The contractor, Narasimha Reddy, and a couple of his followers waylaid the deputy engineer while he was on his way home last night and kicked him on the road besides hurling abuses, a police official said over phone.
The victim was identified as Kistappa, a deputy engineer of the Anantapuramu Municipal Corporation (AMC).
Earlier, the contractor had a heated argument with the civic engineers in the AMC office over non-payment of about Rs 15 lakh for a road sweeping machine he supplied to the municipal body.
The corporation officials reportedly held up payment, after initially paying Rs 23 lakh a couple of months ago, as the machine was in a bad shape.
The deputy engineer sought to intervene and placate the contractor but to no avail. A local corporator also intervened and sent the contractor away, they said.
Later in the night, as he was going home on his motorcycle, Kistappa was waylaid by Reddy and his followers and badly beaten up, police said.
The civic authorities filed a complaint against Reddy with the One-Town police who arrested the contractor, the official said, adding investigation into the case is underway.