Judicial review of commercial contract termination is limited to examining the decision-making process and procedural fairness.

The Petitioner was awarded a contract on 26.05.2025 for user fee collection at Pawangaon Fee Plaza for a one-year tenure commencing 17.06.2025

On 02.04.2026, the Respondent (NHAI) issued a show cause notice-cum-termination notice invoking Clause 35(2) (termination on seven days' notice) and Clause 35(6) (termination for "windfall gain")

The Petitioner challenged the subsequent termination order dated 08.04.2026 and a fresh tender issued for the plaza, contending that Clause 35(6) applied only to "new" plazas and that the premature termination was arbitrary and lacked contractual breach

Data produced by NHAI indicated that toll collections had exceeded the 40% "windfall" threshold as early as June 2025, resulting in a daily loss of approximately Rs. 7.5 lakhs to the public exchequer

1. Whether the Respondent Authority was justified in terminating the Contract in exercise of its enabling powers under Clauses 35(2) and 35(6)

2. Whether any interference is warranted in exercise of writ jurisdiction with a contractual decision taken in the interest of the public exchequer by a public authority

The Court primarily applied the principles of judicial review under Article 226 of the Constitution of India, which restricts interference in contractual matters to the decision-making process rather than the merits

It relied on Tata Cellular v. Union of India, which limits review to cases of irrationality, mala fides, or procedural impropriety

It further applied the restraint doctrine from Jagdish Mandal v. State of Orissa and N.G. Projects Ltd. v. Vinod Kumar Jain, emphasizing that courts should not substitute their commercial wisdom for that of the State, especially where public revenue is at stake

Finally, the Court distinguished Central Inland Water Transport Corporation Ltd. v. Brojo Nath Ganguly, holding that the doctrine of unconscionable contracts does not apply to commercial tenders between sophisticated business entities

The Court found that Clause 35(6) was factually triggered as toll collections consistently exceeded the 40% benchmark above the existing remittance

It reasoned that even if the "new plaza" status was debated, Clause 35(2) provided an express contractual right to terminate with notice, and a contractor cannot claim a vested right to continue until the end of the term

The Court observed that the Petitioner was an experienced contractor (having operated over 80 plazas) and had voluntarily accepted the contract terms, including the termination mechanisms

Procedurally, the Court held the decision-making process was fair because NHAI provided a show-cause notice, considered the Petitioner's reply, and conducted a personal hearing

It concluded that the protection of the public exchequer from a loss of Rs. 7.5 lakhs per day constituted a valid exercise of administrative discretion

The Court answered both issues in the negative, finding no manifest arbitrariness or procedural infirmity

However, the Court directed NHAI to conclude disciplinary proceedings against officials responsible for the delay in invoking the windfall clause within six months and to implement automated technological monitoring to prevent future revenue losses