Delhi District Court
Rajesh Kumar Gupta Proprietor Of M/S ... vs Municipal Corporation Of Delhithrough ... on 9 August, 2024
Rajesh Kumar Gupta Vs. Municipal Corporation of Delhi & Anr.
DLCT010090452023
IN THE COURT OF SH. DEEPAK GARG,
DISTRICT JUDGE-COMMERCIAL COURT-09
(CENTRAL DISTRICT), TIS HAZARI COURTS, DELHI
CIVIL SUIT (COMMERCIAL) NO.:- 1006/2023
IN THE MATTER OF :-
Rajesh Kumar Gupta
(Proprietor of M/s Balaji & Associates)
Address : D-11/51, Sector-8,
Rohini, Delhi-110085 ... Plaintiff
VERSUS
1.Municipal Corporation of Delhi (Through Its Commissioner), 4th Floor, Civic Centre, Minto Road, New Delhi-110001
2. The Executive Engineer (M-II) KPZ Municipal Corporation of Delhi Shakti Nagar, Extn.
Delhi-110052 ... Defendants
SUIT FOR RECOVERY OF RS.5,19,555/-
Date of institution : 11/07/2023
Date on which Judgment was reserved : 08/08/2024
Date of Judgment : 09/08/2024
CS (Comm.) No. 1006/2023 Page 1 of 19
Rajesh Kumar Gupta Vs. Municipal Corporation of Delhi & Anr.
::- 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 defendants for recovery of Rs.5,19,555/- 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 the proprietor of M/s Balaji & Associates a firm duly enrolled as Municipal Con- tractor with the defendant no. 1. The plaintiff has been executing work orders of civil nature for the defendants since long.
ii. The plaintiff was awarded work order no. 396 dated 18.02.19. After award of the said work order, the plaintiff has entered into an agreement with the defendants pertaining to the said work order as a precondition of the award of the work order. The plaintiff completed the aforesaid work orders within the stipulated time period to the satisfaction of the Engineer-in-Charge i.e. defendant no. 2.CS (Comm.) No. 1006/2023 Page 2 of 19
Rajesh Kumar Gupta Vs. Municipal Corporation of Delhi & Anr.
iii. The defendant no. 2 has also completed the fi- nal measurement of the work as mentioned in the work order and the bills pertaining to the same were passed and recorded in the measurement books.
iv. As precondition of the award of work order, the plaintiff had also deposited the earnest money towards the same. The details of the amount of Bills, date of passing and amount of security/ earnest money are tabulated hereunder:-
S. Work Amount of Date of Amount of
No. Order passed bill Passing of Security
No. in Rs. Bill Deposit +
(mm/dd/yy EMD in Rs.
y)
1. 396 3,27,533 29.11.2019 38,224
Total Principal Amount (3,27,533+38,224) = Rs.3,65,757/-
v. Despite of passing of the aforesaid bill, neither the aforesaid payment was released to the plaintiff nor he was informed about the reasons of withhold- ing the aforesaid payment. The plaintiff made sev-CS (Comm.) No. 1006/2023 Page 3 of 19
Rajesh Kumar Gupta Vs. Municipal Corporation of Delhi & Anr.
eral requests for release of the amount of the afore- said passed bill but all in vain.
vi. Since the defendants neglected to make the payments, the plaintiff got served a Legal Notice dated 02.03.21 to the defendants calling upon to re- mit the amount along with interest at the rate of 12% per annum. The said notice was duly delivered upon the said defendants but the defendants neither complied nor replied the same.
vii. As per clause 9 of the General Terms and Conditions of the tender documents, the defendants are liable to release the payment of the passed bills within the period of 6/9 months and also to release the earnest/security amount as pr the clause 45 of the General Terms and Conditions.
viii. The defendants are liable to pay interest @ 12% p.a. on entire amount of Rs.3,65,757/-. The amount of interest accrued from the date of passing of the Bill i.e. from 29.11.19 till 31.05.23 (i.e. for 1279 days) is Rs.1,53,798/-. Thus the total suit amount including principal and interest is Rs.5,19,555/-. Hence, the plaintiff has filed the present suit against the defendants.CS (Comm.) No. 1006/2023 Page 4 of 19
Rajesh Kumar Gupta Vs. Municipal Corporation of Delhi & Anr.
DEFENDANT'S CASE
3. In the written statement, the defendants contended inter alia that the suit of the plaintiff is liable to be dis- missed in view of the provisions of Order VII rule 11 CPC for want of cause of action. The defendants further contended that the defendant no. 2 had issued Notice Inviting Tender (NIT) for certain works, which set outs the relevant terms and conditions and makes it clear that the General Conditions of Contract and Special Condi- tions of Contract shall be applicable. Though, the defen- dants admitted having awarded the Work Order No. 396 dated 18.02.2019 to the plaintiff, however, it is submitted that the plaintiff has not submitted 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 order and the purported bills that the plaintiff seeks to rely upon are only internal notings of the defendants and they do not constitute bills for the purpose of payment and the suit is without any cause of action. It is further submitted that execution of the work order was delayed by the plaintiff as per the Section 29.4 of the CPWD Works Manual, 2014. The plaintiff was given a liberty to apply the extension of time with satisfactory explanation to the defendant, however, till date the plaintiff has never applied for the extension CS (Comm.) No. 1006/2023 Page 5 of 19 Rajesh Kumar Gupta Vs. Municipal Corporation of Delhi & Anr.
of time nor submitted any document of completion or labour clearance certificate.
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.
ISSUES
5. On the basis of the pleadings following issues were settled on 24.11.2023 :
i. Whether the plaintiff is entitled for the recovery of the amount as claimed in the plaint? (OPP) 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 period?
(OPP)
iii. Relief.
EVIDENCE OF THE PLAINTIFF
6. In order to prove its case, plaintiff Sh. Rajesh Kumar Gupta has examined himself as PW1 and has filed his ev-
idence by way of affidavit Ex.PW1/A and has relied upon the documents as under:
i. Attested copy of the work order No. 396 dated 18/02/2019 filed by the defendant is ExPW1/1.CS (Comm.) No. 1006/2023 Page 6 of 19
Rajesh Kumar Gupta Vs. Municipal Corporation of Delhi & Anr.
ii. Attested copy of the passed bill (machine no. 44509) filed by the defendant is ExPW1/2.
iii. Copy of legal notice dated 02/03/2021 are ExPW1/3 (OSR).
iv. Copy of postal receipts are ExPW1/4. (OSR) v. Copy of non starter report dated 11/02/2022 issued by DLSA is ExPW1/5.(OSR) vi. Copy of pre-institution mediation application is ExPW1/6.
vii. Attested copy of Measurement Book relating to the present work order filed by the defendant is ExPW1/7 (16 pages).
viii. Attested copy of Demand of funds raised by the defendants to the authority concerned regarding the present work order filed by the defendant is ExPW1/8.
ix. Attested copy of agreement between the parties filed by the defendant is ExPW1/9.
7. This witness was cross-examined by the Ld. Counsel for the defendants and the same shall be discussed in the later part of this judgment.
EVIDENCE OF THE DEFENDANT
8. In order to prove its case, defendant has examined Sh. Anurag Manohar Kankerwal, Assistant Engineer as CS (Comm.) No. 1006/2023 Page 7 of 19 Rajesh Kumar Gupta Vs. Municipal Corporation of Delhi & Anr.
DW1, who has filed his evidence by way of affidavit Ex.DW1/A and has relied upon the following documents:
(i) Copy of notice inviting tender (NIT) no. EE/M-
II/KPZ/TC/2018-2019 dated 26.11.18 is Ex.DW1/1.
(ii) Copy of the work order EE (M-II) KPZ/SYS/2018- 2019/396 dated 18.02.2019 is already Ex.PW1/1.
(iii) Copy of General Clause Condition (GCC) is Ex.DW1/3.
9. This witness was cross-examined by the Ld. Counsel for the plaintiff and the same shall be discussed in the later part of this judgment.
ISSUE WISE FINDINGS Issue No. 1
(i) Whether the plaintiff is entitled for the recovery of the amount as claimed in the plaint? (OPP)
10. The onus of proving this issue was on the plaintiff.
11. It is the case of the defendants that suit of the plain-
tiff 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 Ku- mar RFA No. 430/2017 decided on 22.03.2018.
CS (Comm.) No. 1006/2023 Page 8 of 19Rajesh Kumar Gupta Vs. Municipal Corporation of Delhi & Anr.
12. It is the case of the plaintiff that the present suit has been filed in respect of work order No. 396 and first & final bill passed by the defendants corporation in the sum of Rs.3,27,533/- in respect of the said work order. It is further the case of the plaintiff that the security deposit amount of Rs.38,224/- in respect of the said work order also remains to be paid by the defendants. This is not disputed by the Ld. Counsel for the defen- dants as well.
13. In respect of the said work order, it is the case of the plaintiff that the defendants had passed the first & final bill in the sum of Rs.3,27,533/- which is Ex.PW1/2 and the first page of the said bill was filled by the plaintiff and the remaining pages were filled by the officials of the defendants.
14. It is not the case of the defendants that the officials of the defendants had not prepared this bill Ex.PW1/2. This bill bears the signatures of the Executive Engineer concerned and the Asstt. Accounts Office (AAO) of the defendants and this fact has not been disputed by the defendants.
15. Mere fact that particulars of the said bill were filled by some officials of the defendants in order to help and CS (Comm.) No. 1006/2023 Page 9 of 19 Rajesh Kumar Gupta Vs. Municipal Corporation of Delhi & Anr.
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 bill give rise to pre- sumption that this was submitted by the plaintiff him- self and that approval was given by officials of the de- fendants and it leads to the inference that there was ap- propriate compliance of judgment of Hon'ble High Court in case NDMC Vs. Sanjeev Kumar (Supra).
16. 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. 396 after completion of work in accordance with the terms and conditions of the work contract. From the perusal of the record, it is evi- dent that if the plaintiff has not complied with the GCC guidelines, the defendants also cannot be said to have been complied 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. 396, the defen- dants are also equally guilty of passing the bill in re- spect of the said work order. 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 opin- ion, the claim of the plaintiff cannot be said to be non suited due to the breach of the terms and conditions of the agreement between the parties on this ground CS (Comm.) No. 1006/2023 Page 10 of 19 Rajesh Kumar Gupta Vs. Municipal Corporation of Delhi & Anr.
alone.
17. The plaintiff in his testimony as PW1 has categori-
cally deposed that he immediately after the award of work order made all the necessary arrangements for the execution and completion of the awarded work or- der and completed the said work order before the stipu- lated time. He further deposed that the work was com- pleted 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 nega- tive remark and to the satisfaction of the Engineer-in- Charge/defendant no. 2. He further deposed that the defendant no. 2 completed the final measurement of the aforesaid work recorded in measurement books, thereafter the defendant no. 2 prepared and passed the running bill pertaining to the aforesaid work order and same was accepted by the plaintiff.
18. The issue of award of work order No. 396 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 de- fendants and the preparation of the running bill in re- spect of the said work have not been denied by the de- fendants. Nothing has been brought on record by the defendants to prove that the plaintiff is not entitled to CS (Comm.) No. 1006/2023 Page 11 of 19 Rajesh Kumar Gupta Vs. Municipal Corporation of Delhi & Anr.
the relief sought in respect of the said work order No.
396. There is no reason to disbelieve the testimony of PW1 and in view of unrebutted and unchallanged doc- uments proved by the plaintiff in respect of the said said work order No. 396. Thus, plaintiff is held entitled to the payment of Rs.3,27,533/- which amount was cleared by the defendants in respect of the said work order No. 396.
19. Coming to the issue of refund of security deposit and earnest money in respect of said work order, the defen- dants have taken a plea that plaintiff is not entitled to refund for security for want of compliance of Clause 17 and 45 of GCC.
20. In this regard, the Hon'ble High Court of Delhi in 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 CS (Comm.) No. 1006/2023 Page 12 of 19 Rajesh Kumar Gupta Vs. Municipal Corporation of Delhi & Anr.
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.
21. 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 defendants 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- fendants/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 obser- vations made in the judgment of Rajnish Yadav, Pro- prietor of M/s Bharat Construction Co. (supra), plain- tiff is also entitled to refund of the security deposit and earnest money of Rs.38,224/- qua the said work order.
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)
22. Ld. counsel appearing for the defendants states that CS (Comm.) No. 1006/2023 Page 13 of 19 Rajesh Kumar Gupta Vs. Municipal Corporation of Delhi & Anr.
as per Clause 7 of the agreement, defendants are not li- able to pay interest. On the other hand, Ld. Counsel appearing for the plaintiff urges that since the defen- dants failed to make payment within a period of 6 months, the defendants are liable to pay interest @ 12% p.a. on the entire outstanding amount.
23. 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?
(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?
24. 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 CS (Comm.) No. 1006/2023 Page 14 of 19 Rajesh Kumar Gupta Vs. Municipal Corporation of Delhi & Anr.
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
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;
CS (Comm.) No. 1006/2023 Page 15 of 19Rajesh Kumar Gupta Vs. Municipal Corporation of Delhi & Anr.
. 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 CS (Comm.) No. 1006/2023 Page 16 of 19 Rajesh Kumar Gupta Vs. Municipal Corporation of Delhi & Anr.
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)
25. As per record, the first & final bill was amounting to Rs.3,27,533/- in respect of the said work order and under Clause 7 and 9 of GCC, defendant ought to have released the payment within 6 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. The first & final bill in respect of the said work order was passed on 29.11.2019. Period of 6 months since passing of the said bills have already expired and hence plaintiff is not only entitled to recover the said amount from the defendants but the defendants are also liable to pay CS (Comm.) No. 1006/2023 Page 17 of 19 Rajesh Kumar Gupta Vs. Municipal Corporation of Delhi & Anr.
interest after expiry of period of 6 months from the date of passing of the bill i.e. w.e.f. 29.11.2019 in respect of the said running bill in respect of the said work order till the actual date of payment qua said work order no. 396 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.
26. In terms of the foregoing observations, with respect to the work order No. 396, defendants are directed to pay as under :
(i) an amount of Rs.3,27,533/- in respect of the first & final bill with interest @ 8% p.a. w.e.f. 01.06.2020 till realization.
(ii) further the defendants would refund the security deposit and earnest money of Rs.38,224/- in respect of the said work order within eight weeks from today failing which it shall be payable with interest @ 8% p.a. after the said period till realization.
27. Decree sheet be prepared according.
CS (Comm.) No. 1006/2023 Page 18 of 19Rajesh Kumar Gupta Vs. Municipal Corporation of Delhi & Anr.
28. File be consigned to Record Room.
Digitally signedDEEPAK by DEEPAK GARG GARG Date: 2024.08.09 15:42:24 +0530 Announced in the open Court on (Deepak Garg) Day of 09th August, 2024 Distt. Judge, (Comm. Court)-09, Central District, THC : Delhi CS (Comm.) No. 1006/2023 Page 19 of 19