Delhi District Court
Meena Tanwar Sole Proprietor Of Jbm ... vs Municipal Coporation Of Delhi on 8 August, 2024
IN THE COURT OF MS. SAVITA RAO
DISTRICT JUDGE (COMMERCIAL COURTS)-01
SOUTH DISTRICT: SAKET : NEW DELHI
CS (Comm) No. 276/2023
CNR No. DLST01- 004358-2023
In the matter of :-
Ms. Meena Tanwar
Proprietor of M/s JBM Construction Co.
Having Office At :
65 B, Village Asola, Fatehpur Beri
New Delhi - 110074
............Plaintiff
Vs.
1. Municipal Corporation of Delhi
Through its Commissioner
Civic Center, Minto Road,
New Delhi - 110002
2. Executive Engineer, M-III
South Zone, Sewa Nagar, New Delhi .........Defendants
Date of institution of the case : 09.05.2023
Date of final arguments : 31.07.2024 & 05.08.2024
Date of judgment : 08.08.2024
JUDGMENT
1. This is suit for recovery of Rs. 8,98,660/- (Rs. Eight Lacs Ninety Eight Thousand Six Hundred and Sixty only) filed by plaintiff against the defendants.
2. As stated, plaintiff is the Proprietor of M/s JBM Construction Company and is engaged in the business of civil construction work.
CS (Comm) No. 276/2023 1/12Plaintiff is also working as a contractor with the defendant corporation and is an approved contractor of defendant no.1. Plaintiff was awarded a work contract by defendant for " Improvement of open area in front Quarter No.2, Block No, 38, Chowk Infront of Block 35,36,37 by Pdg. CC Paver Blocks in Sector-1, Pushp Vihar, in Ward no. 80-S/SZ in Ambedkar Nagar"
vide work order dated 23.03.2021 for the contractual amount of Rs. 8,56,294/-. Said assigned work was completed in all respect to the satisfaction of the defendant on 30.09.2021 by the plaintiff.
3. First RA Bill was approved by defendant on 08.12.2021 for the payment of gross amount of Rs. 8,00,444/-. After making deductions/recoveries on account of security/taxes/cess, ultimately the bill was passed for the payment of Rs. 6,80,379/-. Even the said payment has not been released to plaintiff till date. As stated, security deposit of Rs. 80,044/- was agreed to be retained only for a period of 6 months i.e. the time of defect liability period, however, despite expiry of 6 months, said amount has not been released by defendant till date. Total Payment of Rs. 7,60,423/- which includes Rs. 6,80,379/- as amount of bill passed and Rs. 80,044/- as security deposit, is still due and payable by the defendant to the plaintiff, payment of which was not made by the defendant despite repeated requests.
4. Legal notice dated 26.05.2022 sent to the defendants also did not yield any result. On 06.06.2023, an application was filed before DLSA, South, Delhi in terms of Section 12 A of the Commercial Courts Act, 2015, for Pre-Institution Mediation wherein defendants failed to appear and hence the proceedings were closed by issuing 'Non-Starter' Report dated 27.03.2023.
CS (Comm) No. 276/2023 2/125. Defendants failed to file written statement within stipulated period. Hence, right of defendant to file written statement was closed and its defence was struck off vide order dated 24.04.2024. Defendants were permitted opportunity for cross-examination of plaintiff's witnesses to the limited extent.
6. Following issues were framed vide order dated 24.04.2024:
(1) Whether plaintiff is entitled for recovery of suit amount, as claimed? OPP (2) Relief
7. In plaintiff's evidence, Sh. Hukam Singh, AE from the office of defendant was summoned and examined as PW1, who brought the summoned record and exhibited the copy of agreement between plaintiff and defendant dated 23.03.2021 as Ex. PW1/1, work order dated 23.03.2021 as Ex. PW1/2, 1st Running Bill dated 08.12.2021 passed by Executive Engineer as Ex. PW1/3, Abstract of monthly cash liability for plan head 2021-2022 as Ex. PW1/4 and receipt with respect to the earnest money deposited as plaintiff as Ex. PW1/5.
8. Cross-examination permitted to limited extent had not been conducted by counsel for defendants since the summoned witness was from the office of defendants itself.
9. Evidence in defence was not led since defence of defendants had already been struck off.
Issue-wise findings are as under:-
Issue no. 1:
10. Work order dated 23.03.2021 was awarded to plaintiff vide Ex. PW1/2. Said assigned work was completed in all respect to the satisfaction of the defendant on 30.09.2021, as claimed by plaintiff. First RA Bill was CS (Comm) No. 276/2023 3/12 approved by defendant for the payment of gross amount of Rs. 8,00,444/-. Deductions/recoveries on account of security/taxes/cess were made and lastly the bill was passed for the payment of Rs. 6,80,379/- vide Ex. PW1/3.
11. Ld. Counsel for defendants submitted that plaintiff had not submitted final bills to defendants for payment. As per General Conditions of Contract (GCC), a contractor is required to submit and present bills (both interim and final) to defendant for payment. Since the plaintiff failed to submit the bills as per GCC, amount against bills was passed by the defendant department as per departmental procedure. Ld. Counsel for defendant referred to clause 7 & 9 of GCC and submitted that the payment of final bill is to be made by defendant only after submission of final bill by contractor within three months of completion of work or within one month of final certificate of completion of work furnished by Engineer In charge. Plaintiff will be entitled to interest only if defendant fails to make the payment within time frame after submission of final bills. Ld. Counsel for defendants also submitted that after the guidelines have been issued in the year 2018, it is incumbent upon the plaintiff to follow the guidelines, failing which the contractor shall not be entitled for the claim as made in the instant matter.
12. Post Amendment effect pertaining to Clause 9 was taken up by Hon'ble High Court in NDMC Vs. Garg Construction Company, RFA (COMM) No. 5/2021, wherein it was noted that:
" Perusal of amended clause 9 shows that the appellants have deliberately removed the time period prescribed for making payments in order to overcome the directions issued by the Learned Single Judge of this court in RFA no. 160/2017. In fact, this is not the first time the appellant has adopted this mechanism in as much as they had previously amended clause 9 to include the " queue basis payment" to neutralize CS (Comm) No. 276/2023 4/12 judgment of another Learned Single Judge of this court in Jagbir Singh Sharma Vs. Municipal Corporation of Delhi in CS (OS) No. 1797/2007.
13. Reference was made to NDMC Vs. Vipin Gupta RFA no. 160/2017 decided on 22.3.2018 in the judgment supra wherein following was observed:
"A perusal of old clause 9 reveals that there was an actual limit for making a payment. i.e. 3 months and 6 months and in the context of the said clause, it was held in Jagbir Singh (supra) that " every endeavor should be made by MCD to make payment within the time period stipulated in clause 9". In the case of Jagbir Singh (supra), the Corporation, in its leave to defend application had submitted that payment would be made as and when funds in a particular budget heard are available with it. This court categorically rejected this stand of the corporation by holding " Ex facie, the stand taken in the leave to defend applications cannot be accepted and has to be rejected". This court held that the contractors have no role to play in the internal affairs of the corporation. But a perusal of the present clause i.e. the new Clause 9 of the General Condition of Contract shows that what was expressly rejected by this court, even as a defence in the leave to defend application in Jagbir Singh (supra), has now come to be added in the clause itself along with a second element of a queue basis; which were not part of the earlier clause and has now been made part of the new clause. It is, however, completely incongruous that the addition of conditions of availability of funds and queue basis has been made, while at the same time retaining an upper limit of 6 months and 9 months as against the earlier 3 months and 6 months in Clause 9 of the General Conditions of the Contract. Clause 9 is, therefore, in the teeth of the judgment of this court in Jagbir Singh (supra) and is nothing but an attempt to neutralize the said judgment. A corporation which gets work executed cannot therefore include a term in the contract which is per se unconscionable and unreasonable ".
14. It was further noted in NDMC Vs. Garg Construction Company (supra) that the amended clause 9 is in the teeth of the judgment of Ld. Single Judge in NDMC Vs. Vipin Gupta and yet another attempt of the appellant to indefinitely and arbitrarily delay payment to contractor.
15. Admittedly, plaintiff had completed the work as per work order and no issue was raised nor any complaint was made by the defendant corporation in respect of the work done by plaintiff. Defendants also did not raise any issue or complaint about the performance of work when plaintiff made the demand and also got issued legal notice, demanding CS (Comm) No. 276/2023 5/12 clearance of her dues. In terms of case of plaintiff, even after numerous follow ups and repeated visits to the office of defendant and despite service of legal notice, defendant did not release the outstanding amount.
16. In the instant matter, plaintiff had furnished the running bill which was duly approved and passed by the defendant MCD. It is also not the case of the defendants that plaintiff had not executed the work order as awarded to her. Rather the defendants failed to file the written statement and the defence of defendants had been struck off. Contention was made by Ld. Counsel for defendants during the course of arguments that since plaintiff failed to submit the final bill and failed to obtain the labour clearance certificate, therefore, the amount as claimed by the plaintiff is not payable.
17. It was submitted by Ld. Counsel for plaintiff that there is no labour complaint pending against the plaintiff qua the work order in question. Not even a single letter was written by the defendants alleging non execution of the work or pointing out defect in the work executed by the plaintiff.
18. In Varinder Jeet Singh Vs. MCD, CS (OS) No. 1309/2009 and I.A. No. 16391/2010, Hon'ble Court had noted that :
"16........... Even if the submission of counsel for the defendant/MCD that plaintiff failed to raise final bill is accepted, it is undisputed position that the defendants/MCD had passed the first bill of the plaintiff on 18.10.2006, but the said amount was finally paid three years later, on 12.10.2009 and the second bill was passed on 26.09.2007 but was paid two years later, on 26.10.2009".
19. Defendant corporation has admitted the bill on the basis of which plaintiff has filed the present suit. Once defendants admitted the bill, acknowledged the work and approved the payment, it is not open for the defendants to raise this plea as an after thought.
CS (Comm) No. 276/2023 6/1220. With regard to refund of security amount, it was submitted by Ld. Counsel for defendant that defendant corporation is not liable to refund the security amount since the plaintiff failed to comply the terms and conditions of clause 17 and 45 of the GCC and therefore security deposit cannot be refunded unless plaintiff complies with provisions of GCC. Clause 45 of the terms and conditions stipulated that security deposit of the work shall not be refunded till the contractor produces clearance certificate from the labour officer. As submitted, till the time final bill is furnished and labour clearance certificate is not submitted by the plaintiff, the security amount cannot be released by the defendant department and also plaintiff shall not be entitled for any interest on the delayed payment.
21. It was submitted by Ld. Counsel for plaintiff that Clause 45 contemplates deemed clearance, in case no complaint is pending on record after three months of completion of work and /or no communication is received from Labour Officer to this effect till six months after the date of completion. Reliance is placed upon Rajnish Yadav, Proprietor of M/s Bharat Construction Company Vs. North Delhi Municipal Corporation MANU/DE/0094/2023, wherein it was observed that :
" 24. Insofar as the appellant's / plaintiff's claim for refund of the security deposit is concerned, it was admitted that MCD had deducted 2023/DHC/000174 a sum of ₹27,88,530/- from the amounts payable under the RA Bills furnished by the appellant / plaintiff. The amounts retained by MCD are admittedly refundable to the appellant / plaintiff. It was MCD's case that the appellant / plaintiff was required to complete certain formalities including production of certain certificates regarding clearance of labour dues for claiming a refund of the said amount. The learned Single Judge held that since the appellant / plaintiff had not completed the requisite formalities, he was not entitled to a refund of the said amount.
25. This Court is unable to concur with the said decision of the learned Single Judge. There is no dispute that the security deposit is refundable to the appellant / plaintiff and the same could be withheld only to secure MCD against any claims due to non-performance of the statutory obligations on the part of the appellant / plaintiff. There is no material to indicate that the appellant / plaintiff has not cleared its dues towards labour or any other statutory levy. A considerable amount of time has lapsed CS (Comm) No. 276/2023 7/12 since the contract was completed. Admittedly, no claim has been made against MCD on account of any acts of commission or omission on the part of the appellant / plaintiff. Denying the appellant's / plaintiff's claim in this context would amount to permitting MCD to appropriate the security amount. Admittedly, there are no grounds for MCD to appropriate the security deposit. Thus, the same is required to be refunded to the appellant / plaintiff".
22. In MCD Vs. M/s S.N. Malhotra and Sons, 2006 IV AD (Delhi) 122, it was noted that :
" No doubt as per clause 45, security deposit can be withheld till the clearance certificate is produced by the contractor from the Labour Officer. However, same clause also stipulates that if no complaint is pending on record till after three months after the completion of the work and no communication is received from the Labour Officer till six months after the date of completion, it will be deemed to have received the clearance certificate and the security deposit will be released if otherwise due".
23. Abovenoted is squarely applicable to the facts of the instant matter. Award of work, issuance of work order and performance of work by plaintiff are undisputed facts on record and rather established on record by defendant's records brought by PW1. Defendants cannot withhold the security deposit of plaintiff and plaintiff is entitled for release of security deposit withheld by the defendants in absence of any claim or complaint against plaintiff on account of any act or omission in respect of the work done by her. Since pendency of no such complaint is pleaded or proved on record by defendants till after three months after the completion of the work and no communication having received from the Labour Officer till six months after the date of completion, defendants deemed to have received the clearance certificate and the security deposit has to be released thereafter, if due.
24. In terms of Ex. PW1/3, bill was passed for gross amount of Rs. 8,00,444/- . Security deposit was Rs. 80,044/-. After statutory deductions CS (Comm) No. 276/2023 8/12 i.e. GST, Labour Cess etc., net payable amount was Rs. 6,80,379/-, besides the amount of security deposit, which amount has not been paid to the plaintiff. Defendant is accordingly held liable for payment of approved amount of Rs. 6,80,379/-/- and refund of security amount of Rs. 80,044/- , aggregating to Rs. 7,60,423/.
25. With regard to claim of interest, in North Delhi Municipal Corporation Vs. Vipin Gupta, it was observed that :
" In so far as payment under clause 9 of the General Conditions of Contract is concerned, the Corporation itself specifies the time for payment of the final bills as 6 months and 9 months. Thus, the contract itself considers and specifies the reasonable time. However, the same is sought to be diluted by specifying that this period shall be adhered to ' as far as possible' . The queue system and availability of funds are deemed by the Corporation to override the 6 months and 9 months period. There is no reason as to why the court should consider that the intention was to prescribe no upper limit for making of payment and leave the period for payment as an open ended one".
It was further observed that " in respect of final bills raised by contractors for works executed, that have been approved by Engineer-in-Charge, the clauses have to be read in the following manner:
a) Reasonable time for making of payments of final bills in respect of work orders up to Rs. 5 lacs shall be 6 months and work orders exceeding Rs. 5 lacs shall be 9 months from the date when the bill is passed by the Engineer-In-Charge.
b) The queue basis can be applicable for the payments to be made in chronology.
However, the outer limit of 6 months and 9 months cannot be exceeded while applying the queue system.
c) The payments are held to become due and payable immediately upon the expiry of 6 months and 9 months and any non payment would attract payment of interest for the delayed periods.
The abovesaid has also been affirmed in NDMC Vs. Garg Construction Company, RFA (COMM) No. 5/2021 (supra).
26. In North Delhi Municipal Corporation Vs. Gautam Anand, 2018 SCC Online Del 8044, it was noted by Hon'ble High Court that reasonable time for making payment in respect of work orders upto Rs. 5,00,000/- shall be six months and for work orders exceeding Rs. 5,00,000/- shall be nine months from the date when the bill is passed by the Engineer-In-
CS (Comm) No. 276/2023 9/12Charge. It was further noted that this outer limit of six months and nine months cannot be exceeded and non-payment of bills within said period would attract payment of interest for delayed periods.
27. In the instant matter, defendant has acknowledged and admitted liability towards the bill passed. Since the amount in the work order is more than Rs. 5 lacs, following the ratio of the judgments (Supra), defendants had time of nine months to pay amount without any interest but no payment had been made within that period. Thus, the plaintiff cannot be deprived of the interest amount for the period i.e. beyond the expiry of 9 months till the time payment was/is cleared.
28. In view of the judgments (supra), security amount is also refundable after six months from the date of completion of work. At the cost of repetition, it may be noted that it is not the case of defendant that any complaint was pending or any communication was received from the Labour Office in this behalf. Thus, after the expiry of six months, it would be deemed that clearance certificate is given, and, therefore, at that point of time security deposit became refundable and since it was not refunded even thereafter, the contractor can claim interest. Plaintiff is, therefore, also held entitled for interest upon the security deposit upon expiry of 06 months from the date of completion of work order.
29. Reliance is placed upon judgment of Rajnish Yadav (supra) , wherein it was noted that:-
"In so far as claim of interest is concerned, undisputedly, the appellant/plaintiff would be entitled to interest for the delay in release of the funds due to him. There is no justification for MCD to have withheld the amount of Rs.83,349/- which was the balance amount against the works executed by the appellant/plaintiff. MCD has also failed to refund the security deposit due to the appellant/plaintiff. Accordingly, the appellant/ plaintiff is also entitled to a reasonable rate of interest on the amounts due.CS (Comm) No. 276/2023 10/12
We are of the view that the simple interest @ 9% per annum would be reasonable in the facts of the present case."
30. Reliance is further placed upon Varinder Jeet Singh vs. Municipal Corporation of Delhi (2013) 134 DRJ 284, wherein Hon'ble Delhi Court after discussing the law on the issue of payment of interest on the principal amount and the delay in refund of security deposit, observed as under:-
"15. It is settled law that if a person is deprived of the use of money to which he is legitimately entitled, he has a right to be monetarily compensated for the said deprivation. (Ref: (1992) 1 SCC 508) Secretary, Irrigation Deptt Govt. of Orissa vs.G.C. Roy; (2004) 5 SCC 65:Ghaziabad Development Authority v Balbir Singh, and (2009) 8 SCC 507: Sri.Venkateswara Syndicate v.Oriental Insurance Company Ltd.). The object behind awarding interest to a party, who has suffered loss, due to a legitimate deprivation of the enjoyment of the use of money that he was entitled to rightfully, is to balance the equities".
31. Having discussed as above, suit is decreed with cost in favour of plaintiff and against the defendant no.1 corporation, as follows:
(i) Defendant no.1 is directed to clear the amount of bill i.e. Rs. 6,80,379/-
and security amount of Rs. 80,044/-, aggregating to Rs. 7,60,423/-.
(ii) Defendant no.1 is further directed to pay interest @ 9% per annum on the bill amount after the expiry of nine months period of passing of bill till the date of payment.
(iii) Defendant no.1 is further directed to pay interest @ 9% per annum on the security deposit upon expiry of 06 months from the date of completion of work order till the date of payment.
CS (Comm) No. 276/2023 11/1232. Decree sheet be prepared accordingly. File be consigned to record room.
Announced in the open (SAVITA RAO)
court on this 8th day DISTRICT JUDGE
of August 2024 (COMMERCIAL COURT)-01
(SOUTH) SAKET COURTS,DELHI
CS (Comm) No. 276/2023 12/12