State Of Himachal Pradesh vs Union Of India
- Court
- Supreme Court
2026 INSC 1200
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL ORIGINAL JURISDICTION
ORIGINAL SUIT NO. 2 OF 1996
IN THE MATTER OF :
State of Himachal Pradesh ...Plaintiff
versus
Union of India and others …Defendants
J U D G M E N T
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
Signature Not Verified
Digitally signed by
VISHAL ANAND
Date: 2026.11.06
13:18:29 IST
Reason:
( Defendant-States ).
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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 judgment dated
vide
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
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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
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the States of Punjab, Haryana and Rajasthan and the Union Territory
of Chandigarh.
A.1. T HE SCENARIO PRIOR TO THE REORGANISATION OF S TATES
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
Commissioner's Province under the States Merger (Chief
Commissioners' Provinces) Order, 1949, and was included as a Part
C State. In 1954, Bilaspur and the Himachal Pradesh region were
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united to form a new State of Himachal Pradesh under the Himachal
Pradesh and Bilaspur (New States) Act, 1954, retaining Part C status
until it became a Union Territory under the Constitution (Seventh
Amendment) Act, 1956. The geographical area was further enlarged
in 1966 by the transfer of territory from the composite State of Punjab
under Section 5 of the Punjab Reorganisation Act, 1966, and finally
Himachal Pradesh became a full State of the Indian Union on
25.01.1971 under the State of Himachal Pradesh Act, 1970.
5.6. Meanwhile, through an agreement dated 13.01.1959, the composite
State of Punjab and the State of Rajasthan fixed their respective
shares in the water stored by the Bhakra-Nangal Project at 84.78%
and 15.22%, and provided that each party would contribute to the
capital cost of the Project's electrical works in like proportion. On this
basis, 84.78% of the said capital cost was borne by the composite
State of Punjab as a whole, of which a part of the territory later stood
transferred to the Plaintiff-State.
5.7. Similarly, with regard to the Beas Project, the record of the Inter-State
Conference on the Ravi and Beas waters, held on 25.01.1955, and the
minutes of the sixth meeting of the Beas Central Board, held on
13.12.1963, demonstrate that 85% of the capital cost of Unit I, and
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32% of the capital cost of Unit II, were to be met by composite Punjab
as a whole.
A.2. T HE DIEGESIS POST REORGANISATION
5.8. The composite State of Punjab was thereafter reorganised with effect
from 01.11.1966 under the Punjab Reorganisation Act, 1966, which
split Punjab into the present States of Punjab and Haryana, created
the Union Territory of Chandigarh, and transferred certain territory,
together with its population, to the State of Himachal Pradesh.
5.9. In the context of the dispute permeating between the parties herein,
Section 78 of the Reorganisation Act, is relevant as it provided for the
apportionment of rights and liabilities with regard to the Hydel
Projects between the successor States. Section 78 reads as follows:
“ 78. Rights and liabilities in regard to Bhakra-Nangal
and Beas Projects.— (1) Notwithstanding anything
contained in this Act but subject to the provisions of Sections
79 and 80, all rights and liabilities of the existing State of
Punjab in relation to Bhakra-Nangal Project and Beas
Project shall, on the appointed day, be the rights and
liabilities of the successor States in such proportion as may
be fixed, and subject to such adjustments as may be made,
by agreement entered into by the said States after
consultation with the Central Government or, if no such
agreement is entered into within two years of the appointed
day, as the Central Government may by order determine
having regard to the purposes of the Projects:
Provided that the order so made by the Central Government
may be varied by any subsequent agreement entered into
by the successor States after consultation with the Central
Government.”
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5.10. Regardless of the clear terms enumerated under Section 78, no final
apportionment was apparently undertaken. In the interregnum , the
power generated from the Projects nonetheless continued to be
distributed amongst the successor States on an ad hoc basis, broadly
in the following manner:
i. Of the 84.78% of the Bhakra-Nangal Project attributable to
composite Punjab, Punjab received 54.50%, Haryana 39.50,
Himachal Pradesh 2.50%, and Chandigarh 3.50%.
ii. Of the 80% share of Beas Unit I attributable to composite Punjab,
Punjab received 60%, Haryana 40%, and Himachal Pradesh an
allocation recorded as 15 MW, with no share to Chandigarh.
iii. Of the 41.50% share of Beas Unit II, Punjab received 60% and
Haryana 40%, with neither Himachal Pradesh nor Chandigarh
receiving any share.
iv. Himachal Pradesh separately received 1.2 lakh units per day from
the Bhakra-Nangal Project at what the record refers to as the “ old
Himachal Pradesh rate ”, a concessional rate applicable to certain
of its areas.
5.11. Against this backdrop, certain discussions appear to have been held
on 17.04.1967 at the instance of the Secretary, Ministry of Irrigation
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and Power, Government of India, inter alia , for the purpose of
considering the formation of separate Electricity Boards for Punjab
and Haryana. A summary record of the discussions was thereafter
prepared, which, in substantial part, corresponded with the allocation
of shares set out hereinabove. The record also reveals an arrangement
dated 30.03.1978. The consistent position of the Plaintiff-State has
been that both the record dated 17.04.1967 and the arrangement
dated 30.03.1978 were merely tentative in nature and did not
constitute a final determination of the respective rights of the
successor States. The Defendant-States, on the other hand, have
maintained that the respective rights stood settled pursuant to these
arrangements, save insofar as Beas Unit II was concerned.
NSTITUTION OF THE SUIT BEFORE THIS OURT
A.3 I C
5.12. In this backdrop, the Plaintiff-State addressed a communication to
the Government of India on 22.10.1969, asserting its entitlement to
7.19% of the total benefits arising from the two Projects. This claim
was founded upon the proportion of the population of composite
Punjab that had been transferred to the Plaintiff-State upon
reorganisation. The Plaintiff-State reiterated and pursued its claim
through further representations made from time to time over the
succeeding years. The Central Government ultimately rejected the
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claim in 1994. A tripartite meeting convened in 1995 with a view to
resolving the dispute also failed to yield any resolution.
5.13. It was in the aforesaid background, that the Plaintiff-State instituted
the instant suit in 1996 under Article 131 of the Constitution, seeking,
inter alia , the following reliefs:
i. 12% of the net power generated from the two Projects, free of cost,
from the date of commissioning of each Project, on the basis of
the ‘Home State’ principle;
ii. 7.19% of the power generated from the two Projects, calculated
from 01.11.1966 or, where the relevant Project was
commissioned thereafter, from the date of such commissioning,
whichever was later, on the basis of the population-transfer ratio;
iii. Rs. 2,199.77 crores by way of compensation for the Defendants’
failure to supply the Plaintiff-State with its claimed 12% and
7.19% shares from 01.11.1966 until the institution of the suit,
together with such further amounts as may have accrued
thereafter; and
iv. Interest, both pendente lite and future, and costs.
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5.14. The Defendant-States, in common, denied the Plaintiff-State’s claims
and contended that the rights of the respective States had already
been settled by the record dated 17.04.1967 and the arrangement
dated 30.03.1978.
5.15. The State of Rajasthan, however, raised certain additional objections
to the maintainability and merits of the suit. First , it contended that
the suit was not maintainable against it without the written consent
of the Central Government, as required under Section 87-B read with
Section 86(1) of the Code of Civil Procedure, 1908. Second , it
asseverated that, following the merger of Bilaspur with the Union, no
cause of action survived against Rajasthan in respect of any share
attributable to the erstwhile State of Bilaspur. Third , it disputed the
applicability of the ‘ Home State ’ principle, contending that the Hydel
Projects were State Projects of composite Punjab and Rajasthan,
which were to be regarded as partner States, and that no separate
entitlement could therefore be claimed by the Plaintiff-State on the
basis of its being a ‘ Home State ’.
5.16. Further, the Union of India and the State of Punjab raised the
defences of limitation, delay and laches, estoppel, and election. They
also contended that the summary record dated 17.04.1967
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constituted a binding agreement within the meaning of Section 78.
The Union Territory of Chandigarh, for its part, asserted an
independent entitlement to 3.5% of the free power generated from
the Projects.
5.17. Following the admission and denial of documents before the Registrar
(Judicial) in 1997–98, this Court, by order dated 08.03.1999, settled
the issues arising for determination. Broadly, these included, inter
alia , questions of limitation and maintainability; the effect of the
merger of Bilaspur; the binding nature of the record dated
17.04.1967; the maintainability of the suit against Rajasthan; the
applicability of the ‘ Home State ’ principle; the independent entitlement
claimed by Chandigarh; and the Plaintiff-State’s claims for 12% free
power, a 7.19% share, compensation and interest.
5.18. Evidence was thereafter led by the parties. The Plaintiff-State
examined three witnesses, while Punjab and Haryana examined one
witness each. Rajasthan and Chandigarh did not examine any
witnesses. Since a dispute arose regarding the authenticity of the
record dated 17.04.1967, the Union of India filed an affidavit on
01.07.2000, accompanied by production of the master folder, which
was admitted in evidence as secondary evidence.
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5.19. Subsequently, efforts for a mediated settlement of the dispute were
made under the aegis of the Union of India but the same were
unsuccessful.
5.20. This Court then, vide judgment dated 27.09.2011, rendered the
following findings:
i. The suit was not barred by limitation, since Article 131 prescribes
no period of limitation and the Plaintiff-State’s allocations had at
all times been only ad hoc;
ii. The merger of Bilaspur did not extinguish the Plaintiff-State’s
cause of action, which rested independently on Section 78 of the
Punjab Reorganisation Act, 1966 and on constitutional grounds;
iii. The suit was not barred by Article 363, since the only proved
agreement, the Merger Agreement of 15.08.1948, contained no
provision touching allocation of power, and the draft of
07.07.1948 was never proved executed.
iv. The suit was not barred by Article 262(2), since it concerned
sharing of power and not the use of inter-State river waters. The
Plaintiff-State had a legal right to the power generated,
enforceable against Punjab, Haryana, Chandigarh and the Union
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of India, but not against Rajasthan, which had never formed part
of composite Punjab.
5.21. This Court further held that Section 78(1) itself conferred a legal right
enforceable under Article 131, and that the record of 17.04.1967,
having been contemporaneously described by the Government of
India as ‘tentative’, ‘ ad hoc ’ and subject to readjustment, it did not
constitute a final agreement binding the Plaintiff-State.
5.22. However, with regard to the claim to 12% free power, this Court held
that the Plaintiff-State could claim no right independent of the
Constitution, and that the 1985 Cabinet decision relied upon was a
subsequent policy decision incapable of conferring an enforceable
legal right.
5.23. This Court consequently declared that the Plaintiff-State’s entitlement
out of the total power generated by the Hydel Projects shall be as
follows:
i. 7.19% of the power attributable to composite Punjab,
corresponding to 6.095% of the total power generated from the
Bhakra-Nangal Project, with effect from 01.11.1966;
ii. 5.752% of the total power generated from Beas Unit I, with effect
from the date on which production commenced; and
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iii. 2.984% of the total power generated from Beas Unit II, with effect
from the date on which production commenced.
5.24. Additionally, this Court determined the corresponding shares of
Punjab and Haryana at 51.8% and 37.51%, respectively, while
directing that Chandigarh’s requirement of 3.5% be met by Punjab
and Haryana out of their respective shares.
5.25. Finally, in respect of the Plaintiff-State’s claim for compensation of Rs.
2,199.77 crores, this Court did not award the amount as claimed.
Instead, it directed Defendant No. 1, the Union of India, to compute
the amount payable to the Plaintiff-State on the basis of the
entitlements determined by the Court and to place a statement setting
out the computation before this Court within six months.
5.26. It is significant to note that while directing Defendant No. 1 to
determine the amounts due to the Plaintiff-State, clause (iii) refers in
its concluding portion towards amounts due from Defendant Nos. 3
and 4. This appears to be inconsistent with clause (i), which expressly
decrees the suit in part against Defendant Nos. 2 and 3, and with
clause (iv), which directs payment of interest by Defendant Nos. 2 and
3, namely the States of Punjab and Haryana. The subsequent
proceedings have also proceeded on the basis that the Judgement-
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Debtors were Defendant Nos. 2 and 3 only. The reference to Defendant
Nos. 3 and 4 in the concluding portion of clause (iii) therefore assumes
significance in the context of the subsequent implementation of
the decree.
UBSEQUENT EVELOPMENTS
A.4 S D
5.27. In compliance with the aforesaid judgment, the Ministry of Power
issued an order dated 31.10.2011 revising the allocation of energy
with effect from 01.11.2011. For the purpose of determining the
amounts payable in respect of the anterior period, the Ministry of
Power, by order dated 04.10.2011, constituted a three-member
Committee comprising the Joint Secretary (Hydro), the Chairman of
the Bhakra Beas Management Board ( BBMB ), and the Member
(Hydro) of the Central Electricity Authority. The Committee thereafter
obtained and verified the relevant data from the Board and the
concerned parties.
5.28. On the basis of the aforesaid exercise, the Union of India filed an
affidavit before this Court on 05.07.2013, setting out the Plaintiff-
State’s total energy entitlement for the period from 01.11.1966, or
from the respective dates of commencement of production in the case
of the Beas Units, until October, 2011. The entitlement was computed
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at: ( i ) 8,523 million units from the Bhakra-Nangal Project; ( ii ) 3,145
million units from Beas Unit I; and ( iii ) 1,398 million units from Beas
Unit II; aggregating to a total of 13,066 million units. While the
Plaintiff-State accepted this computation, the same was disputed by
the States of Punjab and Haryana.
5.29. As regards the rate at which the shortfall was to be valued, the Union
of India’s affidavit considered and rejected four rates, namely, the
BTPS rate, the rate applicable to the Union Territory of Chandigarh,
the O&M rate, and the Old Himachal Pradesh rate. It instead proposed
the NFL rate, being the rate at which National Fertilizer Limited was
supplied power on commercial terms, which was a common-pool
consumer of the BBMB.
5.30. Applying this rate, the affidavit computed an amount of Rs. 1,497.39
crores, with simple interest at 6%, or Rs. 1,525.62 crores, with
compound interest at 6%, as payable by Punjab and Haryana to the
Plaintiff-State in the ratio of 58:42. As an alternative to monetary
compensation, the affidavit proposed that the shortfall be
compensated in kind by way of an additional allocation of energy
spread over a period of 30 years.
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5.31. The affidavit also separately quantified the Plaintiff-State’s liability
towards its share of the capital cost and the expenditure incurred on
renovation, modernisation, uprating and O&M. These liabilities were
computed at Rs. 111.54 crores without interest, Rs. 225.77 crores
with simple interest at 6%, and Rs. 459.12 crores with compound
interest at 6%.
5.32. The Plaintiff-State, as well as the States of Punjab and Haryana,
however, filed counter-affidavits disputing the aforesaid computation.
This Court, on 23.07.2020, impressed upon the learned Attorney
General for India to file written submissions and required the parties
to furnish their respective submissions to his office. The learned
Attorney General thereafter filed Brief Written Submissions on
24.08.2020, which substantially recapitulated the computation
contained in the 2013 affidavit. Punjab and Haryana subsequently
filed brief responses on 04.09.2020 and 06.10.2020, respectively,
pursuant to leave granted in I.A. Nos. 86807 of 2020 and 101569
of 2020.
5.33. The State of Punjab filed four further interlocutory applications, being
I.A. Nos. 56789, 56790, 56795 and 56796 of 2021, seeking directions
to the Plaintiff-State and the Union of India to produce material
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relating to the applicable tariff rates and purchases made from
the market.
5.34. This Court thereafter made three successive references to the office of
the Attorney General for India with a view to facilitating a settlement.
Thereafter, on 07.08.2014, the then Attorney General was requested
to assist the parties in arriving at a settlement. He submitted his
report on 16.01.2015, following which the Union of India, Punjab and
Haryana exchanged further affidavits during 2015. It seems that
further discussions took place in November 2017, but finally an office
report dated 09.07.2019 recorded that no settlement document had
been placed on record.
5.35. The third and present reference commenced on 11.09.2024, when the
learned Attorney General placed on record a note dated 10.09.2024
suggesting a possible way forward. The States of Punjab and Haryana
thereafter filed their respective responses on 22.10.2024 and
11.11.2024. The meetings subsequently convened by the learned
Attorney General on 10.12.2024 revealed ‘ some progress ’, whereupon
a ‘ last opportunity ’ was granted to the parties on 04.02.2025 to arrive
at a settlement.
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5.36. On 04.12.2025, this Court recorded that further notes, filed in March
2025 to crystallise the issues between the parties, had not been placed
on record. The Court accordingly directed that the said notes be
brought on record and listed the matter as part-heard for 18.03.2026.
5.37. Thereafter, on 18.03.2026, this Court released the case from part-
heard status and passed the following order:
“1. Released from part-heard.
2. In the meantime, the statement with respect to allocation
of the energy arrears as specified, comparative rates thereof
as specified in paragraph 10 as well as the rates borne by
the respective States be produced showing comparison
thereto. So far as capital expenses part is concerned at the
relevant time in terms of the provisions of the Punjab
Reorganisation Act, the calculation be filed to that effect by
the respondents supplying a copy to the other side within
three weeks.
3. List on 22.04.2026.”
5.38. Pursuant to the aforesaid direction, the Union of India placed notes
on record on 19.03.2026, 22.06.2026 and 15.07.2026. The State of
Haryana filed its statement on 10.06.2026, while the State of Punjab
filed its affidavit on 17.06.2026. The Plaintiff-State also filed its
written submissions. It is these submissions, together with the
settlement framework proposed by the learned Attorney General for
India, that are set out hereinbelow.
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B. SUBMISSIONS ON BEHALF OF THE PLAINTIFF-STATE
6. The Plaintiff-State, in its submissions, elucidated that the entitlement
of 13,066 million units, as computed by the Union of India, Ministry
of Power, the BBMB and the Central Electricity Authority in the
affidavit dated 05.70.2013, correctly represents the shortfall in power
due to it. It further stated that it does not dispute the separate
computation, contained in the same affidavit, of its liability towards
capital cost, renovation, modernisation and uprating ( RM&U ), and
O&M expenditure, quantified at Rs. 111.54 crores.
7. The Plaintiff-State submitted that the NFL rate proposed by the Union
of India was a historically concessional rate extended to the National
Fertilizer Factory as a subsidy during the Green Revolution era, and
was never intended to govern inter-State exchanges of energy. It
instead pressed for adoption of the BTPS rate, contending that this
was the rate actually applied by the BBMB for inter-State and intra-
State energy exchanges within the Northern Region. In support, it
relied upon the Board’s practice of billing Chandigarh and Rajasthan,
as well as Punjab and Haryana in their inter se transactions, at the
BTPS rate. Support was also drawn from the decision of the Northern
Regional Electricity Board dated 11.06.1980 adopting the BTPS rate.
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for supply to Chandigarh. On this basis, the Plaintiff-State claimed an
amount of Rs. 4,249.45 crores from Punjab and Haryana.
8. It further submitted that the Union of India’s computation does not
account for the Plaintiff-State’s other rights and liabilities under the
Punjab Reorganisation Act, 1966, or for the losses allegedly suffered
by it on account of submergence, loss of forest land, displacement and
resettlement. It also claimed reimbursement of Rs. 1,745 crores
allegedly incurred in procuring power from the open market between
1989 and 2011 at rates higher than the BTPS tariff, on the ground
that it had been deprived of its rightful share of power.
C. CONTENTIONS ON BEHALF OF THE DEFENDANTS
C.1 U NION OF I NDIA
9. Through the notes submitted on 19.03.2026, 22.06.2026 and
16.07.2026, learned Attorney General for India, appearing for the
Union of India, reiterated the computation contained in the earlier
affidavit dated 05.07.2013. As a proposed mode of settlement, it was
suggested that the Plaintiff-State’s energy arrears of 13,066 million
units be compensated in kind over a period of fifteen years, at the rate
of 871 million units per year, with such energy to be supplied during
the lean season from October to March. The proposed allocation
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between Punjab and Haryana was in the ratio of 58:42 for the Bhakra-
Nangal Project and 60:40 for the Beas Project, these being, according
to the Union of India, the proportions in which the two States had
actually received energy from the Projects between 1966 and 2011.
10. It was further proposed that the Plaintiff-State should, in each year,
pay for the energy so received at the charges determined by the BBMB
for that year. It was also proposed that, if this Court considers it
appropriate, the Plaintiff-State may bear the capital expenditure
incurred in respect of the two Projects, after adjustment of the
operational expenditure, from the amounts otherwise payable to it.
11. It was also stated that, in view of Punjab and Haryana’s dispute
regarding the Plaintiff-State’s capital-cost liability as computed in the
2013 affidavit, the Ministry of Power obtained the relevant loan and
repayment data from the Comptroller and Auditor General of India,
which was furnished by letter dated 06.02.2026. It was stated that
this data, read with the computation contained in the 2013 affidavit,
provides an adequate basis for reconstructing the Plaintiff-State’s
capital liability, which is estimated at approximately Rs. 420.77 crores
up to the financial year 2025–26. The detailed settlement framework
founded upon this reconstruction is set out in Part D below.
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TATE OF UNJAB
C.2 S P
12. On behalf of the State of Punjab, it was contended that the Union of
India’s computation of 13,066 million units does not account for the
1.2 lakh units per day separately received by the Plaintiff-State at the
concessional “ old Himachal Pradesh rate ”, over and above its ad hoc
2.5% share. According to Punjab, this additional supply amounted to
approximately 1,972 million units during the period from 1.11.1966
to 31.10.2011. Upon deducting this quantity from the computed
entitlement, Punjab submitted that the net energy arrears due to the
Plaintiff-State would be 11,094 million units.
13. On the question of capital cost, it was submitted that the total capital
cost of the Bhakra Project up to 2011–12 was Rs. 7,089.31 crores, of
which the Plaintiff-State’s 7.19% share amounted to Rs. 509.72
crores. In respect of the two Beas Projects, the aggregate capital cost
was stated to be Rs. 15,329.08 crores, with the Plaintiff-State’s
corresponding share amounting to Rs. 1,102.16 crores. The Plaintiff-
State’s aggregate capital-cost liability was thus stated to be Rs.
1,611.88 crores as on 31.10.2011. Applying the weighted average
interest rate applicable to long-term loans under the tariff orders of
the Punjab State Electricity Regulatory Commission, this amount was
stated to have accrued to Rs. 6,368.29 crores as on 31.03.2026.
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14. It was further submitted that the Plaintiff-State’s share of the BBMB’s
common-pool revenue receipts, amounting to Rs. 230.674 crores as
on 31.10.2011 and Rs. 534.57 crores inclusive of interest, is payable
to the Plaintiff-State. Conversely, its share of O&M expenditure,
amounting to Rs. 366.767 crores as on 31.10.2011 and Rs. 849.96
crores inclusive of interest, is recoverable from it. On this basis,
Punjab arrived at a net amount of Rs. 6,683.68 crores as recoverable
from the Plaintiff-State as on 31.03.2026.
15. It was also stated that the O&M rate is the appropriate basis for
valuation, as the BBMB supplies power to all partner States, including
Punjab, on that basis. It further pointed out that, since the judgment
dated 27.09.2011, the Plaintiff-State has itself been paying for its
7.19% share at the O&M rate. According to Punjab, the Union of
India’s objections to adopting the O&M rate are unsupported by the
record, particularly since the Plaintiff-State has not substantiated its
alleged market purchases despite Punjab’s application, I.A. No. 56789
of 2021, seeking a direction for production of material in that regard.
C.3 S TATE OF H ARYANA
16. The State of Haryana asserted that the ratio of 58:42, drawn from the
record dated 17.04.1967 and adopted by the Union of India for
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apportioning liability between Punjab and Haryana, does not
correspond to the energy actually drawn by Haryana. It was claimed
that the applicable ratio was 42:58 for the Bhakra-Nangal Project and
40:60 for the Beas Projects. Relying on ex-bus generation data
supplied by the BBMB, the State of Haryana stated that its liability as
on 27.09.2011 was 3,809.77 million units, as against the 5,487.6
million units attributed to it in the Union of India’s computation.
17. The State of Haryana further stated that the Union of India’s
computation does not account for the Plaintiff-State’s continued
receipt of 1.2 lakh units per day from the Bhakra-Nangal Project, both
before and after the judgment dated 27.09.2011. After accounting for
this supply, the Plaintiff-State’s total entitlement as on 31.07.2018
stood at 10,798 million units, comprising 2,820 million units
attributable to Haryana. By 31.03.2026, the outstanding liability of
the State of Haryana in respect of this entitlement had reduced to
2,679 million units, with the balance of the Plaintiff-State’s
entitlement being attributable to Punjab.
18. On capital cost, the State of Haryana averred that applying the
methodology proposed in the Union of India’s note dated 18.03.2026
to the audited accounts of the erstwhile Haryana State Electricity
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Board and its successor, Haryana Vidyut Prasaran Nigam Limited, the
Plaintiff-State’s liability towards the State of Haryana is Rs. 1,070.75
crores. It further stated that the data furnished by the BBMB, upon
which the Union of India substantially relies, is neither authenticated
nor audited, and that the Central Electricity Authority has itself
acknowledged that it has no means of verifying its accuracy. It was
also stated that the data does not account for administrative
overheads and interest during the construction period, both of which
properly form part of the capital cost.
19. The State of Haryana further maintained that loan liabilities
apportioned between Punjab and Haryana at the time of
reorganisation, in the ratio of 53:47, and, in respect of post-
reorganisation loans, in the ratio of 60:40, were never borne by the
Plaintiff-State and ought now to be attributed to it in the same 7.19%
proportion.
D. SUGGESTED COMPUTATIONAL FRAMEWORK
20. Having considered the positions and concerns advanced by all
stakeholders, and building upon the capital-cost reconstruction
referred to in Part C.1 above, the note(s) submitted by the learned
Attorney General for India propose a cashless settlement framework
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intended to give effect to the decree dated 27.09.2011, without
requiring any direct financial transaction between the States.
21. Under this framework, Punjab and Haryana would supply the
Plaintiff-State with 13,066 million units of energy arrears over fifteen
lean seasons, at the rate of 871 million units per year, in the ratio of
58:42 for the Bhakra-Nangal Project and 60:40 for the Beas Projects.
The Plaintiff-State would pay the charges determined by the BBMB
for the year in which the energy is received. Its capital-cost liability,
reconstructed at approximately Rs. 420.77 crores, comprising Rs.
249.23 crores attributable to Punjab and Rs. 171.55 crores to
Haryana, would be adjusted against a portion of the energy
entitlement at Rs. 3.85 per unit. This would correspond to
approximately 1,093 million units, leaving a balance of approximately
11,973 million units to be supplied over the remaining fifteen-year
period at approximately 798 million units per year.
22. It bears noting that this reconstruction is confined to the capital-cost
component. By contrast, the earlier computation contained in the
affidavit dated 05.07.2013 also accounted for the proportionate
RM&U and O&M expenditure and adjusted the proportionate
revenue receipts.
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23. The aforesaid proposal was firstly placed before this Court on
30.07.2026 and again on 20.08.2026. On both occasions, the
Plaintiff-State and the State of Haryana expressed their agreement to
the proposal in principle.
24. The State of Punjab, however, recorded its reservations on both
occasions and was accordingly granted time until 24.08.2026 to file
its own note. In the note filed thereafter, the State of Punjab raised
objections on three broad issues. First , it contended that the
computation of energy arrears at 13,066 million units did not account
for the daily supply of 1.2 lakh units of energy to the Plaintiff State, a
fact expressly recorded in the minutes of the meeting convened by the
Ministry of Power, Government of India. According to the State of
Punjab, upon adjusting the energy supplied on this account, the net
energy arrears payable to the Plaintiff State would stand reduced
to 11,094 million units.
25. Second , it was submitted that the capital cost liability of the Plaintiff-
State, being Rs. 420.77 crores, was converted into energy at the rate
of Rs. 3.85 per unit, yielding 1093 million units, and that after
adjusting this figure, 11,973 million units were found due to the
Plaintiff-State. This calculation was contended to be fallacious. It was
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urged that the conversion ought to have been made at the O&M rate,
currently being 79 paise, which would have resulted in 5768 million
units being due to the State of Himachal Pradesh.
26. Third , it was put forth that the energy arrears owed to the Plaintiff-
State would have to be supplied over a period of 15 years, whereas an
earlier written submission of the learned Attorney General had
suggested a period of 30 years for the disbursement of energy, which
was said to be the more suitable course.
E. ISSUES
27. Having considered the factual background, the terms of the decree
dated 27.09.2011, and the submissions of learned Attorney General
for India and the parties, as set out hereinabove, it appears to us that
the issues that require immediate consideration by this Court can be
broadly as follows:
i. What is the quantum of energy arrears due to the Plaintiff-State
from the Bhakra-Nangal and Beas Projects, and at what rate is
that quantum to be valued?
ii. Whether, and to what extent, the Plaintiff-State is liable to
contribute towards the capital cost of the two Projects in
proportion to its 7.19% entitlement?
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iii. Whether the liability found due to the Plaintiff-State is to be
discharged in cash or in kind, and if in kind, on what terms and
schedule?
iv. Whether the Plaintiff-State’s capital-cost liability may be set off
against its energy-arrears entitlement, and if so, at what rate and
to what extent?
v. What consequential directions are necessary to give final effect to
the decree dated 27.09.2011?
F. ANALYSIS
28. At the outset, although the above issues have been enumerated
separately, they are merely illustrative in nature and are being dealt
with collectively in this part of our decision. These issues arise in
continuation of the decree of this Court dated 27.09.2011, which
decided the substantive issues in the suit and, at that stage, left it
open to the Union of India to compute the amount payable to the
Plaintiff-State and to work out the manner in which the decree would
be given effect.
29. However, the Union of India was seemingly entrusted with the onerous
task of untying a knot that had only tightened with the passage of
decades. It must be noted at this juncture that the Union of India
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made due efforts, on multiple and successive occasions, to bring
about a settlement amongst the parties, but without success. The
responsibility has accordingly devolved upon this Court to settle the
matter finally and conclusively, so that no further issue remains
pending adjudication.
30. It thus goes without saying that the present exercise is not intended
to reopen matters conclusively decided by this Court in its decree
dated 27.09.2011, nor to afford the parties an opportunity to re-
agitate issues that already stand settled. The exercise is, rather, in the
nature of execution proceedings, necessitated by the differences that
have arisen amongst the parties with respect to the computation made
by the Union of India.
31. As noted earlier in Part D (“Suggested Computational Framework”) of
this judgment, the latest computation note dated 19.03.2026, placed
on record by the learned Attorney General for India, has been
substantially accepted by all the stakeholders. Some reservations
have, however, been recorded by the State of Punjab in its note in
response to such computation.
32. On the one hand, the reservations of the State of Punjab to the efforts
undertaken by the Union of India have, prima facie , given rise to an
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avoidable stalemate. On the other hand, even upon a more considered
examination of the contentions laid out earlier, we are not persuaded
to accept any of them.
33. 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.
34. In the computation made by the Union of India, the adjustment has
been effected after taking into account a number of variables,
including the ratios of energy distribution determined by the decree of
this Court, 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, it has been calculated that 11,973 million units
are to be supplied to the Plaintiff-State over a period of 15 years, after
adjusting the liability against 13,066 million units.
35. It also bears noting that this is not the first occasion on which the
Union of India has endeavoured to bring the parties to a settlement.
Those earlier efforts, though unsuccessful, were not the first attempt
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at resolving the dispute. Additionally, such computation submitted
before us is also not the product of any single method. Rather, it is
the creation of the Union of India having considered various formulae,
methods of calculation and rates.
36. Even in respect of the capital cost liability calculation proposed by the
State of Punjab, there appears to be an attempt to inflate the liability
of the Plaintiff-State and thereby reduce the arrears owed to it, by
converting the liability at the current O&M rate. It is not necessary to
dwell at length on why this approach is inaccurate and misleading,
since the arrears relate to an earlier period and cannot be computed
at a rate that prevails today.
37. Finally, the State of Punjab has contended that the energy arrears
ought to be discharged over a period of 30 years, as against the period
of 15 years suggested by the learned Attorney General for India, the
only ground urged in support being that a period of 30 years had been
averred in an earlier written submission filed by the Union of India.
No other reason has been advanced for departing from the suggested
period. It is also of significance that the State of Haryana, when faced
with the very same period of 15 years for the disbursement of the
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arrears, has taken no exception to it and has instead agreed to the
proposal.
38. That being so, having regard to the total quantum of arrears, and with
a view to easing the burden on the Defendant States and bringing this
long-standing dispute to a close, we are inclined to extend some
concession to them. Accordingly, we deem it appropriate to increase
the period for the disbursement of the energy arrears from 15 years
to 20 years.
39. 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.
40. 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.
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G. DIRECTIONS AND CONCLUSIONS
41. Bearing in mind the issues that remain outstanding, as well as the
respective positions of all parties, we deem it appropriate to issue the
following directions:
a. The energy arrears due to the Plaintiff-State, as computed by the
Union of India, shall be taken at 13,066 million units (MU). The
same shall be supplied by the States of Punjab and Haryana at
the rate of 653 MU per annum over 20 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 shall pay the charges determined by the
Bhakra Beas Management Board for the year in which each
tranche of energy is received;
c. The Plaintiff-State’s liability towards its 7.19% share of the capital
cost of the Bhakra-Nangal and Beas Projects, representing the
unreimbursed share of loan servicing undertaken by Punjab and
Haryana since 1966–67, shall be assessed at ₹ 420.77 crores,
comprising ₹ 249.23 crores attributable to Punjab and ₹ 171.55
crores attributable to Haryana;
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d. The aforesaid capital-cost liability shall be adjusted against a
corresponding portion of the energy arrears due to the Plaintiff-
State. For this purpose, the energy shall be valued at the rate of
₹ 3.85 per unit, resulting in an adjustment of approximately 1,093
MU against the capital-cost liability;
e. Upon giving effect to the aforesaid adjustment, the balance energy
arrears payable to the Plaintiff-State shall stand at approximately
11,973 MU. This balance shall be supplied by Punjab and
Haryana at the rate of approximately 598 MU per annum over 20
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 shall accordingly be implemented on a cashless
basis, with the capital-cost liability being adjusted against the
energy arrears in the manner set out hereinabove, and with
the remaining energy being supplied in accordance with the
aforesaid schedule.
42. We would also like to place on record our appreciation for the
sustained efforts of the good offices of the learned Attorney General
for India over the years, not only in facilitating attempts at mediation
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between the parties, but also in formulating a framework with a view
to bringing this long-standing dispute to a conclusion.
43. As a matter of abundant concern, we must express in no uncertain
terms to all the concerned stakeholders that the directions issued by
this Court are binding and are required to be acted upon without
reservation. The expectation of decree, having remained pending for
several decades, cannot be rendered fruitless by reason of the
unwillingness or recalcitrance of a Judgment Debtor.
44. Ordered accordingly.
45. The instant suit stands disposed of. Pending applications, if any, also
disposed of in the above terms.
…..................................CJI.
[SURYA KANT]
……..................................J.
[JOYMALYA BAGCHI]
……..................................J.
[V. MOHANA]
NEW DELHI
DATED: 06.11.2026
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