Case Note & Summary
The dispute arose from a contract for works executed by the petitioner, who was represented by a general power of attorney holder. The petitioner had been allotted contractual works on 09.03.2011 and completed them without delay or adverse remarks. The total agreement value was Rs.43,53,019, of which the respondent Corporation paid only Rs.23,87,972 after a year. The petitioner had earlier approached the High Court in Writ Petition No.8258 of 2013 for recovery of the balance work amount of Rs.23,71,000, and by judgment dated 06.03.2024 the Court directed payment within three months. In the present writ petition, the petitioner sought refund of the Earnest Money Deposit of Rs.2,41,532, which had been deposited in the first week of March 2011 and was to be refunded after the 24-month defect liability period, which ended on 10.03.2013. Despite over 13 years, the respondent Corporation did not refund the EMD. During the hearing on 22.01.2026, the Court called for written instructions. The Commissioner's written instructions dated 23.01.2026 stated that the then Commissioner, by proceedings dated 30.12.2011, had recommended payment of 50% of the bill amount and that the issue was to be enquired into by the Vigilance Department, but the instructions did not state anything about refund of EMD except that it was kept as security pending the outcome of the Vigilance enquiry. The Court then called for entire records and directed a responsible officer to appear. The Executive Engineer appeared and stated that except for the written noting dated 30.12.2011, there was no proceedings initiating any Vigilance Enquiry. On perusal, the Court found that the noting contained observations about fixation of rates by Engineering Authorities, which had nothing to do with the contractor's performance. The pre-audit accepted that the agreement rate had to be paid, but noted an abnormal difference between APSPDCL SSR rates and the rate adopted, causing loss to the institution. The Court held that these defects in rate fixation were internal and unconnected with the contractor's work; no departmental action or vigilance enquiry had been initiated against officers. The Court found that withholding the EMD for nearly 14 years based solely on the noting was irrational. The Court reminded authorities of the principles of public accountability and fair performance, quoting Eureka Forbes Limited vs Allahabad Bank and Others and Lok Prahari vs State of Uttar Pradesh and Others. It emphasised that public officers are answerable for inaction and irresponsible actions, and that internal administrative deficiencies cannot justify withholding a contractor's legitimate dues. The Court concluded that the respondent Corporation's action was arbitrary and contrary to public duty. The provided excerpt ends without the final operative order, but the Court's findings clearly favoured the petitioner's entitlement to refund.
Headnote
A) Administrative Law - Public Accountability - Refund of Earnest Money Deposit - Not mentioned - The petitioner completed contractual works and the defect liability period ended on 10.03.2013, yet the respondent Corporation withheld EMD of Rs.2,41,532 for over 13 years citing a noting dated 30.12.2011; the Court found that the noting did not initiate any vigilance enquiry and that internal rate fixation irregularities had no connection with the contractor's work; held withholding irrational and contrary to public accountability (Paras 3-11). B) Constitutional Law - Writ Jurisdiction - Duty of Public Authorities - Not mentioned - The Court relied on Eureka Forbes Limited vs Allahabad Bank and Others (2010) 6 SCC 193 and Lok Prahari vs State of Uttar Pradesh and Others (2018) 6 SCC 1 to emphasise that public officers are answerable for inaction and arbitrary action; reminded authorities to address citizens' grievances with timely and fair action (Paras 12-13).
Issue of Consideration
Whether the respondent Municipal Corporation was justified in withholding the petitioner's Earnest Money Deposit after completion of the defect liability period in the absence of any formally initiated vigilance enquiry; whether internal rate fixation defects could be attributed to the contractor to justify withholding dues.
Final Decision
The Court found that the respondent Corporation irrationally withheld the Earnest Money Deposit of Rs.2,41,532 for nearly 14 years based solely on an internal noting, without any formal vigilance enquiry having been initiated. The defects in rate fixation were internal and unconnected with the contractor's work. The Court reminded the authorities of public accountability and fair performance, quoting Eureka Forbes Limited and Lok Prahari. The final operative directions are not included in the provided excerpt, but the Court's findings supported the petitioner's entitlement to refund.
Law Points
- Public accountability
- arbitrary withholding
- internal enquiry no connection to contractor
- refund of earnest money deposit
- public trust
- bona fide action
- ex facie discriminatory action
