Scheme Not Constitutionally Suspect Merely Because It Was Based On Electoral Promise: Supreme Court Upholds TN Loan Waiver Scheme To Small/Marginal Farmers

The Supreme Court upheld a Tamil Nadu Government scheme which granted loan waiver to small and marginal farmers.

A scheme cannot be held to be constitutionally suspect merely because it was based on an electoral promise, the bench comprising Justices DY Chandrachud and Justices AS Bopanna said. The court observed that it justifiable that the benefit of the scheme is only provided to a specified class as small and marginal farmers constitute a class in themselves.

The Government of Tamil Nadu issued G.O Ms. No. 50 dated 13 May 2016 granting a waiver of outstanding crop loans, medium term (agriculture) loans and long term (farm sector) loans issued to small and marginal farmers. This scheme was challenged on the ground that it violates equality clause of the Constitution. Allowing the writ petitions, the Madras High Court held that the exclusion of 'other farmers' – those who hold land exceeding 5 acres – from the land waiver scheme is discriminatory and violative of Article 14. The court also directed that the scheme be extended to all farmers including farmers whose landholding exceeds 5 acres.

The issues raised in the appeal filed by the state were:

(i) Whether the court can exercise its powers of judicial review since the scheme is a policy decision of the government;

(ii) Whether the extension of the scheme only to 'small farmers' and 'marginal farmers' is arbitrary and violative of Article 14 of the Indian Constitution; and

(iii) Whether the scheme is under-inclusive and over-inclusive.

The court noted that the purpose of providing a waiver of agricultural loans for farmers is to uplift the distressed farmers, who have been facing the brunt of the erratic weather conditions, low produce, and fall in the prices because of the market condition. The court observed:

"25. In view of the discussion above, the application of the impugned scheme to only the small and the marginal farmers is justified for two reasons: (i) A climate crisis such as drought and flood causes large scale damages to small holdings as compared to the large holdings due to the absence of capital and technology; and (ii) The small and marginal farmers belong to the economically weaker section of society. Therefore, the loan waiver scheme in effect targets the economically weaker section of the rural population. The scheme is introduced with an endeavor to bring substantive equality in society by using affirmative action to uplift the socially and economically weaker sections. 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 Percentage Distribution of Indebted Agricultural Households 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"

The court also observed that since the classification in the impugned scheme is based neither on the grounds in Article 15 nor on the 'innate and core trait' of an individual, it cannot be struck down on the alleged grounds of under-inclusiveness and over-inclusiveness. While allowing the appeal, the court further observed: 

"The Scheme in issue was introduced in pursuance of an electoral promise made by the then party in power in Tamil Nadu. The High Court seems to have been of the view that because the scheme was in pursuance of an electoral promise, it is constitutionally suspect. This view was made on an assumption that no study must have been conducted before the electoral promise was made. 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. The High Court has erred in holding otherwise. During the pendency of the proceedings the State has granted a broader coverage, based on its assessment of the situation."

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