M/S Jainco Buildcon PVT. LTD. vs. The State Of Madhya Pradesh

Held

The Court held that the Petitioner was not entitled to any payment for the operation and maintenance (O&M) work as claimed, particularly in the absence of cogent documents to substantiate their claim. The Court noted that the Respondent's letter dated May 13, 2024, clearly stated that the Petitioner had not provided the requested details and that the O&M work had been performed by the Municipal Council's employees since the inception of the project. The Court found that the claim of Rs. 3,00,55,774/- for O&M work had not been admitted by the Respondents. Since the matter had taken the form of a dispute, the Court opined that the 'Dispute Resolution System' stipulated in Clause 12 of Section 3 of the Contract could be invoked. Consequently, the petition was dismissed. However, the Petitioner was granted liberty to pursue the dispute resolution mechanism as per the contract.

Facts

M/s Jainco Buildcon Pvt. Ltd. (Petitioner) was awarded a contract for a water supply scheme, including operation and maintenance (O&M), in August 2016, which was completed by April 2019. The Petitioner submitted O&M bills, claiming Rs. 2,81,60,742.51 for the period May 2019 to August 2023. Despite reminders, no payment was made, leading the Petitioner to issue a notice of termination due to non-payment. The Municipal Council (Respondent No. 3) replied on November 23, 2023, requesting details of employees deployed and work done. The Petitioner provided these details and requested payment. The Council, in a meeting on March 7, 2024, decided not to pay the O&M amount, stating that the Petitioner had not performed any O&M work and that the Municipal Council's employees had handled it since inception. The Council also stated that payment for the construction work would be made upon receiving funds from the Government, and the additional GST amount would be borne by the State Government.

Key Issues

1. Whether the Municipal Council's decision dated March 7, 2024, to not pay the Petitioner for operation and maintenance work is illegal and arbitrary, violating principles of natural justice, particularly in light of the Petitioner's contention that their communications were not brought to the Council's notice. 2. Whether the Petitioner is entitled to payment for the operation and maintenance work performed from May 15, 2019, to August 14, 2023, and the additional amount due to GST, given the Respondent's assertion that no such work was performed by the Petitioner. Petitioner's Arguments: The Petitioner argued that the Municipal Council's decision was illegal and arbitrary, taken without notice or a personal hearing. They contended that their communications, including bills and responses to the Council's queries, were not placed before the Council when it considered the bill on March 7, 2024, leading to a wrong conclusion. The Petitioner asserted that they had successfully carried out O&M works, supported by certificates, and that the Respondent had never disputed this until the impugned resolution. They relied on the principle that High Courts can interfere under Article 226 even in contractual matters when the State acts arbitrarily, citing Surya Constructions Vs. State of U.P. & Ors. (2019) 16 SCC 794. Respondent's Arguments: The Respondent argued that the Petitioner had not provided satisfactory and unambiguous details regarding the O&M work. They asserted that the Municipal Council's employees had performed all O&M works for the water distribution network since its inception, and the Petitioner had not carried out any such work. Therefore, no payment was due to the Petitioner for O&M. The Respondent also stated that payment for the balance construction work was contingent on receiving funds from the State Government.