Constitution Section 295 — Succession to property, assets, rights, liabilities and obligations in other cases
Part XII — FINANCE, PROPERTY, CONTRACTS AND SUITS — CHAPTER III.—PROPERTY, CONTRACTS, RIGHTS, LIABILITIES,
Constitutional
Summary
When the Constitution came into effect, any property or assets that belonged to a former Indian State (listed in Part B of the First Schedule) became the property of the Union government, but only if those items were used for purposes that now fall under the Union List. Similarly, any rights, debts, or duties of that former State’s government—whether from contracts or other sources—became the rights, debts, or duties of the Indian government, again only if they relate to Union List matters. This transfer happens unless the Indian government made a separate agreement with that State. For all other property, assets, rights, debts, and duties not covered by the first rule, the government of the new State (the one that replaced the former Indian State) takes over as the successor.
Official Text
(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).