Court affirms NHAI's decision to terminate toll collection agreement citing windfall gains and procedural compliance.
The Delhi High Court has upheld the decision of the National Highways Authority of India (NHAI) to terminate a toll collection contract with Md. Karimunnisa, which was challenged as arbitrary and contrary to contractual stipulations. The bench comprising Justices Anil Kshetarpal and Amit Mahajan delivered the judgment on April 20, 2026, dismissing the writ petition filed by the contractor.
The case revolved around the termination of a toll collection agreement at the Pawangaon Fee Plaza on NH-353J in Maharashtra. The contract, initially awarded for one year, was prematurely terminated by NHAI citing "windfall gains" as per Clause 35(6) of the agreement, which allows termination if toll collections exceed a certain threshold.
The petitioner argued that the termination was arbitrary and that Clause 35(6) was inapplicable as the fee plaza was not new. However, the court found that the contractual terms allowed for such termination and that the NHAI followed procedural fairness, including issuing a show cause notice and providing an opportunity for a personal hearing.
The judgment emphasized the limited scope of judicial review in contractual matters, stating that courts should not act as appellate bodies over commercial decisions unless there is evidence of mala fides or procedural irregularities.
The court also noted that while there was a delay in invoking the "windfall gain" clause, this did not invalidate the termination. It directed NHAI to improve its monitoring mechanisms to prevent future revenue losses and ensure timely enforcement of contractual safeguards.
In conclusion, the court dismissed the writ petition, affirming the legality of the termination and underscoring the importance of procedural compliance and public interest in such contractual disputes.
Bottom Line:
Termination of a contractual agreement by a public authority is valid if it complies with contractual terms and procedural fairness, and judicial review in such matters is limited to examining arbitrariness, mala fides, or procedural irregularities, not commercial wisdom.
Statutory provision(s): Article 14, Article 226 of the Constitution of India, Specific Relief Act, 1963
Md. Karimunnisa v. National Highways Authority of India, (Delhi)(DB) : Law Finder Doc id # 2885755
