Termination of contracts for convenience does not require prior notice as per contractual clauses.

ORDER

The Superintending Engineer, National Highways (Circle), Madurai on behalf of Ministry of Road Transport and Highways of India called for tender for carrying out the works of strengthening the road from (i) 2 lane to 2 land with paved shoulder from Km 0/550-1/100,5/700-21/070,21/500-34/200 & 34/870-38/000 & (ii) strengthening of existing 4 lane from Km 0/000-0/ 550,1/100-1/780,2/420-5/700,21/070-21/500,34/200-34/870 & 2 lane from Km 1/780-2/420 (Dindigul – Natham Section) of NH 383 in the State of Tamil Nadu (Job No.NH 383-TN-2017-18-857). The petitioner was the successful tenderer. Agreement was entered into in this regard between the petitioner and the first respondent on 14.08.2018. The project was completed on 30.06.2022. As per the terms of the contract, the petitioner was obliged to maintain the project for a period of four years ie., up to 30.06.2026. The road was to become tollable road with effect from 07.10.2024. A road to become a tollable road must fulfil certain requirements. The stand of the NHAI is that the road in question did not meet those standards. Taking note of the stand of NHAI, the first respondent issued the impugned termination notice dated 06.03.2025 terminating the maintenance agreement. Challenging the same, this writ petition has been filed.

2.An interim order of stay was also granted. The stand of the petitioner is that the Highways Department carried out an independent inspection and their report is in favor of the writ petitioner. In writ proceedings, such factual controversies cannot be adjudicated. The only question that calls for consideration is whether the impugned termination notice can be quashed on the ground that it was not preceded by any notice setting out the intention of the department to terminate the agreement. The learned Senior Counsel appearing for the petitioner draws my attention to Clause 23.1.2 of the agreement dated 14.08.2018. It reads as follows :

“Without prejudice to any other rights or remedies which the Authority may have under this Agreement, upon-occurrence of a Contractor Default, the Authority shall be entitled to terminate this Agreement by issuing a Termination Notice to the Contractor;

provided that before issuing the Termination Notice, the Authority shall by a notice inform the Contractor of its intention to issue such Termination Notice and grant 15 (fifteen) days to the Contractor to make a representation, and may after the expiry of such 15 (fifteen) days, whether or not it is in receipt of such representation, issue the Termination Notice.”

I wanted to know whether the impugned termination notice was preceded by any earlier notice as envisaged by the said clause. The learned Additional Advocate General appearing for the first and second respondents submitted that the impugned notice was not issued under Clause 23.1.2 but under Clause 23.3. Clause 23.3 reads as under :

“23.3. Termination for Authority's convenience Notwithstanding anything stated hereinabove, the Authority may terminate this Agreement for convenience. The termination shall take effect 30 (thirty) days from the date of notice hereunder.”

3.Though the terms of a contract cannot be interpreted like a statutory provision, I have to necessarily go by the express language set out in the contract. Clause 23.3 opens with a non-obstante clause. In fact, it does not envisage any issuance of prior notice. However, to protect the the rights of the contract when termination is made under the said clause, it has been provided that it would take effect thirty days thereafter. The impugned notice was issued on 06.03.2025. It was to take effect from 07.04.2025. The final paragraph of the impugned order reads as follows :

“Hence, as per Clause 23.3 of agree