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On 19 February 2024, Kerala told the Supreme Court that the Union was willing to consider additional borrowing for the state if it withdrew its lawsuit. The amounts discussed were tied to different calculations and conditions; they were not a single unconditional grant. The Union’s counsel defended the proposed borrowing space and its terms.
What did Kerala tell the Supreme Court?
During a hearing in State of Kerala v. Union of India, Original Suit No. 1 of 2024, Kerala’s counsel said discussions with the Union had failed and that the Centre was prepared to consider additional borrowing if the state withdrew its suit. That was Kerala’s account of the Union’s position in court. The Union’s law officer defended the proposed borrowing space and the conditions attached to it.
The distinction matters: the hearing report described proposals and competing submissions, not a court-approved settlement or a finding that either side’s legal position was correct.
What amounts were discussed, and on what terms?
LiveLaw’s account of the hearing attributed several separate figures to the Union’s offer. The proposed ₹11,731 crore was made up of components with different bases or conditions. The report also described a separate ₹1,877.57 crore amount based on Kerala’s own calculations.
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| Amount | Basis or condition reported |
|---|---|
| ₹4,322 crore | Based on using estimated 2023 public-account figures instead of a three-year average. |
| ₹2,543 crore | For repayment of off-budget borrowings by two entities. |
| ₹4,866 crore | Conditional on power-sector performance criteria certified by the power ministry. |
| ₹11,731 crore total | The sum of the three components above, described as additional borrowing space subject to withdrawal of the suit. |
| ₹1,877.57 crore | A separate amount based on Kerala’s calculations, which LiveLaw reported was offered without detailed examination because of urgency. |
These were figures reported in connection with the February 2024 hearing. The report does not establish that the amounts were later approved or disbursed.
What were the competing positions on Kerala’s borrowing ceiling?
The Union’s counsel said that, before the suit, the Centre had consented to total borrowing of ₹34,230 crore. He described that amount as ₹1,788 crore above a statutory ceiling of 3% of gross state domestic product (GSDP). Kerala’s counsel argued that the state needed substantially more borrowing.
Those figures were submissions by the parties’ lawyers. The hearing reports do not show that the Court accepted either side’s calculation or interpretation.
Why had Kerala sued the Union?
Kerala challenged Union controls on its borrowing, including a net borrowing ceiling set at 3% of projected GSDP for financial year 2023–24 and directions concerning certain public-account liabilities and liabilities of state-owned enterprises. The dispute therefore concerned not only how much Kerala could borrow, but also how particular liabilities were counted and what authority the Union had to impose the controls.
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In its later order, the Supreme Court quantified the 3% net borrowing ceiling for FY 2023–24 as ₹32,442 crore. That is the ceiling identified in the order for that financial year, not a current borrowing limit.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What did the Supreme Court decide in April 2024?
On 1 April 2024, in 2024 INSC 253, the Supreme Court declined Kerala’s request for interim relief and referred constitutional questions in the suit to a five-judge Constitution Bench. The Court said Article 293 of the Constitution had not yet received an authoritative interpretation from the Supreme Court, and that the questions therefore fell within Article 145(3).
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“Since Article 293 of the Constitution has not been so far the subject to any authoritative interpretation by this Court, in our considered opinion, the aforesaid questions squarely fall within the ambit of Article 145(3).”
The order addressed interim relief and the referral. It did not decide whether the Union’s borrowing controls were lawful or whether Kerala’s challenge should ultimately succeed; the Court expressly said its interim-stage observations would not determine the suit’s final outcome. The later status and final disposition of the Constitution Bench referral are not established here.
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