This historic agreement, signed on 29 April 1954, was conceptualised to be the basis of a very friendly relations between India and China. But it became null and void later in the wake of 1962 Sino-Indian war.
Under the agreement, India gave up all extra-territorial rights and privileges it enjoyed in Tibet, which it inherited from the British colonial legacy. India formally recognised Tibet to be a region of China. The five principles agreed upon were:
1. Mutual respect for each other's territorial integrity and sovereignty
2. Mutual non-aggression
3. Mutual non-interference in each other's internal affairs
4. Equal and mutual benefit working relationship
5. Peaceful co-existence
The two countries also recognised that six passes (Shipki La, Mana, Niti, Kungribinri, Darma, and Lipu Lekh) were border passes and "traders and pilgrims of both countries" use them.
The agreement put an end to the flux and friction in Sino-Indian relations at that time. These Five Principles have since been mentioned not only in various other Sino-Indian agreements and documents.
In fact, during the historic visit by premier Rajiv Gandhi to China in December 1968, China’s paramount leader Deng Xiaoping had proposed that both the countries should present Panchsheel as the basic framework for defining the new world order of post-Cold War world.
Although the Agreement lapsed, in 1962, it has stood as a shining document with an immortal guiding principle in international affairs.