Sukhpal Singh Khaira alleged that Badal had given a grant of Rs 1 crore to school in Himachal while ignoring the 18,397 government schools in Punjab which were in a "pitiable" condition.
The state government, however, termed the charge levelled by Khaira as an effort by the Congress leader to remain in the limelight after losing the election.
Khaira, who lost the assembly elections from Bholath in Kapurthala district, said he would move the High Court of Punjab & Haryana, if the grant was not withdrawn.
Meanwhile, a Punjab government spokesman criticised the allegations levelled by Khaira, saying institutions like Lawrence School Sanawar belong to the nation and not to a particular state. The criticism reflects the "parochial mindset" of the Congress leader, the spokesman said.
Meanwhile, SAD Secretary and Spokesman Daljit Singh Cheema in a statement said Khaira's comment is clearly an attempt to divide the country on the regional lines and create a feeling of hatred among the people of the two neighbouring states.
