The Hindu Business Line : HC refuses to stay ADB loan deal

Kochi March 8 A Division Bench of the Kerala High Court on Thursday declined to stay the operation of the loan agreement signed between the Kerala Government and the Asian Development Bank for the Kerala Sustainable Urban Development Project.

The Bench comprising the Acting Chief Justice, Mr K.S. Radhakrishnan, and Mr Justice M.N. Krishnan said they found no reason to stay the operation of the agreement and steps taken on the agreement.

The court observed that the loan would be utilised to improve the urban infrastructure and waste disposal system, sewerage, road and transportation facilities in urban areas.

The purpose of taking the loan was laudable and the Government might have conducted its cost and benefits analysis before entering into such an agreement.

The court, however, pointed out that the State Cabinet should have been taken into confidence before the loan agreement was executed. In the matter of authorising the Resident Commissioner, Kerala House, New Delhi, to sign the agreement on behalf of the State Government, an error had crept in. Lack of proper planning and coordination was seen throughout.

The court added that since the agreement had already been executed, it would not be proper for the court to interfere with the agreements at this stage.

The question whether there had been any illegality or irregularities in the manner in which they were executed and the legal validity of the terms and conditions of agreements could be examined only when the writ petitions were finally heard.

The court directed the Centre and State Government to file counter-affidavits in the case.

PETITIONER'S PLEA

The Anti-ADB Committee and the Peoples Forum for Natural Justice, Palakkad, filed the petitions. According to them, the Joint Secretary who signed the agreement on behalf of the Central Government had no authority to do so. The Secretary had not got the approval of the President of India to sign the agreement with a foreign bank.

Likewise, the Resident Commissioner of the Kerala Government had no power to sign a project agreement for the State Government. The Commissioner had not received any approval from the Governor for signing the agreement.

The petitioners contended that no approval of the Cabinet was obtained before entering into the agreement. The ratification of the agreement by the Cabinet after signing it would not obviate the illegality already committed.

The petitioners also alleged that Constitutional provisions had been violated while signing the agreement and sought to declare null and void the agreement signed on December 8, 2006, by the Central Government as borrower and the State Government as project executor with the President of the ADB.

GOVT STAND

The Kerala Government took the stand that the Government had given the Resident Commissioner sanction to sign the agreement. Besides, consultations were held with the municipal corporations before signing the agreement.

The Government also submitted that the loans offered by ADB were the cheapest. Nationalised banks such as State Bank of India did not offer a loan at a low interest rate as promised by ADB.