Centre Tells Supreme Court It Cannot Probe Graft Allegations Against Arunachal CM Pema Khandu

Background of the Case

The Union government has informed the Supreme Court of India that it cannot investigate corruption and nepotism allegations against Arunachal Pradesh Chief Minister Pema Khandu, as the matter pertains to state jurisdiction. The Centre clarified that issues concerning the Code of Conduct for Ministers and public procurement rules fall within the state government’s domain, not the Centre’s.

The statement came in response to a Public Interest Litigation (PIL) filed by two non-profit organisations — Save Mon Region Foundation and Voluntary Arunachal Sena — seeking a probe into alleged irregularities in the award of public contracts to firms linked to Khandu’s family members.

The Petition and Allegations

The petitioners accused Chief Minister Pema Khandu, his father’s second wife Rinchin Drema, and his nephew Tsering Tashi of benefitting from public contracts awarded by the Arunachal government. They alleged that such actions violated:

  1. The Code of Conduct for Ministers issued by the Ministry of Home Affairs (MHA).

  2. The public procurement guidelines laid down by the Union Finance Ministry under the General Financial Rules (GFR), 2017.

The petition, represented by advocates Prashant Bhushan and Neha Rathi, contended that Khandu’s family members’ involvement in government contracts breached the integrity, transparency, and non-conflict standards expected in public procurement.

Centre’s Response to the Supreme Court

In its affidavit, the Union government stated that the allegations fall entirely under state jurisdiction, and therefore, the Centre has no role in investigating or enforcing compliance.

The Centre cited an Office Memorandum issued by the MHA on September 18, 2025, confirming that the Code of Conduct for Ministers applies to both Union and state ministers. However, it clarified that the implementation and enforcement of this code within the state is the responsibility of the respective state government.

Quoting Clause 2(d) of the Code, the affidavit noted:

“After taking office, and so long as he remains in office, the Minister shall ensure that the members of his family do not start, or participate in, business concerns engaged in supplying goods or services to that government, excepting in the usual course of trade or business and at standard or market rates.”

The Centre stressed that the Ministry of Home Affairs does not have any further role once the Code has been issued, reiterating that the matter lies within the domain of the Arunachal Pradesh government.

The Legal Issue: Applicability of Procurement Rules

The Centre also addressed the procurement guidelines mentioned by the Comptroller and Auditor General (CAG) in its earlier communications with the petitioners.

The CAG had referred to:

  • General Financial Rules (GFR), 2017

  • Manual for Procurement of Consultancy & Other Services

  • Manual for Procurement of Works

These documents emphasize integrity, confidentiality, independence, and transparency in government procurement. However, the Centre clarified that these manuals and rules apply only to Central government entities, not to state governments.

The Ministry of Finance (MoF), through its affidavit, asserted that state governments are governed by their own procurement laws. Therefore, any non-compliance or violation of procurement rules adopted by a state cannot bring the matter under Central jurisdiction.

It further explained that the contracts under question pertained to Tawang district, and thus, the MoF had no role in their scrutiny or approval.

The Supreme Court’s Observations

In its March 18 order, the Supreme Court took note of the allegations and observed that the Code of Conduct for Ministers explicitly requires ministers to ensure that their family members do not participate in government tenders.

The bench directed that there must be a clear answer from the state government on:

  • Whether tenders were called for, and

  • The process followed in awarding the contracts.

The Arunachal Pradesh government, in its July response, denied the allegations. It stated that no government contracts were awarded to Khandu or his family members. It claimed that 95% of the contracts awarded to persons related to Khandu were through open tender procedures involving both technical and financial evaluations.

The state government emphasized that there was no “pick and choose” policy or undue favouritism in awarding any of the contracts.

The State’s Justification under Local Law

The Arunachal government pointed out that it enacted a law in 2015 permitting the awarding of contracts up to ₹50 lakh through work orders — without a formal tender process — where no specialized technical expertise was required.

This practice, according to the state, had existed even before 2015, aimed at promoting local employment and empowering local contractors in remote areas.

Statutory and Constitutional Framework

Relevant Statutes and Rules

  1. Code of Conduct for Ministers (MHA Memorandum, 2025)

    • Applies to both Union and state ministers.

    • Clause 2(d) restricts family members from engaging in business with the government.

  2. General Financial Rules (GFR), 2017

    • Applicable to Central government procurement only.

    • Emphasizes integrity, transparency, and non-conflict of interest.

  3. State Procurement Laws (Arunachal Pradesh, 2015)

    • Governs procurement up to ₹50 lakh through simplified work orders.

  4. Comptroller and Auditor General (CAG) Auditing Authority

    • Examines the use of public funds and procurement transparency at both Central and state levels under Articles 148–151 of the Constitution.

Constitutional Provisions Involved

  • Article 164(1) – Ministers hold office during the pleasure of the Governor; accountability at the state level.

  • Article 256 – Obligation of states and the Centre’s limited power in enforcing compliance with Central laws.

  • Article 298 – Executive power of the Union and States in matters of contracts.

  • Article 299 – Formalities relating to government contracts.

  • Article 14 – Right to equality and prohibition of arbitrary state action.

  • Article 19(1)(g) – Right to carry on business, subject to reasonable restrictions including conflict of interest.

Judicial Precedents

  1. State of Madhya Pradesh v. Ram Singh (2000) 5 SCC 88

    • The Supreme Court held that ministers are trustees of public power and any abuse for personal or family benefit constitutes corruption.

  2. Centre for Public Interest Litigation v. Union of India (2012) 3 SCC 1 (2G Case)

    • Emphasized transparency and non-arbitrariness in allocation of public resources.

  3. Common Cause v. Union of India (2017) 11 SCC 731

    • Reiterated ministerial accountability and the moral obligations under the Code of Conduct.

  4. K.S. Puttaswamy v. Union of India (2017) 10 SCC 1

    • Established the principle of accountability and transparency in governance as part of constitutional morality.

The Broader Implications

This case underscores the jurisdictional limits between the Centre and states in matters involving ministerial conduct and public procurement. It raises critical questions about the scope of Central oversight in ensuring ethical governance in the states.

While the Centre maintains a narrow legal position of “no jurisdiction,” the Supreme Court’s ongoing scrutiny could set a constitutional benchmark for how allegations of corruption involving state ministers are handled.

Conclusion

The case of Pema Khandu v. Petitioners (Save Mon Region Foundation & Voluntary Arunachal Sena) encapsulates a larger governance dilemma — balancing federal autonomy with ethical accountability.

As the Supreme Court prepares to hear the matter next week, the focus will be on whether ministerial codes and state procurement laws can adequately prevent conflict of interest in the absence of Central oversight.

This case could become a constitutional precedent on the extent of ministerial responsibility, the application of procurement ethics, and the Centre-State divide in ensuring clean governance.


Location: Pune, Maharashtra, India

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