Article 267

Article 267 of the Constitution of India provides for the establishment of Contingency Funds at both the Union and State levels to meet urgent and unforeseen expenditures that cannot be delayed until the approval of the legislature. These funds are essential for ensuring the continuity of governance and enabling quick financial responses during emergencies, while maintaining legislative accountability through subsequent authorisation.

Constitutional Provision and Framework

Article 267 is part of Part XII of the Constitution, which deals with Finance, Property, Contracts, and Suits. It ensures that the executive can access funds immediately in cases of emergency, without bypassing the legislature’s authority to approve government expenditure.
The Article provides for:

• A Contingency Fund of India for the Union Government; and
• A Contingency Fund of each State for the respective State Governments.

Both funds are created by law and are replenished as and when expenditures are made, thus maintaining their imprest nature — meaning they are always available for immediate use.

Text and Structure of Article 267

Article 267 reads:

1. Clause (1): Parliament may by law establish a Contingency Fund in the nature of an imprest, to be called the Contingency Fund of India, into which shall be paid from and out of the Consolidated Fund of India such sums as may be determined by law. The fund shall be placed at the disposal of the President of India, who shall have the authority to make advances from it for purposes of meeting unforeseen expenditure, pending authorisation of such expenditure by Parliament.
2. Clause (2): The Legislature of a State may by law establish a Contingency Fund of the State, which shall be placed at the disposal of the Governor, enabling him to make advances for unforeseen expenditure, pending legislative approval.

This dual framework ensures that both the Union and the States can address financial exigencies promptly within their respective jurisdictions.

Contingency Fund of India

Under Article 267(1), Parliament enacted the Contingency Fund of India Act, 1950, which formally created the fund. The fund is:

• Held by the President of India;
• Operated by the Finance Secretary on behalf of the President;
• Used to meet unforeseen expenditures, such as natural disasters, epidemics, national security exigencies, or other emergencies.

The initial corpus of the fund was ₹50 crore, which has been revised periodically to meet growing financial needs. The fund can be replenished through supplementary grants voted by Parliament under Article 115 (for supplementary grants) or Article 116 (for appropriation bills).
When the President authorises withdrawal from the Contingency Fund, the expenditure is temporarily incurred from this fund and later formally authorised by Parliament when additional grants are approved.

Contingency Fund of the States

Under Article 267(2), each State Legislature is empowered to create a Contingency Fund of the State through legislation. The Governor administers the fund and can sanction advances from it to meet unexpected or urgent expenses pending approval by the State Legislature.
Examples of such expenditures include emergency relief during natural calamities, health crises, or infrastructure repairs arising from unforeseen events. Like the Union Fund, State Contingency Funds are replenished through supplementary grants voted under Articles 205 and 206 of the Constitution.
Each State determines the size of its fund based on its budgetary scale and financial requirements. For instance, larger States such as Maharashtra, Tamil Nadu, or Uttar Pradesh maintain larger contingency funds compared to smaller States.

Key Characteristics of Contingency Funds

• Imprest Nature: The fund is always maintained at a fixed amount. Withdrawals are treated as advances and replenished once authorised by the legislature.
• Immediate Availability: It allows the executive to respond quickly to unforeseen situations without waiting for parliamentary approval.
• Legislative Accountability: Although the fund allows temporary spending, final approval by the legislature is mandatory, ensuring democratic oversight.
• Scope of Use: The fund is used only for genuinely unforeseen and urgent expenditures that cannot be deferred until the passage of the Appropriation Act.

Related Constitutional Provisions

Several related Articles support and complement the functioning of Article 267:

• Article 115: Provides for supplementary, additional, or excess grants in Parliament.
• Article 116: Deals with votes on account, votes of credit, and exceptional grants for the Union Government.
• Article 205: Corresponding provision for supplementary and excess grants by State Legislatures.
• Article 206: Relates to votes on account and votes of credit at the State level.
• Article 266: Establishes the Consolidated Fund of India and the States, from which the Contingency Fund draws its corpus.

These interconnected provisions ensure that while the executive has the power to act swiftly in emergencies, financial accountability remains vested in the legislature.

Practical Applications and Examples

The Contingency Fund plays a crucial role in situations requiring immediate government intervention, such as:

• Natural Disasters: Floods, earthquakes, droughts, or cyclones requiring emergency relief and rehabilitation.
• Public Health Crises: Epidemics or pandemics necessitating rapid medical response, as during the COVID-19 outbreak.
• National Security or Defence Needs: Urgent expenditure for security operations or border crises.
• Infrastructure Emergencies: Sudden failures or collapses requiring instant repair and reconstruction.

At the Union level, the Ministry of Finance administers the fund, while at the State level, it is managed by the State Finance Departments under the authority of the respective Governors.

Judicial Context and Interpretations

Although there are no direct Supreme Court judgments interpreting Article 267, the courts have consistently upheld the principles of legislative supremacy and fiscal accountability in financial matters. Cases concerning public finance, such as R.C. Cooper v. Union of India (1970) and Centre for Public Interest Litigation v. Union of India (2012), reinforce the notion that executive discretion over financial resources must always be subject to parliamentary or legislative control.
These principles apply equally to the operation of the Contingency Fund, ensuring that its use is limited to genuine emergencies and subject to post-facto legislative scrutiny.

Significance of the Contingency Fund

The establishment of Contingency Funds under Article 267 serves multiple constitutional and practical purposes:

• Ensures Continuity of Governance: Enables the executive to meet urgent financial needs without administrative delays.
• Maintains Legislative Oversight: Guarantees post-expenditure approval by the legislature, preserving democratic control over public finance.
• Promotes Fiscal Discipline: Prevents misuse of funds by mandating replenishment through parliamentary sanction.
• Supports Federal Structure: Both the Union and States maintain their own funds, ensuring financial autonomy in emergencies.
• Enhances Administrative Efficiency: Provides a readily accessible source of funds for crisis management and disaster response.

Comparative Perspective

The concept of contingency or emergency funds exists in several parliamentary democracies. For example:

• The United Kingdom maintains a Civil Contingencies Fund to handle unforeseen expenditures pending parliamentary authorisation.
• In Australia and Canada, similar mechanisms exist under respective financial management acts.

India’s adoption of the same principle reflects its commitment to combining administrative efficiency with constitutional accountability.

Challenges and Safeguards

While the Contingency Fund is a practical tool, certain issues have been highlighted in its administration:

• Misuse of Funds: Occasional concerns arise regarding the use of the fund for non-urgent expenditures.
• Delayed Replenishment: Legislative authorisation for replenishment may sometimes be delayed, affecting the fund’s continuity.
• Transparency: The public disclosure of expenditures from the fund requires improvement to strengthen accountability.

To address these challenges, regular audits by the Comptroller and Auditor General (CAG) and periodic legislative reviews ensure proper utilisation and transparency.