The States Reorganisation Act,1956
Section 82. Public debt
(1) The public debt of the existing State of Hyderabad attributable to loans raised by the issue of Government securities and outstanding with the public immediately before the 31st day of October,1956, shall as from that day be the debt of the Union and immediately on such transfer of the debt, the Central Government shall be deemed to have made a loan to that State of an amount equal to the debt so transferred on the same terms in regard to interest and repayment as are applicable to the loans so raised by that State.
(2) The public debt of any other existing State attributable to loans raised by the issue of Government securities and outstanding with the public immediately before the appointed day shall, as from that day, be the debt of the successor State or, if there be two or more successor States, be the debt of such one of them as the Central Government may, by order, specify; and in the latter case,-
(a) The other successor States shall be liable to pay to the successor States so specified their shares of the sums due from time to time for the servicing and repayment of the debt, and
(b) For the purpose of determining the said shares, the debt shall be deemed to be divided between the successor States as if it were a debt referred to in sub-section (3).
(3) The public debt of an existing State attributable to loans taken from the Central Government, the Reserve Bank of India or any other bank before the appointed day, including in the case of Hyderabad the loan deemed to have been made by the Central Government under sub-section (1), shall pass to the successor State, or if there be two or more successor States, be divided between them in proportion to the total expenditure on all capital works and other capital outlays incurred up to the appointed day in the territories of the existing State included respectively in each of those successor States:
Provided that for the purposes of such division, only expenditure on assets for which capital accounts have been kept shall be taken into account:
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.
(4) Where a sinking fund or depreciation fund is maintained by an existing State for the repayment of any loan raised by it, the securities held in respect of investments made from that fund shall pass to the successor State or, if there be two or more successor States, be divided between them in the same proportion as the public debt referred to in sub-section (3).
(5) In this section, the expression “Government security” means a security created and issued by a State Government for the purpose of raising a public loan and having any of the forms specified in, or prescribed under, clause (2) of section 2 of the Punjab Debt Act,1944 (18 of 1944).