Press Trust of india

Ceiling on net borrowing: SC refers Kerala govt’s suit to five-judge Constitution bench

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New Delhi:  The Supreme Court on Monday referred to a five-judge Constitution bench the suit filed by the Kerala government raising the issue of ceiling on net borrowing.

A bench of justices Surya Kant and K V Viswanathan passed the order on a suit filed by the Kerala government 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.

Referring to Article 293 of the Constitution, which deals with borrowing by states, the bench said this provision has not been so far subject to any authoritative interpretation by the apex court.

It formulated some questions to be dealt with by the larger bench, including whether Article 293 of the Constitution vests a state with the “enforceable right” to raise borrowing from the Union government or other sources.

On the issue of interim relief, the bench observed that substantial relief has been granted to Kerala through the intervention of the apex court in the matter.

It said the suit raises more than one substantial question regarding the interpretation of the Constitution.

The bench said one of the questions formulated by it pertained to the scope and extent of judicial review by the court in respect of fiscal policy.

It said the matter be placed before the Chief Justice of India for constituting the larger bench.

In an original suit filed under Article 131 of the Constitution, the Kerala government has said the Constitution bestows fiscal autonomy upon states to regulate their finances under various articles, and the borrowing limits or the extent of such borrowings are regulated by state legislation.

Article 131 of the Constitution deals with the original jurisdiction of the apex court in any dispute between the Centre and states.

During the arguments before the apex court, the Centre had said the Kerala government has been overborrowing in recent years which indicates its financial situation.

The Kerala government had maintained that its finances are “sustainable enough” to bear the overborrowings in the previous years.

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

During the earlier hearings, the apex court had stressed on the need to resolve the issue and said that dialogue between the Centre and the state must not stop merely because of the pending suit.

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