Disputed Overpayment Cannot Be Recovered From Bills Under Other Contracts Without Hearing: Supreme Court

The appellant firm executed two earlier road contracts and, later, three PMGSY packages for the Chhattisgarh Rural Road Development Agency (paras 3-5). A committee found Rs 2.01 crore overpaid on the earlier works, and a demand note under Section 146 of the Chhattisgarh Land Revenue Code was quashed by the High Court in March 2025 for want of a hearing (paras 6-8). An FIR was registered against the firm's partner (para 9). On 27.09.2025 the Executive Engineer blocked Rs 84,17,003 from bills under the three later contracts (para 10). The High Court dismissed the writ petitions on 07.01.2026 as raising disputed facts (para 12).

The Court examined each clause the State relied on (para 18). Clause 44.1 of the General Conditions covers only liquidated damages for delay, capped at 10% (para 19.1). Clause 53.1(ii) applies only after termination for breach of defects-liability and maintenance obligations, which never happened (para 20.1). Clause 7(iv) of the Integrity Pact presupposes a finding that the pact was violated, and the order neither cited it nor recorded one (para 21.1). Clause 38 requires the breach to be ascertained and the contractor told first (para 22.1). Clause 4.1 of the Special Conditions, the only audit-recovery clause, allows recovery from the audited work's own account, where about Rs 1.07 crore was still due, and requires a hearing, the CEO's orders and action within twelve months of completion; none was shown (para 23.1). Until established, the alleged overpayment is a disputed claim for damages, not a debt presently due, and cannot be appropriated from sums payable under a separate contract (para 25). The High Court erred, since the question turned on construing the contract, not on disputed facts (paras 26-27).