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Synopsis

A division bench of the Supreme Court today refused to allow the prayer for interim relief made by the State of Kerala in its original suit alleging interference by the Union in its borrowings.

The balance of convenience at this stage lies in the favour of Union of India, observed a bench of Justices Surya Kant and KV Vishwanathan.

Further noting that the instant suit raises questions of interpretation of Articles 131 and 293, the bench added that these question fall within the ambit of Article 145 and have to be heard by a five-judge constitution bench.

Earlier, Kerala had refused to accept the Union's help of INR 5000 crores, after which the court had decided to hear the prayer for interim relief.

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.

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. Court was earlier 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