LAKSHMICHAND & BALCHAND vs STATE OF ANDHRA PRADESH

The Supreme Court held that the power to allow a set off exists even in cases not strictly covered by Order 21, Rule 18 of the Civil Procedure Code, 1908. The Court affirmed that the respondent State's claim for adjustment of amounts due under the final bill is valid under Clause 68 of the contract, as the contract was still being executed. The Court allowed the appeal in part, confirming the High Court's decision that the State was entitled to set off the amount claimed against the contractor's dues, but clarified that the adjustment must await arbitration for the second claim.