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Construction work on the Pong Dam on the river Beas commenced in the year 1960. The land whose acquisition was requisite for the purpose then fell within the State of Punjab. After the reorganisation of State boundaries on 1st November, 1966, that land fell within the territorial limits of the State of Himachal Pradesh. Although the waters impounded by the Pong Dam within the State of Himachal Pradesh, the benefit thereof accrued to a dominant extent to the State of Rajasthan.

On 2nd, 3rd and 12th September, 1981, the Chief Ministers of Rajasthan and Himachal Pradesh met and arrived at a Memorandum of Understanding. They reviewed the case of the 9169 Pong Dam oustees who had been allotted lands in the Rajasthan Canal Project area in the light of the problems experienced by them. As a result of detailed examination and consideration, it was found that 2594 allottees were continuing to cultivate the allotted land but their main problem was with regard to the provision of infra-structural facilities and amenities. The Chief Minister of Rajasthan assured his counterpart that every effort would be made to provide essential basic amenities. There were 689 oustees who had been allotted land but had sold or otherwise transferred it; it was agreed that these were not fit cases for review. In regard to the remaining cases of 5886 allottees, it was agreed that Rule 6(7) of the 1972 Rules would be amended to provide for the cultivation of 50% of the irrigated land in the first year after commencement of irrigation and the balance 50% before the end of the second year, while the allotted unirrigated land should be brought under cultivation before the end of the third year. According to this Rule, oustees who were allotted land were required to take over physical possession within 45 days of receipt of the notice of allotment, but 2289 allotment orders had bean cancelled because the oustees could not take possession within that period. It was decided that these cases would be reviewed and the Rules would be amended to increase the period from 45 to 90 days and that a period of 60 days from the date of publication of the amended Rules in the Gazette would be provided to eligible persons to submit their applications. Rule 6 prescribed various alternative methods through which the allotted lands could be cultivated by the allottees but the allottee was not permitted to have the land cultivated by servants, on wages payable in cash or kind, manager or agent. It was agreed that Rule 6(6) should be amended to include the methods of cultivation provided for in Section 4(vi) of the Rajasthan Coloniation Act and to review cases in which allotment orders had been cancelled on this account. In relation to Rule 6(3), and this is very relevant, it was agreed that the period for acquisition of khatedari rights would be reduced from 20 years to 10 years provided that, before the acquisition of these rights, all dues payable to the State Government had been fully discharged and the right to sell the allotted land would not accrue before the expiry of 20 years from the date of allotment. There were cases in which the lands originally allotted to the oustees were not situated in the command area of Rajasthan Canal Project or, being situated in that area, were not irrigable and cancellations of allotment had been made. Those cases were agreed to be reviewed and cancellation orders withdrawn. It was also agreed that before allotment orders were issued, encroachments on the allotted lands should first be removed. These amendments to the 1972 Rules, it was agreed, would be made within three months. The amendments were duly carried out and on 22nd April, 1982, the Rejasthan Colonisation (Allotment of Government Land to Pong Dam Oustees in the Rajasthan Canal Colony) Amendment Rules, 1782, were published.

lands which had reverted to the State Government as a result of transfer or alienation in breach of Rule 6(4) to the purported transferees if they, were bonafide residents of Rajasthan and in possession of the reverted land.
Put shortly, the principal ground of the writ petition is that the State of Rajasthan, having obtained the benefit of the waters impounded in the Pong Dam, reneges on its obligations to the Pong Dam oustees and discriminates against them and in favour of the Rajasthanis. The case is supported to the hilt by the affidavit in reply to the writ petition made on behalf of the State of Himachal Pradesh on 20th August, 1992.
The affidavit states that on account of the construction of the Pong Dam a total area of 69932.32 hectares was acquired and approximately 30,000 families, scattered in 339 tikkas, were, uprooted. Out of these, 16,100 families were considered eligible of land allotment in Rajasthan. The affidavit recites the history of meetings between representatives of the States of Rajasthan & Himachal Pradesh and records that 9195 allotments had been made upto the year 1980 but, at the time when the affidavit was filed, "only 2537 allotments remained in-tact while the remaining 6658 allotments were cancelled by the allotting authorities of Rajasthan under the harsh application of the allotment rules, 1972". Meetings were held by the Chief Ministers of Rajasthan & Himachal Pradesh in September 1981 and a Memorandum of Understanding was signed on 13th September, 1981, which incorporated various steps and measures that were required to be initiated by the Rajasthan Government in the form of amendment of the 1972 Rules in order to facilitate the resettlement of the oustees in Rajasthan and, accordingly, the 1982 amendment was carried out pursuant to the 1992 amendment of the Rules, which was impugned in the writ petition, the Allotting Department, Rajasthan, had started to issue notices upon oustee allottees to appear in the court of S.D.M.R., Raisingh Nagar and Suratgarh in District Ganganagar. Approximately 4000 oustees had appeared accordingly. 556 morabbas alloted to the oustee allotees had been cancelled for violation of Rule 6(5), 6(6) and 6(7) and in 1373 cases reversion proceedings in favour of the Rajasthan Government had been started to enable sale of the lands to the purported transferees. At a Monitoring Sub-Commitee meeting held at New Delhi on 30th October, 1991, it was decided that the cases of illegal transactions should be verified by joint survey, inspection or verification by the Tehsildar, Resettlement & Rehabilitation, Anupgarh, and the Revenue Tehsildar, Rajasthan, and lands becoming available upon cancellation thereafter should be allotted only to Pong Dam oustees "but the allotting authority Rajasthan has conducted one sided survey ". An extract of the aforesaid meeting is reproduced in the affidavit and is instructive :