Featured image for Supreme Court Judgment dated 06-12-2019 in case of petitioner name State of Uttarakhand vs Union of India & Anr.
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Supreme Court Rules on Shareholding Dispute Between Uttar Pradesh and Uttarakhand Over Tehri Hydro Development Corporation

The Supreme Court of India, in State of Uttarakhand vs. Union of India & Anr., delivered a significant ruling on the dispute regarding the allocation of shareholding in the Tehri Hydro Development Corporation (THDC) following the enactment of the Uttar Pradesh Reorganisation Act, 2000. The ruling determines whether the State of Uttar Pradesh was rightfully entitled to 25% shareholding in THDC or if the State of Uttarakhand should be allocated those shares.

Background of the Case

After the creation of Uttarakhand on 9th November 2000, under the Uttar Pradesh Reorganisation Act, 2000, disputes arose between the two states over assets and liabilities, including the shareholding in THDC. The State of Uttarakhand filed a suit under Article 131 of the Constitution of India, challenging the allocation of 25% shareholding in THDC to Uttar Pradesh and seeking a declaration that Uttarakhand was the rightful owner of those shares.

The State of Uttarakhand also sought a decree of mandatory and permanent injunction to transfer the disputed shareholding to it and allocate dividends from 9th November 2000 until the final resolution of the case.

Legal Issues Before the Supreme Court

  • Whether the allocation of 25% shareholding in THDC to the State of Uttar Pradesh was valid under the Uttar Pradesh Reorganisation Act, 2000.
  • Whether the State of Uttarakhand was the rightful owner of the disputed shares.
  • Whether the dividends from these shares should be allocated to Uttarakhand from the date of state formation.
  • Whether the State of Uttar Pradesh had defaulted in appearing before the Court and should be set ex parte.

Arguments by the Plaintiff (State of Uttarakhand)

  • The allocation of 25% shareholding in THDC to the State of Uttar Pradesh was not in accordance with the reorganization scheme.
  • Since the hydroelectric project primarily falls within Uttarakhand’s territory, it should rightfully hold the shareholding.
  • The dividends from these shares belong to Uttarakhand, not Uttar Pradesh.
  • Uttar Pradesh failed to appear before the Court within the stipulated time, and therefore, an ex parte order should be passed.

Arguments by the Defendant (State of Uttar Pradesh)

  • Uttar Pradesh claimed that the allocation of 25% shareholding was in accordance with the provisions of the Uttar Pradesh Reorganisation Act, 2000.
  • It contended that the ownership of shares does not depend on the geographical location of the project but rather on the financial contributions made to the corporation.
  • The delay in filing a response was due to administrative processes and should not result in an ex parte order.

Supreme Court’s Judgment

The Supreme Court, while ruling on an interlocutory application filed by Uttar Pradesh to recall an earlier ex parte order, considered the procedural delays and the legal grounds of the dispute. The Court observed that Uttar Pradesh had defaulted in appearing before the Court initially but had taken corrective steps upon realizing the consequences.

The Court held:

“Having regard to the entirety of the circumstances, the Interlocutory Application is allowed subject to the State of Uttar Pradesh paying costs quantified at Rs. 30,00,000/- to the plaintiff/State of Uttarakhand within four weeks from today.”

Additionally, the Court directed:

  • Uttar Pradesh was permitted to file its written statement within four weeks.
  • Uttarakhand was allowed to file its replication within eight weeks.
  • Both states were directed to submit relevant documents before the next hearing.
  • The suit would be listed after twelve weeks for framing issues.

Key Takeaways from the Judgment

  • Even when a party defaults in appearing before the Court, it may be allowed to participate in the proceedings upon payment of costs if it provides valid reasons.
  • Disputes arising from state reorganization laws must be resolved by interpreting legislative intent and financial contributions.
  • Future proceedings will determine the rightful owner of the disputed shares in THDC.
  • Dividends from disputed shares may be subject to retrospective allocation based on the final outcome.

Final Decision

  • The Supreme Court allowed the interlocutory application filed by the State of Uttar Pradesh, setting aside the ex parte order.
  • The case was scheduled for further proceedings to resolve the shareholding dispute.
  • The cost of Rs. 30 lakh was imposed on Uttar Pradesh for procedural delays.

Implications of the Judgment

This ruling is significant as it sets the stage for resolving a long-standing dispute between the two states over valuable hydroelectric assets. The final resolution of this case will have implications for inter-state asset allocation and financial claims arising from state reorganizations.


Petitioner Name: State of Uttarakhand.
Respondent Name: Union of India & Anr..
Judgment By: Justice R.F. Nariman, Justice S. Ravindra Bhat.
Place Of Incident: Uttarakhand.
Judgment Date: 06-12-2019.

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