Supreme Court Upholds Cancellation of Letter of Intent but Grants Quantum Meruit Relief; Orders Fresh Tender for Himachal ePoS Project
Case Name: State of Himachal Pradesh & Anr. v. M/s OASYS Cybernetics Pvt. Ltd.
Citation: 2025 INSC 1355
Date of Judgment/Order: 24 November 2025
Bench: Surya Kant, CJI; Ujjal Bhuyan, J.; Nongmeikapam Kotiswar Singh, J.
Held: The Supreme Court held that the Letter of Intent (LoI) issued to OASYS Cybernetics on 02.09.2022 did not create any binding or enforceable contractual rights, as it was expressly conditional and contingent upon successful technical testing, live demonstration, and disclosure of cost details. The Court further held that the State’s cancellation of the LoI on 06.06.2023 was neither arbitrary nor mala fide, since the Respondent had failed to comply with mandatory preconditions and the Department had legitimate concerns relating to NIC-software compatibility and incomplete disclosures. However, recognizing the Respondent’s partial performance and expenditure, the Court invoked principles of quantum meruit to direct reimbursement for tangible assets or work actually appropriated during pilot/testing stages. The High Court’s order compelling continuation of the LoI was accordingly set aside.
Summary: The dispute arose from the Himachal Pradesh Government’s effort to modernise its Public Distribution System through upgraded ePoS devices capable of Aadhaar-enabled authentication and integration with weighing scales. After four rounds of tendering, OASYS Cybernetics emerged as the sole technical qualifier and received an LoI in September 2022, subject to completing several preconditions: NIC-Hyderabad compatibility testing, live demonstrations, and detailed cost disclosures. Over the next eight months, the Department repeatedly sought compliance, but testing remained incomplete, cost details were not submitted in the prescribed format, and no formal certification was issued. Meanwhile, OASYS unilaterally manufactured thousands of devices and undertook training activities. On 06.06.2023, the State cancelled the LoI and initiated a fresh bidding process. The High Court quashed the cancellation as arbitrary. On appeal, the Supreme Court reaffirmed the settled doctrine that an LoI does not constitute a concluded contract unless all preconditions are fulfilled. The Court found that non-compliance, not political motives, drove the cancellation; that concerns regarding NIC-compatibility were genuine; and that the blacklisting allegations raised by a rival bidder were irrelevant due to prior judicial findings. While finding no arbitrariness in the State’s decision to re-tender, the Court recognized that the Respondent had supplied devices and rendered services during pilot stages, entitling it to compensation on equitable grounds.
Decision: The Supreme Court allowed the appeal, set aside the High Court’s judgment, and upheld the cancellation of the LoI dated 02.09.2022. It quashed the immediate post-cancellation Expression of Interest, directed the State to issue a fresh tender strictly in accordance with procurement norms, and permitted OASYS to participate on equal terms. The Court further ordered a fact-finding enquiry to identify devices, components, and services provided during pilot or demonstration stages and directed reimbursement of their verified value to the Respondent on the principle of quantum meruit. All assets deployed under the LoI were directed to vest with the State upon payment of costs. Claims for loss of profit or consequential damages were expressly barred. All pending applications were disposed of.