When the Indian Muslim League was inducted into the interim government in 1946, Liyaqat Ali Khan was assigned the portfolio of

1. The Cabinet Mission Plan of 1946 (basic)

In the aftermath of World War II, the British Empire found itself economically exhausted and under immense international pressure to grant India independence. To find a way to transfer power smoothly, the British government sent a high-level delegation known as the Cabinet Mission. Arriving in India in March 1946, the mission was composed of three British Cabinet members: Lord Pethick-Lawrence (Secretary of State for India), Sir Stafford Cripps (President of the Board of Trade), and A.V. Alexander (First Lord of the Admiralty) History, Class XII (Tamil Nadu State Board 2024 ed.), Chapter 7, p.93. Their mandate was twofold: to oversee the creation of an Interim Government and to establish a procedure for framing a new constitution for a free India Rajiv Ahir, A Brief History of Modern India (2019 ed.), Post-War National Scenario, p.472.

The Mission faced a massive hurdle: the Indian National Congress wanted a united India with a strong center, while the Muslim League demanded a sovereign Pakistan. Since the parties could not agree, the Mission proposed its own compromise in May 1946. It rejected the idea of a separate Pakistan but suggested a unique three-tier structure. Under this plan, the Central Government would control only Defense, Foreign Affairs, and Communications. Below the center, provinces would be grouped into three sections (A, B, and C) based on their religious demographics, allowing them to exercise significant autonomy. This was an attempt to provide the Muslim League with the substance of "Pakistan" within a loose Indian Union.

Initially, both major parties accepted the plan, albeit for different reasons. The Congress viewed it as a path to a sovereign Constituent Assembly that could eventually shape India's future, while the League saw the grouping of provinces as a stepping stone toward an eventual partition History, Class XII (Tamil Nadu State Board 2024 ed.), Chapter 7, p.93. This acceptance paved the way for the formation of the Constituent Assembly in November 1946, which remains the foundational body of our modern democracy M. Laxmikanth, Indian Polity (7th ed.), Making of the Constitution, p.11.

Sources: History, Class XII (Tamil Nadu State Board 2024 ed.), Last Phase of Indian National Movement, p.93; Rajiv Ahir, A Brief History of Modern India (2019 ed.), Post-War National Scenario, p.472; M. Laxmikanth, Indian Polity (7th ed.), Making of the Constitution, p.11

2. Formation of the Interim Government (intermediate)

The Interim Government of 1946 was a crucial 'bridge' administration designed to manage India's transition from British rule to independence. It wasn't a fully sovereign body but rather a reconstruction of the Viceroy’s Executive Council. Under the framework of the 1935 Act, the Viceroy (Lord Wavell) remained the head, while Jawaharlal Nehru was designated as the Vice-President of the Council, effectively acting as the Prime Minister in spirit, if not in legal title Laxmikanth, M. Indian Polity, Historical Background, p.10.

The formation happened in two distinct stages. Initially, on September 2, 1946, a Congress-dominated government was sworn in. The Muslim League initially boycotted it, but Wavell eventually persuaded them to join on October 26, 1946. Crucially, the League joined without withdrawing its call for 'Direct Action' or accepting the long-term plans for a united India, viewing the government as a 'front' to further their demand for Pakistan Rajiv Ahir. A Brief History of Modern India, Post-War National Scenario, p.476. This created a 'government of conflict' rather than cooperation.

The distribution of portfolios was a masterstroke of political maneuvering and a source of future friction. While the Congress held internal security and agriculture, the Finance portfolio was handed to the Muslim League’s Liaquat Ali Khan. He used this position to exert control over every other department, famously presenting the 'Poor Man's Budget' in March 1947, which proposed heavy taxes on business interests—a move that deeply frustrated the Congress leadership History, class XII (Tamilnadu state board 2024 ed.), Last Phase of Indian National Movement, p.95.

Member	Portfolio
Jawaharlal Nehru	External Affairs & Commonwealth Relations
Sardar Vallabhbhai Patel	Home, Information & Broadcasting
Liaquat Ali Khan	Finance
Dr. Rajendra Prasad	Food & Agriculture
Jagjivan Ram	Labour

Sources: Indian Polity, Historical Background, p.10; A Brief History of Modern India, Post-War National Scenario, p.476; History, class XII (Tamilnadu state board 2024 ed.), Last Phase of Indian National Movement, p.95

3. 1945-46 General Elections and Political Mandate (intermediate)

The 1945-46 General Elections were a watershed moment in Indian history, acting as a virtual referendum on the demand for Pakistan. Following the end of World War II and the rise of the Labour Government in Britain Themes in Indian History Part III, Framing the Constitution, p.341, the political climate shifted toward a final settlement of the Indian question. These elections were held under the system of separate electorates, which meant that Hindu and Muslim voters voted in distinct categories—a system often criticized by nationalist leaders as a 'curse' that barred progress Indian Constitution at Work, Election and Representation, p.63. Unlike the 1937 elections, where the Muslim League's performance was modest, the 1946 results showed a deeply polarized electorate. In the Central Legislative Assembly, the Muslim League (ML) achieved a clean sweep, winning all 30 seats reserved for Muslims and capturing 86.6 percent of the total Muslim vote Rajiv Ahir, A Brief History of Modern India, Post-War National Scenario, p.470. While the Congress dominated the general seats, the League's massive success in the reserved constituencies effectively validated its claim to be the 'sole spokesperson' for India's Muslims History, Class XII (TN State Board), Communalism in Nationalist Politics, p.80. In the provinces, the League formed governments in Bengal and Sindh, though in the Punjab, a fragile Unionist-Congress-Akali coalition under Khizr Hayat Khan initially kept the League out of power Rajiv Ahir, A Brief History of Modern India, Post-War National Scenario, p.470. Following these elections and the subsequent Cabinet Mission Plan, an Interim Government was formed in 1946 to manage the transition to independence. Although the Muslim League initially boycotted the administration, it joined in October 1946 Themes in Indian History Part III, Framing the Constitution, p.341. A pivotal moment occurred when Liaquat Ali Khan, a top League leader, was appointed as the Finance Minister History, Class XII (TN State Board), Violent Clashes on Direct Action Day, p.95. By controlling the 'purse strings' of the government, the League was able to paralyze the Congress-led ministries from within, making the administrative deadlock so severe that many leaders began to see partition as the only practical way out of the chaos.

Sources: Themes in Indian History Part III, NCERT 2025 ed., Framing the Constitution, p.341; Rajiv Ahir, A Brief History of Modern India (Spectrum), Post-War National Scenario, p.470; History, Class XII (Tamilnadu State Board 2024 ed.), Communalism in Nationalist Politics, p.80; History, Class XII (Tamilnadu State Board 2024 ed.), Violent Clashes on Direct Action Day, p.95; Indian Constitution at Work, NCERT 2025 ed., Election and Representation, p.63

4. The Mountbatten Plan and Partition Process (intermediate)

By early 1947, the dream of a united India was fading due to the breakdown of the Cabinet Mission Plan and rising communal tensions. A critical but often overlooked factor in this deadlock was the functioning of the Interim Government. While Jawaharlal Nehru headed the cabinet, the Muslim League held the crucial Finance Portfolio under Liaquat Ali Khan. By controlling the purse strings, the League could obstruct the functioning of other ministries, a situation that convinced many Congress leaders that a joint administration with the League was unsustainable History, Class XII (Tamil Nadu State Board), Chapter 7, p. 95.

To resolve this impasse, Lord Mountbatten was sent as the last Viceroy. On June 3, 1947, he announced his plan, which finally accepted the principle of partition. Unlike earlier proposals, this plan provided a clear mechanism for division: the provincial legislative assemblies of Bengal and Punjab were to meet in two groups (Muslim-majority districts and the rest). If either group voted for partition, the province would be split Introduction to the Constitution of India, D. D. Basu, THE MAKING OF THE CONSTITUTION, p.18. This ensured that the decision to divide was seen as being made by the representatives of the people themselves.

The final legal seal was the Indian Independence Act of 1947. Passed with "amazing speed," it transformed the Constituent Assembly into a fully sovereign body, capable of repealing any British law. It abolished the office of the Secretary of State for India and provided for the appointment of two Boundary Commissions under Sir Cyril Radcliffe to draw the actual borders in Punjab and Bengal A Brief History of Modern India, Rajiv Ahir, After Nehru..., p.823. This Act effectively ended British rule on the midnight of August 14-15, 1947 A Brief History of Modern India, Rajiv Ahir, Making of the Constitution for India, p.615.

Sources: History, Class XII (Tamil Nadu State Board), Last Phase of Indian National Movement, p.95; Introduction to the Constitution of India, D. D. Basu, THE MAKING OF THE CONSTITUTION, p.18; A Brief History of Modern India, Rajiv Ahir, After Nehru..., p.823; A Brief History of Modern India, Rajiv Ahir, Making of the Constitution for India, p.615

5. Major Portfolios in the Interim Cabinet (Congress) (exam-level)

The formation of the Interim Government on September 2, 1946, was a pivotal step toward Indian independence, serving as a transitional bridge between British rule and sovereign statehood. Technically, this body was the Viceroy’s Executive Council, where the Viceroy remained the constitutional head, but the actual power of governance shifted to Indian leaders. M. Laxmikanth, Historical Background, p.10. Jawaharlal Nehru was designated as the Vice-President of the Council, essentially acting as the de facto Prime Minister, while also handling External Affairs and Commonwealth Relations. Initially, the Muslim League boycotted the government, but they joined in October 1946 with the intent to "fight for Pakistan from within." This created a unique and often friction-filled cabinet. Sardar Vallabhbhai Patel held the critical Home, Information, and Broadcasting portfolios, a role that allowed him to begin the monumental task of integrating princely states. NCERT Politics in India since Independence, Challenges of Nation Building, p.16. Other Congress veterans included Dr. Rajendra Prasad (Food and Agriculture) and Jagjivan Ram (Labour). Rajiv Ahir, A Brief History of Modern India, Post-War National Scenario, p.477. When the Muslim League entered, they were allotted five portfolios. The most strategic of these was Finance, given to Liaquat Ali Khan. By controlling the purse strings, the League was able to obstruct the functioning of Congress-led departments, leading to significant administrative paralysis. For instance, Liaquat Ali Khan famously presented the 'Poor Man's Budget' in March 1947, which imposed heavy taxes on industrialists—many of whom were Congress supporters—creating a political deadlock that accelerated the realization that partition might be inevitable.

Leader	Portfolio	Party
Jawaharlal Nehru	External Affairs & Commonwealth Relations	Congress
Sardar Patel	Home, Information & Broadcasting	Congress
Liaquat Ali Khan	Finance	Muslim League
Baldev Singh	Defence	Congress (Sikh Rep)
Jogendra Nath Mandal	Law	Muslim League

Sources: A Brief History of Modern India (Spectrum), Post-War National Scenario, p.477; Indian Polity (M. Laxmikanth), Historical Background, p.10; Politics in India since Independence (NCERT), Challenges of Nation Building, p.16

6. Induction of the Muslim League and Portfolio Conflict (exam-level)

The formation of the Interim Government in 1946 was a final attempt to run a united India, but it quickly turned into a stage for political deadlock. Initially, when Jawaharlal Nehru took office on September 2, 1946, the Muslim League stayed away. However, Viceroy Lord Wavell eventually persuaded the League to join on October 26, 1946 History, Last Phase of Indian National Movement, p.94. It is crucial to note that the League did not join to cooperate; they joined to safeguard their interests and demonstrate that the two parties could not work together. They entered the government without withdrawing their call for 'Direct Action' or accepting the Cabinet Mission’s long-term plan Spectrum, Post-War National Scenario, p.476.

The real conflict ignited over portfolio distribution. In a strategic miscalculation, the Congress allowed the League to take the Finance portfolio, which was headed by Liaquat Ali Khan. Other League members included I.I. Chundrigar, A.R. Nishtar, Ghazanfar Ali Khan, and Jogendra Nath Mandal History, Last Phase of Indian National Movement, p.94. By holding the purse strings, the League was able to interfere with and obstruct the functioning of every other department held by Congress ministers. The 'cabinet' spirit vanished; the informal meetings meant to settle disputes before formal sessions were abandoned, leading to a government in a state of constant paralysis History, Last Phase of Indian National Movement, p.95.

The breaking point arrived in March 1947 when Liaquat Ali Khan presented the Interim Budget. Termed by some as a 'socialist' budget, it proposed heavy taxes on big business and a commission to investigate tax evasion by 150 major industrial houses History, Last Phase of Indian National Movement, p.95. This was a masterstroke of political friction: it targeted the wealthy merchant class that largely supported the Congress. For leaders like Sardar Patel, this budget was the final proof that the League was using the government to sabotage the economy and the Congress's base. This internal warfare within the cabinet convinced many that a unified administration was no longer a viable reality for India.

Sources: History, class XII (Tamilnadu state board 2024 ed.), Last Phase of Indian National Movement, p.94; History, class XII (Tamilnadu state board 2024 ed.), Last Phase of Indian National Movement, p.95; Spectrum: A Brief History of Modern India (2019 ed.), Post-War National Scenario, p.476

7. Solving the Original PYQ (exam-level)

Now that you have mastered the timeline of the Cabinet Mission Plan and the shifting strategies of the 1940s, this question brings those building blocks together. The entry of the Muslim League into the Interim Government in October 1946 was a pivotal moment where political theory met administrative reality. While the Congress initially held all key positions, the subsequent power-sharing agreement was a strategic gamble. You must connect the League’s goal—demonstrating that a joint administration was impossible—to the specific department that could most effectively stall government machinery.

To arrive at the correct answer, (C) Finance, think like a strategist. The Congress leadership, particularly Sardar Patel, initially believed that offering the League the Finance portfolio would overwhelm them with technical complexities and limit their influence. However, the reasoning backfired; as the Finance Member, Liyaqat Ali Khan realized he held the power of the purse. He famously scrutinized and blocked the financial requirements of every other ministry, effectively paralyzing the Congress-led departments. This administrative deadlock is a classic theme in History, class XII (Tamilnadu state board 2024 ed.), which notes that his 1947 budget further heightened tensions by targeting the merchant classes who supported the Congress.

UPSC often uses the other "Big Four" portfolios as traps to test your precision. Foreign Affairs (A) was retained by Jawaharlal Nehru in his capacity as Vice-President of the Executive Council. The Home (B) portfolio was the stronghold of Sardar Vallabhbhai Patel, and Defence (D) was held by Baldev Singh. By remembering that the League specifically sought a portfolio that could provide veto power over all administrative actions, you can logically deduce that Finance was their most potent weapon in the struggle for a separate state.