Explore the in-depth legal analysis conducted by the court regarding the classification of small and marginal farmers in a significant loan waiver scheme case. The judgment delves into the constitutional validity of the scheme, focusing on the principles of equality and rational classification methods. This blog post uncovers the court’s insights on economic policy matters and the application of legal standards to ensure fairness and justice in governance.
Facts
- The High Court allowed the writ petition filed by the Respondent under Article 226 of the Constitution to quash G.O. Ms. No 50, which granted loan waiver to small and marginal farmers.
- The Court found that the classification of farmers as small and marginal based solely on landholding size was irrational and led to discriminatory treatment.
- The High Court directed that the loan waiver scheme be extended to all farmers, regardless of the size of their landholdings.
- The Court emphasized that the objective of the Government should be to alleviate the suffering of all farmers, and not just a specific category based on land size.
- The Court also highlighted the over-inclusiveness and under-inclusiveness resulting from the irrational classification method based on landholding.
- The court analyzed the respondent’s claim of unconstitutionality under Article 14 of the Constitution.
- The respondent requested loan waivers for all farmers regardless of landholding size.
- A circular was issued on 1 July 2016 by the Registrar of Cooperative Societies for the scheme’s implementation.
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Arguments
- The petitioner argues that the court can interfere with the government’s policy only if it is unconstitutional or against statutory provisions.
- The scheme of loan waivers was formulated after taking into account the state’s financial capacity and with a focus on small and marginal farmers who are the most affected.
- The State’s policy is to maximize beneficiaries with efficient fund utilization, hence the exclusion of large landholding farmers from the scheme is a fiscal decision.
- The purpose of the loan waiver scheme is to uplift distressed farmers facing challenges like erratic weather conditions and low produce due to market factors.
- The scheme’s classification based on landholding size is argued to have a rational nexus to the objective of helping small and marginal farmers.
- The State contends that waiver of crop loans for small and marginal farmers is in line with the Directive Principles of State Policy and benefits the poor and downtrodden agricultural class.
- The scheme aims to provide maximum benefits to a larger number of farmers with a less significant financial investment, as evidenced by the statistics presented by the State in terms of beneficiaries.
- The argument is made that the scheme does not violate Article 14 since it provides a benefit without imposing a burden, in line with the fiscal objective common to all such schemes.
- Consumption expenditure of marginal and small farmers exceeds their estimated income by a substantial margin.
- Deficits in income are covered by borrowings for small and marginal farmers.
- Small and marginal farmers lack resources like borewells to overcome drought.
- Significant capital deficit for small and marginal farmers compared to other categories.
- Large number of small and marginal farmers availed of agricultural loans, indicating capital deficit.
- Financial distress caused by huge capital deficit and reduced agricultural income due to water scarcity and crop inundation.
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Analysis
- Economic policies involving expenditure are not subject to judicial review.
- The focus should be on the effect of the law, not just its ostensible objective, for equality clauses.
- The proportionality test is used to test the validity of a statute and rules.
- Indian courts do not apply the proportionality standard to classificatory provisions.
- A policy can be subject to judicial review based on compliance with fundamental rights and other constitutional provisions.
- Claims made by the State must be substantiated with material evidence.
- Degree of harm, administrative convenience, and legislative experimentation are factors considered for under-inclusiveness.
- Legislation should not be disturbed by the Court unless there is no fair reason for it.
- Propounded scheme of Tamil Nadu was challenged in Subramaniam Balaji case.
- Proportionality standard is also used to determine non-classificatory arbitrariness.
- The law or scheme should be tested based on constitutional morality, not majoritarian morality.
- Classification based on degrees of harm for substantive equality does not require mathematical precision.
- The test for under-inclusiveness requires a rational nexus to the object sought to be achieved.
- The scheme in question targets the economically weaker section of the rural population.
- The State of Tamil Nadu has raised a preliminary contention that the Court cannot review the scheme since it is a fiscal policy decision of the State.
- Classification based on the extent of landholding is not arbitrary given the disadvantaged status of small and marginal farmers.
- Courts tend to show deference to economic policy matters.
- Classification per se is not discriminatory as per settled law.
- The scheme’s focus on small and marginal farmers is justified due to climate crisis impacts and their economically weaker status.
- Households with less than 0.01 hectares of land utilize 93.1% of agricultural loans for non-agricultural purposes.
- The situation assessment shows the significant income disparity between small/marginal farmers and larger landholders.
- The scheme is deemed both under-inclusive and over-inclusive in the judgment, citing discrepancies in the landholding register.
- Agricultural households under 0.01 hectares have significantly lower incomes compared to those with 2-4 hectares of land.
- The focus on small and marginal farmers is justified due to the specific hardships they face compared to other farmers.
- The High Court made an error in its decision.
- A scheme can only be considered suspicious if it goes against the Constitution, not based on the intent behind its introduction.
- The State has expanded the coverage of the scheme during the ongoing legal proceedings.
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Decision
- The appeal is allowed
- The judgment of the Madras High Court at the Madurai Bench dated 4 April 2017 is set aside
- All pending applications are disposed of
Case Title: THE STATE OF TAMIL NADU FOOD, CIVIL SUPPLIES AND CONSUMER PROTECTION DEPARTMENT SECRETARY Vs. NATIONAL SOUTH INDIAN RIVER INTERLINKING AGRICULTURIST ASSOCIATION (2021 INSC 777)
Case Number: C.A. No.-006764-006764 / 2021
