The state government of Kerala has found itself in the throes of a financial emergency, as it grapples with dire fiscal conditions. In a recent development, the Kerala government has turned to the Supreme Court of India for assistance, citing an urgent need for intervention to address its pressing financial woes.

Senior Advocate Kapil Sibal, representing the Kerala government, apprised the division bench of Justices Surya Kant and KV Vishwanathan of the critical situation confronting the state. Sibal emphasized that Kerala is struggling to meet its essential financial obligations, particularly the payment of salaries to its employees, due to a severe shortage of funds.

Responding to the inquiry from the division bench regarding the nature of the emergency, Sibal underscored the urgency of the situation, highlighting the inability of the state to fulfill its financial obligations using public funds alone.

In response to Kerala's plea for assistance, the bench directed the Union of India to consider extending financial aid to the state. The bench emphasized the importance of continued dialogue between the state and central governments to address the crisis effectively.

However, it's worth noting that the Union of India has conditioned its assistance on Kerala withdrawing the ongoing suit. Despite this stipulation, the bench urged both parties to ensure that the dialogue remains uninterrupted, emphasizing the paramount importance of resolving the financial crisis facing Kerala.

This development comes against the backdrop of previous discussions between the central government and Kerala regarding the borrowing ceiling imposed on the state. The Attorney General had previously expressed the central government's willingness to engage in talks with Kerala to address this issue, signaling a potential avenue for resolving the financial impasse.

In a note filed by the Attorney General in response to Kerala's plea, it was highlighted that Kerala has been designated as a "highly debt-stressed" state by the 15th Finance Commission. The note underscored the urgent need for corrective measures to address Kerala's precarious fiscal situation, as highlighted by various financial indicators.

The plea filed by Kerala contends that the Union's imposition of a net borrowing ceiling on the state has hindered its ability to borrow funds necessary for its development plans. Kerala argues that such limitations on its borrowing capacity impede its constitutional rights and hamper its progress and prosperity.

The Supreme Court, in response to Kerala's plea, had issued a notice on January 12, 2024, signaling its willingness to consider the state's grievances and address the financial challenges it faces.

Case: State of Kerala vs. Union of India.