Andhra Pradesh State Council Of Higher Education Versus Union Of India & ORS. Etc.

[2016] 2 S.C.R. I 008 ANDHRA PRADESH STATE COUNCIL OF HIGHER EDUCATION v.

UNION OF INDIA & ORS. ETC.

(Civil Appeal Nos.3019-3020of2016) 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 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 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 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 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 APSC is ll'holly 1111te11able - Reorganisation of State - Constitution of India, 1950 - Article 3.

I'

Inte11Jretatio11 ()f statutes: Legislarions like Reorganisation Act, 2014 - Interpretation of Allowing the appeals filed by the State of Andhra Pradesh and APSC and disposing of the pending applications, the Court

ANDHRA PRADESH STATE COUNCIL OF HIGHER EDUCATION v. UNION OF INDIA & ORS. ETC.

HELD: 1. 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. 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 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 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; · 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.

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 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 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

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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 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. If the two successor States are unable to arrive at an agreement, the Central Government may constitute a committee, which may be directed to arrive at an agreement, ·in accordance with the provisions of the Reorganisation Act, 2014 within a period of two months from the date such representation is made to the Central Government. [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 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 2005 (1) SCR 408 followed Para 23 CIVIL APPELLATE JURISDICTION : Civil Appeal No. 30 I 9WITH Civil Appeal No.

1 OJ I ANDHRA PRADESH STATE COUNCIL OF HIGHER EDUCATION v. UNION OF INDIA & ORS. ETC.

From the Judgment and Order dated 01.05.2015 of the High Court 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 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 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 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 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 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 (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:

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

c) it provides that Hyderabad in the existing State of Andhra Pradesh shall be the common capital of both the successor States from the appointed day for a period not exceeding ten years, and puts in place legal and administrative measures to ensure that both the State Governments can function efficiently from the common capital. ..... "

Section 75 of the Reorganisation Act, 2014 provides as under: "75. Continuance of facilities in certain State institutions.

(1) The Government of the State of Andhra Pradesh or the State 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 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 from the appointed day, by notification in the Official Gazette, specify in the Tenth Schedule referred to in subsection ( 1) any other institution existing on the appointed day in the States of Andhra Pradesh and Telangana and, on the issue of such notification, such Schedule shall be deemed to be amended by the inclusion of the said institution therein."

APSC figures as item 27 in the Tenth Schedule to the Reorganisation Act, 2014. Thus, in terms of Section 75, APSC was required to continue its functions in respect of both the States, i.e. Andhra Pradesh and Telangana until an agreement was reached between the two successor States.

ANDHRA PRADESH STATE COUNCIL OF HIGHER EDUCATION v. UNION OF INDIA & ORS. ETC. [V. GOPALA GOWDA,).] 5.Vide G.O.M. No. 5 dated 02.08.2014, the Government of Telangana adapted the Act of 1988 in the following terms: "Whereas by Section 101 of the Andhra Pradesh Re-Organisation Act, 2014 (Central Act No. 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 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 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 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.

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 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 c) Allocation of bank balances in various accounts d) Number of employees based on nativity e) . Number of vehicles f) g) Number of equipments Number of movable assets etc."

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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

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 Bank Balances in various accounts S.No.

Category Total Amount 58%to 42%to in Rs.

APSCHE TS CHE I.

General 18405959 10675456 7730503 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 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 I.

Finance OtTicer I I Deputy Director I I Asst. Directors I Lecturers Asst. Secretary I I Consultants I Superintendent I I Private Secretary I I Senior I Accountant

ANDHRA PRADESH STATE COUNCIL OF HIGHER EDUCATION v. I 015 UNION OF INDIA & ORS. ETC. [V. GQPALA GOWDA, J.] Senior Steno I I Jr. Stenographer I I I Jr. Assistant I Clerk-cum-Typist I I Typist-cum-Asst.

l I Computer Operator I I Data Entry Operator l l Drivers I Record Asst.

I I Roneo Operator I I Office Subordinates Total l Cadre wise posts to APSCHE & TSCHE Category Total Number 58% to ofnosts APSCHE Gazetted IO Cadres Other cadres 42% to TSCHE S. No.

I Total Number of employees based on nativity (only Council employees) Category Total Employees Andhra WorkinQ Gazetted cadres Telangana S:No.

I Other cadres Total

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Number of vehicles (working and condemned) S.No.

Category Total Vehicles 58% to 42% to APSCHE TS CHE I Serviceable Condemned Total Number of Equipments S.No.

Category Total Equipments 58% to 42% to A PS CHE TS CHE I Computers Printers IO Others Total Number of Movable Assets S.No.

Total Assets 58% to APSCHE 42% to TSCHE I 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 Branch, stating that TSC is the successor organization to APSC as per the Reorganisation Act, 2014 and requested the Bank to freeze the operation of Account No. 0533100110978 and all other accounts operating in the name of APSC. The Bank sent a letter dated 07.01.2015 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

ANDHRA PRADESH STATE COUNCIL OF HIGHER EDUCATION v. UNION OF INDIA & ORS. ETC. [V. GOPALA GOWDA, J.] it were to freeze its accounts, it would be constrained :to take the appropriate legal action. Accordingly, the Bank sent a letter dated 14.01.2015 to the TSC declining to freeze the accounts of APSC. On 28.01.2015, the State Bank of Hyderabad, Shantinagar, Hyderabad Branch, without giving prior notice to APSC froze the accounts at the behest of TSC.

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 No. 2882 of 2015 praying for a declaration that APSC and the State of Andhra Pradesh be not allowed to withdraw money from the bank accounts of APSC. By way of the impugned common judgment and order dated 01.05.2015, the High Court held that TSC would be allowed to operate the concerned bank accounts, and that the claim made by APSC was not sustainable since it was now located in the State of Telangana. The High Court held as under:

"6. It is the settled position of law that institutions located in the successor States are governed by the law of successor Statelaws of the land namely, principle of land, known as lex situs.

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 governed by the laws of the respective States where they are located. Having regard to the aforesaid legal position, the institutions specified in the tenth schedule located in Telangana are governed by the law of the State of Telangana. 8 ...... The office of institution of petitioner No.2 formerly known as APSC, is now situated in the State 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.

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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 State Bank of Hyderabad, Shantinagar Branch, in respect of the above two saving bank accounts. As such, the petitioner No.2 wrote a letter to the State Bank of Hyderabad and Andhra Bank for freezing of the said accounts. Accordingly, a decision was taken by the Bank and rightly so."

(emphasis laid by this Court) On the question of ownership and control of the erstwhile APSC, the High Court held as under:

"38.0n a fair reading of Section 5 of the Act, 2014, as correctly contended by the learned A.G for the state of Telangana, the State of Andhra Pradesh is a mere user of the city of Hyderabad for a maximum period of ten years. It has no proprietary right, title and interest in this city and none of the assets which belong to the erstwhile State of Andhra Pradesh, located at Hyderabad, can be claimed by the State of Andhra Pradesh except in accordance with the Act, 2014 ......

xxx xxx xxx 40 ...... Because of the adaptation with amendments in the eye of law, APSC has no existence, at least in Hyderabad, or in any part of Telangana State ...

41. Under such circumstances, the assets and properties and funds whatever lying at the present location of the APSC.belong to TSC."

The High Court held that the claim made by APSC is not sustainable in law and that present TSC be allowed to operate the bank accounts of the erstwhile APSC. Hence, the present appeals filed by the State of Andhra Pradesh and APSC.

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 of Section 75 of the Reorganisation Act, 2014. Section 75 (extracted

ANDHRA PRADESH STATE COUNCIL OF HIGHER EDUCATION v. UNION OF INDIA & ORS. ETC. [V. GOPALA GOWDA, J.] above) deals only with the continuance of facilities in respect of the Institutions specified in the Tenth Schedule. It can, by no means, be stretched to deal with either 'apportionment of assets and liabilities' of the Institutions specified in Tenth Schedule of the Reorganisation Act, 2014 or allocation of the Institutions to one State or the other.

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

Section 47 of the Reorganisation Act, 2014 reads as under: "47. (1) The provisions of this Part shall apply in relation to the apportionment of the assets and liabilities of the existing State of Andhra Pradesh immediately before the appointed day. xxx xxx xxx

(3) The apportionment of assets and liabilities shall be subject to such financial adjustment as may be necessary to secure just, reasonable and equitable apportionment of the assets and liabilities amongst the successor States.

(4) Any dispute regarding the amount of financial assets and liabilities shall be settled through mutual agreement, failing which by order by the Central Government on the advice of the Comptroller and Auditor-General oflndia."

(emphasis laid by this Court) Further, Section 49, which deals with Treasury and Bank Balances, reads as under:

"49. The total of the cash balances in all treasuries of the existing State of Andhra Pradesh and the credit balances of the existing State of Andhra Pradesh with the Reserve Bank of India, the State Bank of India or any other bank immediately before the appointed day shall be divided between the States of Andhra Pradesh and Telangana on the basis of population ratio ...... " Population ratio has been defined in Section 2(h) as under: "2.

(h) "population ratio", in relation to the States of Andhra Pradesh and Telangana, means the ratio of 58.32 : 41.68 as per 2011 1-1

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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 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, on the basis of faulty interpretation of the provisions of the Reorganisation Act, 2014. It is submitted that this has effectively resulted in the State of Telangana stopping the State of Andhra Pradesh from utilising the funds it had collected even post the bifurcation, in respect of the thirteen districts which formed part of its territory. The learned senior counsel further draws our attention to Section 64 of the Reorganisation Act, 2014, which reads as under:

"64. Residuary Provision: The benefit or burden of 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 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 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 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 term 'facilities· used in Section 75 of the Reorganisation Act, 2014 should

ANDHRA PRADESH STATE COUNCIL OF HIGHER EDUCATION v. UNION OF INDIA & ORS. ETC. [Y. GOPALA GOWDA, J.] also be understood to include assets and liabilities of those respective 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 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 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 I iabi I ities of the existing Punjab State Electricity Board, as there is specific provision for this purpose viz., Section 67 and moreover the Board has a separate legal entity."

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 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 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 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

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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 of Andhra Pradesh or any part thereof has, by virtue of the provisions of Part II, become an inter-State body corporate, the investments in, or loans or advances to, any such body corporate by the existing State of Andhra Pradesh made before the appointed day shall, save as otherwise expressly provided by or under this Act, be divided between the States of Andhra Pradesh and Telangana in the same proportion in which the assets of the body corporate are divided under the provisions of this Part."

(emphasis laid by this Court) The learned Solicitor General further submits that since all statutory corporations and Public Sector Undertakings are the instrumentalities created by the existing State of Andhra Pradesh in the context of reorganization of the existing State, their assets and liabilities are liable to be apportioned between the two States as per the population ratio stipulated under the provisions of Section 2(h) of the Reorganisation Act, 2014. The APSC, being an asset of the existing State, created by the Act of 1988, it became necessary to provide for bifurcation of APSC and allocation of fixed 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 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 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. 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 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 traceable to Articles 245 to 254 of the Constitution. The State qua the Constitution is federal in structure and independent in its exercise of legislative and executive power. However, being the creature of the Constitution the State has no right to secede or claim sovereignty. Qua the Union, State is quasi-federal. Both are coordinating institutions and ought to exercise their respective powers with adjustment, understanding and accommodation to render socio-economic and political justice to the people, to preserve and elongate the constitutional goals including secularism.

248. The preamble of the Constitution is an integral part of the Constitution. Democratic form of Government, federal structure. unity and 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 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 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

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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 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: "The Court will interpret a statute as far as possible.

agreeably to justice and reason and that in case of two or more interpretations. one which is more reasonable and just will be adopted, for there is always a presumption against the law maker intending injustice and unreason. The Court will avoid imputing to the Legislature an intention to enact a provision which flouts notions of justice and norms of fairplay, unless a contrary intention is manifest from words plain and unambiguous. A provision in a statute will not be construed to defeat its manifest purpose and general values which animate its structure. In an avowedly democratic polity, statutory provisions ensuring the security of fundamental human rights including the right to property will, unless the contrary mandate be precise and unqualified, be construed liberally so as to uphold the right.

These rules apply to the interpretation of Constitutional and statutory provisions alike."

(emphasis laid by this Court)

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 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 ' r2005 J 2 sec 409

ANDHRA PRADESH STATE COUNCIL OF HIGHER EDUCATION v. UNION OF !NOIA & ORS. ETC. [Y. GOPALA GOWDA, J.] Investment Co. Ltd. this Court said:

"33. Interpretation must depend on the text and the context. They are the basis of interpretation. One may well say 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 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 colour and appear different than when the statute is looked at without the glasses provided by the context.

With these glasses we must look at the Act as a whole and discover what each section, each clause, each phrase and each word is meant and designed to say as to fit into the scheme of the entire Act. No part of a statute and no word of a statute can be construed in isolation. Statutes have to be construed so that every word has a place and everything is in its place."

(emphasis laid by this Court)

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

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

SUPREME COURT REPORTS [2016] 2 S.C.R.

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 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.

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. Accordingly, the appeals filed by the State of Andhra 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 amount, but also the amounts collected by APSC for the period after the bifurcation in relation to the thirteen districts of the successor State of Andhra Pradesh. Accordingly, APSC must be allowed to operate their bank accounts in respect of the thirteen districts which fall within State of Andhra Pradesh now, in which the amounts collected post the date of bifurcation have been deposited.

The assets of APSC of the undivided State of Andhra Pradesh, that is, assets existing up to the date of bifurcation may be divided between the two successor States in the population ratio of 58:42, as provided under Section 2(h) of the Reorganisation Act, 2014, if the two successor States are agreeable to the same. If the two successor States are unable to arrive at an agreement, the Central Government may constitute a committee, which may be directed to arrive at an agreement, in accordance with the provisions of the Reorganisation Act, 2014 within a period of two months from the date such representation is made to the Central Government.

29. All pending applications are disposed of. No costs. Devika Gujral Appeals allowed.