2018 Supreme(Del) 123

IN THE HIGH COURT OF DELHI AT NEW DELHI
PRATHIBA M. SINGH, J.
North Delhi Municipal Corporation – Appellant
Versus
Vipin Gupta – Respondent
RFA No. 160 of 2017 & CM APPL. 5807 of 2017 (Stay)
Decided On : 22-03-2018

Headnote:

The court examined the validity of clauses 7 and 9 of the General Conditions of Contract (GCC) and the amendment of 2006, which dealt with the payment of bills to contractors by the North Delhi Municipal Corporation (NrDMC) and East Delhi Municipal Corporation (EDMC). The court held that the clauses were unreasonable and contrary to law as they did not specify a fixed time limit for payment, leaving the contractors with no remedy if the corporations failed to pay for the work executed. The court interpreted the clauses to mean that the reasonable time for making payments of final bills would be 6 months for work orders up to Rs.5 lakhs and 9 months for work orders exceeding Rs.5 lakhs from the date the bill is passed by the Engineer-in-Charge. The court also held that the queue basis for payments could be applied only for clearing payments within the 6-month and 9-month periods and not beyond that, as it would be unreasonable. The court issued guidelines for both the contractors and the corporations to follow to ensure proper execution of work orders, timely submission and passing of bills, and prompt payments to contractors.

Fact of the Case:

The case involved a batch of appeals filed by contractors who had executed work orders for the NrDMC and EDMC. The contractors had not been paid for the work executed, and they filed suits for recovery. The corporations relied on clauses 7 and 9 of the GCC and the amendment of 2006 to justify the delay in payments. The contractors argued that the clauses were unreasonable and contrary to law.

Finding of the Court:

The court held that clauses 7 and 9 of the GCC and the amendment of 2006 were unreasonable and contrary to law as they did not specify a fixed time limit for payment, leaving the contractors with no remedy if the corporations failed to pay for the work executed. The court interpreted the clauses to mean that the reasonable time for making payments of final bills would be 6 months for work orders up to Rs.5 lakhs and 9 months for work orders exceeding Rs.5 lakhs from the date the bill is passed by the Engineer-in-Charge. The court also held that the queue basis for payments could be applied only for clearing payments within the 6-month and 9-month periods and not beyond that, as it would be unreasonable.

Issues: 1. Whether clauses 7 and 9 of the GCC and the amendment of 2006 were valid and enforceable. 2. Whether the corporations were justified in delaying payments to the contractors. 3. Whether the contractors were entitled to interest on the delayed payments.

Ratio Decidendi: The court held that clauses 7 and 9 of the GCC and the amendment of 2006 were unreasonable and contrary to law as they did not specify a fixed time limit for payment, leaving the contractors with no remedy if the corporations failed to pay for the work executed. The court interpreted the clauses to mean that the reasonable time for making payments of final bills would be 6 months for work orders up to Rs.5 lakhs and 9 months for work orders exceeding Rs.5 lakhs from the date the bill is passed by the Engineer-in-Charge. The court also held that the queue basis for payments could be applied only for clearing payments within the 6-month and 9-month periods and not beyond that, as it would be unreasonable.

Final Decision: The court decreed the contractors' suits for recovery of the principal amount, minus the payments already made. The court also directed the corporations to make the payments within a period of eight weeks, failing which, interest @ 12% p.a. would be payable upon the expiry of the said period, on the decretal amount, till the date of payment. The court also issued guidelines for both the contractors and the corporations to follow to ensure proper execution of work orders, timely submission and passing of bills, and prompt payments to contractors.