Case BriefsSupreme Court

Supreme Court: A Division Bench of Sanjay Kishan Kaul and Hemant Gupta, JJ. reiterated that a Letter of Intent merely indicates a party’s intention to enter into a contract with the other party in future. No binding relationship between the parties at this stage emerges and the totality of the circumstances have to be considered in each case.  

The Court was deciding whether, in the facts of the case, the respondent−successful bidder who was awarded a tender by the appellant−South Eastern Coalfields Ltd., was liable for the execution of work by another contractor at the risk and cost of the successful bidder.

Factual Matrix

South Eastern Coalfields Ltd. (“Company”) floated a tender for certain works in June 2009. Bids were received and the respondent was the successful bidder. A Letter of Intent (“LoI”) was issued by the Company in October 2009 awarding the contract for a total work of over Rs 3.87 crore. In pursuance of the LoI, the successful bidder mobilised resources at site. On 28-10-2009, the Company issued a letter of site handover/acceptance certificate, which was to be taken as the date of commencement of the work.

Sometime in December 2009, the machinery deployed by the successful bidder suffered major breakdown and the work had to be suspended. After this, contractual relationship deteriorated and the Company alleged breach of contractual terms and rules and regulations applicable. The Company brought to successful bidder’s notice that they failed to submit the performance security deposit which was required to be submitted within 28 days from the date of receipt of LoI as per the terms of the tender.

The Company issued a show cause notice that they were left with no option except to terminate the work awarded to the successful bidder and get it executed by another contractor at the risk and cost of the successful bidder in terms of Clause 9 of the General Terms and Conditions of the Notice Inviting Tenders (“NIT”). Ultimately, final termination of work was carried out in April, 2010. Thereafter, the work was awarded to another contractor at a higher price and on account thereof a letter was issued by the Company to the successful bidder seeking an amount of over Rs 78 lakh being the difference in the contract value between the successful bidder and the new contractor.


The successful bidder filed a writ petition before the Chhattisgarh High Court seeking quashing of the termination letter as well as the recovery order. The High Court held that the Company was within their rights to cancel the award of work and forfeit the bid security. However, endeavour of the Company to recover the additional amount in award of contract to another contractor as compared to the successful bidder was held not recoverable. Aggrieved, the Company approached the Supreme Court.

Analysis and Observations

The task before the Court was to decide whether there was a concluded contract between the parties, the breach of which will make the successful bidder liable for execution of work by another contractor at the risk and cost of the successful bidder. Considering the conspectus of pleas put forward by the parties, the Court was of the view that it could not be said that a concluded contract had been arrived at inter se the parties.

Perusing the terms of the LoI and what it mandated the successful bidder to do, the Court concluded that none of the mandates were fulfilled except that the successful bidder mobilised the equipment at site, handing over of the site and the date of commencement of work was fixed vide letter dated 28-10-2009. The successful bidder neither submitted the Performance Security Deposit nor signed the Integrity Pact as required. Consequently, the work order was also not issued nor was the contract executed.

The Court stated that the issue of whether a concluded contract had been arrived at inter se the parties is in turn dependent on the terms and conditions of the NIT, the LoI and conduct of the parties. It reiterated the proposition that an LoI merely indicates a party’s intention to enter into a contract with the other party in future. No binding relationship between the parties at this stage emerges and the totality of the circumstances have to be considered in each case. The Court further observed:

It is no doubt possible to construe a letter of intent as a binding contract if such an intention is evident from its terms. But then the intention to do so must be clear and unambiguous as it takes a deviation from how normally a letter of intent has to be understood.

Turning then to the NIT, the Court noted that Clause 29.2 clearly stipulated that the notification of award will constitute the formation of the contract “subject only” to furnishing of the Performance Security/Security Deposit. Thus, it was clearly put as a pre-condition and that too to be done within 28 days following notification of the award. The failure of the successful bidder to comply with the requirement “shall constitute sufficient ground for cancellation of the award work and forfeiture of the bid security” as per Clause 30.2. Further, in terms of Clause 34 dealing with the Integrity Pact, the failure to submit the same would make the tender bid “as not substantially responsive and may be rejected.”


Holding that there was no concluded contract inter se the parties, the Supreme Court affirmed the High Court’s decision that all that the Company can do in the instant case is to forfeit the bid security amount and it was so directed. [South Eastern Coalfields Ltd. v. S. Kumar’s Associates AKM (JV), 2021 SCC OnLine SC 486, decided on 23-7-2021]

Tejaswi Pandit, Senior Editorial Assistant has reported this brief.

Case BriefsHigh Courts

Allahabad High Court: The Division Bench of Prakash Kesarwani and Dr Yogendra Kumar Srivastava, JJ., reiterated the settled position that in normal course it is not open for a person to seek to prevent a rival from exercising the right to carry on business.

Petitioner had a retail outlet dealership of MS/HSD, awarded by the Bharat Petroleum Corporation Limited. The instant petition was filed to seeking to raise a grievance with regard to issuance of a ‘Letter of Intent’ and Addendum to LOI whereunder it was proposed to offer the respondent 6 a retail outlet dealership of Bharat Petroleum Corporation Limited pursuant to an advertisement issued for the purpose.

Question as to whether a competitor in business could seek to prevent a rival party from exercising its right to carry on business came up for consideration in Nagar Rice and Flour Mills v. N.T. Gowda, (1970) 1 SCC 575.

In the above-cited case, it was held that a competitor in business cannot seek to prevent a rival from exercising its right to carry on business.

Analysis, Law and Decision

Bench reiterated the position that in normal course it would not be open to a competitor in business to seek to prevent a rival from exercising a right to carry on business.

Competition in a trade or business may be subject to restrictions as are permissible and as may be imposed by a law enacted in the interests of the general public. However, independent of any such restriction, a person cannot claim that no other person shall carry on business or trade so as to adversely affect his trade or business.

Adding to the above, bench while parting with its’ decision expressed that where the claim of the petitioner was solely to prevent a rival from exercising a right to carry on business, he would not have the locus standi to maintain a writ petition as the same would essentially be aimed at eliminating healthy competition in business.

In light of the above discussion, petition was dismissed. [Prince Filling Station v. Union Government of India, 2020 SCC OnLine All 1562, decided on 17-12-2020]

Advocates for the parties:

Counsel for the petitioner: Awadhesh Kumar Singh, Abhai Kumar Singh

Counsel for the respondent: A.S.G.I., Anand Tiwari, Anand Tiwari, C.S.C., Vikas Budhwar

Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Law Appellate Tribunal (NCLAT): The Bench of Justice Bansi Lal Bhat (Acting Chairperson) and Justice Anant Bijay Sing (Judicial Member) and Kanthi Narahari (Technical Member) set aside the Adjudicating Authorities decision while establishing whether a pre-existing dispute existed between the parties.

The instant appeal was filed against the order of the National Company Law Tribunal, New Delhi wherein the application filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 by the respondent was admitted.

Pre-Existing Dispute

Aggrieved by the above, suspended director of the Corporate Debtor filed the present appeal challenging the admission and initiation of Corporate Insolvency Resolution Process against the Corporate debtor for the reason that there is a pre-existing dispute between the Corporate Debtor and the Operational Creditor.

Brief facts

Corporate Debtor invited tender in carrying out electrical works and respondent/Operational Creditor was assigned the same. In terms of the agreement and Letter of Intent, the payment terms were specifically incorporated therein.

In terms of LOI, a specific mention the time of completion is the essence of the contract and milestones were accordingly incorporated. The work was to be completed within 120 days. However, the work was delayed and the same was communicated by the Operational Creditor.

Further, it was submitted that the Operational Creditor has not completed the work and the Corporate Debtor time and again reminded Operational Creditor to complete the work by pointing out the defects.

Issue for Consideration

Whether there is an existence of dispute prior to the issuance of Demand Notice dated 11-04-2019 or not?

Bench noted that various email were exchanged between the parties. Respondent addressed to the appellant whereby it had been stated that the project was delayed much beyond the original schedule leading to enhanced overheads and stated that they needed funds to source materials with respect to work progress.

Deficiency in Service

Tribunal opined that the Adjudicating Authority instead of taking technical objection that the email dated 29-04-2019 may not be a response to the demand notice issued by respondent, however, the contents raised by the appellant should have been taken into consideration for the purpose of deciding the issue to elucidate any pre-existing dispute keeping in view of the trail of exchange of e-mails regarding deficiency in service.

Letters/e-mails of respondent dated 29-12-2018:

“Dear Sir,

We are handing over Electrical Works, Documents Details at Triumph Resort 336/1A, village Calwaddo, Benaulim, Goa- 403716.”

From the perusal of correspondences between the Appellant and Respondent, Appellant/Corporate Debtor submitted that the Respondent did not complete the project in time thereby the Project got delayed thereby they suffered losses. On the other side, the stand of Respondent/Operational Creditor that they completed the project and handed over to the Appellant/Corporate Debtor, however, Appellant/Corporate Debtor failed to pay bills even after completion of the project.

Bench stated that it is unequivocal that there exists a dispute between the parties prior to the issuance of Demand Notice dated 11-04-2019.

Adjudicating Authority instead of taking a technical objection that the Appellant/Corporate Debtor did not respond to the Demand Notice issued by the Respondent/Operational Creditor within the statutory period of 10 days as contemplated under Section 8(2) of IBC, should have analysed the documents placed before it, before taking such objection.

Tribunal observed that it is bound by the Supreme Court decision in, Mobilox Innovations (P) Ltd. v. Kirusa Software (P) Ltd., (2018) 1 SCC 353, wherein it was held that:

“…Within a period of 10 days of the receipt of such demand notice or copy of invoice, the corporate debtor must bring to the notice of the operational creditor the existence of a dispute and/or the record of the pendency of a suit or arbitration proceeding filed before the receipt of such notice or invoice in relation to such dispute [Section 8(2)(a)]. What is important is that the existence of the dispute and/or the suit or arbitration proceeding must be pre-existing i.e. it must exist before the receipt of the demand notice or invoice, as the case may be.”
Another Supreme Court decision was referred to, Innoventive Industries Ltd. v. ICICI Bank, (2018) 1 SCC 407, wherein it was decided that the dispute must exist before the receipt of the Demand Notice or Invoices as the case may be.
In Gajendra Parihar v. Devi Industrial Engineers,  2020 SCC OnLine NCLAT 274, Bench was of the view that existence of dispute prior to the issuance of Demand Notice, the Application under Section 9 IBC is not maintainable and once there is the existence of such dispute, the Operational Creditor gets out of the clutches of the Code.


Bench held that in view of the email/letters there existed a dispute prior to the Demand Notice.

Exchange of e-mails/correspondences, as referred above, clearly establishes that there is a pre-existing dispute between the parties regarding completion of the work and the Appellant/Corporate Debtor continuously made complaints regarding non-completion of work and deficiency in services, thereby loss caused to the Appellant/Corporate Debtor.

Hence, the Adjudicating Authority ought not to have admitted the application under Section 9 of IBC filed by the respondent.

Bench reiterated that,

Code is a beneficial legislation intended to put the Corporate Debtor on its feet and it s not a mere money recovery legislation for the Creditors.

In view of the above discussion, initiation of Corporate Insolvency Resolution Process is quashed and set aside.

While remitting back the matter to Adjudicating Authority, the tribunal directed Interim Resolution Professional/ Resolution Professional will hand over the assets and records to the Corporate Debtor/Promotor/Board of Director. [Umesh Saraf v. Tech India Engineers (P) Ltd.,  2020 SCC OnLine NCLAT 677, decided on 19-10-2020]

Jammu and Kashmir and Ladakh High Court
Case BriefsHigh Courts

Jammu and Kashmir High Court: Ali Mohammad Magrey, J. allowed the writ petition and directed the respondents to indemnify the petitioner.

The briefly stated case of the petitioner was that, the respondents invited applications for allotment of flats and the petitioner thereafter submitted a form along with a deposit of Rs 3 lacs in July 2013. The petitioner received a notice in November, 2014 wherein 10 days’ time was given to him to deposit the first instalment which time had already elapsed and it came to the knowledge of the petitioner that the flat had been allotted to him. The petitioner immediately approached the respondents, who provided him with the copy of the letter of intent along with a copy of payment schedule and was told that same was posted to him in December, 2013.

It was submitted that the petitioner had already deposited an initial amount and wasn’t conveyed the letter of intent besides the notice. It was further submitted that the petitioner filed a representation before the respondents, wherein the petitioner prayed for extension of at least three months for making the payment of 1st instalment in the backdrop of the fact that due to the floods in the valley in the year 2014, the petitioner had suffered the huge loss and was not in a position to pay.

It was further submitted that the petitioner after waiting for the response to his representation and also an extension of time keeping in view the previous experience of issuance of notices and late dispatch of the same, approached the respondents but was not given any extension and was told to wait and to his surprise, the petitioner came across another notice in January, 2015 wherein he was asked to deposit the instalment by ending of January, 2015 or in default the petitioner’s letter of intent shall be treated as withdrawn and his initial deposit will be forfeited and flat re-advertised.

The petitioner being aggrieved of the above said notice, challenged the same by virtue of writ petition and this Court disposed of the said writ petition with a direction to the respondents to afford the reasonable time to adhere to the terms of notice in regard to deposit of instalment and in the event such notice not having been served upon him, the same be served after affording reasonable time to the petitioner. The petitioner served the said order on the respondents and filed a detailed representation before the respondents, who chose not to file an appeal against the said order and despite the service on the respondents well within time; no action was taken by the respondents.

The Court on perusal of the facts and circumstances of the case cancelled the impugned notice and letter of intent. Further, the earnest money of Rs 3 lacs deposited by the petitioner was forfeited and the Flat in question re-advertised was declared as being against the order passed by this Court.

The Court further pointed out that it had earlier too directed the respondents to consider the hardship encountered by the petitioner in not making the deposit of instalment on account of the cause projected taking a pragmatic view and bearing in mind that a mere technicality in adherence to notice should not result in defeating his legitimate interests in regard to the acquisition of flat.

Petition was allowed and stood quashed to the extent of forfeiture of Rs 3 lacs and by writ of mandamus. Respondents were directed to pay the amount deposited by the petitioner along with interest of 9% from the date of deposition of the amount to its realization, within a period of one month.[Fida Ahmad v. Srinagar Development Authority, 2020 SCC OnLine J&K 484, decided on 21-09-2020]

Case BriefsHigh Courts

Gujarat High Court: Biren Vaishnav J., allowed the petition to grant necessary clearance within the stipulated time for quarry lease under Mines and Minerals (Regulation and Development) Act, 1957 and Gujarat Minor Mineral Concessions Rules, 2017.

A petition was filed for the direction from the State Government to pass an order for grant of quarry lease as a letter of Intent was issued in the favour of the petitioner.

Shivani Rajpurohit, counsel for the petitioner submitted that the permission for conducting mining activities as per the provision of Mines and Minerals (Regulation and Development) Act, 1957 and Gujarat Minor Mineral Concessions Rules, 2017 was obtained by them. The Letter of Intent was executed in which environment clearance and mining plans were to be approved by the competent authorities within 2 years.  The petitioner submitted that the government has to issue an order in writing for grant of quarry lease to the holder of Letter of Intent in the abovementioned time which was going to be over, the consequence of which was forfeiting of the Letter of Intent. Thus, prayed for the necessary orders of grant for quarry lease in favour of petitioner.

Jayneel Parikh, counsel for the respondent, submitted that Letter of Intent was executed after observing all the necessary requirements. It was further submitted that on account of the peculiar situation, which arose on account of the timeline the State had to undertake necessary steps, more particularly in view of the applicability of Model Code of Conduct of General Election, 2019.

The Court after submissions by parties held that “it is for the Government to issue an order in writing for grant of quarry lease to the petitioner. It was also directed by the government that the said order should be passed in writing for the grant of quarry lease to the petitioner with the condition that petitioner shall not commence or carry out any mining activity in the area in question till the environmental clearance and other conditions as mentioned in the Letter of Intent are fulfilled, as provided under the Mines and Minerals (Development and Regulation) Amendment Act, 2015 is obtained by the petitioner”. [Shri Dev Mines and Minerals v. State of Gujarat, 2019 SCC OnLine Guj 861, decided on 16-05-2019]

NewsTreaties/Conventions/International Agreements

The Ministry of Environment, Forests and Climate Change today signed a letter of Intent establishing the India-Norway Marine Pollution Initiative together with the Norwegian Ministry of Foreign Affairs.

In January 2019, the Indian and Norwegian governments agreed to work more closely on oceans by signing a MoU and establishing the India-Norway Ocean Dialogue during the Norwegian Prime Minister’s visit to India in January.

A Joint Task Force on Blue Economy with government officials, researchers and experts as well as the private sector was established to develop sustainable solutions within strategic areas of the blue economy, such as maritime and marine sector in addition to the energy sector.

In partnership, Norway and India will share experiences and competence, and collaborate on efforts to develop clean and healthy oceans, sustainable use of ocean resources and growth in the blue economy.

Both the governments launched the first Joint initiative under this new partnership. The India-Norway Marine Pollution Initiative will combat marine pollution, which is one of the fastest growing environmental concerns.

The Joint Initiative was signed formally by Mr. Nils Ragnar Kamsvag, Ambassador to India, Embassy of Norway and Mr. Anil Kumar Jain, Additional Secretary, Ministry of Environment, Forest and Climate Change (MoEF&CC), Govt. of India.

Ms. Marianne Hagen, Deputy Minister, Norwegian Ministry of Foreign Affairs, Mr. Vidar Helgesen, Special Envoy for Oceans, Norwegian Ministry of Foreign Affairs, Mr. Ratan P Watal, Member Secretary, Economic Advisory Council to Prime Minister & Principal Advisor, Niti Aayog, Govt. of India, Dr. M Rajeevan, Secretary, Ministry of Earth Sciences, Govt. of India, Mr. A Gitesh Sarma, Secretary (West), Ministry of External Affairs, Govt. of India and Dr. Sumita Misra, Joint Secretary, Economic Advisory Council to Prime Minister, Govt. of India were present at the signing of the Joint Initiative.

Through a range of implementing partners, this initiative will seek to support local governments in implementing sustainable waste management practices, develop systems for collecting and analyzing information about sources and scope of marine pollution and improve private sector investment. Support will also be directed towards beach clean-up efforts, awareness-raising campaigns and pilot project using plastic waste as fuel substitution for coal in cement production and developing frameworks for deposit schemes.

[Source: PIB]