Hello Sumithasatheesh,
There are TWO aspects to your situation. One, to cancel the Offer made & Two [which is more important from the HR perspective] to handle the candidate from the Human angle.
Like Devaki mentioned, what if the candidate already resigned? If he hasn't then, frankly, you have a lesser problem. But IF he has already resigned, then you need to show him ways of withdrawing his resignation & continue in his present job.
First call him & explain the situation--during the process pl DON'T put your company in poor light. That's NOT good HR. He may ask you if this is a temporary situation & the timeframe when the position would be revived--pl keep an answer ready, IF asked.
The letter mentioned by Harsh is more for the sake of formality, record/documentation [just in case the candidate is one of those who take advantage of the lack of documentation]--it can follow thru e-mail or postal letter later.
Now coming to the other angle of the issue/problem. It does cast your management in poor light--they didn't seem to have applied their minds when deciding to hire for this position. Except in exceptional circumstances, hiring decisions wouldn't get cancelled within days.
Since you are the HR, suggest keep this aspect in mind when you hire the next time--for this or any other position. Pl be clear that all factors have been considered by the management BEFORE you were given the Clearance to begin to hire [while that may not be your concern, pl remember that it's YOU who is carrying the baby, so to say].
All the Best.
Rgds,
TS