The arguments in the matter would continue on Friday (Representational)
The Kerala government has been overborrowing in recent years which indicates its financial situation, the Centre on Thursday told the Supreme Court which was hearing the state's suit raising the issue of ceiling on net borrowing.
The Kerala government maintained that its finances are "sustainable enough" to bear the overborrowings in the previous years.
A bench of Justices Surya Kant and K V Viswanathan was hearing arguments on interim relief in a suit filed by the Kerala government accusing the Centre of interfering in the exercise of its "exclusive, autonomous and plenary powers" to regulate the state's finances by imposing a ceiling on borrowing.
Senior advocate Kapil Sibal, appearing for Kerala, said under the constitutional structure, the states have their budget and are entitled to manage their expenditure.
He said as far as the limit of the fiscal deficit is concerned, that is decided by the Finance Commission.
"I (Kerala) am saying I have enough fiscal space there to borrow...," Sibal said, adding, "I am saying that the state finances are sustainable enough to bear the overborrowings in the previous years and have this borrowing here".
"What I am going to in fact persuade your lordships and demonstrate to your lordships is that whatever we are doing, even if we do the extra borrowing, it is within the limit," he said.
Additional Solicitor General N Venkataraman, appearing for the Centre, claimed before the bench that lots of wrong things have been said by the state.
Referring to statistics, the law officer said Kerala has been overborrowing in recent years.
He said while deciding the question of interim relief, the court should keep in mind the financial parameters of the state.
Mr Sibal argued that within the framework of the Finance Commission and the Constitution, the state is entitled to borrow.
The arguments in the matter would continue on Friday.
On March 13, the Centre had told the top court that it was ready to allow the Kerala government to borrow Rs 5,000 crore, subject to certain conditions, to deal with the financial issues facing the state as a "very special and exceptional measure".
However, the Kerala government had said Rs 5,000 crore "does not take us anywhere" and the absolute minimum requirement stood at Rs 10,000 crore.
In an original suit filed under Article 131 of the Constitution, the Kerala government has said the Constitution bestows fiscal autonomy upon states to regulate their finances under various articles, and the borrowing limits or the extent of such borrowings are regulated by state legislation.
Article 131 of the Constitution deals with the original jurisdiction of the top court in any dispute between the Centre and states.
The suit said the ability to determine the borrowing of the state in order to balance the budget and make up for the fiscal deficit is exclusively within the domain of the states.
"If the state is not able to borrow to the extent required based on the budget of the state, the state would not be able to complete its state plans for the particular financial year," it said.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)