M/S Jha Constructions PVT. LTD. vs. Municipal Corporation Of Delhi & Anr.

Facts

The Plaintiff, M/s Jha Constructions Pvt. Ltd., was awarded a Work Order on January 3, 2020, and a formal agreement was executed on January 6, 2020. The Plaintiff submitted bills from the 1st to the 7th and final bill. While the 1st bill was paid, payments for the 2nd to 7th bills, totaling Rs. 1,99,96,323/-, were delayed. The Defendants, Municipal Corporation of Delhi & Anr., admitted liability for these amounts in their written statement but claimed the entire principal amount was paid on April 9, 2025, after deducting statutory dues like GST, and denied liability for interest. The Plaintiff sought a decree for the principal amount and interest, including pre-suit and future interest.

Held

The Court held that the Plaintiff is entitled to interest on the delayed payment of the principal amounts due under the 2nd to 7th bills. The Court found merit in the Plaintiff's contention, relying on the judgment in North Delhi Municipal Corporation (supra) and the principle that a person deprived of the use of money to which they are legitimately entitled must be compensated. The Court noted that the Defendants admitted their liability for the principal amounts. The Court applied the principles from North Delhi Municipal Corporation (supra) to determine reasonable periods for payment, setting 9 months for the 2nd to 6th bills and 6 months for the 7th bill from the date they were passed by the Engineer-in-Chief. Interest was awarded at 10.9% per annum, the current rate for unsecured debts, from the expiry of these periods until April 9, 2025, when the principal amount was paid. The suit was decreed in favour of the Plaintiff for the principal amount along with this interest.

Key Issues

1. Whether the Plaintiff is entitled to interest on the delayed payment of admitted outstanding dues, and if so, at what rate and from which date, under Order XII Rule 6 of the Code of Civil Procedure, 1908? Petitioner's arguments: The Plaintiff contended that they are entitled to interest on delayed payments, relying on the judgment in North Delhi Municipal Corporation and Anr. v. Sanjeev Kumar, 2018 SCC OnLine Del 8053, which held that contractors are entitled to interest on delayed payments after a reasonable period from the passing of final bills. The Plaintiff also cited The Interest Act, 1978. Revenue/State's arguments: The Defendants argued that interest is not payable as there is no specific clause in the Work Order for interest, the rate of interest sought is exorbitant, and the principal amount has already been paid. They also contended that once the principal amount is received, the Plaintiff is not entitled to interest, and liability for interest was not admitted in the written statement.