Varinder Jeet Singh vs Municipal Corporation Of Delhi ...
2013 Latest Caselaw 460 Del

*          IN THE HIGH COURT OF DELHI AT NEW DELHI

+           CS(OS) 1309/2009 and I.A. No.16391/2010

                                           Date of Decision: 31st January, 2013

IN THE MATTER OF
VARINDER JEET SINGH                                           ..... Plaintiff
                         Through:     Mr. Vikas Sharma, Advocate

                         versus


MUNICIPAL CORPORATION OF DELHI AND ANR.            ..... Defendants
                   Through: Mr. Nalin Tripathi, Advocate with
                             Mr. Anurag Sharma, Advocate

CORAM
HON'BLE MS.JUSTICE HIMA KOHLI

HIMA KOHLI, J. (Oral)

1. The plaintiff has instituted the present suit against the

defendants/MCD under Order XXXVII CPC for recovery of a sum of

`28,34,441/-.

2. The admitted facts of the case are that the plaintiff is a contractor

and has been executing works of construction for the defendants/MCD for

the past several years. In or around the year 2005, the defendants/MCD

had invited tenders for improvement/widening of the parking space in

Green Park Main Market in C-13/South Zone. In response to the said

invitation, various parties, including the plaintiff herein, had submitted

their tenders. At the time of submission of tender, the plaintiff had

deposited earnest money of `44,500/- and the balance amount of security

was to be deducted from the bills thereafter. Finally, the work was

awarded to the plaintiff vide Work Order dated 08.07.2005 for a

contractual amount of `21,85,937/-. The date stipulated for commencing

the work was 17.07.2005. However, the work actually commenced on

20.07.2005 and as per the plaintiff, due to the delay on the part of the

defendant/MCD, the work was finally completed on 27.10.2007, whereas

the defendants‟ stand is that the work was completed only on

15.02.2007.

3. It is the case of the plaintiff that after completion of the work, the

defendants/MCD measured the same and it prepared the first running bill

for a gross amount of `14,69,937/-. Out of the aforesaid amount, the

balance security amount of `75,017/- was deducted and upon making

other statutory deductions, the defendants/MCD had passed the said bill

on 18.10.2006 for an amount of `13,35,534/-. The plaintiff claims that

after completing further work, measurements were recorded by the

defendants/MCD and he had raised the second running bill for a gross

amount of `7,04,442/-. After deducting the gross value of the work

executed and the balance security amount of `57,276/- and upon making

other statutory deductions, the defendants/MCD passed the aforesaid bill

on 26.09.2007 for a sum of `6,18,271/-.

4. The plaintiff claims that the work was completed by him to the

satisfaction of the Engineers of the defendants/MCD and that the defect

liability period of six months, as provided for in the Agreement, expired

on 26.04.2008 and thereafter, the security amount of `1,76,793/-,

inclusive of the amount of the earnest money was also refundable to him.

It is averred in the plaint that despite repeated requests, the

defendants/MCD failed to make the aforesaid payments. The plaintiff then

issued a legal notice dated 09.04.2009 dispatched by registered post,

addressed to the defendants/MCD, calling upon it to pay the aforesaid

amount alongwith interest, which was calculated @ 24% per annum on

the aforesaid amount, within a period of two months from the date of

receipt of the said notice. It is stated by learned counsel for the plaintiff

that despite the fact that the aforesaid legal notice was duly received by

the defendants/MCD, it failed to make any payment, thus compelling the

plaintiff to institute the present suit against the defendants/MCD for

recovery of a sum of `28,34,441/-, alongwith future and pendente lite

interest calculated @ 18% per annum.

5. Summons in the present summary suit were issued to the

defendants/MCD in the prescribed format on 22.07.2009. Memo of

appearance was entered on behalf of the defendants on 07.08.2009.

Thereafter, the plaintiff issued summons of judgment to the

defendants/MCD which was served upon them on 22.11.2010 whereafter

they filed a leave to defend application under Order XXXVII Rule 3(5)

CPC, registered as I.A. No.16391/2010. In the said application, the

defendants/MCD had admitted having awarded the work order to the

plaintiff and further stated that against the first running bill raised by the

plaintiff, an amount of `13,35,534/- was passed and released and against

the second running bill, an amount of `6,18,271/- was passed and

released. It was thus averred that having received the payments under

the two bills, the plaintiff is not left with any cause of action to pursue

the present proceedings.

6. A reply to the aforesaid leave to defend application was filed by the

plaintiff on 08.07.2011, wherein it was admitted that payment of a sum of

`12,24,982/- was released by the defendants/MCD on 12.10.2009 and

further, a sum of `7,88,208/- was released on 26.10.2009. As per the

plaintiff, after adjustment of the aforesaid amount received from the

defendants/MCD, a sum of `9,06,952/- is due and payable by the

defendants/MCD on account of the component of interest, calculated @

15% per annum on the aforesaid amounts due to late payment and upon

the security amount deposited, which was inclusive of the earnest money

that had been paid by the plaintiff.

7. On 16.07.2012, as counsel for the defendants/MCD had stated that

the principal amount had already been paid to the plaintiff, thus leaving

only the security amount of `1,76,793/-, which was to be paid to the

plaintiff, learned counsel was directed to obtain instructions from the

Department as to the status of the release of the security amount to the

plaintiff and the suit was adjourned to 20.09.2012. On 20.09.2012,

counsel for the defendants/MCD had stated on instructions from the

Department that the aforesaid security amount would be released to the

plaintiff within two weeks. As counsel for the plaintiff had requested on

the aforesaid date that a hearing in the case may be deferred till the

security amount was actually released in favour of the plaintiff and as he

had further stated that the plaintiff was willing to accept a reasonable

sum on account of interest payable on the delayed payment as may be

fixed by the Court, the matter was adjourned to 22.11.2012.

8. On 22.11.2012, counsel for the defendants/MCD had stated that the

security amount of `1,23,473/- would be released in favour of the plaintiff

after deducting a sum of `53,320/- on account of extension of time that

was granted to the plaintiff for completion of work. The said deduction

made on the part of the defendants/MCD was disputed by the counsel for

the plaintiff, who had sought to rely upon the conditions contained in the

contract governing the parties to urge that the plaintiff was entitled to

claim interest on the principal amount and also on the security amount

which had been illegally withheld by the defendants/MCD. As a result,

counsel for the plaintiff was directed to place on record a copy of the

contract governing the parties alongwith an affidavit furnishing the details

of the principal amounts received from the defendants/MCD, including the

dates of receipts of the aforesaid amounts.

9. The said affidavit has not been filed by the plaintiff till date.

However, counsels for the parties do not dispute the fact that though the

first bill of `13,35,534/- was passed by the defendants/MCD on

18.10.2006, but a sum of `12,24,982/- payable to the plaintiffs, under

the aforesaid bill, was released by the defendants/MCD only on

12.10.2009 , i.e., after a period of 3 years. Similarly, the second bill of

`6,18,271/- was passed by the defendants/MCD on 26.09.2007 but

payment for a sum of `7,88,484/- was released by the defendants two

years later, on 26.10.2009. As regards the security deposit amount,

counsel for the defendants/MCD states that a sum of `1,23,473/- has

been remitted into the account of the plaintiff through electronic transfer

only yesterday, i.e., on 30.01.2013.

10. Today, counsel for the plaintiff states that although, the parties had

not executed a separate contract in respect of the work awarded, they are

governed by the General Rules and Directions issued by the MCD and

Clauses 7 and 9 thereof are relevant. Clause 7 of the General Rules

relates to "Payment on Intermediate Certificate to be Regarded as

Advances" and Clause 9 relates to "Payment of Final Bill". Both the

aforesaid Clauses are reproduced hereinbelow for ready reference:-

"CLAUSE 7 Payment on Intermediate Certificate to be Regarded as Advances No payment shall be made for work, estimated to cost Rs. Twenty thousand or less till after the whole of the work shall have been completed and certificate of completion given. For works

estimated to cost over Rs. Twenty thousand the interim or running account bills shall be submitted by the contractor for the work executed on the basis of such recorded measurements on the format of the Department in triplicate on or before the date of every month fixed for the same by the Engineer-in-Charge. The contractor shall not be entitled to be paid any such interim payment if the gross work done together with net payment/adjustment of advances for material collected, if any, since the last such payment is less than the amount specified in Schedule „F‟, in which case the interim bill shall be prepared on the appointed date of the month after the requisite progress is achieved. Engineer-in-Charge shall arrange to have the bill verified by taking or causing to be taken, where necessary, the requisite measurements of the work. In the event of the failure of the contractor to submit the bills, Engineer-in-Charge shall prepare or cause to be prepared such bills in which event no claims whatsoever due to delays on payment including that of interest shall be payable to the contract. Payment on account of amount admissible shall be made by the Engineer-in-Charge certifying the sum to which the contractor is considered entitled by way of interim payment at such rates as decided by the Engineer-in-Charge. The amount admissible shall be paid by 10th working day after the day of presentation of the bill by the contractor to the Engineer-in-Charge of his Asstt. Engineer together with the account of the material is issued by the department, or dismantled materials, if any.

All such interim payments shall be regarded as payment by way of advances against final payment only and shall not preclude the requiring of bad, unsound and imperfect or unskilled work to be rejected, removed, taken away and reconstructed re-erected. Any certificate given by the Engineer-in-Charge relating to the work done or materials delivered forming part of such payment, may be modified or corrected by any subsequent such certificate(s) or by the final certificate and shall not by itself be conclusive evidence that any work or materials to which it relates is/are in accordance with the contract and specifications. Any such interim payment, or any part thereof shall not in any respect conclude, determine or affect in any way powers of the Engineer- in-Charge under the contract or any of such payments be treated as final settlement and adjustment of accounts or in any way vary or affect the contract.

Pending consideration of the extension of date of completion interim payments shall continue to be made as herein provided, without prejudice to the right of the department to take action under the terms of this contact for delay in the completion of work, if the extension of date of completion is not granted by the competent authority.

The Engineer-in-Charge in his sole discretion on the basis of a certificate from the Asstt. Engineer to the effect that the work has been completed upto the level in question make interim advance payments without detailed measurements for work done (other than foundations, items to be covered under finishing items) upon lintel level (including sunshade etc.) and slab level, for each floor working out at 75% of the assessed value. The advance payments so allowed shall be adjusted in the subsequent interim bill by taking detailed measurements thereof.

CLAUSE 9 Payment of Final Bill The final bill shall be submitted by the contractor in the same manner as specified in interim bills within three months of physical completion of the work or within one month of the date of the final certificate completion furnished by the Engineer-in- Charge whichever is earlier. No further claims shall be made by the contractor after submission of the final bill and these shall be deemed to have been waived and extinguished. Payments of those items of the bill in respect of which there is no dispute and of items in dispute, for quantities and rates as approved by Engineer-in-Charge, will, as far as possible be made within the period specified hereinunder, the period being reckoned from the date of receipt of the bill by Engineer-in-Charge or his authorized Asstt. Engineer, complete with account of materials issued by the Department and dismantled materials.

      (i)    If the Tendered value of work           :     3 months
             is upto Rs.5 lacs

      (ii)   If the Tendered value of the work       :     6 months
             exceeds Rs.5 lacs

11. Counsel for the defendants/MCD states that Clause 7 itself

stipulates that in the event of failure on the part of the contractor to

submit the bills, the Engineer-in-Charge would prepare or cause to be

prepared such bills in which event, no claims whatsoever on account of

delay of payment including interest would be payable to the contractor

and in the present case, as the plaintiff had admittedly not raised any

final bill after completing the work and the bills had to be prepared by the

Engineer-in-Charge of the defendants/MCD for payment, the plaintiff

cannot claim entitlement to any interest on the said amount.

12. The arguments advanced by the other side is refuted by the counsel

for the plaintiff, who submits that the interest that the plaintiff claims

from the defendants/MCD is not for the period prior to passing of the bills,

but is for the period thereafter till the dates when the payments were

actually released. He further states that Clause 9 of the General Rules

and Directions stipulates that if the tendered value of the work is upto `5

lacs, then as far as possible, payment in respect of such work would be

cleared within a period of three months and if the tendered value of the

work exceeds `5 lacs, then payment would be made within a period of six

months and the present case falls in the latter category. He points out

that the first bill was passed by the defendants/MCD on 18.10.2006 and

the second bill was passed on 26.09.2007, but the payments were

released as late as in October, 2009, thus entitling the plaintiff to receive

interest on the amount paid so belatedly. In support of the aforesaid

submission, learned counsel seeks to rely upon the following decisions:-

(i) CS(OS) 1797/2007 entitled Jagbir Singh Sharma vs. MCD and Ors. decided on 15.07.2008.

(ii) CS(OS) 2218/2007 entitled M/s Roshan Lal Vohra & Sons vs. MCD & Ors. decided on 26.08.2008.

(iii) CS(OS) 943/2008 entitled M/s Jagbir Singh Sharma vs. MCD & Ors. decided on 20.11.2008.

(iv) CS(OS) 1503/2008 entitled Dev Dutt Sharma vs. MCD & Ors. decided on 25.01.2011.

13. Counsel for the defendants/MCD disputes the submission made by

the other side that Clause 9 of the General Rules and Directions is

applicable to the facts of the present case. He states that the plaintiff had

failed to raise a final bill on the defendants/MCD as per the provisions of

Clause 9 of the General Rules and Directions and in such circumstances,

he cannot claim entitlement to any interest. It is further stated by

learned counsel that the MCD follows the policy of payment to the

contractor on a first in and first out basis and therefore the plaintiff had to

await his turn for the payment due to him to mature, upon the MCD

receiving the grants from the Govt. of NCT of Delhi.

14. As noted above, the only dispute pending in the present case

relates to the interest, if any, payable to the plaintiff for the duration of

the delay in the release of the amounts payable by the defendants/MCD

and also on the security deposit amount, which has been released after a

substantial delay upon deducting a penalty of 3% on account of extension

of time in execution of the contract.

15. It is settled law that if a person is deprived of the use of money to

which he is legitimately entitled, he has a right to be monetarily

compensated for the said deprivation. [Ref: (1992) 1 SCC 508 :

Secretary, Irrigation Deptt. Govt of Orissa vs. G.C. Roy; (2004) 5 SCC

65 : Ghaziabad Development Authority vs. Balbir Singh, and (2009) 8

SCC 507 : Sri Venkateswara Syndicate vs. Oriental Insurance Company

Ltd. and Anr.]. The object behind awarding interest to a party, who has

suffered loss, due to a legitimate deprivation of the enjoyment of the use

of money that he was entitled to rightfully, is to balance the equities and

while doing so, the facts involved in each case must be examined by the

Court.

16. The statutory provisions with regard to payment of interest are laid

down in Section 3 of the Interest Act, 1978, that provides that in any

proceedings for the recovery of any debt or damages or in any

proceedings in which a claim for interest in respect of any debt or

damages already paid is made, the court may, if it thinks fit, allow

interest to the person entitled to the debt or damages or to the person

making such claim, as the case may be, at a rate not exceeding the

current rate of interest, if the proceedings do not relate to a debt payable

by virtue of a written instrument at a certain time, from the date

mentioned in this regard in a written notice given by the person entitled

or the person making the claim to the person liable, then interest will be

claimed, till the date of institution of the proceedings.

17. In the present case, admittedly, the plaintiff had issued a notice

dated 09.04.2009, calling upon the defendants/MCD to clear the

outstanding dues with interest payable @ 24% per annum. In view of the

provisions contained in Section 3 of the Interest Act, 1978, the plaintiff is

entitled to claim interest from the date, the principal amount was due and

payable to him by the defendants/MCD. Even if the submission of the

counsel for the defendant/MCD that the plaintiff failed to raise a final bill

is accepted, it is an undisputed position that the defendants/MCD had

passed the first bill of the plaintiff on 18.10.2006, but the said amount

was finally paid three years later, on 12.10.2009 and the second bill was

passed on 26.09.2007 but was paid two years later, on 26.10.2009.

18. As regards the security deposit amount, as per Clause 17 of the

General Rules and Directions, the defendant/MCD could have retained the

aforesaid amount only for the duration of the defect liability period of six

months reckoned from the date of completion of the contract. Counsel for

the defendants/MCD has submitted that the contract had been completed

by the plaintiff by 15.02.2007. The period of six months if reckoned from

the aforesaid date would have expired on 14.08.2007. However, after

deduction of 3% penalty on account of extension of time, the

defendants/MCD has released a sum of `1,23,473/- to the plaintiff almost

five years later, on 30.01.2013.

19. In the aforesaid facts and circumstances and having regard to the

nature of the transaction between the parties, this Court is of the opinion

that the plaintiff is entitled to receive interest from the defendants/MCD,

calculated @ 10% per annum after the expiry of two months from the

date when the first and the second bills were passed by the

defendant/MCD, i.e., on 12.10.2009 and 26.10.2009 respectively.

Further, the plaintiff is granted interest calculated @ 10% per annum on

the security deposit amount of `1,23,473/- that was lying with the

defendant/MCD, after excluding the period of six months from the date of

completion of the work, i.e., from 15.02.2007, which would then

commence from 15.8.2007.

20. The suit is decreed as above, with costs and counsel‟s fee quantified

at `10,000/-. It is further directed that if the defendants/MCD fails to pay

the decretal amount to the plaintiff within a period of two months from

the date of passing of this order, then the awarded amount shall carry

pendentelite interest @12% per annum, till realization. Decree sheet be

drawn accordingly.

21. The suit is disposed of alongwith the pending application.

                                                                    (HIMA KOHLI)
JANUARY 31, 2013                                                       JUDGE
rkb/mk/sk