Kerela Govt. files suit against the Centre challenging limitations imposed on state’s borrowing powers, SC refers plea to a five-judge Constitution bench

Today (April 01, 2024), the Supreme Court (SC) of India was hearing a plea filed by the Kerela Government against the Union government accusing it of arbitrarily limiting the state’s borrowing powers. The SC bench comprising Justice Surya Kant and Justice KV Viswanathan refused to grant interim relief in the Kerela Govt’s plea and referred the matter to a five-judge constitution bench. While refusing to grant interim relief, the top court said “For interim aspect, we are inclined to accept submission of union that when there is overborrowing then there can be a reduction in the next years. Balance of convenience in this case lies with Union.”  It further said that six questions of law are framed that are to be considered by the top court’s constitution bench. The SC said, “We have formulated six questions other than constitutional interpretation. We have held that these questions fall within Article 145 of the Constitution and thus the matter to lie before five-judge Constitution bench.”

In this case, the Kerela govt. approached the SC against the Union government’s interference in the state’s ‘exclusive, autonomous and plenary powers’ to regulate the state’s finances by imposing a limit on net borrowing and bringing the state to the brink of financial emergency. During the proceedings, the SC bench stressed the importance and necessity of resolving the issue. It said, “Let all the senior officials who are capable to take decisions and who are already involved in decision-making sit together and resolve this.” Senior Advocate Kapil Sibal appeared for the Kerela Government whereas Additional Solicitor General N Venkataraman and Attorney General R Venkataramani appeared for the Centre. 

During the hearing, the bench came to know that the Centre had already agreed to allow an additional borrowing of Rs. 13,608 crores provided that the Kerela government should withdraw the suit. The SC bench did not accept the same. In response to the Centre’s proposal, the Kerela Government pointed out that the proposed amount (Rs, 13,608 crores) could only cover a fraction of the immediate financial requirements of the Kerela. After hearing the arguments, the bench said the issue requires “very serious consideration because fiscal mismanagement of the states is an issue with which the Union must be concerned because ultimately it has its own impact on the nation’s economy.” Therefore, the SC referred the suit to a five-judge Constitution bench.