In a writ petition filed before the Delhi High Court by the Union Bank of India, claiming itself to be a secured creditor as well as successor-in-interest administering Package-II of the Interceptor Sewer Project (ISP), and to seek quashing of a termination letter dated 12-11-2025, a Single Judge Bench of Justice Amit Bansal dismissed the petition for being devoid of merit and held that the impugned termination was done following an exhaustive review of all contractual provisions, correspondence, and issuance of multiple notices.
In 2011, the Delhi Jal Board (DJB) decided to lay interceptor sewers along three major drains – Najafgarh, Supplementary, and Shahdara- to abate pollution in the River Yamuna and appointed Engineers India Limited (EIL) as the project management consultant for the same. EIL floated a tender for design, construction, as well as operation and maintenance of the interceptor sewers for 11 years, including a one-year defect liability period. The tender was awarded to the respondent consortium, which had M/s. Pratibha Industries Limited as the lead member.
On 08-12-2011, a tripartite agreement was executed between DJB, EIL, and the respondent consortium. On 19-07-2014, the Union Bank of India sanctioned a loan to the lead member of the respondent consortium, with a limit of over Rs. 500 crores, and created a first charge over the entire assets of the project. On 01-02-2019, NCLT admitted a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) against the lead member, and a moratorium under Section 14 of the IBC was imposed.
While the lead member was undergoing the corporate insolvency resolution process, the respondent consortium completed and handed over the project to DJB, after which a completion certificate was issued. On 08-02-2021, NCLT commenced liquidation proceedings against the lead member, and Union Bank, being the secured financial creditor, filed its claim of Rs. 900 crores before the liquidator. During these proceedings, DJB entered into an operation and maintenance agreement dated 07-06-2021 with the respondent consortium, where the lead member acted as its representative.
Thereafter, the Union Bank issued a notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), to enforce its security interest. On 27-07-2021, DJB terminated the said operation and maintenance agreement. Subsequently, the respondent consortium filed a writ petition seeking quashing of the termination letter, and this Court granted an interim stay against the operation thereof.
On 17-11-2023, the Union Bank took over possession of Package-II assets of the project, appointed an administrator under Section 15(1)(b) of the SARFAESI Act to take control of the said project, and initiated the auction process of the project. Subsequently, DJB withdrew the termination letter, and the writ petition was disposed of accordingly. On 28-05-2025, DJB issued a show-cause notice identifying 19 concerns and calling upon the lead member, as well as the Union Bank of India, to explain why the contract should not be terminated.
After issuing a fresh show-cause notice alleging five other deficiencies, DJB issued a termination letter dated 12-11-2025, terminating the agreement dated 08-12-2011 and 07-06-2021. Thereafter, DJB took over physical possession of the project from the Union Bank. Aggrieved, the present petition was filed.
In a detailed counter-affidavit by DJB, it was stated that the contractor failed to execute the project to its satisfaction and that numerous deficiencies were identified by DJB officers and EIL during the defect liability period. It was also noted that, despite multiple communications, the contractor took no remedial action. Union Bank asserted that the termination letter was issued in disregard of the petitioner’s rights protected under the IBC as a secured creditor, since the receivables from the project were secured assets of Union Bank.
Regarding the locus of Union Bank to file the present petition, the Court noted that it had relied upon Section 52 of the IBC, Regulation 37 of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, and Section 13(4)(b) of the SARFAESI Act. However, regarding the submission that Union Bank could have validly taken over the management of the borrower’s business, the Court stated that the second proviso of Section 13(4)(b) was not applicable to the present case since this could be done only when a substantial part of the business is held as security for the debt.
The Court perused the loan agreement between the Union Bank and the lead member of the consortium and found it clear that the security created in favour of the Union Bank was in respect of the ‘present and future project receivables of the consortium from the Delhi Jal Board Project Package-II’ and that a charge had also been created on the project-specific current assets. It was stated that no charge had been created in respect of the borrower’s business, and it was held that the Union Bank could not have taken over the borrower’s existing contract, meaning that Section 13(4)(b) could not have been invoked by Union Bank.
The Court also stated that Union Bank could not have appointed an administrator in respect of the business of the lead member of the consortium under Section 15(1)(b) of the SARFAESI Act. Hence, the Court stated that Union Bank did not have the locus to file the petition challenging the termination of agreement by DJB. It was said that DJB had correctly pointed out that the operation and management agreement was signed by an official of the lead member representing the respondent consortium, without any approval from the liquidator and/or the NCLT, Mumbai.
The Court noted that the operation and management agreement was signed on 7th June 2021. However, the lead member’s liquidation was ordered by NCLT on 08-02-2021, and all powers of the lead member’s management had been extinguished under Section 34(2) of IBC. Further, the Court stated that DJB never received any copy of the relevant NCLT order or the liquidator’s written permission, which is why the agreement was executed without authority or approval of the competent insolvency authority.
The Court perused the show-cause notices and found that the one dated 25-10-2025 was preceded by two notices in which serious deficiencies had been repeatedly addressed, along with the possibility of adverse consequences, including termination. It was stated that mere issuance of a subsequent notice does not waive earlier notices that had already given a full spectrum of proposed actions. The Court noted that more than 20 show-cause notices were issued to the contractor.
The Court held that it could not examine the termination letter on the merits in exercise of its jurisdiction under Article 226. It was said that the Court only had to satisfy itself as to whether the termination was in accordance with the contractual provisions and the principles of natural justice. Thus, the Court dismissed the petition as being devoid of merit.
Appearances:
For Petitioner – Mr. Sandeep Bajaj, Ms. Swastika Kumar, Ms. Aakansha Nehra, Mr. Mayank Biyani
For Respondents – Mr. Sanjay Jain (Sr. Adv), Mr. Tushar Sannu, Mr. Nishank Tripathi, Ms. Harshita Sukhija, Ms. Rishika Agrawal, Ms. Priya Tyagi, Mr. T. Sundar Ramanathan, Ms. Sukanya Viswanathan
