Part XII: Finance, Property, Contracts and Suits

Article 295: Succession to Property in Other Cases

Original Article:

(1) As from the commencement of this Constitution—

(a) all property and assets which immediately before such commencement were vested in any Indian State corresponding to a State specified in Part B of the First Schedule shall vest in the Union, if the purposes for which such property and assets were held immediately before such commencement will thereafter be purposes of the Union relating to any of the matters enumerated in the Union List, and

(b) all rights, liabilities and obligations of the Government of any Indian State corresponding to a State specified in Part B of the First Schedule, whether arising out of any contract or otherwise, shall be the rights, liabilities and obligations of the Government of India, if the purposes for which such rights were acquired or liabilities or obligations were incurred before such commencement will thereafter be purposes of the Government of India relating to any of the matters enumerated in the Union List, subject to any agreement entered into in that behalf by the Government of India with the Government of that State.

(2) Subject as aforesaid, the Government of each State specified in Part B of the First Schedule shall, as from the commencement of this Constitution, be the successor of the Government of the corresponding Indian State as regards all property and assets and all rights, liabilities and obligations, whether arising out of any contract or otherwise, other than those referred to in clause (1).

Explanations:

Article 295 addresses the transfer and succession of assets, liabilities, rights, and obligations that belonged to Indian States before the adoption of the Constitution. With the commencement of the Constitution, properties and responsibilities were redistributed to align with the federal structure. This Article plays a critical role in managing the seamless transfer of property and liabilities from princely states to the Union and state governments in independent India.

Key Provisions:

Clause (1): Transfer of Property and Assets to the Union for Union Purposes

This clause specifies that from the commencement of the Constitution, all property and assets of any Indian State that became part of a state listed in Part B of the First Schedule would automatically vest in the Union of India, provided that these assets serve purposes related to matters in the Union List.

Clause (2): Succession to State Governments for State Purposes

This clause ensures that assets and obligations that relate to state functions remain within the state’s jurisdiction.

Real-Life Examples:

An example of Clause (1) is the transfer of defense-related assets from princely states like Hyderabad to the Union of India, ensuring national security alignment. For Clause (2), properties held for state administration continued under the respective state governments.

Amendments:

While Article 295 has not been directly amended, related changes in the reorganization of states affected the classification and management of assets and obligations.

Historical Significance:

By transferring property and liabilities to the appropriate Union and State authorities, Article 295 ensured a smooth transition of governance, fostering stability and continuity in India’s federal structure.

Debates and Deliberations:

During the Constituent Assembly debates, Shri B. Das highlighted the need for clear provisions to ensure princely states’ assets and liabilities were equitably distributed. He particularly stressed the importance of safeguarding privy purses and other guarantees made to rulers of merged states.

Prof. Shibban Lal Saksena proposed adding parliamentary oversight for agreements between the Union and states, arguing that such oversight would ensure transparency and fairness. However, this suggestion was ultimately not adopted by the Assembly.

Dr. B.R. Ambedkar emphasized that Article 295 was essential for integrating princely states into the Indian Union without disrupting governance. He stated that this Article ensured that assets and liabilities were appropriately managed within the new federal structure. He further assured that ambiguities arising from specific cases would be resolved through legal interpretation and executive actions.

Shri H.V. Kamath raised concerns about the possibility of disputes arising from overlapping claims. He proposed that detailed guidelines be framed to address such conflicts. Dr. Ambedkar responded by highlighting the flexibility built into the Article, which allowed for agreements to be reached between the Union and the States to resolve contentious issues.

References:

• Constitution of India: Full text and analysis of Article 295.
• Constituent Assembly Debates: Discussions on asset and liability succession.
• Historical Documents: Records of negotiations with princely states.