Court Rules Petroleum Company Liable to Compensate Petitioner for Investments Made Following Withdrawal of Retail Outlet Advertisement Due to Government Notification of National Highway
In a significant judgment delivered on October 12, 2026, the Allahabad High Court, in a Division Bench comprising Justices Saral Srivastava and Siddharth Nandan, ruled in favor of Shantanu Singh, who was awarded compensation for the cancellation of a petroleum retail outlet (R.O.) dealership location after issuance of a Letter of Intent (LOI).
The petitioner, Shantanu Singh, had applied for a retail outlet dealership at a location between Mahavir Mandir and Bhadaura stand along SH-99, District Ghazipur, in response to an open advertisement by Hindustan Petroleum Corporation Limited (HPCL) dated November 25, 2018. He was selected through a draw of lots and issued an LOI on August 2, 2019, requiring him to develop the site by land filling, constructing retaining and compound walls, and obtaining necessary clearances.
Singh complied with these requirements, investing Rs. 15,78,486 in development activities. However, in March 2021, HPCL abruptly canceled the dealership location citing that the site had been declared part of National Highway No. 124-C (previously NH 134-C) by a government notification dated March 6, 2018, prior to the advertisement, rendering the advertisement defective.
HPCL defended the cancellation by invoking a clause in the advertisement that reserved its right to cancel or withdraw the advertisement at its sole discretion without assigning reasons. They further contended that the LOI was not a concluded contract but a precursor, and thus no binding agreement existed.
The Court, however, held that although an LOI does not constitute a firm contract, once the petitioner acted on the positive representation contained in the LOI and incurred substantial expenses in compliance with its conditions, the cancellation for no fault of the petitioner could not leave him remediless. The Court applied the principle of legitimate expectation, observing that the petitioner had a reasonable commercial expectation that compliance with the LOI conditions would lead to execution of the dealership agreement.
The Court found that the cancellation was attributable to the fault of the authorities for issuing an advertisement for a location already declared a national highway, a fact unknown to the petitioner at the time of his investments. The petitioner was entitled to compensation for the loss suffered due to this administrative error.
Relying on precedents, including the Supreme Court's recognition of public law remedies under Article 226 of the Constitution, the Court awarded compensation of Rs. 15,78,486 to the petitioner, corresponding to the actual undisputed investment made. The compensation is to be paid within one month, failing which interest at 8% per annum will accrue until payment.
This judgment reinforces that public authorities and corporations must act fairly and compensate individuals who suffer losses due to wrongful administrative actions, even in cases where no concluded contract exists but a legitimate expectation has been created and acted upon.
Bottom Line:
Petroleum dealership - Cancellation of advertised retail outlet location after issuance of Letter of Intent - Though Letter of Intent does not create concluded contract and company may cancel advertisement under brochure conditions, where allottee acted on LOI, made investments in developing site and complied with stipulated requirements, cancellation for no fault of allottee entitles him to compensation in writ jurisdiction - Compensation awarded for actual undisputed investment.
Statutory provision(s):
Article 226 of the Constitution of India, Section 2(2) of the National Highway Act, 1956
Shantanu Singh v. State of U.P., (Allahabad)(DB) : Law Finder Doc Id # 2995536
