NEW DELHI: The Supreme Court's two-judge bench on Monday in its order referred to a five judge constitution bench to adjudicate Kerala government's plea challenging the Centre's decision to put cap on the borrowing capacity of states.
A two-judge bench of the top court, headed by Justice Surya Kant, comprising Justice K V Viswanathan, refused to pass any interim order and or direction on the plea of Kerala government's plea.
It noted in its order that that state received grant of Rs 13608 crore from Centre after filing of the present petition.
The apex court in its order said it prima facie held that once a state over borrows from centre there can be reduction in the next payouts by the Union of India and that balance of convenience lies with the Union of India.
The talks had been failed between Kerala and Centre, forcing the apex court to pass the order on the state's plea seeking appropriate directions and or orders on the issue.
The Kerala government, in its petition filed in the Top Court, has alleged that the Centre is unnecessarily interfering in State's finances and said that due to such interference, the state is not able to fulfil the commitments in its Annual Budgets.
Kerala government in its petition said that the Centre is imposing a Net Borrowing Ceiling on the State.
It said that due to the alleged interference by the Centre, this has resulted in huge arrears that it owes by way of welfare schemes to the people of the State particularly the poor and the vulnerable, various beneficiary groups, the employees of the State Government, its pensioners and dues to its State-Owned Enterprises.
This case marks a milestone in fiscal federalism, says Minister Balagopal
Referring to Article 293 of the Constitution, the court said this provision has so far not been subject to any authoritative interpretation by the apex court.
“We are unable to accept the argument of the plaintiff at the interim stage that there is fiscal space of unutilised borrowing of either Rs 10,722 crore as was orally prayed during the hearing or Rs 24,434 crore which was the borrowing claimed in the negotiations with the Union government,” the court said in the order.
Meanwhile, Balagopal emphasised the significance of the interim order, saying, “such cases are the first-of-their-kind in the nation’s history in terms of financial matters.”
“This case marks a milestone in fiscal federalism, despite assertions from the BJP government and the Opposition UDF in Kerala challenging our stance. The apex court’s decision to refer the matter to a Constitution Bench reinforces the validity of our arguments,’’ Balagopal told reporters in Kollam on Monday.
Kerala’s original suit before the apex court questions the curbs imposed by the Union government on the borrowings by the state government. According to the state, certain orders and directives issued by the Union ministry of expenditure were encroachment on its financial affairs and hence unconstitutional.
During the arguments before the SC, 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.
