Delhi High Court
North Delhi Municipal ... vs Munish Anand on 22 March, 2018
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 22nd January, 2018
Date of decision: 22nd March, 2018
+ RFA 447 & CM APPL. 16332/2017(stay)
NORTH DELHI MUNICIPAL CORPORATION &
ANR. ..... Appellants
Through: Ms. Renu Gupta, Advocate.
versus
MUNISH ANAND ..... Respondent
Through: Mr. Vinay Kumar, Advocate.
CORAM:
JUSTICE PRATHIBA M. SINGH
JUDGMENT
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 judgements 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 case, the Contractor was awarded work order No.412
dated 25th September 2014, and work order No. 261 dated 4th December
2014. The Contractor contends that the work was completed in time and the
period prescribed for defect liability also passed without any negative
remark to the satisfaction of the Engineer -in- Charge. The final bills were
passed for the following amounts by the Corporation, details of which are as
under:
Sr. Work Amount of Date of Amount
No Order No. Passed passing of Security
(first and bill deposit/earn
final) bill in est money in
Rs. Rs.
1. 412 410387.00 13.03.2014 49504.00
2 261 342796.00 30.06.2015 41361.00
Total 844048.00 85864.00
Grand Total of passed bills and security 929912.00
amounts (844048+85864)
However, in the above table there are calculation errors. The total sum
payable is Rs.8,44,048/- and not Rs. 9,29,912/- as claimed by the contractor.
Despite repeated requests, the amount was not paid. Legal notice dated 22nd
May, 2015 qua work order No.412 and notice dated 14th September, 2015
qua work order No.261 were issued to the Corporation. Thereafter, the
subject suit for recovery of Rs.9,29,912/- was filed.
7. The Corporation filed its written statement and pleaded as under:
"2. That the suit of the plaintiff is pre-mature and
as such the same is liable to be dismissed. There is a
specific condition in the Agreement entered into
between the parties that the payment of bill will depend
on availability of funds in particular head of account
from time to time in North DMC. The payment of bills
shall be made strictly on queue basis i.e. first the past,
liabilities will be cleared and after that the release of
payment for passed bills will be in order of the demand
received at Head Quarter under particular head of
account. Thus, it is submitted that the delay in making
the payment do not attract any liability and the plaintiff
is not entitled to any interest on account of delay in
payment as per the amended rules incorporated vide
circular dated 19.05.2006 in N.I.T./ Tender conditions.
The plaintiff, after going through & understanding the
terms and conditions of NIT as well as tender
documents, had participated in the Tender and
executed the work."
8. The Corporation also contended that no bills were submitted by the
Contractor but it was the Engineer-in-Charge who passed the bill for
principal amount of Rs.7,53,183/-. It was, however, admitted that the final
bill was sent to the Head quarter for payment on queue basis. The written
statement avers as under:
"6-7. Para 6& 7 of the plaint are wrong and denied. It
is denied that no efforts were made by the defendants
for release of payment. It is further denied that the
plaintiff made various request for release of payment
but no heed was paid by the defendants. All the
allegations are false, frivolous, concocted and hence
denied. In fact the defendant No.2 had sent the bill in
demand on 27.08.2014 vide demand no. 363/23, in
respect of work order no. 412. In so far as the work
order no. 261 is concerned, unverified demand was
sent to the Head Quarter on 31.07.2015. But the same
are still under process. The plaintiff has intentionally
and deliberately concealed the facts that the clause
no.7, 9, 9A and 10CA were amended vide circular no.
D/E(P)-III/27/2006-07 dated 19.05.2006. After
amendment of clause 9, the payment of passed bills will
depend on availability of funds in the particular head
of account, from time to time in MCD. Payments of the
passed bills shall be made strictly on queue basis i.e.
first the past liabilities will be cleared and after that,
the release of payment for passed bills will be in order
of the demand received at HQ under particular head of
account. The plaintiff is a regular contractor of the
defendants and is well aware of the aforesaid facts and
had participated in the tenders after fully
understanding the terms and conditions of the tender
documents and NIT. It is emphatically denied that as
per clause 9 of the term and conditions, the defendants
are liable to release the payment of the passed bills
within a period of three months. The position in this
regard has been changed since the year 2006 vide
above detailed circular. The security amount can only
be paid after payment of the final bills, that too when
the plaintiff applies for refund of security amount and
make necessary formalities in this regard, including
submission of the Clearance Certificate from the
General Terms and Conditions of the Tender
Documents."
9. The Corporation, thus, submitted that insofar as the security deposit is
concerned, the same is not liable to be refunded until payment of final bills
and compliance of conditions contained in Clause 45.
10. On 11th February, 2016, on an application under Order XII Rule 6 of
the CPC, the Trial Court decreed the suit for the principal sum of
Rs.7,53,183/- in the following terms:
"14. Since the outstanding payment of amount of first
and final bill of Rs. 7,53,183/- stands admitted in
unequivocal, unambiguous, unqualified terms by
defendant in favour of plaintiff, so far that is
concerned, the plaintiff is entitled for judgment on
admissions. Plaintiff is held entitled for recovery of
sum of Rs.7,53,183/- in his favour and against the
defendant under Order XII Rule 6 of CPC. Decree
sheet be prepared accordingly.
15. So far as the facets of security amount and
component of interest, its period, rate or whether it is
payable by defendants to plaintiff are concerned, they
are the mixed questions of fact and law, requiring
leading of evidence by the parties at the opportune
time and shall be adjudicated after adducing of
evidence by the parties."
Thus, the trial court decreed the suit for the correct Principal amount and not
the amount claimed by the Contractor.
11. On 23rd February, 2016, the following issues were framed in the
matter:
"ISSUES
1) Whether the plaintiff is entitled for refund of earnest
money/security deposit, as claimed, or not? Onus of
proof of parties.
2) Whether the plaintiff is entitled for interest? If so, on
what amount, at what rate and for which period? OPP
3) Relief."
12. The Contractor led the evidence of Shri Munish Anand, proprietor of
the firm, as PW-1 who stated in cross examination as under:
"I am aware of the circular dated 19.05.2006 of
defendant Corporation. I participated in tender
process which was online. I was aware of all terms and
conditions of tender process. I had not submitted any
bill for work done after completion of the work. I did
not apply for labour clearance certificate before
Labour Commissioner. I did not apply for refund of
security before defendant Corporation. Voltd. it is so
applied only after release of payment of work done"
13. The Corporation led the evidence of Shri K.C. Gupta, Assistant
Engineer who deposed as DW-1 that no bills were submitted by the
Contractor and that the Engineer-in-Charge had himself prepared the bills.
DW1 further relied upon the NIT, Tender documents and Clauses 7 & 9 to
submit that no interest is payable. DW1 further contended that Clause 45
was not complied with by the Contractor. In his cross examination DW1
deposed as under:
"It is correct to suggest that plaintiff contractor had
not submitted the bill after completion of works or
work orders in question. It is correct to suggest that
bills were passed by us for the work orders in question.
It is correct to suggest that till final payment of the
bills are not paid, security is not refunded. It is
incorrect to suggest that payment of the bills in
question was to be done within three months of passing
of the bills in question. We did not receive any
complaint from office of Labour Commissioner
concerned with regard to works of work orders in
question. It is incorrect to suggest that plaintiff is
entitled for sums claimed including refund of security
and interest on delayed payments. It is incorrect to
suggest that I am deposing falsely."
14. The order dated 11th February, 2016 in the application under Order
XII Rule 6 was carried in appeal by the Corporation in RFA 293/2016 which
was disposed of vide order dated 1st December, 2016. This order is
discussed in detail below. However, in paragraph 15 of the said order the
Court recorded as under:
"15. It is therefore clarified that the consent orders
passed in these appeals shall only govern the payments
that are the subject matter of the impugned judgments
and decrees and the suits that have been instituted by
the respondents against the appellants for recovery of
the security amount with interest, etc. and are pending
adjudication in the trial court, shall continue."
15. Considering the nature of the dispute, in the final judgment dated 10 th
January, 2017, the Trial Court records the passing of order dated 1 st
December, 2016 and observed as under:
"25. On 02.01.2017, order of date 01.12.2016 in
RFA No.293/2016 of Hon‟ble Ms. Justice Hima Kohli
was received. Perusal of said order reveals that RFA
NO. 786/2016 had been treated as a lead matter in all
connected appeals filed by appellant North DMC,
therein and in terms thereof, the Hon‟ble High Court
has passed the consent order with respect to the
principal amount payable and interest on principal
amount to plaintiff in terms thereof and has left the
aspect of security and interest thereon pending
adjudication in this Court to be continued. Aforesaid
decision of Hon‟ble High Court in RFA 293/2016 is on
appeal filed by North DMC before High Court of
Delhi, impugning decree and judgment of this Court of
date 11.02.2016 and passed under Order XII Rule 6 of
CPC, herein before elicited."
16. Thus, the issue of refund of security and interest was decided by the
Trial Court. The suit was decreed vide final judgement dated 10 th January,
2017 as under:
"27. In view of my findings with respect to issues
no. 1 and 2, the suit of the plaintiff is decreed in terms
that plaintiff is held entitled for recovery of security
sum of Rs.90,865.00 as well as interest @ 7.5% per
annum w.e.f. (i) 25.07.2015 on Rs.49,504/-; and (ii)
18.09.2015 on Rs.41,361/- till realization with costs
from defendants. Decrees sheet be prepared and file be
consigned to record room."
17. In the present appeal, therefore, only the question of refund of
security and interest thereon was left for adjudication.
18. Order No.1 - Order dated 1st December, 2016 passed in lead matter
RFA 786/2016 and 192/2016 - These orders were passed in appeals
preferred by the Nr.DMC and EDMC, respectively - In this order, a Learned
Single Judge of this Court records that a consensus has been arrived between
the Corporations and Contractors in the following terms:
"2. On 17.11.2016, with the consent of the
parties, the following order was passed :
"6. After interacting with the counsels for the
parties, a consensus has been arrived at and
the following consent order is passed:-
(i) The appellants shall file fresh compilations,
complete in all respects in respect of the
respondents and the other contractors,
irrespective of whether they have filed any
appeals/suits of recovery or not, so that there
is a clarity about their priority in the wait
list.
(ii) The appellants undertake to strictly adhere
to the timeline mentioned in the compilation,
for releasing payments to the respondents.
(iii) No payment shall be released out of turn
by the appellants.
(iv) The appellants shall ensure that the
budget for release of amounts under the head
of Non-Plan Expenditure is increased on a
regular basis so that the release of payments
can be expedited to the respondents and
other contractors in the wait list, even prior
to the dates of priority mentioned against
their names.
(v) The appellants shall upload the
compilation on their websites for ease of
access and update it regularly at the end of
each month for the respondents and others to
know what their status is in the wait list.
(vi) Having regard to the fact that the
appellants expect the respondents to stay
their hands and not pursue their legal
remedies for execution of the impugned
judgments and decrees for a period
mentioned hereinafter, it is agreed that
interest shall be payable to the respondents
on the principal amount after the expiry of
three years and ninety days reckoned from
the date the concerned Division had passed
the bills of the respondents for payment. In
other words, a cushion of 90 days is being
provided to the Head Quarters of both the
appellants for completing the administrative
work of receiving and diarising the bills
received from different Divisions and
preparing a combined list for payment and it
is agreed that for the said period, no interest
shall be payable to the respondents.
(vii) It is further agreed that the appellants
will not be liable to pay interest on the
principal amounts payable to the
respondents under the impugned judgments
and decrees, for a period of three years
reckoned from the date of expiry of 90 days
mentioned above.
(viii) However, immediately on expiry of three
years as noted above, if the amounts remain
outstanding for any reason whatsoever, the
appellants shall pay interest @ 9% per
annum on the principal amount to the
respondents, for the remaining period, till
realization.
(ix) It is further agreed that the aforesaid
arrangement of payment of interest by the
appellants @ 9% per annum on the
outstanding principal amount to the
respondents shall continue only for a period
of two years, reckoned from the end of the
third year as mentioned in clause (vii)
hereinabove.
(x) If the amounts remain payable by the
appellants even thereafter, the respondents
shall be entitled to seek legal recourse for
execution of the impugned judgments and
decrees and claim interest on the decretal
amount from day one.
(xi) The respondents undertake that in view of
the settlement arrived at with the appellants,
as recorded above, they shall not take any
steps to file execution petitions in respect of
the impugned judgments and decrees, subject
matter of the present appeals, for the period
mentioned hereinabove.
(xii) As for the already pending execution
petitions, orders passed in these proceedings
shall be placed on record so that they can be
disposed of by the concerned courts on the
basis of the consent order, with liberty
granted to the respondents to file fresh
execution petitions in case of default on the
part of the appellants, as has been detailed
above."
19. The said order further records in paragraph Nos.14 to17 as under:
"14. The said offer is however unacceptable to the
counsels for the respondents who submit that they
would rather pursue the pending suits for payments of
the security amount with interest etc. as the time line
mentioned by the appellants for release of the
payments is too long.
15. It is therefore clarified that the consent orders
passed in these appeals shall only govern the payments
that are the subject matter of the impugned judgments
and decrees and the suits that have been instituted by
the respondents against the appellants for recovery of
the security amount with interest, etc., and are pending
adjudication in the trial court, shall continue.
16. At this stage, Mr. Sudhir Gupta, learned
counsel appearing for the respondents in RFA
701/2016, RFA No.707/2016, RFA 788/2016, RFA
789/2016, RFA 791/2016 submits, on instructions from
his clients, that they are ready and willing to settle the
entire dispute with the appellant/NrDMC by accepting
the timeline for release of payments, including the
amount due towards security deposit, as mentioned in
Annexure-A. The other side is in any case agreeable to
the said suggestion.
17. Accordingly, the entire dispute, subject matter
of the captioned appeals including the claim of refund
of security deposit with interest etc. raised in the suits
instituted by the said respondents out of which the
appeals have arisen, stand full and finally settled in
terms of the consent order passed on 17.11.2016. It is
clarified that the appellant/NrDMC shall refund the
security amounts to the said respondents, subject
matter of the pending suits, contemporaneous to the
release of the decretal amounts, as per the seniority
assigned to them in the wait list on the same terms and
conditions as recorded on 17.11.2016. In view of a
comprehensive settlement having been arrived at
between the appellant/NrDMC and the respondents in
the appeals mentioned in para 16 above, the
respondents in the said cases shall file copies of the
orders passed in these proceedings in their respective
suits and be at liberty to approach the trial court for
seeking refund of the court fees under Section 16 of the
Court Fees Act."
20. Order No.1 dated 1st December, 2016 was passed in lead matter RFA
786/2106 and RFA 192/2016 involving NrDMC and EDMC. By this order,
the Learned Single Judge of this Court disposed of a bunch of NrDMC and
EDMC matters based on a consensus arrived at between the parties. The
Court refers to an earlier order dated 17th November, 2016 and disposes of
all the appeals in the following terms -
i) That the Corporation would prepare a complete list of
contractors whose payments are due;
ii) As and when funds become available, payments would be
released to the Contractors on the basis of the priority in the waiting
list. No out of turn payments would be released. The list of the
Contractors would be uploaded on the website;
iii) Interest would be payable after a period of three years and 90
days from the date when the bill is passed by the concerned division;
iv) Interest would not run for a period of three years and 90 days as
mentioned above;
v) Upon the expiry of the said period, if amounts remain
outstanding, the said interest @ 9 % p.a. on the principal amount for
the remaining period shall be paid;
vi) The said interest @ 9% p.a. shall be liable to be paid for a
period of two years;
vii) If after the period of two years, amounts remain outstanding,
the Contractor shall be free to pursue their legal remedies and seek
execution of the judgments and decrees passed in their favour and
also claim interest on the decretal amount as per their respective
entitlement from day one;
viii) No execution shall be filed for the period agreed. In so far as
security amount and interest is concerned, as per paragraph 15, the
Contractors were at liberty to pursue their remedies, since suits for
recovery were already pending;
ix) In few of the appeals mentioned in paragraph 16 executed
herein above, settlements was arrived at even qua refund of security
deposit and interest.
For the sake of convenience, the above mentioned order dated 1 st
December, 2016 is referred to as `Order No.1'. On the basis of this
order, several appeals of the Corporation were disposed of.
21. In so far as security amount and interest is concerned, the suits that
are pending adjudication in the Trial Court would continue. Only some
Appellants, therein, agreed for a simple refund of security deposit without
interest and the matter was closed qua the said Contractors. NrDMC and
EDMC had attached Annexure-A along with the said order along with the
details of the names of the Contractors, work orders, proper wait list of the
Contractors with the expected month/year for payments.
Proceedings before the Supreme Court.
22. Order No.1 came to be assailed before the Supreme Court in Special
Leave to Appeal (C) No. 9623/2017 Yashpal Gulati v. EDMC. The
Supreme Court recorded on 15th September, 2017 as under:
"It is stated by the learned counsel for the East Delhi
Municipal Corporation that two bills have already
been paid to the petitioner and the third bill in respect
of which payment is due will be cleared in the month of
November, 2017.
The respondent- Corporation is directed to act
accordingly.
List the matter in the first week of December, 2017."
23. In many connected Special Leave Petitions (hereinafter, „SLPs‟), the
Supreme Court vide order dated 15th September 2017 recorded as under:
"Heard the learned counsel for the petitioner and
perused the relevant material.
Delay condoned.
Issue Notice.
List the matter along with Special Leave Petitioner
(Civil) No.9623 of 2017.
All amounts admitted to be due to the petitioner will
be paid by the respondent- Corporation in the
meantime."
24. On 5th January, 2018, in several appeals/SLPs arising out of Order
No.1, the Supreme Court passed the following order:
"Delay condoned.
In this group of cases some of the petitioners
have been paid the principal amount and the earnest
money whereas some of the petitioners have been paid
only the principal amount. Some of the petitioners have
not been paid even the principal amount. Such of the
petitioners who have not been paid the principal
amount/earnest money/security deposit be paid the
amounts due under the aforesaid heads.
The present Special Leave Petitions have been filed
against order(s) of the High Court which appears to be
consent order(s). Disputes have been raised that the
petitioners have not given their consent. We are not
inclined to go into the said aspect of the matter.
However, we leave it open for the petitioners to agitate
the said question before the High Court, if they are so
advised.
With the aforesaid observation, the present
Special Leave Petitions as well as all pending
applications therein shall stand disposed of".
25. The Supreme Court directed payments to be made to the Contractors
who approached the Court by way of SLPs, "in the meantime", on the first
hearing. By the order disposing of the SLPs, the payment of Principal
amount, Earnest money and Security deposit were directed to be made. This
in effect meant that the said Contractors were not to stand in the queue but
payments were released to them under Supreme Court orders. The Supreme
Court did not adjudicate the matter on the question of interest or the question
as to whether consent was given.
26. Thus, in effect, Order No.1 dated 1st December, 2016, to the extent
that it gave sanctity to the queue system which was also subsequently
followed by Learned Single Judges of this Court, appears to have been
superseded by the Supreme Court insofar as the Queue system of payment is
concerned. In any event, all the three issues on which consent had been
initially recorded in order dated 1st December, 2016 i.e. payment of principal
on queue basis, payment of interest only after three years and 90 days, as
also security deposit, was open for re-agitation. Order No.1 was in effect
modified in respect of the Contractors who approached the Supreme Court.
On the issues of law raised in those appeals and writs, there was no decision
on merits.
27. It is settled as far back as in 1989, when the Supreme Court in
Municipal Corporation of Delhi v. Gurnam Kaur (1989) 1 SCC 101 held
that consent orders do not adjudicate upon the merits of the dispute and
hence do not constitute binding precedents. Relevant extract of the judgment
is as under:
"10. It is axiomatic that when a direction or order is
made by consent of the parties, the court does not
adjudicate upon the rights of the parties nor does it lay
down any principle. Quotability as „law‟ applies to the
principle of a case, its ratio decidendi. The only thing
in a judge‟s decision binding as an authority upon a
subsequent judge is the principle upon which the case
was decided. Statements which are not part of the ratio
decidendi are distinguished as obiter dicta and are not
authoritative..."
This position taken by the Supreme Court has been followed by a Single
Judge of this Court in Yash Sehrawat v. Board of Control for Cricket in
India 2014 (141) DRJ 518.
28. There are two different sets of appeals in this batch. The first batch of
appeals are those in which the order dated 1 st December, 2016 was passed in
respect of the same work orders. The second set of appeals arises out of
different work orders, though sometimes the contractors are the same. To the
extent the appeals relate to the same work order, the parties shall be bound
by the 1st December, 2016 order. However, the said order cannot apply in
the second set of cases as the transactions are completely separate and
distinct. The appeals arise out of completely different suits. Consent terms of
different proceedings and transactions cannot be imposed. Moreover, even
insofar as the first set of appeals are concerned, Contractors have pressed for
the relief of interest on Principal amounts. The question of consent was also
left open by the Supreme Court for being re-agitated. Even in the first set of
appeals where the issue of security deposit and interest thereon was left open
by the order of 1st December 2016, Corporations argue that security deposit
is not liable to be refunded until the final bill is passed - which can only
happen as per the queue system, subject to availability of funds. This is not
acceptable to Contractors who argue that refund of security deposit is not
dependent on the passing of the final bill. Hence, the legal and factual issues
in these appeals have to be adjudicated on their own merits. However, in the
present case, only the question of refund of Security and interest thereon
remains to be adjudicated.
Questions
29. The questions, therefore, that arise in this appeal are:
(i) Whether the refund of earnest money/security deposit can be
delayed in view of Clauses 17 and 45 of the General Conditions of
Contract?
(ii) Whether interest is payable on delayed payments/refunds and if
so, for which period?
Question No.1 - Refund of Security deposit
30. In respect of each work order, the Contractors have to deposit 10% as
the security deposit at the initial stage. Upon the payment of the final bill
and after issuance of labour clearance certificate, the security deposit is
liable to be refunded. There is no doubt that the security deposit is liable to
be refunded after the submission of the documents, certificates from the
Labour Officer. Clause 17 and Clause 45 relating to refund of security
deposit reads as under:
"CLAUSE 17
Contractor liable for damages, defects during
maintenance period :
If the contractor or his working people or servants
shall break, deface, injure or destroy any part of
building in which they may be working, or any
building, road, road kerb, fence, enclosure, water pipe,
cables, drains, electric or telephone post or wires,
trees, grass or grassland, or cultivated ground
contiguous to the premises on which the work or any
part is being executed, or if any damage shall happen
to the work while in progress, from any cause whatever
or if any defect, shrinkage or other faults appears in
the work within twelve months (six months in the case
of work costing Rs.5.00 lacs and below except road
work) after a certificate final or otherwise of its
completion shall have been given by the Engineer-in-
Charge as aforesaid arising out of defect or improper
materials or workmanship the contract shall upon
receipt of a notice in writing on that behalf make the
same good at his own expense or in default the
Engineer-in-Charge cause the same to be made good
by other workmen and deduct the expense from any
sums that may be due or at any time thereafter may
become due to the contractor, or from his security
deposit or the proceeds of sale thereof or of a sufficient
portion thereof. The security deposit of the contractor
shall not be refunded before the expiry of twelve
months (six months in the case of work costing Rs.5.00
lacs except dense carpet works) after the issue of the
certificate final or otherwise, of completion of work or
till the final bill has been prepared and passed
whichever is later. In case of dense carpet works the
Security Deposit of the contractor shall not be
refunded before the expiry of 5 & 7 years of
maintenance from last day of the month in which a
particular road is completed in case of binder of
penetration 60/70 grade & CRMB 60 binders
respectively.
CLAUSE 45
Release of Security deposit after labour clearance :
Security Deposit of the work shall not be refunded
till the contractor produces a clearance certificate
from the Labour Officer. As soon as the work is
virtually complete the contractor shall apply for the
clearance certificate to the Labour Officer under
intimate on to the Engineer-in-Charge. The Engineer-
in-Charge on receipt of the said communication, shall
write to the Labour Officer to intimate if any complaint
is pending against the contractor in respect of the
work. If complaint is pending on record till after 3
months after completion of the work and/or no
communication is received from the Labour Officer to
this effect till six months after the date of completion it
will be deemed to have received the clearance
certificate and the security Deposit will be released if
otherwise due."
31. Clauses 17 and 45 relating to security deposits have also been
interpreted in the Circular dated 10th June 2014, as under:
"Clause 17:- The security deposit shall not be
refunded before expiry of one year from the date of
completion of work.
Clause 45:- Security deposit shall not be refunded till
the contractor produces clearance certificate from the
Labour Officer."
32. A perusal of all the aforementioned Clauses reveals that:
a) For refund of security deposit, a clearance certificate is needed
from the Labour Officer;
b) Once the work is completed, the Contractor would apply for the
clearance certificate under intimation to the Engineer-in-Charge;
c) The Engineer-in-Charge has to communicate to the Labour Officer
if there is any complaint in respect of the work executed;
d) If after completion of the work, 3 months have elapsed and no
communication is received, after date of completion, there is a
deemed clearance certificate and the security deposit is liable to be
released.
33. Thus, irrespective of the date of payment of the principal amount, the
security deposit cannot be held back beyond a period of 6 months from the
date when application is made to the Labour Officer for issuance of the
clearance certificate. These Clauses do not brook any delay in so far as the
refund of the security deposit is concerned. Moreover, there is no clarity
whatsoever as to how the refund of Security deposit is subject to the queue
system and availability of funds. The Clause itself does not contemplate any
such condition. Thus, the security deposit is liable to be refunded upon the
compliance of the conditions in Clauses 17 and 45 of the General Conditions
of Contract. The Supreme Court also directed immediate payment of
Security deposit in its order dated 5th January 2018.
34. Insofar as interest is concerned, the Security amount/Earnest money
deposited would be refundable upon the fulfilment of the conditions
contained in Clauses 17 and 45 of the General Conditions of Contract.
Interest would be payable on delayed payments.
Final decree on facts
35. In the present appeal, after the passing of the 1st December, 2016
order, only the question of refund of security and interest thereon was left
for adjudication. The Trial court has taken note of the order dated 1 st
December, 2016 and granted refund of the security deposit as also interest
thereon. The security deposit is liable to be refunded but no pendente lite
interest is liable to be paid as the Contractor had not filed for the labour
clearance certificate before the labour officer. There was no compliance of
Clauses 17 and 45 of the General Conditions of Contract. However, on the
amount of security deposit, interest would be liable to be granted from the
date of passing of the decree by the trial court.
36. Based on the pleadings, evidence and the reasoning above, the suit of
Contractor is liable to be decreed as under:
i) Decree for a sum of Rs.90,865/- towards the refund of security
amount along with simple interest @ 8% p.a. from date of decree by
the Trial Court till i.e., 10th January 2017 till payment;
ii) In so far as the principal amount and interest thereon is
concerned, the parties are bound by order dated 1st December, 2016 as
they related to the same transactions/work orders;
37. The Corporation is directed to make the payment within 8 weeks,
failing which, 12% interest p.a. shall be payable upon expiry of the said
period till the date of payment.
38. The impugned judgment/decree is modified in the above terms.
Decree sheet be drawn accordingly. Appeal stands disposed of along with all
pending applications. No order as to costs.
39. By way of separate order passed today in these appeals, certain
guidelines are issued. These guidelines shall be read along with the
judgments pronounced today in all these appeals.
PRATHIBA M. SINGH, J.
Judge
MARCH 22, 2018/dk/Rahul
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ RFA Nos.160/2017, 167/2017, 171/2017, 208/2017, 136/2017, 56/2017,
58/2017, 50/2017, 53/2017, 166/2017, 573/2017, 571/2017, 570/2017,
397/2017, 42/2017, 43/2017, 419/2017, 420/2017, 421/2017, 422/2017,
425/2017, 427/2017, 429/2017, 430/2017, 431/2017, 432/2017, 434/2017,
436/2017, 437/2017, 438/2017, 439/2017, 440/2017, 443/2017, 444/2017,
445/2017, 447/2017, 558/2017, 563/2017, 574/2017, 410/2017, 418/2017,
1009/2016 & 560/2017
CORAM:
JUSTICE PRATHIBA M. SINGH
ORDER
% 22.03.2018
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 judgements are being passed
in each of the appeals.
The present guidelines are being issued in all the appeals. The Court
has had the opportunity of perusing the trial court records in all these 43
appeals. A perusal of the records reveals the following:-
1. In most cases, the Contractors who are awarded the work orders do
not submit the interim or final bills to the Engineer-in-Charge for
approval;
2. The final measurement recordal is done by the Engineer-in-Charge;
3. The final bill is also prepared and passed by the Engineer-in-Charge
on his own accord and the Contractor then accepts it;
4. The procedure for obtaining labour clearance certificate from the
Labour Officer is not followed;
5. Once the bills are passed, Contractors are made to wait endlessly for
their payments on the ground of non-availability of funds;
6. Even for refunds of Security Deposit and Earnest money deposits, the
Contractor is made to wait till the final payment is made;
7. The measurement books and the photographs of work, actually carried
out, are not produced in evidence.
The above process is contrary to the General Conditions of Contract.
It is therefore, necessary and important that all the steps of the Contract are
followed by the Contractors and the Corporations. The following guidelines
are being passed:
1. Along with the work order, all the Clauses of the General Conditions
of Contract should be attached;
2. On the award of the Work order, periodic inspections of the work
being carried out should be done by the Engineer-in-Charge;
3. If possible, photographs of the works at different stages should be
taken and maintained on the record;
4. Interim bills should be submitted by the Contractor - duly certifying
the work which has been carried out;
5. Final bills should be submitted by the Contractor - duly certifying the
work carried out along with photographs;
6. The Bill should be scrutinised by the Engineer-in-Charge, works
should be recorded in the measurement book and thereafter, the bill
should be passed;
7. Once the Bill is passed, the payment schedule of 6 months and 9
months should be adhered to. Delay in payments would result in
Interest being levied;
8. For refunds of Security deposit and Earnest Money deposit, the
Contractor should unscrupulously comply with the conditions in
Clauses 17 and 45. For refunds to be made, payment of final bill need
not be awaited. Once the conditions of Clauses 17 and 45 are
complied with and the final bill is passed, refunds ought to be made;
9. In suits relating to recovery of Contractor's dues, all the evidence
including the NIT, General Conditions of Contract, periodic
inspection reports, Final bill as submitted, Final bill as passed,
Measurements carried out, Photographs etc., should be produced and
duly exhibited.
10.IT infrastructure ought to be created to maintain records of the work
orders, inspection reports, final bills, photographs etc., digitally, as it
is noticed that the trial court record does not contain all the relevant
documents and in several cases, different versions of clauses are
relied upon by both sides, bills are not properly understandable and
there is no evidence of actual inspections or measurements having
been taken. Maintenance of digital records will make it more
transparent and easily accessible for the officials and for production in
the Court in case of future litigation.
Adherence to the above shall ensure that the works are duly carried
out as per the quality standards prescribed and there is proper record of work
being done. 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, who take care of basic amenities for citizens such
as roads, pavements, civil works, sewerage lines etc.
These guidelines shall be read along with the judgments pronounced
today in these appeals.
PRATHIBA M. SINGH, J.
Judge
MARCH 22, 2018/Rahul/dk
