PESHAWAR: The Peshawar High Court (PHC) on Monday ordered that the existing federal mechanism for the release of public funds, accounting and audit would continue until a final decision on a constitutional petition challenging the Khyber Pakhtunkhwa government’s 2025 amendments to the Khyber Pakhtunkhwa Public Financial Management Act.
A division bench comprising Justice Syed Arshad Ali and Justice Inamullah Khan issued the directives while hearing a writ petition filed by the Accountant General Office Employees Association through counsel Shumail Ahmad Butt Advocate.
Appearing before the court were Controller General of Accounts Pakistan, KP Finance Secretary Kamran Afridi, Advocate General Khyber Pakhtunkhwa Shah Faisal Utmankhel, Additional Attorney General Sanaullah, Assistant Attorney General Rahat Ali Naqi, and other officials.
Arguing the petition, the counsel for the petitioner submitted that the 2025 amendments to the KP Public Financial Management Act were unconstitutional as they conflicted with existing federal law governing public accounts and audit.
He contended that Article 143 of the Constitution clearly provides that where both Parliament and a provincial assembly legislate on a concurrent subject and there is any inconsistency, the federal law prevails. Since the legal framework relating to government accounts, the Provincial Consolidated Fund and audit already exists under federal law, the provincial government, he argued, could neither enact a parallel legal regime nor assume powers vested in federal institutions.
The counsel argued that the impugned amendments would effectively place the powers of releasing funds, maintaining accounts and overseeing financial management under the same provincial authority, thereby undermining the constitutional principle of checks and balances.
He maintained that the independence of the Controller General of Accounts and the Auditor General of Pakistan was essential to ensuring transparency, accountability and independent oversight of public finances, and that these constitutional safeguards could not be diluted through provincial legislation.
Finance Secretary Kamran Afridi informed the bench that the province was presently continuing to follow the existing federal financial system. He said that implementation of the amended framework would require training from the Auditor General’s Office, as the provincial government did not yet have the required technical expertise and the transition would take time.
He maintained that the amendments related only to the management of funds and did not interfere with the accounting or audit functions.The controller general of Accounts argued that under the Constitution, federal law prevails over any conflicting provincial legislation.
He submitted that the provincial government could not simultaneously release public funds and audit their utilization, as such an arrangement would compromise independent financial oversight. He requested the court to suspend the impugned amendments to preserve the integrity of the audit system.
Additional Attorney General Sanaullah opposed the amendments as well, arguing that the subject falls within the federal legal framework and is already regulated by existing legislation. He requested the court to suspend the provincial amendments.
The Khyber Pakhtunkhwa government enacted amendments to the Khyber Pakhtunkhwa Public Financial Management Act in 2025. According to the petitioner, the amendments seek to transfer powers relating to the management of the Provincial Consolidated Fund to the provincial government, despite the Controller of General of Accounts Ordinance, 2001, and Articles 169 to 171 of the Constitution assigning accounting and audit functions to the Controller General of Accounts and the Auditor General of Pakistan. The petition contends that the amendments violate Article 143 of the Constitution and are therefore liable to be declared unconstitutional.
