Holding

The freezing of APSC’s bank accounts was unlawful and the assets of the erstwhile APSC must be equitably bifurcated between Andhra Pradesh and Telangana, with post‑bifurcation funds for Andhra Pradesh districts remaining with APSC.

Summary

The Supreme Court examined whether the Andhra Pradesh Reorganisation Act, 2014 required the assets and liabilities of the Andhra Pradesh State Council of Higher Education (APSC) to be divided between the successor states of Andhra Pradesh and Telangana, and whether the freezing of APSC’s bank accounts by banks on Telangana’s request was lawful. The Court held that Section 75 only provides for continuation of facilities and does not effect an outright transfer of assets, and that the apportionment of assets must follow the provisions of Part VI of the Act (Sections 47, 49, 2(h), 64). Consequently, the High Court’s order freezing the accounts and vesting all assets in Telangana was set aside. The Court allowed the appeals filed by Andhra Pradesh and APSC, directing that post‑bifurcation funds belonging to the thirteen districts of Andhra Pradesh remain with APSC, and that the pre‑bifurcation assets be divided in the population ratio of 58:42, or otherwise by a committee if the states cannot agree.

Issues considered

Whether Section 75 of the Andhra Pradesh Reorganisation Act, 2014 governs the apportionment of assets and liabilities of the APSC.
Whether the banks were justified in freezing the APSC’s bank accounts on the request of the Telangana State Council of Higher Education.
How the assets and liabilities of the erstwhile APSC should be divided between the successor states under the Reorganisation Act.
Whether the High Court erred in holding that all assets of APSC belong to Telangana.
Whether the principle of equitable bifurcation and population ratio applies to statutory bodies created under the 1988 Act.

Legislation cited

Andhra Pradesh Reorganisation Act, 2014s. 2(h), s. 47, s. 49, s. 52(4), s. 64, s. 75
Andhra Pradesh State Council of Higher Education Act, 1988s. 3
Constitution of Indias. 246(2), s. 246(3), s. 3

Subjects

State bifurcationAsset apportionmentSection 75Andhra Pradesh Reorganisation ActHigher education councilBank account freezingFederalismEquitable distributionLex situsConstitutional law

Judgment

[2016] 2 S.C.R. I 008

A ANDHRA PRADESH STATE COUNCIL OF HIGHER
EDUCATION
v.
UNION OF INDIA & ORS. ETC.
(Civil Appeal Nos.3019-3020of2016)
B
MARCH 18,2016
[V. GOPALA GOWDA AND ARUN MISHRA, JJ.]
Andhra Pradesh Reorganisation Act, 2014: s.75 - Bifurcation
of States - APSC 11•a.1· constituted under s.3 of APSC of Higher
c Education Act, 1988 to advise the State Government in matters
relating to Higher Education in the State - On 2.6.201./, existing
State of Andhra Pradesh bifurcared into lll'o separate States na111ely,
State ofAndhra Pradesh and State of Telangana - Jn terms of s. 75,
of the A. P Reorganisation Act, 20 I./ APSC was required to continue
Its fimctions in respect of both the States, i.e. Andhra Pradesh and
D
Telangana until an agree111ent was reached between the two
Successor States - On 2.8.2014, the Government of Telangana
adopted the Act of 1988 and TSC came in1U existe11ce to discharge
the same fu11ctio11s for the State of Telanga11a as the APSC for the
State of Andhra Pradesh - TSC sent a co111111u11ication to the Banks
E staling that TSC is the successor organization to APSC as per the
201./ Act a11d requested the Bank to freeze the operation of accounts
ofAPSC - Challenge against - Held: Whe11 an existing Stale is
bifurcated to for111 two ne11• States, there must be an equitable
bifi1rcation of the assets and liabilities of the statutory bodies a111ong
the two successor States as well, lo ensure ll'elfare of the public at
I'
large residing within these territories - In the instant case. the Stale
of Telangana has clai111ed 011'11ership over the entire fimds and assets
of the (erst1l'hi/r·1 APSC - This could surely 11ot have been the
i11te11tion of the legislature ll'hile e11acti11g the Reorganisation Act,
2014 - The action of the Banks of freezing the bank accounts of
G APSC is ll'holly 1111te11able - Reorganisation of State - Constitution
of India, 1950 - Article 3.
Inte11Jretatio11 ()f statutes: Legislarions like Reorganisation Act,
2014 - Interpretation of
Allowing the appeals filed by the State of Andhra Pradesh
H and APSC and disposing of the pending applications, the Court
1008
ANDHRA PRADESH STATE COUNCIL OF HIGHER 1009
EDUCATION v. UNION OF INDIA & ORS. ETC.

HELD: 1. The Constitution of India envisages a federal A
feature., which has been held to be a part of the basic structure of
the Constitution of India. Article 3 of the Constitution of India
confers the power of formation of new states on the Parliament.
The issue of bifurcation of States is both sensitive as well as tricky.
Adequate care has to be taken by the legislature while drafting
B
legislations such as the Reorganisation Act, 2014 to ensure a
smooth division of all assets, liabili.ties and funds between the
states to make sure .that the interests of the citizens Jiv.ing in
these states are protected adequatc,ly. Therefore, care must be
taken to ens11rc that no discrimination is done against either of
the successor state. Thus while interpreting statutes of such c
nature, the courts must ensure that all parts of the statute arc
given effect to. [Paras 20, 21, 221 [1022-H; 1023-F; 1024-A-BI
S.R. Bommai & Ors. v. Union of India 1994 (2) SCR
644 : (1994) 3 SCC 1; Raja Ram Pal" l/011 'b/e Speaker.
Lok Sabha 2007 (1) SCR 317 : (2007) 3 SCC 184; D
· HH Maharajadhiraja Madhav Rao Jivaji Rao Scindia
Bahadur of Gwalior & Ors. '' Union of India 1971 (3)
SCR 9 : (1971) 1 SCC 85; Prakash Kumar@ Prakash
Bhutto v. State of Gujarat 2005 (I) SCR 408 : (2005)
2 sec 409 - followed.
E
2. It is natural that when an existing State if bifurcated to
form two new States, there must be an equitable bifurcation of
the assets and liabilities of the statutory bodies among the two
successor Stat.es as well, to ensure welfare of the public at large
residing within these territories. In the instant case, the State of
Telangana has claimed owncrshi11 over the entire funds and assets F
of the (erstwhile) APSC. This could surely not have been the
intention of the legislature while enacting the Reorganisation Act,
2014. The action of the Banks of freezing the bank accounts of
APSC is wholly untenable in law, which must be set aside. By no
stretch of imagination can it be assumed that the complete
G
takeover of assets of the erstwhile APSC by TSC, on the ground
that the State institution happens to be in Hyderabad, which is
now a part of Tclangana, was what the legislature had in
contemplation while enacting the Reorganisation Act, 2014. The
common impugned judgment and order passed by the High Court
of judicature at Hyderabad for the States ofTelangana and Andhra H
1010 SUPREME COURT REPORTS [2016] 2 S.C.R.

A Pradesh upholding the freezing of the bank accounts of APSC
being unsustainable in law is liable to be set aside. Accordingly,
the appeals filed by the State ·of Andhra Pradesh and APSC are
allowed. Having allowed the appeal filed by APSC, the action of
freezing of the bank accounts of APSC is bad in law on account of
the fact that what has been frozen is not just the pre bifurcation
8
amount, but also the amounts collected by APSC for the period
after the bifurcation in relation to the thirteen districts of the
successor State of Andhra Pradesh. Accordingly, APSC must be
allowed to operate their bank accounts in respect of the thirteen
districts which fall within State of Andhra Pradesh now, in which
C the amounts collected post the date of bifurcation have been
deposited. The assets of APSC of the undivided State of Andhra
Pradesh, that is, assets existing up to the date of bifurcation may
be divided between the two successor States in the population
ratio of58:42, as provided under Section 2(h) of the Reorganisation
Act, 2014, if the two successor States are agreeable to the same.
0
If the two successor States are unable to arrive at an agreement,
the Central Government may constitute a committee, which may
be directed to arrive at an agreement, ·in accordance with the
provisions of the Reorganisation Act, 2014 within a period of two
months from the date such representation is made to the Central
E Government. [Paras 24 to 28] [1025-E-H; 1026-A-G]
Electricity Employees Union v. Union of India 2000 (3)
Suppl. SCR 1 : (2000) 7 SCC 339 - referred to.
Case Law Reference

F 2000 (3) Suppl. SCR 1 referred to Para 14
1994 (2) SCR 644 followed Para 20
2007 (1) SCR 317 followed Para 21
1971 (3) SCR 9 followed Para 22
G 2005 (1) SCR 408 followed Para 23
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 30 I 9-
3020 of2016
WITH
Civil Appeal No. 3021 of2016
H
ANDHRA PRADESH STATE COUNCIL OF HIGHER 1OJ I
EDUCATION v. UNION OF INDIA & ORS. ETC.

From the Judgment and Order dated 01.05.2015 of the High Court A
of Judicature at Hyderabad for the State ofTelangana and the State of
Andhra Pradesh in WP No. 1873 and 2882 of 2015.
Ranjit Kumar, SG, K. Ramakrishna Reddi, AG for Telangana, P.
P. Rao, Basava Prabhu S. Patil and T. R. Andhyarujina, Sr. Advocates,
G. Pramod Kumar, Prasanth, Ms. Hemantika Wahi, A. V. Rangam, Buddy B
A. Ranganandhan, D. V. Raghu Vamsy, Guntur Prabhakar, Ms. Prerna
Singh, S. Udaya Kumar Sagar,Abhishek Reddy, Krishna Kumar Singh,
Ms. Binu Tamta, Tushar Bakshi, Ms. S. Usha Reddy, Rajiv Singh and
Ms. Sushma Suri, Advocates for the appearing parties.
The Judgment of the Court was delivered by c
V. GO PALA GOWDA, J. 1. Leave granted in the Special Leave
Petitions.
2. The present appeals arise out of the common impugned judgment
and order dated 01.05.20 I 5 passed by the High Court of judicature at
Hyderabad for the States of Telangana and Andhra Pradesh in Writ D
Petition Nos. I 873 and 2882of2015, wherein it was held that the assets,
properties and funds lying at the present location of the Andhra Pradesh
State Education Council of Higher Education now belong exclusively to
the Telangana State Education Council for Higher Education.
3. The relevant facts which are required for us to appreciate the E
rival legal contentions are stated in brief hereunder:
The Andhra Pradesh State Council of Higher Education
(hereinafter referred to as the "APSC") was constituted under Section
3 of the Andhra Pradesh State Council of Higher Education Act, I 988,
to advise the State government in matters relating to Higher Education F
in the State and to oversee its development with Perspective Planning.
The APSC continued carrying out the various func;tions assigned to it
under the Act of 1988, including conducting common entrance
examinations for various courses in the State of Andhra Pradesh.
4. On 02.06.2014, the Andhra Pradesh Reorganisation Act, 20 I 4 G
(hereinafter referred to as the "Reorganisation Act, 2014") came into
force, which bifurcated the existing State of Andhra Pradesh into two
separate States, namely, the State of Andhra Pradesh and the State of
Telangana. The statement of objects and reasons of the Act provides,
inter al ia, as under:
H
1012 SUPREME COURT REPORTS [2016] 2 S.C.R.

A "a) it provides for the territories of the two successor states of
Andhra Pradesh and Telangana, and necessary provisions relating
to representation in Parliament and State Legislatures, distribution
of revenues, apportionment of assets and liabilities, mechanisms
for the management and development of water resources, power
and natural resources and other matters.
B

c) it provides that Hyderabad in the existing State of Andhra
Pradesh shall be the common capital of both the successor States
from the appointed day for a period not exceeding ten years, and
puts in place legal and administrative measures to ensure that
c both the State Governments can function efficiently from the
common capital. ..... "
Section 75 of the Reorganisation Act, 2014 provides as under:
"75. Continuance of facilities in certain State institutions.
D (1) The Government of the State of Andhra Pradesh or the State
ofTelangana, as the case may be, shall, in respect of the institutions
specified in the Tenth Schedule to this Act, located in that State,
continue to provide facilities to the people of the other State which
shall not, in any respect, be less favorable to such people than
what were being provided to them before the appointed day, for
E such period and upon such tenns and conditions as may be agreed
upon between the two State Governments within a period of one
year from the appointed day or, ifno agreement is reached within
the said period, as may be fixed by orderof the Central Government.
(2) The Central Government may, at any time within one year
F from the appointed day, by notification in the Official Gazette,
specify in the Tenth Schedule referred to in subsection ( 1) any
other institution existing on the appointed day in the States of
Andhra Pradesh and Telangana and, on the issue of such
notification, such Schedule shall be deemed to be amended by the
inclusion of the said institution therein."
G
APSC figures as item 27 in the Tenth Schedule to the
Reorganisation Act, 2014. Thus, in terms of Section 75, APSC was
required to continue its functions in respect of both the States, i.e. Andhra
Pradesh and Telangana until an agreement was reached between the
two successor States.
H
ANDHRA PRADESH STATE COUNCIL OF HIGHER EDUCATION v. 1013
UNION OF INDIA & ORS. ETC. [V. GOPALA GOWDA,).]

5.Vide G.O.M. No. 5 dated 02.08.2014, the Government of A
Telangana adapted the Act of 1988 in the following terms:
"Whereas by Section 101 of the Andhra Pradesh Re-Organisation
Act, 2014 (Central Act No. 6of2014 ), the appropriate Government
i.e. the State ofTelangana is empowered by order, to make such
adaptations and modifications of any law (as defined in section B
2(f) of the Act)made before 02.06.2{) 14, whether by way ofrepeal
or amendment as may be necessary or expedient, for the purpose
of facilitating the application of such law in the State ofTelangaria
before expiration of two years from 02.06.2014; and thereupon
every such law shall have effect subject to the adaptations and
modifications- so made until altered, repealed or amended by a c
competent Legislature or other Competent Authority;
And whereas, it has become necessary to adapt the Andhra
Pradesh State Council of Higher Education Act, 1988 and the
Ru !es and Regulations made thereunder for the purpose of
facilitating their application in relation to the State of D
Telangana ...... " . ·
Thus, the Telangana State Council of Higher Education (hereinafter
referred to as the "TSC") came into existence to discharge the same
functions for the State ofTelangana as the APSC for the State of Andhra
Pradesh. E
6. Pursuant to the creation of the TSC, the Secretary' to the
Government, Higher Education (UE) Department, Telangana, wrote
Letter No.263/UE/2014-2 dated 05.09.2014, to the Principal Secretary
to Government, Higher Education (UE) Department, Andhra Pradesh
outlining a provisional allocation ofassets as well as posts between the
two States, in terms of the proposal already submitted by the APSC, to F
divide the assets in the ratio of population as 52:48, as provided for under
Section 2(h) of the Reorganisation Act, 2014. These were to include:

a) Distribution of posts in the ratio of58:42
b) Allocation of fixed deposits G
c) Allocation of bank balances in various accounts
d) Number of employees based on nativity
e) . Number of vehicles
f) Number of equipments
g) Number of movable assets etc."
H
1014 SUPREME COURT REPORTS [2016] 2 S.C.R.

A The details of the proposed allocation are provided as under:
" Fixed Deposits
S.No Category Total Amount 58% to 42o/o to
in Rs. APSCHE TSCHE
I. General Accounts 607796365 352521892 255274473
B
2. College Accounts 61502021 35671172 25830849

3. CETs Accounts 489531581 283928317 205603264
Total 115,88.29 ,967 67,21,21,381 48.67,08,586

c Bank Balances in various accounts

S.No. Category Total Amount 58%to 42%to
in Rs. APSCHE TS CHE
I. General 18405959 10675456 7730503
D Accounts
2. College 164524435 95424172 69100263
Accounts
3. CETs 1207229 700193 507036
Accounts
Total 18 4137.623 10,67,99.821 7,73,37,802
E
Cadre wise allocation of posts between APSCHE & TSCHE
S.No. Post/Cadre Total Allocation of posts after
Sanctioned bifurcation
Posts
58% to 42% to
APSCH E TSC II E
F
I. Finance OtTicer I I 0
2 Deputy Director I I 0
3 Asst. Directors 3 2 I
4 Lecturers 4 2 2
G 5 Asst. Secretary I 0 I
6 Consultants 3 2 I
7 Superintendent I I 0
8 Private Secretary I 0 I
9 Senior 3 2 I
Accountant
H
ANDHRA PRADESH STATE COUNCIL OF HIGHER EDUCATION v. I 015
UNION OF INDIA & ORS. ETC. [V. GQPALA GOWDA, J.]

A
10 Senior Steno I 0 I
11 Jr. Stenographer 2 I I

12 Jr. Assistant I 0 I
13 Clerk-cum-Typist I I 0
Typist-cum-Asst. l 0 I B
14

15 Computer Operator I I 0

16 Data Entry Operator l l 0

17 Drivers 3 2 I
I 0 I
c
18 Record Asst.
19 Roneo Operator I I 0
20 Office Subordinates 3 2 l
Total 34 20 14
D

Cadre wise posts to APSCHE & TSCHE
S. No. Category Total Number 58% to 42% to
ofnosts APSCHE TSCHE
I Gazetted IO 6 4 E
Cadres
2 Other cadres 24 14 10

Total 34 20 14

F
Number of employees based on nativity
(only Council employees)

S:No. Category Total Employees Andhra Telangana
WorkinQ
I Gazetted cadres 4 4 0 G

2 Other cadres 19 5 14

Total 23 9 14

H
1016 SUPREME COURT REPORTS (2016] 2 S.C.R.

A Number of vehicles (working and condemned)
S.No. Category Total Vehicles 58% to 42% to
APSCHE TS CHE
I Serviceable 4 2 2

B 2 Condemned 5 3 2
Total 9 5 4

Number of Equipments

S.No. Category Total Equipments 58% to 42% to
c A PS CHE TS CHE
I Computers 37 21 16
2 Printers 18 IO 8
3 Others 27 16 11
Total 82 47 35
D
Number of Movable Assets

S.No. Total Assets 58% to APSCHE 42% to TSCHE

E
I 676 392 284

F 7 .On 30. l 0.2014, the Government ofTelangana issued a Circular
Memo to the senior management of the banks in which the bank accounts
of the government were operating to ensure that the provisions of the
Reorganization Act, 2014, especially with respect to the institutions listed
in Schedules VII, IX and X were not violated. On 05.01.2015, TSC sent
a communication to the Manager, Andhra Bar1k, Saifabad, Hyderabad
G Branch, stating that TSC is the successor organization to APSC as per
the Reorganisation Act, 2014 and requested the Bank to freeze the
operation ofAccount No. 0533100110978 and all other accounts operating
in the name of APSC. The Bank sent a letter dated 07.01.2015 toAPSC,
infonning them about the letter from TSC. In its reply dated 08.01.2015,
APSC denied that TSC was its successor and informed the Bank that if
H
ANDHRA PRADESH STATE COUNCIL OF HIGHER EDUCATION v. 1017
UNION OF INDIA & ORS. ETC. [V. GOPALA GOWDA, J.]

it were to freeze its accounts, it would be constrained :to take the A
appropriate legal action. Accordingly, the Bank sent a letter dated
14.01.2015 to the TSC declining to freeze the accounts of APSC. On
28.01.2015, the State Bank of Hyderabad, Shantinagar, Hyderabad
Branch, without giving prior notice to APSC froze the accounts at the
behest of TSC. B
8.Aggrieved of the said action of the Bank in freezing the accounts,
APSC filed Writ Petition No. 1873 of2015 before the High Court of
Andhra Pradesh, praying for the action of the State Bank of Hyderabad,
Shantinagar, Hyderabad Branch in freezing the accounts of APSC to be
declared as illegal, arbitrary and contrary to the principles of natural
justice and setting it aside. The State ofTelangana also filed Writ Petition
c
No. 2882 of 2015 praying for a declaration that APSC and the State of
Andhra Pradesh be not allowed to withdraw money from the bank
accounts of APSC. By way of the impugned common judgment and
order dated 01.05.2015, the High Court held that TSC would be allowed
to operate the concerned bank accounts, and that the claim made by D
APSC was not sustainable since it was now located in the State of
Telangana. The High Court held as under:
"6. It is the settled position of law that institutions located in the
successor States are governed by the law of successor State-
laws of the land namely, principle of land, known as lex situs. E
7. Under A11icle 246 (2) & (3) of the Constituion of India, the
State Legislatures are competent to make laws in respect of their
territory covered by the entries in List-II & Ill of the 7'" schedule
of the Constitution. Therefore, in terms of Section 75 oftheAct,
2014, the specified institutions under the tenth schedule are F
governed by the laws of the respective States where they are
located. Having regard to the aforesaid legal position, the
institutions specified in the tenth schedule located in Telangana
are governed by the law of the State of Telangana.
8 ...... The office of institution of petitioner No.2 formerly known G
as APSC, is now situated in the State ofTelangana at Hyderabad.
Therefore. the law enacted by the State of Telangana alone,
necessarily, has application for administration of the institution.
Consequently. any action taken or order now passed by the
erstwhile body of the institution specified at Item No. 27 of tenth
schedule is without jurisdiction and would be ultra vires. H
1018 SUPREME COURT REPORTS [2016] 2 S.C.R.

A 9. The APSC. at the instance of the State of Andhra Pradesh. is
now asserting its power and authority and physically occupying
the premises without any authority oflaw. The APSC is not entitled
to operate the bank accounts or withdraw any amount.
Notwithstanding the aforesaid legal status, even after 2"d June
2014, the APSC has withdrawn considerable amounts from the
B
State Bank of Hyderabad, Shantinagar Branch, in respect of the
above two saving bank accounts. As such, the petitioner No.2
wrote a letter to the State Bank of Hyderabad and Andhra Bank
for freezing of the said accounts. Accordingly, a decision was
taken by the Bank and rightly so."
c (emphasis laid by this Court)
On the question of ownership and control of the erstwhile APSC,
the High Court held as under:
"38.0n a fair reading of Section 5 of the Act, 2014, as correctly
D contended by the learned A.G for the state of Telangana, the
State of Andhra Pradesh is a mere user of the city of Hyderabad
for a maximum period of ten years. It has no proprietary right,
title and interest in this city and none of the assets which belong to
the erstwhile State of Andhra Pradesh, located at Hyderabad,
can be claimed by the State of Andhra Pradesh except in
E accordance with the Act, 2014 ......
xxx xxx xxx
40 ...... Because of the adaptation with amendments in the eye of
law, APSC has no existence, at least in Hyderabad, or in any part
of Telangana State ...
F
41. Under such circumstances, the assets and properties and funds
whatever lying at the present location of the APSC.belong to
TSC."
The High Court held that the claim made by APSC is not sustainable
G in law and that present TSC be allowed to operate the bank accounts of
the erstwhile APSC. Hence, the present appeals filed by the State of
Andhra Pradesh and APSC.
9.Mr. P.P. Rao, learned senior counsel appearing on behalf of the
APSC, contends that it is essential to first understand the correct purport
H of Section 75 of the Reorganisation Act, 2014. Section 75 (extracted
ANDHRA PRADESH STATE COUNCIL OF HIGHER EDUCATION v. 1019
UNION OF INDIA & ORS. ETC. [V. GOPALA GOWDA, J.]

above) deals only with the continuance of facilities in respect of the A
Institutions specified in the Tenth Schedule. It can, by no means, be
stretched to deal with either 'apportionment of assets and liabilities'
of the Institutions specified in Tenth Schedule of the Reorganisation Act,
2014 or allocation of the Institutions to one State or the other.
10. The learned senior counsel contends that the assets and B
liabilities of the existing State are dealt with in Part-VI, consisting Sections
47-67 of the Reorganisation Act, 2014, under heading ·apportionment
of assets and liabilities'.
Section 47 of the Reorganisation Act, 2014 reads as under:
"47. (1) The provisions of this Part shall apply in relation to the c
apportionment of the assets and liabilities of the existing State of
Andhra Pradesh immediately before the appointed day.
xxx xxx xxx
(3) The apportionment of assets and liabilities shall be subject to D
such financial adjustment as may be necessary to secure just,
reasonable and equitable apportionment of the assets and liabilities
amongst the successor States.
(4) Any dispute regarding the amount of financial assets and
liabilities shall be settled through mutual agreement, failing which
E
by order by the Central Government on the advice of the
Comptroller and Auditor-General oflndia."
(emphasis laid by this Court)
Further, Section 49, which deals with Treasury and Bank Balances,
reads as under:
F
"49. The total of the cash balances in all treasuries of the existing
State of Andhra Pradesh and the credit balances of the existing
State of Andhra Pradesh with the Reserve Bank of India, the
State Bank of India or any other bank immediately before the
appointed day shall be divided between the States of Andhra
G
Pradesh and Telangana on the basis of population ratio ...... "
Population ratio has been defined in Section 2(h) as under:
"2.
(h) "population ratio", in relation to the States of Andhra Pradesh
and Telangana, means the ratio of 58.32 : 41.68 as per 2011 1-1
1020 SUPREME COURT REPORTS [2016] 2 S.C.R.

A Census"
The learned senior counsel contends that the assets of APSC need
to be divided in the population ratio between the successor States of
Andhra Pradesh and Telangana in a fair and equitable manner.
11. Mr. Basava Prabhu S. Patil, the learned senior counsel appearing
B on behalf of the State of Andhra Pradesh contends thm the impugned
judgment and order passed by the High Court is erroneous in law. The
learned senior counsel contends that the funds collected by AP<;C post
the creation of Telangana, i.e., post 02.06.2014 cannot be appropriated
by the State ofTelangana simply by way of the order of the High Court,
c on the basis of faulty interpretation of the provisions of the Reorganisation
Act, 2014. It is submitted that this has effectively resulted in the State of
Telangana stopping the State of Andhra Pradesh from utilising the funds
it had collected even post the bifurcation, in respect of the thirteen districts
which formed part of its territory. The learned senior counsel further
draws our attention to Section 64 of the Reorganisation Act, 2014, which
D reads as under:
"64. Residuary Provision: The benefit or burden of anv asset
or liability of the existing State of Andhra Pradesh not dealt with
in the foregoing provisions of this Part shall pass to the State of
Andhra Pradesh in the first instance, subject to such financial
E adjustment as may be agreed upon between the States of Andhra
Pradesh and Telangana or, in default of such agreement, as the
Central Government may, by order, direct."
(emphasis laid by this Court)
12. The learned senior counsel further contends that the impugned
F
judgment and order has been passed on a faulty consideration of the
provisions ofSecti,ms 5, 75 and IOI of the Reorganisation Act, 2014,
and in ignorance and non consideration of the provisions of Part VI of
the Act, which deal with apportionment of assets and liabilities. The
learned senior counsel contends that the overarching principle of the
G Reorganisation Act, 2014 is a twofold basis of bifurcation, namely
reasonableness and equity, and population ratio, and the same must be
implemented in its true spirit.
13. On the other hand, Mr. T.R. Andhyarujina, the learned senior
counsel appearing on behalf of the State ofTelangana contends that the
H term 'facilities· used in Section 75 of the Reorganisation Act, 2014 should
ANDHRA PRADESH STATE COUNCIL OF HIGHER EDUCATION v. 1021
UNION OF INDIA & ORS. ETC. [Y. GOPALA GOWDA, J.]

also be understood to include assets and liabilities of those respective A
institutions. If an institution falls within the territory ofTelangana, then it
cannot be disturbed, and the new State of Andhra Pradesh cannot stake
any claim in it whatsoever.
14. Mr. K. Ramakrishna Reddi, learned Advocate General for the
State of Telangana contends that the specified institutions in the tenth B
Schedule of the Reorganisation Act, 2014 are partly corporate
personalities, in the nature of state owned institutions, without any
commercial element and are non-profit in nature. The learned Advocate
General places reliance on the decision of this Court in the case of
Electricity Employees U11io11 1·. U11io11 of llldia', wherein this Court,
while interpreting the provisions of the Punjab Reorganisation Act held
c
as under:
"11. Part VI of the Act as stated above deals with apportionment
ofassets and liabilities of the erstwhile State of Punjab. This Part
is not applicable for apportionment of assets and Iiabi Iities of the
existing Punjab State Electricity Board, as there is specific provision D
for this purpose viz., Section 67 and moreover the Board has a
separate legal entity."
15. Further, the learned Advocate General contends that the
apportionment of assets and liabilities as per the Reorganisation Act,
2014 has been made on the basis of territory and location. The Tenth E
Schedule state institutions have to be maintained as per the location of
the respective States. Thus, _purely on the basis of the principle of
territoriality also, the funds and assets of the erstwhileAPSC now belong
to the TSC.
16. Mr. Ranjit Kumar, the learned Solicitor General appearing on F
behalf of Union oflndia, submits thatAPSC is a statutory body constituted
undertheAndhra Pradesh State Council for Higher Education Act, 1988.
Since the Council has to discharge statutory responsibilities under the
relevant Act, both the States should adopt the Act of 1988 under Section
I 01 of the Reorganisation Act, 2014, in the interest of students, till such
G
time as they enact their own laws. While the government ofTelangana
has already adopted this, the Government of Andhra Pradesh is still to
do so. The foamed Solicitor General further submits that the ownership
and division of the assets of the erstwhile APSC would be governed by
Section 47 of the Reorganisation Act, 2014.
1
(2000J1 sec 339 H
1022 SUPREME COURT REPORTS (2016] 2 S.C.R.

A 17. The learned Solicitor General draws our attention to a crucial
provision which governs the assets and liabilities of the institutions
incorporated under Central or State Act, i.e. Section 52( 4), which reads
as under:
"52(4) Where anybody corporate constituted under a Central Act.
State Act or Provincial Act for the existing State ofAndhra Pradesh
B
or any part thereof has, by virtue of the provisions of Part II,
become an inter-State body corporate, the investments in, or loans
or advances to, any such body corporate by the existing State of
Andhra Pradesh made before the appointed day shall, save as
otherwise expressly provided by or under this Act, be divided
c between the States of Andhra Pradesh and Telangana in the same
proportion in which the assets of the body corporate are divided
under the provisions of this Part."
(emphasis laid by this Court)
The learned Solicitor General further submits that since all statutory
D corporations and Public Sector Undertakings are the instrumentalities
created by the existing State of Andhra Pradesh in the context of
reorganization of the existing State, their assets and liabilities are liable
to be apportioned between the two States as per the population ratio
stipulated under the provisions of Section 2(h) of the Reorganisation
Act, 2014. The APSC, being an asset of the existing State, created by
E the Act of 1988, it became necessary to provide for bifurcation of APSC
and allocation of fixed d.eposits, Bank balances, cadre strength, vehicles,
equipment, movable assets etc. The learned senior counsel submits that
subsequent to the impugned judgment and order passed by the High
Court, TSC has been operating the bank accounts of APSC, which
F includes the money collected from the thirteen districts of the successor
State of Andhra Pradesh.
18. We have heard the learned senior counsel appearing on behalf
of the parties. The short point which arises for our consideration is
whether the High Court was right-ill.upholding the action of the Banks in
G freezing the accounts of APSC.
19. We are unable to agree with the contentions advanced by the
learned senior counsel appearing for the State ofTelangana.
20. The Constitution of India envisages a federal feature, which
has been held to be a part of the basic structure of the Constitution of
India, as has been held by the seven Judge Bench of this Court in the
ANDHRA PRADESH STATE COUNCIL OF HIGHER EDUCATION v. I 023
UNION OF INDIA & ORS. ETC. [V. GOPALA GOWDA, J.]

case of S.R. Bomnuti & Ors. v. Union of India', wherein Justice K. A
Ramaswamy in his concurring opinion elaborated as under:
"247. Federalism envisaged in the Constitution oflndia is a basic
·feature in which the Union of India is permanent within the
territorial limits set in Article 1 of the Constitution and is
indestructible. The State is the creature of the Constitution and B
the law made by Articles 2 to 4 with no territorial integrity, but a
permanent entity with its boundaries alterable by a law made by
Parliament. Neitherthe relative importance of the legislative entries
in Schedule VII, Lists I and II of the Constitution, nor the fiscal
control by the Union per se are decisive to conclude that the
Constitution is unitary. The respective legislative powers are c
traceable to Articles 245 to 254 of the Constitution. The State qua
the Constitution is federal in structure and independent in its
exercise of legislative and executive power. However, being the
creature of the Constitution the State has no right to secede or
claim sovereignty. Qua the Union, State is quasi-federal. Both D
are coordinating institutions and ought to exercise their respective
powers with adjustment, understanding and accommodation to
render socio-economic and political justice to the people, to preserve
and elongate the constitutional goals including secularism.
248. The preamble of the Constitution is an integral part of the
Constitution. Democratic form of Government, federal structure. E
unity and integritv of the nation, secularism, socialism, social justice
and judicial review are basic features of the Constitution."
(emphasis laid by this Court)
21. ArtiGle 3 of the Constitution of India confers the power of
formation of new states on the Parliament. The scope of Article 3 was F
elaborated upon by a five judge bench of this Court in the case of Raja
Ram Pal i'. Hon ~hie Speaker, Lok Sablur' as under:
"India is an indestructible Union of destructible units. Article 3
and Article 4 of the Constitution together empower Parliament to
maI<e · 1aws to form a new State by separation of the territory G
from any State or by uniting two or more States or parts of States
or by uniting any territory to a part of any State, and in so doing to
increase or diminish the area of any State and to alter its
boundaries ...... "
2 (1994) 3 sec 1

'(2007) 3 sec 184 H
1024 SUPREME COURT REPORTS (2016] 2 S.C.R.

A 22. The issue of bifurcation of states is both sensitive as well as
tricky. Adequate care has to be taken by the legislature while drafting
legislations such as the Reorganisation Act, 2014 to ensure a smooth
division of all assets, liabilities and funds between the states to make
sure that the interests of the citizens living in these states are protected
adequately. Therefore, care must be taken to ensure that no discrimination
B
is done against either of the successor state. Thus while interpreting
statutes of such nature, the courts must ensure that al I parts of the statute
are given effect to. An eleven Judge Bench of this Court in the case of
11.H. Malwrajadhiraja Madhav Rao Jivaji Rao Seim/ill Bahadur
of Gwalior & Ors. '" U11io11 of llldia' has held as under:
c "The Court will interpret a statute as far as possible. agreeably to
justice and reason and that in case of two or more interpretations.
one which is more reasonable and just will be adopted, for there is
always a presumption against the law maker intending injustice
and unreason. The Court will avoid imputing to the Legislature an
intention to enact a provision which flouts notions of justice and
D
norms of fairplay, unless a contrary intention is manifest from
words plain and unambiguous. A provision in a statute will not be
construed to defeat its manifest purpose and general values which
animate its structure. In an avowedly democratic polity, statutory
provisions ensuring the security of fundamental human rights
E including the right to property will, unless the contrary mandate
be precise and unqualified, be construed liberally so as to uphold
the right. These rules apply to the interpretation of Constitutional
and statutory provisions alike."
(emphasis laid by this Court)
23. In the case of Prakash Kumar(a; l'mkash Bhutto" State of
Gujarat-', a constitution bench of this Court held as under:
'"l3y now it is wel I settled Principle of Law that no pa11 of a statute
<!lld no \VOrd of a statute can be construed in isolation. Statutes
have to be construed so that every word has a place and everything
js in its place. It is also trite that the statute or rules made thereunder
G
should be read as a whole and one provision should be construed
with reference to the other provision to make the provision
consistent with the object sought to be achieved.
In Reserve Bank of India '" Peerless General Finance and
' ( 1971 ) 1 sec 85
H ' r2005 J 2 sec 409
ANDHRA PRADESH STATE COUNCIL OF HIGHER EDUCATION v. 1025
UNION OF !NOIA & ORS. ETC. [Y. GOPALA GOWDA, J.]

Investment Co. Ltd. this Court said: A
"33. Interpretation must depend on the text and the context. They
are the basis of interpretation. One may well say ifthe text is the
texture, context is what gives the colour. Neither can be ignored.
Both are important. That interpretation is best which makes the
textual interpretation match the contextual. A statute is best B
interpreted when we know why it was enacted. With this
knowledge, the statute must be read, first as a whole and then
section by section, clause bv clause, phrase by phrase and word
by word. If a statute is looked at, in the context of its enactment,
with the glasses of the statute- maker, provided by such context,
its scheme, the sections, clauses, phrases and words may take c
colour and appear different than when the statute is looked at
without the glasses provided by the context. With these glasses
we must look at the Act as a whole and discover what each
section, each clause, each phrase and each word is meant and
designed to say as to fit into the scheme of the entire Act. No part D
of a statute and no word of a statute can be construed in isolation.
Statutes have to be construed so that every word has a place and
everything is in its place."
(emphasis laid by this Court)
24. It is natural that when an existing State if bifurcated to form
E
two new States, there must be an equitable bifurcation of the assets and
liabilities of the statutory bodies among the two successor States as
well, to ensure welfare of the public at large residing within these
territories.
25. In the instant case, the State of Telangana has claimed
ownership over the entire funds and assets of the (erstwhile) APSC. F
This could surely not have been the intention of the legislature while
enacting the Reorganisation Act, 2014. The main thrust of the argument
of both the learned senior counsel appearing on behalf of State of
Telangana, as well as the impugned judgment and order passed by the
High Court is that the successor State of Andhra Pradesh has absolutely G
no right over the institutions in the city of Hyderabad, by virtue of the
fact that Hyderabad falls in the successor State of Telangana. Heavy
reliance has also been placed on Section 75 of the Reorganisation Act,
2014, on the ground that the assets belonging to the specified institutions
of the Tenth Schedule exclusively belong to the State institutions, since
the Act does not provide any apportionment to them. We are wholly H
1026 SUPREME COURT REPORTS [2016] 2 S.C.R.

A unable to agree with this contention advanced on behalf of the State of
Telangana. If this contention is accepted, it would render Section 47 of
the Act, which provides for the apportionment of assets and liabilities
among the successor States, useless and nugatory.
26. The action of the Banks of freezing the bank accounts of
B APSC is wholly untenable in law, which must be set aside. By no stretch
of imagination can it be assumed that the complete takeover of assets of
the erstwhile APSC by TSC, on the ground that the State institution
happens to be in Hyderabad, which is now a part of Telangana, was
what the legislature had in contemplation while enacting the
Reorganisation Act, 2014.
c 27. For the reasons stated supra, the common impugned judgment
and order passed by the High Court of judicature at Hyderabad for the
States ofTelangana and Andhra Pradesh in Writ Petition Nos. 1873 and
2882 of 20 I 5, upholding the freezing of the bank accounts of APSC
being unsustainable in law is liable to be set aside and set aside.
D Accordingly, the appeals filed by the State ofAndhra Pradesh and APSC
are allowed.
28. Having allowed the appeal filed by APSC, we also hold that
the action of freezing of the bank accounts of APSC is bad in Jaw on
account of the fact that what has been frozen is not just the pre bifurcation
E amount, but also the amounts collected by APSC for the period after the
bifurcation in relation to the thirteen districts of the successor State of
Andhra Pradesh. Accordingly, APSC must be allowed to operate their
bank accounts in respect of the thirteen districts which fall within State
of Andhra Pradesh now, in which the amounts collected post the date of
bifurcation have been deposited. The assets of APSC of the undivided
F State of Andhra Pradesh, that is, assets existing up to the date of
bifurcation may be divided between the two successor States in the
population ratio of 58:42, as provided under Section 2(h) of the
Reorganisation Act, 2014, if the two successor States are agreeable to
the same. If the two successor States are unable to arrive at an agreement,
G the Central Government may constitute a committee, which may be
directed to arrive at an agreement, in accordance with the provisions of
the Reorganisation Act, 2014 within a period of two months from the
date such representation is made to the Central Government.
29. All pending applications are disposed of. No costs.
H Devika Gujral Appeals allowed.