The Allahabad High Court has set aside the National Highways Authority of India's (NHAI) decision to terminate Tata Projects Limited's engineering, procurement and construction (EPC) contract for the NH-709A highway project, holding that the termination suffered from arbitrariness and lack of proper consideration of the contractor's explanations. The Court also quashed the consequential forfeiture of bank guarantees and the fresh tender issued for the project.
Background of the Case
The dispute arose from an EPC contract awarded to Tata Projects Limited for widening and upgrading a 50.254-km stretch of NH-709A connecting Garhmukteshwar and Meerut in Uttar Pradesh. The project, valued at around ₹940.68 crore, was to be completed within the contractual timeline after the appointed date in October 2021.
Tata Projects challenged the termination of its contract, arguing that NHAI failed to provide the required contiguous, hindrance-free land as contemplated under the EPC Agreement. According to the company, repeated requests seeking extension of time because of land acquisition issues, standing structures, utilities and local protests were either inadequately addressed or ignored.
NHAI, on the other hand, maintained that more than 90% of the land had been handed over and that delays were attributable to the contractor's slow progress and inadequate performance.
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Court's Observations
After examining the contractual documents, correspondence between the parties and reports submitted by the Authority's Engineer, the Division Bench found significant inconsistencies in NHAI's stand.
The Court noted that official communications of NHAI and the Authority's Engineer themselves acknowledged continuing land-related hurdles and recommended extensions of time because the contractor was facing circumstances beyond its control. Yet, these materials were not meaningfully considered while terminating the contract.
The Bench observed:
"This is an absolute arbitrariness, apparent on the face of record."
It further held that the contractor's detailed replies explaining the causes of delay were virtually ignored and that the termination order substantially reproduced the earlier show-cause notice without independently dealing with the contractor's defence.
The Court also found merit in the argument that the so-called Handover Memorandum did not accurately reflect the actual availability of hindrance-free land required under the EPC Agreement. According to the Bench, subsequent official documents contradicted NHAI's assertion that the contractual requirements regarding land handover had been fulfilled.
Emphasising the obligations of public authorities in contractual matters, the Court said:
"The National Highway Authority is state within the meaning of Article 12 of the Constitution... it was expected to behave reasonably in the matter of such contract."
The Bench added that when a State authority itself fails to perform its contractual obligations, it cannot fairly invoke contractual powers to terminate the agreement solely on the ground of delay by the contractor.
Decision
Allowing the writ petition, the Allahabad High Court quashed NHAI's order terminating the contract, the consequential forfeiture of the bank guarantees and the fresh tender floated thereafter.
The Court directed the parties to conduct a fresh joint site inspection within one month and, in accordance with the EPC Agreement, prepare a revised schedule for completing the remaining work.
It also noted the contractor's undertaking to finish the balance project within 14 months and observed that the endeavour of both parties should be to complete the highway project as expeditiously as possible in public interest.
Case Details
Case Title: Tata Projects Limited v. Union of India and 2 Others
Case Number: Writ - C No. 4559 of 2025
Judge: Justice Ajit Kumar and Justice Swarupama Chaturvedi
Decision Date: 08 July 2026
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