Failure to Clear Site Hindrances (Trees) Defeats Penal/Blacklisting Action and Cannot Be Used to Deny a Certified Running Bill

Case: MUNICIPAL CORPORATION OF DELHI v. M/S RAM NIWAS GOEL
Citation Code: 2026 DHC 177-DB
Court: Delhi High Court (Division Bench)
Date: 12-01-2026
Coram: Hon’ble Mr. Justice Nitin Wasudeo Sambre; Hon’ble Mr. Justice Anish Dayal

1. Introduction

The appeal arose from a commercial suit filed by M/s Ram Niwas Goel (contractor; plaintiff before the Commercial Court) against the Municipal Corporation of Delhi (employer; defendant). The dispute concerned payment for work executed under a public works contract for construction of a municipal primary school building at Ashok Vihar, Delhi.

The contractor alleged that (i) the site was handed over late, (ii) the COVID-19 lockdown disrupted performance, and crucially, (iii) trees on the site were not removed despite requests, preventing completion in the balance area; additionally, running bills were not released. MCD, on the other hand, alleged breach of contractual conditions (GCC/NIT), asserted that proper bills were not submitted in the prescribed manner, and proceeded to impose levies/penal consequences, close the contract, forfeit securities, and debar the contractor.

The central issues before the High Court were whether the Commercial Court correctly held MCD liable to pay the certified work value (with interest), and whether MCD’s penal/administrative actions premised on delay/abandonment could stand when the site was not cleared of hindrances by MCD.

2. Summary of the Judgment

The Delhi High Court dismissed MCD’s appeal and upheld the Commercial Court’s decree. In substance, the Court affirmed that:

  • MCD’s failure to clear site hindrances (trees) materially contributed to delay and prevented MCD from blaming the contractor for non-completion within time.
  • The first running bill (Ex.PW-1/16) had been processed/passed by MCD; the mere objection that it was not on the contractor’s letterhead did not vitiate it.
  • Given admissions in evidence (including by MCD’s witness) and the documentary record (hindrance register and inter-departmental communications), the Commercial Court’s view was a “possible view” on evidence and warranted no appellate interference.

The operative result (as upheld): recovery decree of Rs. 1,01,83,222/- with simple interest @ 8% p.a. from 29.07.2021 till realization, along with declaration that specific MCD letters/orders/SCN were null and void, and a permanent injunction restraining their enforcement.

3. Analysis

3.1 Precedents Cited

  • M/S R.K. Goel Abhey Kumar Jain Vs. Municipal Corporation of Delhi (RFA (COMM) 520/2025, decided on 11th September 2025)
    How it featured: Cited by MCD to contend that the contractual/GCC framework and billing requirements should be strictly applied. The High Court recorded MCD’s submission that this decision (and the Supreme Court decision in Borse Brothers) was “not applicable” on facts, and ultimately decided the appeal on the evidentiary matrix—especially admissions regarding hindrances and bill processing—rather than by extending any ratio from this case.
  • Government of Maharashtra Vs. Borse Brother Engineers & Contractors Pvt. Ltd. ((2021) 6 SCC 460)
    How it featured: Referred to in MCD’s argument (again with the caveat that it was said to be factually inapplicable here). The High Court did not apply Borse Brothers to decide any determinative issue; the dispute was resolved through contract-performance facts and admissions.
  • M/S Sethi Auto Service Station & Anr. Vs. Delhi Development Authority & Ors. [(2009) 1 SCC 180]
    How it influenced the reasoning: MCD relied on this authority to argue that internal departmental notings do not have legal effect as “approval” and are only for internal deliberation. The High Court acknowledged the principle but distinguished its application on the facts: here, MCD’s own witness admitted submission and processing of the running bill, and the record showed endorsement of execution of work—making it inappropriate to treat the processed running bill as non-existent merely due to form objections.
  • North Delhi Municipal Corporation Vs. Sanjeev Kumar (2018 SCC Online Delhi 8053)
    How it featured: Cited by MCD to reinforce that the GCC governs the parties and contractual conditions cannot be rewritten. While the High Court accepted the general proposition that contractual terms matter, it effectively held that MCD could not weaponize procedural clauses to deny payment for admitted/certified work or to penalize the contractor when MCD itself failed to provide a clear site.
  • Venkataraman Krishnamurthy and Another v. Lodha Crown Buildmart Pvt. Ltd. [(2024) 4 SCC 230]
    How it featured: Cited by MCD for the general proposition that parties must conduct themselves as per contractual terms. The High Court’s ultimate approach remained fact-driven: it treated MCD’s non-removal of trees and incomplete hindrance-record maintenance as decisive against MCD’s blame narrative.

3.2 Legal Reasoning

(a) Allocation of responsibility for site hindrances (trees)

  • The Court treated removal of trees as an employer-side obligation evidenced by inter-departmental communications involving the Forest and Horticulture Departments.
  • On evidence, five trees were removed only on 10.12.2020 (and that too the witness could only speak to permission/processing), i.e., near/after the contractual completion period, and two trees still remained even after the second running bill was submitted.
  • The Court therefore held MCD “created the situation” by its failure to remove hindrances, and it was “not open” to MCD to blame the contractor for non-completion within time.

(b) Evidentiary weight of the hindrance register and admissions

  • Ex.DW-1/9 (hindrance register) showed non-availability of site for certain periods (03.01.2020–22.02.2020 and 22.03.2020–June 2020).
  • The Court noted the hindrance register had no meaningful later entries addressing the tree obstacle, supporting the contractor’s case that hindrances were not properly cleared/recorded thereafter.
  • MCD’s witness (DW-1) made significant admissions, including that essential site registers (site order book, hindrance register, cement/steel registers, measurement book) were not provided along with the work order, and that extension requests were received and granted.

(c) Running bill payment: form v. substance

  • MCD’s core billing objection was that under GCC clause 7 (as argued), a running bill must be submitted in a prescribed format on the contractor’s letterhead with supporting certifications/particulars; absent this, there was allegedly no enforceable debt.
  • The Court held that where the first running bill (Ex.PW-1/16) bore the contractor’s signature and was processed and passed by MCD after verification of executed work, the narrow objection that it was “not on the letterhead” could not defeat the claim.
  • Importantly, the Court observed it was not MCD’s case that the bill was false or that the work was not executed—undercutting the attempt to reframe the dispute as purely procedural non-compliance.

(d) Appellate restraint

  • The Court repeatedly framed the Commercial Court’s findings as an “appropriate and possible view” on evidence, and therefore not warranting interference under a Section 96 CPC appeal.

3.3 Impact

  • Public works administration: The judgment underscores that municipal bodies cannot impose closure/forfeiture/debarment consequences for delay where the employer failed to provide a hindrance-free site, particularly when the hindrance is within the employer’s control (e.g., tree removal requiring departmental action).
  • Running bill disputes: Where work execution is admitted and the employer has processed/passed a running bill, minor format defects (such as absence of letterhead) may not defeat the contractor’s right to payment.
  • Record-keeping discipline: Non-maintenance or incomplete maintenance of key project records (hindrance register and site registers) can backfire in litigation, especially where the employer seeks to attribute blame to the contractor.
  • Debarment/disciplinary measures: While the judgment is rooted in the suit reliefs before the Commercial Court, its reasoning suggests that punitive administrative actions tied to alleged contractor default are vulnerable if the factual foundation is undermined by employer-caused hindrances.

4. Complex Concepts Simplified

  • Running bill: An interim bill raised during execution (not the final bill), typically based on measured quantities of work done. It is commonly supported by entries in a measurement book and certified by the engineer-in-charge.
  • Hindrance register: A site record noting events/conditions preventing progress (e.g., non-availability of site, utilities, encroachments, trees). It helps allocate responsibility for delay and supports claims for extension/time consequences.
  • GCC (General Conditions of Contract): Standard contractual terms governing performance, billing, extensions, risk-and-cost completion, forfeiture of securities, etc.
  • “Risk and cost”: If a contractor defaults, the employer may get the remaining work executed through another agency and recover the extra cost from the defaulting contractor—provided the underlying default is established and procedures are followed.
  • Departmental file notings: Internal notes are generally not final, binding decisions. However, where the record shows the employer processed/passed a bill after verification and this is supported by admissions, the employer cannot deny liability by characterizing everything as mere internal notation.
  • Section 96 CPC appeal: A first appeal on facts and law; yet appellate courts typically avoid overturning findings that are well-supported and represent a plausible view of the evidence.

5. Conclusion

The Delhi High Court’s decision affirms a pragmatic contract-performance principle in public works disputes: an employer cannot penalize a contractor for delay or deny payment for verified work when the employer itself failed to remove site hindrances within its control. Equally, once a running bill is processed/passed on verification of executed work, minor formal objections (such as absence of letterhead) will not, by themselves, defeat the contractor’s recovery claim. The ruling signals the litigation and governance costs of weak site administration and inadequate project record-keeping by public authorities.