What action did the Congress party take after losing power in Kerala in 1957?

They initiated a 'liberation struggle' against the elected government

The correct answer is Option 4 - They initiated a 'liberation struggle' against the elected government

As early as in 1957, the Congress party had the bitter taste of defeat in Kerala. In the assembly elections held in March 1957, the Communist Party won the largest number of seats in the Kerala legislature. The party won 60 of the 126 seats and had the support of five independents. The governor invited E. M. S. Namboodiripad, the leader of the Communist legislature party, to form the ministry. For the first time in the world, a Communist party government had come to power through democratic elections. On losing power in the State, the Congress party began a ‘liberation struggle’ against the elected government. The CPI had come to power on the promise of carrying out radical and progressive policy measures. The Communists claimed that the agitation was led by vested interests and religious organisations. In 1959 the Congress government at the Centre dismissed the Communist government in Kerala under Article 356 of the Constitution. This decision proved very controversial and was widely cited as one of the prominent instances of the misuse of constitutional emergency powers.