Delhi High Court Reaffirms Limited Judicial Review in Termination of Toll Contracts

The Hon’ble Delhi High Court, in Md. Karimunnisa v. National Highways Authority of India & Anr. (W.P.(C) 4817/2026, judgment dated April 20, 2026), dismissed a writ petition challenging the premature termination of a toll collection contract by the National Highways Authority of India (NHAI), reiterating the limited scope of judicial review in contractual matters involving public authorities.

The dispute arose from a contract dated May 26, 2025, executed between the petitioner and NHAI for collection of user fee at the Pawangaon Fee Plaza on NH-353J, valid until June 17, 2026. A show cause notice dated April 2, 2026 was issued invoking Clauses 35(2) and 35(6) of the contract, followed by a termination order dated April 8, 2026. The termination was premised on the occurrence of “windfall gain” and a perceived imbalance in toll collections. A fresh tender for interim engagement of another toll collection agency was issued simultaneously.

The petitioner challenged the termination as arbitrary, contending that Clause 35(6), relating to “windfall gain”, was inapplicable as the fee plaza was not a “new” plaza, and that no contractual breach had occurred.

Before the Court, the principal issues were whether the termination under Clauses 35(2) and 35(6) was valid, and whether interference was warranted in exercise of writ jurisdiction.

At the outset, the Court reiterated the settled principles governing judicial review in contractual matters, holding that courts do not sit in appeal over commercial decisions of public authorities. Interference is confined to cases involving arbitrariness, mala fides, irrationality, or violation of statutory or constitutional provisions, and does not extend to re-evaluation of commercial or policy considerations.

On merits, the Court observed that Clause 35(6), which contemplates termination upon occurrence of specified financial contingencies, formed part of the contractual framework accepted by the parties. The Court noted that disputes regarding whether the fee plaza qualified as a “new” plaza did not warrant interference, particularly when the clause had been contractually agreed and acted upon. The Court further emphasised that once such a clause is accepted, the contractor cannot claim an enforceable right to continue till expiry of the contractual period.

Independently, the Court held that Clause 35(2), which permits termination upon notice without assigning reasons, conferred a separate and sufficient contractual basis for termination. In the absence of demonstrated mala fides or arbitrariness, such exercise of contractual power could not be invalidated.

The Court also rejected the petitioner’s challenge on grounds of procedural unfairness, noting that a show cause notice had been issued, the petitioner’s reply was considered, and a personal hearing was granted prior to termination. The simultaneous issuance of a fresh tender was held to be an administrative measure to ensure continuity of toll collection and protection of public revenue, rather than evidence of pre-determination.

The Court further held that a party entering into a commercial contract with full knowledge of its terms cannot subsequently challenge those terms on grounds of commercial disadvantage. Notably, the petitioner, having operated the contract for a substantial portion of its tenure, was held to be estopped from questioning the validity of the contractual framework at a later stage.

Reiterating that writ jurisdiction cannot be invoked to enforce contractual rights or seek continuation of a commercial arrangement, the Court held that financial hardship or adverse commercial impact does not justify judicial intervention where no legal infirmity is established. The appropriate remedy, if any, would lie in damages.

While upholding the termination, the Court also took note of delay on the part of NHAI in invoking the “windfall gain” clause, which had allegedly resulted in loss to the public exchequer. The Court directed the authority to take corrective and disciplinary measures and to strengthen monitoring mechanisms to prevent recurrence.

Accordingly, the writ petition was dismissed, reaffirming the validity of contractual termination and the limited scope of judicial review in such matters.