C. K. Achuthan vs The State Of Kerala And Others

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Petition No. 103 of 1958

Decision Date: 11 December 1958

Coram: M. Hidayatullah, S.K. Das, P.B. Gajendragadkar, K.N. Wanchoo

In this case, the Court recorded that the petition was titled C. K. Achuthan versus The State of Kerala and Others and was decided on 11 December 1958 by the Supreme Court of India. The opinion was authored by Justice M. Hidayatullah and was delivered by a bench composed of Justices M. Hidayatullah, S. K. Das, P. B. Gajendragadkar and K. N. Wanchoo. The petitioner, C. K. Achuthan, challenged the State of Kerala and other respondents. The judgment is reported in the 1959 volume of the All India Reporter at page 490 and in the Supreme Court Reporter Supplement (1) at page 787, and it has been cited in several later reports. The matter concerned the alleged infringement of fundamental rights arising out of a contract for the supply of milk and other articles to a Government hospital. The dispute arose from a tender process for the supply of milk to the Government Hospital at Cannanore for the year 1948‑49. Both the petitioner and the third respondent, the Co‑operative Milk Supplies Society of Cannanore, submitted tenders. The Superintendent examined the tenders, accepted the petitioner’s tender and communicated the reasons for that acceptance to the Director of Public Health. Subsequently, the contract awarded to the petitioner was cancelled after the notice required under clause twenty of the tender documents was served. The petitioner was informed that the Government’s policy required that contracts for supply to medical institutions in Cannanore District be granted to the Co‑operative Milk Supplies Union on the basis of prices fixed by the Revenue Department. The petitioner filed a petition under article 32 of the Constitution alleging discrimination, denial of equal opportunity of employment and infringement of articles 14, 16(1), 19(1)(g) and 31. The Court held that none of the cited fundamental rights were attracted. It observed that a contract granted by the Government is no different in nature from a contract granted by a private party, and that a party who is passed over in favour of another cannot invoke article 14. The Court further ruled that a contract for the supply of goods does not create an employer‑employee relationship; consequently, article 16(1) did not apply. The original jurisdiction of the petition was Petition No. 103 of 1958, and counsel for the petitioner, the respondent identified as number 1 and the respondent identified as number 3 were recorded. The judgment was delivered on 11 December 1958 by Justice Hidayatullah.

In the present case, the petitioner claimed that his contract for supplying milk for the diet for the year 1958‑1959 had been cancelled by the District Medical Officer, who was the second respondent in the proceeding. The contract for the supply of milk was thereafter awarded to the third respondent, the Co‑operative Milk Supplies Society of Cannanore. According to the petition, the petitioner had been supplying milk to the Government Hospital at Cannanore since 1946, and his brother had held a similar supply contract from 1936.

In 1957, the authorities introduced a uniform procedure for fixing contracts and issued a notification that set out the conditions for the acceptance of tenders. Both the petitioner and the third respondent submitted tenders, which were to be opened by the Superintendent of the Hospital in the presence of all interested parties. While many conditions were prescribed, the judgment highlighted only those that were material to the dispute. The conditions stipulated that no tender marked as “current market rates” would be accepted. Moreover, the rules gave preference to approved co‑operative milk supply unions and societies if their tender was within five per cent of either the market rate or the lowest tendered rate, whichever was lower. Every tenderer was required to furnish a certificate of solvency, tax‑clearance certificates, and to make a deposit along with the tender.

On 20 January 1958, the submitted tenders were examined. The Superintendent accepted the petitioner’s tender for the supply of milk and rejected the tender of the third respondent. The Superintendent, who was the second respondent, then explained to the Director of Public Health the reasons for accepting the petitioner’s tender and for rejecting the third respondent’s tender. Subsequent correspondence between the Director of Health Services and the second respondent resulted in the petitioner being informed that his contract for supplying milk had been cancelled. He was told that the Government policy required contracts for supply to medical institutions in Cannanore district to be given to the Co‑operative Milk Supplies Union on the basis of prices fixed by the Revenue Department.

Further letters between the Director of Health Services and the second respondent pointed out that, under Clause 20 of the tender conditions, any cancellation had to be effected only after giving the petitioner a one‑month notice. Acting on this instruction, the second respondent served a notice pursuant to Clause 20 and terminated the contract after the notice period had elapsed. The petitioner filed the present petition under Article 32 of the Constitution to challenge the several orders and actions described above. The petition also noted, in closing, that additional observations were forthcoming.

The petitioner had earlier filed a petition under Article 226 of the Constitution in the High Court of Kerala, but his petition (O. P. No. 201 of 1958) was dismissed by Justice Raman Nayar on 6 June 1958. A Letters Patent Appeal was also dismissed by Chief Justice Koshi and Justice Vaidialingam (A. S. No. 354 of 1958 decided on 7 July 1958). The High Court held that the present matter was merely a breach, if any, of the contract by the State Government and that the proper remedy was to file a civil suit rather than to proceed under Article 226. No special leave to appeal was sought from the Supreme Court against those orders, and the petitioner instead brought the dispute directly under Article 32 of the Constitution as an alleged infringement of his fundamental rights. The petitioner contended that he was entitled to equal treatment before the law and that discrimination had occurred with respect to the third respondent. He claimed protection under Articles 14, 16(1), 19(1)(g) and 31 of the Constitution. In the Court’s view, none of these articles could be applied to the facts of the case. While it was true that the petitioner had obtained the contract and the third respondent had not, the contract did not confer an absolute right to continued performance because Clause 20 expressly reserved to the Government the power to terminate the contract after giving a month’s notice. Whether the exercise of that power in the present case was regular or legal was not a matter for the Court to decide, as such disputes were appropriate for adjudication before ordinary civil courts where evidence could be fully examined. The core issue was the alleged breach, if any, of the contract that had been cancelled for reasons that might be good or bad. The Court observed that there was no discrimination, because it is perfectly permissible for the Government, as for any private party, to select a contractor of its choice to fulfill a contract. The selection of one person over another does not fall within the ambit of Article 14, and a contract with the Government is no different in principle from a contract with a private party. If a breach were established, the aggrieved party could seek damages or, where appropriate, specific performance, but could not allege deprivation of the right to practice any profession or to engage in any occupation, trade or business under Article 19(1)(g). Likewise, Article 31 could not be invoked to prevent cancellation of a contract when such cancellation was exercised under a term of the contract itself.

In the present proceeding the petitioner relied mainly on Article 16 paragraph 1 of the Constitution and asserted that he was entitled to equal opportunity of employment by the State. The petitioner argued that the cancellation of a contract awarded to him violated that provision. The Court observed, however, that a contract for the supply of goods does not constitute a contract of employment within the meaning of the term “employment” as employed in Article 16 (1). The petitioner was not engaged to work as a servant who fetched milk for the institution; rather, he was a contractor who supplied milk and other dietary articles on the basis of a price‑based contract. Consequently, his claim was not one of seeking employment as a state servant but rather a claim for performance of a supply agreement. Article 16 (1), both in its literal wording and in the context of the phraseology used, is confined to employment by the State in the sense of service employment, not to contractual arrangements of a commercial nature. While the Court conceded that certain contracts may contain a service component that could bring them within the ambit of Article 16, it noted that such a situation did not arise in the facts of the present case, and therefore there was no need to examine those alternative scenarios. The Court further held that a person whose offer to perform a supply contract is rejected, or whose supply contract is subsequently breached, cannot be said to have been denied equal opportunity of employment under Article 16 (1). The factual record showed that the petitioner was engaged in selling milk and related dietary items to the State for use in hospitals and similar institutions. He was never a servant of the government, and no question of employment in the servant sense ever arose. In these circumstances, the Court concluded that Article 16 (1) was not attracted to the facts. Accordingly, the petition filed under Article 32 of the Constitution was deemed wholly misconceived because no fundamental right was involved. At most, the petitioner could have approached a civil court to seek damages for any breach of contract, if such a breach existed. For these reasons, the petition was dismissed with costs.