Case Background: The Story Behind the Tender Dispute
· Tender Issued: Himachal Pradesh government wanted
ePoS devices to modernise its Public Distribution System (PDS).
· Bid Winner: M/s OASYS Cybernatics Pvt. Ltd.
received a Letter of Intent (LoI) after competitive bidding.
· LoI Conditions: OASYS had to clear NIC technical
testing, demonstrate device compatibility, and submit final cost structure before a formal contract would be
signed.
· Cancellation: Government cancelled the LoI, citing
technical non-fulfillment and possible blacklisting.
· Legal Challenge: OASYS went to court; the High Court
ruled in favour of OASYS. The State appealed to the Supreme Court.
(Keywords: Himachal Pradesh tender
case, LOI cancellation, Supreme Court 2025 judgment)
Main Legal Issues in the Supreme Court Judgment
· Does a Letter of Intent create binding rights before contract
execution?
· Can the government cancel a LoI without being arbitrary or
violating court procedure?
· Is the bidder entitled to compensation (“quantum meruit”) for work
done prior to contract?
(Keywords: enforceability of Letter of
Intent, government tender cancellation, quantum meruit India)
Statutory Provisions and Case Law Cited
·
Indian Contract Act, 1872: Sections 2(h), 2(j), 70, 73
·
Constitution of India: Article 14 - right to equality,
non-arbitrariness
·
Code of Civil Procedure (CPC): Order 39
Authoritative
Supreme Court Cases
·
Tata Cellular v. Union of India (1994) 6 SCC 651
·
Rajasthan Cooperative Dairy Federation v. MahaLaxmi Mills (2010)
15 SCC 485
·
Dresser Rand S.A. v. Bindal Agro Chem (2006) 1 SCC 751
·
Level 9 Biz Pvt Ltd. v. Govt. of NCT (2022 SCC OnLine Del 2388)
·
Monnet Ispat v. Union of India (2012) 11 SCC 1
(Keywords: binding contract India,
court cases on LOI, Indian Contract Act LOI)
Supreme Court Reasoning: What the Judgment Held
Legal Status of Letter of Intent (LoI)
· An LoI is NOT a binding contract unless conditions are fulfilled and a
formal agreement is signed.
·
LoI is an “expression of
intent”—not a legal guarantee.
·
Performance before actual
contract is at the bidder’s risk.
Cancellation
Power and Procedure
· The government can cancel a LoI
if conditions are unmet—as long as reasoning exists on record (file notings
count, even if not detailed in the cancellation order).
· Judicial review is limited:
Courts check if decisions are arbitrary, mala fide, or violate legal
process—not to re-do government’s commercial wisdom.
Compensation for Work Done (“Quantum Meruit”)
· If actual goods or services
benefited the State before LoI cancellation, compensation is due for what was
delivered—not for lost profits or expectation damages.
· Only documented, tangible benefits count.
(Keywords: Supreme Court LoI
cancellation 2025, quantum meruit tender cases, administrative law India)
· Letter of Intent (LoI): A conditional promise to
contract, not enforceable unless
conditions are met.
· Quantum Meruit: Right to payment for the value of work
actually performed, not future expectations.
· Arbitrary Action: Decision lacking fairness or
transparency, usually subject to judicial correction.
· Judicial Review: Court’s power to check unlawful or
unreasonable government decisions.
(Keywords: LoI meaning legal, quantum
meruit explained, judicial review tender India)
Impact, Best Practices & Practitioner Tips
·
Don’t assume LoI is final: Wait for all conditions to be
fulfilled and formal contract execution before large investments.
·
Keep records: Document each step and interaction;
helps in compensation claims if LoI is cancelled.
·
Understand quantum meruit rights: Compensation is limited to what
the State has actually used or benefited from.
·
Document everything: Internal reasons in administrative
files are as important as what’s issued in public notices.
·
Transparent cancellation: Brief reasons should be
communicated, even if not strictly necessary—helps in defending against
arbitrary action claims.
·
Retender fairly: Allow all eligible bidders, including
previously affected parties, to participate in new tenders.
·
Focus on procedure: Arbitrary or unreasoned cancellation
is vulnerable to challenge; robust files matter.
·
Know the precedent: Use this case and its cited
authorities to argue future LoI/tender disputes.
(Keywords: tender law India tips,
government contract procedures, legal advice LOI India)
|
Legal Issue |
SC Ruling |
Key Law/Citation |
Action Point |
|
Status of LoI |
Not binding, conditional |
Dresser Rand, Contract Act |
Wait for full contract |
|
Cancellation |
Allowed—if reasoned, filed |
Tata Cellular, Art 14 |
Document reasons; communicate fairness |
|
Compensation |
Only for work actually done |
S. 70 Contract Act |
Claim value of delivered work only |
|
Retendering |
Open to eligible bidders |
Govt procurement rules |
Participate anew if eligible |
Conclusion: The Real Message of the Judgment for Indian Tender Law
This Supreme Court judgment brings clarity to thousands of bidders
and officials across India: “A Letter of Intent is not a contract. No matter
the excitement, no matter the partial progress, unless every tender condition
is met and the deal signed—you only have hope, not a legal right.”
By reinforcing the limits of judicial review, the Court ensures
government can remain agile—while fairness and transparency are always
demanded. For government procurement in India, this verdict is a practical,
people-centred guide and legal anchor.
Frequently
Asked Questions (FAQs)
Q1: Can I sue the government if it
cancels my LoI after I invest money?
A1: You cannot enforce the contract unless all LoI conditions and a formal
agreement are fulfilled. You may get compensation for actual work benefited by
the government—never for wasted expectations.
Q2: Is file noting evidence of proper
cancellation?
A2: Yes. Supreme Court accepts internal reasoning even if not described in the
official cancellation letter.
Q3: What sections of law should a
lawyer look at for LoI disputes?
A3: Indian Contract Act, Article 14 of Constitution, and relevant tender rules
(plus cited case law above).
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Supreme Court judgment, Himachal Pradesh tender LoI, contract law India, LOI
cancellation, public procurement law, quantum meruit)
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