Delay Due To Bureaucratic Red Tape No Ground To Cancel LoI: Madhya Pradesh HC

Arbitrary cancellation of a Letter of Intent and forfeiture of performance security for delay caused by statutory authorities is illegal. The High Court of Madhya Pradesh has ruled that state authorities cannot penalize a successful bidder for procedural delays completely outside their control.

A Division Bench comprising Justice Subodh Abhyankar and Justice Alok Awasthi adjudicated a writ petition filed under Constitution of India, challenging the cancellation of a Letter of Intent (LoI) and the subsequent forfeiture of a Rs 1.5 Crore bank guarantee by state authorities.

The High Court carefully evaluated the extended timeline granted by the respondents and observed that the delay was entirely attributable to local bodies and government departments processing mandatory approvals.

The Court has following directions:

"Accordingly, the impugned order of cancellation of LoI dated 10.09.2025 is hereby set aside, and the respondents are directed to restore the petitioner’s bank guarantee by depositing the same in the concerned bank, and also provide reasonable additional time to the petitioner to comply with the permissions as required, especially the last permission, which was, to obtain borehole clearance from the Forest Department."

Evaluating the flexibility embedded within the tender conditions, the Court, in its reasoning, observed: "On perusal of para 5 of the LoI, it is apparent that there is an extension clause, and there is no outer limit/cap provided to grant extension to a contractor. Thus, the LoI has been kept flexible by the State itself, knowing fully well that what problems are faced by the contractors to obtain various permissions from the local authorities."

Background

The petitioner was declared the highest successful bidder in an auction for the Navapara-Rampura Manganese Ore Block pursuant to a Notice Inviting Tender (NIT) and was issued a Letter of Intent on October 4, 2023. As mandated under Mineral (Auction) Rules, 2015 and the terms of the LoI, the petitioner furnished a bank guarantee of Rs. 1.5 Crores as performance security and initiated steps to obtain necessary approvals from various authorities, including the Gram Panchayat, Revenue, and Forest departments.

Despite completing initial compliances, the petitioner faced delays due to improper demarcation and was subsequently orally asked to produce additional permissions, including a Differential Global Positioning System (DGPS) survey report and a borehole clearance from the Forest Department. Although the petitioner actively pursued these permissions, the administrative machinery, combined with a personal tragedy involving the death of the managing partner's son, delayed the final submissions. Although an extension was granted, the state calculated it retrospectively, leaving insufficient practical time. On September 10, 2025, the State cancelled the LoI and encashed the bank guarantee.

Aggrieved by the arbitrary cancellation, the petitioner approached the High Court. The High Court allowed the petition, setting aside the cancellation order and ordering the restoration of the bank guarantee within four weeks alongside reasonable additional time for processing the remaining clearance.

Case Details:
Case No.: WRIT PETITION No. 8979 of 2026
Neutral Citation: 2026:MPHC-IND:22849
Case Title: M/S JAI BHOLE ENTERPRISES THROUGH ITS PARTNER AUTHORISED SIGNATORY ALKESH BAKALIYA Versus THE STATE OF MADHYA PRADESH AND OTHERS
Appearances:
For the Petitioner(s): Shri Aviral Vikas Khare- Advocate, through V.C.
For the Respondent(s): Shri Amit Bhatia- G.A. for the State.

Source: 2026 CaseBase(MP) 16525