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THE STATES RE-ORGANIZATION ACT, 1956

Title : THE STATES RE-ORGANIZATION ACT, 1956

Year : 1956



The provisions of this Part shall apply in relation to the apportionment of the assets and liabilities immediately before the appointed day of every Part A or Part B State the whole or any part of whose territories is transferred to another State or becomes 1*[Union territory] by virtue of the provisions of

Part II; and the expression "existing State" shall accordingly be construed to mean any such Part A State or Part B State.

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1. Subs. by the Adaptation of Laws (No. 1) Order, 1956, for "Part C
State".

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(1) Subject to the other provisions of this Part, all land and all stores, articles and other goods belonging to an existing State shall-

(a) If within the existing State, pass to the successor State in which they are situated; or

(b) If outside the existing State, pass to the successor State or if there be two or more successor States, to the principal successor State:

Provided that where there are two or more successor States and the Central Government is of opinion that any goods or class of goods should be distributed among them otherwise than according to the situation of the goods, the Central Government may issue such directions as it thinks fit for a just and equitable distribution of the goods and the goods shall pass to the successor States accordingly.

(2) Any unissued stores of any class in an existing State shall pass to the successor State, or if there be two or more successor States, shall be divided between them in proportion to the total indents for stores of that class made in the period of three years ending with the 31st day of March, 1956, for the territories of the existing State included respectively in each of those successor States excluding the indents relating to the Secretariat and offices of Heads of Departments having jurisdiction over the whole of the existing State:

Provided that nothing in this sub-section shall apply to stores held for specific purposes, such as use or utilisation in particular institutions, workshops or undertakings or on particular works under construction.

(3) In this section, the expression "land" includes immovable property of every kind and any rights in or over such property, and the expression "goods" does not include coins, bank notes and currency notes.



The total of the cash balances in all treasuries of an existing State and the credit balances of that State with the Reserve Bank of India immediately before the appointed day shall pass to the successor State, or, if there be two or more successor States, be divided between them according to the population ratio:

Provided that for the purpose of such division, there shall be no transfer of cash balances from any treasury to any other treasury and the apportionment shall be effected by adjusting the credit balances of the successor States in the books of the Reserve Bank of India on the appointed day:

Provided further that if any successor State has no account with the Reserve Bank of India the adjustment shall be made in such manner as the Central Government may by order direct.



The right to recover arrears of any tax or duty on property, including arrears of land revenue, shall belong to the successor State in which the property is situated, and the right to recover arrears of any other tax or duty shall belong to the successor State in whose territories the place of assessment of that tax or duty is included.



(1) The right to recover any loans or advances made before the appointed day by an existing State to any local body, society, agriculturist or other person in an area within that State shall belong to the successor State in which that area is included.

(2) The right to recover any loans or advances made before the appointed day by an existing State to any person or institution outside that State shall belong to the successor State or, if there be two or more successor States, to the principal successor State:

Provided
that where there are two or more successor States, any sum recovered in respect of any such loan or advance shall be divided between all the successor States according to the population ratio.



The investments in the cash balance investments account, the famine relief fund and the general fund of an existing State and the sums at the credit of an existing State in the central road fund shall pass to the successor State or, if there be two or more successor States, be divided between them according to the population ratio; and the investments in any special fund the objects of which are confined to a local area in an existing State shall pass to the successor State in which that area is included.



(1) The assets and liabilities relating to any commercial or industrial undertaking of an existing State shall pass to the successor State in which the undertaking is located.

(2) Where a depreciation reserve fund is maintained by an existing State for any commercial or industrial undertaking, the securities held in respect of investments made from that fund shall pass to the successor State in which the undertaking is located.



(1) The public debt of the existing State of Hyderabad attributable to loans raised by the issue of Government securities and outstanding with the public immediately before the 31st day of October, 1956, shall as from that day be the debt of the Union, and immediately on such transfer of the debt, the Central Government shall be deemed to have made a loan to that State of an amount equal to the debt so transferred on the same terms in regard to interest and repayment as are applicable to the loans so raised by that State.

(2) The public debt of any other existing State attributable to loans raised by the issue of Government securities and outstanding with the public immediately before the appointed day shall, as from that day, be the debt of the successor State or, if there be two or more successor States, be the debt of such one of them as the Central Government may, by order, specify; and in the latter case,-

(a) The other successor States shall be liable to pay to the successor State so specified their shares of the sums due from time to time for the servicing and repayment of the debt, and

(b) For the purpose of determining the said shares, the debt shall be deemed to be divided between the successor States as if it were a debt referred to in sub-section (3).

(3) The public debt of an existing State attributable to loans taken from the Central Government, the Reserve Bank of India or any other bank before the appointed day, including in the case of Hyderabad the loan deemed to have been made by the Central Government under sub-section (1), shall pass to the successor State, or if there be two or more successor States, be divided between them in proportion to the total expenditure on all capital works and other capital outlays incurred up to the appointed day in the territories of the existing State included respectively in each of those successor States:

Provided that for the purposes of such division, only expenditure on assets for which capital accounts have been kept shall be taken into account:

Provided further that any loan taken from the Central Government by the Government of an existing State before the appointed day in connection with the construction of buildings, roads or other works for the capital of a new State or any State affected by the provisions of Part II or for purposes incidental thereto shall, to the extent of the expenditure so incurred until that day, be wholly the liability of the successor State in which the capital is included.

(4) Where a sinking fund or depreciation fund is maintained by an existing State for the repayment of any loan raised by it, the securities held in respect of investments made from that fund shall pass to the successor State or, if there be two or more successor States, be divided between them in the same proportion as the public debt referred to in sub-section (3).

(5) In this section, the expression "Government security" means a security created and issued by a State Government for the purpose of raising a public loan and having any of the forms specified in, or prescribed under, clause (2) of section 2 of the Public Debt Act, 1944.(18 of 1944).



The liability of an existing State to refund any tax or duty on property, including land revenue, collected in excess shall be the liability of the successor State in which the property is situated, and the liability of an existing State to refund any other tax or duty collected in excess shall be the liability of the successor State in whose territories the place of assessment of that tax or duty is included.



The liability of an existing State in respect of any civil deposit or local fund deposit shall, as from the appointed day, be the liability of the successor State in whose area the deposit has been made.



The liability of an existing State in respect of the provident fund account of a Government servant in service on the appointed day shall, as from that day, be the liability of the successor State to which that Government servant is permanently allotted.



The liability of the existing States in respect of pensions shall pass to, or be apportioned between, the successor States in accordance with the provisions contained in the Fifth Schedule.



(1) Where before the appointed day an existing State has made any contract in the exercise of its executive power for any purposes of the State, that contract shall be deemed to have been made in the exercise of the executive power-

(a) If there be only one successor State,-of that State;

(b) If there be two or more successor States and the purposes of the contract are, as from the appointed day, exclusively purposes of any one of them,-of that State; and

(c) If there be two or more successor States and the purposes of the contract are, as from that day, not exclusively purposes of any one of them,-of the principal successor State;

and all rights and liabilities which have accrued, or may accrue, under any such contract shall, to the extent to which they would have been rights or liabilities of the existing State, be rights or liabilities of the successor State or the principal successor State specified above:

Provided that in any such case as is referred to in clause (c), the initial allocation of rights and liabilities made by this sub-section shall be subject to such financial adjustment as may be agreed upon between all the successor States concerned, or in default of such agreement, as the Central Government may by order direct.

(2) For the purposes of this section, there shall be deemed to be included in the liabilities which have accrued or may accrue under any contract-

(a) Any liability to satisfy an order or award made by any Court or other tribunal in proceedings relating to the contract; and

(b) Any liability in respect of expenses incurred in or in connection with any such proceedings.

(3) This section shall have effect subject to the other provisions of this Part relating to the apportionment of liabilities in respect of loans, guarantees and other financial obligations; and bank balances and securities shall notwithstanding that they partake of the nature of contractual rights, be dealt with under those provisions.



Where, immediately before the appointed day, an existing State is subject to any liability in respect of an actionable wrong other than breach of contract, that liability shall-

(a) If there be only one successor State, be a liability of that State;

(b) If there be two or more successor States and the cause of action arose wholly within the territories which as from that day are the territories of one of them, be a liability of that successor State; and

(c) In any other case, be initially a liability of the principal successor State, but subject to such financial adjustment as may be agreed upon between all the successor States concerned, or in default of such agreement, as the Central Government may by order direct.



Where, immediately before the appointed day, an existing State is liable as guarantor in respect of any liability of a registered co-operative society, that lability of the existing State shall-

(a) If there be only one successor State, be a liability of that State;

(b) If there be two or more successor States and the area of the societys operations is limited to the territories which as from that day are the territories of one of them, be a liability of that successor State; and

(c) In any other case, be a liability of the principal successor State:

Provided
that in any such case as is referred to in clause (c), the initial allocation of liabilities under this section shall be subject to such financial adjustment as may be agreed upon between all the successor States, or in default of such agreement, as the Central Government may by order direct.



If any item in suspense is ultimately found to affect an asset or liability of the nature referred to in any of the foregoing provisions of this Part, it shall be dealt with in accordance with that provision.



The benefit or burden of any assets or liabilities of an existing State not dealt with in the foregoing provisions of this Part shall-

(a) If there be only one successor State, pass to that State, and

(b) If there be two or more successor States, pass to the principal successor State in the first instance, subject to such financial adjustment as may be agreed upon between all the successor States before the 1st day of October, 1957, or in default of such agreement, as the Central Government may be order direct.



Where by virtue of any of the provisions of this Part, any of the successor States becomes entitled to any property or obtains any benefits or becomes subject to any liability, and the Central Government is of opinion, on a reference made within a period of three years from the appointed day by any State that it is just and equitable that that property or those benefits should be transferred to or shared with, one or more of the other successor States, or that a contribution towards that liability should be made by one or more of the other successor States, the said property or benefits shall be allocated in such manner, or the other successor State or States shall make to the State primarily subject to the liability such contribution in respect thereof, as the Central
Government may, after consultation with the State Governments concerned by order determine.



All sums payable by the Union to any State or by any State to any other State or to the Union by virtue of the provisions of this Part shall be charged on the Consolidated Fund of India or, as the case may be, the Consolidated Fund of the State by which such sums are payable.
Last updated on September, 2016

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