Interest on security deposit is not payable unless the contractor fulfills the conditions specified for refund, which includes obtaining a Labour Clearance Certificate.

JUDGMENT

Navin Chawla, J. (Oral)

This appeal has been heard through video conferencing.

CM APPL. 21736/2021 (Exemption)

Allowed, subject to all just exceptions.

RFA (COMM) 11/2021 & CM APPL. 21735/2021

1. This appeal has been filed by the appellant challenging the judgment and decree dated 10.02.2021 passed by the learned District Judge - Commercial Court-05 (Central) in suit being CS (COMM) No.2687/2019 titled R.K. Goel Abhey Kumar Jain vs. The Executive Engineer (MII) Clz & Anr., directing the appellant herein to pay interest at the rate of 12% per annum on the principal amount of Rs.56,77,386/- due from the appellant on the final bills for the three work orders for the period from 15.12.2016 to 19.07.2020 and to further pay interest at the rate of 12% per annum on the security amount of Rs.5,72,329/- from 25.07.2018 till 14.10.2020.

2. The learned counsel for the appellant limits the challenge to the judgment and decree to the extent of direction of payment of interest at the rate of 12% per annum from 25.07.2018 to 14.10.2020 on the security amount of Rs.5,72,329/-.

3. Issue notice. Notice is accepted by Mr.Avinash Trivedi, Advocate on behalf of the respondent.

4. With the consent of the learned counsels for the parties, the appeal is taken up for final adjudication at this stage itself.

5. The learned counsel for the appellant submits that the direction to pay interest on the security amount in the Impugned Judgment is contrary to Clause 45 of the General Conditions of Contract which prohibits refund of security deposit till the contractor produces clearance certificate from the Labour Officer. She submits that in the present case admittedly, the respondent did not produce the clearance certificate from the Labour Officer and therefore, was in fact not entitled to a refund of the security amount. However, the appellant on its own refunded the said amount to the respondent on 15.10.2020, therefore, there was no question of payment of any interest on the said amount and the learned Trial Court has erred in directing the same.

6. On the other hand, the learned counsel for the respondent has placed reliance on the judgment of the learned Single Judge of this Court in North Delhi Municipal Corporation & Anr. vs. Shish Pal, 2018 SCC OnLine Del 8039 to contend that the appellant was under an obligation to refund the security amount after a period of six months from the date of the completion of the work, where no communication is received from the Labour Officer within the said period. He submits that in such a case there is a deemed clearance from the Labour Officer and the security deposit is liable to be released. He submits that therefore, the learned Trial Court has rightly directed payment of interest on the wrongly withheld security deposit with effect from 25.07.2018 till the date of its actual payment.

7. We have considered the submissions made by the learned counsels for the parties.

8. Before adverting to the submissions, a brief background of the progress of the suit resulting in the present appeal needs to be noticed.

9. The respondent filed the above suit seeking a recovery of Rs.94,23,142/- (Ninety Four Lacs Twenty Three Thousand One Hundred Forty Two only) from the appellant herein for the three Work Orders mentioned hereinbelow:

(1) Improvement/strengthening of road from D-17 to E-332, Azadpur Municipal Colony by Dense Carpeting in C-72/CLZ vide work order no. EE(M-CLZ)-III/SYS/2014-2015/182 dated 23.09.2014.

(2) Improvem