Supreme Court refers Kerala Government’s suit on net borrowing cap to five-judge Constitution Bench

Supreme Court refers Kerala's borrowing powers suit to Constitution Bench, Union bails out Kerala with ₹13,608 crore.

In an interim order, a two-judge Bench of the Supreme Court on April 1 referred to Constitution Bench a suit filed by the State of Kerala accusing the Union of India of arbitrarily limiting its borrowing powers and bringing the State to the brink of financial emergency.

The Supreme Court, however, held that Union has currently bailed Kerala out of its current financial crisis by allowing it ₹13,608 crore, which is a “substantial relief”.

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The Kerala Government had 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 told the apex court that the Kerala government had been “over-borrowing” in recent years which reflected its difficult financial situation.

The Kerala Government asserted its finances are “sustainable enough” to bear the burden of over-borrowing in the previous years.

On March 13, the Centre had told the top court that it was willing to allow the Kerala government to borrow ₹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 Kerala Government had said ₹5,000 crore “does not take us anywhere” and the absolute minimum requirement stood at ₹10,000 crore.