Karnataka Chief Minister Siddaramaiah's younger son, Dr. Yathindra Siddaramaiah, resigned as director of Matrix late on Friday.
Matrix, a company jointly owned by him, was awarded a tender to open a diagnostics lab in a government hospital.
Dr. Yathindra and Chief Minister Siddaramaiah had denied wrongdoing on initial reports of Matrix bagging the government diagnostics lab, claiming the tendering process was transparent.
Earlier in the day, Congress general secretary in charge of Karnataka, Digvijaya Singh, had told reporters in New Delhi that he had advised Siddaramaiah to ensure that his son withdrew from the company floated for the laboratory.
"I have advised (that) he withdraws. It is not an order, but an advice. Legally, the son does not have to quit. As a matter of propriety, he may have to," Singh told reporters.
According to reports, Singh has asked the Chief Minister to send a report on the issue, which has caused embarrassment to the party.
Earlier, Siddaramaiah rubbished allegations of favouring his son in a government hospital contract, saying everything is legal and transparent.
The lab, which is reportedly set to open at the end of this month, will be run in partnership with Matrix Imaging Solutions India Private Limited in which Yathindra is a director.
Matrix Imaging was awarded the tender in October last year despite objections from many heads of department at the Bangalore Medical College and Research Institute (BMCRI) and questions over the emergence of the company as the lowest bidder.
