for effective management of the water resources in the country by nationalization and inter-linking of rivers from Ganga - Cauveri, Vaigai-Tambaravarmi up to Cape Kumari. According to him, as early as in 1834, Sir Arthur Cotton, who had constructed the Godavari and Krishna dams, suggested a plan called the `Arthur Cotton 2

REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL ORIGINAL JURISDICTION WRIT PETITION (CIVIL) NO. 512 OF 2002 "IN RE : NETWORKING OF RIVERS" WITH WRIT PETITION (CIVIL) NO. 668 OF 2002 J U D G M E N T Swatanter Kumar, J. 1. Nearly ten years back, the petitioner in Writ Petition (Civil) No. 668 of 2002, a practicing advocate, instituted the petition based on some study that there was a need to conserve water and properly utilize the available resources. Thus, the present petition has been instituted with the following prayers:- "a. Issue an appropriate writ order or direction, more particularly a writ in the nature of Mandamus directing the respondent no. 1 to take appropriate 1 steps/action to nationalize all the rivers in the country. b. Issue an appropriate writ order or direction, more particularly a writ in the nature of Mandamus, directing the respondent No. 1 to take appropriate steps/action to inter link the rivers in the southern peninsula namely, Ganga, Kaveri, Vaigai and Tambaravani. c. Issue an appropriate writ order or direction in the nature of mandamus directing the respondents to formulate a scheme whereby the water from the west flowing rivers could be channelized and equitably distributed." 2. The above directions were sought by the petitioner against the Central Government as well as against various State Governments, for effective management of the water resources in the country by nationalization and inter-linking of rivers from Ganga - Cauveri, Vaigai-Tambaravarmi up to Cape Kumari. According to him, as early as in 1834, Sir Arthur Cotton, who had constructed the Godavari and Krishna dams, suggested a plan called the `Arthur Cotton 2 Scheme' to link the Ganga and Cauveri rivers. In 1930, Sir C.P. Ramaswamy Aiyar also suggested and supported such - a scheme. Thereafter, various political leaders of the country have supported the cause; but no such schemes have actually been implemented. It is the case of the petitioner that the Inter-State Water Disputes Act, 1956 (for short `the Act') and the River Boards Act, 1956 were enacted by the Parliament under Article 262 read with Entry 56 of List-I of the Seventh Schedule to the Constitution of India, 1950 (hereafter, `the Constitution'). Due to reluctance of water-rich States, the National Water Development Agency (hereafter, `NWDA') has not been allowed to undertake detailed survey and it is argued that only by nationalization of the rivers, by the Government of India, this problem can be resolved to some extent. The petitioner had filed a writ before the High Court of Judicature at Madras, being Writ Petition No. 6207 of 1983, praying for various reliefs. This Writ Petition was disposed of without any effective orders by the High Court. Persisting with his effort, the petitioner 3 earlier filed writ petitions before this Court, being Writ Petition (C) No. 75 of 1998 and Writ Petition (C) No. 15 of - 1999, praying inter alia for nationalized navigation and inter-linking of all the rivers in the country. 3. We must notice, to put the records straight, that on 29th September, 1994, a Bench of this Court took suo motu notice of a write-up that had appeared in the Hindustan Times newspaper, dated 18th July, 1994, titled "And quiet flows the maili Yamuna". Notice was issued to the Central Pollution Control Board, Municipal Corporation of Delhi, Irrigation and Flood Department of the Government of India, National Capital Territory of Delhi and the Delhi Administration. Since then, the writ petition is being continuously monitored by this Court, till date. During the pendency of this writ petition, I.A. No. 27 came to be filed, wherein the learned Amicus Curiae in that case referred to the address of Dr. A.P.J. Abdul Kalam, the then President of India, on the eve of the Independence Day. This, inter alia, related to creating a network between various rivers in the 4 country, with a view to deal with the paradoxical situation of floods in one part of the country and droughts in other parts. In other words, it related to the inter-linking of rivers - and taking of other water management measures. On 16th September, 2002, this Court, while considering the said I.A., directed that the application be treated as an independent writ petition and issued notice to the various State Governments as well as the Attorney General for India and passed the following order:- "Based on the speech of the President on the Independence Day Eve relating to the need of networking of the rivers because of the paradoxical phenomenon of flood in one part of the country while some other parts face drought at the same time, the present application is filed. It will be more appropriate to treat to treat it as independent Public Interest Litigation with the cause title "IN RE : NETWORKING OF RIVERS -- v. ---" Amended cause title be filed within a week. Issue notice returnable on 30th September, 2002 to the respondents as well as to the Attorney General. 5 Serve notice on the standing counsel of the respective States. Dasti service, in addition, is permitted." 4. This is how I.A. No. 27 in Writ Petition (Civil) No. 725 of 1994 was converted into Writ Petition (Civil) No. 512 of - 2002. The Writ Petition (Civil) No. 512 of 2002 was taken up for hearing and notice was issued to all the States, inviting affidavits regarding their stance on the issue of networking of rivers. 5. In view of the above order, the petitioner in Writ Petition (Civil) No. 668 of 2002 withdrew Writ Petition (C) No. 75 of 1998 as well as Writ Petition (C) 15 of 1999, which leave was granted by this Court. 6. As already discussed above, the petitioner had filed Writ Petition (Civil) No. 668 of 2002 with somewhat similar prayers as contained in I.A. No. 27. In that writ petition, the petitioner has averred that no prayer with regard to inter linking of rivers covering the southern part of the 6 Peninsular Region had been claimed and it was also his contention that the southern part was most drought prone and had been witnessing more inter-state water disputes. Thus, he had filed Writ Petition (Civil) No. 668 of 2002 and prayers made therein were liable to be allowed. - 7. In the present case, we are concerned with Writ Petition (C) No.668 of 2002, Writ Petition (C) No. 512 of 2002 as well as the I.A.s and the contempt petitions filed in these two petitions. Accordingly, this order shall dispose of all these matters but we make it clear that presently, we are not dealing with Writ Petition (C) No. 725 of 1994. 8. It has also been averred by the petitioners and the intervenors in these petitions that the need to conserve water resources and assuring their optimum consumption can be seen from the steps taken in this regard, not only by the developed countries but also by developing and under- developed countries. The Government of India has always shown considerable concern regarding the management of 7 water resources in the country and had framed, for this purpose, the National Water Policy which is being updated on a yearly basis. The National Water Policy seeks to make available water supply to those areas which face shortages. This aspect of the matter could be effectively dealt with, only if the various rivers in the country are linked and are nationalized. This has been a matter of public debate and - discussion for a considerable time and still continues to be so, without showing any reflection of ground reality. 9. The Ministry of Irrigation, along with the Central Water Commission, had formulated in the year 1980 a National Perspective Plan (NPP) for optimum utilization of water resources in the country which envisaged inter-basin transfer of water from water-surplus to water-deficit areas. Apart from diverting water from rivers which are surplus, to deficit areas, the river linking plan in its ultimate stage of development will also enable flood moderation. It was comprised of two components: Peninsular Rivers Development and Himalayan Rivers Development. The first 8 involved major inter-linking of the river systems and the latter envisaged the construction of storage reservoirs on the principal tributaries of rivers Ganga and Brahmaputra in India, Bhutan and Nepal. This was to help transfer surplus flows of the eastern tributaries of the Ganga to the West, apart from linking the main Brahmaputra and its tributaries with the Ganga and Mahanadi rivers. The scheme is divided into four major parts: i) - ii) Interlinking of Mahanadi-Godavari-Krishna- Cauvery rivers and building storages at potential sites in these basins. iii) Interlinking of West flowing rivers north of Bombay and south of Tapi. iv) Interlinking of rivers Ken & Chambal. v) Diversion of other west flowing rivers from Kerala. 9 10. The petitioners have also made several suggestions which have been appreciated by the competent authorities on consideration. It is emphasized that the cost is negligible when compared to the potential benefits which may be bestowed on the nation. The petitioners rely upon Article 262 of the Constitution, read along with Entry 17, List II and Entry 56 of List I of the Seventh Schedule to the Constitution to substantiate their submissions. Finally, the petitioners submit that the preservation of water resources is a part of the right to life and livelihood, enshrined in Article 21 of the Constitution and that the Central Government should take immediate and urgent steps to nationalize the rivers, so that equitable and proper - distribution of water can be ensured for the betterment of the population. According to them, the Central Government should also adopt all necessary measures, both scientifically and naturally, to increase the usable water resources and to preserve whatever resources the Union of India has already been naturally gifted with. 10 11. As a result and because of the inaction on the part of the Central Government and the State Governments, it is submitted that grant of the reliefs as prayed for in the writ petition would be in consonance with the constitutional spirit and in the larger public interest. 12. The learned Amicus Curiae, who had been pursuing this public cause for a number of years, in furtherance to the request of this Court, has also submitted a detailed note with regard to the background and summary of the proceedings in these petitions. 13. As per the learned Amicus Curiae, on 14th August, 2002, the then President of India, Dr. APJ Abdul Kalam, in his address to the nation on the eve of Independence Day, - had observed that the need of the hour was the creation of a Water Mission which, inter alia, would look into the question of networking of rivers with a view to deal with the paradoxical situation of floods in one part of the country and drought in the other. Based on this and as afore- recorded, a notice was issued, on 16th September, 2002, to 11 the States and the Attorney General for India as respondents. In response to the said notice, none of the States or Union Territories, except the State of Tamil Nadu, had filed affidavits supporting/opposing the prayers made in the writ petition. The time for filing of affidavits was again extended up to 30th September, 2002, but no further affidavits were received by that time. 14. The learned then Attorney General for India, on behalf of the Union of India, stated that the Government had accepted the concept of interlinking of rivers and a High Powered Task Force would be formed. Therefore, this Court, vide Order dated 31st October, 2002, recorded that there is in-principle consensus amongst all States to go ahead with the project of interlinking of rivers. - 15. Vide Order dated 30th August, 2004, it was noticed by this Court that, though there had been a change in the Government, the then Solicitor General, appearing for the 12 Government, informed this Court that a decision had been taken, in principle, to continue with interlinking of rivers. 16. A high level Task Force was set up. However, vide order dated 5th May, 2003, this Court observed that inputs from other experts, in many fields, were necessary and that the Task Force was to give due consideration to such inputs. Feasibility Reports (hereafter, `FR') were prepared for the intended links. Subsequently, vide its order dated 8th April, 2005, this Court made it absolutely clear that the orders of the Court in these respects have to be complied with in letter and spirit. The FR of all links were to be put on the website after their completion. This Court had also made observations that the prior consent of any State Government was not necessary for placing the FRs on the website and directed them to be so placed. With great persuasion and efforts, the FRs of 16 links had been placed on the website. At the request of the Amicus, the website - was ordered to be made interactive so that people could submit their response thereto. 13 17. The status report filed on behalf of the Government of India also showed that a committee of environmentalists, social activists and other experts would be constituted to be involved in the consultative process of formulation and execution of the entire project. 18. The status reports filed, from time to time, have been considered by this Court. 19. Now, we may deal with the response of various States, as they appear from the record before us. The response affidavits have been filed on behalf of ten States. However, the remaining States have not responded, despite the grant of repeated opportunities to do so. While the States of Rajasthan, Gujarat and Tamil Nadu have supported the concept of inter-linking of rivers, the State of Madhya Pradesh had stated that networking of rivers is a subject falling under the jurisdiction of the Central Government and the Central Government should consider the matter. The - 14 States of Karnataka, Bihar, Punjab, Assam and Sikkim have given their approval to the concept in-principle, but with definite reservations, i.e., a kind of qualified approval, arguing that the matters with regard to the environmental and financial implications, socio-economic and international aspects, such as inter-basin water transfer, need to be properly examined at the appropriate levels of the Government. For example, all the rivers in Bihar originate from Nepal and it may be necessary or desirable to take consent of neighbouring countries, is a matter which would require consideration of the appropriate authority in the Central Government. According to the State of Punjab, inter-linking of rivers should be started only from water- surplus States to States facing water deficit. The States of Assam, Sikkim and Kerala had raised their protests on the grounds that they should have exclusive right to use their water resources and that such transfer should not affect any rights of these States. The State of Sikkim was concerned with particular reference to tapping of the hydro - 15 power potential in the State and the State of Kerala entirely objected to long distance, inter-basin, water transfer. 20. The Union of India filed three different affidavits dated 25th October, 2002, 5th May, 2003 and 24th December, 2003. From these affidavits, the stand of the Union of India appears to be that networking of rivers had been considered with great seriousness even after the 1972 Rao Committee Report. Surveys and studies were underway. The 1980 National Perspective Plan of the erstwhile Ministry of Irrigation, presently the Ministry for Water Resources, envisaged inter-basin transfer from water-surplus to deficit areas. It would have direct benefits, like the irrigation of 35 million hectares (Mha), full exploitation of existing irrigation projects of 140 Mha, power generation of 34 million Kilowatt (KW); besides the indirect benefits like flood control, navigation, water supply, fisheries, pollution control, recreation facilities, employment generation, infrastructure and socio-economic development etc. With regard to the approvals required, it is submitted that the Ministry of Environment and Forests, Union of India had given some - 16 clearances, while refusing the same in other cases. The consent of some of the States had not been received. The expected financial implication as far back as in 2002 was Rs.5,60,000 crores. 21. However, the Union of India has submitted that there is no necessity for formation of a high-powered committee as prayed for in the petitions. The high-level task force is to be set up for considering the modalities of state-wise consensus. The NWDA was set up as autonomous registered society under the aegis of Ministry of Water Resources, in New Delhi in 1992, for the purposes of preparation of FRs, conduct of water-balance and other scientific studies, etc. for Peninsular Region rivers (and for Himalayan Region rivers also, since 1990) and is headed by the Union Minister of Water Resources. The Chief Ministers and/or the Ministers and the Secretaries as their nominees for Water Resources/Irrigation of the State governments are its members. The pre-feasibility reports of all 30 identified links had been completed by the NWDA. 17 - 22. The Union of India and some states have shown their concerns and their apprehensions about these projects, including questioning the reliability of water supply from distant sources, distribution of water given the existing tribunal awards and the continued availability of existing water surpluses. 23. In another affidavit, the Union of India referred to the Terms of Reference to the Task Force and the appointment of its Members. Action Plan I was prepared, which was expected to be implemented by 2016. Out of the independent links to be pursued for discussion, the first were the links in the States of Gujarat, Maharashtra, Chattisgarh; secondly, the States of Karnataka, Madhya Pradesh, Uttar Pradesh and Rajasthan were to be included in discussions and thirdly, the States of Andhra Pradesh, Tamil Nadu and Orissa were to be invited for discussion. The Detailed Project Reports (hereafter, `DPR') were expected to be completed by December, 2006. However, from the 18 record, it appears that these DPRs have not been completed even till today. The scheme of inter-linking of - rivers/preparation of DPRs is stated to be under review by different groups and authorities. 24. The Union of India also intended that these project reports should encompass water sector schemes, rainwater harvesting schemes etc., as these cannot be implemented independent of the inter-linking scheme. The last of the affidavits filed on behalf of the Union of India was in December, 2003. This affidavit gives details of the States, with which a dialogue was to be held as also the details of constitution of sub-committees. The Terms of Reference of the Task Force included the approval of all links. With the intention to arrive at a general consensus, before entering into agreements, the Union of India has discussed details with Maharashtra and Gujarat and preliminary discussion has taken place with the States of Andhra Pradesh, Chattisgarh, Karnataka, Orissa, Tamil Nadu and Pondicherry. According to the Union of India, invoking the 19 matter internationally, at this stage, was not advisable as the matter was premature. The NWDA was to begin the DPR for the first link, i.e., the Ken-Betwa project, which itself - was expected to take 30 months time. In this, the DPR has now been prepared; however, the implementation is yet to begin. We must notice that in all other links even the DPRs are not ready, as of now. The draft Memorandum of Understanding (hereafter, `MoU') had been circulated for conduct of DPR of three more Peninsular links. The Standing Committee of the Parliament on Water Resources, (hereafter, `the Standing Committee'), in its report for the year 2004-05 has commented that for the purpose of preparation of DPRs for the Ken-Betwa link and the Parbati- Kalisindh-Chambal link projects, a sum of Rs.14 crores had been earmarked, out of the total Rs.35 crores allocated for NWDA. However, the Standing Committee had been constrained to observe that, though the FR of the Ken- Betwa link was completed in November, 1996, the project was still at a nascent stage. At the time of the report in 2004-05, the basic MoU between the Governments of Uttar 20 Pradesh and Madhya Pradesh, for preparation of DPR, still remained to be signed, on the ground that the State of Uttar Pradesh required more water to be allocated to it. They - further observed that, if the Ministry of Water Resources, Government of India had set a time frame for finalization of issues like this, the precious time of eight years would not have been lost. The matter still rests at that stage. Today, though DPR has been prepared for this link alone, no link project has reached the implementation stage. 25. The report of the Standing Committee which, inter alia, had examined the river inter-linking proposal was presented to the Parliament of India on 23rd August, 2004. It was strongly recommended that the Government should take firm steps and fix a definite time frame to lay down the guidelines for completion of FRs, preparation of DPRs and completion of projects so that they may be completed and the benefits accrued within reasonable time and costs. It was the opinion of the Standing Committee that the inter- linking of Himalayan and Southern region rivers, if done 21 within a definite schedule, would save the nation from the devastating ravages of chronic droughts and floods. The recommendations of the Standing Committee deal primarily with two kinds of States; the States having water shortage - and the States having surplus water. Still, there would be a third category of States, which would be comprised of those States which have just sufficient water and therefore, do not fall in either the flood-affected or the drought-affected categories of States. The role of such States may not be very project-related; but, their consent/concurrence is needed for complete implementation of the programme. Their role is relevant as some canal projects, linking different rivers, may pass through such States. But as already noticed, except one, no other DPR has so far been finalized and in fact, none put into implementation. Thus, this question would remain open and has to be examined at the appropriate stage by the competent forum. Projection of Status Reports : - 22 26. Different Status Reports have been filed in this case. The last of the Status Reports have been filed by the Union of India on 18th March, 2011. It has been pointed out that the NWDA, which was to complete the task relating to preparation of FRs and DPRs of link projects, has completed - 208 preliminary water-balance study of basins, sub-basins and diversion points, 74 toposheets and storage capacity studies of reservoirs, 37 toposheet studies of link alignments and 32 pre-feasibility reports of links, towards the implementation of inter-linking of rivers in the country. Based on these studies, this agency identified 30 links (16 under the peninsular river development component and 14 under the Himalayan river development component) for preparation of FRs. The process of consensus building is on-going, in regard to the feasibility of implementing other interlinking projects. These reports have shown that a significant effort and attempts have been made and the unquestionable benefits that would accrue on the 23 implementation of the interlinking projects will be to benefit the country at large. One aspect that needs to be noticed is that, till today, no minor or major project has been actually implemented at the ground level despite the fact that this case has been pending before this Court for more than ten years. Only the DPR of the Ken-Betwa link has been prepared and its implementation is awaiting the approval of - the State Governments as well as the allocation of funds, even to begin the work. This does not speak well of the desire on the part of any of the concerned Governments to implement these projects, despite the fact that there is unanimity of views among all that this project is in the national interest. 27. The Committee of Environmentalists, Social Scientists and other Experts on inter-linking of rivers, had met after the submission of the Status Report dated 5th March, 2010. They discussed various aspects of different projects. In the Himalayan region, FRs of two remaining 24 links were completed, i.e., the Sarda-Yamuna link and Ghagra-Yamuna Link. The field survey and investigation for Sone Dam on the southern tributaries of the Ganga link, was still in progress. The Ministry of Environment and Forests had refused permission for survey and investigation of the Manas-Sankosh-Tista-Ganga link, but the toposheet study for the alternative Jogigopa-Tista-Farakka link has been completed. In the Peninsular region, the projects relating to Bedti-Varada and Netravati-Hemavati-Tapi are awaiting - Karnataka Government's consent. In Netravati-Hemvati- Tapi link, the Karnataka Government has refused to consent even to the preparation of FR until decision of related cases, pending in the Courts. 28. In the Dhadun dam, relating to the Ken-Betwa link, two power houses and a link canal will be taken up in Phase I and the Betwa basin will be completed in Phase-II. Upper Betwa Sub-Basin will receive priority completion and minor projects are proposed to be completed first. Phase-II will be 25 commenced after survey and investigation. However, this project is still at the survey and planning stage and even comprehensive clearances, from the Uttar Pradesh Government, have not been received. The State of Rajasthan refuses to consider the MoU for another priority link, Parbati-Kalisindh-Chambal, until the updation of its hydrology project. 29. Similarly, there are other projects where public hindrances are caused against carrying out of survey and investigation. In the Par-Tapi-Narmada and Damanganga-- Pinjal links, residents have shown concern about the extent of land to be submerged on the construction of the proposed dam. In response, the State Governments of Gujarat and Maharashtra have set up Committees to take up the matters with the panchayats and to commence the projects. 30. The NWDA had also, in the course of framing of its policies, proposed intra-state links. Except for six States and four Union Territories, all other States and Union Territories have interest in these intra-State links. There 26 are eight inter-linking projects which are under review by different State authorities. However, the details of the divergence between the State Governments are not clearly spelt out, even as of now. 31. An additional study was undertaken by the National Council for Applied Economic Research (hereafter, `NCAER') and the revised final report, published in April 2008, assessed the economic impact of the rivers interlinking program and suggested an investment roll out plan, i.e., a practical implementation schedule, for the same. A copy of - this report was submitted in the year 2011, before this Court. 32. As already noticed, the Task Force was constituted by the Central Government for interlinking of river projects in December 2002. It submitted its Action Plans I and II for implementation of the project and also finalized the terms of reference for the purposes of the DPRs. Action Plan I, 27 submitted in April 2003, envisages completion of 30 FRs by the authorities by December 2005. 33. Action Plan II, submitted in April 2004, mainly envisaged the appraisal of individual projects, in respect of their economic viability, socio-economic and environmental impacts, preparation of resettlement plans and reaching speedy consensus among States. The reports have been submitted to the Central Government and are under consideration. With this completion of work, the Task Force had completed its object and stood dissolved. After winding up of the Task Force, a Special Cell on interlinking of rivers was created under the Ministry of Water Resources. - However, what happened to the two Action Plan reports submitted by the Task Force is a matter left to the imagination of anyone. 34. From the above, it is not difficult to visualize the difficulties in preparation, execution, financing and consensus building, still, it is the need of the hour to carry 28 out these projects more effectively and with greater sensitivity. Economic Aspect : 35. As per the report of the Standing Committee for the year 2004-05, which was presented to the Parliament of India, the planned budgetary allocation was made under NWDA as follows : 36. Actual allocation for 2002-03 was Rs.15.30 crores, the budget estimate for 2003-04 was 20 crores, the revised estimate for the same year was Rs.21.95 crores and for 2004-05, the budget estimate was Rs.35 crores. - 37. The Amicus Curiae, in his report, has noted that the new aggregated cost of the entire program varies between Rs. 4,44,331.20 crores, at 2003-04 prices, and Rs.4,34,657.13 crores, at 2003-04 prices, depending on the implementation of the proposed Manas-Sankosh-Tista- Ganga link or the Jogigopa-Tista-Farakka link respectively. 29 38. As already noticed, the NCAER had been assigned the work of assessing the economic impact of river interlinking programmes, which in turn, suggested an investment roll-out plan for the same. The report of the NCAER was prepared in April, 2008. This report considers various financial aspects and the impact of various river interlinking projects in India. They point out that after independence, irrigation was viewed as infrastructure for agricultural development rather than as a commercial enterprise. In 1983, the Nitin Desai Committee forwarded the idea of Internal Rate of Return (hereinafter referred to as `IRR'), suggesting that projects should normally earn a minimum IRR of 9 per cent. However, for drought-prone and hilly areas and in areas with only 75 per cent of dependable flows - in the basin, a lower IRR of 7 per cent was recommended. Successive Finance Commissions also stressed on recovery of a certain percentage of the capital investment apart from working expenses. The Eleventh Finance Commission has recognized that this would have to be done in a gradual 30 manner. Receipts should cover not only maintenance expenditure but also leave some surplus as return on the capital invested. 39. This NCAER report, with some significance, noticed that until 2003-04, it was only in four years that the economy grew at more than 8 per cent per annum. Each of these years coincided with very high rate of growth in the agricultural sector. In contrast, industry and services sectors have, at best, pulled up the Gross Domestic Product (GDP) growth to 7.3 per cent per annum when there was no significant contribution from the agricultural sector. The report clearly opines that interlinking of river projects will prove fruitful for the nation as a whole and would serve a greater purpose by allowing higher returns from the agricultural sector for the benefit of the entire economy. - This would also result in providing of varied benefits like control of floods, providing water to drought-prone States, providing water to a larger part of agricultural land and even power generation. Besides annuring to the benefit of 31 the country, it will also help the countries like Nepal etc., thus uplifting India's international role. Importantly, they also point out to a very important facet of interlinking of rivers, i.e., it may result in reduction of some diseases due to the supply of safe drinking water and thus serve a greater purpose for humanity. 40. The Bhakra dam has also been cited as an example in this report as having enabled the States of Punjab and Haryana to register faster growth as compared to the rest of the country. This project provided an additional irrigated area to the extent of 6.8 million hectares over 35 years. Increased irrigation intensity led to increased usage of High Yielding Variety (HYV) seeds which at present constitute more than 90 per cent of the area under wheat and 80 per cent of area under paddy cultivation. The region uses some of the most advanced agricultural technologies in India. - NCAER, while depicting the poverty ratio vis-`-vis these States and the other States all over India, has provided the following tables: 32 States Rural Urban Al l Ar ea s 1973-74 1999-00 1973-74 1999-00 1973-74 1999- 00 Punjab 28.21 6.35 27.96 5.75 28.15 6.16 Haryana 34.23 8.27 40.18 10.00 35.36 8.74 All India 56.44 27.09 49.01 23.62 54.88 26.10 41. Thus, they conclude that the Bhakra Dam was instrumental in helping India achieve food security, in reducing volatility of food grain prices and declining the incidence of poverty in those regions. 42. Besides pointing out the benefits of Bhakra Dam, the NCAER Report also states that the link canals have both short and long term impacts on the economy. Short term impact of link canals is in the form of increased employment - 33 opportunities and the growth of the services sector. In the medium to long term, the major impact of link canals is through increased and assured irrigation. Although the major and direct gainers from the interlinking of rivers (ILR) programme will be agriculture and agriculture-dependant households, the entire economy will benefit because of increased agricultural production and other benefits. 43. The Report of the NCAER has pointed out various benefits of rivers interlinking programme at the State and National levels. However, when coming to the financial aspect of the programme, two concepts are of great relevance: firstly, the investment strain and secondly, the scope of financial investment and its recoupment. Primarily, it is clear from the records before us that this is a programme/project on which the nation and the States should have a rational but liberal approach for financial investment. Referring to the financial strain, the NCAER Report projects two sets of investment rollout plan. At the start of the programme, investment would be small, but 34 would increase gradually peaking in the year 2011-2012. It - will then start falling. Investment rollout from the year 2008-2009 to 2014-2015 will have considerable strain on the Central Government finances, especially after the passage of Fiscal Responsibility and Budget Management Rules (FRBMR). The Government is now committed to reducing fiscal deficit by 0.3 percentage points of GDP every year and was to reduce the fiscal deficit down to 3 per cent of GDP by the fiscal year 2007-2008. The FRBMR also put a restriction on Government borrowings. In each subsequent financial year, the limit on borrowings of 9 per cent of GDP was to progressively reduced by at least 1 percentage point of GDP, a commitment which is to be adhered to by all Governments. The investment plan prepared by the NCAER was intended to help in clearing doubts in the minds of the people and opponents of the programme that investment is not going to take place in a single or couple of years, but over a period of at least ten years. Since the impact analysis undertaken by the 35 NCAER assumes that the Interlinking of Rivers (ILR) programme is entirely financed by the Central Government, - a longer rollout plan would also help in reducing the impact on public finances. 44. The NCAER has also suggested changes which are necessary for the effective implementation of the river networking programme. Inter alia, it includes the pricing of irrigation benefits and improvement in the quality of service. It will be useful to notice at this stage, these suggested changes termed as `Changes necessary' which are as under: "A revision of water rates is necessary in the interest of efficiency. However, it should go hand in hand with improvement in the quality of service (Government of India 1992). Specific recommendations were made by the Committee on Pricing of Irrigation Water (Government of India, 1992) with regards to pricing: 1. Water rates are a form of user charges, and not a tax. Users of public irrigation must 36 meet the cost of the irrigation service. 2. As irrigation is one of the key inputs similar to seeds and fertilizer, its pricing should be addressed in the first step. 3. Under-pricing of irrigation is mainly responsible for the - 4. deteriorating quality of irrigation services. A revision of water rates is necessary in the interest of efficiency. However, it should go hand in hand with improvement in the quality of service. 5. Rates for non- agricultural users (domestic and industrial) should also be revised so that full cost is recovered. 6. Rates should be based on O&M norms and capital charges (interest and depreciation). 37 7. Averaging of rates by region and/or categories of projects is desirable. Categorisation could be: major and medium storage system, major and medium projects based exclusively on barrages/diversion works, minor surface irrigation works, lift irrigation canals, and lift irrigation from groundwater. 8. Distinction of rates in terms of tail and head reaches of a system, soil quality, and other criteria for rate determination should be approached with caution due to complexities involved with it. 9. - 10.Water rates should be applied on two-part tariff. All lands in 38 command area should pay a flat annual fee on a per hectare basis for membership of the system and a variable fee linked to the actual extent of service (volume or area) used by each member. 11.The move to full- fledged volumetric pricing cannot be introduced immediately. The proposed rationalization of water pricing will have to be accomplished in three phases. 12.In the first phase, rationalization and simplification of the existing system of assessment (based on crop-wise irrigated area on an individual basis) to a system of season-specific areas rates should be taken up. The level of cost recovery to be aimed during the first phase 39 should at least cover O&M costs and 1 per cent interest on capital employed. The irrigated area under a crop which spreads over to more than one season should be charged at the rates applicable to different seasons. However, in each season, distinction should be made - 13.between paddy, sugarcane, and perennial crops. 14.In the second phase, the aim should be on volumetric measure for irrigation water charging. 15.In third phase, the focus should be on people participation for improving water use and, thus, productivity. The recommendations of the Committee on Pricing of Irrigation (also known as the Vaidynathan Committee Report) were further studied by the Group of Officers formed by the Planning Commission in 40 October, 1992. It recommended that the irrigation water rates should cover the full annual O & M cost in phases in the next five years. These recommendations and the Vaidyanathan Committee Report were, in February 1995, sent to all the States/union territories that had started taking action with several states revising water rates upwards." To sum up the short comings and their analysis, the report states as under : "One shortcoming of the above analysis is that it has not considered the issue of cost of resettlement of displaced people due to ILR Project. A draft National Rehabilitation Policy was prepared with the objective of minimizing development induced displacement of people by - promoting non-displacing or least displacing alternatives for meeting development objectives. The draft policy is yet to be finalized by the National Advisory Council (NAC). The NAC intends to finalise a rehabilitation package that includes, inter alia, providing land for all agricultural families, implementing special employment guarantee programmes, providing homesteads and dwelling houses, bearing transportation cost, providing training and other support services, instituting a rehabilitation grant in order to compensate loss of income/livelihood. The ILR project has to consider displacement costs on the basis of norms stipulated in the national 41 Rehabilitation Policy as and when it gets finalized." 45. Besides making the above observations and recommendations, the NCAER also suggests that after completion of the linking of rivers programme, the different river links should be maintained by separate river basin organizations, which would all be functioning under the direct control of the Central Water Commission or such other appropriate central body. 46. In the summing up of its Report, the NCAER has stated that water is essential for production of food, - economic growth, health and support to environment. Its main contribution to economic well-being is through its use of agriculture to improve food security. Water is essential to increase agricultural productivity under modern technology. Nearly 64 per cent of the population in rural area and 4 per cent in urban area depends on agriculture as their principal source of income. The analysis carried out in the State shows that the ILR programme has the potential to increase the growth rate of agriculture, which declined from 4.4 per 42 cent in 1980s to 3.0 per cent in 1990s and which is still susceptible to the vagaries of rainfall. In order to put our economy on the high growth path and improve the quality for life of people in the rural areas, a mixed policy of both increased availability of irrigation and increasing non-farm activity is required. Principles Applied: 47. From the above narrated facts, stated recommendations and principles, it is clear that primarily there is unanimity between all concerned authorities - including the Centre and a majority of the State Governments, with the exception of one or two, that implementation of river linking will be very beneficial. In fact, the expert opinions convincingly dispel all other impressions. There shall be greater growth in agricultural and allied sectors, prosperity and stimulus to the economy potentially causing increase in per capita income, in addition to the short and long term benefits likely to accrue by such implementation. These would accrue if the expert 43 recommendations are implemented properly and within a timeframe. Then there shall be hardly any financial strain on the economy. On the contrary, such implementation would help advancement of India's GDP and bring greater wealth and prosperity to the nation as a whole. Besides actual benefits accruing to the common man, the Governments also benefit from the definite possibility of saving the States from drought on the one hand and floods on the other. This project, when it becomes a reality, will provide immeasurable benefits. We see no reason as to why the Governments should not take appropriate and timely - interest in the execution of this project, particularly when, in the various affidavits filed by the Central and the State Governments, it has been affirmed that the governments are very keen to implement this project with great sincerity and effectiveness. 48. The States of Rajasthan, Gujarat, Tamil Nadu have fully supported the concept. Madhya Pradesh has also supported the Scheme, but believes that it must be 44 implemented by the Central Government. The States of Karnataka, Bihar, Punjab and Sikkim have given some qualified approvals. Their main concern is, with regard to inter basin transfer, which must involve quid pro quo, as with any other resources inter-linking must be from water surplus to water deficit States and in regard to environmental and financial implications. Some of the other States are not connected with these projects as they have no participation in inter-linking of rivers. The State of Kerala has protested to some extent, to the long distance inter basin water transfer on the basis that the State needs - water to supply their intricate network of natural and man- made channels. 49. It is also the case of the State of Kerala that their rivers are monsoon-fed and not perennial in nature, therefore, Kerala experiences severe water scarcity during summer or off-monsoon months. 45 50. The stand taken by the respective States, as noticed above, shows that, by and large, there is unanimity in accepting interlinking of rivers but the reservations of these States can also not be ignored, being relatable to their particular economic, geographical and socio-economic needs. These are matters which squarely fall within the domain of general consensus and thus, require a framework to be formulated by the competent Government or the Legislature, as the case may be, prior to its execution. 51. The National Commission for Review of the Working of the Constitution (NCRWC) 2002 in its Report also dealt with another important facet of river interlinking i.e. sharing of river waters. Explaining the doctrines of river sharing, it - described Doctrine of Riparian Rights, Doctrine of Prior Appropriation, Territorial Integrity Theory, Doctrine of Territorial Sovereignty, English Common Law Principle of Riparian Right, Doctrine of Community Interest, Doctrine of Equitable Apportionment. It also explained that when 46 determining what a reasonable and equitable share is, the factors which should be taken into consideration. In that behalf, it specifically referred to agreements, judicial decisions, awards and customs that already are in place. Furthermore, relative economic and social needs of interested states, volume of stream and its uses, land not watered were other relevant considerations. Thus, it will be for the expert bodies alone to examine on such issues and their impact on the project. 52. Be that as it may, we have no hesitation in observing that the national interest must take precedence over the interest of the individual States. The State Governments are expected to view national problems with a greater objectivity, rationality and spirit of service to the nation and - ill-founded objections may result in greater harm, not only to the neighbouring States but also to the nation at large. 47 53. Now, we may refer to certain constitutional provisions which have bearing on the matters in issue before us. Under the constitutional scheme, there is a clear demarcation of fields of operation and jurisdiction between the Legislature, Judiciary and the Executive. The Legislature may save unto itself the power to make certain specific legislations not only governing a field of its legislative competence as provided in the Seventh Schedule of the Constitution, but also regarding a particular dispute referable to one of the Articles itself. Article 262 of the Constitution is one of such powers. Under this Article, the Parliament, by law, can provide for the adjudication of any dispute or complaint with respect to the use, distribution and control of water of any inter-state river or river valley. 54. Article 262(2) of the Constitution opens with a non- obstante expression, that `notwithstanding anything contained in the Constitution, Parliament may by law - provide that neither the Supreme Court nor any other Court shall exercise jurisdiction in respect of any dispute or complaint as referred to in Article 262(1)'. In other words, 48 the Parliament can reserve to itself, the power to oust the jurisdiction of the courts, including the highest Court of the land, in relation to a water dispute as stated under this Article. The jurisdiction of the Court will be ousted only with regard to the adjudication of the dispute and not all matters incidental thereto. For example, the Supreme Court can certainly direct the Central Government to fulfill its statutory obligation under Section 4 of the Act, which is mandatory, without deciding any water dispute between the States. [See : Tamil Nadu Cauvery Neerppasana Vilaiporulgal Vivasayigal Nala Urimai Padhugappu Sangam v. Union of India & Ors., AIR 1990 SC 1316]. 55. One of the possible views taken with regard to Article 262 is that the use of expression `may' in the Constitution does not indicate a clear legislative intent, thus, it may be possible that Section 11 of the Act could refer only to such disputes as are already referred to a - 49 Tribunal and which are outside the purview of the courts. Once a specific adjudicatory mechanism is created, that machinery comes into operation with the creation of the Tribunal and probably, then alone will the Court's jurisdiction be ousted. 56. The Seventh Schedule to the Constitution spells out different fields of legislation under the Union List (List I), State List (List II) and Concurrent List (List III). Entry 56 of List I empowers the Union Parliament to enact laws in relation to the regulation and development of inter-state rivers and river valleys, to the extent that such regulation and development is declared by the Parliament, by law, to be expedient in the public interest. Entry 57 deals with fishing and fisheries beyond territorial waters. Entry 97 is a residual entry, which confers those legislative fields upon the Union Parliament which are not specifically provided for under List II and/or List III. Entry 17 relates to water, that is to say, water supplies, irrigation and canals, drainage and embankments, water storage and water power, subject to the provisions of Entry 56 of List I. - 50 Agriculture is again a State subject. The Concurrent List (List III) does not contain any entry in regard to water and agriculture, as such. 57. Entry 42 of List III is the law relating to acquisition and requisition of property by the Union and the State Parliaments. The result is that, in relation to acquisition, the Centre and the State, both, have power to legislate. Entry 20 of List III deals with economic and social planning. Thus, with the aid of the residual powers under Entry 97, List I, the Union Parliament gets a very wide field of legislation, relatable to various subjects. 58. The River Boards Act, 1956 was enacted by the Parliament under Entry 56 of List I. The Inter-State Water Disputes Act was also enacted with reference to the same Entry. Whereas the mandate of the latter is to provide a machinery for the settlement of disputes, the former is an Act to establish Boards for the regulation and development of inter-State river basins, through advice and coordination, - 51 and thereby to reduce the friction amongst the concerned States. 59. It is this kind of coordination which is required to be generated at all levels to implement the inter-linking of rivers program, as proposed. Huge amounts of public money have been spent, at the planning stage itself and it will be travesty of good governance and the epitome of harm to public interest, if these projects are not carried forward with a sense of sincerity and a desire for its completion. 60. In a more recent judgment of this Court in the case of State of Karnataka v. State of Andhra Pradesh & Ors. [(2000) 9 SCC 572], a Constitution Bench of this Court took the view that in Section 11 of the Act, the expression `use, distribution and control of water in any river' are the key words in determination of the scope of power conferred on a Tribunal constituted under Section 3 of the Act. If a matter fell outside the scope of these three crucial words, the power of Section 11 in ousting the jurisdiction of the courts in respect of any water dispute, which is otherwise to be - 52 referred to Tribunal, would not have any manner of application. The test of maintainability of a legal action initiated by a State in a Court would thus be, whether the issues raised therein are referable to a Tribunal for adjudication of the manner of use, distribution and control of water. 61. Further, this Court while declining to issue a mandamus directing the States of Karnataka, Andhra Pradesh and Maharashtra to constitute a common Tribunal, held: "168. ......It is settled law that such a direction cannot possibly be granted so as to compel an authority to exercise a power which has a substantial element of discretion. In any event the mandamus to exercise a power which is legislative in character cannot be issued and I am in full agreement with the submission of Mr. Solicitor General on this score as well. At best it would only be an issue of good governance but that by itself would not mean and imply that the Union Government has executive power even to force a settlement upon the State." - 53 62. The above stated principles clearly show that a greater element of mutuality and consensus needs to be built between the States and the Centre on the one hand, and the States inter se on the other. It will be very difficult for the Courts to undertake such an exercise within the limited scope of its power of judicial review and even on the basis of expanded principles of Public Interest Litigation. A Public Interest Litigation before this Court has to fall within the contours of constitutional law, as no jurisdiction is wider than this Court's constitutional jurisdiction under Article 32 of the Constitution. The Court can hardly take unto itself tasks of making of a policy decision or planning for the country or determining economic factors or other crucial aspects like need for acquisition and construction of river linking channels under that program. The Court is not equipped to take such expert decisions and they essentially should be left for the Central Government and the concerned State. Such an attempt by the Court may amount to the Court sitting in judgment over the opinions of the experts in the respective fields, without any tools and - 54 expertise at its disposal. The requirements in the present case have different dimensions. The planning, acquisition, financing, pricing, civil construction, environmental issues involved are policy decisions affecting the legislative competence and would squarely fall in the domain of the Government of States and Centre. We certainly should not be understood to even imply that the proposed projects of inter-linking of rivers should not be completed. 63. We would recommend, with all the judicial authority at our command, that these projects are in the national interest, as is the unanimous view of all experts, most State Governments and particularly, the Central Government. But this Court may not be a very appropriate forum for planning and implementation of such a programme having wide national dimensions and ramifications. It will not only be desirable, but also inevitable that an appropriate body should be created to plan, construct and implement this inter linking of rivers program for the benefit of the nation as a whole. 55 - 64. Realizing our limitations, we would finally dispose of this Public Interest Litigation with the following directions:- (I) We direct the Union of India and particularly the Ministry of Water Resources, Government of India, to forthwith constitute a Committee to be called a `Special Committee for Inter-linking of Rivers' (hereinafter referred as `the Committee') of which, the following shall be the Members:- (a) The Hon'ble Minister for Water Resources. (b) Secretary, Ministry for Water Resources. (c) Secretary, Ministry of Environment and Forests. (d) Chairman, Central Water Commission. (e) Member-Secretary, National Water Development Authority. (f) Four experts to be nominated, one each from the following Ministries/bodies: (i) One Expert from the Ministry of Water Resources (ii) One Expert from the Ministry of Finance 56 (iii) One Expert from the Planning Commission - (iv) One Expert from the Ministry of Environment & Forests. (g) Minister for Water and/or Irrigation from each of the concurring States, with the Principal Secretary of the concerned Department of the same State. (h) The Chief Secretary or his nominee not below the rank of the Principal Secretary of the concerned Department in case of any other State involved directly or indirectly in the water linking river project. (i) Two social activists to be nominated by each of the concerned Ministries. (j) Mr. Ranjit Kumar (Amicus Curiae). (II) The Committee shall meet, at least, once in two months and shall maintain records of its discussion and the Minutes. 57 (III) In the absence of any person from such meeting, irrespective of his/her status, the meeting shall not be adjourned. If the Hon'ble Minister for Water Resources - is not available, the Secretary, Ministry of Water Resources, Government of India, shall preside over the Meeting. (IV) The Committee would be entitled to constitute such sub-committees, as it may deem necessary for the purposes of carrying on the objects of the Inter-Linking of River Program, on such terms and conditions as it may deem proper. (V) The Committee shall submit a bi-annual report to the Cabinet of the Government of India placing before it the status-cum-progress report as well as all the decisions required to be taken in relation to all matters communicated therewith. The Cabinet shall take all final and appropriate decisions, in the interest of the countries as expeditiously as possible and preferably within thirty days from the date the matters are first placed before it for consideration. 58 (VI) All the reports of the expert bodies as well as the status reports filed before this Court during the pendency of this petition, shall be placed before the Committee for - its consideration. Upon due analysis of the Reports and expert opinions, the Committee shall prepare its plans for implementation of the project. (VII) The plans so prepared shall have different phases, directly relatable to the planning, implementation, construction, execution and completion of the project. (VIII) We are informed that large sums have been spent on preparation of initial and detailed project reports of the project `Ken-Betwa Project'. The DPR is now ready. The States of Madhya Pradesh and Uttar Pradesh and also the Central Government had already given their approval and consent. The clarifications sought will be discussed by the Committee. We would direct the Committee to take up this project for implementation at the first instance itself. 59 (IX) Keeping in view the expert reports, we have no hesitation in observing and directing that time is a very material factor in the effective execution of the Interlinking of Rivers project. As pointed out in the Report by NCAER and by the Standing Committee, the - delay has adversely affected the financial benefits that could have accrued to the concerned parties and the people at large and is in fact now putting a financial strain on all concerned. (X) It is directed that the Committee shall take firm steps and fix a definite timeframe to lay down the guidelines for completion of feasibility reports or other reports and shall ensure the completion of projects so that the benefits accrue within reasonable time and cost. (XI) At the initial stages, this program may not involve those States which have sufficient water and are not substantially involved in any inter-linking of river programme and the projects can be completed without their effective participation. 60 (XII) However, the Committee may involve any State for effective completion of the programme at any subsequent stage. (XIII) There are projects where the paper work has been going for the last ten years and at substantial cost to the public exchequer. Therefore, we direct the Central - and the State Governments to participate in the program and render all financial, administrative and executive help to complete these projects more effectively. (XIV) It is evident from the record that the Reports submitted by the Task Force have not been acted upon. Thus, the entire effort put in by the Task Force has practically been of no use to the concerned governments, much less the public. The Task Force has now been wound up. Let the reports of the Task Force also be placed before the Committee which shall, without fail, take due note of the suggestions made therein and take decisions as to how the same are to be implemented for the benefit of the public at large. 61 (XV) The Committee constituted under this order shall be responsible for carrying out the inter-linking program. Its decisions shall take precedence over all administrative bodies created under the orders of this Court or otherwise. - (XVI) We grant liberty to the learned Amicus Curiae to file contempt petition in this Court, in the event of default or non-compliance of the directions contained in this order. 65. We would fail in our duty if we do not place on record the appreciation for the valuable and able assistance rendered by the learned Amicus Curiae and all other senior counsel and assisting counsel appearing in the present PIL. 66. We not only express a pious hope of speedy implementation but also do hereby issue a mandamus to the Central and the State Governments concerned to comply with the directions contained in this judgment effectively and expeditiously and without default. This is a matter of national benefit and progress. We see no reason why any 62 State should lag behind in contributing its bit to bring the Inter-linking River Program to a success, thus saving the people living in drought-prone zones from hunger and people living in flood-prone areas from the destruction caused by floods. - 67. With the observations and directions recorded supra, Writ Petition (Civil) No.512 of 2002, Writ Petition (Civil) No.668 of 2002 and all the applications filed in both these writ petitions are hereby finally disposed of with no order as to costs. .............................CJI. [S.H. Kapadia] ..................................,J. [A.K. Patnaik] ..................................,J. [Swatanter Kumar] New Delhi; February 27, 2012 63 64

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.= 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)” =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

                                                              Reportable



              IN THE SUPREME COURT OF INDIA






                    ORIGINAL JURISDICTION




                ORIGINAL SUIT NO. 2 OF 1996




                                     


State of Himachal Pradesh                                    ...... Plaintiff




                                Versus








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










                               J U D G M E N T




A. K. PATNAIK, J.






      This   dispute   between   the   State   of   Himachal   Pradesh 






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






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






Haryana   (defendant   No.3),   State   of   Rajasthan   (defendant 






No.4)   and   Union   Territory   of   Chandigarh   (defendant   No.5), 






on the other hand, under Article 131 of the Constitution of 






India   relates   to   the   power   generated   in   the   Bhakra-Nangal 






and Beas Projects.



                                     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 



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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  



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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.   



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(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 



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     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.