Kerala rejects Centre’s offer to allow additional borrowing of Rs 5000 crores with conditions, asks Supreme Court to hear suit on merits

The Centre on Wednesday informed the Supreme Court that it can give consent to an additional borrowing by Kerala for an amount of Rs 5000 crores in the present financial year as a one-time measure subject to stringent conditions to be imposed in the next financial year.

Additional Solicitor General N Venkataraman informed the aforesaid development to a bench of Justice Surya Kant and Justice KV Viswanathan. The Additional Solicitor General said that in view of the court’s suggestion, they can allow Rs 5,000 crores that will be deducted from net borrowing ceiling for the first nine months subject to certain conditions.

Appearing for Kerala, Senior Advocate Kapil Sibal, refused the Centre’s proposal, mentioning that the concession is based on a presumption that the state was not entitled to the additional borrowing. The Senior Advocate stated that Rs 5000 crores will not take the state anywhere and that they need at least Rs 10,000 crores. He further stated that the Centre’s offer is based on the assumption that the suit is liable to be dismissed. He also emphasised that under the recommendations of the Finance Commission, the state was entitled to this money. 

Senior Advocate Kapil Sibal argued that under the garb of giving a concession, the Centre was trying to impose conditions which could control the state’s expenditures, adding that such a measure would violate the principles of federalism. Urging the Supreme Court bench to hear the matter on merits for interim relief, the counsel said that he can demonstrate that the state is entitled to borrow the amount under the law.

Furthermore, he added that the state has a strong case for interim relief, underlining that the prima facie case and the balance of convenience were in its favour and that irreparable injury would be caused to it if the additional borrowing was not allowed. Subsequently, the bench agreed to schedule the suit on March 21 for hearing on interim relief.

Nonetheless, during the hearing, the bench suggested that the state accept the Rs 5000 crores. When the bench observed that the interim relief which the state was seeking amounted to the final relief, Kapil Sibal disagreed, stating that the interim relief will be subject to adjustment in the next financial year. 

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