Farmers to be Free from Vicious Debt Trap

In a landmark judgement, the Supreme Court of India has declared that farmers’ loan would not be covered by Banking Regulation Act. This will give huge relief to the farmers as they have been committing suicides in frustration and heavy indebtedness. The verdict of the bench of Justice R.F. Nariman and Navin Sinha has been written with empathy and pathos.

Hardly, a day passes when a farmer does not commit suicide in one part of the company or other. The importance of agriculture in the social and economic fabric of India can be realized from the fact that the livelihoods of the majority of the country’s population is still agriculture. However, over the years agriculture has become so unremunerative that nobody wants to remain in this profession. But then there is no way out for a large number of people engaged in it. As a result, small and marginal farmers have been forced in the vicious web of loans and debts. The desolation and hopelessness of farmers can be gauged from the painful facts that more than three lakhs of them have killed themselves in the last twenty years.

These farmers are often brought to bear humiliation and insult at every level and they are condemned to live in abject poverty and deprivation. The Public Interest Litigation (PIL) seeking for the exclusion of farmers loans from Section 21A of the Banking Regulation Act was filed in the Supreme court by a journalist Jayant Verma from Jabalpur. The Late Dr B.D. Sharma, former Vice Chancellor of North Eastern Hill University (NEHU), Deb Brata Biswas, former Member of the Rajya Sabha and Dr Sunilam, a former MLA of Madhya Pradesh were co-petitioners. It was filed on their behalf by this columnist.

The Minimum Support Price of the farmers’ products is decided by the Commission for Agricultural Costs and Prices, but it hardly takes into account the competitive prices of other articles. For example, gold was selling at Rs. 18 per ten grams in 1925 and then the price of wheat t was Rs.16 per quintal. While at present the wheat is sold at Rs.1765 per quintal, the gold price has jumped to more than Rs. 30,000 per ten grams. Thus, we see that during the last nearly one century the difference between the prices of gold and wheat per ten grams and per quintal has widened more than 15 times. Section 21A of the Banking Regulation Act of 1949 has further worsened the condition of farmers across the country. The obnoxious part of the Act is that notwithstanding anything contained in the Usurious Loans Act, 1918, or any other law relating to indebtedness in force in any State, a transaction between a banking company and its debtor shall not be reopened by any court on the ground that the rate of interest charged by the banking company in respect of such transaction is excessive.

The main cause of large-scale migration of farmers to the cities is that their problems, necessities and plights have never been properly addressed by all governments after the independence. Prof. M.S. Swaminathan headed National Commission of farmers underlined in its report which was submitted a decade ago said, ‘there is a general feeling of being ‘left behind’ in large parts of rural India. The widening disparity in per capita income between farm and other than farm sector, the very slow rate of growth in agriculture, the declaring profitability, extremely weak social security arrangements, weakening family and community-based mechanism of social protection, lack of employment opportunities etc., and the rising aspirations are building up social unrest, which if not addressed could lead to threats to internal peace and security.

More than a decade ago the report of the Parliamentary Committee had said that ‘the worst exploitation of farmers is through the adverse credit policies of financial institutions which compel farmers to starve under the burden of loans and commit suicides. The Committee found that in 1918 British Rulers passed a Usurious Loans Act which provided that no farmer can be charged a rate of interest higher than the authorised rate. It also provided that the total amount of interest cannot be higher than the original capital but in 1949 a Banking Regulation Act was passed which made a special provision under section 21A saying that these will not apply to Banking Companies, including Cooperative Banks. In view of the pathetic plight of farmers due to the heavy burden of credit, the committee recommended that section 21A of the Banking Regulation Act should be scrapped. The Central Government, however, did not accede to the recommendations of the MS Swaminathan Committee. As a result of this unconscionable harsh law, the farmers have been arrested in states like Uttar Pradesh and Bihar for defaulting on repayment of loans. What is more deplorable is that these defaulting farmers are made to pay even the expenses of their food and transport etc., when they are in jail.

With the unbearable insults and mounting debts, the farmers have been left with no choice but to end their lives. Earlier also many petitions were filed to scrap Section 21A of the Banking Regulatory Act in different High Courts, but the Courts refused to strike down this obnoxious provision of the Act. Therefore. this decision of the Supreme Court is being hailed by the entire spectrum of the society. The Supreme Court said that ‘we have already seen how agriculture as a subject matter is entirely and exclusively left to the States in all its aspects, save and except evacuee property under Entry 41, List III, which is also left to the States, but concurrently with Parliament, specifically including agricultural land therein. Also, we must not forget that the amendment suggested by Shri Shibban Lal Saxena to make it a concurrent subject, was turned down. Any argument that has the effect of making a relief of agricultural indebtedness a concurrent subject by which Parliamentary legislation ousts State legislation must, therefore, also be rejected’.

This is not to say that Parliament is helpless insofar as relief from agricultural indebtedness to banks is concerned. Article 249 of the Constitution enables Parliament to legislate on the aforesaid subject in the national interest if the Rajya Sabha declares, by a resolution supported by not less than 2/3rd of the members present and voting, that it is necessary or expedient in the national interest that Parliament should do so. Equally, under Article 252 of the Constitution, if the legislatures of two or more States deem it desirable that Parliament should pass an Act for regulating a matter exclusively in the State List, this can be done by resolutions to that effect passed by the legislatures of such States. Also, to implement a treaty, agreement or convention with other countries, Parliament, under Article 253 of the Constitution, has the power to legislate on an exclusive State subject. In an emergency, Parliament can, under Article 250, legislate on matters exclusively reserved for the States. This being the case, we need not be unduly weighed down by the argument that, unless we accept his submission, Parliament would be denuded of legislative competence altogether to deal with the subject matter of relief against debts due to banks from the agricultural sector.’

The Court did not consider the judgment of this Court in Yasangi Venkateswara Rao to be binding as it was cryptic and without any reasoning, instead, it agreed with the judgement of the Andhra High Court. After setting out the Banking Regulation Act and the scope of Section 21A, the Andhra Pradesh High Court held that the purpose, operation and effect of Section 21A of the Banking Regulation Act was not even remotely connected with the purpose, operation and effect of the Agriculturists Relief Act, which was held to be a special law enacted to relieve agriculturist debtors. It was further held that charging excessive interest was no longer part of the Agriculturists Relief Act, and, therefore, the spheres of the two provisions were completely different. The learned Judge also went on to hold that Section 21A was arbitrary and violative of Article 14 of the Constitution. The Supreme Court declared Section 21A of the Banking Regulation Act to be valid, in pith and substance, only to the extent it is relatable other sectors and agriculture.

Fragmentation of agricultural land because of the growing population and division of families, the farmers have practically been reduced to become farm labourers. Debts and loans add burden to break their bones. Possibly, this judgement of the Supreme Court will provide them much needed succour.

Farmers to be Free from Vicious Debt Trap