Summary
| Category | Data |
|---|---|
| Court | Supreme Court of India |
| Case Number | C.A. No.-014199-014199 – 2025 |
| Diary Number | 49695/2024 |
| Judge Name | HON’BLE THE CHIEF JUSTICE |
| Bench | HON’BLE THE CHIEF JUSTICE; HON’BLE MR. JUSTICE JOYMALYA BAGCHI; HON’BLE MR. JUSTICE ATUL S. CHANDURKAR |
| Precedent Value | Binding authority |
| Overrules / Affirms | Affirms existing precedent on Letters of Intent |
| Type of Law | Administrative law; public procurement; contract law; constitutional law (Article 14) |
| Questions of Law |
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| Ratio Decidendi |
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| Judgments Relied Upon |
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| Logic / Jurisprudence / Authorities Relied Upon by the Court |
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| Facts as Summarised by the Court |
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Practical Impact
| Category | Impact |
|---|---|
| Binding On | All constitutional courts, tribunals and tendering authorities in India |
| Persuasive For | High Courts and administrative tribunals supervising public procurement; litigants in tender-related disputes |
| Follows |
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What’s New / What Lawyers Should Note
- Clarifies that an LoI, even if acted upon, remains conditional and not a concluded contract unless all stipulated preconditions are met.
- Confirms that absence of specified conditions precedent (compatibility testing, live demo, cost disclosure) justifies lawful cancellation.
- Affirms that courts will enforce tender-law precedents on LoIs and will not convert commercial expectations into legal rights.
- Establishes that judicial review of LoI cancellations under Article 14 is confined to checking for irrationality, mala fides or procedural unfairness.
- Upholds State’s discretion to re-tender in public interest, particularly where technical guarantees (e.g., NIC-software compatibility) remain unverified.
Summary of Legal Reasoning
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Nature of LoI
- Surveyed Supreme Court precedents (Rajasthan Co-op Dairy, Dresser Rand, Level 9 Biz) establishing that LoIs are precursors and not contracts.
- Emphasised conditions precedent in the 02.09.2022 LoI (testing, demo, formal agreement, cost details).
- Held that none of these steps were completed; thus no enforceable right vested.
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Judicial Review of Cancellation
- Applied Article 14 arbitrariness test from Tata Cellular and Jagdish Mandal.
- Recognised that administrative orders need not contain reasons in the letter if record shows contemporaneous rationale; distinguished post-facto justifications.
- Identified two State reasons: blacklisting complaint (already rejected and inapplicable) and non-compliance with LoI preconditions (undisputed factual basis).
- Concluded that non-compliance justified cancellation, was neither irrational nor mala fide, and the High Court over-intervened.
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Remedies and Directions
- Upheld cancellation; set aside Expression of Interest.
- Permitted fresh tender; allowed respondent to participate.
- Directed fact-finding enquiry and reimbursement on quantum meruit for demonstrable costs.
Arguments by the Parties
Petitioner (State of Himachal Pradesh)
- The LoI was a conditional, non-binding intent; preconditions remained unfulfilled.
- No enforceable contract arose; State retained discretion to cancel.
- Respondent failed to produce itemised cost break-up, complete compatibility testing and live demo.
- Technical incompatibility confirmed by NIC Hyderabad in November 2024.
- Respondent’s predecessor had been blacklisted; non-disclosure warranted cancellation.
- Public-interest and financial prudence justified re-tendering; courts should not replace administrative discretion.
Respondent (M/s OASYS Cybernatics Pvt. Ltd.)
- The LoI was final in substance after four tender rounds and financial negotiations.
- All technical requirements were complied with: pilot deployment, integration software, training.
- Cancellation without reasons violated Articles 14 and principles of natural justice.
- Blacklisting allegations were stale, related to a different entity, and irrelevant as on bid date.
- Respondent incurred substantial expenses in reliance on the LoI; abrupt withdrawal caused prejudice.
- Legitimate expectation estops the State from reneging without clear cause.
Factual Background
In 2017, Himachal Pradesh engaged OASYS Cybernatics Pvt. Ltd. to supply and maintain ePoS devices under a rental model for its Public Distribution System. In 2021–22, the State floated four tenders to upgrade to Aadhaar-enabled biometric ePoS devices; OASYS was repeatedly the sole technical qualifier. On 02.09.2022, the Department issued a conditional Letter of Intent subject to compatibility testing, live demonstration, formal agreement and cost disclosure. After eight months of correspondence and a complaint regarding past blacklisting, the State cancelled the LoI on 06.06.2023 without reasons. The High Court quashed the cancellation; the Supreme Court restored it.
Statutory Analysis
- Article 14 of the Constitution: applies to administrative cancellations—requires decisions to be rational and non-arbitrary.
- Tender document provisions: conditions precedent (compatibility tests, live demos, cost break-ups) enforce contractual sequencing.
- Contract law principles: distinction between LoI (pre-contractual) and final contract (LoA/agreement) as per Supreme Court precedents.
Procedural Innovations
- Directed a joint fact-finding enquiry into assets produced or serviced under the cancelled LoI.
- Ordered equitable reimbursement (quantum meruit) for demonstrable costs and installations rather than speculative profits.
Alert Indicators
- ✔ Precedent Followed
Reportable judgment authored by the Chief Justice on 24.11.2025.