The Kerala Water Authority vs T I Raju on 9 February, 2026

Supreme Court – Daily Orders

The Kerala Water Authority vs T I Raju on 9 February, 2026

                                               IN THE SUPREME COURT OF INDIA
                                                CIVIL APPELLATE JURISDICTION

                                          CIVIL APPEAL NO(s).        OF 2026
                                             (@ SLP(C) NO(s). 17823/2023)

                      THE KERALA WATER AUTHORITY & ORS.                                      Appellant(s)

                                                               VERSUS

                      T I RAJU & ORS.                                                        Respondent(s)

                                                                 WITH

                                          CIVIL APPEAL NO(s).        OF 2026
                                             (@ SLP(C) NO(s). 24631/2023)

                                                          O R D E R

1. Leave granted.

2. The brief facts relevant for determination of the

present appeals arising out of the same impugned order

dated 23.02.2023 are produced as under:

i) The appellant – T.I. Raju in Civil Appeal arising out

of SLP (C) No.24631/2023, who is a Government

Contractor had entered into a preliminary agreement

dated 30.04.2013 for the execution of a work contract

pertaining to the construction of Sewage Treatment

Plant at Medical College, Calicut with appellant No.1

in Civil Appeal arising out of SLP (C) No.17823/2023.

ii) On 07.07.2014, the construction work was completed and

the principal sum of Rs.86,64,846/- was due to

appellant – T.I. Raju. Thereafter, in 2015, the
Signature Not Verified

Digitally signed by
RADHA SHARMA
Date: 2026.02.17 appellant-T.I. Raju preferred a Writ Petition before
18:01:20 IST
Reason:

the High Court seeking disbursal of the principal sum

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due to him, which was allowed and resultantly, the

funds were released in his favour by 02.03.2016.

iii) On 25.11.2017, the appellant-T.I. Raju filed a suit for

recovery of interest for delayed payment between the

completion of work till the date of disbursal of

pending dues, i.e. between 09.07.2014 to 02.03.2016 at

the rate of 14% per annum.

iv) The suit filed by the plaintiff/appellant-T.I. Raju was

decreed holding that the defendants/appellants in Civil

Appeal @ SLP (C) No17823/2023 are jointly and severally

liable to pay a sum of Rs.21,48,411/-, with an interest

of 14% from the date of filing the suit till the date

of realization.

v) The High Court partly allowed the appeal filed by the

defendant Nos.2, 3 and 7 against the decree for

recovery of interest and reduced the rate of interest

to 9% per annum, which amounts to a sum of

Rs.12,90,469/-.

3. The present issue is one of the payment of

interests. Clause (5) of the preliminary agreement dated

30.04.2013 states as under:

“The contractor further assures that it is clearly

understood that the settlement of claims either by

part bill or by final bills will be made only

accordingly to the availability of budget provisions

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allotment of funds made with the Divisional Officer

in charge of the work under the respective heads of

account in which the work is sanctioned and arranged

and also subject to the seniority of such bills. No

claims or interest for damages whatsoever shall be

made for the belated settlement of claims of bill.”

4. On a reading of the aforesaid clause, it is clear

that at the time when the tender was floated for a public

project, a conscious decision was taken to commence the

same, notwithstanding the issue pertaining to the

availability of necessary funds. For this reason, clause

(5) has been introduced at the first place in the

preliminary agreement. This clause not only deals with the

issue pertaining to the belated payments, but also touches

upon the consequential interest which is to be paid in the

nature of damages. This is a clause introduced on behalf

of the contractor meaning thereby, that the contractor is

not only aware of the said clause but he is the one who

introduced the same, and hence, he is expected to quote

the amount, while being conscious of a situation

pertaining to belated payments followed by the

consequential interest in the nature of damages.

5. Previously, in the writ petition filed by the

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respondent – T. I. Raju, the High Court left the issue of

the payment of interest open. Thereafter, the respondent

filed the subject suit for recovery of interest on the

principal amount. The decree was modified by the High

Court in the impugned judgment to the effect of payment of

interest at the rate of 9% per annum, on belated payment

of the principal sum, and the pendente lite interest was

reduced to 6% per annum.

6. Though the provision under Section 3(1) of Interest

Act, 1978 has been taken note of by the High Court, and the

exception contained under Section 3(3) of the Interest Act,

1978 has been ignored. The object of the Interest Act, 1978

is to mandate the payment of interest to the parties in the

absence of, or any vacuum in the agreement, or where the

interest so fixed is contrary to law, being in the nature

of an exorbitant charge.

7. In other words, when the parties have agreed upon by

way of a contract executed between them, either to give

away the interest so accrued or to receive belated

payments, they are indeed governed by the terms mentioned

thereunder. Therefore clause (5) of the agreement is

settled between the parties and thus binding upon them.

There is no question regarding the appellants being in a

position to dictate the terms of the same, since clause 5

of the agreement merely shows the nature of the contract

entered into.

8. The appellants in Civil Appeal arising out of SLP(C)

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No. 17823/2023 fall within the definition of ‘State’ under

Article 12 of the Constitution of India, as the project

was undertaken for public purposes. The idea was to

initiate the project so that the general public would not

suffer due of lack of infrastructure, notwithstanding any

delay in the payment. Any profits in favour of the

contractor is also a governing factor to the said clause.

9. In our considered view, the High Court did not take

into consideration Section 3(3) of the Interest Act, 1978,

and thereafter, only read the clause 5 of the preliminary

agreement, contextually.

10. Much reliance has been placed by the learned Senior

counsel appearing for the respondents on Section 34 of the

Code of Civil Procedure, 1908 (for short ‘CPC’). Section

34 of the CPC merely speaks about the rate of interest to

be applied and, therefore, sub-section (5) cannot be

interpreted to have an overriding effect on Section 3(3)

of the Interest Act, 1978.

11. Thus, looking from any perspective, we are not in a

position to give an imprimatur to the decision of the High

Court.

12. In such view of the matter, the impugned order(s)

are set aside. Consequently, the appeal filed by the

appellants in Civil Appeal arising out of SLP(C)

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17823/2023 stands allowed and the appeal filed by the

appellant in Civil Appeal arising out of SLP(C) No.

24631/2023 stands dismissed.

13. Pending application(s), if any, shall stand disposed

of.

………………………………………………………J.
( M.M. SUNDRESH )

…………………………………………………………J.
( NONGMEIKAPAM KOTISWAR SINGH )
NEW DELHI;

FEBRUARY 09, 2026




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ITEM NO.63                   COURT NO.3                  SECTION XI-B

                 S U P R E M E C O U R T O F     I N D I A
                         RECORD OF PROCEEDINGS

Petition(s) for Special Leave to Appeal (C) No(s). 17823/2023
[Arising out of impugned final judgment and order dated 23-02-2023
in RFA No. 56/2020 passed by the High Court of Kerala at Ernakulam]

THE KERALA WATER AUTHORITY & ORS. Petitioner(s)

VERSUS

T I RAJU & ORS. Respondent(s)

WITH
SLP(C) No. 24631/2023 (XI-B)
(FOR ADMISSION and I.R.)

Date : 09-02-2026 This petition was called on for hearing today.

CORAM :

HON’BLE MR. JUSTICE M.M. SUNDRESH
HON’BLE MR. JUSTICE NONGMEIKAPAM KOTISWAR SINGH

For Petitioner(s) Mr. Bijo Mathew Joy, AOR
Ms. Gifty Marium Joseph, Adv.

Mr. Thomas. P. Joseph, Sr. Adv.

Mr. M Gireesh Kumar, Adv.

Mr. Ankur S. Kulkarni, AOR
Mr. Sanjay Singh, Adv.

Ms. Sneha Mathew, Adv.

For Respondent(s) Mr. Thomas. P. Joseph, Sr. Adv.

Mr. M. Gireesh Kumar, Adv.

Mr. Ankur S. Kulkarni, AOR
Mr. Sanjay Singh, Adv.

Ms. Sneha Mathew, Adv.

Mr. Bijo Mathew Joy, AOR
Ms. Gifty Marium Joseph, Adv.

Mr. C. K. Sasi, AOR
Ms. Meena K Poulose, Adv.

UPON hearing the counsel the Court made the following
O R D E R

1. Leave granted.

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2. The appeal filed by the appellants in Civil Appeal

arising out of SLP(C) No. 17823/2023 stands allowed

and the appeal filed by the appellant in Civil Appeal

arising out of SLP(C) No. 24631/2023 stands dismissed

in terms of the signed order.

3. Pending application(s), if any, shall stand disposed

of.

(RADHA SHARMA)                                  (POONAM VAID)
ASTT. REGISTRAR-cum-PS                        ASSISTANT REGISTRAR
                (Signed order is placed on the file)




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