Where, immediately before the appointed day, the existing State of Uttar Pradesh is subject to any liability in respect of any actionable wrong other than breach of contract, that liability shall,—
         (a) if the cause of action arose wholly within the territories which, as from that day, are the territories of either of the successor States of Uttar Pradesh or Uttaranchal, be a liability of that successor State; and
         (b) in any other case, be initially a liability of the State of Uttar Pradesh, but subject to such financial adjustment as may be agreed upon between the States of Uttar Pradesh and Uttaranchal or, in default of such agreement, as the Central Government may, by order, direct.