2026 Supreme(Online)(Del) 6286

IN THE HIGH COURT OF DELHI AT NEW DELHI
MD. KARIMUNNISA – Appellant
Versus
NATIONAL HIGHWAYS AUTHORITY OF INDIA THROUGH ITS CHAIRMAN & ANR. – Respondent
W.P.(C)-4817/2026

Judicial review in contractual matters is limited to examining the decision-making process for arbitrariness or mala fides; a contractor cannot challenge a valid termination clause after accepting it and enjoying benefits under the contract.

Headnote:(A) Constitution of India, 1950 - Article 226 - Scope of judicial review in contractual matters - Termination of contract - Specific Relief Act, 1963 - Specific performance not granted for contracts requiring continuous supervision. (Paras 20-23, 38)

(B) Judicial review in contractual and tender matters is confined to examining the decision-making process and not the merits of the decision itself. Interference is warranted only where the decision is arbitrary, mala fide, irrational, or in violation of statutory or constitutional mandates. (Paras 20-23, citing Tata Cellular v. Union of India, (1994) 6 SCC 651; Jagdish Mandal v. State of Orissa, (2007) 14 SCC 517; N.G. Projects Ltd. v. Vinod Kumar Jain, (2022) 6 SCC 127)

(C) A contractor who enters into a commercial contract with open eyes and accepts mutually agreed termination clauses cannot later challenge those clauses as arbitrary, especially after enjoying the benefits of the contract for a substantial period. The doctrine of unfair contractual terms (Central Inland Water Transport Corpn. Ltd. v. Brojo Nath Ganguly) does not apply to commercial contracts between business entities in a competitive market. (Paras 29-31, 37)

(D) The mere fact that a fresh tender process was initiated contemporaneously with the termination decision does not establish mala fides or pre-determination. Administrative preparedness to avoid disruption in toll collection constitutes prudent governance. (Para 42) (E) Delay by the public authority in invoking contractual safeguards, such as the windfall gain clause, may cause loss to the public exchequer but does not render the termination invalid. However, authorities are expected to implement robust monitoring mechanisms for timely action. (Paras 48-51)

Facts of the case:
The Petitioner, a toll collection agency, entered into a contract with the national highway authority for collection of user fee at a fee plaza for one year from June 2025 to June 2026. The contract contained Clause 35(2) allowing termination on seven days’ notice without assigning reasons, and Clause 35(6) permitting termination in case of “windfall gain” where moving average of collections exceeded 40% of the remittance. In April 2026, the authority issued a show cause notice cum termination notice invoking both clauses, alleging that collections had substantially exceeded the threshold. A fresh tender for a new agency was also issued. The Petitioner challenged the termination and the fresh tender by way of a writ petition under Article 226.

Findings of Court:
The Court held that the termination was valid. The decision-making process was fair - notice, opportunity of hearing, and reasoned order were given. The invocation of Clause 35(6) was not arbitrary; the fee plaza was treated as a new plaza and collections exceeded the 40% benchmark. Even if Clause 35(6) were not strictly applicable, Clause 35(2) independently allowed termination on notice. The contractor had no vested right to continue till the end of the tenure. The challenge to the termination clause at a belated stage was estopped. The relief of specific performance was not available as damages were an adequate remedy. The Court, however, noted the authority’s delay in invoking the clause and directed expeditious conclusion of disciplinary proceedings against officials responsible for the delay, and implementation of automated monitoring systems.

Issues: (i) Whether the authority was justified in terminating the contract under Clauses 35(2) and 35(6). (ii) Whether interference in writ jurisdiction with a contractual decision taken in public interest was warranted.

Ratio Decidendi: The court ruled that judicial review in contractual matters is limited to examining the process, not the commercial wisdom of the authority. The termination was procedurally fair, within the express contractual terms, and not arbitrary or mala fide. A contractor who accepts such terms cannot subsequently challenge them. The remedy for breach, if any, lies in damages, not in specific performance.

Result: Writ Petition dismissed. All pending applications closed. Directions issued regarding disciplinary proceedings and monitoring mechanisms. (Paras 52, 51)