The Allahabad High Court has held that where an advertisement is cancelled after a Letter of Intent has been issued, and the cancellation is the authority’s own fault rather than any breach by the allottee, the allottee must be compensated for what he has spent in complying with the Letter of Intent. The court granted Rs. 15,78,486 to an individual selected for a Hindustan Petroleum Corporation Ltd. retail outlet dealership, citing the principle of legitimate expectation.
Court Orders Compensation After Advertisement Cancellation
The bench of Justice Saral Srivastava and Justice Siddharth Nandan held”it shall not be just for the petitioner to bear his own losses, towards the investment which he has made, in satisfying the conditions proposed in the Letter of Intent, for no fault of his own, as it is not a case of withdrawal of Letter of Intent, on breach of any condition.” The court emphasized that this was not a case of withdrawal due to breach of conditions.
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Hindustan Petroleum Corporation Ltd. had advertised for a retail outlet dealership on SH-99 in Ghazipur district on November 25, 2018. The petitioner applied, deposited Rs. 10,000, and was selected in a draw of lots on February 1, 2019. The Letter of Intent dated August 2, 2019, required site development up to road level and construction of retaining and compound walls measuring 1.5 metres. failing which it was to be withdrawn without notice.
On March 11, 2021, the petitioner was informed that the location had been cancelled. Corporation counsel cited Clause 14 of the general conditions, allowing cancellation at sole discretion without assigning reasons. They also referenced a March 6, 2018 notification under Section 2(2) of the National Highway Act, 1956, declaring the stretch a national highway before the advertisement was published.
He argued that a Letter of Intent binds neither party until the offer is unconditionally accepted and the preconditions are met. However, the court acknowledged that while withdrawal fell within the Corporation’s powers under Clause 14 and the Letter of Intent was not a firm offer, the petitioner’s actions in reliance on it triggered the principle of legitimate expectation.
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It held that the fault lay with the authorities in advertising a location already notified as a national highway, and the petitioner could not be left remedy-less where no condition had been breached by him. It accepted the petitioner’s documented expenditure of Rs. 15,78,486 between February 1, 2019, and March 11, 2021, supported by a photograph of the developed site and no specific denial in the counter affidavit.
Directing payment within one month from the date of production of a certified copy of the order, failing which 8% simple interest per annum would run till actual payment, the Court allowed the writ petition.