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Synopsis

The Supreme Court will hear Kerala's plea on interim reliefs in its suit alleging interference by the Union in its borrowings on March 21. 

ASG Venkataraman told a division bench led by Justice Surya Kant that Centre was willing to give INR 5000 crores to Kerala, which would be deducted from the net borrowings of the next financial year.

"We have adopted a uniform approach for issuing consent on borrowings..other states may cite this as a precedent..", the ASG added.

In response, Senior Advocate Kapil Sibal told court, "They say we are not entitled to borrow..and suit should be dismissed. 5000 crores will not take us anywhere..the absolute minimum we want is 10000 crores..".

"..irreparable injury will be cause to us. this will trap us, we will be unable to pay people...they want to control our expenditures, it is against federal principles...", Sibal further told the bench also comprising Justice KV Vishwanathan.

Noting that a deadlock on the dialogue between the Centre and state had been reached, court ordered that it would hear the parties now on prayer for interim reliefs.

Yesterday, court had asked the Central government to help out Kerala with its borrowing needs as a special case.  "You can be slightly liberal and give a one-time package as a special case..add more rigid conditions in future budgets", the bench had said.

Last week, the Kerala government had submitted before the Supreme Court of India that it was in a state of emergency with regard to its financial conditions.

Two weeks back, Court was informed by Attorney General R Venkataramani that Central Government was open to talks with the Kerala government on the issue of Borrowing Ceiling imposed on the State by the Centre. Kerala government had then also agreed to send a delegation to have a face-to-face with representatives of the central government.

AG had recently filed a note in the State of Kerala's plea against the Union government's alleged interference with its finances.

In said note Supreme Court has been told that Kerala has been one of the most financially unhealthy states whose fiscal edifice has been diagnosed with several cracks. "The 15th Finance Commission designated Kerala to be a “highly debt stressed” State. It observed that Kerala had largely failed to limit its fiscal deficit to 3% of GSDP for almost all of the past decade....The Reserve Bank of India has also categorized Kerala among the five highly stressed States with high indebtedness requiring urgent corrective measures...", the note stated.

A division bench of Justices Surya Kant and KV Vishwanathan had issued notice in said plea on January 12, 2024.

Kerala has submitted that the Union has imposed a Net Borrowing Ceiling on the State in the manner deemed fit by it, which limits borrowings from all sources including open market borrowings and by further reducing the Net Borrowing Ceiling by including aspects into the “borrowing” of the State which, otherwise, are not “borrowings” as contemplated under Article 293 of the Constitution.

Case Title: State of Kerala vs. Union of India