Letter of Intent Creates No Vested Contractual Right; Writ Court Cannot Rewrite Tender Conditions or Substitute Financing Scheme to Accommodate an Individual Bidder: Punjab and Haryana High Court
Case Name: Hawa Singh Khobra v. Union of India
Date of Judgment: 17 August 2026
Citation: CWP-21822-2026
Bench: Hon’ble Mr. Justice Suvir Sehgal and Hon’ble Mr. Justice Deepinder Singh Nalwa
Held: The Punjab and Haryana High Court held that a Letter of Intent is only a provisional communication expressing the tendering authority’s intention to enter into a formal agreement upon fulfilment of the stipulated technical, financial and procedural requirements, and does not by itself create any vested, binding or enforceable contractual right in favour of the successful bidder. Where no formal agreement has been executed and the conditions prescribed in the Letter of Intent remain unfulfilled, the writ court cannot direct the tendering authority to convert a conditional Letter of Intent into a concluded contract.
The Court further held that tender conditions cannot ordinarily be rewritten under Article 226 of the Constitution to accommodate an individual bidder, as substituting the specified financing scheme after completion of the bidding process would materially alter the basis on which the bids were invited and evaluated and could prejudice the competitive position of other participants. Although cancellation of a Letter of Intent may be judicially reviewed where the action is arbitrary, unreasonable or mala fide.
Summary: The Punjab and Haryana High Court decided two connected writ petitions involving common questions concerning the legal effect of Letters of Intent issued by Bharat Petroleum Corporation Limited and the power of a writ court to alter tender conditions after completion of the bidding process.
BPCL invited e-tenders for the transportation of bulk LPG by road for five years. The tender process commenced on 1 March 2025, and the technical bids were scheduled to be opened on 16 April 2025. The petitioners participated under the Scheduled Caste category by proposing to acquire and deploy trucks through financing under the Stand-Up India Scheme.
Under the tender conditions, an SC/ST bidder proposing trucks under the Stand-Up India Scheme was required to furnish confirmation from a scheduled commercial bank regarding the extension of a loan under the scheme. However, the credit guarantee component of the Stand-Up India Scheme was closed with effect from 31 March 2025, and fresh guarantee coverage was no longer available for loans sanctioned after 1 April 2025.
BPCL issued a Letter of Intent dated 9 October 2025 in favour of the petitioner. The proposed contract was for five years, but the Letter of Intent required the petitioner to furnish the stipulated security deposit through an irrevocable bank guarantee and complete other prescribed formalities within the specified period. The petitioner failed to fulfil the conditions within that period, following which BPCL cancelled the Letter of Intent through its communication dated 29 October 2025.
After receiving representations from the petitioner, BPCL issued another communication dated 23 December 2025 directing him to submit formal confirmation from the bank that the credit guarantee facility under the Stand-Up India Scheme remained valid. Punjab National Bank subsequently confirmed on 26 December 2025 that the credit guarantee scheme had been withdrawn by the Government of India.
The petitioner invoked Articles 226 and 227 of the Constitution seeking quashing of BPCL’s communications cancelling the Letter of Intent. He also sought directions requiring the respondents to extend the Stand-Up India Scheme to the tender or convert the 15% reservation for Scheduled Caste bidders to another financing scheme.
It was argued on behalf of the petitioner that he had furnished a bank guarantee of ₹3 lakh in October 2025, which remained with BPCL. He asserted that issuance of the Letter of Intent created binding rights between the parties and obligated BPCL to enter into a formal contract with him. He further contended that the bank could not deny the credit guarantee facility because the facility was available when the tender process commenced.
The High Court relied upon the Supreme Court’s decision in State of Himachal Pradesh v. M/s OASYS Cybernatics Pvt. Ltd., (2026) 3 SCC 348, which held that a Letter of Intent is no more than a provisional communication signifying an intention to enter into a formal agreement after fulfilment of the specified technical and procedural conditions. Acceptance of a tender and formation of a binding contract remain contingent upon compliance with those prerequisites.
Applying that principle, the Court found that the Letter of Intent issued by BPCL could not be treated as conferring an unconditional contractual right upon the petitioner. No formal agreement had been executed between the parties, and compliance with the conditions stipulated in the Letter of Intent remained incomplete. Its issuance, therefore, did not deprive BPCL of the authority to determine whether the bidder had satisfied the prescribed requirements.
The Court also found that the petitioners’ bids under the SC/ST category were dependent upon financing backed by the credit guarantee scheme under the Stand-Up India Scheme. The scheme had already closed on 31 March 2025, and the petitioners’ banker had confirmed its withdrawal. Therefore, the financial condition forming the basis of their bids could not be fulfilled in the manner contemplated by the tender.
The petitioners’ request to substitute another financing scheme, convert the reservation, cancel or recall the tender, or otherwise accommodate them under a different scheme was rejected. The Court held that such a direction would materially modify the terms on which the tender was floated and evaluated. It could also adversely affect other bidders who had participated on the basis of the original notified conditions.
The High Court emphasised that Article 226 does not authorise a writ court to recast a completed public tender merely to protect the commercial expectations of an individual participant. Judicial review could have been invoked if the cancellation of the Letter of Intent had been shown to be arbitrary, unreasonable or motivated by mala fides. However, the petitioners had neither specifically alleged nor established any such infirmity in BPCL’s decision.
Decision: The Punjab and Haryana High Court dismissed both writ petitions and declined to interfere with BPCL’s communication and cancelling the Letters of Intent and requiring confirmation regarding the continued availability of the credit guarantee scheme. The Court also rejected the prayers seeking extension or restoration of the Stand-Up India Scheme, substitution of another financing arrangement, conversion of the tender reservation or recasting of the tender conditions.