Case Title – State of Himachal Pradesh & Anr. vs. M/s OASYS Cybernatics Pvt. Ltd.
Citation – 2025 INSC 1355
Date – 24.11.2025
Hon’ble Supreme Court Bench – CJI SURYA KANT, JUSTICE UJJAL BHUYAN & JUSTICE NONGMEIKAPAM KOTISWAR SINGH
The Hon’ble Supreme Court said a Letter of Interest does not give any legal or contractual right to the company. It only shows that the government is interested, not that a contract exists. The Hon’ble Court explained that a Letter of Interest is like a “promise in embryo”. it can become a contract only if all conditions are fulfilled or a Letter of Acceptance Letter of Interest is issued.
- In this case, The Himachal Pradesh government cancelled the LoI for supplying ePoS devices. The company challenged this, but the Hon’ble Court held that the government’s cancellation was lawful.
- The Hon’ble Court found that the company failed to fulfil important technical requirements, such as compatibility testing with NIC software and a live demonstration. Since these conditions were not completed, no contract came into existence.
- The Hon’ble High Court had restored the Letter of Interest in favour of the company, calling the cancellation arbitrary. The Hon’ble Supreme Court set aside the High Court order. The Hon’ble Court referred to Dresser Rand, which says that a Letter of Interest only shows intention and does not bind either party to enter into a contract.
- Even though the cancellation letter did not give detailed reasons, the Hon’ble Court said there was no proof of bad motive, favouritism or corruption by the State. The Hon’ble Court said the State is allowed to cancel a tender and restart the process if it feels that public interest and technical standards require it, referring to Tata Cellular.
- The company claimed that after investing money, it expected the contract to go through. The Court rejected this, saying the Letter of Interest itself warned that everything was provisional, so no legitimate expectation could arise. The State can issue a new tender for ePoS machines. The company can participate again like everyone else.
- The State must conduct a fact-finding enquiry, verify what devices/services the company already supplied, and reimburse the actual verified costs under the principle of quantum meruit. Any machines, software or technology already given during pilot testing will vest in the State after reimbursement. The company cannot ask for damages, loss of profit or compensation beyond the verified reimbursement.
- The Hon’ble Supreme Court upheld the cancellation of the Letter of Interest, ordered reimbursement for actual work done, and allowed the State to start a fresh, fair tender process.
