Calcutta High Court Concerned Over State Normalizing Delay In Clearing Contractual Dues & Escaping Liability On Ground Of Limitation

The Calcutta High Court on Thursday expressed concern over State government's "open secret" of delaying payment of contractual dues owed to private entities and later rejecting those claims as time barred. Justice Amrita Sinha remarked that if this practice is not curbed, then time is not far that the State will be branded as a "poor pay master" and businessmen will refuse to provide service to the State and its parastatals. "It is the onus duty of the State to make payment to all who owes money from the State in lieu of the service provided," the Judge added.The Court was dealing with a writ petition filed in respect of a commercial contract for supply of goods and services entered into in the year 2016 between a private service provider and the respondent Kolkata Municipal Corporation ("KMC"), an entity within the purview of "State" under Article 12 of the Constitution. Under such arrangement, KMC was obliged to pay the petitioner company, consideration for goods and related services. The dispute relates to the payment of Rs. 2,87,63,815/- which apparently became due and payable to the petitioner under the said contract. Counsels for the petitioners argued that the said sum became due and payable on account of delays on the part of KMC in clearing the payment and that KMC had failed to make payments to the petitioner company promptly and within proper time by arbitrarily withholding payments in respect of bills raised upon it. Counsels for the respondent-State authorities raised preliminary objections with respect to the maintainability of the writ petition on grounds that the monetary claim of the petitioners was time barred and the same ought not to be revived by the Court and that as the said contract contemplated an in-house dispute redressal mechanism, the writ petition was further barred on ground of alternative remedy. The contract contemplated the payment due date as sixty days from submission of bills by the petitioner company and in respect of maintenance charges, fifteen days before commencement of annual maintenance by the petitioner company. The due date for payment of the said sum was on September, 2016.At the outset the Court agreed that the claim was barred by limitation. "Admittedly, the claim of the petitioners flow from a contract...In default to make payment within the time specified in the contract, the petitioners ought to have approached the appropriate forum on time. The time period to sue the purchaser for non-performance of the contractual obligation as laid down in the Limitation Act, 1963 is, three years from the date fixed for the performance." Thus it refused to issue any directions for payment of the said dues.However, it also noted that except on rare occasions, the State is in a habit of causing delay in releasing payment of the contractual dues. As a corollary, petitioner also did not insist on timely payment of bills and admitted ad hoc payments as and when they were made not in accordance with the terms of the contract."Does that give out a healthy picture of the manner in which the State authorities manage their business administration?" the Court asked rhetorically.It insisted that State authorities ought not to adopt technical pleas to defeat the legitimate claim of the claimants provided the claim is pressed within the prescribed period of limitation and there isn't undue delay or laches.It added that trend of delaying payments cannot be a reason to extend the period of limitation to revive a time barred claim. It held,"A person who is entitled to receive any payment ought not to wait for an indefinite period of time for receiving his dues. Legal remedy ought to be sought for at the very first instance and not after expiry of the prescribed time period within which action ought to have been taken. ...Section 3 of the Limitation Act, 1963 clearly mentions that any suit instituted after the prescribed period shall be dismissed. The expression 'shall' gives a mandatory character to the intent of the statute. Limitation goes to the root of the issue and once the same is raised as defense by the respondents, the Court is bound to decide the same."Coming to the merits of the case, the Court rejected the submission of the petitioners that Article 113 of the Limitation Act would apply in the case, in light of the contractually stipulated time limit for payment within the said commercial arrangement between the parties. It held: "… Assuming that the representation seeking payment is not rejected for a period of five, seven or ten years, can it be said that the period of limitation has not started running. The contract itself sets a time limit within which the payment ought to have been made. The period of limitation starts running immediately on completion of the time specified in the contract for payment. One is not required to wait for a formal order rejecting payment. ...It has been repeatedly reiterated by the...

Calcutta High Court Concerned Over State Normalizing Delay In Clearing Contractual Dues & Escaping Liability On Ground Of Limitation

SAMRIDDHA SEN

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