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Supreme Court reserves verdict on Kerala plea for interim relief in suit challenging Centre’s borrowing curbs

The Supreme Court today reserved its verdict on Kerala’s plea for interim relief in its original suit challenging the Centre’s borrowing curbs.

The bench of Justice Surya Kant and Justice KV Viswanathan heard the plea. Kerala’s original suit against the Centre under Article 131 of the Constitution challenges the Union’s norms on borrowing limits, underlining the state’s unique financial landscape. Kerala has also emphasised its substantial investments in critical sectors like health and education, contributing to its commendable human development indices.

In the last few weeks, the top court bench encouraged dialogue between the state and the central governments to resolve this deadlock. Initially, the Centre initially agreed to allow an additional borrowing of Rs 13,608 crores provided that Kerala withdrew its suit. Nonetheless, the bench objected to the condition, with the judges making it clear that the Centre could not insist on the withdrawal of the pending litigation in view of Article 131 of the Constitution.

Responding to the Centre’s proposal, Kerala pointed out that the amount of Rs 13,608 crores would only cover a fraction of the state’s immediate financial requirements. Subsequent discussions also yielded no result as the central government refused Kerala’s request to allow borrowing of Rs 19,351 crore, highlighting concerns over the state’s budget deficit. The top court earlier pressed the Centre to consider some flexibility in the borrowing limits, especially in light of Kerala’s urgent financial needs.

The Supreme Court also suggested a relaxation of Kerala’s borrowing limit for the current financial year, subject to more rigid conditions in the next one. Responding, the Centre agreed to allow an additional borrowing of only Rs 5,000 crores subject to several conditions, one of which was that the amount would be deducted from the state’s next borrowing ceiling for the first nine months of the financial year (FY) 2024-25.

However, the aforesaid proposal was rejected by the State of Kerala last week, leading to a new impasse in the ongoing financial tussle. Appearing for Kerala, Senior Advocate Kapil Sibal maintained that the amount was inadequate to meet essential obligations such as public fund disbursements, pensions, and pay revisions. He also contended that the Centre’s concession was based on a presumption that it was not entitled to the additional borrowing.

Considering the negotiations breaking down, Kapil Sibal insisted on arguing for interim relief, stating that the prima facie case and the balance of convenience were in the state’s favour. He further underlined the irreparable injury caused to it if the additional borrowing is not permitted. 

The bench heard the counsel for both parties on the question of interim relief this week. Considering detailed submissions of the counsels, the bench reserved its verdict on Friday.

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