bÈITEM NO.1B COURT NO.

3 SECTION IIIA
(For jt.)

S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS

ORIGINAL SUIT 2/1996

STATE OF HIMACHAL PRADESH Petitioner(s)

VERSUS

UNION OF INDIA &ORS. Respondent(s)

Date: 27/09/2011 This Petition was called on for judgment today.

For Petitioner(s)
Mr. Naresh K. Sharma,Adv.

For Respondent(s) Mr. Mohan Jain,ASG.

M/s. D.K.Thakur,Prabhat Kumar,
Karthik Ashok,Mudrika Bansal,
Jaspree Aulakh and Ms. Sushma Suri,Advs.

R.2 Mr. R.S.Suri,Sr.Adv.

Mr. H.M.Singh,Adv.
Mr. Kaushal Yadav,Adv.
Mr. K.S.Prasad,Adv.

Mr. Aruneshwar Gupta,Adv.

Ms. Kamini Jaiswal ,Adv

Mr. Ashok Kumar Singh,Adv.

Application for intervention is dismissed.

Hon’ble Mr. Justice A.K. Patnaik pronounced the

judgment of this Court comprising Hon’ble Mr. Justice

R.V. Raveendran and His Lordship.

The suit is decreed in part against Defendant

Nos. 2 and 3 and dismissed against Defendant Nos. 1,4

and 5.
-2-

The matter will be listed after six months along

with the statements to be prepared and filed by the

Defendant No.1 as ordered for verification of the

statements and for making the final decree.

[SUMAN WADHWA] [M.S. NEGI]

COURT MASTER COURT MASTER

Signed Reportable judgment is placed on the file.

Reportable
 IN THE SUPREME COURT OF INDIA

ORIGINAL JURISDICTION

ORIGINAL SUIT NO. 2 OF 1996

State of Himachal Pradesh ...... Plaintiff

Versus

Union of India & Ors. ...... Respondents

J U D G M E N T

A. K. PATNAIK, J.

This dispute between the State of Himachal Pradesh

(Plaintiff), on the one hand, and the Union of India (defendant

No.1), State of Punjab (defendant No.2), State of Haryana

(defendant No.3), State of Rajasthan (defendant No.4) and Union

Territory of Chandigarh (defendant No.5), on the other hand,

under Article 131 of the Constitution of India relates to the

power generated in the Bhakra-Nangal and Beas Projects.

The Case of the Plaintiff (State of Himachal Pradesh) in the

plaint

2. The Bhakra dam across the river Satluj was proposed in the

year 1944 in the Bilaspur State. The construction of Bhakra

dam was to result in submergence of a large territory of the

Bilaspur State but would benefit the Province of Punjab.

Hence, the Raja of Bilaspur agreed to the proposal for

construction of the Bhakra dam only on certain terms and

conditions detailed in a draft agreement which was to be

executed on behalf of the Raja of Bilaspur and the Province of

Punjab. These terms and conditions included payment of

royalties for generation of power from the water of the

reservoir of the Bhakra dam. The formal agreement between the

Raja of Bilaspur and the province of Punjab, however, could not

be executed as the Bilaspur State ceded to the Dominion of

India in 1948. When the Constitution of India was adopted in

the year 1950, Bilaspur and Himachal Pradesh were specified as

Part-C States in the First Schedule to the Constitution. In

1954, Bilaspur and Himachal Pradesh were united to form a new

State of Himachal Pradesh under the Himachal Pradesh and

Bilaspur (New States) Act, 1954. The new State of Himachal

Pradesh, however, continued to be a Part-C State until it

became a Union Territory by the Constitution (7th Amendment)

Act, 1956. In 1966, Parliament enacted the Punjab

Reorganisation Act, 1966 which bifurcated the erstwhile State

of Punjab to two States, Punjab and Haryana, and transferred

some of the territories of the erstwhile State of Punjab to the

Union Territory of Himachal Pradesh. With effect from

25.01.1971, this Union Territory of Himachal Pradesh became a

full fledged State by the State of Himachal Pradesh Act, 1970.

The new State of Himachal Pradesh thus constitutes (i) the

erstwhile Part-C State of Bilaspur; (ii) the erstwhile Part-C

State of Himachal Pradesh and (iii) the transferred territories

of State of Punjab.

3. The construction of Bhakra dam has brought about lot of

benefits to the country and in particular the defendants Nos.

2, 3, 4 and 5, but it has resulted in submergence of 27869

(twenty seven thousand eight hundred and sixty nine) acres of

land in the erstwhile Bilaspur State out of the total 41600

(forty one thousand six hundred) acres. 3/4th of the reservoir

of the Bhakra Dam is located in the erstwhile Part-C State of

Bilaspur, now part of the State of Himachal Pradesh. Such

submergence and reservoir of water over large areas of land in

the State of Himachal Pradesh have meant loss of cultivated and

uncultivated land to a total extent of 103425 acres, trees and

forests, towns, Government buildings, community buildings,

wells, springs and paths, gardens, parks, road, bridges,

telegraph lines, ferries and these in their turn have resulted

in unemployment, loss of agricultural and trading activity,

loss of revenue, etc. These losses must be compensated by the

defendants Nos. 2, 3, 4 and 5.

4. The river Beas originates in District Kullu of Himachal

Pradesh and the Beas Project is a multi-purpose scheme

comprising two units: Unit-I and Unit-II. Unit-I was commenced

in 1960’s when Himachal Pradesh was a Union Territory and was

being administered by the Government of India and this project

involved diversion of water from river Beas at Pandoh in

District Mandi of Himachal Pradesh to river Satluj at Dehar.

As a result of the diversion of water from river Beas a
t

Pandoh, a reservoir comprising an area of 323 (three hundred &

twenty three) acres and a storage capacity of 33240 (thirty

three thousand two hundred and forty) acre feet have bee
n

created. Unit-II of the project involved the construction of

Pong Dam across river Beas at Pong and the construction of the

Pong Dam has caused submergence of more than 65050 (sixty five

thousand & fifty) acres of land in Kangra District including

prime and fertile agricultural land. Consequently, a large

number of families have been uprooted from their homes and

fertile agricultural land which they were cultivating and these

families need to be rehabilitated. Although Units-I and II of

Beas Project are located in the State of Himachal Pradesh,

benefits of the two units have accrued to defendants Nos. 2, 3,

4 and 5.

5. The plaintiff is therefore entitled to its due share of

power generated in the Bhakra-Nangal and Beas Projects. Unde

r

the scheme for apportionment of assets and liabilities between

the successor States in the Punjab Reorganisation Act, 1966 the

assets and liabilities are to be transferred to the successor

States in proportion to the population ratio distributed

between the successor States/Union Territories. As 7.19% of

the total population of the composite State of Punjab wa

s

transferred along with the territories transferred to th

e

plaintiff under the Punjab Reorganisation Act, 1966, th

e

plaintiff was entitled to 7.19% of the total power generated in

the Bhakra-Nangal and Beas Projects. This was also th
e

recommendation of Shri K.S. Subrahmanyam, former Chairman of

the Central Electrical Authority in his report dated

29.06.1979. Moreover, the Union of India has agreed i

n

principle that the "mother State" which houses a hydro-electric

power project by bearing the reservoir of water required for

generation of hydro-electric power shall be entitled to a

t

least 12% of total power generated from such project free of

cost. Since plaintiff is the mother State in which th

e

reservoirs of the two hydro-electric power projects, Bhakra-

Nangal and Beas Projects were located, plaintiff was entitled

to supply of 12% of the total power generated in the tw

o

projects free of cost.

6. The legal right of the plaintiff to its share of power

generated in the Bhakra-Nangal and Beas Projects has been

acknowledged by Section 78 of the Punjab Reorganisation Act,

1966 titled "Rights and Liabilities in regard to Bhakra-Nangal

and Beas Projects". Sub-section 1 of Section 78 states that

notwithstanding anything contained in the Punjab Reorganisation

Act, 1966 but subject to Sections 79 and 80 thereof, all rights

and liabilities of the existing State of Punjab in relation to

Bhakra-Nangal and Beas Projects shall on the appointed da

y

(01.11.1966) be the rights and liabilities of the successor

States in such proportion as may be fixed and subject to such

adjustments as may be made by agreement entered into by the

successor States after consultation with the Central Government

or, if no such agreement is entered into within two years of
the appointed day, as the Central Government may by order

determine having regard to the purposes of the project.

Accordingly, the plaintiff filed its claims with respect to the

Bhakra-Nangal and Beas Projects by letter dated 22.10.1969

before the Central Government and made several subsequent

representations thereafter to the Central Government from time

to time but the Central Government for one reason or the other

did not take steps to determine finally the rights of the

plaintiff in respect of the Bhakra-Nangal and Beas Projects.

7. In the absence of the any such final determination by the

Central Government, the power generated in the Bhakra-Nangal

and Beas Projects presently is being shared by an ad hoc

arrangement. After deducting the power consumed for auxiliary

purposes and the transmission losses, the balance of the power

generated in the two projects is presently apportioned on ad

hoc basis is given as under:

Bhakra-Nangal Beas
Name of the Unit I Unit II
State/U.T (Dehar) (Pong)
Rajastha 15.22% 20% 58.50%
n
The remaining 84.78% 80% 41.50%
is shared as under:
Punjab 54.50% 60% 60%
Haryana 39.50% 40% 40%
H.P. 2.5% 15 MW Nil
U.T. 3.5% Nil Nil
Chandiga
rh

8. The cause of action for filing the suit arose when the
Central Government ultimately failed to determine the lawful

claim of the plaintiff and intimated its decision in this

regard by letter dated 11.04.1994 and when a joint meeting of

all the parties under the aegis of the Principal Secretary of

the Prime Minister held on 30.08.1995 failed to arrive at any

agreement with tangible results. For failure on the part of

the Central Government to determine the share of the plaintiff

in the power generated in the two projects, the plaintiff has

claimed compensation from the Central Government also.

9. The plaintiff has accordingly claimed the following reliefs:

(a) A decree declaring that the plaintiff State is

entitled to a share of 12% of the net power generated
(total power available after deduction of auxiliary
consumption and transmission losses) in Bhakra-Nangal
and Beas Projects free of cost from the date of
commissioning of the projects and further a decree
declaring that the defendants are jointly and
severally liable to compensate and reimburse the money
value of the power to the plaintiff State as per
statements II and IV annexed to the plaint;

(b) A decree declaring that the plaintiff State is

entitled to 7.19% of the power generated in the
Bhakra-Nangal and Beas Projects from the appointed day
(01.11.1966) or from the date of commissioning of the
projects, whichever is later, out of the share of the
then composite State of Punjab on account of the
transfer of population to the plaintiff State under
the Punjab Reorganisation Act, 1966 and a further
decree declaring that the defendants are jointly and
severally liable to compensate or reimburse the
plaintiff State for the difference between 7.19% of
its share out of the share of the then composite State
of Punjab and the power received by the plaintiff
State under the ad hoc and interim arrangement from
the two projects with effect from the appointed day or
the commissioning of the projects, whichever is later
as per statements I and III annexed to the plaint;

(c) A decree for a sum of Rs.2199.77 (two thousand one

hundred ninety nine decimal seven) crores in favour of
the plaintiff and against the defendants jointly and
severally as compensation/reimbursement for their
failure of supply to the plaintiff 12% and 7.19% share
of the power generated in the two projects, being the
total of the statements I and IV;

(d) A decree for interest, pendente lite and future at

the prevailing bank rates till the realization of
amount in full;

(e) Costs of the suit;

(f) Other further reliefs as may be deemed fit and

proper in the circumstances of the case.

Written Statement of Defendant No.1 (Union of India)

10. The Bhakra-Nangal Project was completed in 1963 and the

Beas Project was completed in 1977 and the suit filed by the

plaintiff in 1996 claiming damages from defendant No.1 was

hopelessly barred by limitation.

11. By an agreement executed on 13.01.1959, the composite State

of Punjab and the State of Rajasthan agreed for the construction

of the Bhakra dam across the river Satluj as well as other

ancillary works and the object of this Bhakra-Nangal Project was

to generate hydro-electric power and to improve irrigation

facilities for their respective States and also agreed to fund

and derive benefits from the Bhakra-Nangal Project in the ratio

of 84.78% and 15.22% respectively. Accordingly, the share of

the power generated in the Bhakra-Nangal Project of the State of

Rajasthan was 15.22% and the share of the power of composite

State of Punjab was 84.78%. After the reorganisation of Punjab

in 1966, the representatives of the successor States/Union

Territories, namely Punjab, Haryana, Chandigarh and Himachal

Pradesh agreed at a meeting held on 17.04.1967 in presence of

the Secretary, Ministry of Irrigation and Power, Government of

India that the share of power of the four successor States/Union

Territories out of the share of power of the composite State of

Punjab from the two projects would be as follows:

Punjab - 54.5%
Haryana - 39.5%
Chandigarh - 3.5%
Himachal Pradesh - 2.5%

This agreement was incorporated in the minutes of the meeting

held on 17.04.1967 which were circulated by the letter dated

27.04.1967 of the defendant No.1 to all concerned. This

agreement between the successor States/Union Territories dated

17.04.1967 constitutes a statutory agreement in terms of Section

78(1) of the Punjab Reorganisation Act, 1966 and will hold the

field unless replaced by a consensual agreement between the

successor States/Union Territories.

12. The Beas Project was also funded by the composite State of

Punjab and the State of Rajasthan as would be clear from the

notification dated 17.06.1970 of the Ministry of Irrigation and

Power, Government of India and the benefits of power from the

Beas Project were allocated between the composite State of

Punjab and State of Rajasthan in proportion to the ratio of the

costs borne by the two States. After the reorganisation of

composite State of Punjab, the Government of India, Ministry of

Energy, Department of Power by D.O. Letter dated 30.03.1978 has

allowed supply of 15MW power to Himachal Pradesh from the Dehar

Power Plant of the Beas Project on ad hoc basis.

13. The plaintiff lodged its claim to 7.19% share of the total

power generated from the Bhakra-Nangal and Beas Projects in its

letter dated 22.10.1969 but by letter dated 22.03.1972, Ministry

of Irrigation and Power, Government of India informed the

plaintiff that the allocation of power made at the meeting on

17.04.1967 of the representatives of the successor States/Union

Territories of the composite State of Punjab will not be

modified. The Subrahmanyam Report recommending 7.19% of the

total share of power generated from Beas Project for the

plaintiff has not been accepted by the defendant No.1 and was

not binding on defendant No.1 and the other defendants.

14. The formula of 12% free power to the mother State bearing

hydro-electric power project is applicable only in respect of

Central Sector Hydro Projects and is not applicable to the

Bhakra-Nangal and Beas Projects and this has been clarified in

the D.O. Letter dated 11.04.1994 of the Ministry of Power,

Government of India to the Chief Minister of the plaintiff State

and has also been reiterated in the D.O. Letter dated 28.06.1995

of the Ministry.

15. Under Section 78 of the Punjab Reorganisation Act, 1966,

the claims of the successor States/Union Territories to the

power generated in the Bhakra-Nangal and Beas Projects can be

settled either by agreement between the successor States/Union

Territories or by the decision of the Central Government and not

by the court. The dispute raised by the plaintiff regarding

distribution of electricity from hydro projects between the

plaintiff and defendants No. 2, 3, 4 and 5 is an extremely

sensitive issue and experience of controversy surrounding the

Cauvery dispute between Tamil Nadu, Karnataka, Pondicherry and

Kerala clearly demonstrates that there are grave risks which may

give rise to agitation and eventual politicization with regard

to river water system, irrigation and electricity and this is an

important aspect which has to be borne in the background while

dealing with the present dispute. The suit is not maintainable

under Article 131 of the Constitution.

Written statement by Defendant No. 2 (State of Punjab)

16. The suit as filed by the plaintiff is not maintainable

under Article 131 of the Constitution and the plaintiff has no

cause of action to file the suit. In terms of Section 78(1) of

the Punjab Reorganisation Act, 1966, the representatives of the

successor States/Union Territories of the composite State of

Punjab have at a meeting held on 17.04.1967 agreed to share the

power of the composite State of Punjab from the two projects at

the following percentages:

Punjab - 54.5%

Haryana - 39.5%

Chandigarh - 3.5%

Himachal Pradesh - 2.5%

This agreement dated 17.04.1967 has been entered into within the

two years period specified in Section 78(1) of the Act and,

therefore, the Central Government has no power to intervene in

the matter.

17. The financial liabilities of Bhakra and Beas

Projects are being shared by the States of Punjab and

Haryana. The Central Government had taken a decision

under Section 54(3) of the Punjab Reorganisation Act,

1966 that all liabilities towards the loans incurred

prior to the Punjab Reorganisation Act, 1966 on the two

projects are to be borne by the States of Punjab and

Haryana. The decision of the Central Government in

this regard has been conveyed to the concerned State

 Governments in the letter dated 12.03.1967 of the

Government of India, Ministry of Finance, Department of

Economic Affairs, New Delhi.

18. On 27.06.1961, the Lt. Governor, Himachal Pradesh,

had written to the Chief Minister of Punjab that

Himachal Pradesh should be given guaranteed preference

in the allotment of power generated from the Power

House to be set up at Salappar (Dehar) - Unit No.1 of

Beas Project. After finding out the anticipated firm

demand of power from the Salappar (Dehar) Power House,

the State of Punjab in its communication dated

10.08.1962 agreed to allot 15 M.W. power to Himachal

Pradesh within one year of the commissioning of the two

units of these projects.

19. The decision of the Union Cabinet taken on

12.02.1985 that 12% of power generated at Bhakra and

Beas Projects will be supplied to the "Home State" is

applicable to only Central Sector Hydro-Electric Power

Projects financed by the State Government and is not

applicable to Bhakra and Beas Projects, which are not

Central Projects financed by the Central Government.

Moreover, the Central Government’s decision dated

12.02.1985 does not apply to the Central Sector Hydro-

Electric Power Projects in respect of which sanction

for investment had been granted prior to 12.02.1985 and

sanction for investment in Bhakra and Beas Projects was

much prior to 12.02.1985.

20. Population alone cannot be considered as the basis for

sharing of power because the connected supply to the

consumers in the successors States/Union Territories of

the composite State of Punjab has to be maintained.

Any increase, therefore, in the quota of power to

Himachal Pradesh at the cost of the State of Punjab

 would mean further hardship to the consumers in the

State of Punjab, which is already facing a serious

power crisis.

21. Punjab being a down-stream riparian State of the

rivers Satluj and Beas is entitled to utilize the water

flowing from the two rivers and the plaintiff was free

to utilize the up-stream water in the two rivers in the

manner it liked. But since it did not have the

resources to do so, the States of Punjab, Haryana and

Rajasthan have invested in the construction of the two

projects. By the two projects, Himachal Pradesh has

not lost anything in the process, except that the land

located in the Himachal Pradesh has been acquired for

the projects and more than adequate compensation has

been paid to the owners of the land and reasonable

arrangements have also been made for their

resettlement. Moreover, the creation of big reservoir

has provided Himachal Pradesh the facilities of fish,

farming and increase in tourism potential.

Written statement by Defendant No. 3 (State of Haryana)

22. The suit is barred because of the provisions of

Section 78 of the Punjab Reorganisation Act, 1966, under which

the right to receive and utilize power from the Bhakra-Nangal

and Beas Projects can only be determined by the Central

Government in case the successor States/Union Territories of

the composite State of Punjab are unable to reach an agreement.

23. An agreement has in fact been arrived at by the successor

States/Union Territories of the composite State of Punjab on

17.04.1967 at a meeting taken by the Secretary, Ministry of

Irrigation and Power, Government of India, to share the power

generated by the Bhakra-Nangal and Beas Projects at the

following percentages and of the share of power of the

composite Punjab State:

 Punjab - 54.5%

Haryana - 39.5%

Chandigarh - 3.5%

Himachal Pradesh - 2.5%

Accordingly, only 2.5% of the total power generated in the two

projects out of the share of the composite State of Punjab, has

been made available to the successor State of Himachal Pradesh

right from May, 1967. Since the agreement dated 17.04.1967 has

been arrived at within two years of the appointed date mentioned

in the Punjab Reorganisation Act, 1966, the Central Government

ceased to have any power under Section 78 of the Punjab

Reorganisation Act, 1966 to determine the dispute.

24. The concept of 12% free power from Hydro stations to the

"Mother State" or "Home State" is applicable to only Central

Sector Projects commissioned after 07.09.1990 subject to the

condition mentioned in the letter dated 01.11.1990 of Department

of Power, Government of India and is not applicable to jointly

owned State Sector Projects such as Bhakra-Nangal and Beas

Projects, commissioned much earlier than 07.09.1990.

25. The Bhakra Dam was conceived with the consent of the Raja

of Bilaspur and all obligations towards the erstwhile State of

Bilaspur were fulfilled by the project authorities. No legal

agreement between the Raja of Bilaspur and the Province of

Punjab in respect of Bhakra-Nangal Project for royalty/free

power exists.

26. There is no provision in the Punjab Reorganisation Act,

1966 providing for sharing of power generated in the Bhakra-

Nangal and Beas Projects on the basis of the transferred

population ratio and therefore the claim of the plaintiff to

7.19% of the total power generated in the two projects is not

legally tenable. The Bhakra-Nangal and Beas Projects were

constructed pursuant to an agreement between the State of Punjab

and the State of Rajasthan and the State of Himachal Pradesh

which came to existence much later was entitled to power as per

the provisions incorporated in the Punjab Reorganisation Act,

1966.

27. The Department of Power, Government of India, in its D.O.

Letter dated 30.03.1978 to the Chairman, B.B.M.B. conveyed the

decision of Government of India that the plaintiff be supplied

15 M.W. of power generated from Beas Power Plant and this supply

was to be on ad hoc basis, at Bus Bar rates, pending final

decision about its share of power which was to be examined

separately. Subsequently, by letter dated 16.08.1983 of the

Department of Power, Government of India, the Chairman, B.B.M.B.

has been informed that the quantum of benefits from Bhakra-

Nangal and Beas Projects presently allocated to Himachal Pradesh

will remain unaltered until a final decision is taken.

Written statement of the Defendant No.4 (State of Rajasthan)

28. Under an agreement made on 15.08.1948 between the then

Governor General of India and the Raja of Bilaspur, the

administration of Bilaspur State was transferred to the Dominion

Government of India and in lieu thereof the Raja of Bilaspur

received a compensation of Rs.70,000/- annually as privy purse

free of tax. By a notification dated 20.07.1949 the Governor

General of India ordered that on and from 01.08.1949 the

territory of State of Bilaspur, which had merged in the Dominion

of India, would be administered as if it was Chief

Commissioner’s Province. On the commencement of the

Constitution of India, the territory of Chief Commissioner’s

Province became a Part-C State and continued to be administered

through the Chief Commissioner by the Government of India.

Hence, it is absolutely irrelevant that about 3/4th of the total

area of the reservoir of Bhakra Dam fell within the State of

Bilaspur. With the construction of the Bhakra-Nangal Project,

overall development took place in the area and as a result new

infrastructural facilities were built in the project area such

as new roads, new bridges, new township, new schools and

colleges, fisheries, tourism, etc. and all these benefited the

local populace of the then Part-C State of Bilaspur. It is,

therefore, not correct that the then Part-C State of Bilaspur,

which now formed as a part of Plaintiff-State, has only suffered

on account of the submergence caused by the construction of the

Bhakra Dam.

29. There was no agreement as such between the then State of

Punjab and the Raja of Bilaspur with regard to the construction

of the Dam and unless the draft agreement was finally approved,

settled and signed by the parties, no rights could be claimed by

the State of Bilaspur under the alleged draft agreement.

30. During the construction of the Bhakra-Nangal Project, the

predecessor State or Union Territory of the Plaintiff never

raised the grievances now put forth by the Plaintiff and the

grievances now put forth in the plaint are only an after-thought

and are imaginary. In fact, all persons affected by the

construction of the Bhakra-Nangal Project have been compensated,

a new township of Bilaspur has been constructed, proper

compensation has been paid for acquisition of land and the

beneficiary States have even provided for the rehabilitation of

the oustees of the Bhakra-Nangal Project in Sirsa and Hissar

Districts and rehabilitation of oustees of the Beas Project in

Indira Gandhi Pariyojana.

31. The share of the State of Rajasthan in the power generated

in the Bhakra-Nangal Project is 15.22% and Unit-I of Beas

Project is 20% and Unit-II of Beas Project is 58.50% and these

allocations of share are not interim or ad hoc but are final.

The one-man Committee headed by Shri K. S. Subrahmanyam was not

constituted after consultation with the State of Rajasthan and

hence the recommendation of this Committee has no relevance so

far as the State of Rajasthan is concerned. In any case, the

report of Shri K. S. Subrahmanyam is not a legally admissible

document. The claim of 12% of the total power generated in
Bhakra-Nangal and Beas Projects on the basis of the Plaintiff

being the "Mother State" is baseless. Both the projects,

Bhakra-Nangal and Beas Projects, are the State Projects

conceived planned, constructed, developed and operated and are

being maintained by the participating States, namely the State

of Rajasthan and the composite State of Punjab, and these two

States as partners of the projects have been sharing power from

the two projects on the basis of agreements executed between

them.

32. The dispute raised in the suit relates to the share of

water and generation of power from the use of water in inter-

state rivers and this Court has no jurisdiction under Article

131 of the Constitution to decide the dispute.

33. This Court has no jurisdiction over the dispute which

arises out of an agreement entered into or executed before the

commencement of the Constitution by a Ruler of an Indian State

by virtue of the bar under Article 363 of the Constitution.

Written statement of the Defendant No.5 (Union Territory of

Chandigarh)

34. The suit is hopelessly barred by time inasmuch as the

Bhakra-Nangal Project was completed in 1963 and the Beas Project

was completed in 1977 and the suit has been filed in the year

1996.

35. Under Section 78(1) of the Punjab Reorganisation Act, 1966,

the rights and liabilities of the successor States/Union

Territories of the composite State of Punjab in relation to the

Bhakra-Nangal and Beas Projects are to be fixed by an agreement

entered into by the successor States/Union Territories after

consultation with the Central Government or, if no such

agreement is entered into within two years of the appointed day,

by an order of the Central Government having regard to the

purposes of the project. Hence this suit filed by the plaintiff

claiming rights in the power generated in the Bhakra-Nangal and

Beas Projects is not maintainable under the provisions of the

Punjab Reorganisation Act, 1966.

36. An agreement has in fact been arrived at in relation to

Bhakra-Nangal Project by the representatives of the successor

States/Union Territories of the composite State of Punjab at a

meeting held on 17.04.1967 under the Chairmanship of the

Secretary, Ministry of Irrigation and Power, Government of

India, and as per this agreement the share of power of Himachal

Pradesh from the Bhakra-Nangal and Beas Projects is 2.5% of the

total share of the composite State of Punjab and this agreement

is binding on all parties including the plaintiff and the

plaintiff is estopped from seeking any relief including damages

dehors the agreement.

37. In relation to the Beas Project, the Central Government has

also allowed a supply of 15 MW power to Himachal Pradesh from

Dehar Power Plant on ad hoc basis by letter dated 30.03.1978 of

the Ministry of Energy, Department of Power, Government of India

and this arrangement has been ratified by the Bhakra Beas

Management Board at its 76th meeting held on 28.09.1978.

38. If there is no agreement between the successor States/Union

Territories of the composite State of Punjab and if there is no

final order of the Central Government determining the rights and

liabilities of the successor States/Union Territories of the

composite State of Punjab, the only legal proceeding which can

be initiated is for directing the Central Government to pass a

statutory order under Section 78(1) of the Punjab Reorganisation

Act, 1966 and there is no scope for any legal proceedings for

recovery of damages towards the share of electricity of the

Plaintiff.

Issues:

39. After considering the pleadings of the parties, on

08.03.1999 this Court framed a large number of issues.

Thereafter, the plaintiff examined three witnesses, namely, Shri

A.K. Goswami, the Chief Secretary of the State of Himachal

Pradesh, Dr. Y.K. Murthy, Ex-Chief Engineer-cum-Secretary (MPP &

Power) to the Government of Himachal Pradesh, and Shri Prabodh

Saxena, Deputy Commissioner to the Government of Himachal

Pradesh. The Defendant No.2 examined one witness, namely, Shri

Romesh Chandra Bansal, Consultant of Punjab State Electricity

Board on Inter State Disputes) and Defendant No.3 examined one

witness, namely, Shri Jia Lal Jain, Chief Accounts Officer in

Haryana State Electricity Board. The parties have also produced

a large number of documents, which have been marked as Exhibits.

40. At the hearing of the suit, the learned counsel for the

parties did not press all the issues framed by this Court on

08.03.1999 and confined their arguments to some of the issues.

These issues are rearranged and renumbered as follows:

"01. Whether the suit is not maintainable being

barred by limitation, delay and laches? (Defendant
Nos. 1 & 2)

02. Whether after the merger of the State of Bilaspur

with the Dominion of India, plaintiff could still
have any cause of action to file the present suit?
(Defendant No. 4)

03. Whether the suit barred by reasons of Article 363

of the Constitution? (Defendant No. 4)

04. Whether the suit is not maintainable under

Article 131 of the Constitution? (Defendant No.4)

05. Whether the suit does not disclose any cause of

action against the Defendant Nos. 3 and 4 and
therefore liable to be rejected under Order XXIII
Rule 6(a) of the Supreme Court Rules, 1966.
(Defendant Nos. 3 and 4).

06. Whether the suit is not maintainable by virtue of

the scheme of the Punjab Reorganisation Act, 1966 in
general and provisions of Sections 78 to 80 of the
said Act in particular? (Defendant Nos. 1 & 2)

07. Whether in the discussions held on 17th April,

1967, any agreement was reached between the party
States as regards their share in power generated
(rights to receive and to utilize the power
generated) in the Bhakra Project? (Defendant Nos. 1,
2 & 3)

08. Whether the Plaintiff-State is entitled to 12% of

the net power generated in Bhakra-Nangal & Beas
Projects free of cost from the date of commissioning
of the projects? (Plaintiff)

09. Whether the State of Himachal Pradesh is entitled

to an allocation of 7.19% in addition to 12% free
 power as claimed above, of the total power generated
in Bhakra-Nangal & Beas Projects from the date of
commissioning of the Projects or the appointed date
(01.11.1966)? (Plaintiff)
10. Whether the plaintiff is entitled to a decree for
a sum of Rs.2199.77 crores against the defendants
jointly and severally, as compensation/reimbursement
for their failure to supply to the plaintiff 12% and
7.19% shares (on account of distress caused/surrender
of rights to generate power and on account of
transfer of population to the plaintiff State
respectively in the power generated in these projects
upto the date of the filing of the present suit and
such further sums as may be determined, as
entitlement of the plaintiff for the period
subsequent to the filing of the suit? (Plaintiff)

11. Whether the Plaintiff-State is entitled to the

award of any interest on the amounts determined as
its entitlement? (Plaintiff)"

We may now deal with each of these issues separately.

Issue No.1

41. Mr. Mohan Jain, learned Additional Solicitor General

appearing for Defendant Nos. 1 and 5, submitted that the Bhakra-

Nangal Project was completed in 1963 and the Beas Project was

completed in 1977, whereas the suit has been filed in the year

1996 and, therefore, the suit is belated and barred by

limitation. Mr. C.S. Vaidyanathan, learned senior counsel

appearing for Defendant No.4, cited the decision in U.P. Jal

Nigam & Anr. v. Jaswant Singh & Anr. [(2006) 11 SCC 464] in

which this Court has held that a party would not be entitled to

relief if he has not been vigilant in invoking the protection of

his rights and has acquiesced with the changed situation. He

submitted that in the present case, the Plaintiff-State has

acquiesced in the Bhakra-Nangal and Beas Projects and the

sharing of power from the two projects by Plaintiff and the

Defendant Nos. 2 and 5 in certain proportions since several

decades and has filed the suit only in the year 1996.
42. We are unable to accept the contention that the suit is

barred by limitation. Article 131 of the Constitution does not

prescribe any period of limitation within which a State or the

Union of India has to file a dispute in this Court. No other

provision of law has been brought to our notice prescribing the

period within which a dispute under Article 131 of the

Constitution can be instituted by a State against any other

State or the Union of India. Moreover, as we will indicate

hereinafter in this judgment, there has been no final allocation

of share of power from the Bhakra-Nangal Project and the Beas

Project to the Plaintiff-State as yet and whatever allocations

of power from the two projects to the Plaintiff-State have been

made are only adhoc or interim. Until a final decision was

taken with regard to allocation of power to the Plaintiff-State

from the two projects, the claim of the Plaintiff-State to

appropriate allocation of power from the two projects was live

and cannot be held to be stale or belated. Our answer to Issue

No.1, therefore, is that the suit was not barred by limitation,

delay and laches.

Issue No. 2

43. The second Issue is whether after the merger of the State

of Bilaspur with the Dominion of India, the Plaintiff could

still have any cause of action to file the present suit. A copy

of the Bilaspur Merger Agreement dated 15.08.1948 has been

produced on behalf of Defendant No.4 and marked as Ext. D-4/1-A.

Article 1 of the Bilaspur Merger Agreement dated 15.08.1948

reads as follows:

"The Raja of Bilaspur hereby cedes to the Dominion

Government full and exclusive authority, jurisdiction and
powers for and in relation to the governance of the State
and agrees to transfer the administration of the State to
the Dominion Government on twelfth day of October, 1948
(hereinafter referred to as ‘the said day’).

As from the said day the Dominion Government will be

competent to exercise the said powers, authority and
jurisdiction in such manner and through such agency as it
may think fit."

It is thus clear that by the Bilaspur Merger Agreement dated

15.08.1948 the Raja of Bilaspur ceded to the Dominion Government

full and exclusive authority, jurisdiction and powers for and in

relation to the governance of the State and agreed to transfer

the administration of the State to the Dominion Government on

12.10.1948. Thereafter, the Government of India, Ministry of

Law, issued a notification dated 20.07.1949 (Ext. D-4/2-A) in

exercise of its powers under Section 290-A of the Government of

India Act, 1935 making the States Merger (Chief Commissioners

Provinces) Order, 1949, which came into force from 01.08.1949.

Under this States Merger (Chief Commissioners Provinces) Order,

1949, Bilaspur was to be administered in all respects as if it

was a Chief Commissioner’s Province. Under the Constitution of

India also initially Bilaspur continued to be administered as

the Chief Commissioner’s Province and was included in the First

Schedule of the Constitution as a Part-C State. Under Article

294 (b) all rights, liabilities and obligations of the

Government of the Dominion of India, whether arising out of any

contract or otherwise, became the rights, liabilities and

obligations of the Government of India. These provisions of the

Bilaspur Merger Agreement dated 15.08.1948 (Ext.D-4/1-A), the

States Merger (Chief Commissioners Provinces) Order, 1949, the

First Schedule of the Constitution and Article 294 (b) of the

Constitution make it clear that Bilaspur became the part of the

Dominion of India and thereafter was administered as a Chief

Commissioner’s Province by the Government of India and all

rights of the Raja of Bilaspur vested in the Government of

India.

44. We, therefore, hold that the Plaintiff will not have any

cause of action to make any claim on the basis of any right of

Raja of Bilaspur prior to the merger of Bilaspur State with the

Dominion of India. The pleadings in the plaint and the reliefs

claimed therein, however, show that the Plaintiff’s case is not

founded only on the rights of Raja of Bilaspur prior to its

merger with the Dominion of India. The Plaintiff’s claim to the

share of power generated in the Bhakra-Nangal and Beas Projects

is also based on Section 78 of the Punjab Reorganisation Act,

1966 and the rights of the State of Himachal Pradesh under the

Constitution. The claim of the Plaintiff-State to share of

power from the Bhakra-Nangal and Beas Projects in the suit

insofar as it is based on provisions of the Punjab

Reorganisation Act, 1966 and the provisions of the Constitution

are not affected by the merger of the State of Bilaspur with the

Dominion of India. Issue No. 2 is answered accordingly.

Issue No. 3

45. Issue No. 3 relates to the bar of the suit under Article

363 of the Constitution. Mr. Vaidyanathan, learned counsel for

the Defendant No.4 submitted that the suit was barred under the

proviso to Article 131 of the Constitution and Article 363 of

the Constitution. In support of this contention, he relied on

State of Seraikella and Others v. Union of India and Another

[AIR 1951 SC 253]. Mr. Nageshwar Rao, learned counsel for

Defendant No.3 also raised this contention and relied on State

of Orissa v. State of A.P. [(2006) 9 SCC 591].

46. Articles 131 and 363 of the Constitution are quoted

hereinbelow:

"131. Original Jurisdiction of the Supreme Court -

Subject to the provisions of this Constitution, the
Supreme Court shall, to the exclusion of any other court,
have original jurisdiction in any dispute--

(a) between the Government of India and one or more

States; or

(b) between the Government of India and any State or

States on one side and one or more other States on the
other; or

(c) between two or more States,

if and in so far as the dispute involves any question

(whether of law or fact) on which the existence or extent
of a legal right depends:

[Provided that the said jurisdiction shall not extend to a

dispute arising out of any treaty, agreement, covenant,
engagement, sanad or other similar instrument which,
having been entered into or executed before the
commencement of this Constitution, continues in operation
after such commencement, or which provides that the said
jurisdiction shall not extend to such a dispute.]
363. Bar to interference by courts in disputes
arising out of certain treaties, agreements, etc. -

(1) Notwithstanding anything in this Constitution but

subject to the provisions of article 143, neither the
Supreme Court nor any other court shall have jurisdiction
in any dispute arising out of any provision of a treaty,
agreement, covenant, engagement, sanad or other similar
instrument which was entered into or executed before the
 commencement of this Constitution by any Ruler of an
Indian State and to which the Government of the Dominion
of India or any of its predecessor Governments was a party
and which has or has been continued in operation after
such commencement, or in any dispute in respect of any
right accruing under or any liability or obligation
arising out of any of the provisions of this Constitution
relating to any such treaty, agreement, covenant,
engagement, sanad or other similar instrument.

(2) In this article--

(a) "Indian State" means any territory recognized before

the commencement of this Constitution by His Majesty or
the Government of the Dominion of India as being such a
State; and

(b) "Ruler" includes the Prince, Chief or other person

recognised before such commencement by His Majesty or the
Government of the Dominion of India as the Ruler of any
Indian State."

47. The language of the proviso to Article 131 of the

Constitution makes it clear that the jurisdiction of this Court

under Article 131 shall not extend to a dispute arising out of

any treaty, agreement, covenant, engagement, sanad or other

similar instrument which, having been entered into or executed

before the commencement of the Constitution, continues in

operation after such commencement, or which provides that the

said jurisdiction shall not extend to such a dispute. Hence,

there is a clear bar for this Court to exercise jurisdiction

under Article 131 of the Constitution to decide a dispute

arising out of any treaty, agreement, covenant, engagement,

sanad or other similar instrument which, having been entered

into or executed before the commencement of the Constitution,

continues in operation after such commencement. Clause (1) of

Article 363 of the Constitution quoted above also states that

notwithstanding anything in the Constitution, the Supreme Court

shall have no jurisdiction in any dispute arising out of any

provision of a treaty, agreement, covenant, engagement, sanad or

other similar instrument which were entered into or executed

before the commencement of the Constitution by any Ruler of an

Indian State or to which the Government of the Dominion of India

or any of its predecessor Governments was a party and which has

or has been continued in operation after such commencement, or

in any dispute in respect of any right accruing under or any

liability or obligation arising out of any of the provisions of

this Constitution relating to any such treaty, agreement,

covenant, engagement, sanad or other similar instrument. These

being the clear constitutional provisions, obviously this Court

will have no jurisdiction under Article 131 of the Constitution

to decide any dispute arising out of any agreement or covenant

between the Raja of Bilaspur and the Government of the Dominion

of India. The only agreement proved to have been executed by the

Raja of Bilaspur and the Government of the Dominion of India

before the commencement of the Constitution is the Bilaspur

Merger Agreement (Ext. D-4/1A) and on a close examination of the

provisions of the Bilaspur Merger Agreement dated 15.08.1948, we

find that there are no provisions therein which have any

relevance to the claim of the Plaintiff to the share of the

Plaintiff to the power generated in the Bhakra-Nangal and Beas

Projects. The draft agreement dated 07.07.1948, however, has

provisions in clause 13 for allocation of power to the Bilaspur

State, but this draft agreement is not proved to have been

executed on behalf of the parties thereto and cannot constitute

a basis for allocation of power to the Plaintiff-State.

However, we have already held that the claim of the Plaintiff-

State is based also on the Punjab Reorganisation Act, 1966 and

the provisions of the Constitution and such claim is not barred

under Article 363 of the Constitution. This issue is answered

accordingly.

Issue No. 4

48. Issue No. 4 has been raised by the Defendant No.4

(State of Rajasthan) and its case is that the suit is actually a

dispute with regard to use of water in inter state rivers,

namely, Satluj and Beas, and is barred under Article 262 (2) of

the Constitution. Mr. Vaidyanathan, learned counsel appearing

for the Defendant No.4, submitted that the case of the Plaintiff

is that on account of the use of water of the two inter state

rivers for generation of hydro-electric power in the Bhakra-

Nangal and Beas Projects, the Plaintiff has lost its entitlement

to beneficial use of the water. He cited decisions of this

Court in Re: Cauvery Water Disputes Tribunal [1993 Supp (1) SCC

96(II), State of Karnataka v. State of A.P. and Others [(2000) 9

SCC 572], State of Haryana v. State of Punjab and Another

[(2002) 2 SCC 507] and State of Orissa v. Government of India

and Another [(2009) 5 SCC 492] in support of his submissions

that a suit which is really a dispute relating to the use of

water of an inter-state river is barred under clause (2) of

Article 262 of the Constitution read with Section 11 of the

Inter-State Water Disputes Act, 1956.

49. Clause (2) of Article 262 of the Constitution provides

that notwithstanding anything in the Constitution, Parliament

may by law provide that neither the Supreme Court nor any other

court shall exercise jurisdiction in respect of any such dispute

or complaint relating to waters of inter state rivers or river

valleys. Parliament has in fact made the Inter-State Water

Disputes Act, 1956 and has also provided in Section 11 of this

Act that neither the Supreme Court nor any other court shall

have jurisdiction or exercise jurisdiction in respect of any

water dispute which may be referred to a Tribunal under the Act.

In State of Karnataka v. State of A.P. and Others (supra) a

Constitution Bench of this Court held in Para 24 at pages 604,

605 and 606 that when a contention is raised that a suit filed

under Article 131 of the Constitution is barred under Article

262(2) of the Constitution read with Section 11 of the Inter-

State Water Disputes Act, 1956, what is necessary to be found

out is whether the assertions made in the plaint and the relief

sought for, by any stretch of imagination, can be held to be a

water dispute so as to oust the jurisdiction of this Court under

Article 131 of the Constitution and on examining the assertions

made in the plaint and the relief sought for by the Plaintiff-

State, the Constitution Bench took the view that the suit in

that case could not be held to be barred under Article 262 of

the Constitution read with Section 11 of the Inter-State Water

Disputes Act, 1956. This decision in State of Karnataka v. State

of Andhra Pradesh was followed by this Court in State of Haryana

v. State of Punjab and Another (supra) and it was held that the

question of maintainability of the suit has to be decided upon

the assertions made by the Plaintiffs and the relief sought for,

and taking the totality of the same and not by spinning up one

paragraph of the plaint and then deciding the matter. Applying

this test to the present case, we find on a reading of the

assertions made in the entire plaint as well as the reliefs

claimed therein by the Plaintiff that the dispute does not

relate to a dispute in relation to inter state river water or

the use thereof, and actually relates to sharing of power

generated in the Bhakra-Nangal and the Beas Projects and such a

dispute was not barred under clause (2) of Article 262 of the

Constitution read with Section 11 of the Inter-State Water

Disputes Act, 1956.

Issue No. 5

50. Mr. Nageshwar Rao, learned counsel for Defendant No.3 and

Mr. Vaidyanathan, learned counsel for Defendant No.4 submitted

that Article 131 of the Constitution is clear that this Court

will have the original jurisdiction in a dispute between the

parties mentioned therein "if and insofar as the dispute

involves any question (whether of law or fact) on which the

existence or extent of a legal right depends". They argued that

unless the Plaintiff-State establishes its legal right to the

share of power from the Bhakra-Nangal and Beas Projects, the

suit of the Plaintiff is not maintainable under Article 131 of

the Constitution. They submitted that Order XXIII Rule 6(a) of

the Supreme Court Rules, 1966 states that a plaint shall be

rejected where it does not disclose any cause of action and in

this case since the plaint does not disclose a legal right in

favour of the Plaintiff-State to its share of power from the

Bhakra-Nangal and Beas Projects, the plaint is liable to be

rejected. In support of this contention, Mr. Rao and Mr.

Vaidyanathan relied on the decision of this Court in State of

Haryana v. State of Punjab and Another [(2004) 12 SCC 673].

51. At this stage, when oral and documentary evidence have

already been led by the parties and arguments have been made by

the learned counsel for the parties and when we are going to

finally decide the suit, it is not necessary for us to consider

whether the plaint discloses a cause of action and is liable to

be rejected under Order XXIII Rule 6(a) of the Supreme Court

Rules, 1966. We have to however consider whether on the

pleadings of the parties and on the evidence adduced by the

parties, the Plaintiff-State has established a legal right to

the utilization of power from the Bhakra-Nangal and Beas

Projects. After examining the pleadings of the parties and the

evidence adduced on behalf of the parties, we find that under

the Bilaspur Merger Agreement dated 15.08.1948, the State of

Bilaspur merged with the Dominion of India and was administered

as the Chief Commissioner’s Province and was included as a Part-

C State is the First Schedule of the Constitution. In 1954

Bilaspur and Himachal Pradesh however, were united to form a new

State of Himachal Pradesh under the Himachal Pradesh and

Bilaspur (New States) Act, 1954. This new State of Himachal

Pradesh continued to be a Part-C State until it became a Union

Territory by the Constitution (7th Amendment) Act, 1956. It

is when Himachal Pradesh was a Union Territory that the State of

Punjab and the State of Rajasthan entered into an agreement on

13.01.1959 (Ext.D-1/3) to collaborate in the construction of a

Dam across the river Sutlej at Bhakra and other ancillary works

executed under the Bhakra-Nangal Project for the improvement of

irrigation and generation of Hydro-electric power and as per the

terms and conditions of this agreement, the power generated in

Bhakra-Nangal Project was to be shared between Punjab and

Rajasthan in the ratio of 84.78% and 15.22% respectively. The

plaintiff’s case in the plaint is that the construction of the

Bhakra Dam across the river Satluj has resulted in submergence

of large areas of Himachal Pradesh and its rights have been

affected by the construction of the Bhakra Dam. According to

Mr. Ganguli, learned counsel appearing for the Plaintiff, the

legal rights of the plaintiff which have been affected by the

construction of the Bhakra-Nangal Project are the (a) natural

right to the beneficial use of the water; (b) rights under the

agreement executed with the Raja of Bilaspur and (c)

constitutional rights of Himachal Pradesh over its water and

land under Entries 17 and 18 of List-II of the Seventh Schedule

to the Constitution; (d) the statutory rights under Section 78

of the Punjab Reorganisation Act, 1966 and (e) the right to

equal treatment in matter of utilization of power from the

Bhakra-Nangal and Beas Projects.

52. We have already held while answering Issue No.2 that after

Bilaspur became part of the Dominion of India, the Plaintiff

cannot make any claim to power on the basis of the rights of the

Raja of Bilaspur prior to the merger of the Bilaspur State with

the Dominion of India. So far as the rights of a State or Union

Territory over its water and land are concerned, none of the

constituent units of the Indian Union were sovereign and

independent entities before the Constitution and after the

commencement of the Constitution the constituent units have only

such rights as are conferred on them by the provisions of the

Constitution. As has been held by this Court in Babulal Parate

v. State of Bombay and another (AIR 1960 SC 51) cited by Mr.

Shyam Diwan, learned counsel for the Defendant No.2:

"None of the constituent units of the Indian Union was

sovereign and independent in the sense the American
colonies or the Swiss Cantons were before they formed
their federal unions. The Constituent Assembly of
India, deriving its power from the sovereign people,
was unfettered by any previous commitment in evolving
a constitutional pattern suitable to the genius and
requirements of the Indian people as a whole." (At
Page 55 of AIR 1960)
In 1959, as we have noticed, Himachal Pradesh which included
the erstwhile State of Bilaspur was a Union Territory and not a

State. The executive and the legislative power over water and

land in Entries 17 and 18 of List-II of the Seventh Schedule to

the Constitution vested in 1959 in the Union of India

(Defendant No.1). This will be clear from Article 73(1) of the

Constitution, which provides that subject to the provisions of

the Constitution, the executive power of the Union shall extend

to the matters with respect to which Parliament has power to

make laws and from Article 246(4) of the Constitution which

states that Parliament has power to make laws with respect to

any matter for any part of the territory of India not included

in a State notwithstanding that such matter is a matter

enumerated in the State List. In other words, in 1959 when the

agreement was made between the States of Punjab and Rajasthan

to construct the Bhakra Dam across the river Satluj which would

have the effect of submerging large areas within Himachal

Pradesh, it is the Union of India which had the right over the

water and land in Himachal Pradesh and if the Union of India

has, in exercise of its constitutional powers acquiesced in the

construction of the Dam at Bhakra over river Satluj, the

Plaintiff-State can have no cause of action to make a claim to

power from the Bhakra-Nangal Project on the basis of

submergence of large areas of Himachal Pradesh on account of

the construction of the Bhakra Dam.

53. We further find that in 1960-1961 when Himachal Pradesh

was a Union Territory, the State of Punjab and the State of

Rajasthan decided to collaborate and undertake the execution of

Beas Project including all connected works in Punjab, Rajasthan

and Himachal Pradesh. The Government of India, Ministry of

Irrigation and Power, also adopted a resolution on 10.02.1961

(Ext.D-1/7) constituting the Beas Control Board for ensuring

efficient, economical and early execution of the Beas Project

(comprising Unit-I - Beas Satluj Link and Unit-II the Dam at

Pong) and there were the representatives of the States of

Punjab, Rajasthan and the Himachal Pradesh Administration and

the Government of India in the Beas Control Board. Thus, the

submergence of the large areas of Himachal Pradesh because of

the construction of the Beas Project took place due to

decisions to which the Government of India was a party and when

Himachal Pradesh was a Union Territory and the Union of India

had executive and legislative power over water and land in

Himachal Pradesh by virtue of the constitutional provisions in

Article 73(1) and Article 246(4) of the Constitution. The

Plaintiff-State therefore cannot have any cause of action to

make a claim to power from the Beas Project on the basis of

submergence of large areas of Himachal Pradesh.

54. In our considered opinion, however, the Plaintiff had

the statutory right under Section 78 of the Punjab

Reorganisation Act, 1966 to the utilization of power and also

the constitutional right to equal treatment vis-à-vis the other

successor States of the composite State of Punjab and the

Plaintiff has cause of action in the suit to make a claim to

the utilization of power from the Bhakra-Nangal and Be

as

Projects on the basis of such statutory right a

nd

constitutional right and we shall advert to the statutory right

and the constitutional right of the plaintiff when we deal with

the remaining issues. On a perusal of the Punjab

Reorganisation Act, 1966, however, we find that the provisions

of this Act deal with the rights of the successor States of the

composite State of Punjab and it is by reference to th

e

provisions of the Punjab Reorganisation Act, 1966 that th

e

Plaintiff-State has claimed equal rights to power from th

e

Bhakra-Nangal and Beas Projects. The Defendant No.4 (State of

Rajasthan) was never a part of composite State of Punjab and

its rights and liabilities including its rights to utilization

of power in the Bhakra-Nangal and Beas Projects are no

t

affected by the Punjab Reorganisation Act, 1966. Hence, on the

basis of the statutory right and the constitutional right of

the plaintiff to utilization of power from the Bhakra-Nangal

and Beas Projects from out of the share of composite State of

Punjab prior to the Punjab Reorganisation Act, 1966, th

e

Plaintiff-State has no cause of action to file a suit against

the State of Rajasthan. In other words, since the Plaintiff-

State has no legal right to claim a share of power from the

Bhakra-Nangal and Beas Projects from out of the share of power

of the State of Rajasthan, the Plaintiff had no cause of action

to file the suit against the State of Rajasthan (Defendant

No.4), but since the Plaintiff-State has a legal right

to
utilization of power out of the total share of power of the

composite State of Punjab from the Bhakra-Nangal and Beas

Projects as a successor State, the Plaintiff has cause of

action to file the suit and to maintain the suit as against

Defendant Nos. 2, 3 and 5. Moreover, as under Section 78(1) of

the Punjab Reorganisation Act, 1966 the Central Government was

required to determine by an order the rights of the plaintiff

to utilization of power from the Bhakra-Nangal and Beas

Projects and the Central Government has not done so, the

Plaintiff-State has cause of action to file the suit against

the Defendant No.1. Issue No.5 is answered accordingly.

Issue Nos. 6

55. For deciding issue No. 6, a reference to Section 78 of the

Punjab Reorganisation Act, 1966 is necessary.

"78. Rights and liabilities in regard to Bhakra-Nangal

and Beas Projects (1) Notwithstanding anything contained
in this Act but subject to the provisions of sections 79
and 80, all rights and liabilities of the existing State
of Punjab in relation to Bhakra-Nangal Project and Beas
Project shall, on the appointed day, be the rights and
liabilities of the successor States in such proportion
as may be fixed, and subject to such adjustments as may
be made, by agreement entered into by the said States
after consultation with the Central Government or, if no
such agreement is entered into within two years of the
appointed day, as the Central Government may by order
 determine having regard to the purposes of the
Projects :

Provided that the order so made by the Central

Government may be varied by any subsequent agreement
entered into by the successor States after consultation
with the Central Government.

(2) An agreement or order referred to in sub-section (1)

shall, if there has been an extension or further
development of either of the projects referred to in
that sub-section after the appointed day, provide also
for the rights and liabilities of the successor States
in relation to such extension or further development.

(3) The rights and liabilities referred to in sub-

sections (1) and (2) shall include-

(a) the rights to receive and to utilise the

water available for distribution as a result of
the projects, and

(b) the rights to receive and to utilise the

power generated as a result of the projects, but
shall not include the rights and liabilities
under any contract entered into before the
appointed day by the Government of the existing
State of Punjab with any person or authority
other than Government.

(4) In this section and in sections 79 and 80-

(A) "Beas Project" means the works which are either

under construction or are to be constructed as
components of the Beas-Sutlej Link Project (Unit I) and
Pong Dam Project on the Beas river (Unit II) including-

(i) Beas-Sutlej Link Project (Unit I) comprising-

(a)Pandoh Dam and works appurtenant thereto.

(b) Pandoh-Baggi Tunnel,

(c) Sundernagar-Hydel Channel,

(d) Sundernagar-Sutlej Tunnel,

(e) By-pass Tunnel,

(f) four generating units each of 165 M.W.

capacity at Dehar Power House on the right side
of Sutlej river,

(g) fifth generating unit of 120 M.W. capacity

at Bhakra Right Bank Power House,

(h) transmission lines,

(i) Balancing Reservoir;

(ii) Pong Dam Project (Unit II) comprising-

(a) Pong Dam and works appurtenant thereto,

(b) Outlet Works,

(c) Penstock Tunnels,

(d) Power plant with four generating units of 60

M.W. each;
 (iii) such other works as are ancillary to the works
aforesaid and are of common interest to more than one
State;

(B) "Bhakra-Nangal Project" means-

(i) Bhakra Dam, Reservoir and works appurtenant

thereto;

(ii) Nangal Dam and Nangal-Hydel Channel;

(iii) Bhakra Main Line and canal system;

(iv) Bhakra Left Bank Power House, Ganguwal

Power House and Kotla Power House, switchyards,
sub-stations and transmission lines;

(v) Bhakra Right Bank Power House with four

units of 120 M.W. each."

56. Mr. Shyam Diwan, leaned counsel appearing for the Defendant

No.2, submitted that Section 78(1) of the Punjab Reorganisation

Act, 1966 starts with the non-obstante clause "Notwithstanding

anything contained in this Act". He argued that considering

these opening words in Section 78 of the Punjab Reorganisation

Act, 1966, no other provisions of the Act should be looked into

by the Court and the rights and liabilities of the successor

State of the composite State of Punjab in regard to Bhakra-

Nangal and Beas Projects have to be decided with reference to

the provisions of Section 78 only. He submitted that Section

204(u) of the Government of India Act, 1935 was the provision

corresponding to Article 131 of the Constitution and

interpreting the said Section 204(u) of the Government of India

Act, 1935 the Federal Court has held in United Provinces v.

Governor-General in Council [AIR 1939 Federal Court 58] that the

term ‘legal right’ used in Section 204 means a right recognized

by law and capable of being enforced by the power of a State.

He submitted that under Section 78 (1) of the Punjab

Reorganisation Act, 1966, there is no right of the Plaintiff-

State to the power generated in the Bhakra-Nangal and Beas

Projects except what is agreed upon by the successor States or

determined by the Central Government and hence the right of the

Plaintiff, if any, is not enforceable in Court. He finally

submitted that even if this Court holds that the Plaintiff has a
legal right to a share of power generated in the Bhakra-Nangal

and Beas Projects, this Court can only direct the Central

Government to determine the share of Himachal Pradesh and cannot

itself determine the share of Himachal Pradesh. Mr. Mohan Jain,

learned Additional Solicitor General, learned counsel appearing

for Defendant No.1, also made similar submissions.

57. We are not in a position to accept the submissions of

learned counsel appearing on behalf of the Defendant Nos. 1 and

2 that this Court has no jurisdiction under Article 131 of the

Constitution to determine the share of the Plaintiff to the

power generated in the Bhakra-Nangal and Beas Projects. Section

78(1) of the Punjab Reorganisation Act, 1966, it is true,

provides that the rights and liabilities of the successor States

of the composite State of Punjab will be fixed according to an

agreement between the successor States. But, as we will discuss

under Issue No.7, there is no such final agreement between the

successor States with regard to the share of power generated in

the Bhakra-Nangal and Beas Projects and there is only a

‘tentative, ad hoc or interim arrangement’ arrived at in the

meeting held on 17.04.1967. We may add here that even when this

suit was pending before this Court, an order was passed by this

Court on 29.04.2010 directing the Union of India to make a final

effort to bring all the parties to the dispute to the

negotiating table and by acting as a meaningful mediator attempt

to find a solution which is mutually acceptable to all the

parties and the case was adjourned for three months to enable

the parties to arrive at a mutually acceptable solution with the

guidance of the Union Government, but an affidavit was filed in

the Court on behalf of the Central Government stating that a

Secretary level meeting was held with the stakeholder States but

a settlement could not be arrived at, as the stakeholder States

stuck to their respective claims. It is in these circumstances

only that the Court has proceeded to hear and decide the suit.

58. We have also perused the decision of the Federal Court in

United Provinces v. Governor-General in Council (supra) cited by

Mr. Diwan and we find that Sulaiman and Varadachariar, JJ. have

taken a view that the term ‘legal right’ used in Section 204 of

the Government of India Act, 1935 means a right recognized by

law and capable of being enforced by the power of a State, but

not necessarily in a Court of Law. Section 78(1) by its plain

language states that all rights and liabilities of the existing

State of Punjab in relation to Bhakra-Nangal Project and Beas

Project shall, on the appointed day, be the rights and

liabilities of the successor States. This provision in Section

78 is enough to confer a legal right on Himachal Pradesh as a

successor State in relation to Bhakra-Nangal and Beas Projects.

Clause (b) of Sub-section (3) of Section 78 further provides

that the rights and liabilities referred to in sub-section (1)

shall include the rights to receive and utilize the power

generated as a result of the projects. This provision in

Section 78 further confirms that the rights of the successor

State such as the State of Himachal Pradesh includes the right

to receive and utilize the power generated as a result of the

Bhakra-Nangal and Beas Projects. The fact that the rights and

liabilities of the successor States were to be fixed by an

agreement to be entered into by the successor States after

consultation with the Central Government does not affect the

legal right of the State of Himachal Pradesh to receive and

utilize the power generated as a result of Bhakra-Nangal and

Beas Projects. Similarly, the fact that in the absence of any

agreement within two years as stipulated in sub-section (1) of

Section 78 the Central Government was empowered to determine by

an order the right and liabilities of the successor States does

not affect the legal right of the State of Himachal Pradesh to

receive and utilize the power generated as a result of the

Bhakra-Nangal and Beas Projects. We have, therefore, no doubt

in our mind that the Plaintiff had a legal right as a successor

State of the composite State of Punjab to receive and utilize

the power generated in the Bhakra-Nangal and Beas Projects and

this right was recognized by law and capable of being enforced

by the power of the State.
59. Article 131 of the Constitution provides that this Court

has original jurisdiction in any dispute between the parties

mentioned therein if and in so far as the dispute involves any

question (whether of law or fact) on which the existence or

extent of a legal right depends. Hence, this Court has

jurisdiction not only to decide any question on which the

existence of a legal right depends but also to decide any

dispute involving any question on which the extent of a legal

right depends. We, therefore, have the jurisdiction to decide

the extent to which Plaintiff-State would be entitled to receive

and utilize the power generated in the Bhakra-Nangal and Beas

Projects. In other words, the suit of the Plaintiff is not

barred by the scheme of Sections 78 to 80 of the Punjab

Reorganisation Act, 1966. Issue No.6 is answered accordingly.

Issue No.7

60. Mr. Mohan Jain, the Additional Solicitor General appearing

for Defendant No.1 and Mr. Shyam Diwan, learned counsel for

Defendant No.2, submitted that Section 78 of the Punjab

Reorganisation Act, 1966, provides that the rights and

liabilities in regard to Bhakra-Nangal and Beas Projects of the

successor States of the composite State of Punjab shall be in

such proportion as may be fixed by an agreement entered into by

the successor States after consultation with the Central

Government or, if no such agreement is entered into within two

years of the appointed day, as the Central Government may by

order determine having regard to the purposes of the Projects.

They submitted that the rights and liabilities of the successor

States in regard to Bhakra-Nangal Project have already been

fixed by the agreement dated 17.04.1967.

61. Mr. A.K. Ganguli, learned counsel for the Plaintiff, on the

other hand, submitted that no agreement whatsoever in terms of

Section 78(1) of the Punjab Reorganisation Act, 1966 has been

arrived at between the parties and the agreement dated

17.04.1967 is only ‘tentative, ad hoc or provisional

arrangement’ pending final determination of rights and

liabilities of the successor States of the composite State of

Punjab. He submitted that the Plaintiff did not accept the

tentative, adhoc or provisional arrangement made on 17.04.1967

and lodged its claim with the Central Government in its letter

dated 27.10.1969 marked as Ext. P-12 claiming share to the

extent of 7.19% of the total benefits from Bhakra-Nangal and

Beas Projects, but the Central Government did not decide the

claim of the Plaintiff-State and hence the Plaintiff had no

option but to file the suit under Article 131 before this Court.

62. We have gone through the evidence and we find that by a

letter dated 12.03.1967 of the Government of India, Ministry of

Finance, Department of Economic Affairs, addressed to the

Secretaries, Finance Department of the Government of Punjab and

Haryana, marked as Ex.P-4, liability for the loan taken by the

composite State of Punjab from the Central Government for

Bhakra-Nangal and Beas Projects have been allocated

‘provisionally’ among the successor States of Punjab and Haryana

in the ratio of 53:47 (for Bhakra Loans) and 60:40 (for Beas

Project) for the purpose of repayment of principal and payment

of interest. In the said letter (Ex.P-4) it is clearly stated

that the allocation is a ‘purely an ad hoc and temporary

arrangement’ and will be subject to re-adjustment later when the

final allocation of the debt is made in terms of the provisions

of Section 54(3) of the Punjab Reorganisation Act, 1966. The

summary of discussions held in the room of the Secretary,

Ministry of Irrigation and Power on 17.04.1967 regarding the

formation of two separate Electricity Boards for Haryana and

Punjab and related matters have been circulated by a memorandum

dated 27.04.1967 of the Government of India, Ministry of

Irrigation and Power, marked as Ex.D-1/6. Para 3 of the summary

discussions which records the alleged agreement between the

successor States with regard to allocation of assets and

liabilities in relation to the Bhakra-Nangal Project and the

Beas Project is extracted hereinbelow:

"Shri Nawab Singh stated that a decision on the

tentative allocation of assets and liabilities of
Punjab and Haryana had been taken earlier on the basis
of 58% : 42%. Now the shares of the Union Territories
of Himachal Pradesh and Chandigarh had to be decided.
He further stated that at a meeting held in this
regard recently an agreement had been reached on the
allocation of a share of 3.5% to Chandigarh and 2.5%
to Himachal Pradesh and the remaining, ratio of 58:42.
On this basis, the shares of the four constituents
would become as under:

Punjab - 54.5%
Haryana - 39.5%
Chandigarh - 3.5%
Himachal Pradesh - 2.5%

The above percentages were agreed to the Power Houses,

sub-stations, Transmission Lines will, of course, be
owned on the basis of location etc. as per
distribution shown in Annexure-I. It was further
decided that the depreciation accrued and loans raised
for any particular fixed asset would be allocated
along with the asset itself as per Annexure-I and that
the distribution systems and other small lengths of
transmission lines, sub-stations etc. not included in
the list will go to the successor States on location
basis."

It will be clear that the decision on the ‘tentative’ allocation

of asset and liabilities of Punjab and Haryana had been taken

first and this was 58% for Punjab and 42% for Haryana and the

shares of Chandigarh and Himachal Pradesh were determined at the

meeting held on 17.04.1967 and the resultant allocation was 54%

for Punjab, 39% for Haryana, 3.5% for Chandigarh and 2.5% for

Himachal Pradesh. The record of the discussions for allocation

of shares of the 4 constituent of the composite State of Punjab

shows that the basis for distribution was location of the power

houses, sub-stations, transmission lines etc. Along with the

record of discussion, the list of fixed assets ‘tentatively’

allocated to the Haryana Electricity Board, Punjab Electricity

Board, Union Territory of Himachal Pradesh and Union Territory

of Chandigarh were annexed. Similarly, the list showing

‘tentative’ apportionment of financial assets and liabilities as

agreed in the meeting held on 17.04.1967 was also annexed. It

thus appears that allocation of rights and liabilities to the

constituents of the composite State of Punjab which took place

at the meeting held on 17.04.1967 was purely ‘tentative’ and not

final. This is confirmed in the letter dated 29.05.1967 of the

Government of India, Ministry of Irrigation and Power, marked as

Ex.P-7, addressed to the Secretaries to the Government
of

Punjab, Haryana and Rajasthan on the subject ‘Finan

cial

Arrangements for Bhakra and Beas Projects’, in which it

is

reiterated that the allocation was purely on ad hoc

and

tentative basis and was to be without prejudice to the rights of

Governments of Punjab and Haryana and was subject to

re-

adjustment later when final allocation of debt liability is made

and the ratio in which capital and reserve expenditure

in

respect of the project is decided in terms of the provisions of

Section 54(3) of Punjab Reorganisation Act, 1966. We also find

from the evidence that by a letter dated 20.03.1978 addressed by

the Ministry of Energy, Government of India to Shri Sh

anta

Kumar, Chief Minister of Himachal Pradesh, 15 MW of power has

been allotted on ‘ad hoc basis’ to Himachal Pradesh pending a

final decision of the concerned States if Himachal Pradesh was

agreeable to the proportionate cost of the project. In

an

another subsequent letter dated 16.08.1983 of the Government of

India, Ministry of Energy (Department of Power) to the Chairman,

Bhakra Beas Management Board, marked as Ex.P-48, it is expressly

stated:

"The quantum of benefits from Bhakra and Beas projects

presently allocated to these two areas on an ad hoc
basis will remain unaltered until a final decision is
taken on the sharing of the rights and liabilities of
all the successor states in the two projects."

The documentary evidence before the Court, therefore, cl

early

establishes that the allocation of power to Himachal Pradesh to the

extent of 2.45% of the share of the power of the composite State of

Punjab from both Bhakra and Beas Projects was ‘tentative and ad hoc’
and not final. There is, in other words, no final agreement between

the successor States of the composite State of Punjab with regard to

the rights and liabilities of the successor States including the

right to the power generated in the Bhakra and Beas Projects in

terms of Section 78(1) of the Punjab Reorganisation Act, 1

966.

Issue No.7 is answered accordingly.

Issue No.8

63. Mr. Ganguli, learned counsel for the Plaintiff, submitted

that the territorial integrity of Bilaspur State could not be

affected by submergence on account of construction of Bhakra Dam

without the consent of the Bilaspur State and the Raja

of

Bilaspur while giving such consent, incorporated in the draft

agreement various conditions such as payment of royalty a

nd

transfer of power to Bilaspur as a consideration f

or

construction of the Bhakra Dam. He submitted that as t

he

Bilaspur State became part of Himachal Pradesh and the State of

Himachal Pradesh as the Mother State bears the reservoir of

Bhakra-Nangal Project, Himachal Pradesh is the Mother State vis-

à-vis the Bhakra-Nangal Project. He submitted that similarly as

Himachal Pradesh bears the reservoir of the Beas Project,

Himachal Pradesh is also the "Mother State" vis-à-vis the Beas

Project. He submitted that the Union Government has taken a

decision that the Mother State or the Home State where a hydro-

electric power project is located, will be supplied 12% of the

power generated by the power station free of cost and this will

be evident from the letter dated 22.07.1985 of the Government of

India, Ministry of Irrigation & Power (Department of Power) to

the Chairman, H. P. State Electricity Board, which has been

produced and marked as Ext. P-55. He submitted that the

Himachal Pradesh Assembly accordingly adopted a resolution on

13.03.1984 making a demand to the Union of India to give to

Himachal Pradesh 12% free power from Bhakra, Dehar and Pong

power projects in lieu of use of water and land of Himachal

Pradesh for generation of electricity and accordingly the Chief

Minister of Himachal Pradesh addressed a letter on 18.06.1984

forwarding a copy of the resolution of the Himachal Pradesh

Assembly claiming 12% free supply of power to Himachal Pradesh

from Bhakra, Dehar and Pong power projects, but this claim of

Himachal Pradesh has not been accepted by the Central

Government. Mr. Ganguli referred to the letter dated 19.02.1968

of Shri Y. S. Parmar to Dr. K. L. Rao, Union Minister of

Irrigation & Power, marked as Ext. P-8, to show how in the case

of other projects, namely, the Periyar Project in the Madras

State and the Muchkund Project in Orissa State benefits have

been given to the State whose resources are affected on account

of the construction of hydro-electric project. He also referred

to the views of the Vice-Chairman of the Central Water and Power

Commission in his communication dated 02.05.1968, marked as Ext.

P-10, suggesting that the Himachal Pradesh should be made an

active partner of the Hydro-Electric Project borne by it by

paying to Himachal Pradesh the annual royalties based on actual

utilization of the water, power rights. He argued that all these

materials clearly show that Himachal Pradesh is entitled to 12%

free power from the Bhakra-Nangal and Beas Projects by virtue of

it being the Mother State or the Home State and by virtue of

loss of its land and water on account of the Bhakra and Beas

Projects.

64. Mr. Shyam Diwan, learned counsel for the Defendant No.2,

submitted that this claim of the Plaintiff to 12% free power is

based upon a notion that Himachal Pradesh has some pre-existing

or natural rights over its land and water. He submitted that

under Article 3 of the Constitution Parliament has power to form

a new State, increase the area of any State, diminish the area

of any State, alter the boundaries of any State and alter the

name of any State and, therefore, States in India are not

indestructible and the territorial integrity of the States can

be destroyed by Parliament by law. He argued that the whole

notion of Himachal Pradesh having any rights over its land and

water apart from what is given by Parliament by law is thus

alien to the Indian Constitution. He submitted that the State

of Himachal Pradesh cannot have any right dehors the Punjab

Reoganisation Act, 1966 made under Article 3 of the

Constitution. In support of this submission, he relied on the

decisions of this Court in Babulal Parate v. State of Bombay and

another (supra) and Kuldip Nayar& Ors. v. Union of India & Ors.

[(2006) 7 SCC 1).

65. We find that under the provisions of Article 3 of the

Constitution, Parliament has the power to form a new State by

separation of territory from any State or by uniting two or more

States or parts of States or by uniting any territory to a part

of any State, increase the area of any State, diminish the area

of any State, alter the boundaries of any State and alter the

name of any State, but under Article 3, Parliament cannot take

away the powers of the State Executive or the State Legislature

in respect of matters enumerated in List-II of the Seventh

Schedule to the Constitution. This has been made clear in the

speech of Dr. B.R. Ambedkar in the Constituent Assembly quoted

in Para 52 of the decision of this Court in Kuldip Nayar v.

Union of India & Ors. (supra). Relevant portion from the speech

of Dr. B.R. Ambedkar is quoted hereinbelow:-

".... The basic principle of federalism is that the

legislative and executive authority is partitioned
between the Centre and the States not by any law to be
made by the Centre but by the Constitution itself. This
is what Constitution does. The States under our
Constitution are in no way dependent upon the Centre for
their legislative or executive authority. The Centre
and the States are coequal in this matter....."

66. We have however held, while answering Issue No.2, that

pursuant to the Bilaspur Merger Agreement, the States Merger

(Chief Commissioners Provinces) Order, 1949, inclusion of the

Bilaspur State as a Part-C State in the First Schedule of the

Constitution and Article 294(b) of the Constitution, the Raja of

Bilaspur lost all rights first to the Dominion of India and

thereafter to the Government of India and that the Plaintiff,

therefore, could not have any cause of action to make any claim

on the basis of any right of Raja of Bilaspur prior to the

merger of the Bilaspur State with the Dominion of India. The

Plaintiff, therefore, cannot claim any free power because of

loss of land and water by the Raja of Bilaspur. We have also

held while answering Issue No.5 that in 1959 when the States of

Punjab and Rajasthan agreed to construct the Bhakra Dam,

Himachal Pradesh was a Union Territory and the executive and

legislative power over water and land under Entries 17 and 18 of

List-II of the Seventh Schedule to the Constitution vested in

the Union of India and the Union of India in exercise of its

constitutional powers acquiesced in the construction of the Dam

at Bhakra over river Satluj. We have also held while answering

to Issue No.5 that in 1960-1961 when the Himachal Pradesh was a

Union Territory, the States of Punjab and Rajasthan also decided

to collaborate and undertake the execution of the Beas Project

and the Government of India, Ministry of Irrigation & Power, in

fact, adopted a resolution on 10.02.1961 constituting the Beas

Control Board for early execution of the Beas Project. Thus, at

the time of the Bhakra-Nangal Project and the Beas Project were

executed, Himachal Pradesh was not a full fledged State having

the rights and powers under Articles 162 and 246 (3) of the

Constitution over its land and water under Entries 17 and 18 of

List-II of the Seventh Schedule to the Constitution and it was

the Union of India which had such rights and powers over the

land and water in Himachal Pradesh by virtue of the provisions

of Article 73 and Article 246(4) of the Constitution.

67. The State Reorganisation Act, 1966 and, in particular

Section 78 thereof, does not also provide for grant of 12% free

power to the State of Himachal Pradesh. It only provides for

the rights and liabilities of Himachal Pradesh as a successor

State of the Composite State of Punjab and what would be such

rights and liabilities of Himachal Pradesh as a successor State

of the Composite State of Punjab will be discussed while

answering the Issue No.9.

68. The claim of the Plaintiff to 12% free power therefore is

not based on any legal right of the Plaintiff, constitutional or

statutory, but only on the decision of the Government of India

referred to in the letter dated 22.07.1985 of the Government of

India, Ministry of Irrigation & Power, (Department of Power) to

the Chairman, H.P. State Electricity Board (Ext. P-55) which is

extracted hereinbelow in extenso:-

"K. Padmabhaiah
Jt. Secretary
Government of India
Ministry of Irrigation & Power
(Department of Power)
(Sanchai aur Vidyut Mantralaya

New Delhi the 22nd July 1985

D.O.No. 53/3/79-DDH

Dear Shri Mahajan,

I am glad to inform you that the formula for sharing

of power and benefits from Central Sector Hydro Electric
Projects has been modified by the Cabinet on 12.02.1985.
The revised formula is reproduced below for your
information:-

(a) 15% of the generation capacity should be kept as

unallocated at the disposal of the Central Govt. to be
distributed within the Region or outside, depending upon
overall requirements.
(b) The "Home State", i.e. where the project is located
will be supplied 12% of power from the energy generated by
the power station, free of cost. The "energy generated"
figures for the purpose will be calculated at the bus bar
level, i.e. after discounting the auxiliary consumption but
without taking into account the transmission line losses
and

(c) The remaining power (73%) would be distributed between

the States of region (including the Home State) on the
basis of Central Assistance given to various States in the
region during the last five years and on the basis of
consumption of electricity in the States in the region in
the last five years, the two factors being given equal
weightage.

2. This revised formula would be applicable in respect of

those Central Sector Hydro Electric Projects in whose case
sanction for investment decision is issued after
 12.02.1985.

3. The Cabinet has also approved the concept of Joint

ventures between the Union and one or more State Government
for implementation of hydro-electric projects in such
projects, the partner State/States would be entitled to the
supply of quantity of power proportionate to their
investment, at bus bar rates, after supply of 12% free
power to the Home State. The Centre’s share of power would
be distributed from such projects as per the formula for
Central Sector Hydro Electric Projects, i.e. 15% to be
reserved with the Centre as unallocated share and the
balance to be distributed between the States of the region
on the basis of two factors enumerated in (c) of para (1)
above.

With regards,
Yours faithfully,

Sd/-
(K. Padmanabhaiah)

Shri Kailash Chand Mahajan,

Chairman,
H. P. State Electricity Board,
Vidyut Bhawan"

69. It will be crystal clear from the aforesaid letter dated

22.07.1985 that the formula of supply of 12% free power from the

energy generated by a power station to the Home State is

applicable to Central Sector Hydro-Electric Projects and with

effect from 12.02.1985 the Union Cabinet has made this

applicable to Joint Ventures between the Union and one or more

State Governments for implementation of Hydro-Electric Projects

and as per this formula after supply of 12% free power to the

Home State, the remaining power is to be distributed to the

partner States proportionate to their investment. This formula

of making 12% free power from the energy generated by a power

station is purely a policy-decision taken by the Government of

India much after the Bhakra-Nangal Project and Beas Project were

executed and in any case does not find place in any provision of

law so as to confer a legal right on the Plaintiff to claim the

same. Our answer to Issue No.8 is that the Plaintiff-State is

not entitled to 12% power generated from the Bhakra-Nangal and

Beas Projects free of cost from the date of commissioning of the

Projects.
Issue No.9

70. The claim of the Plaintiff to allocation of 7.19% of the

total power generated in Bhakra-Nangal and Beas Project from

01.01.1996 is based on the Punjab Reorganisation Act, 1966 and

the State of Himachal Pradesh Act, 1970.

We have already

extracted Section 78 of the Punjab Reorganisation Act, 1966,

while answering Issue No. 6. The other p

rovisions of the

Punjab Reorganisation Act, 1966, which are relevant for deciding

this issue, are extracted herein below:

"Section 2(b) "appointed day" means

the 1st day of
November, 1966;

.......................................................................
.......................................................................

(f) "existing State of Punjab" means the State of Punjab

as existing immediately before the appointed day;

(i) "population ratio", in relation to the States of

Haryana and Punjab and the union, means the ration of
37.38 to 54.84 to 7.78;

(m) "successor state", in relation to the existing State

of Punjab means the State of Punjab or Haryana, and
includes also the Union in relation to the Union rerritory
of Chandigarh and the transferred territory;

(n) "transferred territory" means the territory which on

the appointed day is transferred from the existing State
of Punjab to the Union territory of Himachal Pradesh;

Section 5. Transfer of territory from Punj

ab to
Himachal Pradesh. - (1) On and from the appoi
nted day,
there shall be added to the Union territory o
f Himachal
Pradesh the territories in the existing State
of Punjab
comprised in-

(a) Simla, Kangra, Kulu and lahul and Spiti districts;

(b) Nalagarh tehsil of Ambala district;

(c) Lohara, Amb and Una kanungo circles of Una tehsil of

Hoshiarpur district;

(d) the territories in Santokhgarh kanungo circle of Una

tehsil of Hoshiarpur district specified in Part I of the
Third Schedule;

(e) the territories in Una tehsil of Hoshiarpur district

specified in part II of the Third Schedule; and

(f) the territories of Dhar Kalan Kanungo circle of

Pathankot tehsil of Gurdaspur district specified in Part
III of the Third Schedule,
and thereupon the said territories shall cease to form
part of the existing State of Punjab.
 (2) The territories referred to in clause (b) of sub
section (1) shall be included in, and form part of Simla
district.

(3) The territories referred to in clauses (c), and (d)

and (e) of sub-section (1) shall be included in and form
part of Kangra district, and
(i) the territories referred to in clauses (c) and (d)
shall form a separate tehsil known as Una tehsil in that
district and in that tehsil the territories referred to in
clause (d) shall form a seperate kanungo circle known as
the Santokhgarh kanungo circle; and

(ii) the territories referred to in clause (e) shall form

part of the Hamirpur tehsil in the said district.

(4) The territories referred to in clause (f) of sub-

section (1) shall be included in, and form part of the
Bhattiyat tehsil of Chamba district in the Union territory
of Himachal Pradesh and in that tehsil, the villages
Dalhousie and Balun shall be included in, and form part of
Banikhet kanungo circle and the village Bakloh shall form
part of Chowari kanungo circle."

71. The State of Himachal Pradesh Act, 1970 thereafter

established the New State of Himachal Pradesh comprising the

territories which were comprised in the existing Union

Territory of Himachal Pradesh. In exercise of the powers

conferred on the Central Government under Section 38 of the

State of Himachal Pradesh Act, 1970, the Central Government has

passed an order dated 07.07.1972 called ‘the State of Himachal

Pradesh (Transfer of Assets and Liabilities) Order, 1972’.

Para 7 of this Order, which is relevant and is extracted

hereinbelow:

"For the purposes of paragraphs 5 and 6 of this order the

provisions of Section 2 of the Punjab Reorganisation Act,
1966 (31 of 1966), shall have effect as if: (i) for
clause (i), the following clauses had been substituted
namely:

(i) "Population ratio" in relation to the States of

Haryana, Punjab and Himachal Pradesh and the Union
means the ratio of 37.38 to 54.84 to 7.10 to 0.59%".

(ii) For clause (m), the following clause had been

substituted namely:

(m) "Successor State" in relation to the existing State

Punjab means the State of Punjab or the State of Haryana
or the State of Himachal Pradesh and includes also the
Union, in relation to the Union Territory of Chandigarh."

72. Mr. Ganguli, learned counsel for the Plaintiff,

submitted that it will be clear from clause (i) of

 para 7 of the State of Himachal Pradesh (Transfer

of Assets and Liabilities) Order, 1972 that th

e

population ratio in relation to the States o

f

Haryana, Punjab and Himachal Pradesh and the Union

Territory of Chandigarh is Haryana: 37.38%, Punjab:

54.84, Himachal Pradesh: 7.19% and Chandigarh:

0.59%. He argued that on the basis of suc

h

population ratio, the Plaintiff is, therefore,

entitled to 7.19% of the total power generated in

the Bhakra-Nangal and Beas Projects as a successor

State of the composite State of Punjab. He

submitted that the allocation of only 2.5% of the

power from Bhakra-Nangal and Beas Projects to the

State of Himachal Pradesh as compared to
the

allocation of 54.5% to Punjab and 39.5% to Haryana

and 3.5% to Chandigarh, is in violation of

the

right of the Plaintiff-State to equal treatment.

He submitted that the Plaintiff has, therefore,

sent by the letter dated 22.10.1969, produced and

marked as Ext. P-12, to the Joint Secretary,

Government of India, Ministry of Home Affairs, New

Delhi, claiming a share to the extent of 7.19% of

the total benefits from the Bhakra-Nangal and Beas

Projects on the basis of transfer of 7.19% of the

population of the composite Punjab State

to

Himachal Pradesh along with the transferred

territory, but the Central Government has

not

passed any order as yet granting the Plaintiff its

share of 7.19% of the power generated from

the

Bhakra-Nangal and Beas Projects on the basis of the

ratio of population transferred to the Plaintiff-

 State along with the transferred territory.

73. Mr. Mohan Jain, learned ASG appearing for the Defendant No.1

and Mr. Shyam Diwan appearing for Defendant No.2, on the other

hand, submitted that since there was an agreement between the

successor States arrived at in the meeting held on 17.04.1967 and

this agreement was entered into within two years stipulated in

Section 78(1) of the Punjab Reorgansiation Act, 1966 and

was

binding on the parties, the Plaintiff-State is not entitled to

7.19% of the share of power generated in Bhakra-Nangal and Beas

Projects. They further submitted that Section 78(1) of the Punjab

Reorgansiation Act, 1966 is clear that the rights and liabilities

of the successor State of the composite Punjab State in relation

to Bhakra-Nangal and Beas Projects are to be settled by agreement

within two years or by an order passed by the Central Government

if no such agreement is entered into within two years and,

therefore, this Court cannot consider the claim of the Plaintiff

to a share of 7.19% of the power generated in the two Projects.

74.The language of Section 78(1) shows that the right of

the successor States in relation to Bhakra-Nangal and

Beas Projects are rights on account of their succession

to the composite State of Punjab on the reorganization

of the composite State of Punjab. The language of

Section 78 further makes it clear that if no agreement

is entered into between the States within two years of

the appointed day, the Central Government was required

to determine the rights and liabilities of the successor

States "having regard to the purposes of the Projects".

Hence, the purposes of the Bhakra-Nangal and Beas

Projects will have to be kept in mind while deciding the

share of the successor States.

75.The purposes of the Bhakra-Nangal Project, as evident

from the agreement dated 13.01.1959 between the State of

 Punjab and the State of Rajasthan, were "improvement or

irrigation and generation of Hydro-electric power".

Clause 9(2) of the agreement dated 13.01.1959 (Ext. D-

1/3) provides that the shares of the Punjab and

Rajasthan in the stored water supplies was to be 84.78%

and 15.22% respectively and clause 32 of this agreement

provides that each party shall contribute to the capital

cost of the electrical portion of the project in

proportion to the share of either party in the stored

water supply. Thus, the capital cost contributed by the

composite State of Punjab for construction of the Hydro-

electric project of Bhakra-Nangal was 84.78% and this

capital cost was borne by the composite State of Punjab

as a whole including the transferred territory which

formed part of the State of Himachal Pradesh.

Similarly, we find on a reading of the record of

decisions arrived at the inter-State Conference on

development and utilization of the waters of the rivers

Ravi and Beas held on 25.01.1955 marked as Ext. D-4/10

as well as the minutes of the 6th meeting of the Beas

Central Board held on 13.12.1963 marked as Ex. D-4/15

that 85% of the capital cost of Unit-I and 32% of the

capital cost of Unit-II of Beas Project were to be met

by the composite State of Punjab as a whole including

the transferred territory which formed part of the State

of Himachal Pradesh.

76.The purposes of the Bhakra-Nangal and the Beas Projects,

therefore, were to benefit the entire composite State of

Punjab including the transferred territory which became

part of Himachal Pradesh. If the ratio of the

population of this transferred territory vis-à-vis the

composite State of Punjab was 7.19% and the transferred

territory as detailed in Section 5 of the Punjab

Reorganisation Act, 1966 extracted above was not small,

allocation of only 7.19% of the share of power of the

composite State of Punjab generated in the Bhakra-Nangal

 and Beas Projects was only fair and equitable. The

allocation of only 2.5% of the total share of the power

of the composite State of Punjab generated in the two

Projects to Himachal Pradesh has been made on the basis

of actual consumption of power by the people in the

transferred territory and the location of the sub-

stations in the transferred territory. The summary of

discussion held in the room of the Secretary, Ministry

of Irrigation and Power, on 17.04.1967 (Ext. D-1/6)

shows that the allocation of power to Punjab is 54.5% of

the total power whereas the allocation of power to

Haryana is 39.5% of the total power available to the

composite State of Punjab. These allocations appear to

have been done on the basis of the population ratio of

Punjab and Haryana in the composite State, which were

54.84% and 37.38% respectively. Thus, while States of

Punjab and Haryana have been allocated power on the

basis of their population ratio, Himachal Pradesh has

been allocated power on "as is where is basis".

77.Equal treatment warranted that the Plaintiff-State was

allocated 7.19% of the total power generated in the

Bhakra-Nangal and Beas Projects (after excluding the

power allocated to the Defendant No.4 - State of

Rajasthan) from the appointed day as defined in the

Punjab Reorganisation Act, 1966, i.e. 01.11.1966.

Considering the fact that Chandigarh is the Capital of

both Punjab and Haryana, these two States should meet

the power requirements of the Union Territory of

Chandigarh out of their share. We accordingly order

that the entitlement of power of the constituents of the

composite State of Punjab from the Bhakra-Nangal and

Beas Projects will be at the following percentages:

Himachal Pradesh : 7.19%

UT of Chandigarh : 3.5%

Punjab : 51.8%
 Haryana : 37.51%

Therefore, the entitlement of the Plaintiff out of the total

production will be as under:

Project Entitlement in With

effect from
total production

(i) Bhakra-Nangal 6.095% 01.11.1966

(7.19% of 84.78%) (date of re-
organisation)

(ii) Beas I 5.752% From the date of

(7.19% of 80%) commencement of
Production

(iii) Beas II 2.984% From the date of

(7.19% of 41.5%) commencement of Production
From the above entitlement, what has been received by
the

Plaintiff in regard to Bhakra-Nangal and Beas I have to

be

deducted for the purpose of finding out the amount due to the

Plaintiff-State from the States of Punjab and Haryana u

pto

October, 2011.

Issue No. 10

78. On the basis of its entitlement to 7.19% of the total power

generated in the Bhakra-Nangal and Beas Projects, the Plaintiff

has filed Statements I and III. These statements, however, are

disputed by the Defendants in their written statements. The

Defendant No.1-Union of India will have to work out the details

of the claim of the Plaintiff-State on the basis of the

entitlements of the Plaintiff, Defendant No.2 and Defendant No.3

in the tables in Paragraph 77 above as well as all other rights

and liabilities of the Plaintiff-State, the Defendant Nos. 2 and

3 in accordance with the provisions of the Punjab Reorganisation

Act, 1966 and file a statement in this Court stating the amount

due to the Plaintiff from Defendant Nos.2 and 3 upto October,

2011.

Issue No. 11
79. Since the Defendant Nos. 2 and 3 have utilized power in

excess of what was due to them under law, we also hold that the

Plaintiff-State will be entitled to interest at the rate of 6%

on the amounts determined by the Union of India to be due from

Defendant Nos.2 and 3.

80. Reliefs:

(i) The suit is decreed in part against Defendant Nos. 2 and 3

and dismissed against Defendant Nos. 1, 4 and 5.

(ii) It is hereby declared that the Plaintiff-State is

entitled to 7.19% of the power of the composite State of Punjab

from the Bhakra-Nangal Project with effect from 01.11.1966 and

from Beas Project with effect from the dates of production in

Unit I and Unit II.

(iii)It is ordered that Defendant No.1 will work out the

details of the claim of the Plaintiff-State on the basis

of such entitlements of the Plaintiff, Defendant No.2

and Defendant No.3 in the tables in Paragraph 77 of this

judgment as well as all other rights and liabilities of

the Plaintiff-State, Defendant No.2 and Defendant No.3

in accordance with the provisions of the Punjab

Reorganisation Act, 1966 and file a statement in this

Court within six months from today stating the amounts

due to the Plaintiff-State from Defendant Nos. 3 and 4.

(iv) On the amount found to be due to the Plaintiff-State

for the period from 01.11.1966 in the case of Bhakra-

Nangal Project and the amount found due to the

Plaintiff-State for the period from the dates of

production in the case of Beas Project, the Plaintiff-

State would be entitled to 6% interest from Defendant

Nos. 2 and 3 till date of payment.

(v) With effect from November 2011, the Plaintiff-

State would be given its share of 7.19% as decreed in

this judgment.

(vi) The Plaintiff-State will be entitled to a cost of Rs.

5 lakhs from Defendant No.2 and a cost of Rs.5 lakhs

 from Defendant No.3.

The matter will be listed after six months along with the

statements to be prepared and filed by the Defendant No.1 as

ordered for verification of the statements and for making the

final decree.

..........................J.
(R. V. Raveendran)

..........................J.
(A. K. Patnaik)
New Delhi,
September 27, 2011.