Date:09/03/2007 URL: http://www.thehindu.com/2007/03/09/stories/2007030905800500.htm

Kerala - Kochi

High Court declines to stay ADB loan agreement

Staff Reporter

But points out lack of proper planning

Kochi: A Division Bench of the Kerala High Court on Thursday declined to stay the implementation of the loan agreement signed between the Kerala Government and the Asian Development Bank (ADB) and also the sending of letter of consent to the Bank.

However, the Bench comprising Acting Chief Justice K.S. Radhakrishnan and Justice M.N. Krishnan 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 Bench observed.

The court said 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 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 also directed the Central and State Governments to file counter-affidavits in the case.

The petitions were filed by the Anti-ADB Committee and the Peoples Forum for Natural Justice, Palakkad. According to them, the Joint Secretary who had signed the agreement on behalf of the Central Government had no authority to sign such an agreement. The official did not get 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 given by the Cabinet after signing it would not obviate the illegality. The petitioners further alleged that the Constitutional provisions had been violated while signing the agreement.

The Advocate General submitted that the Government had given the Resident Commissioner its sanction to sign the agreement. Besides, consultations were held with the municipal corporations before signing the agreement.

The Advocate General submitted that that the loan offered by the ADB was the cheapest one. The nationalised banks did not offer a loan at a low interest rate as promised by the ADB.