The Delhi High Court dismissed a plea against NHAI’s termination of the toll contract at Pawangaon Fee Plaza. It also asked NHAI to quickly introduce real-time monitoring systems to detect windfall gains and prevent loss to the public exchequer.
The Delhi High Court upheld NHAI’s decision to terminate the toll collection contract at Pawangaon Fee Plaza before the end of its tenure. The Court also directed NHAI to place on record the final decision taken against the official concerned. It further asked the authority to complete the related disciplinary proceedings, as far as practicable, within six months.
A Division Bench of Justice Anil Kshetarpal and Justice Amit Mahajan also recorded NHAI’s statement that it was taking steps to introduce an automated or software-based monitoring system. According to NHAI, the system will allow real-time tracking of toll collections and early detection of “windfall gain” situations.
Md. Karimunnisa filed the writ petition under Article 226 of the Constitution. She challenged the April 8, 2026 order, the April 2, 2026 show cause notice, and the fresh tender issued on the same date. The tender sought a new user fee collecting agency for three months at Pawangaon Fee Plaza, located at Km. 57+935 on NH-353J in Maharashtra.
The petitioner had entered into a contract with NHAI on May 26, 2025. Under that contract, she was to collect user fee at the plaza from June 17, 2025 at 08:00 hours until June 17, 2026 at 08:00 hours.
The Court noted that the petitioner had already worked as the user fee collection agency at the same fee plaza for two months in April and May 2025. After that, NHAI invited bids through an e-tender for a one-year contract.
The petitioner emerged as the successful bidder. She quoted a daily remittance of Rs. 2,62,430, although the respondents put the figure at Rs. 2,58,737. NHAI then issued a Letter of Award in her favour on May 13, 2025.
The judgment also records that the petitioner’s quoted remittance was much higher than both the reserve price and the bid submitted by the second-highest bidder.
The contract included Clause 35, which dealt with termination. The Court noted that Clause 35(2) allowed NHAI to terminate the contract by giving seven days’ notice without assigning any reason. Clause 35(6) allowed termination in cases of “windfall gain” at new fee plazas. This clause applied where the moving average of ETC and cash collections for the previous fifteen days crossed 40 percent of the remittance then being paid by the toll agency.
On April 2, 2026, NHAI issued a show cause notice-cum-seven days’ termination notice to the petitioner. It invoked Clauses 35(2) and 35(6) and alleged that a windfall gain situation had arisen. NHAI also gave the petitioner an opportunity of personal hearing. On the same day, it floated a fresh tender to appoint a new agency for three months. It later terminated the contract by an order dated April 8, 2026.
Senior Advocate Mr. Sanjoy Ghose appeared for the petitioner along with Mr. Kaustubh Anshuraj, Mr. Parmod Kalirana, Mr. Manish Choudhary and Mr. Amaya Vaid. He argued that the termination was arbitrary, pre-decided and contrary to the contract.
He contended that NHAI could not invoke Clause 35(6) because Pawangaon Fee Plaza was already operational and was not a “new” user fee plaza. He also argued that the contract remained valid until June 17, 2026 and that NHAI had not alleged any breach or default against the petitioner.
Counsel further submitted that the show cause notice and the termination order were mechanical and non-speaking. He said NHAI did not consider the petitioner’s reply dated April 4, 2026. He also argued that NHAI wrongly applied the policy circular dated March 26, 2025, which deals with “overstay” situations, during the subsistence of the contract.
He finally argued that the action violated Article 14 of the Constitution.
Appearing for NHAI, Additional Solicitor General Mr. N. Venkataraman, with Mr. Namit Saxena, argued that the contract expressly conferred power on NHAI to terminate under Clause 35(2), and that such power could not be curtailed merely because the contract period had not expired. It was submitted that invocation of Clause 35(6), read with applicable policy circulars, was a policy and administrative decision taken in public interest to safeguard public revenue and ensure efficient toll operations. The respondents further argued that judicial review in contractual matters is limited to examining the decision-making process and does not extend to re-appreciating commercial or policy decisions of a public authority.
The Bench reiterated that in contractual and tender matters under Article 226, the Court does not sit as an appellate authority over commercial decisions and may interfere only where the decision-making process is shown to be arbitrary, mala fide, irrational, or contrary to statutory or constitutional mandates. For this proposition, the Court referred to Tata Cellular v. Union of India, (1994) 6 SCC 651; Jagdish Mandal v. State of Orissa, (2007) 14 SCC 517; and N.G. Projects Ltd. v. Vinod Kumar Jain, (2022) 6 SCC 127. The Bench also referred to Central Inland Water Transport Corporation Ltd. v. Brojo Nath Ganguly & Anr., AIR 1986 SC 1571, while rejecting the petitioner’s argument that the termination clause was arbitrary or oppressive.
During hearing, the respondents produced a tabulated compilation showing substantial and consistent increase in toll collection at Pawangaon Fee Plaza over successive months. As reflected in the table reproduced in the judgment on page 5, ETC collection including compensation rose from Rs.2,31,734 in April 2025 to Rs.9,12,646 in March 2026 against a present remittance per day of Rs.2,58,737, with the comparison percentage crossing the 40 percent threshold as early as June 2025 and thereafter rising steadily. According to NHAI, continuation of the existing arrangement despite such escalation in collections resulted in an estimated loss of around Rs.7.5 lakhs per day to the public exchequer. The Court also noted that, despite being granted an opportunity on April 16, 2026, the respondents had not furnished any satisfactory explanation for the delay in invoking Clause 35(6).
The High Court held that once Clause 35(6) formed part of the contractual framework accepted by the parties, the dispute over whether the fee plaza was “new” lost much of its force, particularly when the respondents treated it as a new fee plaza on the footing that it was less than one year old at the time of award and had been operated by the petitioner itself for a limited period earlier. The Court said that once the contract reserved an express right of termination, the contractor could not claim an indefeasible right to continue till the end of the contractual tenure merely because the contract was otherwise valid up to June 17, 2026. It also held that the petitioner, being an experienced contractor who itself claimed to have successfully operated more than 80 fee plazas across the country since 2020, could not contend that the consequences of Clause 35(6) were unforeseen or inequitable
The Bench rejected the contention that the show cause notice and impugned order were mechanical or that the simultaneous issuance of a fresh tender established pre-determination. It recorded that NHAI had issued prior notice, considered the petitioner’s reply, afforded a personal hearing on April 6, 2026, and then proceeded to terminate the contract. According to the Court, the decision-making process satisfied procedural fairness and no material had been placed on record to indicate mala fides, bias or manifest arbitrariness in exercise of the contractual power under Clause 35(2). The Court added that the fresh tender process merely reflected administrative preparedness to avoid disruption in user fee collection and thereby protect public revenue.
The Court further observed that the relief sought by the petitioner was, in substance, enforcement of a commercial contract in the nature of specific performance while simultaneously challenging the validity of a contractual clause. Under the Specific Relief Act, 1963, contracts requiring continuous supervision or day-to-day monitoring are ordinarily not specifically enforceable, particularly where damages or compensation would be an adequate remedy. The Court said the appropriate remedy, if any, would lie in seeking damages or compensation in accordance with law. It held that, viewed either from the standpoint of valid invocation of Clause 35(6) or independently under Clause 35(2), the termination could not be said to be legally unsustainable.
Before parting with the matter, the Court observed that the material placed on record showed that the circumstances giving rise to the alleged “windfall gain” had not been acted upon with promptitude by NHAI. It said that delay in timely assessment and invocation of contractual safeguards in contracts involving collection of public revenue had the potential to result in avoidable loss to the exchequer. The Bench noted the statement made by the ASG on April 17, 2026 that there had been significant delay in invoking Clause 35(6), that a senior official had already been issued a show cause notice in that regard, and that steps were being taken to introduce an automated technological mechanism or software-based monitoring system for real-time tracking of toll collections and early identification of windfall gain situations. The Court appreciated that statement and said it expected NHAI to expeditiously implement robust monitoring mechanisms ensuring transparency, timely decision-making and protection of public revenue.
In larger public interest, the Court directed NHAI to place on record the ultimate decision taken pursuant to the show cause notice issued to the concerned senior official. It also directed that disciplinary proceedings against the concerned officials be concluded, as far as practicable, within six months, and that the outcome thereof be placed before the Court notwithstanding disposal of the writ petition. The Court clarified that these directions would not affect the legality of the impugned termination, which it upheld. The writ petition was dismissed and all pending applications were closed.
