Garg Construction Company & Ors. vs North Delhi Municipal Corporation & Ors.

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:-

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:-

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:-

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.