Delhi District Court
Kamal Gupta vs Municipal Corporation Of Delhi on 11 November, 2024
Kamal Gupta Vs. Municipal Corporation of Delhi
DLCT010082662024
IN THE COURT OF SH. DEEPAK GARG,
DISTRICT JUDGE-COMMERCIAL COURT-09
(CENTRAL DISTRICT), TIS HAZARI COURTS, DELHI
CIVIL SUIT (COMMERCIAL) NO.:- 650/2024
IN THE MATTER OF :-
Kamal Gupta
S/o Sh. Tilak Raj Gupta
R/o C-6 B/177, Janakpuri,
New Delhi-110058 ... Plaintiff
VERSUS
Municipal Corporation of Delhi
Through Its Commissioner,
Civic Centre, Minto Road,
New Delhi ... Defendant
SUIT FOR RECOVERY OF RS.9,78,227/-
Date of institution : 29/05/2024
Date on which Judgment was reserved : 08/11/2024
Date of Judgment : 11/11/2024
::- J U D G M E N T -::
1.By way of present judgment, this court shall adjudi- cate upon suit filed by the plaintiff against the defendant CS (Comm.) No. 650/2024 Page 1 of 18 Kamal Gupta Vs. Municipal Corporation of Delhi for recovery of Rs.9,78,227/- alongwith pendent elite and future interest @ 12% per annum.
PLAINTIFF'S CASE
2. Brief facts necessary for just adjudication of the present suit, as stated in the plaint, are as under:-
i. The plaintiff is registered contractor of the de- fendant vide Registration No. 363/40/V/Civil dated 07.04.2022.
ii. The suit is being filed against the defendant through its Commissioner who is in charge of all the acts and day to day business of the defendant. The defendant is engaged in taking care of all the civic amenities, development.
iii. The work, in respect of which the present suit is being filed was awarded to the plaintiff by the de- fendant vide Work Order No. EE(M-KBZ)-II (EE XXIX)/SYS/2022-2023/30 dated 04.01.2023 and EE(M-KBZ)-II(EE-XXIX)/SYS/2022-2023/31 dated 04.01.2023. The details of the work order are as follows:
S. Work Gross Net Security Date of Division No. Order No.Amount Amount Amount passing of the Bill
1. EE(M)- 441459/- 386837/- 40500/- 29.12.2023 EE(M)-II KBZ- II CS (Comm.) No. 650/2024 Page 2 of 18 Kamal Gupta Vs. Municipal Corporation of Delhi (EE KBZ XXIX/SY S/2022- 2023/30 Dated 04.01.23
2. EE (M)- 443471/- 388569/- 40685/- 29.12.2023 EE(M)-II KBZ-II KBZ (EE XXIX/SY S/2022- 2023/31 dated 04.01.23 iv. The plaintiff has completed the work order given by the defendant to the satisfaction of officials of the defendant but the amount due was not paid to the plaintiff.
v. The officials of the defendant were not passing the bills and plaintiff wrote a letter dated 26.10.23 and only then in December 2023, the bills were passed.
vi. Since the defendant neglected to make the payments, the plaintiff got issued a Legal Notice dated 31.10.23 to the defendant but the defendant did not make any payment.
vii. The defendant is liable to pay interest @ 12% p.a. on principal amount of Rs.8,56,591/- till CS (Comm.) No. 650/2024 Page 3 of 18 Kamal Gupta Vs. Municipal Corporation of Delhi 15.05.2024 which comes to Rs.1,21,636/-. Thus the total suit amount including principal and interest comes to Rs.9,78,227/-. Hence, the plaintiff has filed the present suit for a sum of Rs.9,78,227/- along with pendent lite and future interest @ 12% p.a. against the defendant.
DEFENDANT'S CASE
3. In the written statement, the defendant contended in-
ter alia that the suit of the plaintiff is liable to be dis- missed as it is without any cause of action since the plaintiff has not submitted any bill (either interim or fi- nal). Though, the defendant admitted having awarded the Work Order No. EE(M-KBZ)-II (EE XXIX)/SYS/2022- 2023/30 dated 04.01.2023 and EE(M-KBZ)-II (EE XXIX)/SYS/2022-2023/31 dated 04.01.2023 to the plain- tiff, however, it is submitted that the plaintiff has not sub- mitted any bills that he was contractually required to in terms of Clause 7 & 9 of the General Conditions and Special Conditions of Contract (GCC) and Clause 4 of the work orders and the purported bills that the plaintiff seeks to rely upon are only internal notings of the defen- dant and they do not constitute bills for the purpose of payment and the suit is without any cause of action.
CS (Comm.) No. 650/2024 Page 4 of 18Kamal Gupta Vs. Municipal Corporation of Delhi
4. It is further submitted that as the plaintiff has failed to comply with Clauses 17 & 45 of the GCC, he is not entitled to refund of security deposit and the claim for re- turn of Security Deposit is pre-mature and untenable.
5. The Defendant further averred that till date the plain-
tiff has not complied with requirements of labour clear- ance and has neither applied for no obtained the neces- sary Labour Clearance Certificate as required under Clause 45 of GCC. The plaintiff has not even applied for a 'No Objection Certificate' from the Legal Department of the defendant. Therefore, unless the procedure pre- scribed under the GCC is complied with, the stage for return of the Security Deposit does not even arise.
REPLICATION
6. Plaintiff has filed the replication controverting the al-
legations of the defendants in the written statement and the contents of the plaint has been reiterated and reaf- firmed.
ISSUES
7. On the basis of the pleadings following issues were settled on 23.09.2024 :
i. Whether the plaintiff is entitled for the recovery of the amount as claimed in the plaint? (OPP) CS (Comm.) No. 650/2024 Page 5 of 18 Kamal Gupta Vs. Municipal Corporation of Delhi ii. If the issue no. (i) is decided in affirmative, whether the plaintiff is entitled for the pendente-lite and fu ture interest. If so, at what rate and for what pe riod? (OPP) iii. Relief.
EVIDENCE OF THE PLAINTIFF
8. In order to prove its case, plaintiff Sh. Kamal Gupta has examined himself as PW1, who has filed his evi- dence by way of affidavit Ex.PW1/A and has relied upon the documents as under:
i. The registration Certificate of the plaintiff is ExPW1/1 (OSR).
ii. Work orders EE (M)(KBZ)- II (EE XXIX/SYS/ 2022-2023/30 dated 04.01.2023 and EE (M) (KBZ)- II (EE XXIX/SYS/2022-2023/31 dated 04.01.2023 are ExPW1/2 and ExPW1/3.
iii. Letter dated 26.10.2023 sent by plaintiff to the de-fendant is ExPW1/4
iv. Copy of two vouchers are mark A and Mark B (mentioned as ExPW1/5 and ExPW1/6 in the affidavit).
v. Legal notice dated 31.10.2023 issued by plaintiff to defendant is ExPW1/7.CS (Comm.) No. 650/2024 Page 6 of 18
Kamal Gupta Vs. Municipal Corporation of Delhi vi. Speed post receipt regarding sending of legal notice is ExPW1/8.
vii. Non Starter report dated 25/04/2024 issued by DLSA is ExPW1/9.
9. This witness was cross-examined by the Ld. Counsel for the defendant and the same shall be discussed in the later part of the judgment.
EVIDENCE OF THE DEFENDANT
10. In order to prove its case, defendant has examined Sh. Ravinder Kumar, Asstt. Engineer as DW1, who has filed his evidence by way of affidavit Ex.DW1/A.
11. This witness was cross-examined by the Ld. Counsel for the plaintiff and the same shall be discussed in the later part of the judgment, ISSUE WISE FINDINGS Issue No. 1
(i) Whether the plaintiff is entitled to the recovery of the amount as claimed in the plaint? (OPP)
12. The onus of proving this issue was on the plaintiff
13. It is the case of the defendant that suit of the plaintiff CS (Comm.) No. 650/2024 Page 7 of 18 Kamal Gupta Vs. Municipal Corporation of Delhi is pre-mature and he is not entitled to the suit amount for want of submitting the bills for payment. Reliance is placed upon the judgment in the case of North Delhi Municipal Corporation Vs. Sanjeev Kumar RFA No. 430/2017 decided on 22.03.2018.
14. It is the case of the plaintiff that the present suit has been filed in respect of work order No. EE(M-KBZ)- II (EE XXIX)/SYS/2022-2023/30 dated 04.01.2023 and EE(M-KBZ)-II (EE XXIX)/SYS/2022-2023/31 dated 04.01.2023 and first and final bill in respect of the first work order by the defendant corporation in the sum of Rs.19,42,123/- and first & final bill passed by the defendant in the sum of Rs.21,69,832/- in respect of the second work order. It is further the case of the plaintiff that the security deposit amount of Rs.81,185/- (40,500+40,685) in respect of the said work orders also remains to be paid by the defendant. This is not disputed by the Ld. Counsel for the defen- dants as well.
15. In respect of the said work orders, it is the case of the plaintiff that the defendant had passed the first and final bills in the sum of Rs.3,86,837/- and 3,88,569/- which are mark Ex.DW1/P1 and Ex.DW1/P2 and the first page of the said bills were filled by the plaintiff and the remaining pages were filled by the officials of CS (Comm.) No. 650/2024 Page 8 of 18 Kamal Gupta Vs. Municipal Corporation of Delhi the defendant.
16. It is not the case of the defendant that the officials of the defendant had not prepared these bills Ex.PW1/P1 and Ex.PW1/P2 respectively and in fact DW1, the As- stt. Engineer of the defendant has admitted the said fact in his cross-examination. These bills bear the sig- natures of the Executive Engineer concerned and the Asstt. Accounts Office (AAO) of the defendant and this fact has not been disputed by the defendant.
17. Mere fact that particulars of the said bills were filled by some officials of the defendant in order to help and assist the plaintiff in its preparation and presentation is by itself non sufficient to reject the same. Rather signa- tures of the plaintiff on the said bills give rise to pre- sumption that these were submitted by the plaintiff himself and that approval was given by officials of the defendant and it leads to the inference that there was appropriate compliance of judgment of Hon'ble High Court in case NDMC Vs. Sanjeev Kumar (Supra).
18. In view of the aforesaid position, it cannot be said that the plaintiff had not submitted the said bills in re- spect of work order No. EE(M-KBZ)-II (EE XXIX)/ SYS/2022-2023/30 dated 04.01.2023 and EE(M- KBZ)-II (EE XXIX)/SYS/2022-2023/31 dated CS (Comm.) No. 650/2024 Page 9 of 18 Kamal Gupta Vs. Municipal Corporation of Delhi 04.01.2023 after completion of work in accordance with the terms and conditions of the work contract. From the perusal of the record, it is evident that if the plaintiff has not complied with the GCC guidelines, the defendant also cannot be said to have been com- plied with the said guidelines. If the plaintiff is alleged to be guilty of non submitting of the bill in respect of the work order No. EE(M-KBZ)-II (EE XXIX)/SYS/ 2022-2023/30 dated 04.01.2023 and EE(M-KBZ)-II (EE XXIX)/SYS/2022-2023/31 dated 04.01.2023, the defendant is also equally guilty of passing the bill in respect of the said work orders. Thus equity demands that if both the parties are guilty of non compliance of the terms and conditions of the agreement, only one party cannot be penalized for the default. Hence in my opinion, the claim of the plaintiff cannot be said to be non suited due to the breach of the terms and condi- tions of the agreement between the parties on this ground alone.
19. The issue of award of work order No. EE(M-KBZ)-
II (EE XXIX)/SYS/2022-2023/30 dated 04.01.2023 and EE(M-KBZ)-II (EE XXIX)/SYS/2022-2023/31 dated 04.01.2023 to the plaintiff, the plaintiff having completed the said work order within time without any negative remark, final measurements of the work also carried out by the defendant and the preparation of the CS (Comm.) No. 650/2024 Page 10 of 18 Kamal Gupta Vs. Municipal Corporation of Delhi running bill in respect of the said work have not been denied by the defendant. Nothing has been brought on record by the defendant to prove that the plaintiff is not entitled to the relief sought in respect of the said work order No. EE(M-KBZ)-II (EE XXIX)/SYS/2022- 2023/30 dated 04.01.2023 and EE(M-KBZ)-II (EE XXIX)/SYS/2022-2023/31 dated 04.01.2023. There is no reason to disbelieve the testimony of PW1 and in view of unrebutted and unchallanged documents proved by the plaintiff in respect of the said said work order No. EE(M-KBZ)-II (EE XXIX)/SYS/2022- 2023/30 dated 04.01.2023 and EE(M-KBZ)-II (EE XXIX)/SYS/2022-2023/31 dated 04.01.2023. Thus, plaintiff is held entitled to the payment of Rs.7,75,406/- which amount was cleared by the defen- dant in respect of the said work orders No. EE(M- KBZ)-II (EE XXIX)/SYS/2022-2023/30 dated 04.01.2023 and EE(M-KBZ)-II (EE XXIX)/SYS/ 2022-2023/31 dated 04.01.2023.
20. Coming to the issue of refund of security deposit and earnest money in respect of said work orders, the de- fendant has taken a plea that plaintiff is not entitled to refund for security for want of compliance of Clause 17 and 45 of GCC.
21. In this regard, the Hon'ble High Court of Delhi in CS (Comm.) No. 650/2024 Page 11 of 18 Kamal Gupta Vs. Municipal Corporation of Delhi case of Rajnish Yadav, Proprietor of M/s Bharat Con- struction Co. (supra) has observed as under :-
25. ........... 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-perfor-
mance 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 due towards labour or any other statutory levy. A considerable amount of time has lapsed since the contract was complete. 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. Admit- tedly, there are no grounds for MCD to appro- priate the security deposit. Thus, the same is required to be refunded to the appellant/plain- tiff.
22. Although during cross-examination, the PW1 admit-
ted that he had not submitted any labour clearance cer- tificate but it is relevant here to state that nothing has been placed on record by defendant to bring out that plaintiff has failed to clear the dues towards labour or any other statutory levy in respect of the said work or- ders. Admittedly, no claim has been made against de- fendant/MCD on account of any acts of commission or omission on the part of plaintiff and thus in these facts and circumstances as well as in view of the observa- tions made in the judgment of Rajnish Yadav, Propri- etor of M/s Bharat Construction Co. (supra), plaintiff CS (Comm.) No. 650/2024 Page 12 of 18 Kamal Gupta Vs. Municipal Corporation of Delhi is also entitled to refund of the security deposit and earnest money of Rs.81,185/- qua the said work orders.
Issue No. 2(ii) If the issue no. (i) is decided in affirmative, whether the plaintiff is entitled for the pendente- lite and future interest, if so at what rate and for what period? (OPP)
23. Ld. counsel appearing for the defendant states that as per Clause 7 of the agreement, defendant is not liable to pay interest. On the other hand, Ld. Counsel appear- ing for the plaintiff urges that since the defendant failed to make payment within a period of 9 months, the defendant is liable to pay interest @ 12% p.a. on the entire outstanding amount.
24. In North Delhi Municipal Corporation & Anr. vs. Sanjeev Kumar (RFA-430/2017) & CM Nos. 15925- 26 of 2017,DOD: 22.3.2018), Hon'ble High Court dealt with the issues relating to clause-7, 9, 17 & 45 of the General Conditions of Contract extensively by framing the following questions:
(i) Whether payment of the principal amount can be delayed in view of Clause- 7 & 9 of the General Conditions of Contract read with the amendments?CS (Comm.) No. 650/2024 Page 13 of 18
Kamal Gupta Vs. Municipal Corporation of Delhi
(ii) Whether the refunds of earnest money/secu- rity deposit can be delayed in view of Clause 17 & 45 of the General Conditions of Contract?
(iii) Whether interest is payable on delayed pay- ments/refunds and if so, for which period?
25. After dealing with all the issues extensively, Hon'ble Court summarized the conclusions and findings in para 77 to 81 and same are reproduced as under:
77. The General Conditions of Contract i.e., clauses 7and 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.
Section46 of the Contract Act and the explanation thereto is clear that "what is a reasonable time is a question off act 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 CS (Comm.) No. 650/2024 Page 14 of 18 Kamal Gupta Vs. Municipal Corporation of Delhi
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 25read 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 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.
CS (Comm.) No. 650/2024 Page 15 of 18Kamal Gupta Vs. Municipal Corporation of Delhi
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 beheld 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 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.
(emphasis supplied)
26. As per record, the first & final running bill was amounting to Rs.3,86,837/- and the another first & final bill was amounting to Rs.3,88,569/- both in CS (Comm.) No. 650/2024 Page 16 of 18 Kamal Gupta Vs. Municipal Corporation of Delhi respect of the said work orders and under Clause 7 and 9 of GCC, defendant ought to have released the payment within 9 months thereafter. It is not disputed that payment is to be released by Head Quarter and concerned zone is authorized only to verify and pass the bill(s) before sending it to Accounts Department for release of payment. Both the first and final bills in respect of the said work orders were passed on 29.12.2023. Period of 9 months since passing of the said bills have already expired and hence plaintiff is not only entitled to recover the said amount from the defendant but the defendant is also liable to pay interest after expiry of period of 9 months from the date of passing of the bills i.e. w.e.f. 01.10.2024 in respect of both the working orders till the actual date of payment qua said work order no. EE(M-KBZ)-II (EE XXIX)/SYS/2022-2023/30 dated 04.01.2023 and EE(M-KBZ)-II (EE XXIX)/SYS/2022-2023/31 dated 04.01.2023 by the corporation. The rate of interest shall be simple interest @ 8% per annum in terms of aforesaid judgment of Hon'ble High Court.
Issue No. 3(iii) Relief.
27. In terms of the foregoing observations, with respect CS (Comm.) No. 650/2024 Page 17 of 18 Kamal Gupta Vs. Municipal Corporation of Delhi to the work orders No. EE(M-KBZ)-II (EE XXIX)/SYS/2022-2023/30 dated 04.01.2023 and EE(M-KBZ)-II (EE XXIX)/SYS/2022-2023/31 dated 04.01.2023, defendant is directed to pay as under :
(i) an amount of Rs.7,75,406/- in respect of both the first & final running bills with interest @ 8% p.a. w.e.f. 01.10.2024 till realization.
(iii) further the defendant would refund the security deposit and earnest money of Rs.81,185/- in respect of the said work orders with interest @ 8% p.a. from today till realization.
28. Decree sheet be prepared according.
29. File be consigned to Record Room.
Digitally signed by DEEPAK GARG DEEPAK Date:
GARG 2024.11.11
16:07:42
+0530
Announced in the open Court on (Deepak Garg)
Day of 11th November, 2024 Distt. Judge, (Comm. Court)-09,
Central District, THC : Delhi
CS (Comm.) No. 650/2024 Page 18 of 18