Municipal Corporation Of Delhi vs Sh. Sahibjeet Singh Bagga

$~7
* IN THE HIGH COURT OF DELHI AT NEW DELHI
th
Date of decision: 15 May, 2026
+ RFA(COMM) 619/2025 & CM APPL. 69343/2025, CM
APPL. 69344/2025, CM APPL. 69346/2025

MUNICIPAL CORPORATION OF DELHI
(THROUGH ITS CIVIC CENTER,
MINTO ROAD, NEW DELHI-110002) .....APPELLANT

Through: Mr. Siddhant Nath, Standing
Counsel with Mr. Amaan Khan,
Advocate

Versus


SH. SAHIBJEET SINGH BAGGA
(61/10 IIND FLOOR RAMJAS ROAD,
KAROL BAGH, NEW DELHI-O5) … RESPONDENT
Through: Mr. Vikas Sharma, Advocate


CORAM:
HON'BLE MR. JUSTICE NITIN WASUDEO SAMBRE
HON'BLE MR. JUSTICE AJAY DIGPAUL
J U D G M E N T (O R A L )

NITIN WASUDEO SAMBRE, J.
1. The present proceedings arise out of a commercial dispute between the
respondent/plaintiff, Shri Sahibjeet Singh Bagga, sole proprietor of M/s
Sahibjeet Singh Bagga, a registered contractor of the Municipal Corporation
Signature Not Verified
Signed By:SURYAKANT
YADAV
Signing Date:05.06.2026
12:46:20
RFA(COMM) 619/2025 Page 1 of 16

of Delhi (MCD), and the appellant/defendant, MCD. The dispute pertains to
payments allegedly due in respect of civil works executed by the respondent
pursuant to four work orders issued by the appellant during the period 2019–
2020 for improvement and development of lanes within the jurisdiction of
MCD.
2. The four work orders forming the subject matter of the dispute are:
(i) Work Order No. EE(M-SZ-I)(EE-IV)/SYS/2019-2020/128 dated
05.11.2019;
(ii) Work Order No. EE(M-SZ-I)(EE-IV)/SYS/2019-2020/367 dated
11.03.2020;
(iii) Work Order No. EE(M-SZ-I)(EE-IV)/SYS/2019-2020/336 dated
26.12.2019; and
(iv) Work Order No. EE(M-SZ-I)(EE-IV)/SYS/2019-2020/334 dated
26.12.2019.
For the convenience, details are as under:
Work Order
No
Date Issued Stipulated
Contractual Amount
Earnest Money at
Tender + Security
Deposit
128 05.11.2019 2 months 4,27,477/ Rs.42,744
Timeline
(Completion)
(as per plaint)
336 26.12.2019 3 months 6,78,143/ Rs.67,814
334 (5year
warranty
obligation
specifically)
26.12.2019 3 months 7,88,941/ Rs.78,894
367 11.03.2020 2 months 4,20,436 Rs.42,003

Signature Not Verified
Signed By:SURYAKANT
YADAV
Signing Date:05.06.2026
12:46:20
RFA(COMM) 619/2025 Page 2 of 16

3. The stipulated completion period for Work Orders Nos. 128 and 367
was two months, while the completion period for Work Orders Nos. 336 and
334 was three months.
4. According to the respondent, the contractual works were executed and
the corresponding bills were processed; however, certain amounts relating to
running account bills, final bills, security deposits, and earnest money
remained unpaid or withheld by the appellant. The respondent asserted that
despite repeated requests and correspondence seeking release of the
outstanding amounts, the payments were not made. Consequently, the
instituted Commercial Suit No. 1131/2024 before the Court of the District
Judge (Commercial Court–01), Central District, Tis Hazari Courts, Delhi,
seeking recovery of a total sum of ₹9,33,105/-, comprising ₹7,27,073/-
towards the principal amount allegedly due and ₹2,06,032/- towards interest
calculated from the date of institution of the suit.
5. Upon service of summons, the appellant entered appearance and filed
a written statement contesting the suit. The appellant raised preliminary
objections regarding maintainability, limitation, absence of cause of action,
and non-compliance by the respondent with contractual requirements. The
appellant relied upon various provisions of the General Conditions of
Contract (‘ GCC ’), contending that payments under the work orders were
governed by contractual stipulations relating to submission of bills,
processing of payments on queue basis, release of security deposits, and
fulfilment of statutory requirements. The appellant further asserted that
Signature Not Verified
Signed By:SURYAKANT
YADAV
Signing Date:05.06.2026
12:46:20
RFA(COMM) 619/2025 Page 3 of 16

certain payments and deductions had been made in accordance with the
contract and departmental procedures.
6. The respondent thereafter filed a replication denying the averments
made in the written statement and reaffirming the claims set out in the plaint.
Upon completion of pleadings, the Commercial Court framed the following
issues on 10.01.2025:
“(i) Whether the suit was barred by limitation; OPD
(ii) Whether the plaintiff was entitled to recovery of ₹4,95,618/-
towards allegedly withheld bill amounts; OPP
(iii) Whether the plaintiff was entitled to release of security deposit and
earnest money amounting to ₹2,31,455/-; OPP
(iv) Whether the plaintiff was entitled to interest and, if so, at what rate
and for what period; and OPP
(v) Relief.”
7. Both parties led evidence in support of their respective pleadings. The
respondent examined himself and relied upon the work orders, bills,
correspondence, and other documents in support of his claim. The appellant
also led evidence and relied upon contractual documents, departmental
records, calculation sheets, and the General Conditions of Contract to
substantiate its defence. Following completion of evidence, final arguments
were heard on 18.07.2025.
8. By judgment and decree dated 30.07.2025, the learned Commercial
Court partly decreed the suit holding that the respondent is entitled to recover
₹4,95,618/- towards withheld bill amounts in respect of Work Orders Nos.
Signature Not Verified
Signed By:SURYAKANT
YADAV
Signing Date:05.06.2026
12:46:20
RFA(COMM) 619/2025 Page 4 of 16

128, 367 and 336, and ₹1,88,711/- towards security deposits relating to Work
Orders Nos. 367, 336 and 334. The Court further awarded pre-suit, pendent
lite and future interest @ 9% per annum on the amounts found due, along with
costs of the proceedings. In relation to Work Order No. 128, the Court also
granted pendent lite interest on certain amounts of earnest money until the
dates on which such amounts were released.
9. Aggrieved by the judgment and decree dated 30.07.2025, the appellant-
Municipal Corporation of Delhi has preferred the present Regular First
Appeal under Section 13 of the Commercial Courts Act, 2015, challenging
the findings recorded by the Commercial Court and setting aside of the
impugned judgment and decree. The appeal principally concerns the parties’
dispute regarding the plaintiff’s entitlement, under the contractual framework
governing the work orders, to the withheld bill amounts, security deposits,
earnest money, and the interest claimed thereon.
SUBMISSIONS OF THE APPELLANT
10. Learned counsel appearing for the appellant submits that the same is
contrary to the evidence on record and the contractual terms governing the
parties. It is argued that the learned Commercial Court failed to appreciate
that the contractor had not submitted the final bills in the prescribed
departmental format within the time stipulated under Clauses 7 and 9 of the
GCC. According to the appellant, submission of a valid final bill was a
condition precedent for processing and release of payments, and in the
absence of compliance with the contractual requirements, no decree could
have been passed in favour of the respondent.
Signature Not Verified
Signed By:SURYAKANT
YADAV
Signing Date:05.06.2026
12:46:20
RFA(COMM) 619/2025 Page 5 of 16

11. Counsel further contends that the letters dated 06.12.2023 relied upon
by the respondent could not be treated as final bills, as they were not
accompanied by measurement sheets, material account statements and other
supporting documents required for verification under the GCC. It was
submitted that the learned Commercial Court ignored these deficiencies while
adjudicating the respondent's claims.
12. It was next argued that the respondent had accepted running account
bills and part payments from time to time without raising any protest
regarding deductions made by the department. Having accepted such
payments without reservation, the respondent was estopped from
subsequently asserting further claims. Learned counsel submits that the
principles of waiver, accord and satisfaction, and estoppel squarely apply to
the facts of the present case, rendering the respondent's claims legally
untenable.
13. The appellant further submits that the learned Commercial Court failed
to appreciate the contractual mechanism governing release of payments.
Drawing attention to Clauses 7 and 9 of the GCC, counsel argued that
payments were to be processed on a queue basis and were dependent upon
availability of funds. The contract expressly excluded liability on the part of
the department to pay interest for delays attributable to shortage of funds.
Consequently, the award of pre-suit, pendent lite and future interest @ 9% per
annum was contrary to the contractual stipulations binding upon the parties.

14. It is further submitted that the learned Commercial Court erred in
directing release of security deposits and earnest money. Counsel argued that
Signature Not Verified
Signed By:SURYAKANT
YADAV
Signing Date:05.06.2026
12:46:20
RFA(COMM) 619/2025 Page 6 of 16

Clause 45 of the GCC mandates production of a clearance certificate from the
Labour Department before refund of the security deposit, whereas Clause 17
provides that the security amount could be released only after clearance of the
final bill. According to the appellant, the respondent had not fulfilled these
contractual requirements.
15. In relation to Work Order No. 334 dated 26.12.2019, learned counsel
submits that the work was subject to a five-year warranty period, which had
not expired when the suit was instituted. It was therefore argued that the
security deposit pertaining to the said work order could not have been
released. Similarly, with respect to Work Order No. 336, it was contended
that the respondent had failed to furnish mandatory SLF receipts relating to
disposal of ‘ malba’ and had submitted incomplete RMC challans, thereby
justifying withholding of the amounts claimed.
16. The appellant has also challenged the findings of the Commercial Court
on limitation. It is argued that several claims pertained to deductions and
payments made during the years 2020–2021 and were, therefore, barred by
limitation. Counsel submits that the Commercial Court erroneously relied
upon the orders of the Hon'ble Supreme Court extending limitation during the
COVID-19 pandemic and applied them beyond their intended scope.
17. Learned counsel further contends that the Commercial Court failed to
properly consider the documentary evidence adduced by the appellant,
including calculation sheets and departmental clarifications explaining the
reasons for deductions and non-payment. According to the appellant, these
documents demonstrates that the amounts withheld were not admitted
Signature Not Verified
Signed By:SURYAKANT
YADAV
Signing Date:05.06.2026
12:46:20
RFA(COMM) 619/2025 Page 7 of 16

liabilities but were retained in accordance with the contractual provisions
pending fulfilment of contractual obligations by the respondent.
18. It is additionally submitted that the award of interest @ 9% per annum
was arbitrary and unsupported by reasons. Counsel argued that Section 34 of
the Code of Civil Procedure requires the Court to assign reasons while
granting interest and that the impugned judgment failed to do so.
19. Lastly, counsel has submitted that the impugned judgment did not
adequately deal with the specific defence raised by the appellant, including
limitation, waiver, non-submission of final bills, contractual exclusion of
interest, and the contractual justification for withholding security deposits. It
was argued that the Commercial Court was required to adjudicate the dispute
strictly in accordance with the contractual terms between the parties, but
instead proceeded on equitable considerations, thereby effectively rewriting
the contract. On these grounds, the appellant has prayed that the impugned
judgment and decree be set aside and the appeal be allowed.
SUBMISSIONS OF THE RESPONDENT
20. In response, the learned counsel representing the Respondent-
contractor has supported the impugned judgment and decree, submitting that
the Trial Court's findings are based on a meticulous evaluation before the Trial
Court and require no interference. It is submitted that the physical completion
of the public works was fully verified, certified, and passed within the internal
accounting registers of the department by MCD’s own engineering staff,
which makes the non-submission of triplicate paper forms a completely
Signature Not Verified
Signed By:SURYAKANT
YADAV
Signing Date:05.06.2026
12:46:20
RFA(COMM) 619/2025 Page 8 of 16

hollow, hyper-technical objection. The Respondent argues that a public
statutory body cannot consume and enjoy the benefits of civic infrastructure
developments and subsequently hide behind internal fund shortages or
priority queues to withhold a contractor's hard-earned money for over five
years.
21. The learned counsel contends that the priority "Queue System" can
only regulate reasonable, short-term administrative delays and cannot be used
as an elastic, open-ended license to block working capital indefinitely, which
would completely cripple independent businesses. With respect to the defense
of Accord and Satisfaction, the Respondent submits that the partial payments
and the letters of December 2023 were accepted under sheer economic duress
to keep the business afloat while the corporation choked its funds. It is argued
that there was no free consent or true intention to waive the remaining dues,
and MCD has failed to produce any formal "No Dues Certificate" or explicit
discharge voucher signed by the contractor that shows a waiver of the
remaining passed balances or security guarantees.
22. Regarding the objection on limitation, the counsel submits that the
internal processing, continuous representations, and subsequent verifications
by the department kept the claim alive, and the Trial Court correctly applied
the protective pandemic-era extension orders passed by the Hon’ble Supreme
Court. On the issue of security deposits, the Respondent has argued that under
the clear terms of Clause 45, if no labour complaint is pending on record
within six months from completion, the clearance certificate is deemed to
have been received. It is highlighted that MCD’s own witness admitted during
Signature Not Verified
Signed By:SURYAKANT
YADAV
Signing Date:05.06.2026
12:46:20
RFA(COMM) 619/2025 Page 9 of 16

cross-examination that no labour complaints, wage disputes, or structural
defects were ever recorded across any of the four work orders, making the
retention of the security deposits for over five years wholly arbitrary and
punitive.
23. The counsel concludes by stating that when a public body wrongfully
detains verified public dues for years, it causes immense financial loss to the
contractor, and therefore, the Commercial Court holds full statutory discretion
to award a reasonable, compensatory rate of interest under Section 34 of the
Code of Civil Procedure, 1908.
ANALYSIS
24. We have carefully perused the trial records, examined the conflicting
submissions advanced by the learned counsel, and scrupulously evaluated the
evidence brought on record in light of the governing clauses of the General
Conditions of Contract.
25. The primary defence set up by the Corporation hinges upon its internal
priority queue system and the general policy guidelines linking payments to
fund availability at headquarters. While this Court understands that a public
statutory body must manage complex budgetary allocations, an administrative
queue cannot be stretched out to an unreasonable, open-ended period to deny
clear, verified operational dues. The civic works were fully executed and used
by the public as far back as 2020. Retaining a contractor's money for more
than five years while citing an internal shortage of liquid funds is completely
unconscionable and stands opposed to public policy.
Signature Not Verified
Signed By:SURYAKANT
YADAV
Signing Date:05.06.2026
12:46:20
RFA(COMM) 619/2025 Page 10 of 16

26. We must note that a very similar controversy involving the same
appellant and identically worded standard conditions came up for our detailed
th
adjudication in the matter of RFA (COMM) 677/2025 decided on 12 January
2026 titled Municipal Corporation of Delhi v. M/s Ram Niwas Goel
[2026:DHC:177-DB]. In the aforesaid matter, this Court specifically
evaluated the operational failures of the Corporation, observing that while the
MCD regularly blames independent contractors for project delays, the internal
departmental communications reveal that the Corporation systematically fails
to move the appropriate forest and horticulture channels to clear structural
impediments.
27. Reaffirming the legal principles settled in paragraphs 52 and 53 of M/s
Ram Niwas Goel (supra), we hold that where the public authority itself creates
a situation wherein structural impediments arise due to its failure to remove
site hindrances, it is simply not open for the Appellant to blame the contractor
for not executing the entire agreement within the stipulated calendar period.
A priority queue or an internal fund-allocation guideline cannot serve as an
open-ended legal shield to escape a vested debt when the engineering division
has already certified the physical execution of the works. For the convenience,
the observation reads thus under:
“52. If we look into the documents which are in the form of
intradepartmental communications between the appellant and the Forest
Department and the Horticulture Department, it is apparent that the
appellant was under obligation to remove the trees and there is inordinate
delay on the part of the appellant in moving the appropriate proceedings
with Forest Department and Horticulture Department for removal of the
trees.
Signature Not Verified
Signed By:SURYAKANT
YADAV
Signing Date:05.06.2026
12:46:20
RFA(COMM) 619/2025 Page 11 of 16

53. The appellant themselves created the situation wherein impediments
arose due to their failure to remove the trees which affected the smooth
execution of the contract. In such an eventuality and for failure to remove
the trees for which the appellant was duty-bound to take action, it is not
open for the appellant to blame the respondent for not executing the entire
contract within the stipulated time.”
28. Furthermore, as explicitly noted in paragraphs 55 and 56 of M/s Ram
Niwas Goel (supra), the absolute failure on the part of MCD’s engineers to
properly maintain the official site registers and hindrance logs cannot be used
to penalize a small enterprise. Following the mandate established in M/s Ram
Niwas Goel (supra), the administrative inertia on the part of the public body
in updating and maintaining clear operational books entirely justifies the case
of the contractor that a clear, unhindered site was never handed over within
the contemplation of the original notice inviting tenders. The relevant paras
read thus:
“ 55. Hindrance register Ex.DW-1/9 placed on record rather establishes
that the site was not available to the respondent from 03 January 2020 to
nd nd
22 February 2020 and thereafter from 22 March 2020 till June 2020.
56. The hindrance register, if verified, does not speak of any further entries
which fact justifies the ease of the respondent/plaintiff that there was
complete failure on the part of the appellant in the matter of clearing
hindrances by removing of trees.”
29. The objection regarding the non-submission of final bills in triplicate
is equally a hyper-technicality that cannot be countenanced by this Court. The
internal departmental records, particularly the calculation sheets marked as
Ex.-DW1/13 , conclusively establish that the Engineering Wing of the
Corporation measured the executed works, verified the parameters, and
formally passed these precise sums within their own internal accounting
ledgers. Following the rationale of paragraph 58 of M/s Ram Niwas Goel
Signature Not Verified
Signed By:SURYAKANT
YADAV
Signing Date:05.06.2026
12:46:20
RFA(COMM) 619/2025 Page 12 of 16

(supra), once a public body calculates, verifies, and records an admitted debt
in its own official books, the mere fact that a bill is not submitted on a specific
departmental format layout will not vitiate the legitimacy of the transaction
or wipe out an active public debt. The relevant para reads thus:
“58. As far as the first running bill is concerned viz. Ex.PW-1/16, same
bears the signatures of the partner of the plaintiff. The said bill was duly
processed and passed by the appellant and merely because the bill is not on
the letter head that by itself will not vitiate the first running bill.”
30. We also find that since these transactions directly intersected with the
global pandemic, the learned Trial Court was correct in extending the
protective benefit of limitation, directives passed by the Hon’ble Supreme
Court In Re:Cognizance for Exentension of Limitation.
31. We find equally little substance in the plea of Accord and Satisfaction
raised under Section 63 of the Indian Contract Act, 1872. To establish a
complete discharge of debt by waiver, the release of partial funds must be
accompanied by a free and unconditional mutual intent to drop all remaining
claims. In the arena of public works, a contractor whose working capital has
been systematically blocked by a dominant state entity is often left with no
practical choice but to accept whatever partial amounts are released by the
department to ensure economic survival.
32. The Appellant failed to produce any explicit " No Dues Certificate " or
unreserved discharge voucher signed by the Respondent. The mere
acceptance of running payments without a formal protest on every single
occasion does not translate into an absolute waiver of the contractor’s right to
sue for their remaining passed balances.
Signature Not Verified
Signed By:SURYAKANT
YADAV
Signing Date:05.06.2026
12:46:20
RFA(COMM) 619/2025 Page 13 of 16

33. Similarly, the Corporation’s reliance on Clause 45 to hold back the
security deposits is legally untenable. Clause 45 contains an express deeming
provision designed specifically to prevent administrative inertia from harming
a contractor. It mandates that if no communication is received from the Labor
Officer within six months from completion, the clearance certificate is
deemed to have been received and the security deposit must be released.
34. In the present case, the Appellant’s witness admitted during cross-
examination that the Corporation has not received a single labour complaint,
wage dispute, or structural defect notice across any of the four work orders.
Continuing to retain these security guarantees after five years, while ignoring
the clear deeming mandate of clause, is arbitrary and unauthorized.
35. Finally, regarding the challenge to the award of interest, it is a settled
principle of commercial jurisprudence that contractual interest-barring terms
only protect an authority during a reasonable period of administrative
processing. When a statutory body wrongfully detains verified public dues for
over half a decade, it strips the contractor of liquidity and forces them to incur
commercial borrowing costs.
36. The Division Bench of this Court in North Delhi Municipal
Corporation & Anr. v. Sanjeev Oberoi [2018 SCC OnLine Del 13149] has
systematically held that generic "no interest on delayed payments" clauses do
not strip the courts of their statutory power to award interest where a state
entity blocks a contractor's verified dues for a lengthy, unconscionable
window. The commercial court, therefore, retains full statutory discretion
under Section 34 of the Code of Civil Procedure, 1908, to award a reasonable,
Signature Not Verified
Signed By:SURYAKANT
YADAV
Signing Date:05.06.2026
12:46:20
RFA(COMM) 619/2025 Page 14 of 16

compensatory rate of interest to balance the financial loss, and the Trial
Court’s choice of a modest 9% interest per annum, requires no appellate
intervention.
CONCLUSION
37. The learned Trial Court has properly analyzed the oral and
documentary evidence on record, applied the core principles of contractual
fairness, and rightly prevented the statutory body from unjustly enriching
itself at the expense of its contractor. The impugned judgment contains no
perversity, illegality, or misreading of facts that warrants correction in appeal.
38. For the reasons discussed above, the present appeal is found to be
devoid of any merit and is accordingly dismissed.
th
39. The impugned Judgment and Decree dated 30 July, 2025 passed by
Learned District Judge, Commercial Court- Delhi in CS (COMM) No.
1131/2024 is hereby affirmed and upheld in its entirety.
40. The Appellant Corporation is directed to clear all outstanding decretal
amounts, including up-to-date interest, to the Respondent contractor within a
period of eight weeks from today. The parties shall bear their own costs in
this appeal.
41. The Trial Court Record be returned immediately along with a certified
copy of this Judgment.
42. Pending applications, if any, also stand disposed of.
Signature Not Verified
Signed By:SURYAKANT
YADAV
Signing Date:05.06.2026
12:46:20
RFA(COMM) 619/2025 Page 15 of 16

43. Copy of this judgment be uploaded on the website of this Court.


NITIN WASUDEO SAMBRE
(JUDGE)




AJAY DIGPAUL
(JUDGE)
MAY 15, 2026/ dm/st
Signature Not Verified
Signed By:SURYAKANT
YADAV
Signing Date:05.06.2026
12:46:20
RFA(COMM) 619/2025 Page 16 of 16