'Letter Of Intent' Does Not Create Any Right In Favour Of The Party To Whom It Is Issued: Supreme Court
The Supreme Court reiterated that a 'Letter of Intent' is merely an expression of intention to enter into a contract and it does not create any right in favour of the party to whom it is issued.
The Court imposed a cost of Rupees Five Lakhs on Himachal Pradesh Housing and Urban Development Authority (HIMUDA) after finding that it took the Himachal Pradesh High Court “for a ride” in a tender process in collusion with a construction company.
The Court stated that HIMUDA misused the process of law to cover up the irregularities and illegalities committed in the tender process in collusion with M/s. Vasu Constructions (Company).
Justice Bela M. Trivedi and Justice Pankaj Mithal observed, “It hardly needs to be reiterated that the Letter of Intent is merely an expression of intention to enter into a contract. It does not create any right in favour of the party to whom it is issued. There is no binding legal relationship between the party issuing the LOI and the party to whom such LOI is issued. A detailed agreement/contract is required to be drawn up between the parties after the LOI is received by the other party more particularly in case of contract of such a mega scale.”
AOR Ritesh Khatri represented the petitioner, while AOR Shankar Divate appeared for the respondents.
Level 9 BIZ Pvt. Ltd. had challenged the High Court’s order pertaining cancellation of an initial tendering process. The Court permitted HIMUDA to withdraw the cancellation of the initial tender, allowing the Company to proceed with the process, despite earlier withdrawal due to confirmed gross irregularities and illegalities committed by the officers of HIMUDA.
The Supreme Court scrutinised the events leading to the cancellation of the tender due to irregularities and illegalities confirmed by an independent committee. The Court questioned the disposal of the case by the High Court based solely on statements from counsels, allowing the project to proceed despite the cancellation of the original tender.
The Court was surprised to note that the High Court did not notice the ill-intention of the company and HIMUDA and permitted them to go ahead with the original tender, ignoring the reports of the independent committee with regard to the irregularities and illegalities committed by the officers of HIMUDA.
“Since, we have found that the respondent no.1 HIMUDA, though ‘State’ within the meaning of Article 12 of the Constitution of India, had acted malafide and in collusion with the respondent no.2, and had taken the High Court for a ride, the present appeal deserves to be allowed with heavy cost,” the Court held.
Accordingly, the Supreme Court set aside the Order of the High Court and allowed the appeal.
Cause Title: Level 9 Biz Pvt. Ltd. v. Himachal Pradesh Housing And Urban Development Authority & Anr. (Neutral Citation: 2024 INSC 257)
Appearance:
Appellant: AOR Ritesh Khatri
Respondents: AOR Shankar Divate and Bimlesh Kumar Singh; Advocate J P Mishra
