Featured image for Supreme Court Judgment dated 04-10-2019 in case of petitioner name M/S. Madhoor Buildwell Pvt. Lt vs Yeola Municipal Council & Ors.
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Supreme Court Directs State to Consider Sewerage Project Funding for Yeola Municipal Council

The Supreme Court of India, in its ruling in M/S. Madhoor Buildwell Pvt. Ltd. v. Yeola Municipal Council & Ors., addressed a critical dispute regarding the disbursement of funds for an urban sewerage project. The case primarily revolved around the responsibility of funding under the Urban Infrastructure Development Scheme for Small and Medium Towns (UIDSSMT) and whether the central or state government was liable for non-payment to a contractor despite prior approvals.

The Court concluded that while there was no binding financial obligation on the central government, it directed the state government to reconsider the approval of the sewerage project under its policies and, if necessary, seek funds from the central government under the Atal Mission for Rejuvenation and Urban Transformation (AMRUT) scheme.

Background of the Case

The dispute arose when the appellant, M/S. Madhoor Buildwell Pvt. Ltd., a contractor, undertook the task of laying a sewerage system for Yeola Municipal Council in Maharashtra. The project was initiated under the centrally sponsored UIDSSMT scheme, which mandated an 80:10:10 cost-sharing structure—80% from the central government, 10% from the state government, and 10% from the municipal council.

The key contentions in the case were:

  • The contractor claimed to have completed 35% of the work but was not paid because the central government had not released funds.
  • The contractor filed a writ petition seeking the disbursement of funds.
  • The Bombay High Court dismissed the petition, citing that the UIDSSMT scheme had been discontinued after March 31, 2015.
  • The contractor then approached the Supreme Court challenging the High Court’s ruling.

Arguments by the Appellant

The appellant, represented by senior counsel Mr. Shyam Divan, argued that:

  • The proposal for the sewerage project had been approved at both the state and central levels.
  • The appellant was awarded the contract through a legitimate tendering process and had completed a substantial portion of the work.
  • Sanitation infrastructure is essential for urban areas, and the government should ensure that essential projects do not suffer due to bureaucratic delays.
  • Even if UIDSSMT was discontinued, the project should be funded under the new urban development scheme, AMRUT.

Arguments by the Respondents

The central government, represented by Additional Solicitor General Mr. K.M. Nataraj, and the state of Maharashtra contended that:

  • There was no privity of contract between the contractor and the central government.
  • The state government and the municipal council were responsible for awarding the contract without confirmed financial sanction from the central government.
  • The central government had approved funding for some municipalities in Maharashtra but not for Yeola Municipal Council.
  • The Ministry of Finance had not approved the release of funds before the expiry of UIDSSMT.

Supreme Court’s Observations

The Supreme Court bench, comprising Justices L. Nageswara Rao and Hemant Gupta, carefully examined the issue and made the following observations:

  • The project was approved by the State Level Sanctioning Committee and the Ministry of Urban Development.
  • The funds for UIDSSMT were subject to approval by the Ministry of Finance, which had declined funding for Yeola Municipal Council.
  • While the contractor could not claim funds directly from the central government, the state government had an obligation to ensure that essential public projects were completed.

The Court emphasized:

“Sewage and sanitation projects serve the public interest and are necessary for urban development. The State Government should consider approving the project under its existing schemes or seek funds under AMRUT.”

Final Judgment

The Supreme Court issued the following directives:

  • The appeal was disposed of with a direction to the state government to reconsider and approve the sewerage project for Yeola Municipal Council.
  • If the state government was unable to provide funds, it should seek financial assistance from the central government under AMRUT.
  • The state government was instructed to take action within three months, and the central government was given another three months to respond to any financial requests.

Implications of the Judgment

This judgment underscores the importance of structured financial planning in government projects and highlights key lessons:

  • Government Approvals Must Be Finalized: State and local authorities should ensure that financial sanctions are in place before awarding contracts.
  • Public Infrastructure Cannot Be Ignored: Essential services like sanitation must be prioritized, even if original funding schemes lapse.
  • State Governments Have an Obligation: When central funding is unavailable, state authorities must find alternative means to support critical infrastructure projects.

Conclusion

The Supreme Court’s decision in M/S. Madhoor Buildwell Pvt. Ltd. v. Yeola Municipal Council reflects a balanced approach. While it upheld the principle that the central government could not be forced to fund projects lacking financial approval, it also directed the state government to ensure that the essential sewerage infrastructure was not abandoned.


Petitioner Name: M/S. Madhoor Buildwell Pvt. Ltd..
Respondent Name: Yeola Municipal Council & Ors..
Judgment By: Justice L. Nageswara Rao, Justice Hemant Gupta.
Place Of Incident: Yeola, Maharashtra.
Judgment Date: 04-10-2019.

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