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Judgment
Manoj Kumar Ohri, J
By way of the present batch of petitions filed under Article 226 of the Constitution of India, the petitioners have sought release of payments due and payable to them under the bills prepared and approved by respective Assistant Engineer(s) and counter-signed by Junior Engineer(s) of the erstwhile North Delhi Municipal Corporation, East Delhi Municipal Corporation and South Delhi Municipal Corporation (hereinafter, collectively referred to as ‘Corporation’) against the works executed by the petitioners. The petitioners have also claimed interest @ 24% per annum from the date of approval of the bills.
As the issue raised in all petitions is the same, they have been taken up for consideration together and are being disposed of accordingly vide a common judgment. With the consent of the parties, W.P.(C) 116/2021 is being treated as the lead case.
A perusal of the petitions would show that the petitioners claim themselves to be registered contractors engaged with the Corporation for carrying out development work in various municipal wards. They are aggrieved by the failure of the Corporation in making payments due towards them for execution of tender works, and reportedly in some cases, the bills have remained pending for reimbursement by the Corporation since the year 2014-15.
Learned counsels for the petitioners submitted that the Corporation has not released the due payments, ostensibly relying on Clauses 7 and 9 of the General Conditions of Contract. It was also submitted that despite repeated reminders, the Corporation has failed to take requisite action and the same has resulted in a situation where the petitioners have been forced to take loan from the market, on interest, for executing others’ tenders.
To supplement the petitioners’ contentions, a summary of outstanding dues/arrears has been placed on record depicting the principal amounts and interests claimed by them. The summary of claimed dues towards principal amounts is extracted below:-
Summary of Outstanding Dues/ Arrears
S.
No.
Writ Petition No.
Title of Writ Petition
Outstanding Principal Amount of Bills claimed in the Writ Petition (In Rupees)
(A)
Amount received during pendency of Writ Petition, if any. [In Rupees] (B)
Principal Outstanding Amount
[In Rupees] C= (A-B)
1
W.P. (C)
116/2021
Garg Construction Co.
vs. NDMC
6,20,42,493
8,71,701
6,11,70,792
2
W.P. (C )
5486/2022
Gaurav Mehtan VS.
NDMC
2,04,85,656
10,22,238
1,94,63,418
3
W.P. (C )
9924/2022
K K Enterprises VS.
NDMC
21,27,856
NIL
21,27,856
4
W.P. (C )
9966/2022
Shree Builders VS.
NDMC
51,58,050
9,13,927
42,44,123
5
W.P. (C ) 2511/2022
Neeraj Gupta VS. NDMC
97,70,963
NIL
97,70,963
6
W.P. (C ) 3419/2022
G. R. Constructions VS. NDMC
1,23,42,184
NIL
1,23,42,184
7
W.P. (C ) 4299/2022
Prem Mehta VS. NDMC
59,49,751
6,99,167
52,50,584
8
W. P. (C ) 4350/2022
SRK Construction VS. NDMC
24,73,490
NIL
24,73,490
9
W.P. (C ) 5032/2022
R.K. Tushir Const. VS. NDMC
2,02,58,092
32,30,706
1,70,27,386
10
W. P. (C )
6141/2022
Jatin Const. VS. NDMC
1,75,27,385
19,71,669
1,55,55,716
11
W.P. (C )
9747/2022
Gupta Engineering Co
VS. NDMC
27,94,916
NIL
27,94,916
12
W.P. (C )
483/2021
M S Builders VS.
NDMC
1,68,19,438
17,39,039
1,50,80,399
13
W.P. (C )
492/2021
BarahiConsts.VS.
NDMC
4,52,88,898
52,23,226
4,00,65,672
14
W.P. (C ) 2140/2021
Krishna Builders VS. NDMC
1,37,95,533
7,25,429
1,30,70,104
15
W.P. (C ) 2190/2021
Kalra Const. VS. NDMC
3,59,59,729
16,72,298
3,42,87,431
16
W.P (C ) 2198/2021
Rakesh Bansal VS. NDMC
5,69,61,996
82,43,095
4,87,18,901
17
W.P. (C ) 2202/2021
Ankur Gupta VS. NDMC
2,16,15,005
4,12,830
2,12,02,175
18
W.P. (C ) 2411/2021
Shivansh Const. VS. NDMC
89,77,511
NIL
89,77,511
19
W.P. (C )
2412/2021
Bansal Const.VS.
NDMC
3,38,61,518
1,01,89,67
1
2,36,71,847
20
W.P. (C )
2413/2021
M K traders VS. NDMC
4,87,70,044
10,04,471
4,77,65,573
21
W.P.(C )
2704/2021
Gupta Radhey Shyam
VS. NDMC
1,56,86,985
10,21,898
1,46,65,087
22
W.P. (C )
2705/2021
S.V. Const VS. NDMC
21,24,475
NIL
21,24,475
23
W.P. (C ) 5444/2021
Devansh Const. VS. NDMC
1,30,25,348
3,49,327
1,26,76,021
24
W.P. (C ) 5445/2021
A.A Const VS. NDMC
6,17,89,958
18,01,193
5,99,88,765
25
W.P. (C ) 5446/2021
Mudit Const VS. NDMC
4,90,43,552
42,13,777
4,48,29,775
26
W.P.(C) 4859/2021
Monika vs. NDMC
97,29,307
12,59,097
84,70,210
27
W.P.(C) 7280/2021
Lalita Garg vs. NDMC
12,61,503
NIL
12,61,503
28
W.P. (C)
7276/2021
Atul Gupta vs. NDMC
83,84,461
NIL
83,84,461
29
W.P. (C)
6952/2021
Anil Kumar Bhardwaj
vs. NDMC
66,04,904
7,59,152
58,45,752
30
W.P. (C) 13773/2022
Vikas Bansal Vs. MCD
2,78,10,366
NIL
2,78,10,366
31
W.P. (C) 13136/2022
Nitin Gupta Vs.MCD
5,17,17,971
3,43,030
5,13,74,941
32
W.P. (C) 9889/2021
Ashok Kumar Vs. NDMC
31,03,651
NIL
31,03,651
33
W.P. (C) 9887/2021
Baljeet Singh Satender Parkash Vs.
NDMC
21,87,597
NIL
21,87,597
34
W.P.(C) 9874/2021
Deepak Const. Co. Vs. NDMC
45,67,684
8,00,000
37,67,684
35
W.P.(C)
9814/2021
J.S. Sethi & Sons Vs.
NDMC
25,10,482
4,68,196
20,42,286
36
W.P.(C)
9873/2021
Islamuddin Vs. NDMC
53,66,439
4,83,187
44,71,157
37
W.P.(C)
9809/2021
Khan Enterprises Vs.
NDMC
60,45,632
4,78,000
55,67,632
38
W.P.(C)
9871/2021
MaheswariConst.Co.
Vs. NDMC
28,49,200
6,92,467
21,56,733
39
W.P.(C) 9890/2021
Mohd Rashid Vs. NDMC
22,07,597
NIL
22,07,597
40
W.P.(C) 8910/2021
Prem Bros. Vs. NDMC
27,02,289
7,44,198
19,58,091
41
W.P.(C) 9885/2021
RashtriyaConst Co. Vs. NDMC
21,03,217
NIL
21,03,217
42
W.P.(C) 9891/2021
Sajid Khan Vs. NDMC
3,11,76,155
14,53,526
2,97,22,629
43
W.P.(C) 9876/2021
Sunshine Const. Co. Vs. NDMC
9,98,973
NIL
9,98,973
44
W.P.(C)
9907/2021
Vikas DandonaConst
Co. Vs. NDMC
16,14,599
NIL
16,14,599
45
W.P. (C)
14989/2021
Aggarwal Associates
Vs. NDMC
31,23,684
NIL
31,23,684
46
W.P. (C)
11731/2021
Akash Construction
Vs. NDMC
27,16,063
NIL
27,16,063
47
W.P.(C)
7013/2022
Amit Sehrawat Vs.
NDMC
74,62,962
NIL
74,62,962
48
W.P.(C) 12245/2021
Anubhav Gupta Vs. NDMC
25,23,285
4,06,870
20,31,494
49
W.P.(C) 10503/2021
Arpit Electric Co. Vs. NDMC
1,24,56,620
8,22,048
1,14,68,350
50
W.P.(C) 10606/2022
Arya & Co. Vs. NDMC
31,06,000
NIL
31,06,000
51
W.P.(C) 10598/2022
Ashok Kumar Bahl Vs. NDMC
10,95,479
NIL
10,95,479
52
W.P.(C)
12246/2021
Bharat ConstCo.Vs.
NDMC
50,96,903
NIL
50,96,903
53
W.P.(C)
1387/2022
Deepak ConstCo.Vs.
NDMC
83,47,243
NIL
83,47,243
54
W.P.(C)
11286/2021
Deepak Kumar Vs.
NDMC
24,15,798
NIL
24,15,798
55
W.P.(C)
11477/2021
Deepika Enterprises
Vs. NDMC
9,30,723
NIL
9,30,723
56
W.P.(C)
10606/2021
Dhankar Construction
Vs. NDMC
25,23,058
14,83,511
10,39,547
57
W.P.(C) 12243/2021
Hardit Singh Kochar Vs. NDMC
48,89,962
1,64,980
47,24,982
58
W.P.(C) 6796/2021
Jagdamba Trading Co. Vs. NDMC
37,50,060
NIL
37,50,060
59
W.P.(C) 12274/2021
Japneet Builders Vs. NDMC
8,56,460
8,56,460
NIL
60
W.P.(C) 11449/2021
Kay Const. Co Vs. NDMC
47,71,405
83,928
46,87,477
61
W.P.(C)
12249/2021
Kays Buildcon Vs.
NDMC
14,87,951
NIL
14,87,951
62
W.P.(C)
12244/2021
Kochhar Const Vs.
NDMC
9,69,253
2,49,895
7,19,358
63
W.P.(C)
14959/2021
Lamba Brothers Vs.
NDMC
87,27,811
NIL
87,27,811
64
W.P.(C)
1336/2022
Landscape Const Vs.
NDMC
13,03,311
NIL
13,03,311
65
W.P.(C) 10501/2021
M K Gupta Vs. NDMC
25,55,824
11,96,995
13,58,829
66
W.P.(C) 10504/2021
M. Chhiba& Co. Vs. NDMC
2,50,42,447
8,51,524
2,41,90,923
67
W.P.(C) 1361/2022
Mohan Lal & Co. Vs. NDMC
59,43,128
NIL
59,43,128
68
W.P. (C) 11438/2021
Monu Enterprises Vs. NDMC
10,59,646
2,76,396
7,83,251
69
W.P.(C) 11456/2021
N A Construction Vs. NDMC
11,03,593
NIL
11,03,593
70
W.P.(C) 10605/2021
Narender Singh Dhankar Vs. NDMC
54,95,834
NIL
54,95,834
71
W.P.(C)
11728/2021
Narender Construction
Vs. NDMC
2,10,62,339
NIL
2,10,62,339
72
W.P.(C)
15152/2021
New Lamba Brothers
Vs. NDMC
15,61,612
NIL
15,61,612
73
W.P.(C)
6781/2022
Pradeep Kumar Vs.
NDMC
35,05,524
35,05,524
NIL
74
W.P.(C)
11771/2021
Prateek Const Co. Vs.
NDMC
87,75,708
NIL
87,75,708
75
W.P.(C) 1386/2022
Prem Prakash Gupta & Co. Vs. NDMC
35,80,033
19,88,666
15,91,367
76
W.P.(C) 1456/2022
Puneet const Co. Vs. NDMC
6,53,211
NIL
6,53,211
77
W.P.(C) 1457/2022
Puneet Enterprises Vs. NDMC
21,32,766
NIL
21,32,766
78
W.P.(C) 10590 /2022
Raj Kumar Kesar Vs. NDMC
53,46,709
4,58,950
48,87,759
79
W.P.(C) 9872/2021
Rakesh Gupta Vs. NDMC
3,66,44,566
8,14,609
3,58,29,957
80
W.P.(C)
11451/2021
Sameer Enterprises Vs.
NDMC
63,75,693
NIL
63,75,693
81
W.P.(C)
10597/2022
Sanjeev Builders Vs.
NDMC
57,27,812
4,83,280
52,44,532
82
W.P.(C)
10605/2022
Shri Shiv Shankar
Const Co. Vs. NDMC
9,49,519
NIL
9,49,519
83
W.P.(C)
11440/2021
Sudhir Construction
Vs. NDMC
17,66,524
NIL
17,66,524
84
W.P.(C) 10607/2021
Vijender Bhardwaj Vs. NDMC
38,85,249
NIL
38,85,249
85
W.P.(C) 6842/2022
Vinod Kumar Vs. NDMC
2,05,31,732
5,29,877
2,00,01,855
86
W.P.(C) 12157/2022
Ansh Construction Vs. NDMC
24,43,777
4,85,905
19,57,872
87
W.P. (C) 12070/2022
Arora Construction Vs. NDMC
23,06,739
NIL
23,06,739
88
W.P. (C) 12051/2022
Harpreet Arora Vs. NDMC
15,97,586
NIL
15,97,586
89
W.P.(C)
12111/2022
Kapil Constructions Vs.
NDMC
22,63,055
NIL
22,63,055
90
W.P.(C)
12127/2022
Kartar Builders Vs.
NDMC
51,91,10
NIL
51,91,10
91
W.P.(C)
12066/2022
Sarab Constructions
Vs. NDMC
6,39,167
NIL
6,39,167
92
W.P.(C)
12108/2022
Tanya Constructions
Vs. NDMC
33,24,104
NIL
33,24,104
93
W.P.(C) 13020/2022
AIPL & PPMPPL (JV) v.
MCD and Ors.
1,18,79,663
NIL
1,18,79,663
94
W.P. (C) 11314/2021
Sumit Infra. vs. NDMC
75,46,829
NIL
75,46,829
95
W.P. (C) 11287/2021
R.S. Constructions v NDMC
22,59,288
NIL
22,59,288
96
W.P. (C) 11285/2021
Vinod & Company v NDMC
1,21,26,435
NIL
1,21,26,435
97
W.P.(C)
2938/2022
Anurag Rana v. Govt.
of NCT of Delhi
1,19,38,998
4,91,789
1,14,47,209
Though the Corporation had at the first instance filed a Counter-Affidavit contesting the petitions, subsequently, Ms. Shilpa Shinde, Additional Commissioner (Engineering), MCD appeared before this Court on 09.09.2022 and stated that the Corporation has taken a decision to release the payments towards principal amounts. In this regard, a copy of policy dated 13.10.2022 approved by the Commissioner, MCD has been placed on record alongwith an affidavit of the aforementioned officer regarding mode and manner of disbursement.
Mr. Kunal Vajani, learned Standing Counsel for the Corporation, submitted that though a decision has been taken by the Corporation to make payments due towards principal amounts, the same would be released to the petitioners in a phased manner in terms of the policy dated 13.10.2022. It was further submitted that a sum of Rs.30 crores has been allocated to be released to the contractors on a monthly basis in the ratio of 38:38:24 i.e. on the basis of geographical spread and staff strength of the erstwhile North Delhi Municipal Corporation, South Delhi Municipal Corporation and East Delhi Municipal Corporation. Learned Standing Counsel also drew attention of the Court to policy dated 13.10.2022 placed on record to submit that payments would be released as per seniority of bills according to cut out date of each erstwhile Corporation, subject to the following three conditions:-
(i) The contractor shall certify that they have not received the payment earlier, either in part or in full, with respect to the claim raised by them against the Corporation,
(ii) The contractor shall submit an undertaking that if any payment is erroneously made, it would be returned to the Corporation on first demand, and
(iii) An affidavit to the above effect will be rendered to the Corporation before disbursement of payment under this policy.
Learned counsels for the petitioners contended that the Corporation, by way of above policy, has in-principle agreed to release payments towards the principal amounts, but its decision to release the payments as per seniority of the bills, that too in the manner stipulated in policy dated 13.10.2022, would result in further delay of about four to five years. The policy was challenged on various other grounds, including inter-alia that being an administrative decision, the same is ultra vires the DMC Act.
Before proceeding further, it is noted that a similar issue of release of payments against bills prepared, verified and approved by the respondent/Corporation in respect of contractors engaged with it for tender works came up before this Court in North Delhi Municipal Corporation and Anr. v. Sanjeev Kumar reported as 2018 SCC OnLine Del 8053, wherein a Co-ordinate Bench of this Court observed as under:-
“81. The General Conditions of Contract i.e., clauses 7 and 9 which are admittedly part of the work orders issued by both the NrDMC and the EDMC are being tested in these batch of cases. A contract which stipulates that the consideration would be paid in an unforeseen time in the future based on certain factors which are indeterminable, would in effect be a contract without consideration. Even if the contract is held to be a valid contract, then the concept of `reasonableness' has to be read into the same. Section 46 of the Contract Act and the explanation thereto is clear that “what is a reasonable time is a question of fact in each case.” A Corporation which gets works executed cannot therefore include terms in the contract which are per se unconscionable and unreasonable as –
a) There is no fixed time period as to when the funds would be available;
b) There is also no fixed mechanism to determine as to when and in what manner the head of account is to be determined and as to how the Contractor would acquire knowledge of these two facts;
c) There is also no certainty as to how many persons are in the queue prior to the Contractor and for what amounts;
d) There is enormous ambiguity in the receipt under the particular heads of accounts.
These clauses in effect say that the Contractor is left with no remedy if the Corporation does not pay for the work that has been executed. Such a Clause would be illegal and contrary to law. Such clauses, even in commercial contracts, would be contrary to Section 25 read with Section 46 of the Contract Act.
The clauses do not specify an outer time limit for payment. The expression reasonable time has to be `a time'. The concept of time itself is ensconced with specificity and precision. Clause 9 is the opposite of being precise. It is as vague and ambiguous as it could be because it depends on factors which are totally extraneous to the contract, namely –
* Allotment of funds to the Corporation by the Government;
* Allotment of funds in a particular head;
* Allotment of funds for payments who are in queue prior to the contractor;
xxx
By applying the above said principles, in respect of final bills raised by Contractors for works executed, that have been approved by the Engineer-in-Charge, the Clauses have to be read in the following manner:
a) Reasonable time for making of payments of final bills in respect of work orders up to Rs.5 lakhs shall be 6 months and work orders exceeding Rs.5 lakhs shall be 9 months from the date when the bill is passed by the Engineer-in-Charge.
b) The queue basis can be applicable for the payments to be made in chronology. However, the outer limit of 6 months and 9 months cannot be exceeded, while applying the queue system.
c) The payments are held to become due and payable immediately upon the expiry of 6 months and 9 months and any non-payment would attract payment of interest for the delayed periods.
d) A conjoint reading of Clauses 7 & 9 along with the amendment dated 19th May, 2006, clearly shows that for the payment of bills, the contractors have to follow the queue basis and as and when the amount is available under the particular head of account, the amount would be payable. The amendment does not, however, have a condition that no interest is payable for delayed payment. Such a condition exists only in Clause 7. Clause 9, therefore, when read with the amendment has to mean that the Corporation itself considers 6 months and 9 months to be the reasonable periods for which the payments of the final bills can be held back. Obviously, therefore, if payments are made, whether on a queue basis or otherwise, beyond the period of 6 months and 9 months, interest is payable.
e) To the extent that queue basis is applied only for clearing of payments which do not extend beyond the period of 6 months and 9 months period, it is reasonable. However, if the queue basis is applied in order to make Contractors wait for indefinite periods for receiving payments, then the same would be unreasonable and would have to therefore be read down.
f) 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.”
Although learned counsels on both sides have cited a catena of decisions, the same need not be gone into in view of the decision taken by Corporation to release the payments which are due to the petitioners towards principal amounts.
On a reading of the policy dated 13.10.2022, however, it is evident that the same is in teeth of the decision of this Court in Sanjeev Kumar (Supra), which was passed in facts and circumstances akin to the present case. It is worthwhile to note that in the captioned case, applicability of queue system to payments due beyond 6/9 months, bereft of an upper time limit, was found to be unreasonable. Further, it was opined that reasonable time for making of payments of final bills in respect of work orders with tendered value up to Rs.5 lakhs shall be 6 months and work orders with tendered value exceeding Rs.5 lakhs shall be 9 months from the date when the bill was passed by the Engineer-in-Charge. In the present case, most of the bills date back to the year 2015 and reasonable time for making payment has passed long back.
It is apparent that by bringing out the policy dated 13.10.2022 in the present case, the Corporation, has aggravated the agony of the petitioners and other similarly situated persons, as the release of payments has been made dependent on the availability of funds with the Corporation, among other extraneous factors mentioned in the policy. Further, not only the amount allocated for disbursement is miniscule, but also the ratio specified with regard to manner of disbursement bears no rationale. The ratio specified by the Corporation is arbitrary and unreasonable. This Court is also persuaded to take note of the fact that the policy dated 13.10.2022 fails to specify as to how many contractors are awaiting their payments from the Corporation. Insofar as the Corporation’s decision to release payments in a phased manner is concerned, it is reiterated that the brunt of shortage/non-availability of funds with the Corporation shall not be borne by a contractor who has duly executed tendered works and whose bills have been approved.
Moreover, the summary of outstanding dues/arrears of principal amounts placed on record by the petitioners has not been disputed by the Corporation, the relevant bills having been prepared and approved by officials of the Corporation itself.
Accordingly, the present petitions are allowed and the Corporation is directed to release payments due towards principal amounts to the petitioners, against verified and approved bills, within a period of eight weeks from the date of passing of this judgment. So far as the petitioners’ prayer for interest on delayed payments is concerned, they may pursue their remedy by initiating appropriate proceedings in accordance with law.
It is clarified that the present petitions are entertained and disposed of in the peculiar facts and circumstances, where the Corporation has taken a conscious decision to release the payments.
Pending applications stand disposed of.