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.
2
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
3
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
4
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 at Pandoh, a reservoir comprising an area of
5
323 (three hundred & twenty three) acres and a storage
capacity of 33240 (thirty three thousand two hundred and
forty) acre feet have been 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.
Under 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.
6
As 7.19% of the total population of the composite State of
Punjab was transferred along with the territories transferred
to the plaintiff under the Punjab Reorganisation Act, 1966,
the plaintiff was entitled to 7.19% of the total power
generated in the Bhakra-Nangal and Beas Projects. This
was also the 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 in 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 at least 12% of total power generated from
such project free of cost. Since plaintiff is the mother State
in which the 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 two 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-
7
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 day (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.
8
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 (Dehar) Unit II (Pong)
State/U.T
Rajasthan 15.22% 20% 58.50%
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
Chandigarh
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
9
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
10
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
11
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
12
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
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.
14
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)
15
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.
16
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-
17
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.
18
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
19
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
20
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
21
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.
22
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
23
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
24
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
25
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
26
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
27
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:
28
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:
29
"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)
30
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
31
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
32
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
33
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-
34
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
35
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].
36
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
37
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
38
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.
39
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
40
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
41
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
42
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
43
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.
44
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
45
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
46
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.
47
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
48
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
49
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
50
the constitutional right to equal treatment vis-`-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 Beas
Projects on the basis of such statutory right and
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 the provisions of the Punjab Reorganisation Act,
1966 that the Plaintiff-State has claimed equal rights to
power from the 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 not 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
51
Projects from out of the share of composite State of Punjab
prior to the Punjab Reorganisation Act, 1966, the 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.
52
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-
53
(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,
54
(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."
55
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
56
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
57
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
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
59
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
60
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
61
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
62
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
63
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
64
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
65
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 `Financial 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 Shanta Kumar, Chief
Minister of Himachal Pradesh, 15 MW of power has been
allotted on `ad hoc basis' to Himachal Pradesh pending a
66
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,
clearly 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, 1966. Issue No.7 is answered
accordingly.
67
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 and transfer of power
to Bilaspur as a consideration for construction of the
Bhakra Dam. He submitted that as the 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-`-
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-`-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
68
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
69
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
70
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
71
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
72
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
73
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,
74
(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
75
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
76
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.
77
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 provisions 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
78
the existing State of Punjab to the Union territory
of Himachal Pradesh;
Section 5. Transfer of territory from
Punjab to Himachal Pradesh. - (1) On and from
the appointed day, there shall be added to the
Union territory of 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
79
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
80
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 the population
ratio in relation to the States of 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 such 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
81
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
82
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
83
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
84
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-`-vis the
85
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
86
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%
87
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 upto 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
88
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.
89
(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
90
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.
