Secured creditor lacks locus to challenge contract termination when security interest excludes business management.

In 2011, Delhi Jal Board (DJB) awarded a contract for the Interceptor Sewer Project (ISP) to a consortium led by Pratibha Industries Limited (PIL)

Union Bank of India (Petitioner) sanctioned a loan to PIL in 2014, creating a first charge over the project assets

In 2019, PIL entered Corporate Insolvency Resolution Process (CIRP), and liquidation was initiated in February 2021, with a Liquidator appointed

Despite the liquidation and the cessation of management powers, an Operation and Maintenance (O&M) Agreement was signed between DJB and the PIL-led consortium on June 7, 2021

The Petitioner bank later took physical possession of project assets under the SARFAESI Act and appointed an Administrator

In 2025, DJB issued multiple show-cause notices alleging 19 performance deficiencies and eventually terminated the contract on November 12, 2025

The Petitioner filed this writ seeking to quash the termination and restore the contract

1. Whether the Petitioner bank, as a secured creditor, has the locus standi to challenge the termination of the O&M Agreement and manage the project under the SARFAESI Act.

2. Whether the O&M Agreement dated June 7, 2021, was legally valid given it was executed after the commencement of PIL’s liquidation.

3. Whether the termination order was arbitrary or violated the principles of natural justice.

4. Whether a writ petition under Article 226 is maintainable in a purely contractual dispute involving an infrastructure project.

Section 52 of the Insolvency and Bankruptcy Code (IBC), 2016, regarding a secured creditor’s right to realize security interest

Section 34(2) of the IBC, which mandates that all powers of the board of directors and management cease and vest in the liquidator upon appointment

Section 13(4)(b) of the SARFAESI Act, 2002, which allows taking over management only if a substantial part of the borrower’s business is held as security

Bareilly Development Authority v. Ajai Pal Singh (1989), which establishes that writ jurisdiction under Article 226 cannot be invoked to remedy a breach of a purely non-statutory contract

Section 41(ha) of the Specific Relief Act, 1963, was noted as a bar against injunctions that impede infrastructure projects

The court first analyzed the Petitioner’s locus standi by reviewing the Loan Agreement. It found that the security was restricted to "project receivables" and specific movable assets, not the "business" of the borrower itself.

Consequently, the Petitioner could not invoke Section 13(4)(b) of the SARFAESI Act to take over management or appoint an Administrator for the project.

Regarding the validity of the contract, the court observed that the O&M Agreement was signed in June 2021, four months after the NCLT appointed a Liquidator for PIL. Under Section 34(2) of the IBC, the PIL officials lacked the authority to execute the agreement without the Liquidator's approval, rendering the contract unauthorized.

On the merits of the termination, the court found no violation of natural justice; DJB had issued over 20 notices and show-cause letters identifying 19 specific deficiencies (e.g., submerged chambers, defunct ICs) before terminating.

Finally, the court held that since the dispute was purely contractual and non-statutory, it fell outside the narrow scope of judicial review under Article 226.

The court further held that the termination was preceded by adequate notice and that it would not interfere in a purely contractual matter through writ jurisdiction.

The petition was dismissed, though the court clarified that the Petitioner remains free to pursue other legal remedies.