Article 290

Article 290 of the Constitution of India provides for financial adjustments between the Union and the States, particularly in relation to expenses and pensions connected with courts, commissions, and individuals who have served under the Crown or in connection with Union or State affairs. The article plays an essential role in ensuring fairness and cooperation in sharing financial responsibilities between the two levels of government within India’s federal framework.

Constitutional Context and Objective

Article 290 forms part of Part XII of the Constitution, which deals with financial provisions, property, contracts, and suits. It was included to manage financial obligations arising from the administrative structure that existed before the commencement of the Constitution and to regulate subsequent expenses that may involve both Union and State interests.
The article seeks to achieve an equitable arrangement for sharing certain expenses, pensions, and administrative costs between the Union and the States. This ensures that neither level of government bears a disproportionate financial burden for services or benefits that are jointly related to their functions.

Scope and Applicability

Article 290 applies primarily in two situations:

1. When expenses or pensions are charged on the Consolidated Fund of India but relate partly to the affairs of a State.
2. When expenses or pensions are charged on the Consolidated Fund of a State but relate partly to the affairs of the Union or another State.

In both cases, the provision establishes the principle of mutual financial contribution to maintain fairness in public expenditure.

Key Provisions of Article 290

The article contains two principal clauses outlining financial responsibility and adjustment mechanisms:
(a) Charges on the Consolidated Fund of India

• This applies where a court, commission, or individual serves the needs of a State, even though the expenditure or pension is initially charged on the Consolidated Fund of India.
• In such cases, the State concerned is required to contribute an appropriate share of the expenses or pension to the Union.

(b) Charges on the Consolidated Fund of a State

• This applies where a court, commission, or individual serves the needs of the Union or another State, but the expenditure is charged on the Consolidated Fund of that particular State.
• In this situation, the Union or the other State must contribute to the expenses or pension concerned.

Thus, the article ensures that expenditure is distributed equitably between the governments involved based on the benefit derived from the service rendered or the responsibility incurred.

Financial Contributions and Determination

The article provides that the amount of contribution payable in such cases shall be determined by mutual agreement between the Union and the State concerned. This principle of consultation promotes financial cooperation and prevents conflicts in fiscal matters.
If no agreement can be reached regarding the quantum or method of contribution, the issue is resolved through an arbitration mechanism, ensuring impartial settlement.

Arbitration Mechanism

In the event of a dispute, Article 290 prescribes that the Chief Justice of India shall appoint an arbitrator to determine the contribution payable by either party. The arbitrator’s decision is binding, and the determination ensures that disputes are settled fairly without prolonged political or administrative negotiations.
This provision guarantees an independent and judicial process for resolving financial disagreements, reinforcing the spirit of cooperative federalism.

Judicial Interpretation

The judiciary has interpreted Article 290 in several cases, clarifying its scope and application to financial relations between the Union and the States.

• State of Bihar v. Union of India (1970): The Supreme Court discussed the financial responsibilities of the Union and the States, highlighting that expenses and pensions shared between them must be determined fairly and in accordance with Article 290.
• K. K. Verma v. Union of India (1954): The Court addressed issues related to pension obligations and financial adjustments, affirming the need for cooperative settlement of disputes under Article 290.
• Union of India v. State of Kerala (1979): The Court emphasised that Article 290 upholds the principle of financial fairness and that the Union and the States must work collaboratively in matters involving shared expenditure and pensions.

Through these judgments, the Supreme Court has underscored that Article 290 strengthens fiscal balance and mutual accountability between the Union and the States.

Related Constitutional Provisions

Article 290 operates alongside several other financial articles that define India’s federal fiscal system:

• Article 280: Establishes the Finance Commission to recommend financial distributions between the Union and the States.
• Article 281: Provides for the presentation of the Finance Commission’s recommendations before Parliament.
• Article 266: Defines the Consolidated Fund of India and the Consolidated Funds of the States.
• Article 283: Deals with the custody and management of public funds.

Together, these provisions ensure an integrated framework for financial administration, resource sharing, and accountability in the Indian federal system.

Significance of Article 290

Article 290 serves multiple important functions within India’s constitutional and financial framework:

• It promotes fair financial adjustment between the Union and the States for shared responsibilities.
• It provides a constitutional basis for pension and expense sharing relating to individuals and institutions serving both levels of government.
• It reinforces cooperative federalism by encouraging negotiation and mutual consent in fiscal matters.
• It ensures fiscal accountability through arbitration in case of disputes, preventing financial disagreements from escalating into political conflicts.

Practical Implications

In practical governance, Article 290 has the following implications:

• Budgetary Planning: Both the Union and State governments must account for potential financial contributions towards shared expenses or pensions.
• Judicial and Administrative Commissions: When courts or commissions function across jurisdictions, their financial obligations are distributed fairly.
• Pension Management: Pensions of officials who have served in roles related to both Union and State affairs are managed through coordinated funding.
• Conflict Resolution: Any dispute over financial contributions is settled through the prescribed arbitration mechanism, ensuring legal certainty.