Supreme Court Reserves Order on Kerala’s Borrowing Limit Challenge

The Supreme Court has concluded hearings and reserved its judgment on the contentious issue of borrowing limits between the Union government and the state of Kerala. The case, filed by Kerala under Article 131 of the Constitution, challenges the borrowing norms imposed by the Union government and underscores the unique financial circumstances of the state.

Over the course of two days, a bench comprising Justice Surya Kant and Justice K.V. Viswanathan heard arguments from both Kerala and the Union government. Despite repeated negotiations, no agreement was reached, prompting Kerala to seek legal recourse.

Initially, Kerala sought approval to borrow ₹19,351 crore, but discussions with the Centre yielded a conditional offer of ₹13,608 crore, contingent on the withdrawal of the legal suit. However, the Supreme Court intervened, asserting Kerala’s right to pursue legal action without conditions.

Senior advocate Kapil Sibal, representing Kerala, argued against the Union government’s restrictions, labeling them as executive overreach. Sibal emphasized Kerala’s constitutional autonomy in fiscal matters and criticized the Centre’s interference in the state’s financial affairs.

In response, additional solicitor general N. Venkataraman contested Kerala’s claims, citing concerns about the state’s consistent over-borrowing and its impact on macroeconomic stability. The Union government maintained that Kerala’s financial stress was a result of mismanagement, not restrictive borrowing norms.

Finance minister Nirmala Sitharaman had previously stated in Parliament that there were no plans to relax borrowing rules for state governments in the current financial year, including Kerala’s.

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