Delhi High Court Affirms NHAI's Right to End Toll Deal Over Explosive Revenue Surge

The Delhi High Court has dismissed a writ petition filed by toll operator Md. Karimunnisa, ruling that the National Highways Authority of India (NHAI) validly terminated its contract at the Pawangaon Fee Plaza after collections dramatically outpaced expectations. The decision reinforces the limited scope of judicial intervention in commercial contracts involving public authorities.

A Sudden Revenue Spike Triggers Early Exit

The controversy began when the petitioner won a competitive tender to collect user fees at the Pawangaon Fee Plaza on NH-353J in Maharashtra. Awarded in May 2025 for a one-year period starting June 17, the contract required daily remittances of approximately ₹2.58–2.62 lakh. Within weeks, however, daily collections surged far beyond this benchmark.

By November 2025, actual toll revenue had climbed to nearly double the contracted amount, and it kept rising. Data placed before the Court showed a staggering progression: collections exceeded the 40% “windfall” threshold as early as June 2025 and reached 270% above the remittance target by February 2026. Estimating the daily loss to the public exchequer at around ₹7.5 lakh, NHAI invoked both Clause 35(2) (seven-day termination without reasons) and Clause 35(6) (windfall-gain termination) on April 2, 2026, and formally ended the arrangement on April 8.

Petitioner Claims Arbitrary Action, NHAI Cites Public Interest

Senior counsel for the petitioner argued the termination was pre-determined, mala fide, and contrary to the contract. They stressed that Clause 35(6) applies only to “new” fee plazas, that Pawangaon was already operational, and that no fault or breach had been attributed to Karimunnisa. The fresh tender floated on the same day as the show-cause notice was said to prove the decision was already made before hearing the operator’s reply.

Additional Solicitor General N. Venkataraman countered that the contract expressly reserved termination powers in favour of NHAI. He emphasised that protecting public revenue through timely invocation of contractual safeguards is a legitimate administrative function, and that courts should not second-guess commercial decisions taken by statutory bodies managing national highways.

Limited Judicial Review in Contractual Matters

Justice Anil Kshetarpal, writing for the Division Bench also comprising Justice Amit Mahajan, reaffirmed the well-settled principle that writ jurisdiction under Article 226 does not turn courts into appellate forums for contractual disputes. Citing Tata Cellular v. Union of India (1994) and Jagdish Mandal v. State of Orissa (2007), the Bench held that interference is warranted only when the decision-making process is shown to be arbitrary, mala fide or irrational.

The Court further noted that a contractor who has engaged with the State in a competitive bidding process “must accept both the advantages and the burdens flowing from such agreements.” Because the termination clause formed part of the tender conditions voluntarily accepted by an experienced operator, it could not later be branded unconscionable.

Key Observations from the Judgment

The Bench delivered several pointed observations that underscore the rationale:

> “Once such a contractual power stand reserved in favour of the NHAI, the contractor cannot claim an indefeasible right to continue till expiry of the contractual tenure.”

> “The doctrine invalidating unfair contractual terms… applies primarily to situations involving gross inequality of bargaining power… The present case, however, arises out of a commercial tender between business entities operating in a competitive market environment.”

> “Public authorities entrusted with management of national highway toll operations discharge functions closely connected with public finance.”

> “Judicial interference in such administrative decisions, absent demonstrable illegality, would amount to substituting administrative discretion with judicial preference.”

Court Dismisses Plea, Flags Institutional Delay

While upholding the validity of the termination, the Court expressed concern over NHAI’s delay in invoking the windfall clause and directed the authority to conclude pending disciplinary proceedings against the responsible officials within six months. It also welcomed NHAI’s plan to introduce automated real-time monitoring of toll collections to prevent future revenue leakage.

The writ petition was accordingly dismissed, bringing to a close Karimunnisa’s challenge. The ruling serves as a clear signal that while contractors enjoy contractual protections, they cannot invoke writ jurisdiction to escape the commercial consequences of clauses they willingly accepted—especially when those clauses protect the public purse.