Meghalaya HC Dismisses Plea Against LOA Cancellation | Says No Enforceable Contract Formed Without IAMA, Writ Not Maintainable
Sanchayita Lahkar
The High Court of Meghalaya Single Bench of Acting Chief Justice H.S. Thangkhiew held that the writ petition challenging the cancellation of a Letter of Award issued to a public limited company was not maintainable. The Court concluded that despite the issuance of the Letter of Award, the formation of a binding contract was contingent upon the execution of the Infrastructure Asset Management Agreement (IAMA), which had not materialized. The Court directed that the petitioner may seek alternate remedies through arbitration or civil courts for damages, but declined to interfere under Article 226, stating that the dispute arose from a commercial transaction and involved contested facts. Consequently, the writ petition was disposed of.
The petitioner, a public limited company, assailed the cancellation of a Letter of Award (LOA) dated 29.11.2023, issued to it for selection as the exclusive operating partner for the Optical Ground Wire (OPGW) Passive Fibre Infrastructure of the Meghalaya Power Transmission Corporation Limited (MePTCL). The cancellation was conveyed via a letter dated 03.04.2024, which the petitioner argued was arbitrary and violative of Article 14 of the Constitution of India.
According to the petitioner, the LOA was issued after it emerged as the highest bidder pursuant to a tender dated 25.09.2023. The petitioner contended that clause 5.1 of the LOA stipulated that its issuance would constitute the formation of a contract, thereby making the parties contractually bound. Additionally, clause 5.2 obligated both parties to enter into a formal contract within fifteen days of the LOA.
It was submitted by the petitioner that although some concerns arose regarding the draft IAMA, these were addressed and resolved via a letter dated 11.12.2023. The petitioner claimed that it completed all required formalities and yet the respondent failed to proceed with the signing of the IAMA. Despite further oral follow-ups and meetings with the Chairman of MePTCL, the agreement was not executed, and instead, the cancellation letter was received.
The petitioner argued that clause 3.25.1 of the tender mandated the awarding of the contract to the successful bidder and clause 3.28 designated the LOA as a contract document, rendering its unilateral cancellation impermissible. Furthermore, the petitioner asserted that the respondent's failure to execute the IAMA and subsequent cancellation of the LOA breached contractual obligations and violated Article 14.
In support of its contentions, the petitioner relied on the Supreme Court judgements in Subodh Kumar Singh Rathour v. Chief Executive Officer & ors (Civil Appeal No. 6741 of 2024) and Mihan India Ltd. v. GMR Airports Ltd & ors (Civil Appeal No. 3699 of 2022).
The Advocate General representing the respondents countered that the writ petition was not maintainable, stating that the petitioner was effectively seeking specific performance of the LOA conditions. He argued that writ jurisdiction under Article 226 does not extend to enforcement of contractual obligations, particularly where alternative remedies such as arbitration exist.
It was submitted that no contract had been concluded between the parties as the IAMA, which was to define the detailed obligations, had not been executed. The LOA, according to clause 3.2.14, merely signified the acceptance of the bid, while clause 3.25.2 authorized MePTCL to annul the bidding process at any time before contract award. Clause 3.25.4 and related provisions required submission of a performance guarantee within stipulated timeframes and completion of the IAMA.
The Advocate General further submitted that the decision to cancel the LOA was taken by MePTCL's Board of Directors after assessing the financial viability of the project. It was concluded that the project would not be financially sustainable based on capital expenditure and projected returns. As a result, there was no consensus on material terms and no contract came into effect.
Judicial precedents cited by the respondents included State of Gujarat v. Meghji Pethraj Shah Charitable Trust (1994) 3 SCC 552, Kerala SEB v. Kurian E. Kalathil (2000) 6 SCC 293, and RKI India Limited v. State of Meghalaya & Ors. in WP(C) No. 116 of 2024.
The Court recorded that the essential issue was "the justifiability and legality of the cancellation of the LOA for selecting the exclusive operating partner of the OPGW Passive Fibre Infrastructure." It noted that although clause 5.1 of the LOA stated that it would constitute the formation of the contract, several preconditions remained unfulfilled, including the execution of the IAMA.
It was "expedient to refer to the general conditions of contract" which included multiple clauses requiring steps to be completed post-LOA issuance. The Court cited clause 3.25.4, which mandated that the successful bidder must sign the IAMA within fifteen days or face default.
The Court further noted that "the logical progression of the matter would have been the execution of the IAMA... which would constitute the finalization of a formal contract agreement between the parties." However, this had not occurred.
It was observed that since the petitioner was seeking what amounted to specific performance in a writ proceeding, and given the existence of an arbitration clause, the dispute was more appropriately addressed through alternate legal remedies.
Referring to the Supreme Court’s judgement in Subodh Kumar Singh Rathour, the Court quoted: "Where State action is challenged on the ground of being arbitrary, unfair or unreasonable, the State would be under an obligation to comply with the basic requirements of Article 14..."
However, the Court held that the cancellation decision, though resulting in abandonment of the tender, did not amount to a re-tender and was not proven to be arbitrary.
The judgment cited Jagdish Mandal v. State of Orissa (2007) 14 SCC 517, noting: "Evaluating tenders and awarding contracts are essentially commercial functions. Principles of equity and natural justice stay at a distance."
The Court held that interference under Article 226 must be based on arbitrariness or violation of public interest, which was not evident in this case.
The Court stated that the cancellation of the LOA, though contested, was not arbitrary or illegal to warrant interference under writ jurisdiction. It declared: "In conclusion, taking into account the entire facts and circumstances, the instant writ petition is held to be not maintainable on the grounds as placed..."
The Court held that: "The petitioner, is therefore, at liberty to initiate appropriate proceedings and seek alternate remedies as available in the agreement through arbitration, or before the civil courts for damages or losses, if any, has been suffered by it."
Accordingly, the writ petition was closed and disposed of without further orders.
Advocates Representing the Parties:
For the Petitioners: Mr. R. Jain, Senior Advocate, with Mr. S.K. Hassan, Advocate and Ms. M. Rahman, Advocate
For the Respondents: Mr. A. Kumar, Advocate General, with Mr. A. Kharwanlang, Additional Senior Government Advocate and Ms. S. Laloo, Government Advocate
Case Title: Sterlite Interlinks Limited vs. The State of Meghalaya & Ors.
Neutral Citation: 2025: MLHC:480
Case Number: WP(C) No. 370/2024
Bench: Acting Chief Justice H.S. Thangkhiew
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