2016 (3) TMI 1477 - SC - Indian Laws

Freezing of bank accounts of APSC - Ownership and control of assets and liabilities of APSC post -bifurcation - Interpretation of Section 75 of the Reorganisation Act 2014 - Apportionment of assets and liabilities between Andhra Pradesh and Telangana - Whether the High Court was right in upholding the action of the Banks in freezing the accounts of APSC - HELD THAT - It is natural that when an existing State if bifurcated to form two new States there must be an equitable bifurcation of the assets and liabilities of the statutory bodies among the two successor States as well to ensure welfare of the public at large residing within these territories. In the instant case the State of Telangana has claimed ownership over the entire funds and assets of the (erstwhile) APSC. This could surely not have been the intention of the legislature while enacting the Reorganisation Act 2014. The main thrust of the argument of both the learned senior counsel appearing on behalf of State of Telangana as well as the impugned judgment and order passed by the High Court is that the successor State of Andhra Pradesh has absolutely no right over the institutions in the city of Hyderabad by virtue of the fact that Hyderabad falls in the successor State of Telangana. Heavy reliance has also been placed on Section 75 of the Reorganisation Act 2014 on the ground that the assets belonging to the specified institutions of the Tenth Schedule exclusively belong to the State institutions since the Act does not provide any apportionment to them. We are wholly unable to agree with this contention advanced on behalf of the State of Telangana. If this contention is accepted it would render Section 47 of the Act which provides for the apportionment of assets and liabilities among the successor States useless and nugatory. Thus the common impugned judgment and order passed by the High Court of judicature at Hyderabad for the States of Telangana and Andhra Pradesh in Writ Petition upholding the freezing of the bank accounts of APSC being unsustainable in law is liable to be set aside and set aside. Accordingly the appeals filed by the State of Andhra Pradesh and APSC are allowed. Having allowed the appeal filed by APSC we also hold that the action of freezing of the bank accounts of APSC is bad in law on account of the fact that what has been frozen is not just the pre bifurcation amount but also the amounts collected by APSC for the period after the bifurcation in relation to the thirteen districts of the successor State of Andhra Pradesh. Accordingly APSC must be allowed to operate their bank accounts in respect of the thirteen districts which fall within State of Andhra Pradesh now in which the amounts collected post the date of bifurcation have been deposited. The assets of APSC of the undivided State of Andhra Pradesh that is assets existing up to the date of bifurcation may be divided between the two successor States in the population ratio of 58 42 as provided under Section 2(h) of the Reorganisation Act 2014 if the two successor States are agreeable to the same. If the two successor States are unable to arrive at an agreement the Central Government may constitute a committee which may be directed to arrive at an agreement in accordance with the provisions of the Reorganisation Act 2014 within a period of two months from the date such representation is made to the Central Government. All pending applications are disposed of. No costs.

Summary

Issues Involved:
1. Ownership and control of assets, properties, and funds of the Andhra Pradesh State Council of Higher Education (APSC) post-bifurcation.
2. Legality of freezing APSC's bank accounts.
3. Apportionment of assets and liabilities between the successor States of Andhra Pradesh and Telangana.

Summary:

Issue 1: Ownership and Control of Assets, Properties, and Funds
The High Court held that the assets, properties, and funds of the APSC, now located in Telangana, belong exclusively to the Telangana State Council for Higher Education (TSC). The court emphasized that institutions located in the successor States are governed by the law of the respective State (lex situs). The High Court stated, "The APSC, at the instance of the State of Andhra Pradesh, is now asserting its power and authority and physically occupying the premises without any authority of law. The APSC is not entitled to operate the bank accounts or withdraw any amount."

Issue 2: Legality of Freezing APSC's Bank Accounts
The High Court upheld the action of the banks in freezing the accounts of APSC, stating that TSC should be allowed to operate the concerned bank accounts. However, the Supreme Court found this action "wholly untenable in law," noting that "by no stretch of imagination can it be assumed that the complete takeover of assets of the erstwhile APSC by TSC... was what the legislature had in contemplation while enacting the Reorganisation Act, 2014."

Issue 3: Apportionment of Assets and Liabilities
The Supreme Court highlighted that the assets of APSC need to be divided in the population ratio of 58:42 between Andhra Pradesh and Telangana, as provided u/s 2(h) of the Reorganisation Act, 2014. The Court stated, "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." If the States cannot reach an agreement, the Central Government may constitute a committee to resolve the issue.

Final Judgment
The Supreme Court set aside the High Court's judgment, allowing the appeals filed by the State of Andhra Pradesh and APSC. The Court directed that APSC must be allowed to operate their bank accounts for the thirteen districts of Andhra Pradesh. The Court also suggested that if the two States cannot agree on asset division, a committee should be formed by the Central Government to resolve the matter within two months.