No ‘vested right’ to run toll till contract ends: Delhi High Court backs NHAI's early exit over public revenue loss

The Delhi High Court has reaffirmed that a contractor engaged in toll collection cannot insist on completing the full contractual tenure when the agreement itself permits early termination, particularly in situations where continued operation would result in loss to the public exchequer.Dismissing a writ petition filed by a toll operator, a Bench of Justice Anil Kshetrapal and Justice Amit Mahajan upheld the action of the National Highways Authority of India (NHAI) in terminating a toll collection contract before its scheduled expiry. The Court held that contractual clauses allowing termination must be given full effect, and courts cannot rewrite commercial bargains under writ jurisdiction.Background: Contract Terminated MidwayThe case arose from a contract awarded to the petitioner for collection of tolls at the Pawangaon Fee Plaza in Maharashtra. The contract was awarded through a bidding process and was valid for one year, from June 2025 to June 2026.However, in April 2026, NHAI issued a show cause notice to the contractor, followed by termination of the agreement and a fresh tender was floated for appointment of a new toll operator.

Aggrieved, the petitioner approached the High Court contending that the termination was arbitrary, pre-determined, and contrary to the terms of the contract. It was argued that once a contract for a fixed period is awarded, the contractor has a legitimate expectation to continue till its expiry.At the heart of the dispute was a significant increase in toll collections during the petitioner’s tenure. Data placed before the Court showed that revenue from the toll plaza had sharply risen within a short period, far exceeding the figures contemplated at the time of bidding.NHAI invoked a specific contractual clause that allowed termination in case of such abnormal revenue escalation, commonly referred to as a “windfall gain” clause.According to NHAI, continuation of the contract under such circumstances would result in substantial financial loss to the public exchequer. The authority submitted that the differential between actual collections and the contracted remittance was causing a loss of approximately Rs.7.5 lakh per day.The Court found merit in this reasoning and observed that where contractual terms expressly contemplate such contingencies, the authority is well within its rights to act in public interest.No Absolute Right to Continue till Contract EndsRejecting the petitioner’s primary argument, the Court held that no contractor can claim an absolute or vested right to continue till the end of the contractual period when termination clauses exist within the agreement.The Bench observed:“Once the contract between the parties provides adequate safeguards to both sides, it would not be appropriate to interfere with such terms or render them otiose.”It further held:“The contractor cannot claim an indefeasible right to continue till expiry of the contractual tenure when the agreement itself provides otherwise.”The Court emphasized that commercial contracts must be interpreted as they stand, and parties are bound by the risks and conditions they consciously accept.Judicial Review Limited in Contractual MattersA significant portion of the judgment reiterates the limited scope of judicial review in matters arising out of government contracts.The Court clarified that it does not examine the correctness of commercial decisions but only the legality of the decision-making process.It observed:“Judicial review in contractual matters is confined to examining whether the decision-making process is fair, reasonable and not arbitrary. The Court does not sit as an appellate authority over commercial decisions.”In the present case, the Court found no procedural irregularity, mala fides, or arbitrariness in the decision taken by NHAI.The petitioner had argued that issuance of a fresh tender on the same day as the show cause notice demonstrated that the termination decision had already been taken, rendering the process a mere formality. The Court rejected this argument, noting that toll collection is a continuous public function and any disruption would directly affect revenue collection. It held that initiating a fresh tender simultaneously is a pragmatic administrative step to ensure continuity and does not, by itself, indicate pre-determination or bad faith.“Open Eyes” Doctrine AppliedIn a pointed observation, the Court underscored that parties entering into government contracts do so with full awareness of the contractual terms.The Bench noted:“Persons who enter into contractual dealings with the State with open eyes must accept both the benefits and burdens of the agreement.”The Court also highlighted that the petitioner was not a novice contractor but an experienced toll operator who had participated in multiple such contracts.

This, according to the Court, weakened any claim of unfairness or lack of understanding of contractual risks.The petitioner had also relied on financial hardship, submitting that the toll plaza was its primary source of income and that premature termination would cause severe losses. The Court, however, held that such considerations are irrelevant in the context of contractual enforcement.It observed that commercial risks are inherent in such agreements and cannot be used as a ground to seek protection under writ jurisdiction.NHAI’s Delay Noted, But Not FatalWhile upholding the termination, the Court did take note of a delay on the part of NHAI in invoking the windfall clause.It observed that the revenue increase was evident earlier, yet the authority acted only after some delay, resulting in avoidable loss to the public exchequer.The Court recorded submissions made on behalf of NHAI and noted that disciplinary action had already been initiated against officials responsible for the delay.

It also took note of steps being taken to implement automated toll monitoring systems to ensure real-time revenue tracking. However, the Court clarified that such delay does not invalidate the eventual exercise of contractual rights.The High Court ultimately held that the termination of the toll collection contract was in accordance with the terms agreed between the parties and was justified in light of the significant revenue escalation impacting public interest.

It found no arbitrariness, mala fides, or illegality in the decision-making process and reiterated that writ jurisdiction cannot be invoked to enforce purely commercial contractual rights.Accordingly, the Court dismissed the petition and upheld NHAI’s decision to terminate the contract before its expiry.W.P.(C) 4817/2026, CM APPL. 23578/2026, CM APPL. 23579/2026, CM APPL. 23580/2026 and CM APPL. 24716/2026MD. KARIMUNNISA vs NATIONAL HIGHWAYS AUTHORITY OF INDIA THROUGH ITS CHAIRMAN & ANRFor Petitioner: Mr. Sanjoy Ghose, Sr. Adv. with Mr. Kaustubh Anshuraj, Mr. Parmod Kalirana, Mr. Manish Choudhary, Mr. Amaya Vaid, Advs.For Respondent: Mr. N. Venkataraman, ASG with Mr. Namit Saxena, Adv.(The author of this article, Vatsal Chandra is a Delhi-based Advocate practicing before the courts of Delhi NCR.)