At the time of Indian independence in 1947, India was divided into two sets of territories, one under direct British rule, and the other under the suzerainty of the British Crown, with control over their internal affairs remaining in the hands of their hereditary rulers. The latter included 554 princely states, having different types of revenue sharing arrangements with the British, often depending on their size, population and local conditions. In addition, there were several colonial enclaves controlled by France and Portugal. The political integration of these territories into India was a declared objective of the Indian National Congress, and the Government of India pursued this over the next decade. Through a combination of factors, Sardar Vallabhbhai Patel and V. P. Menon convinced most of the rulers of the various princely states to accede to India.
Two key documents were produced. The first was the Standstill Agreement, which confirmed the continuation of the pre-existing agreements and administrative practices. The second was the Instrument of Accession, by which the ruler of the princely state in question agreed to the accession of his kingdom to independent India, granting the latter control over specified subject matters.
The states which had internal autonomy under the British signed an Instrument of Accession which only ceded three subjects to the government of India—defence, external affairs, and communications, each defined in accordance with List 1 to Schedule VII of the Government of India Act 1935. Rulers of states which were in effect estates or talukas, where substantial administrative powers were exercised by the Crown, signed a different Instrument of Accession, which vested all residuary powers and jurisdiction in the Government of India. Rulers of states which had an intermediate status signed a third type of Instrument, which preserved the degree of power they had under the British. The Instruments of Accession implemented a number of other safeguards. Clause 7 provided that the princes would not be bound to the Indian constitution as and when it was drafted. Clause 8 guaranteed their autonomy in all areas that were not ceded to the Government of India. This was supplemented by a number of promises. Rulers who agreed to accede would receive guarantees that their extraterritorial rights, such as immunity from prosecution in Indian courts and exemption from customs duty, would be protected, that they would be allowed to democratise slowly, that none of the eighteen major states would be forced to merge, and that they would remain eligible for British honours and decorations.
In discussions, Lord Mountbatten reinforced the statements of Patel and Menon by emphasising that the documents gave the princes all the "practical independence" they needed. The Standstill Agreement was also used as a negotiating tool, as the States Department categorically ruled out signing a Standstill Agreement with princely states that did not sign an Instrument of Accession. So we can say that Stand Still Agreement and Instrument of Accession were the lynchpin for the annexation of Princely states.