The Supreme Court on Wednesday nudged Kerala to meet the Centre’s team a second time and accept the ₹13,608 crore on offer to tide over the immediate financial emergency looming in the State.
“Let the Chief Secretary, Finance Secretary and the Advocate-General, with a financial adviser, meet the Central team. Take ₹13,608 crore. Make out a case for the remaining amount. Accept the conditions, except withdrawal of this suit filed in the Supreme Court, to resolve the immediate emergency,” Justice Surya Kant, heading a Bench comprising Justice K.V. Viswanthan, orally advised the State of Kerala, represented by senior advocate Kapil Sibal and advocate C.K. Sasi.
The first round of talks between the Centre and the State on February 14 proved inconclusive when the former insisted that Kerala withdraw its suit as a precondition for the release of ₹13,608 crore.
The Bench did not pass any interim orders on Kerala’s original suit. It gave Kerala liberty to mention whenever there was a need for a hearing. The court did not fix a time for the meeting between the Centre and Kerala, leaving it to the discretion of the officials on both sides.
Also read | K.N. Balagopal hails SC decision allowing Kerala to borrow ₹13,600 crore despite Centre’s objections
Cap on borrowings
The suit filed by the State had accused the Union government of violating the federal structure of governance and causing “severe damage to the economy of a small State with meagre resources” by limiting its borrowing powers. The State said the arbitrary limitations set by the Centre had brought it to the brink of a financial emergency.
As an urgent interim measure, Kerala had also sought ₹26,226 crore to clear its “unmet arrears and immediate obligations”. “We cannot pay out of public funds. We cannot pay other allowances like pension, dearness allowance, pay revision. The impact of all this is only a few months away. There is a critical overdraft position. If we lose another two Tuesdays, we will not get any money from the Reserve Bank of India. We cannot do any market borrowing at this time. This is a serious issue,” Mr. Sibal had informed the court.
On Wednesday, Justice Viswanathan asked the Centre, represented by Attorney-General R. Venkataramani and Additional Solicitor-General N. Venkataraman, whether it was fair to compel the State to withdraw a suit filed in exercise of its right to approach the Supreme Court directly against the Centre under Article 131 of the Constitution.
“They [Kerala] cannot have it both ways. It was not to twist somebody’s arms that the condition of withdrawal of the suit was imposed,” Mr. Venkataramani countered.
Justice Kant observed that by asking the State to withdraw its suit, the Union government was actually asking the Supreme Court not to judicially review the issue. The suit, Justice Kant noted, was the “first of its kind”.
“We would like to hear the issue. We want to find a structured solution for it. If you both can resolve the immediate emergency, there will be time for the court to hear the suit,” Justice Kant told both sides.
Mr. Sibal said the Centre could even take back the money the next year if it found that the allocation was incorrect, but the need of the State was dire now.
Mr. Venkataramani said the State cannot create a “mess” through its “financial imprudence and mismanagement” and then come to the Supreme Court with a suit, claiming that the Centre should endorse its actions.
The Attorney-General said the first thing to be looked into would be whether the suit was maintainable and whether the top court could ultimately provide any relief in a matter of pure fiscal policy.
“You [Kerala] cannot go on a freewheeling borrowing and then accuse the Centre in court of borrowing recklessly,” Mr. Venkataramani contended.
“There is a trust deficit between the Centre and the State, both constitutional authorities,” Justice Kant observed.
Mr. Sibal said the suit raised questions about the handling of the finance of the country. “The finance of the country is partly handled by the Union and partly by the States, and there are misgivings at both ends,” he said.
Mr. Sibal said the Union cannot control the State budget. “A State budget is tailor-made to the needs of the people of the State. The financial landscape is as diverse as the political and cultural landscape. Kerala invests in human capital, which is the State’s ultimate source of progress,” he said.
