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Five-judge Constitution bench to hear Kerala govt's suit over ceiling on net borrowing

The Supreme Court refused to grant interim relief in Kerala government's suit filed against the Centre challenging the limits imposed on the State's borrowing capacities on Monday (April 1).

Five-judge Constitution bench to hear Kerala govt's suit over ceiling on net borrowing anr
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First Published Apr 1, 2024, 11:26 AM IST

New Delhi: In a setback for the Kerala government, the Supreme Court refused to grant interim relief in its suit filed against the Central government challenging the limits imposed on the State's borrowing capacities on Monday (April 1). The bench, consisting of Justices Surya Kant and KV Viswanathan, noted that the suit filed by the State pertains to matters concerning the interpretation of the Constitution. Consequently, they referred the case to a Constitution Bench comprising five judges, as per the provisions outlined in Article 145(3) of the Constitution.

As per the bench's assessment, the suit has brought forth questions regarding the interpretation of Articles 131 and 293 of the Constitution. Specifically, the matter of whether Article 293 confers authority on the States for external borrowing and the extent to which the Centre can regulate this power is under scrutiny. Furthermore, the scope of judicial review concerning fiscal policy is also a pivotal issue to be addressed.

Observing that there has been no authoritative ruling on Article 293 of the Constitution up to this point, the panel decided it was appropriate to forward the case to a five-judge bench.

Regarding the issue of interim relief, the Court indicated a preliminary inclination to favor the Union's argument. The Union argued that if a State exceeds its borrowing powers in a given financial year, there should be a corresponding reduction in borrowing allowances for the subsequent years.

In regards to the matter of interim relief, the Court noted that the Centre had a greater advantage in terms of convenience. Furthermore, the Court observed that the State had received significant relief as a result of the Court's involvement.

The Centre also argued that Kerala has so far borrowed 4.25 percent of GSDP in the financial year 2023-24 and if it is allowed to borrow another Rs 25,000 crores, it will be 7 percent. The order came on the petition on the first day of the financial year. 

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