The Supreme Court has reserved its judgment in a significant case concerning borrowing limits between the Union government and the state of Kerala, marking a crucial development in the ongoing legal dispute.

A bench comprising Justice Surya Kant and Justice K.V. Viswanathan conducted an exhaustive hearing over two consecutive days before deciding to reserve the verdict.

This move follows intense deliberations and arguments presented by both parties involved. Kerala, invoking Article 131 of the Constitution, initiated legal proceedings against the Union government, contesting the borrowing norms and highlighting the distinctive financial landscape of the state. The disagreement escalated when negotiations failed to yield an agreement, prompting Kerala to seek judicial intervention.

During the hearing, Kerala and the Union government urged the court to consider an interim order before the conclusion of the current financial year on 31st March, underscoring the urgency of the matter. Despite several rounds of discussions, a consensus remained elusive, leading to the legal battle.

The heart of Kerala's argument lies in its demand for greater borrowing flexibility, challenging the constraints imposed by the Union government. Initially seeking approval to borrow ₹19,351 crore, Kerala faced resistance and subsequent offers from the Centre, leading to a stalemate. The Centre's insistence on withdrawing the lawsuit as a precondition for increased borrowing was met with opposition from the court, emphasizing Kerala's right to pursue legal action independently.

Senior advocate Kapil Sibal, representing Kerala, vehemently argued against what he perceived as executive overreach, stressing Kerala's constitutional prerogative in financial matters. Meanwhile, the Union government, represented by additional solicitor general N. Venkataraman, countered Kerala's claims, citing concerns over fiscal discipline and macroeconomic stability.

Finance Minister Nirmala Sitharaman's statement in Parliament further underscored the government's stance on fiscal regulations, emphasizing the need to uphold financial discipline across states, including Kerala.

Case: State of Kerala vs Union of India.