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 RFA 430/2017 Page 1 of 60 of the following payments:

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 -

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 22 dated 28th May 2014 and Work Order no. 30 dated 29th May 2014. The Contractor contends that the work was completed before the stipulated time. The Contractor pleads that the final bills were cleared after recording the work in the measurement book. The security deposit was also to be refunded. The details of the amount of bills, dates of passing of bills and the security deposits are as under:

was liable to be paid. Despite repeated requests, the amount was not paid. Legal notice dated 22nd May, 2015 was issued to the Corporation. Thereafter, the subject suit for recovery of Rs.8,66,851/- along with interest was filed. The Contractor, thus, claimed recovery of the following sums:

7. The Corporation filed its written statement and pleaded as under:

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 the principal amounts. It was, however, admitted that the final bill was sent to the Head quarter for payment on queue basis. Paragraph 5 of the written statement avers as under:

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. In view of the stand of the Corporation, an application Order XII Rule 6 was filed. On 11th February 2016, the Trial Court decreed the suit for the principal sum of Rs.7,66,020/- in the following terms:

11. On 23rd February, 2016, the following issues were framed in the matter:

12. The Contractor led the evidence of Shri Sanjeev Kumar, proprietor of the firm, as PW-1 who stated in cross examination as under:

13. The Corporation led the evidence of Shri Jagdish Chander, Assistant Engineer who deposed as DW-1. He stated that no bills were submitted by RFA 430/2017 Page 6 of 60 the Contractor and the final bills were passed. DW-1 further deposed that unless the final bill amount is released, contractor is not entitled to apply for refund of security and earnest money deposit. Further he submitted that the refund of security is not liable to be made in view of the non-compliance of clauses 17 & 45 of the General Conditions of Contract.

14. The order dated 11th February, 2016 in the application under Order XII Rule 6 was carried in appeal by the Corporation in RFA 617/2016 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. Accordingly, the Trial Court was to deal with the pending issues of security refund and interest payment. On the basis of the pleadings and evidence on record the trial court decreed the suit on 2nd December, 2016 as under:

Thus, the Trial court granted refund of the security deposit and also awarded interest on the Principal amount as also the security deposit.

16. History of litigations between contractors and Corporations - EDMC/ Nr.DMC in the Delhi High Court.

17. The said order further records in paragraph Nos.14 to17 as under:

18. 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 appeals 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 -

For the sake of convenience, the above mentioned order dated 1st December, 2016 is referred to as `Order No.1'. On the basis of this order, several appeals of the Corporation were disposed of.

19. Thus, 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.

(ii) Order No.2- Order dated 23rd January, 2017 passed in writ petitions with the lead matter W.P. (C) 10055/2015 - Several writ petitions RFA 430/2017 Page 13 of 60 were filed before the Delhi High Court by Contractors seeking their dues from the Corporation. The Corporation relied upon Clause 7 of the General Conditions of Contract. A Learned Single Judge of this Court held that the said writ petitions could be disposed of on the same terms and conditions as Order No.1, as there is no dispute to the fact that the cases of the writ petitioners were similar to the parties in the Order No.1. The Court directed that the Corporation would abide by the timeline. Thus, Order No.1 came to be followed and the writs came to be disposed of in terms thereof. For the sake of convenience, the order dated 23rd January 2017 is referred to as `Order No. 2'.

(iii) Order No.3 - Orders passed in RFA Nos. 835/2017, 836/2017, 837/2017, 838/2017, 839/2017, 840/2017, and 841/2017 dated 27 th September, 2017 which relied on an order of this Court dated 25 th September, 2017 passed in RFA 818/2017, 820/2017 and 821/2107. The Learned Single Judge of this Court, in Order No.3 followed Order no.2 and directed as under:

(iv) Order No.4 - Order dated 9th October, 2017 in RFA 847/2017 and RFA 849/2017 - In these matters also the appeals were disposed of in terms of Order No.1. The relevant portion of the order reads as under:

3. These appeals are therefore also disposed of in terms of the order dated 27.9.2017 passed in RFA Nos. 835/2017, 836/2017 and 837/2017 decided on 27.9.2017.

4. RFAs stand disposed of accordingly."

For the sake of convenience, this order would be referred as „Order No.4'.

20. A summary of all the above mentioned 4 orders shows that each of the orders is based on Order No.1 of 1st December, 2016. The said order i.e. Order No.1 has the following unique features:

On this aspect, some parties accepted the terms for refunds as submitted by the Corporation but some parties agreed to continue to pursue their respective suits.

d) In so far as interest on the payment of the bills were concerned, the parties therein consented that interest would be paid only if the amounts remained outstanding after a period of three years.

e) None of the four orders above adjudicated the legal issues on merits. The orders did not go into the validity of Clauses 7 and 9 of the General Conditions of Contract.

21. Orders 1 - 4 would have been binding on this Court except for the fact that Order No.1 dated 1st December, 2016, thereafter, became subject matter of Special Leave Petitions, filed by various contractors, in the Supreme Court. In addition, the Contractors in the present appeals have refused to abide by the terms of Order No.1 as the said order was a consent order.

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:

23. In many connected Special Leave Petitions (hereinafter, „SLPs‟), the Supreme Court vide order dated 15th September 2017 recorded as under:

All amounts admitted to be due to the petitioner will be paid by the respondent- Corporation in the RFA 430/2017 Page 16 of 60 meantime."

24. On 5th January, 2018, in several appeals/SLPs arising out of Order No.1, the Supreme Court passed the following order:

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. Subsequent Orders No.2, 3 and 4 are passed on the basis of Order No.1. 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:

This position taken by the Supreme Court has been followed by a Single RFA 430/2017 Page 18 of 60 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 1st 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. Order Nos.1 to 4 do not constitute precedents as they were based on the initial consent order which stood modified/merged in the orders passed by the Supreme Court. 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 1 st 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.

29. The questions, therefore, that arise in this appeal and all the connected appeals are:

Question No. 1- Payment of Principal amount

30. Whenever tenders are called for and work orders are placed by the Corporation, all Contractors are bound by the General Conditions of Contract. The said conditions are published by the Corporations and are "Standard Form". No deviation is usually permissible from the said General Conditions of Contract. Registered Contractors are aware of the General Conditions of Contract and apply for the tenders accordingly. They also execute the work orders, fully conscious of the General Conditions of Contract. However, the question that arises is whether the two clauses relating to non-payment of bills indefinitely, though the bills are passed by the Executive Engineer and non-payment of interest for delayed payment, would be legal and valid?

Clauses relied upon

31. The Corporations rely on Clauses 7 and 9 of the General Conditions of Contract, so do the Contractors. There are however, different versions of the said clauses, especially Clause 9. The work orders have been awarded post-2008. There is actually no clarity as to which version of the clause was applicable during which period and hence the latest clause is being applied uniformly in all cases. The Clauses relied upon by the Corporation are Clauses 7 and 9 of the General Conditions of Contract, which are reproduced below:

32. In addition, the Corporation also relies on the amendment to the General Conditions of Contract dated 19th May, 2006 which reads as under:

33. A further Circular was issued on 10th June 2014 by the Office of Chief Engineer of the Corporation to the following effect:

" CIRCULAR Subject:- Implementation of various protection clause available in the General Terms & Conditions.

It has been brought to the notice of the Chief Law Officer that following clauses existing in the General RFA 430/2017 Page 24 of 60 Terms & Conditions are not taken care of while pleading cases before the arbitrators & ADJ Courts i.e. at first court level. It is a well settled law that a plea not taken up before the first court cannot be aggregated before the higher court i.e. the appellate court. The protection clauses are enumerated as under:-

availability of funds in particular head of account of MCD.

All Chief Engineers are hereby requested to direct the concerned EEs to take care of above mentioned clauses of agreement while pleading Arbitration/Court Cases at initial level itself.

Chief Engineer (Plg.)"

34. On the basis of the above Clauses, amendment and Circular, the submission of the Corporation is that:

35. On the other hand, it is the submission on behalf of the Contractors that since their clients, in these cases, have not given any consent they cannot be made to be bound by Orders 1-4. Further, it is their submission that the queue system was not followed by the Supreme Court in the SLPs, in respect of payment of Principal, Security deposit etc. Thus, it is their submission, that the present suits arise out of different transactions and consent has not been given by their clients. It is their further submission that even in those cases, the Supreme Court has reopened the issue of consent itself and thus, the said orders cannot bind the contractors in these cases.

Analysis of the Clauses

36. Clause 7 of the General Conditions of Contract deals with the payment on the basis of intermediate certificates as advance payments and Clause 9 of the General Conditions of Contract relates to payment of final bills. In both cases, the Engineer-in-Charge has to certify the payments. So far there can be no issue. Obviously if payments have to be made to Contractors, the Engineer-in-Charge who is getting the work done has to certify that the work has actually been done on site and the material etc. for which payment is being executed has been duly employed in the works.

37. However, the quandary for the Contractor begins after the bills are RFA 430/2017 Page 26 of 60 passed by the Engineer-in-Charge. Clause 7 provides that the amount so certified shall be paid by the 30th working day after the presentation of the bill by the Contractor. However, thereafter comes the big caveat i.e. that the Corporation should have funds available with it under the specific head of account.

38. It is slightly unfathomable as to how the Corporation can postpone the payment to the Contractor, indefinitely. The issuance of the tender and the work order in favour of the Contractor has to be on the pre-condition that funds are available with the Corporation. 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". Even if such a clause has been signed and accepted by the Contractor, it does not make the clause valid inasmuch as it would render a fundamental condition of contract being hit by provisions of the Indian Contract Act, 1872 (hereinafter, „ Contract Act ‟). Every contract, to be valid, has to have consideration and the indefinite postponement of consideration would be wholly unconscionable. In fact a Single Judge of this Court in Jagbir Singh Sharma v. Municipal Corporation of Delhi [order dated 15th July, 2007 in CS(OS) 1797/2007] (hereinafter, „Jagbir Singh‟), while dealing with Clause 9 of the General Conditions of Contract (as it then stood) has held as under:

39. The clause which the Court dealt with in the said case reads as under:

40. A perusal of the old Clause 9 reveals that there was an actual limit for making of payment i.e. 3 months and 6 months and in the context of the said Clause, it was held in Jagbir Singh (supra) that "every endeavor should be made by MCD to make payment with the time period stipulated in Clause 9". In the case of Jagbir Singh (supra), the Corporation, in its leave to defend application had submitted that payment would be made as and when funds in a particular budget head are available with it. This Court categorically rejected this stand of the Corporation by holding "Ex facie, the stand taken in the leave to defend applications cannot be accepted and has to be rejected". This Court held that the Contractors have no role to play in the internal affairs of the Corporation. But a perusal of the present Clause i.e., the new Clause 9 of the General Conditions of Contract shows that what was expressly rejected by this Court, even as a defense in the leave to defend application in Jagbir Singh (supra), has now come to be added in the RFA 430/2017 Page 29 of 60 Clause itself along with a second element of a queue basis, which were not part of the earlier Clause and has now been made part of the new Clause. It is, however, completely incongruous that the addition of conditions of availability of funds and queue basis has been made, while at the same time retaining an upper limit of 6 months and 9 months as against the earlier 3 months and 6 months in Clause 9 of the General Conditions of Contract. Clause 9 is, therefore, in the teeth of the judgment of this court in Jagbir Singh (supra) and is nothing but an attempt to neutralize the said judgment . A Corporation which gets works executed cannot therefore include a term in the contract which is 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.

41. 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.

42. Corporations which form a part of the State as envisaged under Article 12 of the Constitution 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 RFA 430/2017 Page 30 of 60 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/corporation who enters into a contract, let alone a State Corporation.

43. While the Contractors have argued that they have an unequal bargaining power with the Corporation, the Corporation argues that these are commercial contracts and the Contractor has signed the contract with open eyes. In Central Inland Water Transport Corporation Limited and Anr. v. Brojo Nath Ganguly and Anr. (1986) 3 SCC 156, the Supreme Court held:

92 . The Indian Contract Act does not define the expression "public policy" or "opposed to public policy". From the very nature of things, the expressions "public policy", "opposed to public policy" or "contrary to public policy" are incapable of precise definition. Public policy, however, is not the policy of a particular government. It connotes some matter which concerns the public good and the public interest. The concept of what is for the public good or in the public interest or what would be injurious or harmful to the public good or the public interest has varied from time to time. As new concepts take the place of old, transactions which were once considered against public policy are now being upheld by the courts and similarly where there has been a well recognized head of public policy, the courts have not shirked from extending it to new transactions and changed circumstances and have at times not even flinched from inventing a new head of public policy. There are two schools of thought - "the narrow view" school and "the broad view" school. According to the former, courts can not create new heads of public policy whereas the latter countenances judicial law-making in this area. The adherents of "the narrow view" school would not invalidate a contract on the ground of public policy unless that particular ground had been well-

established by authorities..... Hardly ever has the voice of the timorous spoken more clearly and loudly than in these words of Lord Davey in Janson v. Driefontein Consolidated Gold Mines Limited 1902 A.C. 484"Public policy is always an unsafe and treacherous ground for legal decision." That was in the year 1902. Seventy-eight years earlier, Burrough, J., in Richardson v. Mellish 1824 (2) Bing. 229; (s.c.) 130 E.R. 294 and 1824 All E.R. Rep 258, described public policy as "a very unruly horse, and when once you get astride it you never know where it will carry you." The Master of the Rolls, Lord Denning, however, was not a RFA 430/2017 Page 34 of 60 man to shy away from unmanageable horses and in words which conjure up before our eyes the picture of the young Alexander the Great taming Bucephalus, he said in Enderyby Town Football Club Ltd. v. Football Association Ltd. 1971 Ch. 591. "With a good man in the saddle, the unruly horse can be kept in control. It can jump over obstacles." Had the timorous always held the field, not only the doctrine of public policy but even the Common Law or the principles of Equity would never have evolved. Sir William Holdsworth in his "History of English Law", Volume III, page 55, has said:

45. Thus, the argument of `unequal bargaining power' may not apply in commercial contracts of the kind, which are the subject matter of the present appeal. This however does not take away the important aspect of the contract i.e., that it is still a Standard Contract, signed by the Contractor on the dotted line. With most of the work orders, the General Conditions of the Contract are not even attached. They are simply taken to be read and known to the Contractor. Even presuming that the parties are of equal bargaining power, the question is whether the clauses in such General Conditions stand the test of `reasonableness'.

46. In Indian Oil Corporation Limited v. Nilofer Siddiqui & Ors. (2015) 16 SCC 125 (hereinafter, „Nilofer Siddiqui‟), the Supreme Court has, in the context of an LPG dealership and termination of the same, held as under:

47. In Nilofer Siddiqui (supra), the Court found that the distributorship had been terminated arbitrarily and unfairly. On the strength of Article 14 of the Constitution of India and the decision in Brojo Nath Ganguly and Anr. (supra), the Supreme Court read down the provisions of the condition of the contract that gave unfettered powers of termination to the IOCL and restored the distributorship of the petitioner. Thus, irrespective of the bargaining power of the parties, the clauses of a contract have to abide by the test of reasonableness and have to be conscionable.

48. In the present case, the combined effect of the Clauses and the Circular and amendments, set out above, is that if the Corporation does not procure funds, it is not liable to even pay the Contractor any interest and the Contractor has no remedy. This by itself would mean that such a Clause could be read as leading to a contract without consideration and hence unlawful under Section 23 of the Contract Act. The Corporation being an instrumentality of State, such a contract would also be opposed to public policy under Section 23 of the Contract Act. Section 46 of the Contract Act is also clear that if no time for performance of a contract is specified, it has to be performed within a reasonable time. Reading these provisions RFA 430/2017 Page 37 of 60 together, it is clear that an open ended Clause which in effect says that the payment shall be made at an undetermined time in the future, subject to availability of funds, in a particular head of accounts is wholly unreasonable and such a term would also be unfair.

49. It is equally strange that the Corporation seeks to justify the non- payment on the ground of non-availability of funds for medicines or hospital items or pensions or salaries of the Corporation. Running the Corporation is not the business of the Contractor. It is for the Corporation to manage its affairs as per the funds available with it and it cannot be a defense that the Contractor should bear the brunt of non-payment for years, of works executed by him.

50. Mrs. I.K. Sohan Singh v. State Bank of India AIR 1964 P&H 123, involved a transaction of a sale deed wherein the balance sale consideration was to be paid "as soon as possible" but at a time when the vendee is in a position to make the payment. The question arose as to whether the time prescribed for making the payment of balance consideration was reasonable. The Punjab & Haryana High Court, following the dicta of Justice Warrington in Watling v. Lewis 1911 1 Ch. 414, held the balance sum ought to be paid within a reasonable time in view of Section 46 of the Contract Act. The Court held as under:

10. Consequently there is a good deal of force in the submission of Mr. Kapur that the true import of the stipulation in the sale deed with regard to payment of RFA 430/2017 Page 39 of 60 the amount of balance consideration of Rs. 25,000 was that the same would be payable within a reasonable time by virtue of the application of Section 46 of the Contract Act as it must be deemed that no time for performance had been specified. It may be mentioned that this view justifiably commended itself to the Court below."

51. A similar view is echoed in Hungerford Investment Trust Ltd. v. Haridas Mundhra and others AIR 1972 SC 1826 wherein it was held that though no specific time was provided for payment of purchase money, it has to be construed as reasonable time under Section 46 of the Contract Act. The Court, however, held that what is reasonable is a question of fact. The observation of the Supreme Court reads as under:

52. Learned counsel for the Corporation has relied upon Bank of India v. K. Mohandas ( 2009) 5 SCC 313 and Super Poly Fabriks Ltd. v. Commissioner of Central Excise, Punjab (2008) 11 SCC 398 to argue that the contract has to be read as a whole. This position is not in dispute. However, the contract has to be construed as per the principles contained in Section 46 of the Contract Act.

53. The learned counsel for the Corporation also relies upon Cauvery Coffee Traders, Mangalore v. Hornor Resources (International) Co. Ltd. (2011) 10 SCC 420 (hereinafter, „Cauvery Coffee Traders‟) to argue that Contractors cannot approbate and reprobate. Since Contractors wanted to obtain benefits under the work order and the terms of the work order (including the General Conditions of Contract) were well known to them, they cannot then argue that "I want the work order but without clause 7 & 9". This argument would have been acceptable and appealing if the Clause under the contract had some reasonable time limit fixed for the payment to be made, while following a queue system. However, the Corporation argues that there is no time limit fixed at all. There are too many contingencies and conditions that are stipulated in order to make payment, namely:

54. These four conditions are so vague and ambiguous into the future that at no point would a Contractor, who had executed the work order, be able to demand payment. On the one hand, the Contractor is expected to obtain all the construction material at his own expenses, employ labour at his own expenses and execute the work order. Thereafter, he has to submit his bills to the Corporation and the Engineer-in-Charge has to pass the said bills. So far, the conditions are reasonable. However, to say that even after the bills are passed the payment would be made if and when the funds are available, if and when Contractor‟s turn comes, is in effect to say that it would make the payment in 1 year, 5 years, 10 years or not pay at all. Such a condition in any contract would be illegal, unconscionable and unreasonable. There is no question of estoppel by election in such a case. In Cauvery Coffee Traders (supra) the Supreme Court's observation on approbate and reprobate was in the context of a transaction that stood concluded `after extensive and exhaustive bilateral deliberations'. The position in the present cases is the opposite. Here it is a standard form contract which is to be accepted without much choice. The only choice before a Contractor is simply to not to apply for or accept the work order itself. Thus, the authority cited on this proposition would not apply.

55. The counsel for the Corporation also relies upon New Bihari Biri Leaves Co. v. State of Bihar (1981) 1 SCC 537 to submit that once a party has accepted the terms of the contract and takes the advantage of the terms RFA 430/2017 Page 42 of 60 which are in his favour, he cannot then repudiate the other parts of the contract. This is again a general principle. The payment of consideration goes to the root of a contract. Without consideration, there is no valid contract. The contractor, apart from having the work orders placed on him, and making the deposit of the earnest money/security amount has executed the contract after making his own expenditure in terms of the material used and the payments to labour and other overheads. Under the contract entered into with the Corporation apart from placing of the work order and hoping of clearance of the final bills, there is no other term of which the other Contractor has taken advantage of. Any term of the contract has to be construed within the four corners of law. A term in a contract which is contrary to law has to be interpreted as per the applicable provisions. In that sense, there is no repudiation by the Contractor.

56. On the word `reasonable' the Corporation relies on Veerayee Ammal Vs. Seeni Ammal AIR 2001 SC 2920. Even in the said judgment the Supreme Court holds:

Thus, the reasonableness has to be seen from the facts of each case.

57. A harmonious interpretation of the Clauses in the General Conditions of Contract and the amendment of 2006, has to be made, failing which, the Clauses would be contrary to law and to the basic principles of valid contracts. An indefinite open ended Clause for making payment would be unreasonable and hence contrary to Section 46 of the Contract Act. Reading the contract as a whole with the amendment of May, 2006, it is clear that insofar as payment under Clause 9 of the General Conditions of Contract is concerned, the Corporation itself specifies the time for payment of the final bills as 6 months and 9 months. Thus, the contract itself considers and specifies the reasonable time. However, the same is sought to be diluted by specifying that this period shall be adhered to `as far as possible'. The queue system and availability of funds are deemed by the Corporation to override the 6 months and 9 months period. There is no reason as to why the court should consider that the intention was to prescribe no upper limit for making of payment and leave the period for payment as an open ended one.

Question No.2 - Refund of Security deposit

58. 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. The Contractors have, in some of the appeals included the security deposit amount in the principal amount claimed and in some other cases the refund of security deposit has been sought for separately. In either case, 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:

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 RFA 430/2017 Page 45 of 60 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 :

59. Clauses 17 and 45 relating to security deposits have also been interpreted in the Circular dated 10th June 2014, as under:

60. A perusal of all the aforementioned Clauses reveals that:

61. 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 RFA 430/2017 Page 47 of 60 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.

Order XII Rule 6

62. Further reliance has also been placed on a number of orders in respect of Order XII Rule 6 and as to when a decree on admission can be passed. In the present case, no oral evidence is actually required to be adduced. The awarding of the contract is not disputed. The execution of the contract is not disputed. The final bill having been passed by the Engineer-in-Charge is not disputed. What is disputed is the time when the payment is to be made. This is only a matter of interpretation of the Clauses of the General Conditions of Contract. In cases where there are factual disputes, evidence can be led to adjudicate those facts. However, in the present cases, there being no factual dispute and only a question of application of the Clauses of the General Conditions of Contract and their interpretation is involved, the approach of the Trial Court in applying Order XII Rule 6 of the CPC cannot be faulted.

63. It is the settled position in law, even in the authorities cited by the Corporation that when the pleadings are clear, they constitute admission. A reading of the written statement shows that the Corporation does not seriously dispute the passing of the final bills and the amount of Security deposited. Only the interest component is seriously disputed.

64. As per Himani Alloys Ltd. v. Tata Steel Ltd. (2011) 15 SCC 273 cited by the Corporation, the test for the invoking of Order XII Rule 6 of the CPC being that the admission so made must clear and unequivocal, on the face of which it is impossible for the party making it to succeed. In the light of the RFA 430/2017 Page 48 of 60 stand in the written statement, there is a clear admission as to the final bill amount as also that the Contractor has to wait in a queue. Thus the Trial Court has rightly invoked the provisions of Order XII Rule 6.

Question No.3- Whether Interest is payable?

65. The question that now arises is as to whether interest is payable on the principal amount and the delay in refund of security deposit. This question has been considered by two Single Judges of this Court in cases involving almost identical clauses in R.K. Pabbi v. DDA [CS(OS) No. 1368/2012 dated 9th January, 2014] and Varinder Jeet Singh v. Municipal Corporation of Delhi & Anr. 2013 (134) DRJ 284 (hereinafter, „Varinder Jeet Singh‟), which in turn relied upon the decision of a Single Judge of this Court in Jagbir Singh (supra).The judgement in Varinder Jeet Singh (supra), after discussing the law on the subject held:

66. In almost similar circumstances, a Contractor had filed a suit under Order XXXVII of the CPC against the MCD claiming interest on delayed payments. In NDMC v. Prem Chand Gupta [RFA Nos. 623/2017 and 628/2017 dated 17th July, 2017] (hereinafter, „Prem Chand Gupta‟) a Single Judge of this Court held that under Clause 9 of the General Conditions of Contract, interest is liable to be paid. The relevant portion is extracted herein below:

67. This judgment has relied upon another judgment of a Single Judge of this Court in Union of India v. N.K. Garg 2015 (224) DLT 668 (hereinafter, „N.K. Garg‟) wherein the Court had held that non-payment of interest would be contrary to the provisions of the Interest Act, 1978 . The Corporation argues that the judgment in N.K. Garg (supra) has been stayed by a Division Bench of this Court in FAO(OS) No. 73/2016 vide order dated 9th March, 2016. However, the judgment in Prem Chand Gupta (supra) has not been reversed or set aside. In fact, the order in Prem Chand Gupta (supra) has also been reiterated subsequently on 14th September, 2017, when the Corporation had sought recall of the order dated 17thJuly, 2017 on the ground that the judgment in N.K. Garg (supra) had been stayed. While dealing with the judgment in N.K. Garg (supra), the Single Judge of this Court reiterated the order dated 17th July, 2017 in the following terms:

(supra) proceeds on the basis that such a clause denying interest is itself hit by Section 23 of the Contract Act, 1872 and hence such a clause denying interest is void and therefore cannot be relied upon."

68. On this aspect, the Corporation unabashedly relies on the amendment dated 19th May, 2006. In effect, therefore, the Corporation says that it would not pay any interest in case of delayed payments as per the amended conditions of contract. Thus, even if a Contractor is willing to wait, for God knows how long, he would not be entitled to any interest.

69. The provisions of Section 3 of The Interest Act, 1978 and Section 34 of the CPC clearly recognize that the Court may allow interest to the person entitled to the debt or damages. The question is whether interest would be awardable even if the contract prohibits the same. The question of award of interest in commercial contracts has been discussed by the Supreme Court in Union of India Vs. M/s. Bright Power Projects (I) P. Ltd (2015) 7 SCALE 638 (hereinafter `Bright Power') and recently in Chittaranjan Maity Vs. RFA 430/2017 Page 52 of 60 Union of India (2017) 9 SCC 611 (hereinafter `Chittaranjan Maity'). Both these cases dealt with the prohibition of award of interest in the context of Section 31(7)(a) of the Arbitration & Conciliation Act, 1996 (hereinafter, „1996 Act‟). In these two cases the Supreme Court held that when the terms of the agreement had prohibited award of interest, the arbitrator could not award interest pendente lite.

70. Clause 9 in the present case, which deals with interest not being liable to be paid, merely stipulates as under:

71. The Clause in the present case does not prohibit award of interest. It merely stipulates that no interest is payable in case of delay due to non- availability of funds, for a period of 6 months and 9 months, meaning thereby any delay beyond the said period would attract interest. This is in contradistinction to clauses which contain absolute prohibitions for payment of interest. The Supreme Court in Secy, Irrigation Deptt Govt of Orissa Vs. G.C.Roy (1992) 1 SCC 508 (hereinafter `G.C.Roy') held as under:

This is the principle of Section 34 , Civil Procedure Code, and there is no reason or principle to hold otherwise in the case of arbitrator.

(ii) An arbitrator is an alternative form (sic forum) for resolution of disputes arising between the parties. If so, he must have the power to decide all the disputes or differences arising between the parties. If the arbitrator has no power to award interest pendente lite, the party claiming it would have to approach the court for that purpose, even though he may have obtained satisfaction in respect of other claims from the arbitrator. This would lead to multiplicity of proceedings.

(iii) An arbitrator is the creature of an agreement It is open to the parties to confer upon him such powers and prescribe such procedure for him to follow, as they think fit, so long as they are not opposed to law. (The proviso to Section 41 and Section 3 of Arbitration Act illustrate this point). All the same, the agreement must be in conformity with law. The arbitrator must also act and make his award in accordance with the general law of the land and the agreement.

(iv) Over the years, the English and Indian Courts have acted on the assumption that where the agreement does not prohibit and a party to the reference makes a claim for interest, the arbitrator must have the power to award interest pendente lite. Thawardas has not been followed in the later decisions of this Court. It has been RFA 430/2017 Page 54 of 60 explained and distinguished on the basis that in that case there was no claim for interest but only a claim for unliquidated damages. It has been said repeatedly that observations in the said judgment were not intended to lay down any such absolute or universal rule as they appear to, on first impression. Until Jena case almost all the Courts in the country had upheld the power of the arbitrator to award interest pendente lite. Continuity and certainty is a highly desirable feature of law.

(v) Interest pendente lite is not a matter of substantive law, like interest for the period anterior to reference (pre-reference period). For doing complete justice between the parties, such power has always been inferred"

72. The judgment of the Constitution Bench in G.C. Roy (supra) was under the Arbitration Act, 1940 where a provision similar to Section 37(1)(a) of the 1996 Act, was not present. G.C. Roy (supra) clearly holds that interest would be payable depending on the terms of the contract.

73. Such a clause is clearly violative of the provisions of the Interest Act, 1978 and the Contract Act as has been held in Prem Chand Gupta (supra) wherein this Court has held that non-payment of interest is invalid and void as per Sections 16(2) and 23 of the Contract Act.

74. 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 RFA 430/2017 Page 55 of 60 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.

75. In view of the question of interest having been gone into detail and non-payment having been held to be illegal by various Single Judges of this Court, in cases involving the Corporations, it is held that non-payment of interest beyond the period of 6 months and 9 months, as stipulated in Clause 9 of the General Conditions of Contract, would be contrary to law. Hence, the Contractors are entitled for payment of interest after a period of 6 months - 9 months respectively.

76. It is completely unconscionable and illegal for the Corporation to argue that no interest is payable. Thus, in those cases where the Contractor has complied with the various conditions in respect of Principal and refund of Security deposit, interest would be payable.

Conclusions and Findings

77. 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 RFA 430/2017 Page 56 of 60 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.

78. 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.

79. 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;

80. Thus, these factors, which are beyond the control of the Contractor RFA 430/2017 Page 57 of 60 and which would govern the payment of consideration, make the said clauses of the contract completely unreasonable. The clauses have to thus, be read or interpreted in a manner so as to instill reasonableness in them.

81. 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:

Final decree on facts:

82. The Trial Court, in its judgment dated 2nd December 2016, has granted interest on the principal amount. However, this issue is covered by the order dated 1st December, 2016 wherein interest is liable to be paid only after expiry of period of three years and 90 days. Since no SLP was filed against the said order, parties are, thus, bound by the said order dated 1 st December, 2016. However, refund of security is being directed as the written statement admits the security amount and considerable time has elapsed. Admittedly, the said amount is liable to be refunded and no complaint has been received from the labour officer. No pendente lite interest is liable to be granted either on the principal or on the security amount as there was no compliance of Clauses 17 & 45 of the General Conditions of Contract.

83. On the basis of the facts, the pleadings and the evidence recorded, the Contractor‟s suit is liable to be decreed as under:

84. 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.

85. 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.

86. By way of separate order passed today in these appeals, certain guidelines are issued. These guidelines shall be read alongwith the judgment pronounced today in all these appeals.

PRATHIBA M. SINGH, J.

+ 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:

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:

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, RFA 430/2017 Page 3 of 4 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 RFA 430/2017 Page 4 of 4