Allottee Must Be Compensated For Investment If Advertisement Is Withdrawn Due To Authority's Own Fault: Allahabad High Court

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.

Moulding the relief under Article 226 of the Constitution of India, the Court awarded Rs. 15,78,486 to a man selected for a Hindustan Petroleum Corporation Ltd. retail outlet dealership.

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.”

Hindustan Petroleum Corporation Ltd. advertised on 25.11.2018 for a retail outlet dealership on SH-99 in district Ghazipur. Petitioner applied, deposited Rs. 10,000/- and was selected in the draw of lots held on 01.02.2019. The Letter of Intent dated 02.08.2019 required him to develop the site up to road level and to raise a retaining wall and a compound wall of 1.5 metres, failing which it was to be withdrawn without notice. By letter dated 11.03.2021 he was told that the location stood cancelled.

Counsel for the Corporation relied on Clause 14 of the general conditions pertaining to the advertisement, which allowed the company to cancel it at its sole discretion without assigning reasons, and on a notification dated 06.03.2018 under Section 2(2) of the National Highway Act, 1956 by which the stretch had been declared a national highway before the advertisement was published, rendering the advertisement defective. He argued that a Letter of Intent binds neither party until the offer is unconditionally accepted and the preconditions are met.

The Court held that withdrawal of the advertisement was within the Corporation's power under Clause 14 and that a Letter of Intent is not a firm offer, but that it carries a promise, acted upon by the petitioner, which attracts the principle of legitimate expectation. 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 noted that the petitioner had brought on record a break-up of Rs. 15,78,486 spent between 01.02.2019 and 11.03.2021 along with a photograph of the developed site, and the counter affidavit did not specifically deny it. 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.