Delhi District Court
Rakesh Malhotra vs North Delhi Municipal Corporation on 13 December, 2023
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IN THE COURT OF SH. JITEN MEHRA: ADDITIONAL
DISTRICT JUDGE-10: TIS HAZARI COURTS: DELHI.
CS DJ NO. 278/2019
CNR No. DLCT01-004088-2019
In the case of:
Sh. Rakesh Malhotra
Sole Proprietor:
M/s. Rakesh Enterprises
A-3/256A, Janakpuri,
New Delhi.
.....Plaintiff
Versus
1.North Delhi Municipal Corporation Through its Commissioner:
4th Floor, Civic Centre, Minto Road, New Delhi-110001.
2. The Executive Engineer (M-1) KBZ., North Delhi Municipal Corporation 52 Block, Old Rajinder Nagar, Near Karol Bagh, Metro Station, New Delhi-110060.
.....Defendants
Date of institution: : 26.03.2019
Date of reservation of order : 05.09.2023
Date of decision : 13.12.2023
SUIT FOR RECOVERY OF RS 13,97,786/-
-:JUDGMENT:-
Rakesh Malhotra Vs. NDMC CS DJ No.278/19
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1. This is suit for recovery of Rs. 13,97,786/- (Thirteen Lakhs Ninety Seven Thousand Seven Hundred And Eighty Six) along with pendent lite and future interest @12% p.a. from the date of filing of the present suit till its realization along with costs of the suit filed by the plaintiff against the defendant. The plaintiff is claiming Rs. 10,58,929/- towards net outstanding due of the passed bill including security/earnest money amount and Rs. 3,38,857/- towards interest along with pendent lite and future interest.
2. That it is pertinent to mention that the plaintiff had originally filed the suit for recovery of Rs. 75,33,415/- against the defendants clubbing together 13 bills, however vide order dated 22.7.2017 the plaintiff was ordered to separate the claims into separate suits and the plaintiff has restricted the present suit to work order no. 188 and 190 dated 7.8.2013.
PLAINTIFF'S VERSION AS PER THE PLAINT
3. As per the plaint, the plaintiff The plaintiff is the sole proprietor of M/s. Rakesh Enterprises, a firm duly enrolled as Municipal Contractor with the defendants (erstwhile M.C.D.). The plaintiff is engaged in the civil constructions and supply of building materials. The plaintiff has been executing Rakesh Malhotra Vs. NDMC CS DJ No.278/19 3 the work of civil nature for the erstwhile MCD and now, the North Delhi Municipal Corporation, since long.
4. The defendant no.1 i.e. North Delhi Municipal Corporation (part of erstwhile Municipal Corporation of Delhi), is a body corporate of state of Delhi, established and governed under the M.C.D. Act. The suit is being filed against the defendants through its Commissioner, who is in-charge of all the acts and day-to-day business of the defendants. The defendants are engaged in taking care of all the civil amenities, developments etc. of South Delhi.
5. The plaintiff being Govt. Contractor approached for the work orders through tenders, which were invited by the defendant no.2. The defendant no.2, after the satisfaction of the completion of the required conditions at the stage of pre-work orders, for the nature of works, as mentioned in the respective work orders, awarded work order no. 420 dated 7.8.2013 to the plaintiff for and on behalf of the defendant no.1.
6. The plaintiff, after the award of respective work orders, entered into agreement with the defendant no.2 pertaining to respective work orders as a pre-
Rakesh Malhotra Vs. NDMC CS DJ No.278/19 4 condition of the award of work orders. The plaintiff completed the said work orders before the stipulated time. The works were completed by the plaintiff to the satisfaction of Engineer-in-Charge/defendant no.2 and the period prescribed for defect liability also passed-over without any negative remark and to the satisfaction of defendant no.2.
7. The defendant no.2 completed the final measurement of the aforesaid works and bills (first and final) pertaining to the aforesaid work orders were passed and recorded in the measurement books of the respective work orders. Further, as a pre-condition of the award of work orders, the plaintiff had also deposited the security/ earnest money towards the respective work orders. The details of amount of bills, date of passing and amount of security/ earnest money are tabulated below:-
Sr. Work Order Amount of passed Date of Amount of
No No. (first running and passing of bill security
final/first & final) deposit/earnest
bill in Rs money in Rs.
1. 420 Rs. 9,26,124/- 28.3.2014 1,32,805/-
Rakesh Malhotra Vs. NDMC CS DJ No.278/19
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8. That the plaintiff states that the defendant no.2 completed the final measurement of the aforesaid works and passed the first and final bill in respect of work order no. 420 for a sum of Rs. 9,26,124/- on 28.3.2014 and the plaintiff had deposited a security deposit of Rs. 1,32,805/-. Thus the total amount payable by the defendants to the plaintiff in respect of the above passed bills as well as security/earnest money in respect of work order no.420 comes to Rs. 10,58,929/-.
9. Despite passing of the aforesaid bills, neither the aforesaid payments were neither released to the plaintiff nor was informed about the reason for withholding the aforesaid payments. The plaintiff made several requests for release of the amount of the passed bills and the security amount but no heed was paid to the request of the plaintiff. As per Clause-9 of General Terms and Conditions of the defendants, the defendants are liable to release the payment of the passed bills within a period of 6/9 months.
10. Since the aforesaid sum of Rs. 10,58,929/- is an admitted amount and the Rakesh Malhotra Vs. NDMC CS DJ No.278/19 6 plaintiff also did not raise any objection, the defendants were under obligation to release the payments of the aforesaid amounts to the plaintiff within a reasonable time, but the defendants failed to release the payment of the passed bills' amount as well as the security amount in favour of the plaintiff till date. Since the aforesaid amount has not been paid by the defendants to the plaintiff till date, therefore the plaintiff has been put to loss of investment and interest further accrued thereon. Therefore, the plaintiff states that the defendants are liable to pay interest @ 12% p.a. on entire outstanding amount of Rs. 10,58,929/-.
11. The plaintiff being aggrieved from callous and irresponsible attitude of the defendants, got issued a legal notice dated 23.01.2016 through his counsel under Section 477/478 of the M.C.D. Act thereby calling upon the defendants to release the sum of Rs.81,11,714/- of the plaintiff in respect of various work orders and release the payments of the same along-with interest @ 12% per annum from the date of passing of the respective bills within 60 days from the receipt of the notice. The legal notice was duly served upon the defendants.
Rakesh Malhotra Vs. NDMC CS DJ No.278/19 7
12. The notice period for the payment has also been passed but the defendants have not made any effort for release of the outstanding sum to the plaintiff.
13. That the plaintiff has also stated that The mode of business transaction between the plaintiff and defendants was commercial and the plaintiff had undertaken the works for making profit, therefore, the plaintiff is entitled to charge interest as per norms of charging of interest on unsecured loan i.e. rate of 12% per annum. Therefore, as per Clause-9 of the general conditions of the defendants, the plaintiff is also entitled to interest for the delay caused by the defendants in releasing the payment of the plaintiff. The plaintiff states that it has calculated interest @12% per annum on the aforesaid amount of Rs. 10,59,929/- taking into account clause 9 of the General Terms and Conditions of the Defendant itself Accordingly the amount of interest on the aforesaid amount of Rs. 10,58,929/- comes to 3,38,857/-. The plaintiff is entitled to claim the said sum of 3,38,857/- towards interest from the defendants till the date of filing of the suit. The plaintiff is entitled for pendent-lite and future interest over the principal amounts from the date of filing of the suit until payment of the entire amount by the defendants. The plaintiff has also suffered losses in terms of money and further investment, therefore, the defendants are liable for costs Rakesh Malhotra Vs. NDMC CS DJ No.278/19 8 and further interest thereon.
14. Hence the plaintiff has filed the present suit seeking recovery of Rs.13,97,786/- which included admitted due payable beyond any dispute and difference and interest for the delay caused by the defendants in payment to the plaintiff despite passing of the respective bill.
DEFENDANT'S VERSION AS PER THE WRITTEN STATEMENT
15. The defendants have submitted in their WS that no legal, valid or justiciable cause of action has ever arisen in favour of the plaintiff and against the defendants for filing the present suit.
16. That the defendants had already released principal amount of the first and final bill in respect of work order No. 420 to the tune of net amount of Rs. 9,48,316, gross amount was of Rs. 11,09,601/- in the Bank account of the plaintiff through RTGS No. 68NP dated 14.11.2018. The plaintiff is not entitled for any interest as there was no clause for payment of interest to the contractor in the tender documents as well as the agreement entered into between the parties.
Rakesh Malhotra Vs. NDMC CS DJ No.278/19 9
17. The defendants have stated that the suit is premature with respect to work order no.420 as there is a specific condition in the Agreement entered into between the parties that the payment of the bill will depend on availability of funds in particular head of account from time to time in South DMC, thus, the delay in making the payment does not attract any liability and the plaintiff is not entitled to any interest on account of delay in payment as per amended rules incorporated by Circular dated 19.05.2006 in N.I.T./ and Tender conditions. The plaintiff, after going through & understanding the terms and conditions of NIT as well as tender documents, had participated in the Tender and executed the work.
18. On merits, the contents of the plaint have been denied and it has been submitted that in respect of the work order no 420, the bills have been prepared by the Engineer in charge as the plaintiff has failed to raise any bill. The plaintiff has further accepted the bill as prepared by the Engineer-in-Charge and sent them for collection.
19. That the payment was to be made on the availability of funds, as per Rakesh Malhotra Vs. NDMC CS DJ No.278/19 10 terms and conditions, hence, the question of interest does not arise. The plaintiff after going through and understanding the terms and conditions of the NIT as well as tender documents had participated the tender. Payment of bills is made strictly on a queue basis, i.e first the past liabilities will be cleared and after that, the release of payment for passed bill will be in accordance of seniority in respect of the date of passing of the bill. The question of release of the security amount does not arise at all as the plaintiff has neither applied for release of the security amount nor submitted original G-8 receipt and clearance certificate from labour department as per clause 45 of the General conditions.
20. The defendants further state that they have already released the first and final bill of the plaintiff in respect of work order no. 420 on 14.11.2018. It is also stated that clause 9 of the General Terms and Conditions along with clause 7, 9A and 10CA were amended vide circular no. D/E(P)III/27/2006-2007 dated 19.5.2016. After the said amendment, the payment of funds shall be subject to availability in the particular head of account and payment will be made on a queue basis. The defendants also admitted receipt of the notice dated 23.1.2016 sent by the plaintiff.
Rakesh Malhotra Vs. NDMC CS DJ No.278/19
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ISSUES FRAMED:
21. The following issues were framed vide order dated 1.10.2019
1. Whether plaintiff is entitled to recover a sum of Rs. 1,32,805 in respect of Work Order No. 188 ? OPP
2. Whether plaintiff is entitled to recover interest on Rs.10,58,929/-, if so at what rate and for what period ? OPP
3. Relief
21. A The issues no. 1 and 2 have been wrongly framed in the present suit as admittedly the present suit has been filed with respect to work order no. 420 and the issues no. 1 and 2 are corrected as:
1. Whether the plaintiff is entitled to recover a sum of Rs.
9,26,124 in respect of Work Order No. 420 ? OPP
2. Whether the plaintiff is entitled to recover the security deposit of Rs. 1,32,805/- ? OPP EVIDENCE OF THE PLAINTIFF AND DEFENDANTS AND DOCUMENTS RELIED UPON BY THEM
22. The plaintiff, in order to prove his case, led his evidence and got Rakesh Malhotra Vs. NDMC CS DJ No.278/19 12 examined himself as PW-1. PW-1 has filed his evidence by way of affidavit, wherein, he reiterated and reaffirmed the contents of the plaint. PW-1 in his testimony has relied upon photocopy of the Work Orders as Mark A, since the originals are stated to be in the power and possession of the defendants. Copy of the bills are relied upon as Mark B (Colly), since the originals are stated to be in the power and possession of the defendants. The relevant page of the general rules and directions of the defendants containing clause 9 - payment of final bill is relied upon marked as Mark-C. The legal notice dated 23.1.2016 is relied upon as Ex. PW-1/1.
23. That in the cross examination of PW-1he admitted that he had not filed any bill in respect of the work order in question, but the engineer in charge had prepared the bill in respect of the work order, which have been accepted as correct by him. He also admitted that he has received the full and final payment with respect to Work Order No. 420. The witness was also confronted with Clause 9 of the General terms and conditions (Mark C) wherein there is no provision for interest and further payment of bills was subject to availability of funds.
Rakesh Malhotra Vs. NDMC CS DJ No.278/19 13
24. That the defendant also examined Sh. Abhay Jain, its Assistant Engineer as DW-1 who filed his evidence by way of affidavit, wherein, he reiterated and reaffirmed the contents of the written statement. The booklet of the General Conditions of Contract is relied upon as Ex. DW-1/1. The copy of the Agreement between the parties is relied upon as Ex. DW-1/2. The copy of the NIT in respect of the work orders is relied upon as Ex. DW-1/3. The witness further stated that the defendants had already released the bill amount of the plaintiff through RTGS no. 02-NP on 14.11.2018 against Work Order 420 dated 26.9.2013 and the security amount of Rs. 1,05,805/- has also been released on 2.5.2019, and the RTGS transactions are relied upon as Ex. DW-1/4 to Ex. DW- 1/5.
25. That in the cross-examination, the DW-1 admitted that the bills pertaining to Work order no. 420. The copies of the bill with respect to Work Order No.420 dated 26.9.2013 were placed on record as Ex. DW-1/P1. The DW-1 has further admitted that the bills were accepted by the contractor and no labour complaint was also pending before the Labour Commission. The Witness stated that the full and final payment had already been paid by the department, but denied that the plaintiff is entitled to interest on account of inordinate delay in releasing the Rakesh Malhotra Vs. NDMC CS DJ No.278/19 14 payment.
ISSUE WISE FINDINGS AND CONCLUSION ISSUES NO.1,2, &3
1. Whether plaintiff is entitled to recover a sum of Rs. 9,26,124 in respect of Work Order No. 420 ? OPP
2. Whether the plaintiff is entitled to recover the security deposit of Rs.
1,32,805/- ? OPP
3. Relief
26. That admittedly, with respect to Work Order no.420 dated 26.9.2013, the defendant no.2 completed the final measurement of the aforesaid works and passed the first and final bill in respect of work order no.420 for a sum of Rs. 9,26,124/- on 28.3.2014. The department has paid the said amount under work order no.420 to the plaintiff by way of RTGS on 14.11.2018, which is also admitted by the plaintiff in his cross-examination dated 8.8.2023. The security deposit has also been released on 2.5.2019. The only defence, which is raised, is that under the terms and conditions of the Contract, no interest is payable in terms of the contract between the parties. The said aspect has been discussed in detail by the Hon'ble High Court of Delhi in number of cases, most notably in Rakesh Malhotra Vs. NDMC CS DJ No.278/19 15 the judgment of North Delhi Municipal Corporation Vs. Varinderjeet Singh, bearing RFA No. 434/2017 decided on 22.03.2017:-
"Conclusions and Findings
77. The General Conditions of Contract i.e., clauses 7 and 9 which are admittedly part of the work orders issued by both the NDMC and the EDMC are being tested in these batch of cases. A contract which stipulates that the consideration would be paid in an unforeseen time in the future based on certain factors which are indeterminable, would in effect be a contract without consideration. Even if the contract is held to be a valid contract, then the concept of `reasonableness' has to be read into the same. Section 46 of the Contract Act and the explanation thereto is clear that "what is a reasonable time is a question of fact in each case." A Corporation which gets works executed cannot therefore include terms in the contract which are per se unconscionable and unreasonable as -
a) There is no fixed time period as to when the funds would be available;
b) There is also no fixed mechanism to determine as to when and in what manner the head of account is to be determined and as to how the Contractor would acquire knowledge of these two facts;
c) There is also no certainty as to how many persons are in the queue prior to the Contractor and for what amounts;
d) There is enormous ambiguity in the receipt under the particular heads of accounts.
78. These clauses in effect say that the Contractor is left with no remedy if the Corporation does not pay for the work that has been executed. Such a Clause would be illegal and contrary to law. Such clauses, even in commercial contracts, would be contrary to Section 25 read with Section 46 of the Contract Act.
79. The clauses do not specify an outer time limit for payment. The expression reasonable time has to be `a time'. The concept of time itself is ensconced with specificity and precision. Clause 9 is the opposite of being precise. It is as vague and ambiguous as it could be because it Rakesh Malhotra Vs. NDMC CS DJ No.278/19 16 depends on factors which are totally extraneous to the contract, namely - Allotment of funds to the Corporation by the Government; Allotment of funds in a particular head; Allotment of funds for payments who are in queue prior to the contractor;
80. Thus, these factors, which are beyond the control of the Contractor and which would govern the payment of consideration, make the said clauses of the contract completely unreasonable. The clauses have to thus, be read or interpreted in a manner so as to instill reasonableness in them.
81. By applying the above said principles, in respect of final bills raised by Contractors for works executed, that have been approved by the 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 lakhs shall be 6 months and work orders exceeding Rs.5 lakhs 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.
d) A conjoint reading of Clauses 7 & 9 along with the amendment dated 19th May, 2006, clearly shows that for the payment of bills, the contractors have to follow the queue basis and as and when the amount is available under the particular head of account, the amount would be payable. The amendment does not, however, have a condition that no interest is payable for delayed payment. Such a condition exists only in Clause 7. Clause 9, therefore, when read with the amendment has to mean that the Corporation itself considers 6 months and 9 months to be the reasonable periods for which the payments of the final bills can be held back. Obviously, therefore, if payments are made, whether on a queue basis or otherwise, beyond the period of 6 months and 9 months, interest is payable.
e) To the extent that queue basis is applied only for clearing of payments Rakesh Malhotra Vs. NDMC CS DJ No.278/19 17 which do not extend beyond the period of 6 months and 9 months period, it is reasonable. However, if the queue basis is applied in order to make Contractors wait for indefinite periods for receiving payments, then the same would be unreasonable and would have to therefore be read down.
f) The Security amount/Earnest money deposited would be refundable upon the fulfilment of the conditions contained in Clauses 17 and 45 of the General Conditions of Contract. Interest would be payable on delayed payments."
27. The decision of the Hon'ble High Court of Delhi in North Delhi Municipal Corporation vs Vipin Gupta, bearing RFA No. 160/2017 decided on 22.3.2018 is also to the same effect.
28. There is no dispute that the principal amounts under Work order no.420 is already paid during the pendency of this case. The only aspect, which remains to be adjudicated, is the amount of interest of the said amount. The bills of Work Order no.420 were passed on 28.3.2014 and the principal payment was received on 14.11.2018, whereas the security deposit was paid on 2.5.2019. The Plaintiff has claimed interest at the rate of 12% per annum. Therefore, the plaintiff is entitled to interest upto the date of 14.11.2018 and 2.5.2019 on the principal payment and the security deposit. However, it would appropriate to award interest @ 9%, which is a reasonable rate of interest for commercial transactions. Hence, in the interest of justice, the plaintiff is granted the Rakesh Malhotra Vs. NDMC CS DJ No.278/19 18 interest @ 9% p.a. annum on Rs. 9,26,124/- under Work Order no.420 from the period of 29.12.2014 (being nine months from the date of passing of the bill under Work Order no.420) till 14.11.2018 (date of payment of the bill under Work Order no.420), which amounts to Rs. 3,23,356.82/- . The plaintiff is also granted interest @ 9%p.a. on Rs. 1,32,805 from the period of 29.12.2014 (being 9 months from the date of passing of the bill under Work order no.420) till 2.5.2019 (date of payment of the security deposit under Work Order no.420) which amounts to Rs. 51,903.10/-. Relief
29. Accordingly, the plaintiff is held entitled to interest @ 9% p.a. annum on Rs. 9,26,124/- from the period of 29.12.2014 till 14.11.2018 amounting to Rs. 3,23,128.47/-. The plaintiff is also entitled to interest @ 9%p.a. on Rs. 1,32,805 from the period of 29.12.2014 till 2.5.2019 amounting to Rs. 51,870.36/-. The said total amount of Rs. 3,74,998.83/- is held to be payable only by defendant no.1, as the defendant no.2 is not personally liable for the acts of the Corporation i.e. defendant no.1 and therefore, the decree is required to be satisfied only by defendant no.1. The future simple interest @ 9% on Rs. 3,74,998.83/- would be required to be Rakesh Malhotra Vs. NDMC CS DJ No.278/19 19 paid by the defendant no.1 till its realization.
Decree sheet be prepared in terms of the order.
File be consigned to the record room.
Announced in the open court (Jiten Mehra)
on 13.12.2023 ADJ-10/Central/THC
Delhi.
Rakesh Malhotra Vs. NDMC CS DJ No.278/19