Court refers Kerala government’s lawsuit against the Center to the Constitution bench no temporary remedy is granted
A two-judge bench stated that it was prima facie “inclined to accept the Center’s argument that where there is over utilisation of the borrowing limit in the previous year, to the extent of over borrowing, reductions are permissible in the subsequent year.” The Kerala government filed a suit against the Center over the limits on its borrowing powers on Monday, but it was unsuccessful in getting any interim relief. The suit raises several significant issues that should be reviewed by a five-judge Constitution bench, according to a bench of Justices Surya Kant and K V Viswanathan. The bench ordered that the suit be brought before the Chief Justice of India for this purpose.
The state government had petitioned the Supreme Court to overturn the federal government’s cap on borrowing capacity, claiming that doing so had “brought the operation of” its “Budget…to a grave crisis” and violated the federalism principles. The bench stated that the questions posed in the petition “are referred for answering by a five judge bench” since Article 293 of the Constitution, which addresses borrowing by the states, “has not so far been subject to any authoritative interpretation by this court.”
The court declared that it had taken into account the triple criteria of irreparable harm, balance of convenience, and prima facie case in order to grant interim relief. The bench further stated that the Union of India currently has the advantage in terms of convenience when declining temporary relief. The defendant Union has already offered to permit more borrowing, the court ruled, and it cannot ignore this fact in light of the plaintiff state’s argument on unpaid debt.
The bench stated that, even if it is assumed that the state’s financial difficulties are partially attributable to the Center’s regulations, the State has obtained significant relief while the interim application is pending, and the Center has partially consented to the state’s bailout from the current crisis. Kerala’s financial problems are the result of “poor public financial management,” the Center said in response to the state government’s Supreme Court challenge of the borrowing cap. It informed the supreme court that it had received significant funding from central taxes and charges, the largest portion of the Revenue Deficit Grant following devolution, and additional funding beyond the suggestions.
