The observations by the court came on a batch of appeals by the North and East Delhi Municipal Corporations against a trial court decision allowing the contractors' suits for recovery of their money spent on the works
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The Delhi High Court has taken the municipal corporations here to task for indefinitely delaying the settling of bills of contractors for civil works, terming it "wholly arbitrary" and "unfathomable".
"To ask the contractor to wait endlessly for his payment is wholly arbitrary. The corporation which hands over the works contract to the contractor cannot say 'do the work now, I will pay when I have the money'," Justice Pratibha M Singh said, adding that the tenders or work orders must be issued on the pre-condition that funds are available.
"It is unfathomable as to how the corporation can postpone the payment to the contractor indefinitely," the court said, adding that the "delay in payments compromises on availability of quality civil work for the corporations, who take care of the basic amenities for citizens such as roads, pavements, civil works, sewerage lines etc."
The observations by the court came on a batch of appeals by the North and East Delhi Municipal Corporations against a trial court decision allowing the contractors' suits for recovery of their money spent on the works, the security deposit and interest on the amount for delay in payment.
The court also laid down guidelines to be followed by the civic bodies and the contractors to ensure that the works are carried out as per the quality standards and there is no delay in making the payments.
Upholding the trial court's decision, the high court said the corporations are part of the State and have to conduct their activities in accordance with law and public policy.
"Instrumentalities of States ought to be saddled with a higher responsibility to behave reasonably and not arbitrarily. It can be no justification for a corporation to claim that it would float the tender, it would issue the works contract, it would get the work executed, its Engineer would supervise the work, the Engineers would pass the bills, but yet no payment would be made.
"Such a luxury ought not to be available to anyone, even a private individual or corporation who enters into a contract, let alone a State corporation," it said.
According to the court's guidelines, there should be periodic inspections of the works by the Engineer-in-Charge, maintenance of records with photographs of the work, contractors should submit interim and finals bills certifying work carried out, bills be paid within six to nine months with interest being levied for delay.
The court also said that once the final bill is passed, refund of security deposit be made without waiting for payment of the bill.
It said that reasonable time for paying the final bills for work orders up to Rs 5 lakh would be six months and for amounts exceeding that, the time period should be 9 months from the date when the bill was passed. It also suggested creating an information technology infrastructure to maintain digital records of the work orders, inspection reports, final bills, photographs, saying that this will make the contract process more transparent.
The court analysed the contracts that the civic bodies had entered into with the contractors and noted that the clauses did not provide any remedy for non-payment of the bills after completion of the work. It said that such clauses could be read as leading to a contract without consideration and hence unlawful under the Contract Act.
"The corporation being an instrumentality of State, such a contract would also be opposed to public policy under the Contract Act," it said.
The court also rejected the corporations' defence that they did not have funds for even medicines or hospital items or pensions or salaries of its employees. "Running the corporation is not the business of the contractor" and the civic bodies have to manage its affairs as per the money available with it, it said, adding "it cannot be a defence that the contractor should bear the brunt of non-payment for years, of works executed by him."
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