Chhattisgarh High Court Directs HPCL To Pay ₹1 Lakh Compensation Over Withdrawal Of Petrol Pump Letter Of Intent

The Chhattisgarh High Court has held that although Hindustan Petroleum Corporation Limited (HPCL) was justified in withdrawing a Letter of Intent (LOI) issued for establishment of a Rural Retail Outlet after discovering that the proposed site was situated on a State Highway and therefore ineligible under the applicable Dealer Selection Guidelines, the petitioner was entitled to compensation for the hardship caused by the Corporation's delayed verification of the site after issuance of the LOI.

Justice Amitendra Kishore Prasad was hearing a writ petition challenging HPCL's communication withdrawing the Letter of Intent issued in favour of the petitioner for the establishment of a Rural Retail Outlet. Pursuant to HPCL's advertisement dated 14.12.2018, the petitioner had applied for the dealership by offering her land situated at Village Nawagaon. After scrutiny of her application, HPCL issued the LOI on 29.12.2020. The petitioner thereafter commenced construction and incurred expenditure towards the installation of an electricity transformer. Subsequently, HPCL sought clarification regarding the location of the land and thereafter withdrew the LOI on the ground that the land was situated on State Highway No. 16, whereas the Dealer Selection Guidelines prohibited the establishment of Rural Retail Outlets on National or State Highways.

The petitioner contended that the subsequent withdrawal of the LOI after she had altered her position and made substantial investments was arbitrary and contrary to the principles of fairness and legitimate expectation.

The Court held that the applicable Dealer Selection Guidelines clearly prohibited the establishment of Rural Retail Outlets on National Highways, State Highways, Coastal Highways, Expressways, A, B and C Class markets and areas within municipal limits. Since the petitioner's land was admittedly situated on State Highway No. 16, HPCL had acted in accordance with the mandatory guidelines while withdrawing the LOI, and no direction could be issued for the establishment of the Retail Outlet contrary to those guidelines.

However, the Court observed that before issuing the LOI, HPCL had itself inspected the site, verified the petitioner's documents, accepted the demand drafts deposited by her and thereafter issued the LOI. It was only at a much later stage that the Corporation discovered that the land was situated on the State Highway.

The Court held that although withdrawal of the LOI could not be faulted in law, the delayed verification by HPCL had caused the petitioner financial loss, inconvenience and mental agony after she had altered her position by incurring expenditure on demarcation, construction and other preparatory works in reliance upon the LOI.

Accordingly, while declining to quash the communication dated 01.02.2022 or restore the LOI, the Court partly allowed the writ petition and directed HPCL to pay the petitioner consolidated compensation of Rs.1,00,000/-.

Case Title: Smt. Ananta Chowdhary v. Hindustan Petroleum Corporation Limited & Ors. [WPC No. 1464 of 2022]

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