Issuance of Letter of Intent does not constitute a concluded contract or preclude tender cancellation for budgetary constraints.

The Petitioner, declared the L-1 bidder in a tender for the purchase and installation of server systems for the Jharkhand High Court (JHC), was issued a Letter of Intent (LOI) on May 19, 2025.

Following the LOI, the Petitioner submitted a Performance Bank Guarantee of Rs. 1.52 crores.

However, JAP-IT (the executing agency) requested the Petitioner to negotiate and reduce its bid from Rs. 30.52 crores to approximately Rs. 22.86 crores due to the JHC’s budgetary constraints.

After the Petitioner refused to lower its rates despite multiple extensions and scaled-down specifications, the Respondents cancelled the tender on August 21, 2025.

The Petitioner’s Earnest Money Deposit (EMD) was refunded and accepted without protest on August 22, 2025.

The Petitioner approached the Court seeking to quash the cancellation and a direction to execute the contract.

1. Whether the issuance of a Letter of Intent (LOI) and submission of a performance guarantee constitutes a concluded contract, thereby preventing the State from cancelling the tender process.

2. Whether the cancellation of the tender for budgetary constraints and refusal to negotiate by the bidder is arbitrary, unreasonable, or violative of Article 14 of the Constitution.

3. Whether the Petitioner's acceptance of the EMD refund without protest and non-disclosure of the same impact the maintainability of the writ petition.

The Court applied the principles of judicial review in contractual matters as established in Tata Cellular v. Union of India, which limits the Court's role to the decision-making process rather than the merits, emphasizing that the State has the right to refuse the lowest tender to protect financial interests.

It relied on Dresser Rand S.A. v. Bindal Agro Chem Ltd. to hold that a Letter of Intent (LOI) merely indicates an intention to contract and does not create a binding legal relationship.

Furthermore, it applied Afcons Infrastructure Ltd. v. Nagpur Metro Rail Corp Ltd., which mandates judicial restraint in administrative decisions unless there is established mala fides, perversity, or irrationality.

The Court reasoned that no concluded contract existed because no formal agreement was signed and no work order was issued; the LOI was merely an invitation to offer, not an acceptance.

Regarding arbitrariness, the Court found that the Respondents provided cogent reasons for cancellation—specifically, a budgetary ceiling of Rs. 22-23 crores against the Petitioner's bid of Rs. 31 crores.

The Court noted that the Respondents acted transparently by offering the Petitioner opportunities to negotiate and scaling down specifications before deciding to re-tender.

The Court also highlighted that the Petitioner suppressed the material fact of receiving and accepting the EMD refund before filing the petition, which suggested acquiescence and disentitled them from equitable relief.

It held that a bidder has no vested right to force a contract upon the State, especially when the bid exceeds available budgetary provisions.

The Court clarified that the Respondents were within their rights to cancel the tender and initiate a fresh process to ensure competitive pricing within the High Court's financial limits.

No costs were awarded.