New Delhi: The Supreme Court on Monday referred to a five-judge constitution bench a suit filed by the Kerala government challenging the Centre's decision to put a cap on the borrowing capacity of states. The apex court said that prima facie once a state overborrows from Centre there can be a reduction in the next payouts by the Union of India and added that the balance of convenience lies with the Union of India.
A bench comprising justices Surya Kant and K V Viswanathan rejected the Kerala government's plea for directing the Union government to relax its borrowing cap restrictions so that it could borrow additional funds during the current fiscal year.
Justice Surya Kant said the bench has passed a common order on maintainability and interim injunction and it seems that instant suit raises important questions on constitutional interpretation, like the interpretation of article 131, article 293 on whether state has enforceable right to borrow from the Union, and the scope and extent of judicial review.
The bench said it has formulated six questions other than constitutional interpretation, and these questions fall within article 145 of the Constitution and the matter should be considered by a five- judge constitution bench.
The apex court said that for the interim, it is inclined to accept the submission of the Union and added that when there is overborrowing by a state then there can be a reduction in the payout by the Union of India in the next year, and the balance of convenience lies with the Union.
On March 22, the Supreme Court had reserved its order on a plea filed by the Kerala government seeking interim relief in a lawsuit contesting a ceiling on the state’s net borrowing.
After a detailed hearing in the matter, the apex court had reserved the order. Senior advocate Kapil Sibal represented the Kerala government and Attorney General R Venkataramani and Additional Solicitor General (ASG) N Venkataraman represented the central government.
The state government has filed a suit in the apex court accusing the Centre of interfering in the exercise of its “exclusive, autonomous and plenary powers” to regulate the state’s finances by imposing a cap on borrowing.
The Centre had argued before the apex court that the Kerala government has been “over-borrowing” in recent years, which reflected its difficult financial situation. However, the state government emphasized that its finances are “sustainable enough” to bear the burden of over-borrowing in the previous years.
On March 12, the Supreme Court had asked the Centre to be slightly liberal and consider providing a one-time package to Kerala, to rescue the state from its current financial crisis. The next day, the Centre told the apex court that it was willing to allow the Kerala government to borrow Rs 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 state government turned down this offer saying that it does not take it anywhere. The state government stressed that the absolute minimum requirement stood at Rs 10,000 crore.
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