Delhi High Court sets aside NHAI action against toll contractors in software fraud case - India Legal

 

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Delhi High Court sets aside NHAI action against toll contractors in software fraud case
=======================================================================================

By

[Legal Desk](https://indialegallive.com/author/legaldesk/)

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July 6, 2026 

268

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The Delhi High Court has quashed a series of orders passed by the National Highways Authority of India (NHAI) debarring several toll collection contractors, terminating certain toll collection contracts and directing the encashment of their performance securities over allegations that they had deployed parallel software systems to siphon toll revenue, holding that the impugned actions were not supported by sufficient or credible material.

The single-judge Bench of Justice Sachin Datta delivered the ruling on Friday on a batch of petitions challenging the NHAI’s action, which stemmed from an investigation conducted by the Uttar Pradesh Special Task Force (STF) into an alleged toll collection fraud racket.

The NHAI had issued debarment orders barring the contractors from participating in its tenders for one year. It had also terminated certain existing toll collection agreements and invoked the contractors’ performance securities on the ground that they had allegedly used parallel software to divert toll collections. The authority relied principally on an STF press note, the confessional statement of one of the accused persons, and an alleged increase in cash collections at certain toll plazas after the STF conducted raids.

After examining the record, the High Court held that the material relied upon by the NHAI did not establish the petitioners’ involvement in the alleged fraud. The Court noted that neither the contractors nor any of their employees had been named as accused in the FIR, the charge sheet or the supplementary charge sheet filed during the criminal investigation.

Justice Datta further observed that no unauthorised or parallel software, electronic devices or any other incriminating material had been recovered from the toll plazas operated by the petitioners. The Court also took note of inspections carried out by the NHAI itself after the STF raids, which failed to detect the existence of any unauthorised software or any manipulation of toll collection data.

Emphasising the nature and consequences of blacklisting, the Court observed that debarment has severe civil consequences and is often regarded in law as being akin to civil death because it deprives a contractor of the opportunity to participate in public procurement and government contracts. Such punitive action, the Court held, must therefore be founded on objective satisfaction based on credible, cogent and legally sustainable evidence and must conform to the principles of natural justice.

The Court held that the NHAI could not validly base its decision merely on an STF press release, the confessional statement of an accused person or uncorroborated statistical inferences drawn from a post-raid increase in cash collections. It observed that none of these materials, either individually or collectively, constituted sufficient evidence to justify blacklisting, termination of contracts or invocation of performance securities.

The High Court also noted that the contractual framework governing toll collection itself provides for continuous supervision, periodic monitoring and surprise inspections of toll plazas by the NHAI. Despite the availability of these regulatory mechanisms, no evidence of unauthorised software or any other irregularity had surfaced during inspections conducted by the authority.

Holding that the impugned orders suffered from lack of objective material and failed to satisfy the legal threshold required for imposing such serious civil consequences, the Court quashed the debarment orders as well as the consequential actions terminating contracts and encashing performance securities.

At the same time, the High Court clarified that the NHAI would remain at liberty to initiate fresh proceedings or take appropriate action in accordance with law if credible evidence of misconduct is discovered in future. It observed that any such action would have to be preceded by due process and supported by legally admissible material.

 

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