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Sunday, March 20, 2016

The action of the Banks of freezing the bank accounts of APSC is wholly untenable in law, which must be set aside. By no stretch of imagination can it be assumed that the complete takeover of assets of the erstwhile APSC by TSC, on the ground that the State institution happens to be in Hyderabad, which is now a part of Telangana, was what the legislature had in contemplation while enacting the Reorganisation Act, 2014.- the High Court of judicature at Hyderabad for the States of Telangana and Andhra Pradesh in Writ Petition Nos. 1873 and 2882 of 2015, upholding the freezing of the bank accounts of APSC being unsustainable in law is liable to be set aside and set aside. Accordingly, the appeals filed by the State of Andhra Pradesh and APSC are allowed.= the action of freezing of the bank accounts of APSC is bad in law on account of the fact that what has been frozen is not just the pre bifurcation amount, but also the amounts collected by APSC for the period after the bifurcation in relation to the thirteen districts of the successor State of Andhra Pradesh. Accordingly, APSC must be allowed to operate their bank accounts in respect of the thirteen districts which fall within State of Andhra Pradesh now, in which the amounts collected post the date of bifurcation have been deposited. The assets of APSC of the undivided State of Andhra Pradesh, that is, assets existing up to the date of bifurcation may be divided between the two successor States in the population ratio of 58:42, as provided under Section 2(h) of the Reorganisation Act, 2014, if the two successor States are agreeable to the same. If the two successor States are unable to arrive at an agreement, the Central Government may constitute a committee, which may be directed to arrive at an agreement, in accordance with the provisions of the Reorganisation Act, 2014 within a period of two months from the date such representation is made to the Central Government.



|REPORTABLE        |

                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION

                     CIVIL APPEAL NOS. 3019-3020 OF 2016
             (Arising out of SLP (C.) Nos. 14705-14706 of 2015)


ANDHRA PRADESH STATE
COUNCIL OF HIGHER EDUCATION              ……APPELLANT

                                     Vs.

UNION OF INDIA & ORS. ETC.               ……RESPONDENTS

                        WITH

            CIVIL APPEAL NO. 3021 OF 2016
                 (Arising out of SLP (C.) No.14712 of 2015)

                                 J U D G M E N T


V. GOPALA GOWDA, J.

    Leave granted in the Special Leave Petitions.
The present appeals arise out of the  common  impugned  judgment  and  order
dated 01.05.2015 passed by the High Court of  judicature  at  Hyderabad  for
the States of Telangana and Andhra Pradesh in Writ Petition  Nos.  1873  and
2882 of 2015, wherein it was held that  the  assets,  properties  and  funds
lying at the present location of the Andhra Pradesh State Education  Council
of Higher Education now belong exclusively to the Telangana State  Education
Council for Higher Education.



The relevant facts which are required for us to appreciate the  rival  legal
contentions are stated in brief hereunder:

The Andhra Pradesh State Council of Higher Education  (hereinafter  referred
to as the “APSC”) was constituted under Section  3  of  the  Andhra  Pradesh
State Council of Higher Education Act, 1988, to advise the State  government
in matters relating to Higher Education in the  State  and  to  oversee  its
development with Perspective Planning. The APSC continued carrying  out  the
various  functions  assigned  to  it  under  the  Act  of  1988,   including
conducting common entrance examinations for various courses in the State  of
Andhra Pradesh.
On 02.06.2014, the Andhra  Pradesh  Reorganisation  Act,  2014  (hereinafter
referred to as the  “Reorganisation  Act,  2014”)  came  into  force,  which
bifurcated the existing State of Andhra Pradesh into  two  separate  States,
namely, the State  of  Andhra  Pradesh  and  the  State  of  Telangana.  The
statement of objects and reasons of the Act provides, inter alia, as under:

 “a) it provides for the territories of the two successor states  of  Andhra
Pradesh and Telangana, and necessary provisions relating  to  representation
in  Parliament   and   State   Legislatures,   distribution   of   revenues,
apportionment of assets and liabilities, mechanisms for the  management  and
development of water  resources,  power  and  natural  resources  and  other
matters.
……
c) it provides that Hyderabad in the existing State of Andhra Pradesh  shall
be the common capital of both the successor States from  the  appointed  day
for a  period  not  exceeding  ten  years,  and  puts  in  place  legal  and
administrative measures to  ensure  that  both  the  State  Governments  can
function efficiently from the common capital……”

Section 75 of the Reorganisation Act, 2014 provides as under:
“75. Continuance of facilities in certain State institutions.
 (1) The Government  of  the  State  of  Andhra  Pradesh  or  the  State  of
Telangana, as the case  may  be,  shall,  in  respect  of  the  institutions
specified in the  Tenth  Schedule  to  this  Act,  located  in  that  State,
continue to provide facilities to the people of the other State which  shall
not, in any respect, be less favorable to such people than what  were  being
provided to them before the appointed day, for such  period  and  upon  such
terms  and  conditions  as  may  be  agreed  upon  between  the  two   State
Governments within a period of one year from the appointed  day  or,  if  no
agreement is reached within the said period, as may be  fixed  by  order  of
the Central Government.
(2) The Central Government may,  at  any  time  within  one  year  from  the
appointed day, by notification in  the  Official  Gazette,  specify  in  the
Tenth Schedule referred to in subsection (1) any other institution  existing
on the appointed day in the States of Andhra Pradesh and Telangana  and,  on
the issue of such notification, such Schedule shall be deemed to be  amended
by the inclusion of the said institution therein.”

APSC figures as item 27 in the Tenth Schedule  to  the  Reorganisation  Act,
2014. Thus, in terms of Section  75,  APSC  was  required  to  continue  its
functions in respect of both the States, i.e. Andhra Pradesh  and  Telangana
until an agreement was reached between the two successor States.
Vide G.O.M. No. 5 dated 02.08.2014, the Government of Telangana adapted  the
Act of 1988 in the following terms:

“Whereas by Section 101 of the  Andhra  Pradesh  Re-Organisation  Act,  2014
(Central Act No. 6 of 2014), the appropriate Government i.e.  the  State  of
Telangana is empowered by order, to make such adaptations and  modifications
of any law (as defined in section 2(f) of the  Act)made  before  02.06.2014,
whether by way of repeal or amendment as may be necessary or expedient,  for
the purpose of facilitating the application of such  law  in  the  State  of
Telangana before expiration of two  years  from  02.06.2014;  and  thereupon
every  such  law  shall  have  effect  subject  to   the   adaptations   and
modifications so made until altered, repealed  or  amended  by  a  competent
Legislature or other Competent Authority;
And whereas, it has become necessary  to  adapt  the  Andhra  Pradesh  State
Council of Higher Education Act, 1988 and the  Rules  and  Regulations  made
thereunder for the purpose of facilitating their application in relation  to
the State of Telangana……”

Thus, the Telangana State Council of Higher Education (hereinafter  referred
to as the “TSC”) came into existence to discharge  the  same  functions  for
the State of Telangana as the APSC for the State of Andhra Pradesh.
Pursuant to the creation of  the  TSC,  the  Secretary  to  the  Government,
Higher Education (UE) Department, Telangana, wrote  Letter  No.263/UE/2014-2
dated  05.09.2014,  to  the  Principal  Secretary  to   Government,   Higher
Education  (UE)  Department,  Andhra   Pradesh   outlining   a   provisional
allocation of assets as well as posts between  the two States, in  terms  of
the proposal already submitted by the APSC, to  divide  the  assets  in  the
ratio of population as 52:48, as provided for  under  Section  2(h)  of  the
Reorganisation Act, 2014. These were to include:


Distribution of posts in the ratio of 58:42

Allocation of fixed deposits

Allocation of bank balances in various accounts

Number of employees based on nativity

Number of vehicles

Number of equipments

Number of movable assets etc.”




The details of the proposed allocation are provided as under:
“                    Fixed Deposits
|S.No.   |Category   |Total Amount in   |58% to APSCHE   |42% to TSCHE     |
|        |           |Rs.               |                |                 |
|        |General    |607796365         |352521892       |255274473        |
|        |Accounts   |                  |                |                 |
|        |College    |61502021          |35671172        |25830849         |
|        |Accounts   |                  |                |                 |
|        |CETs       |489531581         |283928317       |205603264        |
|        |Accounts   |                  |                |                 |
|        |Total      |115,88,29,967     |67,21,21,381    |48,67,08,586     |


                      Bank Balances in various accounts
|S.No.     |Category    |Total Amount in |58% to APSCHE   |42% to TSCHE   |
|          |            |Rs.             |                |               |
|          |General     |18405959        |10675456        |7730503        |
|          |Accounts    |                |                |               |
|          |College     |164524435       |95424172        |69100263       |
|          |Accounts    |                |                |               |
|          |CETs        |1207229         |700193          |507036         |
|          |Accounts    |                |                |               |
|          |Total       |18,41,37,623    |10,67,99,821    |7,73,37,802    |

Cadre wise allocation of posts between APSCHE & TSCHE
|S.No.   |Post/Cadre               |Total         |Allocation of posts    |
|        |                         |Sanctioned    |after bifurcation      |
|        |                         |Posts         |                       |
|        |                         |              |58% to APSCHE |42% to  |
|        |                         |              |              |TSCHE   |
|1.      |Finance Officer          |1             |1             |0       |
|2       |Deputy Director          |1             |1             |0       |
|3       |Asst. Directors          |3             |2             |1       |
|4       |Lecturers                |4             |2             |2       |
|5       |Asst. Secretary          |1             |0             |1       |
|6       |Consultants              |3             |2             |1       |
|7       |Superintendent           |1             |1             |0       |
|8       |Private Secretary        |1             |0             |1       |
|9       |Senior Accountant        |3             |2             |1       |
|10      |Senior Steno             |1             |0             |1       |
|11      |Jr. Stenographer         |2             |1             |1       |
|12      |Jr. Assistant            |1             |0             |1       |
|13      |Clerk-cum-Typist         |1             |1             |0       |
|14      |Typist-cum-Asst.         |1             |0             |1       |
|15      |Computer Operator        |1             |1             |0       |
|16      |Data Entry Operator      |1             |1             |0       |
|17      |Drivers                  |3             |2             |1       |
|18      |Record Asst.             |1             |0             |1       |
|19      |Roneo Operator           |1             |1             |0       |
|20      |Office Subordinates      |3             |2             |1       |
|        |Total                    |34            |20            |14      |

                     Cadre wise posts to APSCHE & TSCHE
|S.No.         |Category      |Total Number  |58% to APSCHE |42% to TSCHE  |
|              |              |of posts      |              |              |
|1             |Gazetted      |10            |6             |4             |
|              |Cadres        |              |              |              |
|2             |Other cadres  |24            |14            |10            |
|              |Total         |34            |20            |14            |

                    Number of employees based on nativity
                          ( only Council employees)

|S.No.         |Category      |Total         |Andhra        |Telangana     |
|              |              |Employees     |              |              |
|              |              |Working       |              |              |
|1             |Gazetted      |4             |4             |0             |
|              |cadres        |              |              |              |
|2             |Other cadres  |19            |5             |14            |
|              |Total         |23            |9             |14            |

                 Number of vehicles (working and condemned)
|S.No.         |Category       |Total Vehicles|58% to APSCHE |42% to TSCHE  |
|1             |Serviceable    |4             |2             |2             |
|2             |Condemned      |5             |3             |2             |
|              |Total          |9             |5             |4             |

                            Number of Equipments
|S.No.         |Category      |Total         |58% to APSCHE |42% to TSCHE  |
|              |              |Equipments    |              |              |
|1             |Computers     |37            |21            |16            |
|2             |Printers      |18            |10            |8             |
|3             |Others        |27            |16            |11            |
|              |Total         |82            |47            |35            |

                          Number of Movable Assets
|S.No.             |Total Assets      |58% to APSCHE     |42% to TSCHE      |
|1                 |676               |392               |284               |


                                                                ”
On 30.10.2014, the Government of Telangana issued a  Circular  Memo  to  the
senior management of the banks in which the bank accounts of the  government
were operating to ensure that the  provisions  of  the  Reorganization  Act,
2014, especially with respect to the institutions listed in  Schedules  VII,
IX and X were not violated. On 05.01.2015, TSC sent a communication  to  the
Manager, Andhra Bank, Saifabad, Hyderabad Branch, stating that  TSC  is  the
successor organization to APSC as  per  the  Reorganisation  Act,  2014  and
requested the Bank to freeze the operation of Account No. 0533100110978  and
all other accounts operating in the name of APSC. The  Bank  sent  a  letter
dated 07.01.2015 to APSC, informing them about the letter from TSC.  In  its
reply dated 08.01.2015, APSC denied that TSC was its successor and  informed
the Bank that if it were to freeze its accounts, it would be constrained  to
take the appropriate legal action.  Accordingly,  the  Bank  sent  a  letter
dated 14.01.2015 to the TSC declining to freeze the  accounts  of  APSC.  On
28.01.2015, the State Bank  of  Hyderabad,  Shantinagar,  Hyderabad  Branch,
without giving prior notice to APSC froze the  accounts  at  the  behest  of
TSC.



Aggrieved of the said action of the Bank  in  freezing  the  accounts,  APSC
filed Writ Petition No. 1873  of  2015  before  the  High  Court  of  Andhra
Pradesh,  praying  for  the  action  of  the  State   Bank   of   Hyderabad,
Shantinagar, Hyderabad Branch  in  freezing  the  accounts  of  APSC  to  be
declared as illegal, arbitrary and contrary to  the  principles  of  natural
justice and setting it  aside.  The  State  of  Telangana  also  filed  Writ
Petition No. 2882 of 2015 praying for a declaration that APSC and the  State
of Andhra Pradesh be not allowed to withdraw money from  the  bank  accounts
of APSC. By way of the impugned common judgment and order dated  01.05.2015,
the High Court held that TSC would be allowed to operate the concerned  bank
accounts, and that the claim made by APSC was not sustainable since  it  was
now located in the State of Telangana. The High Court held as under:

“6. It is the settled position of  law  that  institutions  located  in  the
successor States are governed by the law  of  successor  State-laws  of  the
land namely, principle of land, known as lex situs.
7. Under Article 246 (2) & (3)  of  the  Constituion  of  India,  the  State
Legislatures are competent to  make  laws  in  respect  of  their  territory
covered by the entries  in  List-II  &  III  of  the  7th  schedule  of  the
Constitution. Therefore, in terms of  Section  75  of  the  Act,  2014,  the
specified institutions under the tenth schedule are governed by the laws  of
the  respective  States  where  they  are  located.  Having  regard  to  the
aforesaid legal position, the institutions specified in the  tenth  schedule
located in Telangana are governed by the law of the State of Telangana.
8…… The office of institution of petitioner No.2 formerly known as APSC,  is
now situated in the State of Telangana  at  Hyderabad.  Therefore,  the  law
enacted by the State of Telangana alone, necessarily,  has  application  for
administration of the institution. Consequently, any action taken  or  order
now passed by the erstwhile body of the institution specified  at  Item  No.
27 of tenth schedule is without jurisdiction and would be ultra vires.
9. The APSC, at the  instance  of  the  State  of  Andhra  Pradesh,  is  now
asserting its power and authority  and  physically  occupying  the  premises
without any authority of law. The APSC is not entitled to operate  the  bank
accounts  or  withdraw  any  amount.  Notwithstanding  the  aforesaid  legal
status, even after 2nd  June  2014,  the  APSC  has  withdrawn  considerable
amounts from the State Bank of Hyderabad, Shantinagar Branch, in respect  of
the above two saving bank accounts. As such, the  petitioner  No.2  wrote  a
letter to the State Bank of Hyderabad and Andhra Bank for  freezing  of  the
said accounts. Accordingly, a decision was taken by  the  Bank  and  rightly
so.”
                                  (emphasis laid by this Court)

On the question of ownership and control of the  erstwhile  APSC,  the  High
Court held as under:
“38.On a fair reading of Section 5 of the Act, 2014, as correctly  contended
by the learned A.G. for the state of Telangana, the State of Andhra  Pradesh
is a mere user of the city of Hyderabad for a maximum period of  ten  years.
It has no proprietary right, title and interest in this  city  and  none  of
the assets which belong to the erstwhile State of  Andhra  Pradesh,  located
at Hyderabad, can be claimed by  the  State  of  Andhra  Pradesh  except  in
accordance with the Act, 2014……
       XXX        XXX           XXX
40……Because of the adaptation with amendments in the eye of  law,  APSC  has
no existence, at least in Hyderabad, or in any part of Telangana State…
41. Under such circumstances, the assets and properties and  funds  whatever
lying at the present location of the APSC belong to TSC.”

The High Court held that the claim made by APSC is not  sustainable  in  law
and that present TSC  be  allowed  to  operate  the  bank  accounts  of  the
erstwhile APSC. Hence, the present appeals filed  by  the  State  of  Andhra
Pradesh and APSC.
Mr. P.P. Rao, learned senior  counsel  appearing  on  behalf  of  the  APSC,
contends that it is essential to first understand  the  correct  purport  of
Section 75 of the Reorganisation Act, 2014.  Section  75  (extracted  above)
deals  only  with  the  continuance  of  facilities  in   respect   of   the
Institutions specified in the Tenth  Schedule.  It  can,  by  no  means,  be
stretched to deal with either ‘apportionment of assets and  liabilities’  of
the Institutions specified in Tenth  Schedule  of  the  Reorganisation  Act,
2014 or allocation of the Institutions to one State or the other.

The learned senior counsel contends that the assets and liabilities  of  the
existing State are dealt with in Part-VI, consisting Sections 47-67  of  the
Reorganisation  Act,  2014,  under  heading  ‘apportionment  of  assets  and
liabilities’.

     Section 47 of the Reorganisation Act, 2014 reads as under:
“47. (1) The provisions  of  this  Part  shall  apply  in  relation  to  the
apportionment of the assets and liabilities of the existing State of  Andhra
Pradesh immediately before the appointed day.
    XXX           XXX            XXX
(3) The apportionment of assets and liabilities shall  be  subject  to  such
financial adjustment as may be necessary  to  secure  just,  reasonable  and
equitable apportionment of the assets and liabilities amongst the  successor
States.
(4) Any dispute regarding the amount of  financial  assets  and  liabilities
shall be settled through mutual agreement, failing which  by  order  by  the
Central Government on the advice of the Comptroller and  Auditor-General  of
India.”
                                  (emphasis laid by this Court)
Further, Section 49, which deals with Treasury and Bank Balances,  reads  as
under:
“49. The total of the cash balances in all treasuries of the existing  State
of Andhra Pradesh and the credit balances of the existing  State  of  Andhra
Pradesh with the Reserve Bank of India, the  State  Bank  of  India  or  any
other bank immediately before the appointed day  shall  be  divided  between
the States of Andhra Pradesh  and  Telangana  on  the  basis  of  population
ratio……”

Population ratio has been defined in Section 2(h) as under:
“2.
(h) “population ratio”, in relation to the  States  of  Andhra  Pradesh  and
Telangana, means the ratio of 58.32 : 41.68 as per 2011 Census”

The learned senior counsel contends that the  assets  of  APSC  need  to  be
divided in the population ratio  between  the  successor  States  of  Andhra
Pradesh and Telangana in a fair and equitable manner.
Mr. Basava Prabhu S. Patil, the learned senior counsel appearing  on  behalf
of the State of Andhra Pradesh  contends  that  the  impugned  judgment  and
order passed by the High Court is  erroneous  in  law.  The  learned  senior
counsel contends that the funds collected  by  APSC  post  the  creation  of
Telangana, i.e., post 02.06.2014 cannot be  appropriated  by  the  State  of
Telangana simply by way of the order of the High  Court,  on  the  basis  of
faulty interpretation of the provisions of the Reorganisation Act, 2014.  It
is submitted that this has effectively resulted in the  State  of  Telangana
stopping the State of  Andhra  Pradesh  from  utilising  the  funds  it  had
collected even post the bifurcation, in respect of  the  thirteen  districts
which formed part of its  territory.  The  learned  senior  counsel  further
draws our attention to Section 64 of the  Reorganisation  Act,  2014,  which
reads as under:

“64. Residuary Provision: The benefit or burden of any  asset  or  liability
of the existing State of Andhra Pradesh not  dealt  with  in  the  foregoing
provisions of this Part shall pass to the State of  Andhra  Pradesh  in  the
first instance, subject to such financial adjustment as may be  agreed  upon
between the States of Andhra Pradesh and Telangana or, in  default  of  such
agreement, as the Central Government may, by order, direct.”
                          (emphasis laid by this Court)

 The learned senior counsel further contends that the impugned judgment  and
order has been passed  on  a  faulty  consideration  of  the  provisions  of
Sections 5, 75 and 101 of the Reorganisation Act,  2014,  and  in  ignorance
and non consideration of the provisions of Part VI of the  Act,  which  deal
with apportionment of assets and liabilities.  The  learned  senior  counsel
contends that the overarching principle of the Reorganisation Act,  2014  is
a twofold basis  of  bifurcation,  namely  reasonableness  and  equity,  and
population ratio, and the same must be implemented in its true spirit.



 On the other hand,  Mr.  T.R.  Andhyarujina,  the  learned  senior  counsel
appearing on behalf of  the  State  of  Telangana  contends  that  the  term
‘facilities’ used in Section 75 of the Reorganisation Act, 2014 should  also
be  understood  to  include  assets  and  liabilities  of  those  respective
institutions. If an institution falls within  the  territory  of  Telangana,
then it cannot be disturbed, and the new  State  of  Andhra  Pradesh  cannot
stake any claim in it whatsoever.



 Mr. K. Ramakrishna  Reddi,  learned  Advocate  General  for  the  State  of
Telangana contends that the specified institutions in the tenth Schedule  of
the Reorganisation Act, 2014 are  partly  corporate  personalities,  in  the
nature of state owned institutions, without any commercial element  and  are
non-profit in nature. The learned Advocate General places  reliance  on  the
decision of this Court in the case of Electricity Employees Union  v.  Union
of India[1], wherein this Court, while interpreting the  provisions  of  the
Punjab Reorganisation Act held as under:

“11. Part VI of the Act as stated above deals with apportionment  of  assets
and liabilities  of  the  erstwhile  State  of  Punjab.  This  Part  is  not
applicable for apportionment of  assets  and  liabilities  of  the  existing
Punjab State Electricity Board, as there  is  specific  provision  for  this
purpose viz., Section 67  and  moreover  the  Board  has  a  separate  legal
entity.”


 Further, the learned Advocate General contends that  the  apportionment  of
assets and liabilities as per the Reorganisation Act, 2014 has been made  on
the basis of territory and location. The Tenth Schedule  state  institutions
have to be maintained as per the location of the  respective  States.  Thus,
purely on the basis of the principle of territoriality also, the  funds  and
assets of the erstwhile APSC now belong to the TSC.



 Mr. Ranjit Kumar, the learned Solicitor  General  appearing  on  behalf  of
Union of India, submits that APSC is a statutory body constituted under  the
Andhra Pradesh State Council for  Higher  Education  Act,  1988.  Since  the
Council has to discharge statutory responsibilities under the relevant  Act,
both the States should adopt the Act  of  1988  under  Section  101  of  the
Reorganisation Act, 2014, in the interest of students,  till  such  time  as
they enact their own laws. While the government  of  Telangana  has  already
adopted this, the Government of Andhra  Pradesh  is  still  to  do  so.  The
learned Solicitor General further submits that the  ownership  and  division
of the assets of the erstwhile APSC would be governed by Section 47  of  the
Reorganisation Act, 2014.



The learned Solicitor General draws our attention  to  a  crucial  provision
which governs the assets and liabilities of  the  institutions  incorporated
under Central or State Act, i.e. Section 52(4), which reads as under:

“52(4) Where anybody corporate constituted under a Central  Act,  State  Act
or Provincial Act for the existing State  of  Andhra  Pradesh  or  any  part
thereof has, by virtue of the provisions of Part II, become  an  inter-State
body corporate, the investments in, or loans or advances to, any  such  body
corporate by the existing State of Andhra Pradesh made before the  appointed
day shall, save as otherwise expressly provided by or  under  this  Act,  be
divided between the States of Andhra  Pradesh  and  Telangana  in  the  same
proportion in which the assets of the body corporate are divided  under  the
provisions of this Part.”
                          (emphasis laid by this Court)

     The learned Solicitor General further submits that since all  statutory
corporations  and  Public  Sector  Undertakings  are  the  instrumentalities
created  by  the  existing  State  of  Andhra  Pradesh  in  the  context  of
reorganization of the existing  State,  their  assets  and  liabilities  are
liable to be apportioned between the two States as per the population  ratio
stipulated under the provisions of Section 2(h) of the  Reorganisation  Act,
2014. The APSC, being an asset of the existing State, created by the Act  of
1988, it became necessary to provide for bifurcation of APSC and  allocation
of fixed deposits,  Bank  balances,  cadre  strength,  vehicles,  equipment,
movable assets etc. The learned senior counsel submits  that  subsequent  to
the impugned judgment and order passed by  the  High  Court,  TSC  has  been
operating the bank accounts of APSC,  which  includes  the  money  collected
from the thirteen districts of the successor State of Andhra Pradesh.
 We have heard the  learned  senior  counsel  appearing  on  behalf  of  the
parties. The short point which arises for our consideration is  whether  the
High Court was right in upholding the action of the Banks  in  freezing  the
accounts of APSC.



 We are unable to agree with the contentions advanced by the learned  senior
counsel appearing for the State of Telangana.



 The Constitution of India envisages a federal feature, which has been  held
to be a part of the basic structure of the Constitution  of  India,  as  has
been held by the seven Judge Bench of this Court in the case of S.R.  Bommai
& Ors. v. Union of India[2], wherein Justice K. Ramaswamy in his  concurring
opinion elaborated as under:

“247. Federalism envisaged in the Constitution of India is a  basic  feature
in which the Union of India is permanent within the territorial  limits  set
in Article 1 of the Constitution and is indestructible.  The  State  is  the
creature of the Constitution and the law made by Articles 2  to  4  with  no
territorial integrity, but a permanent entity with its boundaries  alterable
by a law  made  by  Parliament.  Neither  the  relative  importance  of  the
legislative entries in Schedule VII, Lists I and  II  of  the  Constitution,
nor the fiscal control by the Union per se are  decisive  to  conclude  that
the  Constitution  is  unitary.  The  respective  legislative   powers   are
traceable to Articles 245 to 254 of the  Constitution.  The  State  qua  the
Constitution is federal in structure and  independent  in  its  exercise  of
legislative  and  executive  power.  However,  being  the  creature  of  the
Constitution the State has no right to secede or claim sovereignty. Qua  the
Union, State is quasi-federal. Both are coordinating institutions and  ought
to exercise their  respective  powers  with  adjustment,  understanding  and
accommodation to render socio-economic and political justice to the  people,
to preserve and elongate the constitutional goals including secularism.

248.  The  preamble  of  the  Constitution  is  an  integral  part  of   the
Constitution. Democratic form of Government, federal  structure,  unity  and
integrity of the nation, secularism, socialism, social justice and  judicial
review are basic features of the Constitution.”
                       (emphasis laid by this Court)


 Article 3 of the Constitution of India confers the power  of  formation  of
new states on the Parliament. The scope of Article 3 was elaborated upon  by
a five judge bench of this Court in the case of  Raja  Ram  Pal  v.  Hon’ble
Speaker, Lok Sabha[3] as under:
“India is an indestructible Union  of  destructible  units.  Article  3  and
Article 4 of the Constitution together empower Parliament to  make  laws  to
form a new State by separation  of  the  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, and in so doing to increase or diminish the area  of
any State and to alter its boundaries……”

 The issue of bifurcation of states is both sensitive  as  well  as  tricky.
Adequate  care  has  to  be  taken  by  the   legislature   while   drafting
legislations such as  the  Reorganisation  Act,  2014  to  ensure  a  smooth
division of all assets, liabilities and funds between  the  states  to  make
sure that  the  interests  of  the  citizens  living  in  these  states  are
protected adequately. Therefore, care  must  be  taken  to  ensure  that  no
discrimination is done against either of the  successor  state.  Thus  while
interpreting statutes of such nature, the courts must ensure that all  parts
of the statute are given effect to. An eleven Judge Bench of this  Court  in
the case of H.H. Maharajadhiraja Madhav Rao Jivaji Rao  Scindia  Bahadur  of
Gwalior & Ors. v. Union of India[4] has held as under:
“The Court will interpret  a  statute  as  far  as  possible,  agreeably  to
justice and reason and that in case of  two  or  more  interpretations,  one
which is more reasonable and just will be adopted, for  there  is  always  a
presumption against the law maker  intending  injustice  and  unreason.  The
Court will avoid imputing  to  the  Legislature  an  intention  to  enact  a
provision which flouts notions of justice and norms of  fairplay,  unless  a
contrary  intention  is  manifest  from  words  plain  and  unambiguous.   A
provision in a statute will not be construed to defeat its manifest  purpose
and general values which animate its structure. In  an  avowedly  democratic
polity, statutory provisions ensuring  the  security  of  fundamental  human
rights including the right to property will, unless the contrary mandate  be
precise and unqualified, be construed liberally so as to uphold  the  right.
These rules apply to the  interpretation  of  Constitutional  and  statutory
provisions alike.”
                     (emphasis laid by this Court)


In the case of Prakash Kumar@ Prakash  Bhutto  v.  State  of  Gujarat[5],  a
constitution bench of this Court held as under:
“By now it is well settled Principle of Law that no part of  a  statute  and
no word of a statute can be construed in  isolation.  Statutes  have  to  be
construed so that every word has a place and everything is in its place.  It
is also trite that the statute or rules made thereunder should be read as  a
whole and one provision should be construed  with  reference  to  the  other
provision to make the provision consistent with  the  object  sought  to  be
achieved.
In Reserve Bank of India v. Peerless  General  Finance  and  Investment  Co.
Ltd. this Court said:
"33. Interpretation must depend on the text and the context.  They  are  the
basis of interpretation. One may well  say  if  the  text  is  the  texture,
context is  what  gives  the  colour.  Neither  can  be  ignored.  Both  are
important.  That  interpretation   is   best   which   makes   the   textual
interpretation match the contextual. A statute is best interpreted  when  we
know why it was enacted. With this knowledge,  the  statute  must  be  read,
first as a whole and then section by section, clause by  clause,  phrase  by
phrase and word by word. If a statute is looked at, in the  context  of  its
enactment, with  the  glasses  of  the  statute-  maker,  provided  by  such
context, its scheme, the sections,  clauses,  phrases  and  words  may  take
colour and appear different than when the statute is looked at  without  the
glasses provided by the context. With these glasses we must look at the  Act
as a whole and discover what each section,  each  clause,  each  phrase  and
each word is meant and designed to say as to fit  into  the  scheme  of  the
entire Act. No part of a statute and no word of a statute can  be  construed
in isolation. Statutes have to be construed so that every word has  a  place
and everything is in its place." "
                            (emphasis laid by this Court)


It is natural that when an existing State if  bifurcated  to  form  two  new
States,  there  must  be  an  equitable  bifurcation  of  the   assets   and
liabilities of the statutory bodies among the two successor States as  well,
to ensure welfare of the public at large residing within these territories.

In the instant case, the State of Telangana has claimed ownership  over  the
entire funds and assets of the (erstwhile) APSC. This could surely not  have
been the intention of the  legislature  while  enacting  the  Reorganisation
Act, 2014. The main thrust of  the  argument  of  both  the  learned  senior
counsel appearing on behalf of State of Telangana, as well as  the  impugned
judgment and order passed by the High Court is that the successor  State  of
Andhra Pradesh has absolutely no right over the institutions in the city  of
Hyderabad, by virtue of the fact  that  Hyderabad  falls  in  the  successor
State of Telangana. Heavy reliance has also been placed  on  Section  75  of
the Reorganisation Act, 2014, on the ground that  the  assets  belonging  to
the specified institutions of the Tenth Schedule exclusively belong  to  the
State institutions, since the Act does  not  provide  any  apportionment  to
them. We are wholly unable to agree with this contention advanced on  behalf
of the State of Telangana. If this contention is accepted, it  would  render
Section 47 of the Act, which provides for the apportionment  of  assets  and
liabilities among the successor States, useless and nugatory.

The action of the Banks of freezing the bank  accounts  of  APSC  is  wholly
untenable in law, which must be set aside. By no stretch of imagination  can
it be assumed that the complete takeover of assets of the erstwhile APSC  by
TSC, on the ground that the State institution happens to  be  in  Hyderabad,
which is  now  a  part  of  Telangana,  was  what  the  legislature  had  in
contemplation while enacting the Reorganisation Act, 2014.


For the reasons stated supra, the common impugned judgment and order  passed
by the High Court of judicature at Hyderabad for  the  States  of  Telangana
and Andhra Pradesh in Writ Petition Nos. 1873 and 2882  of  2015,  upholding
the freezing of the bank accounts of APSC  being  unsustainable  in  law  is
liable to be set aside and set aside. Accordingly, the appeals filed by  the
State of Andhra Pradesh and APSC are allowed.


Having allowed the appeal filed by APSC, we also hold  that  the  action  of
freezing of the bank accounts of APSC is bad in law on account of  the  fact
that what has been frozen is not just the pre bifurcation amount,  but  also
the amounts collected by APSC  for  the  period  after  the  bifurcation  in
relation to  the  thirteen  districts  of  the  successor  State  of  Andhra
Pradesh. Accordingly, APSC must be allowed to operate  their  bank  accounts
in respect of the thirteen districts  which  fall  within  State  of  Andhra
Pradesh now, in which the amounts collected post  the  date  of  bifurcation
have been deposited. The assets of APSC of the  undivided  State  of  Andhra
Pradesh, that is, assets existing up to  the  date  of  bifurcation  may  be
divided between the two successor States in the population ratio  of  58:42,
as provided under Section 2(h) of the Reorganisation Act, 2014, if  the  two
successor States are agreeable to the same. If the two successor States  are
unable to arrive at an agreement, the Central Government  may  constitute  a
committee, which may be directed to arrive at an  agreement,  in  accordance
with the provisions of the Reorganisation Act, 2014 within a period  of  two
months from the date such representation is made to the Central Government.


All pending applications are disposed of. No costs.
………………………………………J.
                                  [V. GOPALA GOWDA]



………………………………………J.
[ARUN MISHRA]
New Delhi,
Dated: March 18, 2016
-----------------------
[1]
      [2] (2000) 7 SCC 339
[3]
      [4] (1994) 3 SCC 1
[5]
      [6] (2007) 3 SCC 184
[7]
      [8] (1971) 1 SCC 85
[9]
      [10] (2005) 2 SCC 409

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