Retention money becomes payable when the contract says it does, usually on completion or at the end of the defect liability period, and withholding it after that is a debt like any other. FundRaksha's advocate sends a notice within 24 hours with the completion certificate, DLP expiry and account statement, negotiates release, and if needed invokes the contract's arbitration clause or files a suit. MSME contractors can also use the Facilitation Council.
How retention money gets stuck
Retention is legitimate security while the work is in progress and for a defined period after. The problem begins when that period ends. The site team has moved on, the project accountant has changed, the principal's cash is in the next project, and the contractor's request for release is met with "send the completion certificate again", "there were some defects", or silence. Sub-contractors face a second layer: the main contractor says it has not received its own retention from the owner.
None of these is a legal defence once the contractual trigger has passed. The contractor's problem is not the law; it is that nobody at the principal is paid to release old retention, and only a formal demand changes that.
What the contract says, and what the law adds
- The trigger. Read the retention clause: release on virtual completion, on final bill certification, or on expiry of the defect liability period (DLP), typically 12 months. Some contracts release half at completion and half after DLP.
- Defects. Retention may be applied only to defects notified during the DLP and not rectified after notice. A list produced for the first time after the contractor demands release is an afterthought.
- Back-to-back clauses. A main contractor's obligation to a sub-contractor is not suspended because the owner has not paid, unless the sub-contract clearly makes payment conditional, and such clauses are read narrowly.
- Interest. Contractual interest if specified; otherwise reasonable interest from the due date. For Udyam-registered contractors, three times the RBI bank rate under the MSMED Act.
- Bank guarantee in lieu. Many contracts allow retention to be replaced by a bank guarantee; where the principal refused this and also withholds, the advocate uses it.
The FundRaksha recovery process for retention
- Free consultation: we review the contract, completion certificate, final bill, DLP correspondence and the retention ledger across all running account bills.
- Legal notice within 24 hours to the principal (and the owner, where a sub-contractor is involved), setting out the trigger date, the amount, the interest and the absence of any timely defect notice.
- Negotiation. Principals often release retention against a short no-claims letter; the advocate ensures that letter does not waive other dues.
- Filing: arbitration under the contract clause (common in construction), MSME Samadhaan for registered contractors, or a civil suit.
- Enforcement of the award or decree, including against the principal's receivables from its own clients.
Fee: 30% of the amount recovered, nothing upfront. Arbitrator and court fees, where incurred, are quoted in advance.
Related held-back amounts we recover
| Amount | Typical excuse | Our approach |
|---|---|---|
| Retention money | DLP, defects, awaiting owner release | Notice on trigger date and absence of defect notice |
| Security deposit | Final reconciliation pending | Deposit is refundable on terms; see security deposit recovery |
| Final bill and variations | Measurement dispute | Joint measurement records, approved variation orders |
| Withheld GST or TDS reimbursement | Compliance mismatch | Reconciliation with returns and certificates |
| Mobilisation advance set-off | Over-recovery of advance | Account statement showing full recovery |
Who we work with
Civil, electrical, HVAC, interior and specialist contractors, EPC sub-contractors and fabricators across India. See construction, engineering and solar and renewables for industry pages, and contractor payment recovery for running bills and final bills. Book a free consultation and bring the retention ledger; the first thing we do is total what you are owed across every project.
Last reviewed: 2026-10-08. Information for Indian businesses; not legal advice.