The Supreme Court, on Wednesday, March 6, observed that it is a Constitutional right of states under Article 131 (original jurisdiction of the Supreme Court) to file a petition against the Union government. A bench of Justices Surya Kant and KV Viswanathan was hearing a plea filed by the Kerala government against the Union government’s decision to limit the amount of additional money the state can borrow. The Union government had informed the court that it was willing to consider allowing Kerala to borrow additional money of Rs 13,608 crore in view of its current precarious financial situation, but only if the state government withdraws the case against the Union government. 

The top court disapproved of the Union’s ‘condition’ and said that while the Union can impose other conditions that are within the parameters of the Constitution, it cannot ask the state government to withdraw their petition. The court also questioned if they can impose such a condition, “Can you tell this to a litigant? To not file a suit. It is a Constitutional right under Article 131," it added.

Additional Solicitor General N Venkataramani argued that it was a financial matter and was beyond the purview of judicial review. He also contended that if the court entertained the petition, it would set a precedent for other states to approach the court seeking additional borrowing and that it would be "judicially unmanageable".

Senior Advocate Kapil Sibal, appearing for the Kerala government, said that the state was not in a position to pay off salaries and dearness allowances, and that it needed additional borrowing of Rs 50,000 crores. Stating that it was not passing any orders, the court suggested the Union and the state government hold a meeting and see if some additional amount can be released, subject to whatever conditions permissible as per Constitution “except the condition for withdrawal of suit”.

The petition was filed by the Kerala government in December last year against the Union government’s decision to limit the amount of additional money the state can borrow. For the current financial year, the Union government fixed a borrowing limit of Rs 47,762.58 crore for Kerala. Out of this, Rs 29,136.71 crore is open market borrowing and the remainder from other sources. The state requested the Union to allow additional borrowing, and stated that it required Rs 26,000 crore to meet its financial obligations. Kerala is the second state after Punjab to move the apex court in relation to a financial dispute with the Union government.

The Kerala government also alleged that this act of the Union government violated the principles of fiscal federalism. The state’s petition also alleged that the Union government’s action could lead to a financial crisis. On February 8, the Kerala government under the leadership of Chief Minister Pinarayi Vijayan had organised a protest in New Delhi against the Union government’s financial curbs on southern states, alleging that they are eroding democracy and federalism.

Read: 'Union eating into states' resources’: Full text of Pinarayi speech at Delhi protest

Also Read: Kerala’s deepening fiscal crisis and the way ahead