ANDHRA PRADESH STATE COUNCIL OF HIGHER EDUCATION versus UNION OF INDIA & ORS. ETC.
[2016] 2 S.C.R. 1008, Supreme Court of India, 2016
Outcome: Appeal(s) allowed (Granted)
Segment: Ratio
[2016] 2 S.C.R. I 008 
A 
ANDHRA PRADESH STATE COUNCIL OF HIGHER 
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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. 
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 
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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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 
8 
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 
0 
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 
E
Government. [Paras 24 to 28] [1025-E-H; 1026-A-G] 
F 
G 
H 
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 9-
3020 of2016 
WITH 
Civil Appeal No. 3021 of2016
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: 
1 OJ I 
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SUPREME COURT REPORTS 
[2016] 2 S.C.R. 
"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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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 
F 
APSCH E 
TSC II E 
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 
H 
Accountant
ANDHRA PRADESH STATE COUNCIL OF HIGHER EDUCATION v. 
I 015 
UNION OF INDIA & ORS. ETC. [V. GQPALA GOWDA, J.] 
10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
S. No. 
I 
2 
S:No. 
I 
2 
Senior Steno 
I 
0 
Jr. Stenographer 
2 
I 
Jr. Assistant 
I 
0 
Clerk-cum-Typist 
I 
I 
Typist-cum-Asst. 
l 
0 
Computer Operator 
I 
I 
Data Entry Operator 
l 
l 
Drivers 
3 
2 
Record Asst. 
I 
0 
Roneo Operator 
I 
I 
Office Subordinates 
3 
2 
Total 
34 
20 
Cadre wise posts to APSCHE & TSCHE 
Category 
Total Number 
58% 
to 
ofnosts 
APSCHE 
Gazetted 
IO 
6 
Cadres 
Other cadres 
24 
14 
Total 
34 
20 
Number of employees based on nativity 
(only Council employees) 
Category 
Total Employees Andhra 
WorkinQ 
Gazetted cadres 
4 
4 
Other cadres 
19 
5 
Total 
23 
9 
I 
I 
I 
0 
I 
0 
0 
I 
I 
0 
l 
14 
42% 
to 
TSCHE 
4 
10 
14 
Telangana 
0 
14 
14 
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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 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 
H
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 State-
laws 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 
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 
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 
c 
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and Telangana, means the ratio of 58.32 : 41.68 as per 2011 
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SUPREME COURT REPORTS 
[2016] 2 S.C.R. 
A 
Census" 
B 
c 
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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. 
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UNION OF INDIA & ORS. ETC. [Y. GOPALA GOWDA, J.] 
also be understood to include assets and liabilities of those respective 
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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 
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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. 
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UNION OF INDIA & ORS. ETC. [V. GOPALA GOWDA, J.] 
case of S.R. Bomnuti & Ors. v. Union of India', wherein Justice K. 
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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 
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formation of new states on the Parliament. The scope of Article 3 was 
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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 
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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. 
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Investment Co. Ltd. this Court said: 
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"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 
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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 
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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. 
H 
Devika Gujral 
Appeals allowed.