“Extra-Judicial Execution Victim Families Association v. Union of India, AIR 2016 SC 3400 considered the situation in Manipur. The expression ‘internal disturbance’ must be interpreted in the context in which it is used. Under Article 352, an ‘internal disturbance’ must be of the order of an armed rebellion threatening the security of India to proclaim an emergency. Similarly, in order to sustain a valid exercise of power under Article 356 on the ground of an ‘internal disturbance’, it must be of such a nature as to disrupt the functioning of the constitutional order of State. In other words, it must be of such a nature, Government of a State cannot be carried on in accordance with the Constitution.
The Report of Sarkaria Commission on Centre-State Relations (January 1988) recognized, a range of situations may qualify to be ‘internal disturbances’. The instances of ‘internal disturbance’ given were in the context of Article 355 and Article 356, where the breakdown of the constitutional machinery of State is in question. In any event, Sarkaria Commission clarified, mere financial exigencies of a State do not qualify as an ‘internal disturbance’.”
– Hon’ble Justice Dr. D.Y. Chandrachud, Gujarat Mazdoor Sabha v. State of Gujarat, [Writ Petition (Civil) No. 708 of 2020].