Synopsis

The petitioner was awarded a contract by the National Highways Authority of India (NHAI) for collection of user fee at the Pawangaon Fee Plaza for one year (from 17th June 2025 to 17th June 2026). Clause 35(6) of the contract permitted termination if the moving average of toll collections for the preceding fifteen days exceeded forty percent of the existing remittance payable by the contractor (a “windfall gain” situation). Toll collections increased substantially from June 2025 onwards, crossing the 40% threshold and reaching over 270% by February 2026. The NHAI issued a show cause notice and terminated the contract under Clauses 35(2) and 35(6) on 8th April 2026. The petitioner challenged the termination. The Delhi High Court dismissed the writ petition, holding that: (i) judicial review in contractual matters is limited to examining the decision‑making process, not the merits; (ii) the termination clause was part of the agreed tender conditions; (iii) the petitioner, being an experienced contractor, accepted the contractual terms with open eyes; (iv) the NHAI followed principles of natural justice; and (v) the appropriate remedy, if any, was damages, not specific performance under Article 226. The court also noted that the NHAI had delayed invoking the clause, resulting in loss to the public exchequer, and directed disciplinary action against concerned officials.

Court: High Court of Delhi at New Delhi

Coram: Justice Anil Kshetarpal and Justice Amit Mahajan

Date of Judgment: 20th April 2026

Citation: W.P.(C) 4817/2026 (2026:DHC:3250-DB)

Core Law: Contract law – termination of contract; Constitutional law – Article 14; Judicial review of administrative/contractual decisions

2. Legal Framework

Major laws and provisions involved

• Constitution of India – Article 14 (right to equality), Article 226 (writ jurisdiction)

• Contract law – principles of termination, breach, specific performance

• Specific Relief Act, 1963 – contracts not specifically enforceable if requiring continuous supervision

Key legal principles applied

• Limited scope of judicial review in contractual matters: The court will not sit as an appellate authority over commercial decisions of public authorities. Interference is warranted only if the decision is arbitrary, mala fide, irrational, or in violation of statutory or constitutional mandates.

• Contractual termination clauses are binding: If the contract expressly reserves a right of termination upon specified conditions (including windfall gain), the contractor cannot claim an indefeasible right to continue till the expiry of the tenure.

• Party accepting contract with open eyes cannot later challenge its terms: A contractor participating in a competitive bidding process, especially an experienced one, is bound by the terms o

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