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M/S Awadhesh Singh Gautam v. State of Chhattisgarh & Ors.

Civil Appeal · 2026 INSC 1072Decided 30 Sept 2026
Civil Appeal arising out of SLP(C) No. 10464 of 2026 with connected appeals
Justice Pamidighantam Sri Narasimha · Justice Alok Aradhe

Background

A contracting firm was awarded three road-construction packages under the Pradhan Mantri Gram Sadak Yojana and had completed about 40% of the work, but the government withheld payment of running bills worth over ₹1 crore. The State separately alleged the firm had been overpaid on two earlier, unrelated road contracts (now the subject of a departmental inquiry and criminal proceedings), and issued a recovery order deducting that disputed amount directly from the money due under the three new contracts. The High Court dismissed the firm's writ petitions challenging this deduction.

Decision Breakdown

The Supreme Court quashed the recovery order and directed the government to release the withheld ₹84,17,003 with 6% annual interest. It held that the contract clause governing recovery required prior notice to the contractor and specific approval from the CEO of the road agency before any deduction, neither of which had been obtained, and that an unproven, disputed overpayment claim from an entirely separate contract cannot simply be treated as an ascertained debt and unilaterally adjusted against money owed under a different, unrelated contract. The Court clarified this ruling only addressed the legality of how the recovery was carried out, and does not affect the pending criminal case or the State's ability to pursue the alleged overpayment through proper legal channels.

Lesson Learnt

A government authority cannot bypass a contract's own procedural safeguards, like prior notice and a designated approving officer, to recover a disputed, unproven claim by simply withholding payments legitimately due under a separate contract.

Official source (sci.gov.in)View Judgment (PDF)

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