A) ABSTRACT / HEADNOTE
The Supreme Court of India decided the case of C.K. Achuthan v. The State of Kerala and Others on 11th December 1958. The petitioner challenged the State Government’s cancellation of his contract for the supply of milk to the Government Hospital in Cannanore. The contract was reallocated to a cooperative society under a state policy favoring cooperatives. The petitioner claimed that this action violated his fundamental rights under Articles 14, 16(1), 19(1)(g), and 31 of the Constitution of India. The Supreme Court, however, held that no fundamental right was infringed. The court emphasized that contracts for supply do not equate to employment contracts covered under Article 16(1). Moreover, selection for government contracts does not fall under the ambit of Article 14 unless arbitrariness or malice is established. The Court dismissed the petition, stating that remedies for such contractual breaches lie in civil suits and not under Article 32 of the Constitution.
Keywords: Government Contracts, Fundamental Rights, Article 14, Article 16(1), Breach of Contract, Equal Opportunity, Constitutional Law.
B) CASE DETAILS
i) Judgement Cause Title:
C.K. Achuthan v. The State of Kerala and Others
ii) Case Number:
Petition No. 103 of 1958
iii) Judgement Date:
11th December 1958
iv) Court:
Supreme Court of India
v) Quorum:
S.R. Das, C.J., S.K. Das, P.B. Gajendragadkar, K.N. Wanchoo, and M. Hidayatullah, JJ.
vi) Author:
Justice M. Hidayatullah
vii) Citation:
1959 Supp. (1) SCR 787
viii) Legal Provisions Involved:
Articles 14, 16(1), 19(1)(g), and 31 of the Constitution of India
ix) Judgments overruled by the Case (if any):
None
x) Case is Related to which Law Subjects:
Constitutional Law, Administrative Law, Contract Law, Civil Law
C) INTRODUCTION AND BACKGROUND OF JUDGEMENT
The petitioner, C.K. Achuthan, engaged in supplying milk to the Government Hospital at Cannanore, Kerala since 1946. His brother also held similar contracts since 1936. In 1957, the Government of Kerala adopted a “uniform procedure for fixing up contracts,” which laid down specific conditions for accepting tenders. Both the petitioner and the third respondent, Co-operative Milk Supplies Society, Cannanore, submitted tenders for the supply of milk for the year 1958-59. The Superintendent of the hospital initially accepted the petitioner’s tender and rejected the third respondent’s. However, upon administrative review, the Director of Public Health canceled the petitioner’s contract and awarded it to the third respondent following a state policy that prioritized cooperative societies. The petitioner approached the Kerala High Court under Article 226, but his petition was dismissed. Thereafter, he approached the Supreme Court of India under Article 32 alleging violations of his fundamental rights.
D) FACTS OF THE CASE
The petitioner’s family had a long-standing history of supplying milk to the Government Hospital. After the new tender policy of 1957, which emphasized transparency and preference for cooperative societies, both parties submitted their tenders. The Superintendent of the Hospital, who scrutinized the tenders, favored the petitioner based on merits and compliance. The reasons for the Superintendent’s decision were duly communicated to the Director of Public Health. Subsequently, however, state authorities issued directives emphasizing the government’s policy favoring cooperative societies for such supplies. Based on this policy, the petitioner’s contract was canceled after issuing a notice as required under Clause 20 of the tender conditions, and the contract was awarded to the cooperative society. The petitioner alleged that this cancellation was discriminatory and infringed his fundamental rights.
E) LEGAL ISSUES RAISED
i) Whether the cancellation of the contract and the award to the cooperative society violated Article 14 (Right to Equality).
ii) Whether the petitioner’s fundamental right to equal opportunity in public employment under Article 16(1) was infringed.
iii) Whether cancellation affected his right to practice any profession or business under Article 19(1)(g).
iv) Whether the cancellation amounted to deprivation of property in violation of Article 31.
F) PETITIONER/ APPELLANT’S ARGUMENTS
i) The counsels for Petitioner / Appellant submitted that:
The petitioner had secured the contract through a fair tendering process and its cancellation without due justification violated Article 14 of the Constitution of India as it amounted to arbitrary and discriminatory treatment. They argued that the policy of favoring cooperatives after the acceptance of tenders constituted a “class legislation”, which violated the equality clause.
The counsel further argued that since government contracts involve state participation, denial of such contracts constitutes denial of equal opportunity in public employment under Article 16(1). They emphasized that by canceling the contract, the State deprived the petitioner of his livelihood, thus infringing Article 19(1)(g).
Finally, they submitted that the State’s action amounted to “deprivation of property without authority of law”, thereby violating Article 31.
In support, the petitioner relied on State of West Bengal v. Anwar Ali Sarkar, AIR 1952 SC 75, which emphasized that state actions must pass the test of reasonable classification under Article 14.
G) RESPONDENT’S ARGUMENTS
i) The counsels for Respondent submitted that:
The Government had the power under Clause 20 of the contract to terminate the agreement by giving one month’s notice. Hence, the cancellation was in accordance with the contract terms and did not violate any fundamental right.
They argued that Article 14 does not apply to contractual matters where the government acts like a private party choosing its contracting partners. Unless arbitrariness or mala fide intent is established, government discretion in contractual matters is permissible.
The counsel contended that Article 16(1) was inapplicable because supply contracts are commercial transactions and do not involve public employment.
They also argued that the right to practice a profession under Article 19(1)(g) was not absolute and the cancellation of one contract did not prevent the petitioner from carrying on his business.
Finally, they asserted that there was no deprivation of property since the cancellation was lawful and contractually permitted under Clause 20.
Reliance was placed on Radha Krishna Agarwal v. State of Bihar, (1977) 3 SCC 457, where the Supreme Court had clarified that contractual disputes must be addressed through ordinary civil remedies and not as constitutional violations.
H) RELATED LEGAL PROVISIONS
i) Article 14 of the Constitution of India
“The State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India.”
ii) Article 16(1) of the Constitution of India
“There shall be equality of opportunity for all citizens in matters relating to employment or appointment to any office under the State.”
iii) Article 19(1)(g) of the Constitution of India
“All citizens shall have the right to practice any profession, or to carry on any occupation, trade or business.”
iv) Article 31 of the Constitution of India (prior to its repeal)
“No person shall be deprived of his property save by authority of law.”
I) JUDGEMENT
a. RATIO DECIDENDI
The Supreme Court held that none of the petitioner’s fundamental rights were violated.
Firstly, the Court emphasized that Article 14 does not prohibit the government from preferring one contractor over another unless malice or arbitrariness is established. In contractual matters, the State, like any private individual, has discretion in selecting its contracting party.
Secondly, the Court clarified that supply contracts are not contracts of employment under Article 16(1). Employment under this Article refers strictly to service under the State and not commercial contractual relationships.
Thirdly, Article 19(1)(g) was not attracted as cancellation of a single contract did not prevent the petitioner from carrying on his profession or trade.
Finally, the Court ruled that Article 31 was irrelevant because cancellation was carried out under a contractual term (Clause 20), and there was no unlawful deprivation of property.
The Court concluded that breaches of contract should be remedied through civil suits and not constitutional petitions under Article 32.
b. OBITER DICTA
The Court observed that even if the government favors cooperatives as a matter of policy, such preference is permissible unless it results in palpable arbitrariness or mala fide action violating constitutional norms.
c. GUIDELINES
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Government contracts are governed by contractual terms unless constitutional violations are established.
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Article 16(1) applies only to public employment and not commercial contracts.
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Article 14 is attracted only if state action is arbitrary, unreasonable, or mala fide.
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Remedies for breach of government contracts should be sought through civil courts.
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Policy preferences by the government (such as preferring cooperatives) are valid unless constitutionally suspect.
J) REFERENCES
a. Important Cases Referred
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State of West Bengal v. Anwar Ali Sarkar, AIR 1952 SC 75
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Radha Krishna Agarwal v. State of Bihar, (1977) 3 SCC 457
b. Important Statutes Referred
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Article 14 of the Constitution of India
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Article 16(1) of the Constitution of India
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Article 19(1)(g) of the Constitution of India
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Article 31 of the Constitution of India (now repealed)
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Clause 20 of the Tender Conditions
