Jahanvi Agarwal
On 12th January 2024, the Supreme Court took notice of Kerala’s plea against alleged financial interference by the Union government. Kerala argues that the Union imposed a ‘Net Borrowing Ceiling’ on the State, restricting borrowings, including those from open market sources. The state claims that the Net Borrowing Ceiling is being further reduced by incorporating aspects that don’t fall under the definition of “borrowings” in Article 293 of the Constitution.
The court consisted of Justices Surya Kant and KV Vishwanathan, has scheduled the matter for January 25, 2023. Kerala filed an Original Suit under Article 131 of the Constitution, invoking the Supreme Court’s original jurisdiction. In the suit, Kerala emphasizes the essential need for the state to borrow without hindrance for the progress and development outlined in its State Plans.
The suit challenges the amendment to the Fiscal Responsibility and Budget Management Act, 2003, arguing that it encroaches on the state’s legislative domain. Kerala seeks a declaration asserting its exclusive power to regulate and manage public debt, Public Account, liabilities, and borrowings under various articles of the Constitution.
The plea adds, “Declare and hold that the Defendant Union has no right, power or authority to regulate, interfere with, fetter, limit and/ or impose any conditions on the borrowings by the Plaintiff State including under Article 293(3) and Article 293(4) of the Constitution or otherwise, except for conditions that may be imposed in respect of specific loans of the Plaintiff State availed from the Defendant Union of India or raised on the security of guarantees issued by the Defendant Union of India, as provided for under Article 293(2) of the Constitution…”.
The plea aims to limit the Union’s authority to interfere with the state’s borrowings, except for conditions related to specific loans provided by the Union. This legal move echoes similar concerns raised by the State of Punjab earlier this year, challenging the Union Government’s refusal to reimburse statutory charges on food grain procurement. Punjab argued that despite the constitutionally valid actions of the state, the Union is not disbursing market and rural development fees.
Case Name: State of Kerala vs. Union of India
Diary Number: 51385 / 2023
Bench: Justices Surya Kant and KV Vishwanathan