The Supreme Court has emphasized the boundaries of Judicial intervention in contractual matters, highlighting the principle that courts lack the expertise to evaluate the soundness of such decisions.

The Bench underscored that the role of the Courts, particularly under Article 226 of the Constitution of India, is to ensure transparency and fairness in the decision-making process rather than dictating specific outcomes.

The Bench of Justice Sanjiv Khanna and Justice Dipankar Datta said, "We are of the view that the impugned judgment/order passed by the High Court is unsustainable in law. The Court, while exercising jurisdiction under Article 226 of the Constitution of India in a public interest litigation, should not have directed that the work on the highway, including the work of maintenance and repairs, must be undertaken by a particular contractor."

The case in question involved a Public Interest Litigation (PIL) concerning the allocation of highway maintenance and repair contracts to a particular contractor. While the Court acknowledged concerns regarding delays in project execution, it ruled that the judiciary cannot dictate who should undertake specific tasks, as this exceeds the bounds of judicial review and encroaches upon the authority of administrative bodies like the National Highways and Infrastructure Development Corporation Limited (NHIDCL).

"While we do not doubt that the Court can, and was right in expressing concern for the delay in completion and execution of the works, nevertheless, the Court could not have issued directions on who should be assigned the task of execution. The directions are well beyond the power of judicial review as they impinge upon the role, the duty and the task assigned to the appellant—NHIDCL," the Bench said.

The Court added, "The Courts can and do issue directions in the public interest but would hesitate in donning or taking over the role of the appellant (NHIDCL) in deciding who should execute the work."

The Bench clarified that it is for the NHIDCL to take such decisions and to ensure that the work is executed in accordance with the terms and conditions of the tender/agreement and in case of violation or breach of the terms and conditions of the agreement, it can proceed in accordance with law, which includes the power to terminate the agreement, claim damages, etc.

While referring to Directorate of Education v. Educomp Datamatics Ltd., (2004) 4 SCC 19, Tata Cellular v. Union of India (1994) 6 SCC 651 and Air India Ltd. v. Cochin International Airport Ltd. (2000) 2 SCC 617, the Bench held, "The terms and requirements for eligibility prescribed by the authorities depend on the nature of the contract and the scope of the work undertaken. The contracts are in the nature of a commercial transaction, and thus require the authority to primarily focus on commercial considerations in arriving at a decision. The authority calling for the tender, is therefore the best judge to prescribe the conditions of the tender."

Consequently, the Court directed NHIDCL to file an affidavit before the High Court, nominating a nodal officer who will be overseeing the execution of the work. "The nodal officer will ensure and be responsible for completion of the work within time and in accordance with the agreement," the Court further directed.

"In case there is any delay in construction beyond September 2025, the appellant – NHIDCL will move an application before the High Court for extension of time. The application will state and give reasons for the delay. The High Court may thereupon pass appropriate order/directions," the Bench ordered.

Accordingly, while allowing the Appeal, the Court set aside the impugned Judgment of the High Court of Gauhati.

Cause Title: National Highway and Infrastructure Development Corporation Limited v. M/S Chabou and Co. & Ors.

Appearance:-

Petitioner: Senior Advocate Geeta Luthra, Advocates Avneesh Garg, Muddam Thirupathi Reddy (AOR), Srika Selvam, Pragati Srivastava, Anuj Singh

Respondents: Advocates Aditya Giri, Farhat Jahan Rehmani (AOR)

Click here to read/download the Order


Justice Sanjiv KhannaJustice Dipankar DattaTender

Sukriti Mishra