021 SCC OnLine J&K 814], where it was held that financial constraints cannot be a defence for non-payment of amount due to the contractors for the work undertaken them, and it is a bounden duty of Corporations to reimburse amounts payable for executive works.
In light of the same, the Court allowed the petition and directed the respondent authorities to complete the inter-departmental and intra-departmental administrative process through mutual coordination, and thereafter transfer the pending amount to the petitioner.
Case Details:
Case Number: WRIT PETITION NO: 34418 OF 2025
Case Title: Kattam Reddy Venkateswarlu Reddy v. State of Andhra Pradesh & Ors