Ceiling on net borrowing: SC reserves order on Kerala’s plea seeking interim relief

A bench of Justices Surya Kant and KV Viswanathan reserved the order after hearing two sides.


Published Mar 22, 2024 | 6:07 PMUpdatedMar 22, 2024 | 6:08 PM

Supreme Court of India

The Supreme Court on Friday, 22 March, reserved its order on Kerala government’s plea seeking interim relief in a lawsuit contesting a ceiling on the state’s net borrowing.

The Kerala government had filed a suit in the apex court accusing the Union government of interfering in the exercise of its “exclusive, autonomous and plenary powers” to regulate the state’s finances by imposing a cap on borrowing.

A bench of Justices Surya Kant and KV Viswanathan reserved the order after hearing two sides.

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‘Over borrowing’

The Union government had on Thursday told the apex court that the Kerala government has been “over-borrowing” in the recent years which reflected its difficult financial situation.

The Kerala government asserted its finances are “sustainable enough” to bear the burden of over-borrowing in the previous years.

On 13 March, the Union government had told the top court that it was willing to allow the Kerala government to borrow ₹5,000 crore, subject to certain conditions, to deal with the financial issues facing the state as a “very special and exceptional measure”.

However, the Kerala government had said ₹5,000 crore “does not take us anywhere” and the absolute minimum requirement stood at ₹10,000 crore.

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The Kerala petition

In an original suit filed under Article 131 of the Constitution, the Kerala government has said the Constitution bestows fiscal autonomy upon states to regulate their finances under various articles, and the borrowing limits or the extent of such borrowings are regulated by state legislation.

Article 131 of the Constitution deals with the original jurisdiction of the apex court in any dispute between the Centre and states.

The suit said the ability to determine the borrowing of the state in order to balance the budget and make up for the fiscal deficit is exclusively within the domain of the states.

“If the state is not able to borrow to the extent required based on the budget of the state, the state would not be able to complete its state plans for the particular financial year,” it said.

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