Cancellation of a Letter of Intent and forfeiture of security are invalid for delay not attributable to the bidder.

The petitioner participated in the auction for the Navapara–Rampura Manganese Ore Block and, being the highest bidder, was issued a Letter of Intent (LoI) dated 04.10.2023 for grant of a composite licence. The LoI required the petitioner to obtain the necessary permissions, approvals, permits and no-objection certificates and furnish performance security of ₹1.5 crore.

The petitioner’s minor son died on 30.03.2025. On 02.04.2025, the Forest Department informed the petitioner that the borehole-clearance process required an extension of the LoI, which was due to expire on 03.04.2025. The petitioner applied for extension on 02.04.2025, but the respondents rejected the request on 10.09.2025, cancelled the LoI and forfeited the ₹1.5 crore bank guarantee.

1. Whether the respondents were justified in cancelling the petitioner’s LoI when the delay in obtaining the requisite permissions was substantially attributable to governmental and local authorities rather than to the petitioner?

2. Whether forfeiture of the petitioner’s ₹1.5 crore bank guarantee following cancellation of the LoI was legally sustainable in the circumstances?

3. Whether the petitioner was entitled to restoration of the LoI-related bank guarantee and a reasonable additional period to complete the pending permissions, particularly borehole clearance?

The Court exercised judicial review jurisdiction under Article 226 of the Constitution to examine whether cancellation of the LoI and forfeiture of the security were fair and legally sustainable.

Rule 18(2) of the Mineral (Auction) Rules, 2015 requires completion of the prescribed compliances and execution of the composite licence within the stipulated period, subject to the consequences under the Rules and tender conditions.

Clause 5 of the LoI prescribed an initial validity period of one year but expressly authorised the State Government to extend the LoI for such further period or periods as it deemed fit where the preferred bidder required additional time to fulfil the conditions.

The Court applied the principles of fairness and non-arbitrariness in administrative action, holding that cancellation and forfeiture could not be sustained where the delay was not attributable to the bidder and the bidder had continued to pursue the required permissions.

The Court found that the LoI did not specifically enumerate all permissions required, though it generally required the petitioner to obtain consents, approvals, permits and NOCs necessary for commencing prospecting operations.

The petitioner had actively pursued the required approvals, while the delay in demarcation, DGPS permission and borehole clearance was connected with governmental or local-authority processes.

The Court further noted that Clause 5 contained no express outer limit on the State’s power to extend the LoI and that the earlier six-month extension had not provided six clear months because it was retrospectively calculated from the expiry date.

The petitioner had also applied for further extension immediately before expiry, despite the intervening death of his son, and had already furnished substantial performance security.

In these circumstances, the Court held that the delay did not demonstrate abandonment or negligence by the petitioner and that cancellation and forfeiture offended fair play.

It directed the respondents to restore the ₹1.5 crore bank guarantee by depositing the requisite amount with the concerned bank and to grant the petitioner reasonable additional time to complete the pending permissions, particularly borehole clearance from the Forest Department.

The respondents were directed to complete the exercise within four weeks, and the petition was accordingly disposed of.