Authority: Supreme Court of India

Order Date: 30 September 2026

Case Overview

  • Parties: Appellant – M/s Awadhesh Singh Gautam, a partnership firm; Respondents – State of Chhattisgarh & others.
  • Background: The appellant was awarded three PMGSY road‑work packages by the Chhattisgarh Rural Road Development Agency (CGRRDA) on 01‑09‑2023 and 05‑11‑2024. Approximately 40% of each work was completed, and running bills of Rs 39,78,500, Rs 45,62,000 and Rs 23,55,000 were raised but remained unpaid despite reminders on 22‑09‑2025 and 25‑09‑2025.
  • Earlier Works: Two contracts awarded on 03‑01‑2023 for roads at 10.10% above Schedule of Rates, total cost approx. Rs 437.43 lakhs. A five‑member committee (report dated 09‑01‑2024) found that Rs 3,55,82,055 had been paid, but work executed was only Rs 1,54,75,938, indicating excess payment of Rs 2,01,06,117. The committee recommended recovery, blacklisting, and departmental action.
  • Revenue Action: Collector’s memo (03‑06‑2024) directed Tehsildar to recover Rs 2,01,06,117; a demand note under Section 146 of the Chhattisgarh Land Revenue Code was issued on 16‑12‑2024. The High Court quashed this demand note on 05‑03‑2025 for lack of notice and hearing.
  • Criminal Proceedings: FIR filed against Mr. Awadhesh Singh Gautam and CGRRDA officers for offences under IPC sections 420, 467, 468, 471, 409 and 120‑B; chargesheet filed on 30‑12‑2025.
  • Recovery Order: Executive Engineer‑cum‑Member Secretary, Project Implementation Unit K‑01, issued a recovery order on 27‑09‑2025, blocking Rs 84,17,003 and directing deductions of Rs 28,00,000, Rs 38,00,000 and Rs 18,17,003 from the three subsequent PMGSY contracts.
  • Appellant’s Representation: On 09‑10‑2025, the appellant sought a refund of the blocked amount, arguing that deductions were from contracts unrelated to the alleged over‑payment, but received no response.
  • High Court Decision (07‑01‑2026): Dismissed three writ petitions challenging the recovery order, holding that the relief depended on disputed factual questions not suitable for Article 226 proceedings, while leaving open alternative remedies.
  • Submissions: Counsel for appellant (Gaurav Agrawal) argued lack of notice, violation of Clause 4.1 of Special Conditions, and improper cross‑contract recovery. Counsel for State (Bishwajit Dubey) relied on Clause 7(iv) of the Integrity Pact, Clause 38 and Clause 53.1(ii) of General Conditions, asserting contractual right to set‑off.
  • Judicial Analysis: The Court examined Clauses 44.1, 53.1(ii), 7(iv) of Integrity Pact, 38, and 4.1. It found none provided a legal basis for the cross‑contract deduction. Clause 4.1 permits recovery only from security deposit or dues of the same contract and requires notice, hearing, and CEO approval – none of which were complied with.
  • Natural Justice: The recovery order was passed without notice, hearing, or sanction of the CGRRDA CEO, violating the procedural safeguards embedded in Clause 4.1.

Final Outcome

  • The recovery order dated 27‑09‑2025 is quashed and set aside.
  • Respondents must release the full blocked sum of Rs 84,17,003 to the appellant, with interest at 6% per annum calculated from 27‑09‑2025 until actual payment.
  • The judgment does not preclude the State from pursuing separate lawful proceedings to recover any amount ultimately found due for the earlier works.
  • The pending criminal case (Chargesheet No. 87 of 2025) and the substantive over‑payment dispute remain untouched and will be decided on their own merits.
  • Appeals are allowed; no order as to costs; any pending applications stand disposed of.

Topics: Contract Enforcement; Road Infrastructure