M/s. Mittal Agency vs The State Of Bihar & Ors.

Date : 14-08-2026

The petitioners have filed the instant application for the following reliefs:

The brief facts culled out of the Writ petition are that the petitioner, a registered Government Contractor and General Order Supplier, was awarded the work for supply of Bench/Desk sets to Government schools in Sitamarhi District under the Integrated Action Plan. The rate was settled at Rs.4,200/- per set inclusive of taxes and work orders dated 20.06.2013 and 03.08.2013 were issued.

The petitioner supplied 4199 sets in phases and raised bills amounting to Rs.1,76,36,600/-. A substantial amount of payment was made by the respondents to the petitioner, while the balance remained unpaid. The petitioner thereafter made several representations for release of the outstanding amount.

The case of the petitioner is that when payment was demanded, illegal gratification was sought by the then District Planning Officer. A Vigilance trap was consequently conducted, in which the District Planning Officer was arrested while accepting Rs.2,00,000/-. The petitioner alleges that thereafter an inquiry was initiated regarding the quality of the Bench/Desks and, on the basis of a limited inspection, the agreed rate was subsequently reduced from Rs.4,200/- to Rs.3,300/- per set.

The Learned counsel for the petitioner submits that the supplies had already been accepted by the concerned schools after verification of quality and quantity and substantial payment had also been made.

It is contended by the Learned counsel for the petitioner that the subsequent inspection was conducted after considerable delay and only on a random basis, without proper notice or effective opportunity of hearing to the petitioner.

It is further submitted by the Learned counsel for the petitioner that there was no contractual provision authorising unilateral reduction of the agreed rate after acceptance of the supplies. The petitioner accordingly seeks payment of its balance dues at the agreed rate.

A counter affidavit and supplementary counter affidavit have been filed on behalf of respondent Nos. 2 to 5.

The Learned counsel for the respondents submits that the petitioner did not supply the materials within the stipulated period and, more importantly, the materials supplied were found deficient in quality and quantity. It is submitted that earlier reports of the D.E.O., S.D.O. and Senior Deputy Collector had also noticed deviations from the prescribed specifications.

The Learned counsel further submits that the Committee headed by the D.D.C., with the Range Officer of the Forest Department as a member, examined the materials and found inferior quality of wood, cracks, poor finishing and deficiency in dimensions. According to the respondents, the petitioner's representative was present during the inspection and signed the inquiry report. On the basis of the report, proportionate deduction of Rs.900/- per set was made and Rs.7,45,729/- was paid after statutory deductions.

It is also submitted by the Learned counsel for the respondents that the deduction had no connection with the Vigilance case and was made in accordance with the tender conditions and prayed to dismiss the Writ petition.

A rejoinder has also been filed on behalf of the petitioner.

The Learned counsel for the petitioner reiterates that the supplies were accepted and payments were made after verification, and that the subsequent inquiry could not justify retrospective reduction of the agreed contractual rate. It is further submitted that the petitioner's representative's signature on the inquiry report does not amount to waiver of the right of hearing and that the impugned action is contrary to the principles of natural justice.

Heard the Learned counsel for the parties and perused the materials available on record.

The principal question which arises for consideration is whether, after acceptance of the supplies at the agreed rate of Rs.4,200/- per set and after substantial amount of payment thereafter, whether the respondents could unilaterally reduce the contractual rate to Rs.3,300/- per set on the basis of a subsequent random inspection.

From the materials on record, it is not in dispute that the petitioner was awarded the work at the agreed rate of Rs.4,200/- per set and that the supplies were received by the concerned schools. It is also not in dispute that substantial payment had already been made to the petitioner after verification of the supplies.

The respondents rely upon the tender condition providing for payment after verification of quality. However, no specific provision has been shown which authorised the respondents to retrospectively, alter the agreed contractual rate from Rs.4,200/- to Rs.3,300/- per set after acceptance of the supplies.

The subsequent inquiry was admittedly conducted on a random basis. The respondents themselves rely upon inspection of Bench/Desk sets at selected schools. Such limited inspection, conducted after considerable lapse of time from the date of supply, could not by itself justify reduction of the agreed rate in respect of all the supplies made by the petitioner.

The respondents have relied upon the presence and signature of the petitioner's representative on the inquiry report. However, mere presence or signature on the report cannot, by itself, be treated as an effective opportunity of hearing before taking an adverse decision involving substantial reduction of the contractual amount. The record does not demonstrate that the petitioner was given a proper opportunity to show cause against the proposed reduction before the impugned order was passed.

It is also significant that the issue relating to the alleged demand of illegal gratification need not be finally adjudicated in the present Writ proceeding. Even if the said allegation is kept aside altogether, the impugned reduction of the agreed rate cannot be sustained merely on the basis of the subsequent inquiry, particularly when the supplies had already been accepted and substantial payments had been made.

As regards the alleged delay in supply, the respondents admittedly accepted the supplies, made payments thereagainst and proceeded to act upon the same. Having accepted the supplies, the respondents cannot, in the facts of the present case, use the delay as a ground for retrospectively altering the agreed rate, particularly when the impugned order itself is founded principally upon the alleged deficiency in quality.

This Court is, therefore, of the considered view that the unilateral reduction of the agreed rate from Rs.4,200/- to Rs.3,300/- per set and the consequential deduction from the petitioner's dues cannot be sustained in law. The petitioner is entitled to have its balance amount calculated at the agreed rate, after adjustment of the amount already paid and after making only such statutory deductions as are permissible in law.

Accordingly, the part of Memo No. 389/Zila Yojna dated 13.04.2017, whereby the agreed rate of Rs.4,200/- per set was reduced to Rs.3,300/- per set and consequential deduction was made from the petitioner's dues, is hereby quashed.

The respondents are directed to recalculate the amount payable to the petitioner at the agreed rate of Rs.4,200/- per set, after giving credit for the amount already paid and after making permissible statutory deductions, and release the balance amount to the petitioner within a period of three months from the date of receipt/production of a copy of this order.

So far as the claim for interest at the rate of 24% per annum is concerned, in the facts and circumstances of the case, no such direction is considered justified.

With the aforesaid observations and directions, the Writ petition stands allowed.

With the aforesaid observations and directions, the Writ petition stands allowed.

Interlocutory Application, if any, shall stands disposed of.