After the ceasefire on the 1st Jan 1949 the State stood divided between India and Pakistan. The rebellious Government established in Muzaffarabad was welcomed by the world this government had its own army a defence minister and had the task to work towards complete freedom of the entire State. This unfortunately did not happen as the Government of Pakistan established the Rules of Business through an agreement termed the Karachi Agreement the agreement was signed by then President of Muzaffarabad Government Sardar Mohammad Ibrahim Khan Chaudhry Ghulam Abbas sahib President of All Jammu Kashmir Muslim Conference (the only political party in the region at that time) and Mr Mushtaq Gormani Federal Minister without portfolio of Pakistan. Following are salient points of the agreement:


The President of Muzaffarabad government would be the person who would be elected by the General Council of Muslim Conference


The Muslim Conference would be the one that the joint secretary of ministry of Kashmir Affairs would endorse and approve.


Thus the agreement completely changed the status of the rebellious and representative government that was originally formed with the purpose of acquiring freedom for entire State of Jammu Kashmir. Through this agreement the real powers to govern the areas were transferred to the joint secretary of the ministry of Kashmir affairs division Government of Pakistan


In the meantime the areas of Gilgit Baltistan that were freed by the local people and were constitutional part of the State of Jammu Kashmir their control was acquired for the purposes of management on the plea that Muzaffarabad government cannot manage these far flung areas.


Thus about 4500 miles of area that comprised of two and a half districts was left that included two tehsils of Poonch Jagir Pullandri, and Bagh and parts of tehsil Haveli and Mendhar. These areas were converted into Poonch district Mirpur district along with a part of tehsil Kotli and part of Muzaffarabad formed the Azad Kashmir.


The electoral college of the President was made subjugate to the Ministry of Kashmir affairs. All powers of the President of Muzaffarabad government were made subjugate to a chief advisor while the President of the state had no say in the nomination of this chief advisor.


The ministry Kashmir affairs prepared lists of the leaders and the workers of Muslim Conference they were given stipend ranging from 50 to 500 rupees. Thus many effective political workers were left at the mercy of Ministry Kashmir Affairs. There was no regular system of Government the entire system was in the clutches of the Ministry of Kashmir affairs.


In these circumstances President of Pakistan Gen Ayub Khan approached Mr KH Khurshid and he was offered to become the President of AJK. Mr Khurshid discussed with Miss Fatima Jinnah sister of the founder of Pakistan Mr Muhammad Ali Jinnah and on her advice he accepted the offer.


After assuming the post he realised that the system was draconian and he worked hard to abolish the draconian rules of business that deprived the people of their basic and fundamental civil and political rights and provided a strong grip to the bureaucracy on the system. Mr Khurshid was able to secure the right of vote for the people of AJK equivalent to what was being practiced in Pakistan at the time a system of Basic democracy. As a consequence the first elections were held in AJK, which Mr Khurshid won with a majority.