The Supreme Court on Monday referred to the Constitution Bench, a petition filed by the State of Kerala against the Central government over the alleged interference with the State’s power to borrow and regulate its own finance.
The order was passed by the Bench of Justice Surya Kant and Justice KV Viswanathan on a petition filed by the government of Kerala seeking interim relief to borrow money from the Union government, in order to bail it out of its financial crises.
The Centre had earlier refused to let the State of Kerala borrow money under Article 131, sub-Article (3) of the Constitution, which empowered the Union of India to make reductions in the State fund in a succeeding year, if there was over utilisation of the borrowing limit in the previous year to the extent of over borrowing.
The petitioner further raised the question of the interrelation of Article 131, sub-Article (3) and its effect when read with Article 293, which vested in the State enforceable right to borrow from the Union Government and other source, especially in the light of ‘to what extent such right can be regulated by the Union Government?’
After taking into account the developments that took place during the pendency of the interim application, the Apex Court observed that after consolidating the offers of aid by the Union to Kerala, a total amount of Rs 13,608 crore has been issued by the Union towards the fiscal hardship of the State to bail it out of the crises.
Holding this as ‘substantial’ relief, the Bench dismissed the interim application.
As to the main question of interpretation of the Constitution, and the substantial question of law, with respect to Article 131 and Article 293 (3), the Apex Court expressed the opinion that the said provisions have ‘not been so far subject to any authoritative interpretation by this Court. It said the questions squarely fell within the ambit of Article 145 sub-Article (3)(Power to refer the matter to Constitutional Bench). The Bench referred the questions to the Constitutional Bench for the pronouncement by a Constitutional Bench comprising five Judges, under the mandate of Article 145(3).
The bench observed that prima facie, it was inclined to accept the argument of the Union that where there was over utilisation of the borrowing limit in the previous year to the extent of over borrowing, reductions were permissible in the succeeding year (under Article 131).
However, the Aoex Court expressly clarified that the observation made today was only for the purpose of ad-interim injunction. The main case was to be placed before the Chief Justice of India to be referred to the Constitutional Bench comprising five Judges.
The Apex Court said it has formulated six questions other than constitutional interpretation to be considered by the Constitution Bench. It held that these questions fell within Article 145 of the Constitution and thus, the matter would now be heard by a five-judge Constitution Bench.
The top court of the country refused to grant any interim relief to Kerala on the grounds that the balance of convenience lay with the Central government.
It further said that it was inclined to accept the submission of the Union of India that when there was overborrowing, then there could be reduction in the next years, noting that the Union government had already agreed to release Rs 13,068 crore after the intervention of the top court.