{"id":390223,"date":"2026-07-13T18:30:11","date_gmt":"2026-07-13T13:00:11","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=390223"},"modified":"2026-07-13T18:42:37","modified_gmt":"2026-07-13T13:12:37","slug":"all-hc-slams-nhai-for-arbitrary-contract-termination-with-tata-for-highway-repair","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2026\/07\/13\/all-hc-slams-nhai-for-arbitrary-contract-termination-with-tata-for-highway-repair\/","title":{"rendered":"Allahabad HC slams NHAI for arbitrary contract termination of Tata for highway construction, directs joint review of project site and expeditious project completion"},"content":{"rendered":"
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Disclaimer:<\/span> This has been reported after the availability of the order of the Court and not on media reports so as to give an accurate report to our readers.<\/span><\/p>\n

Allahabad High Court:<\/span> In a writ petition filed by Tata Projects Limited (Tata) against mid-term contract termination of a highway construction project, the Division Bench of Ajit Kumar and Swarupama Chaturvedi, JJ., allowed the petition, holding that the National Highway Authority of India (NHAI) failed to discharge its duties and obligations and arbitrarily terminated the contract. Accordingly, the Court directed joint inspection of the project site and expeditious completion of the project.<\/span><\/p>\n

Background<\/p>\n

NHAI issued a Request For Proposals (RFP) on 11 December 2018 for widening and strengthening for improvement and up-gradation of NH-709A, Garhmukteshwar to Meerut, including connector to NH-119 Package XII in Uttar Pradesh. The contract of the Highway was 50.254 Km at the cost of Rs. 940.68 Crores.<\/p>\n

Tata, upon being successfully selected as a bidder, was issued a Letter of Acceptance (LOA) on 12 March 2021 for the development of the above section of NH-709A. The deadline was decided as 10 October 2023. Under the contract, while the NHAI was to provide absolute possession of the entire stretch of the highway area free from encumbrances\/ hindrances to facilitate the work, which, according to the NHAI Project Director, was provided to Tata as admitted by them. Tata repeatedly raised a plea of not receiving a hindrance-free 5 kms contiguous stretch at a time to carry out the work, which delayed the project. Ultimately, a curative notice was issued to Tata on 11 October 2024, to which Tata submitted a detailed reply raising the issue of not having a free stretch of land as per the agreement within 150 days, which resulted in delay in completion of the project.<\/p>\n

Ultimately, a show-cause notice was issued to Tata, to which he also submitted a reply. However, the contract was terminated mid-term vide order dated 25 November 2024 by the NHAI Project Director, citing various provisions contained under various clauses of the agreement for low maintenance and not completing the project within time. Aggrieved, Tata filed the present petition against the termination of the contract and the consequential actions by the respondents concerned.<\/p>\n

During the proceedings, the Court had granted the Court granted interim relief to the effect that no fresh contract shall be awarded in favour of a third party until such affidavit as required was filed. Thereafter, the Court directed NHAI to file an affidavit within a week of the said order specifying the dates when the possession of the land was given to Tata to carry out work. After repeated noncompliance, NHAI filed a supplementary affidavit containing the ‘Handover Memorandum’ which stated that possession of more than 90 per cent of the land had been handed over initially to Tata.<\/p>\n

Discussion and Analysis<\/p>\n

1. Issues<\/p>\n

At the outset, the Court noted that the dispute on this case was regarding real and effective transfer of unencumbered and hindrance free land to the petitioner as per the agreement at the very beginning and thereafter as well, with free ‘Right of Way’ and hindrances free land streching 5 kms in contiguous parts of the total length, which made it impossible for contractor to complete the project within the time line prescribed under the agreement; and further that the NHAI instead of giving objective construction to the replies filed by Tata and ignoring reports of the NHAI’s own Engineer, it proceeded to rescind the contract midterm. Thus, the following two points arose for consideration to test the correctness of the order impugned:<\/p>\n

    \n
  1. \n

    Whether the agreement’s terms on handing over the possession of the land site after its due procurement as per Article 8.1 and 8.2 and the documents brought on record by NHAI do constitute an effective factum of delivery of possession of such land site undisputedly.<\/p>\n<\/li>\n

  2. \n

    Whether disputed questions of facts arise in this case for which Tata should be relegated to the remedy of arbitration invoking Article 26 of the agreement or there is a fair admission of the respondents reflected from the documents brought on record as to issue and it is all question of law regarding exercise of power to terminate the contract mid-term for being arbitrary and unlawful and paramount public interest involved in the matter to hear and decide the petition on merits.<\/p>\n<\/li>\n<\/ol>\n

    2. Elements of the Engineering, Procurement, and Construction Agreement (EPC):<\/span><\/p>\n

    From a bare reading of the EPC, the Court took note of the following provisions:<\/p>\n

      \n
    1. \n

      The possession of the project highway site will be made available to Tata, free from all encroachments and encumbrances, with further free access. The authority shall provide ‘Right of Way’ on the site in accordance with the alignment. The right of way as defined is a site in accordance with the alignment finalised by the authority, free from all encroachments and encumbrances.<\/p>\n<\/li>\n

    2. \n

      Clause 3 provides for a right of way to the contractor in respect of all land included in the appendix by the dates specified in Schedule-A for those parts of the site referred therein and, in the event of delay, the force majeure clause of the agreement can be enforced.<\/p>\n<\/li>\n

    3. \n

      It will be NHAI’s duty to design the site in terms of alignment of the national highway road.<\/p>\n<\/li>\n

    4. \n

      NHAI’s representative, Tata, and NHAI’s Engineer shall inspect the site within 10 days of the agreement. Soon after the inspection, a memorandum would be prepared containing an inventory of the site qua vacant land and encumbered land, building structures, road works, trees and any other immovable property on or attached to the site. This would be a Handover Memorandum.<\/p>\n<\/li>\n

    5. \n

      The Handover Memorandum shall contain an Appendix regarding details of those parts of the site which are vacant, having access as the land where ‘Right of Way’ has not been given to the contractor, with further details of hindrances in the construction zone.<\/p>\n<\/li>\n

    6. \n

      NHAI is to provide right of way to the contractor in respect of all the land included in the appendix by the date specified in Schedule-A and in the event of breach of this, the contractor would be entitled to damages etc.<\/p>\n<\/li>\n

    7. \n

      The site of the project will be prepared as per Schedule-A of the EPC agreement.<\/p>\n<\/li>\n

    8. \n

      The Handover Memorandum shall also provide clearly the part of the site where work can be executed, and the handover memorandum shall have the counterparts, and each shall be construed as original by the authorised representatives of NHAI, Tata and NHAI’s Engineer.<\/p>\n<\/li>\n

    9. \n

      Existing rights of way, easements, privileges, liberties and appurtenances to the site shall not be deemed to be encumbrances.<\/p>\n<\/li>\n

    10. \n

      Tata would have to shoulder the responsibility to shift obstructing utilities like electric lines, water pipes, gas pipelines, telephone cables to the appropriate location if these utilities create obstructions in the work or maintenance of the project highway in accordance with law, and the cost incurred in such reallocation will be borne by the authority. Such work and shifting of utilities has been indicated in Schedule B-1 of the EPC agreement.<\/p>\n<\/li>\n

    11. \n

      Tata shall allow use of the site for laying down new public telephone utilities like lines, electric lines, water pipelines, cables, and 90% of the total length of the project shall be handed over to the contractor prior to the appointed day.<\/p>\n<\/li>\n

    12. \n

      Existing rights of way, easements, privileges, liberties and appurtenances to the site shall not be deemed to be encumbrances.<\/p>\n<\/li>\n

    13. \n

      Tata would have to shoulder the responsibility to shift obstructing utilities like electric lines, water pipes, gas pipelines, telephone cables to the appropriate location if these utilities create obstructions in the work or maintenance of the project highway in accordance with law, and the cost incurred in such reallocation will be borne by the authority. Such work and shifting of utilities has been indicated in Schedule — B-1 of the agreement.<\/p>\n<\/li>\n<\/ol>\n

      Thus, the Court found that the EPC agreement very comprehensively prescribed terms and conditions to ensure time-bound execution of work with a right to reserve with Tata to enforce obligations of NHAI to ensure carrying out of the project as per the agreement. It also provides for NHAI to adopt measures in the event of default by Tata in carrying out the work as per the agreement within the time schedule and upon Tata’s failure to complete the project.<\/p>\n

      3. Sequence of Events<\/p>\n