MCD Cannot Withhold Payment on Admitted RA Bills: Delhi High Court Rules

The Delhi High Court has once again signaled a firm message to the Municipal Corporation of Delhi (MCD), warning against the "mechanical" filing of appeals in cases where legal liability is already well-settled. In a recent order, a Division Bench comprising Justice Prathiba M. Singh and Justice Madhu Jain dismissed an appeal filed by the MCD, directing the immediate release of funds owed to a contractor for completed municipal work.

The Backdrop: A Stalled Contract

The dispute originated from a works contract awarded to M/S Ram Niwas Goel in July 2019 for the construction of classrooms and ancillary facilities at a pre-school in Central Delhi. Despite the contractor completing a significant portion of the work and raising Running Account (RA) bills that were subsequently cleared by the MCD, the payments remained frozen.

The contract, which was to be completed within 18 months, ultimately saw the work halted amidst rising disputes. With the MCD failing to honor the admitted bills, the contractor approached the Commercial Court, which eventually decreed a recovery of over Rs. 1.29 crore along with interest.

The "Mechanical" Appeal Strategy

The MCD challenged the Trial Court's decision before the High Court. However, the Respondent’s counsel argued that the appeal was devoid of merit and a clear abuse of judicial process. Pointing to the landmark ruling in North Delhi Municipal Corporation v. Vipin Gupta , counsel noted that the law regarding the payment of admitted bills is settled: if the corporation accepts the bills raised by a contractor, it cannot withhold payment on the grounds of administrative delays or lack of funds.

The court noted that the MCD had previously been directed by a coordinate bench to formulate a screening protocol for litigation, ensuring that the Chief Law Officer reviews pleadings to prevent the re-agitation of settled legal issues.

Key Observations from the Court

The bench expressed dissatisfaction with the MCD’s stance, emphasizing that once the work is verified and the bills are acknowledged, the contractor’s right to payment is crystallized. During the hearing, the court highlighted:

> "The stand of the MCD is that only 35% of the work was completed. This Court is of the view that if there was any breach by the Contractor, it was for the MCD to avail of its remedies. Once the RA bills for the work which was completed has been admitted and approved by the MCD, the grant of the decree cannot be faulted."

Further, the court underscored the necessity of honoring financial obligations to maintain the quality of essential civic works:

> "Once the work is carried out payments ought not to be delayed, inasmuch as delay in payments compromises on availability of quality civil work for the Corporations."

The Verdict and Future Implications

Finding no error in the Trial Court’s decree, the High Court held that the MCD was liable to pay the decreed amount with 6% interest from the date of filing the suit. The court ordered the immediate release of the deposited decretal amount, currently held in a Fixed Deposit Receipt (FDR), to the contractor.

This decision serves as a stern reminder to municipal bodies that procedural delay and the "routine" filing of appeals against settled legal positions will not be tolerated. For contractors working under government contracts, the ruling reinforces that their fundamental right to receive payments for verified work remains protected under the law, regardless of the bureaucratic hurdles often placed in their way.