The Court interpreted various clauses of the General Conditions of Contract and provided guidelines for the proper execution and payment of work orders. The Court held that the clauses in the General Conditions of Contract were unreasonable and contrary to law and interpreted the clauses to provide for a reasonable time limit for payments, with interest payable for delayed payments beyond that time limit. The Court also held that the security deposit was refundable upon fulfillment of certain conditions, with interest payable for delayed refunds.

Prathiba M. Singh, J.

1. These are a batch of appeals which have arisen out of disputes between Contractors/Plaintiffs (hereinafter, ‘Contractors’) on the one hand and the North Delhi Municipal Corporation (hereinafter, ‘NrDMC’) and East Delhi Municipal Corporation (hereinafter, ‘EDMC’), on the other. NrDMC and EDMC are collectively referred to as ‘Corporations'. The facts in each appeal are different and hence separate judgments are being passed in each of the appeals.

2. Briefly, these are cases where various work orders were placed on Contractors by both the Corporations. The works were executed by the Contractors and thereafter, the Engineer-in-Charge has passed the final bills. Payments in respect thereof were not made. Suits for recovery were filed by the Contractors. The Trial Court decreed the suits in favour of the Contractors.

3. In respect of each of the work orders, the Contractors seek either/all of the following payments:

(a). Payment of the principal amount as passed in the final bill;

(b). Refund of security deposit;

(c). Interest on account of late payment of the principal amount, as also due to delay in refund of security deposit.

4. The Corporations rely on Clauses 7 and 9 of the General Conditions of Contract in respect of payment of principal amount and interest, read with the amendment of 19th May, 2006. In respect of the security deposit, the Corporations rely on Clauses 17 and 45 of the General Conditions of Contract for Municipal Corporation of Delhi Works (hereinafter, ‘General Conditions of Contract’). In addition, the Corporations also rely upon Circular dated 10th June 2014 signed by the Chief Engineer, MCD which was issued in the nature of a clarification. The questions that have arisen in all these cases are -

(i) Whether payment of the principal amount can be delayed in view of Clause 7 and Clause 9 of the General Conditions of Contract read with the amendments?

(ii) Whether the refund of earnest money/security deposit can be delayed in view of Clauses 17 and 45 of the General Conditions of Contract?

(iii) Whether interest is payable on delayed payments/refunds and if so, for which period?

5. Arguments have been addressed by Mr. Sunil Goel and Ms. Mini Pushkarna on behalf of the Corporations - NrDMC and EDMC, respectively. On behalf of the Contractors in some matters, Mr. Vinay Kumar has made submissions.

Background of the case

6. In the present appeal, one work order No. 250 dated 31st December, 2012 was awarded to the Contractor by the Corporation. It is averred in the plaint that upon the award of the work order, the execution of the work was undertaken by the Contractor and the same was completed without any negative remark. Upon completion of the work, the Engineer-in-charge computed the final measurements of the work order and passed the first and final bill for a sum of Rs.4,88,827/- on 22nd November, 2013. Despite the final bill being passed, payment was not released. The Contractor had also deposited a sum of Rs.54,210/- as security. Even this amount was not released. Thus, the total claimed amount by including the principal and security deposited was Rs.5,43,037/-. The Contractor issued a notice dated 28th April, 2015 under Section 477/478 of the Delhi Municipal Corporation Act, 1957. Despite service of the said notice, payment was not made. The Contractor thus, filed the subject suit seeking the following payments.

(i) Payment of the principal amount as per the bill passed by the Engineer-in-Charge;

(ii) Refund of security deposited; and

(iii) Payment of interest.

7. In the written statement, the Corporation contended that the requisite documents were not supplied by the Contractor. However, the Corporation contended in the written statement as under:

“4. That the suit of the plaintiff is premature and as such the same is liable to be dismissed. It is further submitted that as and when the contractor provides us the requisite documents of complying with the mandatory statutory provisions only