The Supreme Court on Monday referred to a Constitution bench the suit filed by the state of Kerala government against the Union of India over the alleged interference with the state’s power to borrow and regulate its finance.

A bench comprising Justices Surya Kant and KV Viswanathan, however, refused to pass orders on the interim relief sought by the state of Kerala for additional borrowing for the financial year 2023-24 saying that balance of convenience lay with the Central government.

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“For interim aspect, we are inclined to accept submission of union that when there is over borrowing then there can be reduction in the next years. Balance of convenience in this case lies with Union,” the court said.

The court also noted that the Centre had already agreed to release Rs.13,068 crore after the intervention of the top court.

The apex court observed that the suit filed by the state raised issues relating to the interpretation of the Constitution and referred the matter to a Constitution Bench comprising 5-judges in terms of Article 145(3) of the Constitution.

The bench noted that the suit raised issues regarding the interpretation of Articles 131 and 293 of the Constitution. Another issue is whether Article 293 vests an enforceable right on the states to borrow from government and other sources and if yes, to what extent it can be regulated by the Union. Whether the borrowing by state-owned enterprises and liabilities arising from public accounts should be included under the purview of Article 293(3) of the Constitution and the scope of judicial review regarding fiscal policy are other issues.

The apex court said it had framed six questions of law to be considered by the Constitution bench of the Court.

“We have formulated six questions other than constitutional interpretation. We have held that these questions fall within article 145 of the Constitution and thus the matter to lie before five-judge Constitution bench,” the court said.

In its suit filed in December last year, the Kerala government alleged that the Union government’s decision to impose certain limits on the State’s borrowings had led to an accumulation of unpaid dues including salaries.

The Union government countered the contentions in the suit by claiming that Kerala’s financial health is in dire straits due to substantial off-budget borrowings and a compromised fiscal edifice.