In an important judgment affecting government procurement, the Supreme Court on Monday set aside a Himachal Pradesh High Court order that had reinstated a cancelled Letter of Intent (LoI) issued to a private tech firm for supplying biometric ePoS devices to Fair Price Shops across the State. The courtroom atmosphere was tense but calm, with both sides heavily relying on months of correspondence, internal notes, and tender documents.
Background
Back in 2022, Himachal Pradesh issued an LoI to Chennai-based M/s OASYS Cybernetics Pvt. Ltd. after four attempted tender processes failed to secure multiple qualifying bidders. The company was expected to supply upgraded Aadhaar-enabled Point-of-Sale machines, including IRIS scanners, on a rental model.
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However, in June 2023, the Food and Civil Supplies Department abruptly cancelled the LoI and announced plans for a fresh tender-without stating any reasons. The company cried foul and approached the High Court, which ruled in its favour, calling the cancellation arbitrary and unfair. The State appealed to the Supreme Court.
Court’s Observations
The three-judge bench headed by Chief Justice Surya Kant didn’t mince words while clarifying the legal position of a Letter of Intent. “The bench observed, ‘An LoI, unless expressly accepted and acted upon after satisfying conditions, does not create enforceable contractual rights,’” stressing that it merely signals intention-not a guarantee of contract.
Looking at recorded communications, the Court noted that the LoI required several preconditions: NIC-led compatibility testing, a live demonstration, and detailed cost disclosures. The State argued these weren’t fulfilled even after eight months. The Court agreed, remarking that taking preparatory steps like manufacturing devices “does not transform an inchoate LoI into a binding agreement.”
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On the allegation that the State acted maliciously based on a competitor’s complaint, the Court didn’t fully accept that theory. Instead, it found the cancellation stemmed from concerns over compliance and technical readiness rather than favoritism. “Administrative deliberation cannot be treated as duplicity,” the bench said, adding that governments must retain discretion to protect public interest-especially in welfare delivery systems.
At the same time, the bench acknowledged that the unreasoned cancellation letter should not have been issued in such a casual manner, noting the need for better procurement discipline.
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Decision
Ultimately, the Supreme Court allowed the State’s appeal and upheld the cancellation of the LoI dated 02.09.2022. The High Court’s reinstatement order was overturned. Yet, the Court did not allow the government’s subsequent tender process to continue, directing Himachal Pradesh to issue a fresh tender instead, ensuring transparency and equal opportunity. Importantly, it ordered a fact-finding exercise to assess devices or services already supplied during pilot testing and reimburse the company fairly on a quantum meruit basis-no profit claims, only verified expenses.
With that, the Court concluded that public procurement must balance fairness, accountability, and efficiency, especially when it concerns essential food distribution.
Case Title: State of Himachal Pradesh & Anr. vs. M/s OASYS Cybernetics Pvt. Ltd.
Case No.: Civil Appeal No....../2025 (Arising out of SLP (C) No. 6531/2025)
Case Type: Civil Appeal – Government Tender / Contract Cancellation Dispute
Decision Date: 24 November 2025