THE HON’BLE SRI JUSTICE K.C.BHANU WRIT PETITION NOs.22297, 22298 and 22299 OF 2010 COMMON JUDGMENT:- These Writ Petitions raise identical issues of fact and law. Therefore, they are heard and being disposed of by this common judgment. In all these writ petitions, the petitioners have called in question the legality and propriety of the action of the respondents in seeking to apply Memo No.22829/Reforms/(A1)/2008, dated 23.12.2008 pertaining to retention of 2.5% (of the 5% Retention amount) in cash from the bills of the contractors as arbitrary and illegal. Barring the dates, the value and the nature of the contract works, the facts in broader sense are similar to each other in all these cases. The petitioners are engineering contractors registered with the Government of A.P. and carrying on works in various departments. Each of these petitioners was awarded with contract works through tender process. Agreements were entered into on behalf of the Government of A.P. by the respective departments, which entrusted the works to the petitioners prior to 23.12.2008, on which date the abovementioned Memo was issued by the State Government. In each of these agreements, separate provision was made for retention amounts and the stage at and the manner in which the retention amounts shall be released. For disposal of these cases, it is not necessary to refer to these clauses in detail, which may vary from one case to the other. While some of the contracts were at the stage of execution and some others were completed, the State Government issued the aforesaid Memo dated 23.12.2008 containing terms pertaining to retention amounts and release of these amounts, at variance with the terms contained in the agreements entered into with the petitioners. These terms enable the Government to withhold higher amounts than that were envisaged in the agreements entered into with the petitioners towards retention amounts both during the execution of the works and also the defects liability period. When the petitioners raised these issues with the respective departments with which they entered into agreements by contending that the said Memo cannot be applied to the contracts already entered into by them, the State Government did not accept their stand. As a result, when the official respondents started withholding the amounts more than what is contemplated under the contract terms from the bills of the petitioners, they filed these writ petitions. No counter affidavits have been filed by the respondents in any of these writ petitions. However, on the basis of the instructions, the learned Government Pleader for Irrigation and CAD advanced his arguments. Heard Sri S.V.S.Chowdary, learned counsel for the petitioners and the learned Government Pleader for Irrigation and CAD for the respondents. The learned counsel for the petitioners submitted that the action of the respondents in acting contrary to the specific conditions of the contracts by seeking to force upon the petitioners Memo dated 23.12.2008 is manifestly illegal and patently arbitrary. The said Memo, contend the learned counsel, cannot be given retrospective operation and the same does not override the terms of the concluded contracts. The learned counsel further contended that in the face of the concluded contracts, which contain reciprocal obligations between the parties, the respondents, who are one of the parties, cannot unilaterally thrust greater obligations on the petitioners than those provided by the contracts. The learned Government Pleader for Irrigation raised a preliminary objection regarding maintainability of the writ petitions. He submitted that the disputes raised by the petitioners in these writ petitions arise under non-statutory commercial contracts and therefore they are not entitled to invoke the public law remedy under Article 226 of the Constitution of India. The learned Government Pleader further submitted that it is only in the proceedings that may be initiated by the petitioners by invoking common law remedies, that the various contentions raised by them can be adjudicated by the appropriate forum. The objection concerning maintainability of writ petitions for resolution of disputes arising under the concluded non-statutory contracts is often raised by the State or its instrumentalities and considered by the Apex Court and also by this Court. This aspect of the case is no longer res integra. In a recent judgment, a Division Bench of this Court in Superintending Engineer, T.G.P. Circle, Cuddapah and another vs. M/s. Pioneer Builders[1][5], held that: ‘The ratio that could be culled out from the above reproduced judgment if applied to the undisputed facts of the present cases, the objection raised by the learned Government Pleader regarding maintainability of the writ petitions deserves to be negatived. On the admitted factual matrix of these cases, it is evident that the State and its officers are acting contrary to the specific terms of the contracts and such an action undoubtedly constitutes patent arbitrariness. The State and its officers cannot perpetrate such arbitrariness on their subjects by taking shelter under the plea of acting under a non-statutory contract”. “A perusal of the said judgment reveals that disputes of similar nature were raised in the writ petitions filed by certain contractors. Their grievance was that contrary to clause 47 of the Conditions of Contract, under which the department was entitled to retain 5% in each of the running bills towards ensuring the obligation of the petitioners therein under the defects liability clauses, additional amounts are retained under certain memos issued by the respondents therein. While rejecting the objections raised regarding the maintainability of the writ petitions, the learned Judge had this to say: “Where the State is a party to a contract, the mere fact that the State enters into a contractual relationship with private institutions or individuals, under the rubric of a contractual instrument, does not wholly relieve the State from its constitutional and public law obligations. It does not appear to be the principle that when the State acts in its executive capacity it is obliged to conform to constitutional and Public law obligations but when it acts through a contractual instrument, it enjoys absolute and untrammeled immunity and is wholly liberated from constitutional and public law limitations. True it is that in the sphere of contracts including commercial contracts, a substantial play in the joints is available to the State, to negotiate the terms of its relationship with contracting parties including private contracting parties in a manner that in the State’s assessment would best subserve the commercial interest of the State. When a State enters into a contractual relationship and the interpretation is as to the terms of such contract; where the contract is a non-statutory contract and the lis is at the post threshold stage, normally the Court relegated the disputing parties to an alternative, available remedy, be it arbitral or to the Civil Court of competent jurisdiction since fundamentally no public law issues present themselves for consideration and also since disputed questions of fact require to be resolved. Where however the complaint is as to a threshold discriminatory treatment by the State in the matter of entering into a contract, or with regard to farming out of State largesse or in circumstances, where the parties’ reciprocal obligations are governed by statutory terms, public law scrutiny is available. These principles are well established and are impregnated into our administrative law vide M/s. Radhakrishna Agarwal and others vs. State of Bihar and others (AIR 1977 SC 1496)” “On the above said premise, the learned Judge held that the action of the State was amenable to the jurisdiction of this Court under Article 226 of the Constitution of India. Having held that the writ petitions were maintainable, the learned Judge allowed the writ petitions on merits by holding that there is no contractual term enabling the respondents to withhold any amount in excess of or in addition to the amounts covered by clause 47 of the Conditions of Contract and that therefore the respondents therein were not entitled to retain any amounts from the running bills of the contractor except warranted by and in terms of clause 47 of the Conditions of Contract and deduction of 2.5% amount towards maintenance charges over and beyond the 5% (referable to clause 47) cannot be retained.” The present cases are evenly situated where by purporting to place reliance on executive instructions contained in Memo dated 23.12.2008, the respondents are seeking to withhold additional amounts in excess of those envisaged under the concluded contracts. Such an action apart from being without sanction of law is anathema to Article 14 of the Constitution. Following the judgment, all the writ petitions are to be allowed. The respondents are restrained from withholding any amounts towards retention amounts contrary to the terms envisaged in the contracts entered into with the petitioners. The excess amounts, if any, withheld shall be released to the petitioners within a reasonable period, which shall not be later than three months from today. As a sequel to disposal of the writ petitions in the manner indicated above, the respective miscellaneous applications pending in this batch of cases stand disposed of. __________________ K.C.BHANU, J DATED: 18-11-2011 Hsd [1][5] 2009 (4) ALT 414 (DB)