M/S. Ss And Company vs. The Commissioner

Facts

The petitioner, M/s. SS & Company, filed a writ petition seeking a direction to the Commissioner, Sivagangai Municipal Corporation, to release pending arrears of Rs. 43,58,958/- for executing BT surface work in specific wards, as per work order dated 02.06.2023. The petitioner had participated in a tender, executed the work, and incurred significant interest on loans taken for the project. Despite satisfactory completion, the Municipality had not disbursed the payment. This delay led to the petitioner facing penalties from the GST Authority for non-payment of taxes. The respondent Municipality stated that payment would be disbursed after a Council meeting decision.

Held

The Court held that the respondent Municipality was duty-bound to settle the amount due to the petitioner in a timely manner, as the contract was awarded based on a Council resolution and the work was executed to the Municipality's satisfaction. The Court rejected the respondent's contention that the delay was due to the need for a Council meeting, stating that this could not be a reason to deny payment. The Court acknowledged the petitioner's difficulties, including facing GST penalties and incurring interest on loans. Consequently, the Court directed the respondent Municipality to settle the amount due to the petitioner for the executed contract work along with interest at the rate of 6% per annum within 12 weeks from the date of receipt of the order. The issue of cumulative interest as prayed by the petitioner was not expressly decided, with the Court awarding 6% simple interest.

Key Issues

1. Whether the respondent Municipality is obligated to disburse the payment for the executed contract work to the petitioner in a timely manner, considering the petitioner has completed the work to the satisfaction of the Municipality and has incurred financial hardship due to delayed payment and potential GST penalties? (Question of law and fact, turning on principles of contract law and administrative duty). Petitioner's arguments: The petitioner argued that they had fulfilled their contractual obligations by completing the work satisfactorily. The delay in payment by the Municipality was causing them financial distress, including facing penalties from the GST Authority and bearing high interest on borrowed funds. They sought release of the due amount with cumulative interest. Respondent's arguments: The respondent Municipality contended that the payment would be disbursed on a priority basis after a decision was taken in a Council meeting. No specific provision or precedent was cited by the respondent.