Ceiling on net borrowing: Supreme Court agrees to consider Kerala government’s request to form five-judge Constitution Bench

Tribune News Service

New Delhi, August 30

The Supreme Court on Friday agreed to consider setting up a five-judge Constitution Bench to examine the Kerala government’s original suit against the Union of India over financial borrowing limits.

On behalf of the Kerala government, senior counsel Kapil Sibal mentioned the matter before a Bench led by CJI DY Chandrachud and requested him to form the Bench.

“This is an original suit regarding Kerala’s financial structure… the court said we will refer to the Constitution Bench… the Registrar said that he will not send an email because these are matters of an original suit. Therefore, I am saying My Lords, just look at it and see...,” Sibal told the Bench.

“I will look into it,” CJI told Sibal.

In a setback to the Kerala government, the Supreme Court had on April 1 refused to grant any interim relief to it and had referred to a five-judge Constitution Bench the Kerala government’s original suit raising the issue of ceiling on net borrowing.

“Since Article 293 (on borrowing by states) has not been so far subjected to any interpretation by this court, we have referred this question to a five-judge Bench,” a Bench led by Justice Surya Kant had said, refusing to grant any interim relief to the Kerala government which has challenged the Centre’s decision not to increase the borrowing limits of the state.

“If the state has essentially created financial hardship because of its own financial mismanagement, such hardship cannot be held to be an irreparable injury that would necessitate an interim relief against Union,” the top court had said.

“There is an arguable point that if we were to issue interim mandatory injunction in such cases, it might set a bad precedent in law that would enable the states to flout fiscal policies and still successfully claim additional borrowings,” it had noted.

“We cannot be oblivious of the fact that in light of the plaintiff’s (Kerala government) contention regarding pending financial dues, the defendant (Centre) has already made an offer to allow additional borrowing (to the tune of Rs 13,608 crore),” it had said.

“Even if we assume that the financial hardship of the plaintiff is partly a result of the defendant’s regulations, during the course of hearing this interim application, the concern has been assuaged by the defendant – Union of India to some extent so as to bail out the plaintiff – state from the current crisis. The plaintiff thus has secured substantial relief during the pendency of this interim application,” the top court had said.

The top court had said, “We are of the view that since the plaintiff – state has failed to establish the three prongs of proving prima facie case, balance of convenience and irreparable injury, State of Kerala is not entitled to the interim injunction, as prayed for.”

The order came on the state’s suit, 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.

In an original suit filed under Article 131 of the Constitution, which deals with the original jurisdiction of the apex court in any dispute between the Centre and states, the Kerala government has said the Constitution bestowed fiscal autonomy upon states to regulate their finances under various articles, and the borrowing limits or the extent of such borrowings were regulated by state legislation.

The Kerala government had submitted that an amount of Rs 26,226 crore was imminently and urgently required in order for it to avert “the impending grave financial crisis…”