A Manhattan judge declared that “something doesn’t smell right” about how the state Independence Party handled $1.2 million donated by Mayor Bloomberg in 2009.

The searing comment by Supreme Court Justice Martin Shulman came at a civil hearing where party lawyers sought unsuccessfully to lift an order obtained by Manhattan DA Cyrus Vance Jr., freezing all of the party’s accounts.

Vance is trying to recover $1.1 million funneled by the Independence Party to campaign operative John Haggerty Jr., for what was billed as poll-watching on Election Day. Prosecutors charge the operation was nothing more than a sham designed by Haggerty, who has been indicted for swiping most of the mayor’s money in a case that’s being watched in political circles.

Virtually nothing the judge said was good news for the party or Haggerty. Shulman rejected arguments that the party — the third largest in the state — needs money now to pay its debts, including a $42,000 catering bill.