1. States dispute apportionment of power generated from inter-State hydel projects post-reorganisation under the Reorganisation Act. (Para 1 , 2 )
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2026 Supreme(SC) 1338
SUPREME COURT OF INDIA
Surya Kant, CJI., Joymalya Bagchi, V. Mohana, J.
IN THE MATTER OF:
State of Himachal Pradesh – Plaintiff
Versus
Union of India and others – Defendants
Original Suit No. 2 of 1996
Decided On : 06-11-2026
Important Points
In the execution of a decree regarding inter-state power sharing, computations made by the Union based on reasonable frameworks are binding to ensure finality, allowing for the set-off of capital costs against energy entitlements through a structured, cashless settlement.
Subject
Constitutional Law - Inter-State Disputes
Act Referred
Headnote
(A) Constitution of India - Article 131 - Reorganisation Act, 1966 - Section 78 - Inter-State dispute regarding hydroelectric power sharing - Execution of decree - Computation of energy arrears and capital cost liability - The present proceedings are in the nature of execution of a prior decree where substantive rights were already decided - Computation of dues by the Union, based on various formulae and rates, is acceptable to avoid further prolonged litigation (Paras 30, 35)
(B) Set-off and Valuation - Liability towards capital costs can be adjusted against energy entitlements - Valuation for such adjustment should be based on a reasonable rate applicable to the relevant period rather than current operational and maintenance rates (Paras 36, 41)
Facts of the case:
A dispute arose between successor States and a Plaintiff-State regarding the sharing of power generated from hydroelectric projects following the reorganisation of a State. A previous decree held the Plaintiff-State entitled to a 7.19% share of the power. Subsequently, disputes arose regarding the computation of energy arrears, the rate of valuation for those arrears, the quantum of capital cost liability, and the manner of discharge of these liabilities.
Findings of Court:
The energy arrears are fixed at 13,066 million units. The capital cost liability is assessed at Rs. 420.77 crores. This liability is to be adjusted against the energy arrears by valuing the energy at Rs. 3.85 per unit, resulting in a net balance of approximately 11,973 million units to be supplied in kind over 20 lean seasons.
Issues: The main issues were the determination of the quantum and valuation of energy arrears, the extent of the Plaintiff-State's liability toward capital costs, whether the liability should be discharged in cash or in kind, and the timeframe for such disbursement.
Ratio Decidendi: The court held that where a prior decree establishes an entitlement and entrusts the computation of dues to a central authority, the resulting calculations are binding unless they are superficial or an attempt to relitigate settled issues. To ensure a final quietus to a decades-old dispute, the court prioritized a comprehensive settlement framework that balances the entitlements of the claimant with the burden on the debtors, extending the disbursement period to ease the financial burden on the judgment debtors.
Result: Suit disposed of with directions for cashless settlement of energy arrears over 20 years.
(B) Set-off and Valuation - Liability towards capital costs can be adjusted against energy entitlements - Valuation for such adjustment should be based on a reasonable rate applicable to the relevant period rather than current operational and maintenance rates (Paras 36, 41)
Facts of the case:
A dispute arose between successor States and a Plaintiff-State regarding the sharing of power generated from hydroelectric projects following the reorganisation of a State. A previous decree held the Plaintiff-State entitled to a 7.19% share of the power. Subsequently, disputes arose regarding the computation of energy arrears, the rate of valuation for those arrears, the quantum of capital cost liability, and the manner of discharge of these liabilities.
Findings of Court:
The energy arrears are fixed at 13,066 million units. The capital cost liability is assessed at Rs. 420.77 crores. This liability is to be adjusted against the energy arrears by valuing the energy at Rs. 3.85 per unit, resulting in a net balance of approximately 11,973 million units to be supplied in kind over 20 lean seasons.
Issues: The main issues were the determination of the quantum and valuation of energy arrears, the extent of the Plaintiff-State's liability toward capital costs, whether the liability should be discharged in cash or in kind, and the timeframe for such disbursement.
Ratio Decidendi: The court held that where a prior decree establishes an entitlement and entrusts the computation of dues to a central authority, the resulting calculations are binding unless they are superficial or an attempt to relitigate settled issues. To ensure a final quietus to a decades-old dispute, the court prioritized a comprehensive settlement framework that balances the entitlements of the claimant with the burden on the debtors, extending the disbursement period to ease the financial burden on the judgment debtors.
Result: Suit disposed of with directions for cashless settlement of energy arrears over 20 years.
Legal Category Hierarchy
Advocates appeared:
For the Petitioner(s):Mr. Kapil Sibal, Sr. Adv. Mr. J S Attri, Sr. Adv. Mr. Anoop Rattan, Advocate General Mr. Vaibhav Srivastava, AAG Ms. Sugandha Anand, Adv. Mr. Puneet Rajta, Adv. Mr. Varinder Kumar Sharma, AOR Mr. C. N. Jha, Adv. Mr. Kapil Sibal, Sr. Adv. Mr. Anup Rattan, Advocate General Mr. Vaibhav Srivastava, A.A.G. Mr. Puneet Rajta, Adv. Ms. Sugandha Anand, AOR
For the Respondent(s): Mr. R Venkataramani, Attorney General for India Mr. Raman Yadav, Adv. Mr. Ameyavikrama Thanvi, Adv. Mr. Abhishek Kumar Pandey, Adv. Mr. Chinmaee Chandra, Adv. Mr. Kartikay Aggarwal, Adv. Mr. Chitvan Singhal, Adv. Mr. Amrish Kumar, AOR Dr. Arun Kumar Yadav, Adv. Mr. Harinder Mohan Singh, Sr. Adv. Mr. Nidhesh Gupta, Sr. Adv. Mr. Ranbir Singh Yadav, AOR Ms. Shabana, Adv. Mr. Rajat Bhardwaj, Adv. Mr. Balbir Singh, Sr. Adv. Mr. Parvinder Chouhan, Sr. Adv. Mr. Lokesh Sinhal, Sr. A.A.G. Mr. Samar Vijay Singh, AOR Mr. Nikunj Gupta, Adv. Mr. Siddharth Raj, Adv. Ms. Sabarni Som, Adv. Mr. Aman Dev Sharma, Adv. Mr. Gaj Singh, Adv. Mr. Ankur, Adv. Mr. Harsh Kumar Singh, Adv.
For the Petitioner(s):Mr. Kapil Sibal, Sr. Adv. Mr. J S Attri, Sr. Adv. Mr. Anoop Rattan, Advocate General Mr. Vaibhav Srivastava, AAG Ms. Sugandha Anand, Adv. Mr. Puneet Rajta, Adv. Mr. Varinder Kumar Sharma, AOR Mr. C. N. Jha, Adv. Mr. Kapil Sibal, Sr. Adv. Mr. Anup Rattan, Advocate General Mr. Vaibhav Srivastava, A.A.G. Mr. Puneet Rajta, Adv. Ms. Sugandha Anand, AOR
For the Respondent(s): Mr. R Venkataramani, Attorney General for India Mr. Raman Yadav, Adv. Mr. Ameyavikrama Thanvi, Adv. Mr. Abhishek Kumar Pandey, Adv. Mr. Chinmaee Chandra, Adv. Mr. Kartikay Aggarwal, Adv. Mr. Chitvan Singhal, Adv. Mr. Amrish Kumar, AOR Dr. Arun Kumar Yadav, Adv. Mr. Harinder Mohan Singh, Sr. Adv. Mr. Nidhesh Gupta, Sr. Adv. Mr. Ranbir Singh Yadav, AOR Ms. Shabana, Adv. Mr. Rajat Bhardwaj, Adv. Mr. Balbir Singh, Sr. Adv. Mr. Parvinder Chouhan, Sr. Adv. Mr. Lokesh Sinhal, Sr. A.A.G. Mr. Samar Vijay Singh, AOR Mr. Nikunj Gupta, Adv. Mr. Siddharth Raj, Adv. Ms. Sabarni Som, Adv. Mr. Aman Dev Sharma, Adv. Mr. Gaj Singh, Adv. Mr. Ankur, Adv. Mr. Harsh Kumar Singh, Adv.
Table of Contents
2. Plaintiff-State claims equitable power share based on population-ratio; Defendant-States dispute entitlement based on settled interim arrangements and valuation methods. (Para 6 , 7 , 8 , 9 , 12 , 13 , 16 , 18 )
3. Court evaluated prior decrees, rejected relitigation of settled issues, and determined appropriate valuation for energy arrears and capital cost liabilities. (Para 28 , 29 , 30 , 31 , 32 , 33 , 34 , 35 , 37 )
4. Statutory rights under the Reorganisation Act are enforceable, and ad hoc administrative arrangements cannot supersede judicial determinations of entitlement. (Para 21 , 38 , 43 )
5. Court directed cashless settlement of energy arrears through phased supply and offset of capital cost liabilities. (Para 41 , 43 , 44 , 45 )
6. How are arrears of energy and capital cost liabilities to be adjusted in a judicial decree for inter-State distribution?
Arrears are valued based on equitable principles rather than current commercial rates, and capital-cost liabilities are offset against energy entitlements to enable a cashless, final settlement between parties. (Para 36 , 41 )
JUDGMENT :
SURYA KANT, CJI.
1. The controversy in this suit instituted by the State of Himachal Pradesh (Plaintiff-State), invoking the original jurisdiction of this Court under Article 131 of the Constitution, pertains to the Plaintiff-State’s claim to a share in the power generated from the Bhakra-Nangal and Beas Hydro-Electric Projects (collectively, ‘Hydel Projects’) against the Union of India, the States of Punjab, Haryana and Rajasthan, and the Union Territory of Chandigarh (Defendant-States).
2. The subject Hydel Projects were conceived during the period when the erstwhile State of Punjab existed as a single composite entity, consequent upon the reorganisation of the State of Punjab. The dispute arose out of the competing claims of the successor States and the Plaintiff-State to the benefits of the said Projects. In a nutshell, the case of the Plaintiff-State has been that it became entitled, upon reorganisation, to a defined share in the power generated from the Projects; whereas, the States of Punjab and Haryana, for their part, have disputed both the basis and the extent of such entitlement. This dispute, having remained unresolved over several decades, eventually culminated in the institution of the present suit in the year 1996.
3. The suit was decreed in part by this Court vide judgment dated 27.09.2011, whereby the Plaintiff-State was held entitled to 7.19% of the power generated from the Bhakra-Nangal and Beas Projects. The Union of India was accordingly directed to work out the amounts due to the Plaintiff-State in terms of the declaratory-decree.
4. However, the effective implementation of the decision of this Court appears to have given rise to further proceedings and conflict, concerning both the computation of the energy due to the Plaintiff-State and the manner in which the amounts and liabilities arising therefrom are to be worked out against the States of Punjab and Haryana.
A. FACTS
5. Before delving into the particulars of these subsequent developments, we deem it imperative to first traverse the trajectory of the dispute as it stood prior to the institution of the suit, culminating in the present state of affairs.
5.1. The first development ancillary to the Hydel scheme was proposed in the year 1944, for the construction of a dam across the river Satluj at Bhakra. Specifically, the Bhakra-Nangal Project, and subsequently the Beas Project, came to be built substantially upon the territory of the then princely State of Bilaspur and within the Kangra district, both of which form part of the present-day State of Himachal Pradesh.
5.2. To elucidate, the Bhakra-Nangal Project, in particular, required the submergence of approximately 27,869 acres of the land of the erstwhile State of Bilaspur, while the Beas Project required the submergence of over 65,050 acres in Kangra district. Yet, the power generated at these two Projects came to be enjoyed principally by the composite State of Punjab, and, after its reorganisation in 1966, by the States of Punjab, Haryana and Rajasthan and the Union Territory of Chandigarh.
A.1. THE SCENARIO PRIOR TO THE REORGANISATION OF STATES
5.3. It may be relevant to note that on 15.08.1948, vide the Bilaspur Merger Agreement, the Raja of Bilaspur ceded to the Dominion Government full and exclusive authority, jurisdiction and power in relation to the governance of the State, and agreed to transfer its administration with effect from 12.10.1948.
5.4. Separately, and prior to such cession, a draft agreement dated 07.07.1948 had been prepared between the Government of Bilaspur and the then Government of East Punjab, concerning the terms on which land in Bilaspur territory would be made available for the Bhakra Project, and the compensation payable therefor, including a provision for allocation of power to the Bilaspur State. Although initialled by representatives of both Governments, this draft was not formally signed or executed.
5.5. Bilaspur thereafter continued to be administered as a Chief C
