Active Stocks
Fri Apr 19 2024 15:56:00
  1. Tata Steel share price
  2. 162.10 1.31%
  1. Tata Motors share price
  2. 963.20 -0.84%
  1. NTPC share price
  2. 350.90 -0.14%
  1. ITC share price
  2. 424.80 1.40%
  1. Power Grid Corporation Of India share price
  2. 281.70 0.54%
Business News/ News / Supreme Court reserves order on Kerala's borrowing limit challenge
BackBack

Supreme Court reserves order on Kerala's borrowing limit challenge

Both Kerala and the Union government urged the court to pass an interim order in the case before the conclusion of the current financial year on 31 March after several rounds of talks failed to yield an agreement.

A SC bench of Justice Surya Kant and Justice K.V. Viswanathan has reserved the verdict following an extensive hearing that spanned over two consecutive days. (ANI)Premium
A SC bench of Justice Surya Kant and Justice K.V. Viswanathan has reserved the verdict following an extensive hearing that spanned over two consecutive days. (ANI)

The Supreme Court has reserved its judgment in the case regarding borrowing limits between the Union government and the state of Kerala.

A SC bench of Justice Surya Kant and Justice K.V. Viswanathan has reserved the verdict following an extensive hearing that spanned over two consecutive days.

Both Kerala and the Union government urged the court to pass an interim order in the case before the conclusion of the current financial year on 31 March after several rounds of talks failed to yield an agreement.

Kerala filed the suit against the Centre under Article 131 of the Constitution, contesting the Union's norms on borrowing limits and highlighting the unique financial landscape of the state.

During negotiations, Kerala initially requested the Centre's approval to borrow 19,351 crore. While the Centre initially agreed to allow an additional borrowing of 13,608 crores, it insisted that Kerala withdraw the legal suit. However, the court intervened, stating that the Centre cannot impose conditions on Kerala to withdraw the lawsuit.

Subsequently, Kerala rejected the Centre's offer of 5,000 crore as a one-time measure, citing various conditions. Instead, the state demanded a minimum of 10,000 crore as a one-time measure, arguing that the proposed amount was insufficient to meet essential obligations such as public fund disbursements, pensions, and pay revisions.

Senior advocate Kapil Sibal representing Kerala argued that the Centre's restrictions constituted executive overreach, emphasizing Kerala's constitutional authority to determine its budget and borrowing needs. Sibal highlighted the significant reduction in Kerala's borrowing from the Union government post-liberalization and objected to the Union's interference in the state's financial affairs.

In response, additional solicitor general N. Venkataraman contested Kerala's claims, alleging misrepresentation of figures and pointing out that the state's consistent over-borrowing in recent years. He raised concerns about Kerala's macroeconomic stability and the potential adverse effects of granting the requested 10,000 crore.

According to the Union government, any financial stress faced by Kerala was due to mismanagement, citing substantial financial resources provided to the state, including payments to meet GST compensation shortfalls. The Union government noted the importance of public finance management in maintaining India's credit rating.

Finance minister Nirmala Sitharaman clarified in Parliament in December that there was no proposal to relax rules on state governments' borrowing capacity for FY24, including Kerala's.

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

ABOUT THE AUTHOR
Krishna Yadav
Krishna, a lawyer turned journalist, is a key member of Mint's corporate team. He covers major legal battles in Delhi's courtrooms, with a focus on finance, markets, and policy. Additionally, he crafts easy-to-understand explainers for complex stories and holds a PG Diploma from the renowned Asian College of Journalism.
Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 22 Mar 2024, 04:35 PM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App