We secured the release of our client’s retention money that was being withheld by RDA due to pending audit objections.
The Lahore High Court, Pindi Bench has ordered the Rawalpindi Development Authority to release Habib Construction Services’ retention money with interest.
In 2015, Habib Construction Services entered into two contracts with RDA for the construction of the Rawalpindi-Islamabad Metro Bus Project. Despite fulfilling all contractual obligations within the stipulated timeline and despite the expiry of the Defects Liability Period, the Employer refused to release the retention money of these projects on account of outstanding audit paragraphs. The Employer maintained that the retention money could not be released to the contractor as the audit objections were yet to be settled. The Employer argued that this was necessary to forestall any unwarranted loss to the government exchequer.
The High Court, however, accepted the arguments raised by ABS & Co and allowed the petition. In particular, the Court held that pending audit paras or audit objections were no grounds for withholding the contractor’s retention money as these were internal matters to be resolved between the department and the auditor. Government agencies could not act in an arbitrary fashion. Withholding retention money that was otherwise due under FIDIC’s 1987 Red Book (as reprinted in 1992) constituted arbitrary and capricious conduct. The court ruled that if RDA considered itself entitled to any amount, it should follow the procedure given in the contract by giving appropriate notices and follow the dispute resolution clause. The court directed RDA to release the retention money with interest.
The ABS & Co litigation team representing the client on this matter was led by Ahmer Bilal Soofi.
