In Brief
The State of Himachal Pradesh issued a Letter of Intent (LoI) to M/s OASYS Cybernetics for supplying ePoS devices for its Public Distribution System, subject to pre-conditions including compatibility testing, live demonstration, and formal agreement. After eight months of correspondence, the State cancelled the LoI without detailed reasons. The High Court quashed the cancellation. The Supreme Court held that an LoI is a provisional instrument—a 'promise in embryo'—not a binding contract until all conditions are met. Since the respondent failed to fulfil the stipulated pre-conditions and the State's cancellation was traceable to bona fide grounds (technical non-compliance), the Court upheld the cancellation and set aside the High Court's order, allowing the State to re-tender. The Court directed reimbursement of verified costs incurred by the respondent on quantum meruit principles.
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