Contractual decisions of State instrumentalities are subject to Article 14 review but afford administrative commercial flexibility.

The Petitioners, a partnership firm and a private limited company, were appointed by the Hassan Co-operative Milk Producers Societies Union ("Hassan Union") as agents for Warehousing, Clearing, and Forwarding (WCF) and co-packing of "Nandini" milk products

These appointments were based on an arrangement where the Karnataka Co-operative Milk Producers Federation Limited ("KMF") entrusted the "Hyderabad Market" to the Hassan Union

In 2024, KMF issued a communication permitting the Raichur Milk Union to market products in five specific Telangana districts

and issued a fresh tender for co-packing activities for the entire "State of Telangana"

The Petitioners challenged these actions, asserting that their existing contracts granted them exclusive rights over the entire State of Telangana, not just Hyderabad city

1. Whether the writ petitions are maintainable under Article 226 against KMF and the Milk Unions as "State" under Article 12

2. Whether the expression "Hyderabad Market" in the contracts extends to the entire State of Telangana or is restricted to the Hyderabad Metropolitan Area

3. Whether KMF's actions in appointing parallel agencies were arbitrary or violative of Article 14

4. Whether a petitioner who did not participate in a tender process has the locus standi to challenge its outcome

the "instrumentality of State" test under Article 12 from Pradeep Kumar Biswas v. Indian Institute of Chemical Biology

K.V. Panduranga Rao v. Karnataka Dairy Development Corp. to hold KMF as "State"

Regarding maintainability in contractual matters, it followed ABL International Ltd. v. Export Credit Guarantee Corpn. of India Ltd.

Subodh Kumar Singh Rathour v. Kolkata Metropolitan Development Authority

The interpretation of contracts was governed by the "plain meaning rule" and the "parol evidence rule" under Section 94 of the Bharatiya Sakhya Adhiniyam (Section 92 of the Evidence Act)

For tender challenges, the court applied the locus standi rule from NHAI v. Gwalior-Jhansi Expressway Ltd., which precludes non-participants from challenging the process

The Court first determined that KMF and Hassan Union are "State" under Article 12 because they perform public functions (dairy development under Article 48) and operate under deep Government control

On the core dispute, the Court rejected the Petitioners’ broad interpretation of "Hyderabad Market." Applying the plain meaning rule, it held that "Hyderabad" refers to the specific metropolitan region and not the entire State of Telangana

The Court noted that in the nine years of correspondence, "State of Telangana" was never used to define the territory until the 2024 tender, indicating a deliberate distinction

Furthermore, under the principle of delegatus non potest delegare, Hassan Union could not have granted the Petitioners rights over all of Telangana since KMF had only delegated the "Hyderabad business" to the Union

Regarding the 2024 tender, the Court found the Petitioner in WP 22850/2024 lacked locus standi as they chose not to bid, thereby sitting on the fence while a third party (M/s Shakti Milk) invested heavily in reliance on the award

The Court upheld KMF’s actions, holding that "Hyderabad Market" is confined to the Hyderabad Metropolitan Area and does not include the five districts assigned to Raichur Union or the wider State territory

The Court directed that the newly appointed agencies must not encroach upon the Petitioners' operations within the Hyderabad Metropolitan Area (HMDA limits) during the subsistence of the Petitioners' current contracts

while the challenge to KMF's 2024 tender was dismissed for lack of locus standi and on merits, the Court emphasized that State instrumentalities should provide prior notice to long-standing partners before material territorial changes as a matter of procedural fairness