Supreme Court Stays Allahabad HC Order Quashing Termination of ₹940 Crore NHAI–Tata Projects Contract

The Supreme Court, in National Highways Authority of India v. Tata Projects Limited (SLP(C) No. 29512 of 2026), decided on August 31, 2026, stayed the operation of the Allahabad High Court judgment which had quashed the termination of Tata Projects Limited’s ₹940.68 crore contract with the National Highways Authority of India (“NHAI”) for widening, upgrading and maintaining a 50.254 km stretch of NH-709A between Garhmukteshwar and Meerut. The Hon’ble Court observed that, in view of the public interest involved and the nature of the project, the parties should attempt to resolve the issues underlying the termination.

The dispute arose from an Engineering, Procurement and Construction (“EPC”) contract awarded by NHAI to Tata Projects in 2021 for the development of the NH-709A stretch, with the project scheduled for completion by October 10, 2023. NHAI subsequently terminated the contract on the grounds of delay in completion of the project and deficiencies in maintenance.

Tata Projects challenged the termination before the Hon’ble High Court, contending that NHAI had failed to provide the requisite hindrance-free land with Right of Way in contiguous five-kilometre stretches as required under the agreement. The Hon’ble High Court of Allahabad found substance in the contention and quashed the termination, forfeiture of bank guarantees and fresh tender, while directing a fresh joint site inspection so that the parties could work towards completing the project within a rescheduled timeline.

Before the Hon’ble Supreme Court, NHAI contended that the Hon’ble High Court had failed to consider an independent ground for termination, namely Tata Projects’ alleged failure to maintain the existing project highway during construction. The Solicitor General submitted that under Clause 10.4 of the agreement, Tata Projects was required to maintain the existing road at its own cost and ensure its traffic worthiness and safety.

It was further submitted that the existing road had deteriorated during the construction period and that complaints regarding its condition had been received. NHAI also pointed out that the termination dispute could ultimately proceed to arbitration, which could result in further litigation and expenditure.

The Hon’ble Supreme Court examined the contention regarding maintenance of the existing highway and questioned the manner in which the contractual obligation was expected to operate while the new and widened portions of the highway were being constructed. The Bench also noted that the Hon’ble High Court had not addressed the maintenance ground relied upon by NHAI in the termination notice.

Considering the peculiar facts of the case, the overall public interest involved and the nature of the highway project, the Hon’ble Supreme Court stayed the operation of the Hon’ble High Court’s judgment. The Hon’ble Court further indicated that it would be appropriate for NHAI and Tata Projects to sit together and attempt to work out the issues arising from the reasons assigned in the termination notice.

Accordingly, the operation of the Hon’ble High Court judgment was stayed, with the parties encouraged to explore a resolution of the issues arising from the termination.