Mcd vs Anil Gupta And Ors.
2019 Latest Caselaw 3703 Del

$~
*      IN THE HIGH COURT OF DELHI AT NEW DELHI
                                               Reserved on: 16th July, 2019
                                          Date of decision: 8th August, 2019
+                         O.M.P. 709/2011
       MCD                                                   ..... Petitioner
                          Through:     Mr. Sunil Goel, Standing Counsel
                                       with Ms. Supreet Bimbra and Mr.
                                       Mayank Goel, Advocates with Mr. K.
                                       S. Maan, EE and Mr. Vimal
                                       Bhandari, AE. (M: 9810215488)
                          versus

       ANIL GUPTA AND ORS.                              ..... Respondents
                    Through:           Mr. Darpan Wadhwa and Mr. Aditya
                                       Chhibber,    Advocates.       (M:
                                       9810233548)
     CORAM:
      JUSTICE PRATHIBA M. SINGH
                      JUDGMENT

Prathiba M. Singh, J.

I.A. 2364/2019 (modification of order dt. 12.12.2018) in O.M.P. 709/2011

1. The present OMP was disposed of vide judgment dated 12th December, 2018. However, an application was filed by the Petitioner through the Standing Counsel for the North Delhi Municipal Corporation, the successor to the Municipal Corporation of Delhi (hereinafter, jointly referred to as „Corporation‟) seeking recall and modification.

2. The case arose out of a construction contract for the zonal building of the Corporation in Narela. The work was awarded to an earlier contractor in 1998, who had left the work incomplete and accordingly, the remaining work was awarded to Respondent No. 1 (hereinafter, „Contractor‟) on 28th August, 2004. Disputes had arisen in respect of the said project. Various

claims were raised relating to escalation under Clause 10CC, reimbursement of amount spent in keeping watch/ward, short payment, interest and costs.

3. This Court had upheld the award of the Ld. Arbitrator, in the judgment rendered on 12th December 2018 (hereinafter, „judgment‟). One of the first facts noted by the Court, as captured in paragraphs 9 to 11 of the judgment, was in respect of a condition imposed by the Contractor, which reads as under:

"9. This Court has heard the submissions of the parties and has also gone through the written submissions filed by them. The first and the foremost fact that needs to be noted is that the contractor at the time when he submitted his bid in response to the tender, had done so on the following condition:

"Condition:

1) Our Rates are hold good for Monthly Payment if the monthly Payment not be done then 24% interest will be Charged."

10. The fact that the above condition was written in hand by the contractor at the time of submitting the bid itself shows that:

i) Timely monthly payments were essential for the contractor, especially owing to the past history wherein the earlier contractor had exited the contract due to non-payment by MCD;

ii) The contractor also agreed to carry out the work only if monthly payment was made;

iii) For any delay 24% interest would have to be paid by the MCD.

11. This condition shows that that the contractor was apprehensive about the fact that the payments may not be made in a timely manner by the MCD, which apprehension in fact turned out to be true. The contractor took over the project on 22nd September,

2004, but due to the nature of the property and the condition in which it was left by the earlier contractor, certain clarifications were sought. On 28th December, 2004, since no decision was taken by the MCD, that the work had to be stopped by the contractor. Repeated communications have also been relied upon to support the contention that timely payments were also not made. The Commissioner, MCD thereafter agreed to process the contractor's payment on priority and it was only thereafter the work could be re-commenced."

On the basis of the above condition, which was contained in the documents and the arbitral record, the Court had concluded that the Contractor was apprehensive about the payments not being made in a timely manner.

4. The completed building had been taken over by the Corporation. The Court noted that escalation was liable to be granted under Clause 10CC of the contract. However, the award of watch and ward was set aside on the ground that no evidence was placed on record. Thereafter, paragraph 18 of the judgment noted the condition of 24% interest which the Contractor had imposed in the tender and concluded as under:

"18. The contractor had demanded interest @ 24% as a condition in the tender. The Arbitrator has awarded interest @ 18% for the entire period from 8th March 2004 viz., `the date of cause of action i.e. 08.03.2004 till the date of filing suit, date of degree and date of payment holds goods as per law.‟ The notice of arbitration was given on 6th July, 2008 i.e. within a period of 10 months after the actual date of completion. However, in view of the fact that the work involved was in respect of the zonal office building of the MCD at Narela, which is a public amenity, the simple interest @ 18% p.a. shall be payable from date of invocation of arbitration i.e., 6th July 2008 till date of award. However, during the period when the

objection petition remained pending before this Court, the interest is modified to simple interest on awarded amount @12% p.a. till today.

19. If the entire payment is made within 8 weeks, no further interest would be charged and if the payment is not made within 8 weeks, then simple interest @ 18% p.a. would be liable to be paid on the entire amount."

5. An application has come to be moved by the Corporation for modification of the judgment on the ground that the condition seeking payment of interest at 24% p.a. if the monthly payment is not made, which was purportedly imposed by the Contractor was, in fact, withdrawn by the Contractor subsequently and the Court has been misled into believing that the said condition was in operation. The stand in the application is that after receipt of the judgment, when the file was being processed and legal opinion was sought, ld. counsel for the Corporation expressed surprise on the fact that the Corporation had accepted a conditional tender, which was completely unusual.

6. The said opinion was sent to the Chief Law Officer of the North Delhi Municipal Corporation and the files relating to the present contract were traced. Upon tracing the files, it was revealed that the Contractor had actually given a letter on his own letter head withdrawing the condition which he had added in the tender form. The said letter is set out herein below:

7. The fact that the Contractor had withdrawn the condition was also clear from the negotiation letter. Finally, when the award of contract was approved, the competent authority of the Corporation records that the condition has been withdrawn. On the basis of these three important and relevant documents - viz., the letter of withdrawal, the negotiation letter as

also the detailed note sheet recording the approval of the competent authority, it is submitted that the Contractor was well aware that the condition had been withdrawn and despite that, the Court was misled in believing that the condition was in operation.

8. Further, it is submitted that due to change of department staff and lack of continuity within the department, it was unable to place the relevant records either before the Ld. Arbitrator or before this Court. It is thus prayed by the Corporation that the rate of interest awarded be modified. The prayer in the application is as under:

"In view of the aforesaid facts and circumstances, it is therefore, most respectfully and humbly prayed that this Hon'ble Court may kindly be pleased to appropriately modify the Order dated 12.12.2018 thereby recording that the unilateral condition written by respondent contractor by hand while submitted his tender (as recorded in para 9 of Order dated 12.12.2018) was withdrawn by him prior to award of contract/work order to him and further modifying the rate of interest to 9% p.a. as pleaded in para 7 of the application above and suitably extend the time for the petitioner to deposit/pay the same, in the interests of justice.

Any other further order as this Hon‟ble Court deems fit and proper in the facts and circumstances of the case may also be passed in favor of the petitioner and against the respondents."

9. When this application was listed, notice was issued in this application and the Corporation was directed to produce the original records. Mr. Anil Gupta, proprietor of the Contractor was also directed to be present in Court. His statement was recorded on 8th March, 2019, which reads as under:

"Statement of Mr. Anil Kumar Gupta, S/o Late Mr. Nathu Ram Gupta, R/o B5/151, Safdarjung Enclave, New Delhi.

On S.A.

I have been dealing with the MCD since 1980. I am a regular contractor with the MCD and regularly visit their office. I had two legal disputes with the MCD and one I am yet to file. I get contracts worth approximately Rs.8 to 15 crores per annum from the MCD. I deal with almost all the zones of the MCD. The dispute in the present case relates to the construction of the Narela Zonal Office of the MCD. The value of the contract was approximately Rs.4 crores. The matter was argued by my counsels, namely, Mr. Aditya Chibber and Mr. Ankur Chibber on 12 th December, 2018. I had instructed my counsels about all the relevant facts in the matter. (The witness has been shown the affidavit in support of his reply and he confirms that the signatures on the affidavit are his.) (The witness has been shown original page no.811 of the MCD record produced by Mr. Goel. He states that the signatures on this letter do not belong to him.) The name of my firm is M/s Nathu Ram Gupta & Co. (He admits that the original letter head shown to him at page no.811 of the MCD record is of his firm. The said letter head is taken on record and is exhibited as Exhibit R-1.) The Executive Engineer designated for my contract with the MCD, as per my memory, was Mr. M.S. Yadav. Since it was long time back, I do not recall accurately. I was the lowest tenderer in this bid. (The witness has been shown original page no. 802 of the MCD record. He admits that his bid has been accurately reflected in the document. The same is taken on record and exhibited as Exhibit R-2.) I was called for negotiations after I had submitted

the bid. I was asked to reduce the rate as my rate was higher. The bid amount which I had submitted was 17.17% above. The offer was reduced by me to 17%. I admit the signatures appearing at page no.816 of the MCD record. (The same is taken on record and exhibited as Exhibit R-3.) I was not present when the matter was argued on th 12 December, 2018. Only my counsels were present on that date.

(At this stage, the witness is shown the original negotiation letter appearing at page.816 of the MCD record) Question: - Please point out where your signatures are in this document.

Answer:- In the document exhibited as Exhibit R-3, the witness has admitted his signatures in four places which are marked as points A, B, C and D."

The documents that are exhibited on the basis of the statement of the Contractor are:

i. Exhibit R1 - Letter written on the letter head of M/s. Nathu Ram Gupta & Co., extracted hereinabove.

ii. Exhibit R2 - Document of the `Engineering Department' reflecting the various bids submitted including that of the Contractor.

iii. Exhibit R3 - Negotiation letter where the Contractor makes three offers and there is a handwritten note which reads - "I hereby withdraw my condition for monthly payment and interest of 24% on a/c of non payment". This document has four signatures of the Contractor - i.e., below all three offers and below the above note. However, the contractor denies the note, while admitting the signatures.

10. The submission of Mr. Sunil Goel, ld. counsel appearing for the Corporation is that the manner in which the Ld. Arbitrator and the Court

have been misled, is not condonable. He submits that the Contractor has deliberately taken advantage of the change of staff at the Corporation and misguided the Ld. Arbitrator and the Court to rely on this condition to project the case against the Corporation. It is further submitted that the original record shows that when the negotiations took place, the Contractor clearly withdrew the condition which he had imposed. The fact that the condition was withdrawn is clear from the negotiation letter placed on record as also the permission, which was given for processing of the award of the contract, which has been approved right till the Mayor of Delhi on 30th July, 2004.

11. Mr. Darpan Wadhwa, ld. Senior counsel for the Respondents, on the other hand submits that the Contractor had not been relying on the condition which he had imposed. The Contractor had merely prayed for 18% interest even in the arbitral proceedings. It was the Corporation, which had produced the tender form containing the condition, which was then relied upon by the Ld. Arbitrator. Thus, the Contractor had not misled the Ld. Arbitrator. Further, he relied upon the various letters written by the Contractor seeking escalation which clearly showed that the Contractor was merely asking for 18% interest even on the escalation amount. He submits that the imposition of the said condition was not central to the case of the Contractor and thus, this Court ought not to be swayed by the fact that the condition was withdrawn. It is further submitted that the negotiation letter (Exhibit R-3) as also the letter on the letter head (Exhibit R-1) are forged documents and are not genuine. Therefore, such documents cannot be relied upon by the Corporation. It is further submitted that after passing of the final judgment, the court becomes functus officio and cannot vary the terms of the

judgement in an application filed under Section 151 of the CPC.

12. Ld. counsel for the Corporation relied upon the Hon'ble Supreme Court's judgment in A.V. Papayya Sastry & Ors. v. Government of A.P. & Ors., 2007 V AD (S.C.) 21, as well as the judgment of this Court in Dr. Manmohan Singh Dhaliwal v. Gurbax Singh, 94 (2001) DLT 820 to argue that in cases where a judgment or order has been obtained by playing fraud upon the Court, the Court has the inherent power under Section 151 of the CPC to recall its judgment or order.

13. The Court has heard the counsels for the parties and perused the original record of the Corporation. There is no doubt that the original record of the Corporation was never produced either before the arbitral tribunal or before the court when the final arguments took place. Both the tribunal and the Court were kept in the dark about crucial and relevant documents including Exhibits R1-3 and the office notings thereon. These documents were important and would have had a bearing on the decision in the disputes between the parties. While on the hand the non-placing of these records is not condonable on behalf of the Corporation, there can be no justification whatsoever, for the contractor who was aware of all the facts, not to reveal these documents/facts.

14. Every litigant is expected to place all the necessary, relevant and complete facts before the Court. A litigant cannot seek to justify the suppression of these documents simply by stating that he never relied upon them. Unlawful and Fraudulent conduct includes both commission and omission. Even deliberate suppression of a document or silence about a fact which the litigant is aware of, constitutes suppression. It is not necessary to commit an overt act. Even discreet silence is as bad.

15. On the tender form, there was a condition in handwriting, which is initially imposed by the Contractor, which reads as under:

"Our Rates are hold good for Monthly Payment if the monthly Payment not be done then 24% interest will be Charged."

However, the original negotiation letter which has been produced, shows that there was proper negotiation held with the Contractor and at that time, the Contractor gave three offers, each of which is signed by him and the condition has been specifically withdrawn. The said document is relevant and is extracted herein below:

On the basis of this document, permission to award the tender was processed and the same reads as under:

"Subject: - Permission to process the tender case for construction of Zonal Office Building in Narela Zone at Narela (remaining work) in anticipation approval of Corporation through Works Committee. The worthy Commissioner vide his letter No. PSC/CO-272/03 dated 10.10.2003 has desired to resume the construction of the office building for which the funds shall be provided by C.A.-cum-P.A either from MCD budget or by taking short term loans as and when required.

Accordingly, estimate amounting to Rs.4,60,60,481/- for the above said work (remaining work) was prepared and tenders amounting to Rs.3,66,67,376/- were called after taking permission from the Competent authority in anticipation approval of Corporation vide NIT No.EE(Pr.)R/TC/03-04/29 dated 30.1.2004 due on 10.3.2004. The lowest tenderer M/s Nathu Ram Gupta & Co. has quoted their rates @ 17.17% above with the condition of monthly payment. During negotiation held on 29.3.04 the contractor has reduced the rates from 17.17% above to 17.00% above and withdraw the condition of monthly payment. ..."

16. The Contractor admits his signatures on the above document at points A, B, C and D. However, he denies the sentence written above point 'D' which reads - "I hereby withdraw my condition for monthly payment and interest of 24% on a/c of non-payment". Thus, the Contractor's argument that the writing above Point D is not his, would not be sufficient. Even alleging that there is forgery is not sufficient. The existence of contemporaneous documents viz., negotiation letter, note sheet duly signed by the competent authority, none of which are disputed, shows that the condition was indeed withdrawn. The signatures of the officers of the Corporation on these documents is not disputed by either side. Thus,

independent of the letter Exhibit R1, there is sufficient material to conclude that the condition was clearly withdrawn by the contractor during negotiations and prior to the award of the contract. The note sheet clearly records that the Contractor had initially put the condition which was thereafter withdrawn.

17. What is shocking and surprising is the fact that even during the course of final arguments before this Court, reliance was placed on the said condition. Even if it is presumed that the counsel who had argued was not aware of the withdrawal of the condition, at the time when the record was put to the Contractor himself, who was present in Court, he blatantly denied having withdrawn the condition. He admitted the letter exhibited as Exhibit R-1, which is the negotiation letter, and admitted his signature at points A, B, C & D in the document. However, it was argued that the sentence mentioned above the signature at point D was not written by him. It was claimed that the signatures on Exhibit R-1 do not belong to him. He also confirmed that he was the lowest tenderer in the bid and admitted the document which contained the bid itself, i.e., Exhibit R-2.

18. A perusal of the original record of the Corporation leaves no matter of doubt that the condition which the contractor had put was withdrawn and this fact was concealed all along in the arbitral proceedings as well as before this Court. Contemporaneous documents, including the letter on the original letter head of the Contractor i.e. Exhibit R-1, the negotiation letter i.e. Exhibit R-3 and the note to be put up by the department which was approved right till the Mayor, establish the withdrawal of the condition. Clearly the Contractor was in the wrong.

19. Another shocking feature of this case is that the tender form

containing the condition was produced by the Corporation before the Ld. Arbitrator. At that stage, the Contractor did not inform the Ld. Arbitrator of the withdrawal of the condition but the Corporation employees also failed to produce these records relating to the withdrawal of the condition. The said documents were not easy for anyone to miss as is evident from the original file produced before the Court. The staff of the Corporation are also to blame in this regard.

20. The above events throw light on a very disturbing feature of proceedings of this nature, i.e. selective documents being relied upon in the proceedings. The fact that the withdrawal of the condition went unnoticed in all these years till the final judgment was passed by this Court clearly shows that there is no accountability whatsoever within these departments. The contract dates back to the year 2004, i.e., 15 years ago. The impugned award is dated 1st April, 2011 and the matter was finally disposed of on 12th December, 2018. Despite so many years having passed by, the withdrawn condition continued to be part of the record.

21. In such a situation, the court is not powerless. When parties play a fraud on the Court or deliberately suppress relevant facts and documents and further mislead the court, the argument of functus officio would not be applicable. The Court has the inherent power to recall/modify its order/judgment. This is the settled position as held in A.V. Papayya Sastry & Ors. v. Government of A.P. & Ors., 2007 V AD (S.C.) 21 and Dr. Manmohan Singh Dhaliwal v. Gurbax Singh, 94 (2001) DLT 820, the relevant portions of which are extracted below:

A.V. Papayya Sastry & Ors. v. Government of A.P. & Ors., 2007 V AD (S.C.) 21

"21. Now, it is well-settled principle of law that if any judgment or order is obtained by fraud, it cannot be said to be a judgment or order in law. Before three centuries, Chief Justice Edward Coke proclaimed:

"Fraud avoids all judicial acts, ecclesiastical or temporal."

22. It is thus settled proposition of law that a judgment, decree or order obtained by playing fraud on the court, tribunal or authority is a nullity and non est in the eye of the law. Such a judgment, decree or order--by the first court or by the final court--has to be treated as nullity by every court, superior or inferior. It can be challenged in any court, at any time, in appeal, revision, writ or even in collateral proceedings.

26. Fraud may be defined as an act of deliberate deception with the design of securing some unfair or undeserved benefit by taking undue advantage of another. In fraud one gains at the loss of another. Even most solemn proceedings stand vitiated if they are actuated by fraud. Fraud is thus an extrinsic collateral act which vitiates all judicial acts, whether in rem or in personam. The principle of "finality of litigation" cannot be stretched to the extent of an absurdity that it can be utilised as an engine of oppression by dishonest and fraudulent litigants."

Dr. Manmohan Singh Dhaliwal v. Gurbax Singh, 94 (2001) DLT 820 "26. Thus the Court has inherent powers under Section 151 CPC to recall its judgment or order if it is obtained by playing fraud upon it as it cannot remain a silent or helpless spectator. Main function of the court is to administer justice. Judgment or order procured by playing fraud upon the Court cannot be rammed down the throat of

the aggrieved party. Justice and fraud are aliens to each other. Fraud pollutes the sanctity and solemnity of the judicial proceedings. This is why Courts have inherent powers to recall or set aside such a judgment or the order."

22. This matter calls for an enquiry into the working of the officials of the Corporation as also if there was any malpractice in the deliberate suppression of relevant and material documents. Responsibility also needs to be assigned upon the officials, who were involved in the pairvi of this case, both before the Ld. Arbitrator and before this Court. The above facts could also be a reflection of serious misdemeanours in imposition and acceptance of tender conditions and withdrawal thereof. It is noticed that in several cases conditions/undertakings are submitted by Contractors but the Contractors are permitted to resile from the same later on. A proper policy needs to be put in place to ensure that the files of such contracts are properly maintained and are made available in case of disputes, to be placed before the fora which adjudicates the disputes. A proper policy on data management also needs to be framed by the Corporation in this regard, including with respect to maintaining electronic copies of files.

23. For such apparent omissions in placing the true facts before the court and the arbitral tribunal, responsibility ought to be affixed on the errant officers. It is, accordingly, directed that the Central Vigilance Commission (hereinafter, „CVC‟) conduct an enquiry into this matter and submit a report within three months as to who were the officers responsible for not placing the entire facts before the Arbitral Tribunal and before this Court, and if the Contractor was also involved in the said records not being placed before the Court. Specific responsibility be assigned by naming the officers. The

outcome of the enquiry and the recommendations of the CVC be placed before this Court within three months for further directions in the matter.

24. On merits, the Court is convinced that the original record makes it clear that the condition of 24% interest in the event that monthly payment was not made, was clearly withdrawn. On behalf of the Contractor, it has been submitted that any reasonable rate of interest be awarded to the Contractor. However, in order to ensure that such conduct is not encouraged and to ensure the integrity of the adjudication process, it is directed that no interest shall be payable to the Contractor in the facts and circumstances of the present case. The awarded amount shall be paid within a period of eight weeks to the Contractor. No interest would be payable from the date of invocation of the arbitration till the date of judgment dated 12th December, 2018. Even the award of costs is set aside. The amounts liable to be paid would be as under:

 Claim 1 - Allowed. Claimant held to be entitled to payment of Rs. 62,48,150/- escalation charges as per the arbitral award.  Claim 2 - Set aside due to absence of evidence by judgment dated 12th December, 2018.

 Claim 3 - In the impugned award, the Ld. Arbitrator notes that qua Claim 3, the Contractor was guilty of submitting false and frivolous claims and a penalty of approximately Rs. 4,000 was levied on him for misleading the arbitrator.

 Claim 4 - Set aside.

 Claim 5 - Set aside.

25. Thus, the Corporation is directed to pay a sum of Rs.62,44,150/- without any interest. If the said payment is made within 8 weeks, no further

payment would be liable to be made. If the payment is not made, simple interest @ 9% p.a. would be liable to be paid on the awarded amount from expiry of 8 weeks till the date of payment.

26. I.A. is disposed of in the above terms.

27. Let a copy of this order be sent to Mr. Sharad Kumar, Central Vigilance Commissioner and to Mr. Ashok Malik, Chief Vigilance Officer, North Delhi Municipal Corporation.

PRATHIBA M. SINGH, J.

JUDGE AUGUST 08, 2019/dk