In a significant development, the Supreme Court has declined interim relief to Kerala, dismissing its plea to raise additional borrowing of Rs 10,722 crores for the fiscal year 2023-24 amidst a financial dispute with the Union. The Court’s decision underscores the intricate balance between state autonomy and fiscal responsibility.
The Court, led by Justices Surya Kant and KV Viswanathan, emphasized that financial hardships stemming from a state’s mismanagement cannot justify interim relief against the Union. It cautioned against setting a precedent that could allow states to flout fiscal policies and exceed borrowing limits.
While acknowledging the triple tests for interim relief, the Court found in favor of the Union, highlighting potential adverse effects on the nation’s economy if Kerala’s plea were granted. The Court noted the Union’s concerns about market repercussions and macroeconomic stability, emphasizing the interconnectedness of state borrowings with national creditworthiness.
Moreover, the Court identified a lacuna in the interpretation of Article 293 concerning the Union’s authority to regulate state borrowing. Given the constitutional importance of this issue, the Court decided to refer it to a larger bench of five judges for authoritative interpretation.
The Court’s refusal to permit Kerala’s additional borrowing reflects a nuanced understanding of the broader implications and the need for clarity on constitutional matters. It underscores the delicate balance between state autonomy and national fiscal stability.
The case, titled State of Kerala v. Union of India, marks a pivotal moment in the ongoing dialogue between states and the Union regarding fiscal governance and constitutional interpretation.
Based on the above premise, the court refused to permit the State of Kerala to raise additional borrowings to meet its fiscal requirements.
Case Title: State of Kerala v. Union of India | Original Suit No. 1 of 2024
