Legal action by Virgin Rail has prevented the government signing a contract awarding a major franchise to a rival bidder, MPs were told.
Rail minister Theresa Villiers said the government would "robustly" defend the case following the decision to award the West Coast Mainline contract to FirstGroup.
"As a result of a legal challenge, which the government intends to defend robustly, we have not yet signed the contract with First West Coast, and consequently the competition remains live," she told MPs in a written statement.
She added: "I cannot give the full commercial details of the winning bid, or indeed of the other bids. Nor is it usual or appropriate – once litigation proceedings have commenced - for the Government to comment on the detail of that, other than to say that our legal advisers are fully engaged in addressing and responding to those proceedings."
Virgin Trains has been operating services on the West Coast mainline since 1997 and recently introduced high-speed tilting Pendolino express trains that have proved very popular with passengers.
Passenger numbers on the line, since Virgin took over, have increased from around 13m a year to around 31m a year now.
The awarding of the franchise to FirstGroup was followed by a huge public backlash, with thousands of people signing an e-petition in an effort to persuade the government to change its mind.
Virgin boss Sir Richard Branson was furious at losing the contract, describing the decision as "outrageous".
Speaking at the end of August, he said: "We had hoped that Parliament or an external review would be able to scrutinise this badly flawed process before the franchise was signed.
"However that opportunity would be denied if the DfT follows through with its determination to rush through the process before Parliament returns next week.
"That ignores the wishes of more than 150,000 people who signed the Downing St e-petition in 10 days, the Labour Opposition, two important Commons committees and many backbench Conservative MPs who wanted a debate before the decision is taken, not a post-mortem afterwards.
"We have not taken this decision [legal action] lightly, but it is the only course now available to try to unravel this sorry process."
He has also argued that running the line could send FirstGroup into bankruptcy.
Virgin Trains said in a statement: "We have tried for three weeks to get clarity over the Department for Transport's decision and to have a number of key questions answered. On each occasion we have been refused information.
"We are left with no choice but to commence Court proceedings."
Billionaire Branson offered to run the line for free, with profits going to charity, while the bids are given further scrutiny.
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