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Synopsis

The Supreme Court today 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", a bench of Justices Surya Kant and KV Vishwanathan told the law officers appearing for Centre.

Senior Advocate Kapil Sibal mentioned the issue before the bench today saying that funds were not being released.

"Theirs is not a special case. They do not even budget expenditures. 15 times more bailout sought than expenditure package..", ASG N Venkataraman told the bench in response. 

When the court pressed on some relief being given to Kerala, it was told that the Centre would get back after a meeting today.

The matter is to be taken up at 10.30 AM tomorrow.

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.

accordingly asked the Union of India to consider how much of financial assistance it could provide to the state.

"You have a meeting today on the exceeding amount with all conditions in place..except withdrawal of suit..because of the suit the dialogue must not stop..", the bench directed asking for a meeting to be held today at 4.30 PM.

Notably, the Centre had agreed to help Kerala out on the condition that it withdraws the instant suit.

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 states.

Court has been further informed that an analysis of financial situation of Kerala has revealed that the State still has poor financial indicators pointing towards a lack of proper management of its public finances.

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