Centre can’t insist on withdrawal of suit by Kerala as it has right to move top court under Article 131: Supreme Court

Satya Prakash

New Delhi, March 6

Noting that it’s a state’s right to approach it under Article 131 of the Constitution, the Supreme Court on Wednesday disapproved of the Centre insisting on withdrawal of a suit filed by the Kerala Government as a pre-condition for giving consent to the state for additional borrowing.

“What we only want to suggest to you right now is that you don’t insist on the condition of withdrawal of the suit… You can’t say withdraw the suit. That’s a constitutional right under Article 131,” a Bench led by Justice Surya Kant told Attorney General R Venkataramani and Additional Solicitor General G Venkataraman, who represented the Centre.

The Bench — which also included Justice KV Vishwanathan —however, said the Centre could impose other conditions for improved fiscal management.

Article 131 deals with the Supreme Court’s original jurisdiction in a dispute between the Centre and one or more states; or a dispute between two or more states.

The Bench praised the Indian economy, saying, “The entire world is recognising India as a robust economically sound country. There is no doubt about it. Even when we go out of the country on judicial platforms, we find this kind of feeling there. And it’s not a feeling based on perception. It’s based on correct facts and figures and the strong pillar on which the economy is thriving…”

Noting that the Centre should be concerned about fiscal mismanagement by states as it impacted the nation’s economy, the top court advised the Centre and the Kerala Government to iron out their differences over a cap on net borrowing by the latter.

The dialogue between the Centre and the state must not stop merely because of the pending suit, the court said while stressing on the need to resolve the issue.

“Let all the senior officials who are capable of taking a decision and who are already involved in decision making sit together and resolve this,” it said.

The Bench did not fix any date for further hearing the matter but said the parties were at liberty to mention it whenever they wanted a hearing.

The Kerala government has accused the Centre of interfering in the exercise of its “exclusive, autonomous and plenary powers” to regulate the state’s finances by imposing a ceiling on borrowing.    

It had told the top court on February 19 that a meeting held on February 15 failed to make much headway in resolving the contentious issue.

On behalf of the Kerala government, senior advocate Kapil Sibal said the state was left with no choice but to agitate the issue. Sibal said he wanted to inform the court with a “heavy heart” that though the issue needed to be resolved in the spirit of cooperative federalism, it has not. The state needed a breather, he added.

Earlier, the Bench was told that in the February 15 meeting, the Centre had said it was going to release over Rs 13,000 crore to the state straightaway. The Bench said the Centre has said it will approve release of Rs 13,608 crore to the state.

“As regards their (Kerala) additional demand, let a meeting be held today itself in the afternoon or may be tomorrow,” it added.

In an original suit filed under Article 131, the Kerala Government said the Constitution bestowed fiscal autonomy upon states to regulate their finances under various articles, and the borrowing limits were regulated by a state legislation.

However, the Centre submitted that uncontrolled borrowing by states would affect the credit rating of the country, and that the fiscal edifice of Kerala has been diagnosed with “several cracks”.