The correct answer is option 'D', the States Reorganization Act, 1956. This Act was a significant piece of legislation that was responsible for the reorganization of states in India and the creation of Union Territories.

The Act was introduced in response to the demand for linguistic states, which emerged as a result of various factors such as language-based political movements and the need to better administer and govern diverse regions based on linguistic and cultural similarities.

Below are the key points regarding the States Reorganization Act, 1956:

1. Background:
- Before the enactment of this Act, India's states were primarily organized based on administrative convenience and historical factors, rather than linguistic or cultural considerations.
- The demand for linguistic states gained momentum after India's independence, as people sought to have states formed on the basis of their own language.

2. Objectives:
- The Act aimed to provide for the reorganization of states on a linguistic basis, ensuring better governance, administration, and development.
- It aimed to address the linguistic and cultural diversity of India and promote a sense of regional identity and unity.

3. Salient Features:
- The Act led to the creation of new states and the redrawing of state boundaries based on linguistic considerations.
- It established the concept of Union Territories, which were areas directly administered by the central government without a separate state legislature.
- The Act also made provisions for the transfer of territories between states and the formation of autonomous regions within states.

4. Implementation:
- The Act was passed by the Parliament of India and received the President's assent on August 31, 1956.
- A State Reorganization Commission was appointed to study and make recommendations regarding the reorganization of states.
- The recommendations of the Commission formed the basis for the Act.

5. Impact:
- The Act led to the formation of several linguistic states such as Andhra Pradesh, Maharashtra, Gujarat, Punjab, and Tamil Nadu, among others.
- It facilitated the preservation and promotion of regional languages and cultures, allowing for more effective governance and development.
- The creation of Union Territories ensured direct central administration in areas with special status or strategic importance.

In conclusion, the States Reorganization Act, 1956 played a crucial role in reorganizing states in India based on linguistic considerations and creating Union Territories. It addressed the demands for linguistic states, promoted regional identity, and aimed to enhance governance and development in the country.