Landholding Classification Dispute: Debt Waiver Scheme Judgement by Supreme Court of India

In a crucial development, the Supreme Court of India has delivered a judgement on a case revolving around the classification of landholdings under the Debt Waiver Scheme. The case involved a dispute between two brothers, who had taken a loan for purchasing a tractor for their agricultural land. The judgement addresses the eligibility criteria for loan waivers based on the size of land holdings, with implications for the broader agricultural sector in India.


  • The appellants, who are two brothers, took a loan of Rupees three lacs from the first respondent in 2008 to purchase a tractor for their agricultural land.
  • The District Consumer Disputes Redressal Forum, Faridabad, allowed the complaint by ruling that each of the appellants had a holding of less than five acres, making them eligible for loan waiver under clause 5 of the Debt Relief Scheme for agriculturists.
  • The first respondent, in response to the complaint, argued that the appellants, with a joint holding of more than five acres, should be categorized as ‘other farmers’ entitled to only a twenty-five percent waiver of the loan amount.
  • The Bank of India, which had sanctioned the loan, refused to accept the claim for waiver put forth by the appellants based on their holding size.
  • The appellants maintain that they fall under the definition of ‘small farmers’ and hence should be eligible for a higher waiver of the loan amount.
  • District Forum and SCDRC agreed that the land of the appellants is situated in Faridabad, not included in Annexure-I of the Scheme.
  • National Commission held that the debt waiver policy was not applicable to the appellants due to their location.
  • National Commission stated that denial of complete loan waiver cannot be seen as deficiency in service.
  • District Forum applied the largest holding in the pool for joint loans to determine appellants’ status as small farmers.
  • Both appellants were categorized as small farmers based on this test.

Also Read: Court’s Jurisdiction in Re-appraising Arbitrator’s Findings


  • Appellants argued that under clause 5 of the Scheme, eligible amount can be waived for small and marginal farmers.
  • They believe that their entitlement under clause 5 was established before the District Forum and State Commission.
  • The National Commission’s view on the entitlement is considered erroneous.
  • Appellants claim that their rights recognized by law have been an illusion so far.
  • Clause 6 provides debt relief for ‘other farmers’ with a proviso referencing Annexure-I.
  • The proviso in clause 6 allows for an OTS rebate of twenty-five percent of the eligible amount or Rs 20,000, whichever is higher, with conditions specified in Annexure-I.
  • Appellants argue that their claim falls under clause 5, not clause 6, and is not governed by Annexure-I.
  • Learned Counsel for the first respondent relies on explanation 3 of the Scheme for processing cases involving investment credit for allied activities.
  • The appellants have not entered into any OTS settlement with the first respondent.
  • Without a complete waiver in terms of the Scheme, the appellants would not be entitled to certain benefits.
  • The expression ‘direct agricultural loans’ is defined in clause 3.1 of the Scheme.
  • The first respondent’s case processing is based on considering the appellants as ‘other farmers’ under clause 3.7 of the Scheme.

Also Read: Contrary Directions in Issuance of Letter of Intent


  • The National Commission incorrectly concluded that the Scheme only applied to certain districts in Haryana and since Faridabad was not listed, the appellants were not entitled to relief.
  • The loan was for allied activities, making Explanation 3 irrelevant.
  • The appellants did not claim under clause 6, making the entire eligible amount available for waiver under clause 5.
  • The State Commission also supported this finding.
  • Clause 5 of the Scheme allows for debt waiver, while clause 6 provides for debt relief.
  • Explanation 3 only applies to farmers with investment credit for allied activities.
  • Claiming to be small farmers, the appellants fell under the ‘other farmer’ category due to their land holding.
  • The largest landholding amongst pooled farmers determines their classification.
  • The relief under clause 6 offers a rebate of twenty-five percent of the loan amount in a one-time settlement.
  • The National Commission erred by deeming the appellants ineligible based on Faridabad not being in Annexure-I.
  • The appellants’ loan was for purchasing a tractor, falling under investment credit.
  • The District Forum correctly classified the appellants as ‘small farmers’ due to their landholding.
  • The definitions of marginal farmer, small farmer and other farmer are contained in clauses 3.5, 3.6 and 3.7.
  • Marginal farmer is defined in clause 3.5.
  • Small farmer is defined in clause 3.6.
  • The definition of ‘other farmer’ is provided in clause 3.7.
  • Concurrent findings of District Forum and State Commission were upheld.
  • No valid basis for National Commission to reverse the concurrent findings.
  • The decision of the National Commission was not supported by evidence.
  • District Forum and State Commission had correctly assessed the case.
  • The decision of National Commission was deemed unjust.

Also Read: Application for Stay in Civil Suit Rejected: Court’s Legal Analysis


  • District Forum allowed the complaint by directing the appellants to waive the loan amount and interest outstanding in the name of the complainants against the tractor loan.
  • National Commission’s judgment was set aside in this case.
  • The appellants are entitled to costs amounting to Rs. 50,000.
  • The order of the District Forum, which was confirmed by the State Commission in appeal, has been restored.


Case Number: C.A. No.-000367-000367 / 2020

Click here to read/download original judgement

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