Public Authority Must Compensate Successful Applicant For Investments Made Under LOI If Cancellation Is Due To Its Own Fault: Allahabad High Court

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Published 26 October 2026

Case: Not stated in the source
Court: Allahabad High Court
Bench: Not stated in the source
Citation: Not stated in the source
Source: Verdictum

Bottom Line Up Front (BLUF)

The Allahabad High Court directed Hindustan Petroleum Corporation Limited to reimburse ₹15.78 lakh to a successful applicant. This compensation was for investments made in developing a proposed retail-outlet site after the company cancelled the Letter of Intent due to its own fault in issuing an advertisement for a location outside its purview.

Ratio Decidendi · Legal Principle Established

A public authority is liable to compensate a successful applicant for investments made under a Letter of Intent if the cancellation of the LOI is attributable to the authority's own fault, such as issuing an advertisement for a location outside its operational purview.

Practice & Procedural Impact for Advocates

Advocates should advise clients to document all investments made pursuant to a Letter of Intent from a public authority. Litigants can seek compensation for losses incurred due to the public authority's errors leading to LOI cancellation.

Key Legal Takeaways

1Public authorities bear responsibility for their administrative errors.
2Applicants can claim compensation for investments made under a faulty LOI.
3Due diligence by public authorities is essential before issuing advertisements or LOIs.

The Legal Issue This case involved a situation where Hindustan Petroleum Corporation Limited (HPCL), a public authority, issued an advertisement for a retail outlet location that was subsequently found to be outside its operational purview. Following a successful application and the issuance of a Letter of Intent (LOI), the applicant made significant investments in developing the proposed site. However, due to HPCL's initial error, the LOI was eventually cancelled, leading to a dispute over the reimbursement of the applicant's investments.

Court's Reasoning The Allahabad High Court held that HPCL was at fault for issuing an advertisement for a location that was not within its jurisdiction. The Court reasoned that the applicant had proceeded in good faith, relying on the LOI issued by HPCL, and had incurred substantial expenses in developing the site. Since the cancellation of the LOI was directly attributable to the public authority's own administrative error, the Court found HPCL liable to compensate the applicant for the investments made. The principle applied was that a public authority cannot benefit from its own wrong and must bear the financial consequences of its faulty actions that lead to losses for innocent parties.

What Follows The Allahabad High Court directed Hindustan Petroleum Corporation Limited to reimburse the applicant an amount of ₹15.78 lakh. This amount represents the investments made by the applicant towards developing the proposed retail-outlet site. The order ensures that the applicant is compensated for the losses incurred due to HPCL's error.