SC upholds TN loan waiver for small, marginal farmers

Sets aside Madras HC order, says scheme to uplift poor cannot be held suspect for being part of electoral promise

A government scheme introduced to uplift socially and economically weaker sections of the society cannot be held suspect merely because it was based on an electoral promise, the Supreme Court held in a judgment on Tuesday.

A Bench of Justice D.Y. Chandrachud and A.S. Bopanna laid down the law while upholding a loan waiver scheme introduced by the earlier AIADMK government for small and marginal farmers in Tamil Nadu.

“It is settled law that a scheme cannot be held to be constitutionally suspect merely because it was based on an electoral promise. A scheme can be held suspect only within the contours of the Constitution, irrespective of the intent with which the scheme was introduced. The scheme propounded by the State of Tamil Nadu passes muster against the constitutional challenge,” Justice Chandrachud observed in the 21-page judgment authored by him.

The Tamil Nadu government had moved the Supreme Court in 2021 after the Madras High Court quashed the scheme, saying it was discriminatory and excluded farmers who held land over five acres.

The scheme defines a ‘small farmer’ as one who holds land between 2.5 to 5 acres and ‘marginal farmer’ means a farmer who holds land upto 2.5 acres.

The High Court had concluded that the scheme should have extended to all farmers. It said AIADMK was only pursuing its electoral promise to implement the scheme if voted to power. The High Court said the scheme was introduced without any proper study.

The apex court set aside the High Court’s decision, finding fault with its reasoning.

“Due to the distinct degree of harm suffered by the small and marginal farmers as compared to other farmers, it is justifiable that the benefit of the scheme is only provided to a specified class as small and marginal farmers constitute a class in themselves. Therefore, the classification based on the extent of landholding is not arbitrary since owing to the inherent disadvantaged status of the small and marginal farmers, the impact of climate change or other external forces is unequal,” Justice Chandrachud wrote.

The State government had introduced the scheme on May 13, 2016. The scheme granted waiver of outstanding crop loans, medium term (agriculture) loans and long term (farm sector) loans to small and marginal farmers.

The State had argued in the apex court that small and medium farmers were the main producers of food. They were poor and downtrodden and suffered greatly during floods and other disasters. The scheme was implemented with an objective of promoting the welfare of the farmers as a class to secure economic and social justice.

It had argued that the consumption expenditure of marginal and small farmers exceeds their estimated income by a substantial margin, and the deficits were covered by borrowings.

“The fact that 16,94,145 small and marginal farmers have availed of agricultural loans as compared to 3,01,926 farmers belonging to the ‘other category’ testifies that the small and marginal farmers have a significant capital deficit when compared to the rest of the farmers,” the judgment recorded the government submissions.

The government had referred to the Situation Assessment of Agricultural Households and Land and Holdings of Households in Rural India, 2019, which undertakes an extensive discussion on the ‘Average Monthly Income per Agricultural Household’.

“The report depicts that India’s small and marginal farmers have essentially become wage earners,” the court noted.

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