Borrowing limit case: Kerala has no right to borrow additional money, says Supreme Court; state's plea referred to Constitution Bench

NEW DELHI: Kerala received a setback in the borrowing limit case as the Supreme Court ordered that the state has no right to borrow additional money. The court also stated in its order that the state was not able to assert its right to borrow Rs 10722 crores. The verdict stated that the argument raised by the Centre against Kerala was correct.

The bench comprising Justices Suryakant and KV Viswanathan said that Kerala received substantial relief in the matter of loans. The court accepted the central government's argument that if the state is allowed to borrow additional money, then that money will have to be reduced in the next financial year. The state's argument that it has the right to borrow more money is not correct. The Supreme Court upheld the Centre's contention that Kerala had borrowed additional money during 2017/20. The apex court also pointed out that there was a discrepancy in the figures of the amounts demanded by Kerala.

The apex court referred the suit filed by the state against the Centre over interference with the state’s powers to borrow and regulate its own finances to a Constitution Bench. The two-member bench framed six questions of law to be considered by the five-judge Constitution bench.

Kerala had approached the Supreme Court seeking permission to borrow more money. The court concluded after evaluating the case that the central government's arguments were stronger than the state's. The Centre argued that if it gives relaxation to Kerala, other states will also come up raising similar demand.