Providing capital (s) for a new State

(This article was sent by E-mail to Shri Y.S. Jagan Mohan Reddy garu, Hon’ble Chief Minister of Andhra Pradesh for his use in resolving the issue surrounding the capital for the State. It was also sent by E-mail to the Editor, The New Indian Express for publication if considered suitable.)

The issue of providing capital (s) for a new State has become controversial in recent times when the Government of Andhra Pradesh changed its stand from having a single capital at Amaravati to having three capitals at Amaravati, Visakhapatnam and Kurnool to accommodate respectively the Legislative, Executive and Judicial organs of the State. The farmers of the villages located in and around Amaravati (Rajadhani Rythu Parirakshnana Samithi), who surrendered their land in response to the Land Pooling Scheme of the State Government, got agitated because of this deviation in the policy of the Government. 

In so far as the establishment of new States is concerned, the Constitutional provisions indicate that the States are wholly at the mercy of the Centre. Article 1 of the Indian Constitution lays down that India shall comprise (a) the territories of the States; and (b) the Union territories, specified in the First Schedule. Although the Constitution did not describe India as a federation, it has got both federal and unitary features. In fact, it is quasi-federal with more unitary features. One of the unitary features is about admission/ establishment of new States and about altering the boundaries/ names of existing States, i.e. about amending the First Schedule of the Constitution.

Article 2 of the Constitution is an enabling provision for the Parliament to make laws to establish new States on appropriate terms and conditions. Article 3 is about the methods of forming a new State or changing boundaries/ names of existing States and about introducing the relevant Bill in either House of the Parliament only on the recommendation of the President. In the case of changing boundaries/ names of existing States, the article specifically provides that relevant Bills must be introduced in Parliament only after the Bills have been referred by the President to the Legislature of the concerned States for expressing views thereon. Article 4 states that the laws made under articles 2 and 3 shall contain necessary provisions for amending First and Fourth Schedules (Fourth Schedule is about allocation of seats in the Council of States, i.e., Rajya Sabha) and may also contain relevant supplemental, incidental, and consequential provisions. It also states that such law shall not be deemed to be an amendment of the Constitution for the purposes of article 368.

A Bill under articles 3 and 4 requires only a simple majority (of those present and voting in either House of the Parliament) to be passed, which any party in power will usually have, whereas amendments under article 368 require special majority (majority of the total membership and majority of two-thirds of the members present and voting). This means that the Centre, if it chooses, can easily establish a new State or alter the boundaries/ name of an existing State. This is a strong unitary feature.

It is clear from articles 2 to 4 of the Constitution that none of the States have any say in the matter, except in case of altering the boundaries/ names of existing States where the concerned State Legislatures may at best express views thereon. Even when the State Legislature opines against altering State boundaries/ name, the Parliament may still decide in favour of doing it. Hence, the matter is wholly in the purview of the Parliament.

The manner in which the new State of Andhra Pradesh has been formed, bifurcating it from another new State, Telangana, under the Andhra Pradesh Reorganisation Act, 2014, that too after the combined State Legislature, i.e. the erstwhile Andhra Pradesh State Legislature, opposed the Andhra Pradesh Reorganisation Bill referred to it by the President, opened up many fundamental questions such as legislative competence in the Rajadhani Rythu Parirakshnana Samithi’s case which was recently disposed off in the High Court of Andhra Pradesh in favour of the petitioners. Having lost in the High Court, the State Government is reported to have taken the matter to the Supreme Court through Special Leave Petition (SLP).

For examining the issue of legislative competence, it is necessary to briefly examine the relevant constitutional provisions. Distribution of legislative powers between the Centre and the States is dealt with, in articles 245-255 of the Constitution. These articles indicate that Parliament has exclusive power to legislative on any matter enumerated in the Union List and State Legislature has exclusive power to legislative on any matter enumerated in the State List. In respect of matters enumerated in the Concurrent List, the Parliament as well as the State Legislatures have the power to legislate. When both legislate on the same subject and there is repugnancy between the two laws, then Central law will prevail to the extent of repugnancy. Residuary powers of legislation are with the Parliament. In case of matters of national interest, Parliament may legislate on any matter in the State List if the Rajya Sabha requires it to do so through a resolution passed with special majority. Besides, Parliament may legislate on any matter to give effect to international agreements.

Thus, there could be occasions when the Parliament may be required to legislate on matters in the State List, but a State Legislature can never legislate on any matter which is in the purview of the Parliament. The power of the Parliament, under articles 2 to 4 as also on any matter in the Union List etc., is exclusive and there is no provision in the Constitution by which a State Legislature can be asked to legislate on such matters. However, the Constitution provides for conferring powers and duties to officers of a State through a Central legislation subject to payment of relevant costs to the State as per provisions under article 258.

Except in respect of national capital, the Constitution is expressly silent about the location of State capitals. But article 4 states that the law to amend the First and the Fourth Schedules may contain necessary supplemental, incidental, and consequential provisions. The interpretation of this provision came up for adjudication before the Supreme court in Mangal Singh’s case. In Mangal Singh & Anr. vs Union of India 1967 SCR (2) 109, the apex Court held as follows:

“The law referred to in Arts. 2 & 3 may therefore alter or amend the First Schedule to the Constitution which sets out the names of the States and description of territories thereof and the Fourth Schedule allotting seats to the States in the Council of States in the Union Parliament. The law so made may also make supplemental, incidental, and consequential provisions which would include provisions relating to the setting up of the legislative, executive and judicial organs of the State essential to the effective State administration under the Constitution, expenditure and distribution of revenue, apportionment of assets and liabilities, provisions as to services, application and adaptation of laws, transfer of proceedings and other related matters. On the plain words of Art. 4, there is no warrant for the contention advanced by counsel for the appellants that the supplemental, incidental, and consequential provisions, which by virtue of Art. 4 the Parliament is competent to make, must be supplemental, incidental, or consequential to the amendment of the First or the Fourth Schedule. The argument that if it be assumed that the Parliament is invested with this wide power it may conceivably exercise power to abolish the legislative and judicial organs of the State altogether is also without substance. We do not think that any such power is contemplated by Art. 4. Power with which the Parliament is invested by Arts. 2 and 3, is power to admit, establish, or form new States which conform to the democratic pattern envisaged by the Constitution; and the power which the Parliament may exercise by law is supplemental, incidental, or consequential to the admission, establishment or formation of a State as contemplated by the Constitution, and is not power to override the constitutional scheme. No State can therefore be formed, admitted or setup by law under Art. 4 by the Parliament which has not effective legislative, executive and judicial organs. Power to reduce the total number of members of the Legislative Assembly below the minimum prescribed by Art. 170 (1) is, in our judgment, implicit in the authority to make laws under Art. 4.”

In the Rajadhani Rythu Parirakshnana Samithi’s case, the High Court of Andhra Pradesh, placing reliance on the above verdict of the apex court, held that the language employed in Article 4 of the Constitution of India using the words “supplemental, incidental or consequential provisions” includes setting up of legislature, executive and judiciary of the State, which are three organs governing the State, which is within the powers of Parliament and the State legislature is incompetent to enact any law for setting up those three wings. Setting up of legislature, executive and judiciary of a State is nothing but setting up of a capital for the State.

Thus, the Constitutional provisions, read with the afore-mentioned interpretation of the Supreme Court and the High Court of Andhra Pradesh, indicate that establishment of a new State and if required, providing a capital for it when it is consequent to such a decision, is wholly under the legislative competence of the Parliament. It is pertinent to mention here that providing a capital to a State is not a matter on which the Parliament is wholly and solely competent to legislate in all situations and for all time to come. It is also necessary to emphasize that there may not be a requirement of providing a capital whenever a new State is formed. Only when such a requirement is there, it can be provided for, in the law by which a new State is formed, purely as an incidental and consequential provision and appropriate provisions have to be made where necessary on who would meet the cost of establishing a capital (the Centre or the State). If the situation falls under the purview of clause (3) of article 258, then the cost has to be paid to the State by the Centre. Except in cases where a capital has to be established under articles 2 to 4 and clause (3) of article 258, in all other situations, the decision to establish a capital (s) and meeting the expenditure thereof is in the purview of the concerned State Government.

When a new State already has a capital at the time of its establishment as was the case of Telangana, there is no need for the Parliament to make a consequential provision for it. Power to decide the actual location or locations for capital of a new State cannot be held to be consequential to setting up of a new State. Obviously, every State has the power to decide the location or locations for its capital and make appropriate arrangements including funding for setting up capital (s). The framers of the Constitution are justified in carving out an exception, when a new State is created by the Centre and it has no arrangement for a capital at the time of its birth. In such a situation, the responsibility to provide a capital has to be definitely taken up by the Centre and it cannot be left to the State Government, which at the best can limit its role to decide the location or locations of its capital.

The next question that arises is with whom competence lies to provide for a capital or shift a capital in a State? In other words, does the State Legislature possess the legislative competence in all cases not falling under article 4?

According to the Cambridge English Dictionary, the word “capital” means a city that is the centre of government of a country or smaller political area. But, as per the interpretation of the Courts, the word ‘capital’ means the seat or place where the legislative, executive, and judicial organs are located or to be located.

In the case of judicial organ, namely the High Court, only the Parliament has got legislative competence on its constitution and organization, as per Entry 78 of the Union List [Constitution and organisation (including vacations) of the High Courts except provisions as to officers and servants of High Courts; persons entitled to practise before the High Courts]. In the case of High Court of Andhra Pradesh, the Parliamentary law, i.e., the Andhra Pradesh Reorganisation Act, 2014, made adequate provisions in Part-IV (sections 30 to 43) thereof. Sub-section (2) of section 31 of the Act states that: “The principal seat of the High Court of Andhra Pradesh shall be at such place as the President may, by notified order, appoint”. Accordingly, a presidential order dated 26-12-2018 fixing the seat of the High Court of Andhra Pradesh at Amaravati was issued by the Centre. Being a matter in the Union List, the State Legislature lacks legislative competence to enact a law fixing Kurnool or any other place as judicial capital.

With regard to the legislative organ of the capital, it is important to note that, as per article 168 (applicable to Andhra Pradesh), Legislature comprises the Governor and the two Houses, namely, the Legislative Assembly and the Legislative Council. Hence, the legislative organ of the capital means the place where the Governor and the two Houses of Legislature would be located. Article 174 states that the Governor shall from time to time summon the House or each House of the Legislature of the State to meet at such time and place as he thinks fit. Obviously, the Governor has to exercise this power as per the advice of the Council of Ministers, as provided in article 163. Hence, the matter of deciding the location of legislative organ of the capital is with the State Government in all situations.

Regarding the executive organ of a capital, it is quite obvious that any Government will have an inherent power to decide the place (s) from where they want to govern. More specifically, in the case of a State Government, the ambit of the following entries in the State List (Seventh Schedule of the Constitution) is wide enough to include the power to decide the location (s) of State capital:

Thus, providing legislative and executive organs of a capital is in the purview of State. This has to be respected by the Centre while exercising its power under articles 2 to 4.  Making provision for a capital consequent to forming a new State cannot supplant the jurisdiction of the State with regard to capital. The provisions under the Andhra Pradesh Reorganisation Act, 2014 are subject to the power of State regarding legislative and executive organs of its capital and they have to be read accordingly.

In all the laws made by the Parliament so far under articles 2 to 4, care has been taken to ensure that the pith and substance of such laws was intended mainly to create a new State or change the boundaries/ names of existing States but not wholly directed towards only setting up a capital. Based on articles 2 to 4, the Parliament has made laws on twenty-four occasions in the past, the latest being the Andhra Pradesh Reorganisation Act, 2014. In all these laws, there were provisions supplemental, incidental, and consequential to the amendments, as mentioned in Mangal Singh’s case. In three of these cases prior to enacting the Andhra Pradesh Reorganisation Act, 2014, establishing a new capital was relevant for the newly formed States and the related provisions in the laws are indicated below:

(1)  The State of Andhra was constituted (without the Telangana region) by the Centre under the Andhra State Act, 1953 on 1^st November 1953. A mention was made about capital of the new State (Kurnool was made its capital) in the proviso under sub-section (2) of section 12 of the Act. The proviso is given below:

“Provided that any loan taken from the Central Government before the appointed day in connection with the construction of buildings, roads or other works for the temporary capital of the State of Andhra or for purposes incidental thereto shall to the extent of the expenditure so incurred until that day be wholly the liability of the State of Andhra.”

(2)  Under the States Reorganisation Act, 1956, many new States were formed, and boundaries of existing States were altered. The Telangana region was added to the State of Andhra and the State was renamed as Andhra Pradesh under this law. Mention about capital for new States can be seen in the second proviso under sub-section (3) of section 82 of the Act. which is given below:

“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.”

(3)  Sub-section (1) of section 51 of the Bombay Reorganisation Act, 1960 provides for funding for construction of a capital for Gujarat State, which is extracted below:

“51. (1) Out of the investments of the State of Bombay made before the appointed day in the cash balance investment account of the State, such securities of the value of ten crores of rupees, as the Central Government may by order specify, shall pass to the State of Gujarat in connection with the construction of a capital for that State; and the remaining investments in the said account shall be divided between the States of Maharashtra and Gujarat according to the population ratio.”

It can be seen from the above cases that the liability for setting up capital for new State has not been wholly taken up so far by the Centre. Unlike the other laws so far made under articles 2 to 4, the Andhra Pradesh Reorganisation Act, 2014 has got very elaborate and clear provisions about the capital of Telangana and Andhra Pradesh States, as detailed below:

Telangana and Andhra Pradesh are new States created under the Andhra Pradesh Reorganisation Act, 2014. Short of stating that the Central Government shall be wholly liable for setting up a new capital for Andhra Pradesh, the Act stated almost everything that is required. A maximum period of ten years has been provided under the law to establish a new capital. Had the new capital been established quickly, say within one or two years, there would not have been any confusion. But the ten year period which ends in 2024, saw two elected Governments in the State. It would be natural and a matter of pride for any representative Government to think that they have complete authority to decide the location (s) of new capital. In the normal course, this is alright, but when the first elected Government took some decisions which are irreversible, there would be problems for the second elected Government to modify the decisions. This is what has happened in the instant case.

Undoubtedly, the Parliament has the power to make a provision for capital purely and only as a consequence of forming a new State. The Central law has to be read in a manner that none of its provisions take away the power of the State Government to decide about legislative and executive organs of the capital including the location or locations suitable for the purpose. In reply to a Parliament Question (Unstarred Question No. 318 dated 04-02-2020 in the Lok Sabha), the Home Minister stated that it is for each State to decide its capital within its territory. This being the situation, it is necessary to look at the sequence of facts in some detail.

The Andhra Pradesh Reorganisation Bill, 2014 became an Act after receiving President’s assent on 01-03-2014. Soon thereafter (on 28-03-2014), the Central Government appointed an expert committee under the chairmanship of Shri Sivaramakrishnan. Appointed day for the Andhra Pradesh Reorganisation Act, 2014 was notified to be 02-06-2014. The committee submitted its report on 29-08-2014 and it was forwarded to the State Government on 02-09-2014. The Sivaramakrishnan Committee also, in its report, recognised the prerogative of the State of Andhra Pradesh to decide the location of its capital city. The foundation stone for the capital city was laid by the Prime Minister at Amaravati on 22-10-2014. Thereafter, the State Legislature passed the Andhra Pradesh Capital Region Development Authority (APCRDA) Act, 2014 on 29-12-2014. The APCRDA Act provides for notification of Andhra Pradesh Capital Region Development Area, declaring capital city area within the Region, and setting up a body corporate to be known as Andhra Pradesh Capital Region Development Authority (APCRDA) to plan and develop the Region accordingly.

On 30-12-2014, orders were issued by the Government of Andhra Pradesh, notifying the erstwhile Vijayawada, Guntur, Tenali, Mangalagiri, Urban Development Authority (VGTMUDA) area as Andhra Pradesh Capital Region and notifying area between Vijayawada and Guntur Districts on the Krishna River bank as Capital city. On 23-04-2015, orders were issued by the State Government, notifying that the Capital City be named as “Amaravati”. Spread across 217 sq. km., the capital was founded with the support of more than 24,000 farmers who participated in the largest-ever consensual land-pooling initiative. The APCRDA Act, 2014 applies only to the legislative and executive organs of the capital, as the State Legislature has no competence to make a law on judicial organ of the capital.

The APCRDA Act was amended by Act No. 6 of 2015 (04-04-2015) to make a provision for regulation and penalization of buildings constructed unauthorizedly in the capital region but outside the capital city area, in deviation of sanctioned plan as on 31-12-2014 as a onetime measure. Later, this was further amended by Act No. 34 of 2018 (01-11-2018) to change the date mentioned in the Act No.6 of 2015 from 31-12-2014 to 31-08-2018.

The APCRDA Act was further amended by the Andhra Pradesh Capital Region Development Authority (Amendment) Act, 2O17, i.e. Act No. 1 of 2018 (28-12-2017) to retrospectively amend sections 25, 57 and 84 of the APCRDA Act to create separate Capital City Infrastructure Development Fund within the Development Fund, to vest the notified area under the final land pooling scheme absolutely with State Government and Authority acting on behalf of the Government instead of with the Authority or the developer entity, and to vest all lands required by the Authority on the day on which the Preliminary Scheme comes into force absolutely with State Government and Authority acting on behalf of the Government instead of in the Authority.

The APCRDA Repeal Act, 2020, i.e. Act No. 27 of 2020 (31-07-2020) repealed the APCRDA Act, 2014 creating Amaravati Metropolitan Region Development Authority (AMRDA) in place of APCRDA. The State Legislature also enacted the Andhra Pradesh Decentralisation and Inclusive Development of All Regions Act, 2020 i.e. Act No. 28 of 2020 (31-07-2020) mainly to demarcate zones in the State for development and set up three seats of governance, namely, legislative capital at Amaravati, executive capital at Visakhapatnam and judicial capital at Kurnool.

These laws (Act Nos. 27 and 28 of 2020) along with other matters were challenged in the High Court. During the pendency of the case, the State Legislature enacted the Andhra Pradesh Decentralisation and Inclusive Development of All Regions Repeal Act, 2021, i.e. Act No. 11 of 2021 (09-12-2021) to repeal the Act Nos. 27 and 28 of 2020 and to revive the APCRDA Act, 2014. The statement of objects and reasons with regard to this enactment keeps the agenda of multiple capitals alive, as can be seen from the following extract:

According to the High Court of Andhra Pradesh (in Rajadhani Rythu Parirakshnana Samithi’s case):

In the judgement (dated: 03-03-2022) of the High Court, it was also observed inter alia that:

It appears that the High Court misread the provisions under article 258, in particular the sub-clause (2) thereof, which is given below:

“(2) A law made by Parliament which applies in any State may, notwithstanding that it relates to a matter with respect to which the Legislature of the State has no power to make laws, confer powers and impose duties, or authorise the conferring of powers and the imposition of duties, upon the State or officers and authorities thereof.”

Plain reading of article 258 indicates that it only talks about conferring (or even delegating) powers and imposing duties upon the State or officers and authorities thereof by a Central Act, but not about delegating power to legislate. In fact, there is no provision in the Constitution for the Parliament to delegate its legislative power to any State. Hence, article 258 (2) by itself or when read with the Reorganisation Act cannot be the basis for the legislative competence of the State Legislature for passing the APCRDA Act, 2014. With due respect to the Hon’ble High Court, it is pertinent to mention here that if the State Legislature lacks competence to enact the Act Nos. 27 and 28 of 2020 simply because of Parliamentary law, then for the same reason it lacks competence to enact the APCRDA Act, 2014 also. One-time delegation in one case and lack of it in another case is a misnomer.

The State Government’s decision to pick up a well-developed place like Visakhapatnam for one organ of the capital in the name of decentralized development eludes logic, as there are less developed places in the State which merit consideration. Secondly, the thinking of the State Government that we should have multiple capitals to achieve the goal of decentralized development also defies logic, as it cannot be the only means for the purpose. Empowering the third tier of the Government in a better way, setting up industrial clusters/ parks at different places and improving health and education facilities are some of the measures that the State Government may consider, to achieve decentralized development.

Distributing the components/ organs of a capital geographically is no way of achieving decentralized development. There could be many components/ organs of a capital which are functionally related to each other, and they may require mutual consultations almost on a daily basis. In such cases, the recurring cost of travel of officers/ staff etc. for these purposes may outweigh the benefit that may accrue due to the so-called decentralization. Moreover, having a capital at different places will increase the overhead cost of construction. If the Centre has to bear the cost, then the State Government has to convince the Centre on the cost implications of having multiple capitals.

With regard to the statutory contractual obligations and vested rights created under the APCRDA Act and the Land Pooling Scheme, the State Government has to appreciate that it is like a Going Concern and it cannot ignore statutory obligations created under a previous regime. On this issue, the High Court is right in saying that the State or the APCRDA cannot abandon the partly completed projects at Amaravati.

Although the matter is sub judice at the moment, it would be better if the State Government consults the Centre, all political parties and noted personalities in the State, and warring groups to bring consensus on further course of action and to mitigate all tensions spreading in the State of Andhra Pradesh. This initiative may also be appreciated by the apex court and it can be taken up with the leave of that court.