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Kerala government has not got relief from the Supreme Court in the loan case. Hearing the case on Monday (April 1, 2024), the Supreme Court rejected the Kerala government's plea seeking direction to the Central government to relax borrowing limit restrictions. The Supreme Court refused to give orders to the Central Government in this regard and referred the matter to the Constitution Bench.
Kerala asked for a loan of Rs 26000 crore from the central government
According to the information, Kerala has asked for a loan of Rs 26,000 crore from the Central Government citing financial constraints. The Central Government opposed this and said that the Kerala Government has already taken more than the prescribed limit. Kerala government went to the Supreme Court and sought relief in this regard.
The state got big relief from the Center for the financial year
Also, the court refused to pass an order on the interim relief sought by the state for additional borrowing for the financial year 2023-24. The court said that after the intervention of the court, the state has got adequate relief from the Center for the financial year. The Court also held that prima facie the balance of case and convenience is in favor of the Central Government.
Justices Suryakant and K.V. The bench comprising Vishwanathan commented
However, Justices Surya Kant and K.V. Vishwanathan's bench found that the suit filed by the state raised issues relating to interpretation of the Constitution and referred the case to a 5-judge Constitution bench in terms of Article 145(3). Constitution.
Issues raised regarding interpretation of Articles 131 and 293 of the Constitution
The bench said that this suit raises issues related to the interpretation of Articles 131 and 293 of the Constitution. The second issue is whether Article 293 gives the states the right to borrow from the government and other sources and if yes, to what extent it can be controlled by the Union. Whether borrowings by state-owned enterprises and liabilities arising from public accounts are included within the scope of Article 293(3) of the Constitution and the scope of judicial review over fiscal policy are other issues. Noting that no official pronouncement has been made so far on Article 293 of the Constitution, the bench deemed it appropriate to refer the matter to a 5-judge bench.
on interim relief
On the question of interim relief, the Court said that it applied the triple tests of (i) prima facie case, (ii) balance of convenience and (iii) irreparable injury. The Court said it was prima facie inclined to accept the Union's contention that if any excess of the borrowing limit is utilized by a State in a financial year, a similar reduction can be made in subsequent years . The court said that the balance of the facility lies with the Central Government. Also, the court said that after the intervention of the court, adequate relief has been given to the state.
On March 19, the union paid Rs. Rs 8742 crore. Agreed on Rs 4866 crore
The court said it rejected the condition imposed by the Union that the state should pay Rs. Rs 13,608 crore should be taken out to obtain consent for additional borrowing. Also, in the meeting held on March 8, the Sangh had offered the consent of Rs 5000 crore. On March 19, the union paid Rs. Rs 8742 crore. An agreement was reached on Rs 4866 crore i.e. a total of Rs 4866 crore. 13,608 crores.
The court said that the state has got a lot of relief for the financial year 2023-24.
It is noteworthy that in the present case, the Court was trying to find a solution to the immediate financial needs of Kerala before the end of the financial year ending March 31, 2024. The Center initially allocated Rs. It was agreed to allow additional borrowing of Rs 13,608 crore, provided the State of Kerala withdrew its claim. However, this faced objections from the bench, with the judges clarifying that the central government cannot insist on withdrawal of pending litigation as a condition of bailout in view of Article 131 of the Constitution. Responding to the proposal of the Central Government, the State of Kerala informed that Rs. Rs 13,608 crore can meet only a fraction of Kerala's immediate financial needs.
When did this dispute start between Kerala and the Center regarding borrowing?
The dispute originated in December, when the state of Kerala approached the Supreme Court condemning the encroachment into its financial affairs by the central government. The state claimed that certain instructions and amendments issued by the Finance Ministry hindered its ability to meet budgetary commitments, thereby disrupting important welfare schemes and developmental initiatives outlined in its annual budget.
To immediately meet the financial obligations of the state, Rs. 26,000 crores needed
Central Kerala's grievances were concerns over the low borrowing limit imposed by the Union, potentially creating a severe fiscal crisis, and the state's urgent need to meet its financial obligations of Rs. 26,000 crores are needed.
Credit rating and overall financial stability of a country
In a written note submitted to the court, the central government defended its actions as necessary measures aimed at achieving macroeconomic stability. It emphasizes the potential effects of unregulated government debt on a country's credit rating and overall financial stability.