Telangana cannot claim absolute right over AP Education Council’s funds merely because they are located in Hyderabad: SC [Read Jt]

The Supreme Court has ruled that Telangana cannot claim “absolute” right over institutions merely because they are located in the capital city of Hyderabad, which it is sharing with Andhra Pradesh.
The Bench comprising Justice V. Gopala Gowda and Justice A.K. Mishra observed, “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 Reorganization 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.”

The Court was hearing appeals challenging a judgment passed by Hyderabad High Court, wherein it was held that the funds lying at the present location of the Andhra Pradesh State Education Council of Higher Education (APSC) now exclusively belong to the Telangana State Education Council for Higher Education.

APSC advises State Government in matters relating to higher education in the State, and to oversee its development with Perspective Planning. Under the Andhra Pradesh Reorganization Act, 2014, the APSC was required to continue its functions in respect of both, Andhra Pradesh and Telangana, until an agreement was reached between the two States. Soon after, the Telangana State Council of Higher Education (TSC) came into existence, to discharge the same functions for the State of Telangana, as the APSC does for Andhra Pradesh.

In furtherance of this, TSC had approached the Banks in the State to freeze the operation of all Bank accounts operating in the name of APSC. The banks complied with TSC’s request and froze the accounts, without giving prior notice to APSC. Aggrieved of the bank’s actions, APSC then approached the High Court of Andhra Pradesh, praying for the freezing of the accounts to be declared illegal, arbitrary and contrary to the principles of natural justice. The State of Telangana had also filed a Writ Petition, praying for a declaration that APSC and the State of Andhra Pradesh be disallowed from withdrawing money from the banks accounts of APSC. The High Court had allowed TSC to operate APSC’s bank accounts and had observed that the claim by APSC was not sustainable as it was now located in Telangana.

Hearing the Appeal, the Court observed that bifurcation of an existing State into two new States calls for an equitable bifurcation of assets and liabilities of the statutory bodies among the two successor States as well, in order to ensure welfare of the public at large.

It refused to accept the claim of Telangana over the ownership of entire funds and assets of the APSC. Observing that this could surely not have been the intention of the legislature while enacting the Reorganization Act, 2014, it stated, “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 Reorganization Act, 2014.”

The Court hence held that the freezing of banks accounts of APSC was bad in law, on account of the fact that what was frozen was not just the pre-bifurcation amount, but also the amounts collected by APSC for the period after bifurcation. It thereafter directed that the 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 Reorganization Act, 2014, if the two successor States are agreeable to the same. In case the two successor states are unable to arrive at an agreement, it observed that the Central Government may constitute a committee, which may be directed to arrive at an agreement, in accordance with the provisions of the Reorganization Act, 2014 within a period of two months from the date such representation is made to the Central Government.

Read the Judgment here