Case Title and Citation
The Kerala Water Authority & Ors. v. T.I. Raju & Ors., Civil Appeal Nos. of 2026 (arising out of SLP (C) Nos. 17823/2023 & 24631/2023), decided by the Supreme Court of India, Judgment dated 09.02.2026. (Paras 1–2)
Facts in Brief
The respondent, a government contractor, executed a work contract for construction of a sewage treatment plant under an agreement dated 30.04.2013. The work was completed on 07.07.2014, but payment of ₹86,64,846/- was delayed and released only on 02.03.2016 following a writ petition.
The contractor thereafter filed a suit claiming interest for delayed payment. The trial court decreed the claim at 14% interest, which was reduced by the High Court to 9%. The dispute before the Supreme Court concerned entitlement to such interest. (Paras 2(i)–(v))
Issues for Determination
The principal issues were whether interest on delayed payment could be claimed despite an express contractual bar, and whether statutory provisions override such contractual stipulations. (Paras 3, 6–7, 10)
Submissions of the Plaintiff / Petitioner
The contractor contended that it was entitled to interest for delayed payment of the principal sum. Reliance was placed on statutory provisions, including the Interest Act, 1978 and Section 34 CPC, to justify the grant of interest as awarded by the High Court. (Paras 2(iii)–(v), 6, 10)
Submissions of the Defendant / Respondent
The authority relied on Clause (5) of the agreement, which expressly barred claims for interest on delayed payments due to budgetary constraints and prioritisation of bills. It was contended that parties are bound by contractual terms knowingly agreed upon. (Paras 3–4, 7)
Findings of the Court
The Court held that Clause (5) is binding and operates as a complete bar to any claim for interest. Section 3(3) of the Interest Act, 1978 preserves contractual stipulations, and statutory provisions cannot override such agreed terms.
Section 34 CPC was held to concern only the rate of interest and not to override contractual exclusions. The High Court erred in granting interest contrary to the agreement. (Paras 6–7, 9–11)
Final Order
The impugned judgment of the High Court was set aside. The appeal filed by the Kerala Water Authority was allowed, and the contractor’s appeal was dismissed. No order as to costs was recorded. (Para 12)
2026-SC-Kerala-Water-Authority-v.-Raju