The Supreme Court of India has put a final quietus to the long-standing dispute concerning the Plaintiff-State’s share in the power generated from the Bhakra-Nangal and Beas Hydro-Electric Projects.

Treating the exercise as in the nature of execution proceedings, the Court accepted the computation framework proposed by the Attorney General for India and directed that the energy arrears of 13,066 million units be settled on a cashless basis.

After adjusting the Plaintiff-State’s capital-cost liability of ₹420.77 crores against approximately 1,093 million units, the balance of approximately 11,973 million units is to be supplied by the States of Punjab and Haryana over twenty lean seasons, the Court having enlarged the period from fifteen years in order to ease the burden on the Defendant-States.

The Bench comprising Chief Justice Surya Kant, Justice Joymalya Bagchi and Justice V. Mohana observed, "We must, however, also acknowledge that although the State of Punjab disputes the quantum of the final dues payable to the Plaintiff- State, it has, in principle, accepted the methodology adopted for computing the Plaintiff-State’s capital-cost liability...It is particularly unfortunate that a dispute which has remained pending for several decades continues to be prolonged, requiring further judicial time and attention. It therefore becomes imperative that the issues which still remain to be resolved are brought to a final quietus. We trust that all concerned parties will extend their cooperation and ensure that the directions issued by this Court are implemented in their true letter and spirit."


Senior Advocate Kapil Sibal appeared for the Plaintiff, while Attorney General for India R. Venkataramani appeared for the Defendants

Brief Facts of the Case

The Plaintiff, the State of Himachal Pradesh, instituted the suit invoking the original jurisdiction of the Supreme Court under Article 131 of the Constitution, claiming a share in the power generated from the Bhakra-Nangal and Beas Hydro-Electric Projects (Hydel Projects) against the Union of India, the States of Punjab, Haryana and Rajasthan, and the Union Territory of Chandigarh (Defendant-States).

The Hydel Projects were conceived when the erstwhile State of Punjab existed as a single composite entity. The Projects were 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.

The Bhakra-Nangal Project required the submergence of approximately 27,869 acres of land of the erstwhile State of Bilaspur, while the Beas Project required the submergence of over 65,050 acres in Kangra district. The power generated, however, came to be enjoyed principally by the composite State of Punjab and, upon its reorganisation, by Punjab, Haryana, Rajasthan and the Union Territory of Chandigarh.

The composite State of Punjab was reorganised under the Punjab Reorganisation Act, 1966, which split it into the present States of Punjab and Haryana, created the Union Territory of Chandigarh, and transferred certain territory, together with its population, to the Plaintiff-State. 

Despite the clear terms of Section 78, no final apportionment was undertaken. In the interregnum, the power continued to be distributed amongst the successor States on an ad hoc basis.

The Plaintiff-State also separately received 1.2 lakh units per day from the Bhakra-Nangal Project at a concessional rate, referred to as the “old Himachal Pradesh rate”.

The Plaintiff-State asserted its entitlement to 7.19% of the total benefits from the Projects, founded upon the proportion of the population of composite Punjab transferred to it.

The Central Government rejected the claim, and a tripartite meeting convened to resolve the dispute also failed. The Plaintiff-State thereafter instituted the suit seeking, inter alia, 12% of the net power free of cost on the basis of the ‘Home State’ principle; in the alternative, 7.19% of the power on the basis of the population-transfer ratio; compensation of Rs. 2,199.77 crores for non-supply of the claimed shares; and interest and costs.

The Defendant-States, in common, denied the claims and contended that the rights of the respective States stood settled by the summary record of discussions and a subsequent arrangement.

The Court, by its earlier judgment, partly decreed the suit. It held that the suit was not barred by limitation, Article 363 or Article 262(2); that the merger of Bilaspur did not extinguish the cause of action; that Section 78(1) conferred a legal right enforceable under Article 131; and that the summary record, being ‘tentative’ and ‘ad hoc’, was not a binding agreement.

In compliance, the Union of India computed the Plaintiff-State’s energy arrears at 13,066 million units. It rejected several rates for valuing the shortfall and proposed the NFL rate, quantifying the monetary liability at Rs. 1,497.39 crores with simple interest (Rs. 1,525.62 crores with compound interest) payable by Punjab and Haryana in the ratio of 58:42, or alternatively compensation in kind.

The Plaintiff-State’s liability towards capital cost, renovation, modernisation, uprating and O&M expenditure was separately computed. The computation was disputed by Punjab and Haryana.

Contentions of the Parties

On behalf of the Plaintiff-State

The Plaintiff-State submitted that the entitlement of 13,066 million units, as computed by the Union of India, correctly represented the shortfall due to it, and that it did not dispute the computation of its liability towards capital cost, RM&U and O&M expenditure at Rs. 111.54 crores.

It contended that the NFL rate was a historically concessional rate extended to a fertilizer factory as a subsidy during the Green Revolution era and was never intended to govern inter-State exchanges of energy. It pressed for the BTPS rate, being the rate actually applied by the Bhakra Beas Management Board (BBMB) for inter-State and intra-State exchanges, relying on the Board’s practice of billing Chandigarh, Rajasthan, Punjab and Haryana at that rate and on a decision of the Northern Regional Electricity Board. On that basis, it claimed Rs. 4,249.45 crores from Punjab and Haryana.

On behalf of the Union of India

The Union reiterated the earlier computation of 13,066 million units and proposed a cashless settlement, whereby the arrears would be compensated in kind over fifteen years during the lean season, in the ratio of 58:42 for the Bhakra-Nangal Project and 60:40 for the Beas Projects, being the proportions in which Punjab and Haryana had actually received energy. It was proposed that the Plaintiff-State pay the BBMB charges for the energy received, and that its capital-cost liability, reconstructed at approximately Rs. 420.77 crores on the basis of data obtained from the Comptroller and Auditor General of India, be adjusted against the energy entitlement.

On behalf of the State of Punjab

The State of Punjab contended that the computation did not account for the 1.2 lakh units per day separately received by the Plaintiff-State, which reduced the net arrears to 11,094 million units. It claimed that the Plaintiff-State’s capital-cost liability, with interest, stood at Rs. 6,368.29 crores, and after adjusting common-pool revenue receipts and O&M expenditure, a net sum of Rs. 6,683.68 crores was recoverable from it.

It asserted that the O&M rate was the appropriate basis for valuation. Opposing the proposed framework, it urged that conversion of the capital-cost liability into energy at Rs. 3.85 per unit was fallacious and ought to have been at the O&M rate of 79 paise, and that the arrears be supplied over thirty years instead of fifteen.

On behalf of the State of Haryana

The State of Haryana asserted that the ratio of 58:42 did not correspond to the energy actually drawn by it, and that the applicable ratio was 42:58 for the Bhakra-Nangal Project and 40:60 for the Beas Projects.

It contended that the continued receipt of 1.2 lakh units per day by the Plaintiff-State had not been accounted for, and that the Plaintiff-State’s capital-cost liability towards it was Rs. 1,070.75 crores, the BBMB data relied upon by the Union of India being neither authenticated nor audited. Eventually, however, Haryana, along with the Plaintiff-State, expressed its agreement in principle to the framework proposed by the Attorney General for India.

Observations/Directions of the Court

The Court noted that the Union of India had been entrusted with the onerous task of untying a knot that had only tightened with the passage of decades. Though it made due efforts on multiple and successive occasions to bring about a settlement, the same did not succeed. The responsibility therefore devolved upon the Court to settle the matter finally and conclusively, so that no further issue remained pending adjudication.

The Court noted that the computation placed on record by the learned Attorney General for India had been substantially accepted by all the stakeholders, save for the reservations recorded by the State of Punjab. While those reservations had, prima facie, given rise to an avoidable stalemate, the Court, upon a considered examination, was not persuaded to accept any of them.

The Court held that the contentions of Punjab were vague and superficial and amounted to an attempt to relitigate issues already settled by the earlier decree. 

"We say so because these contentions are vague and superficial, and amount to an attempt to relitigate issues already settled by this Court in its decree dated 27.09.2011. By way of illustration, the supply of 1.2 lakh units per day, said to be adjustable against the total arrears, has already been considered and accounted for in the capital cost liability worked out in the framework submitted by the Union of India", it observed.

The Court observed that the computation by the Union of India took into account a number of variables, including the ratios of energy distribution determined by the decree, the energy arrears owed to the Plaintiff-State by the two States, and the liability owed by the Plaintiff-State for energy supplied to it. On this basis, 11,973 million units were found to be due to the Plaintiff-State after adjusting the liability against 13,066 million units.

The Court further noted that the computation was not the product of any single method, but was the creation of the Union of India having considered various formulae, methods of calculation and rates.

The Court rejected the contention of Punjab that the capital-cost liability be converted at the current O&M rate, observing that it was an attempt to inflate the liability of the Plaintiff-State and thereby reduce the arrears owed to it. The approach was held to be inaccurate and misleading, since the arrears related to an earlier period and could not be computed at a rate prevailing at present.

As regards the contention that the arrears be discharged over thirty years, the Court noted that the only ground urged was that such a period had been averred in an earlier written submission of the Union of India. No other reason was advanced for departing from the suggested period of fifteen years. It was also significant that the State of Haryana, faced with the same period, took no exception to it and agreed to the proposal.

Nevertheless, having regard to the total quantum of arrears, and with a view to easing the burden on the Defendant-States and bringing the long-standing dispute to a close, the Court extended some concession to them and increased the period of disbursement from fifteen years to twenty years.

The Court issued the following directions:

(a) The energy arrears due to the Plaintiff-State, as computed by the Union of India, were taken at 13,066 million units (MU). The same were to be supplied by the States of Punjab and Haryana at the rate of 653 MU per annum over twenty lean seasons, being the period from October to March, in the inter se ratio of 58:42 for the Bhakra-Nangal Project and 60:40 for the Beas Projects.

(b) The Plaintiff-State was to pay the charges determined by the Bhakra Beas Management Board for the year in which each tranche of energy was received.

(c) The Plaintiff-State’s liability towards its 7.19% share of the capital cost of the Projects, representing the unreimbursed share of loan servicing undertaken by Punjab and Haryana since 1966–67, was assessed at ₹420.77 crores, comprising ₹249.23 crores attributable to Punjab and ₹171.55 crores attributable to Haryana.

(d) The said capital-cost liability was to be adjusted against a corresponding portion of the energy arrears, the energy being valued at ₹3.85 per unit, resulting in an adjustment of approximately 1,093 MU.

(e) Upon such adjustment, the balance energy arrears payable to the Plaintiff-State stood at approximately 11,973 MU, which was to be supplied by Punjab and Haryana at the rate of approximately 598 MU per annum over twenty lean seasons, in the inter se ratio of 58:42 for the Bhakra-Nangal Project and 60:40 for the Beas Projects.

(f) The settlement was accordingly to be implemented on a cashless basis, the capital-cost liability being adjusted against the energy arrears and the remaining energy being supplied in accordance with the aforesaid schedule.

The suit was accordingly disposed of.

Cause Title: State of Himachal Pradesh v. Union of India and others [Neutral Citation: 2026 INSC 1200]

Appearances:

Plaintiff: Advocate General Anoop Rattan, Advocate General Anup Rattan, Additional Advocate General Vaibhav Srivastava, Additional Advocate General Vaibhav Srivastava, Senior Advocate Kapil Sibal, Senior Advocate J. S. Attri, Advocate on Record Varinder Kumar Sharma, Advocate on Record Sugandha Anand, Advocate Sugandha Anand, Advocate Puneet Rajta, Advocate C. N. Jha, Advocate Puneet Rajta

Defendants: Attorney General for India R. Venkataramani, Senior Additional Advocate General Lokesh Sinhal, Senior Advocate Harinder Mohan Singh, Senior Advocate Nidhesh Gupta, Senior Advocate Balbir Singh, Senior Advocate Parvinder Chouhan, Advocate on Record Amrish Kumar, Advocate on Record Ranbir Singh Yadav, Advocate on Record Samar Vijay Singh, Advocate Raman Yadav, Advocate Ameyavikrama Thanvi, Advocate Abhishek Kumar Pandey, Advocate Chinmaee Chandra, Advocate Kartikay Aggarwal, Advocate Chitvan Singhal, Advocate Dr. Arun Kumar Yadav, Advocate Shabana, Advocate Rajat Bhardwaj, Advocate Nikunj Gupta, Advocate Siddharth Raj, Advocate Sabarni Som, Advocate Aman Dev Sharma, Advocate Gaj Singh, Advocate Ankur, Advocate Harsh Kumar Singh

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