TaxTMI 
TaxTMI 
2021 (11) TMI 1188
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....June 2016 was issued providing guidelines for the implementation of G.O. Ms. No. 50. The guidelines provide that for the classification of farmers as small and marginal, the extent of landholding as mentioned in the landholding register and loan register at the time of sanction of the agricultural loan shall be taken into consideration. As for the definition of 'small farmer' and 'marginal farmer', it provides that 'small farmer' means a farmer who holds land of 2.5 acres to 5 acres and 'marginal farmer' means a farmer who holds land upto 2.5 acres. Subsequently, a circular was issued by the Registrar of Cooperative Societies on 1 July 2016 providing further guidelines for implementation of the scheme. 3. The Respondent challenged the scheme as unconstitutional for violation of Article 14 of the Constitution, and sought a direction to provide loan waiver for all farmers irrespective of the extent of landholding. The High Court allowed the writ petition holding 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. It directed that the scheme be ex....
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....ategories of farmers. 5. In pursuance of the above directions, the State of Tami Nadu has produced on record GO (MS) 15 and 16 dated 8 February 2021 by which the Government has waived off crop loans of Rs. 12,110.74 crore outstanding as on 31 January 2021 availed by 16,43,346 farmers from cooperative banks. 6. The Appellant has made the following submissions: (i) The court can interfere with the policy of the government only when the action is unconstitutional or contrary to statutory provisions; (ii) The scheme was formulated after studying the financial capacity of the State; (iii) There is an intelligible differentia in providing loan waiver only to small and marginal farmers since they are the most affected class; and (iv) The underlying policy of the Government is to maximize the beneficiaries with an efficient use of funds. Even if farmers with larger landholdings suffered losses, it is a fiscal policy decision of the State to only extend the scheme to small and marginal farmers. 7. The Respondents have made the following submissions: (i) Farmers who hold more than five acres of land contribute more to the GDP and food security of the country. The small and margi....
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.... SCC 333; State of Orissa v. Gopinath Dash, (2005) 13 SCC 495. It is also settled that the Courts would show a higher degree of deference to matters concerning economic policy, compared to other matters of civil and political rights. In R.K. Garg v. Union of India (1981) 4 SCC 675, this Court decided on the constitutional validity of the Special Bearer Bonds (Immunities and Exemptions) Act 1981. The challenge to the statute was on the principal ground that it was violative of Article 14 of the Indian Constitution. Rejecting the challenge, the Constitution Bench observed that laws relating to economic activities must be viewed with greater latitude and deference when compared to laws relating to civil rights such as freedom of speech: 8. Another Rule of equal importance is that laws relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion etc. It has been said by no less a person than Holmes, J., that the legislature should be allowed some play in the joints, because it has to deal with complex problems which do not admit of solution through any doctrinaire or strait-jacket formula and this is partic....
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....s. Here the policy was tested and the motion defeated in the Lok Sabha on 1-3-2001. 12. Economic policies broadly comprise of policies on taxation, expenditure, and allocation. The State and its agencies often endeavor to make economically feasible decisions. The implementation of every policy of the State involves expenditure. Merely because the policy involves the expenditure of funds, it cannot be termed as an economic policy. The core feature of the policy and the targeted area needs to be determined to identify the nature of the policy. The impugned loan waiver scheme is, in essence, a social policy in pursuance of the Directive Principles of State Policy, introduced with an object to eliminate inequality in status, income, and facilities. 13. In Subramaniam Balaji v. State of T.N. (2013) 9 SCC 659, the scheme of gifts in the State of Tamil Nadu was under challenge. One of the arguments was that the distribution of color television sets, laptops and mixer-grinders violates Article 14 of the Constitution as unequals are treated equally since the gifts were distributed irrespective of the income level. The contention was rejected on the ground that the distribution of the gift....
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....ationship to the object sought to be achieved by the statute. 15. Justice Das in Anwar Ali Sarkar (supra) held that there must be some yardstick to differentiate the class included and the others excluded from the group. The differentia used for the classification in the scheme is the total extent of landholding by every individual. Therefore, there is a yardstick used for constituting the class for the purpose of the scheme. 16. The Appellant contended that the objectives of the scheme are thus: (i) Small and Medium farmers are the main producers of food, inspite of their limited access to technology, credit, and capital; (ii) Small and marginal farmers constitute 85% of the crop loan beneficiaries. The objective of the State is to cover maximum beneficiaries with minimum funds. The scheme has been framed after considering vital parameters such as budgetary allocation, revenue mobilization and the position of the farmers vis-à-vis their landholding; and (iii) The small and marginal farmers constitute the poor and downtrodden class of farmers. Therefore, they have suffered greater harm due to floods and the impact of climate change. 17. Therefore, the reasons that....
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....eview by focusing on the multi axle operation of equality and non-discrimination. 21. The State of Tamil Nadu in the counter filed before the High Court states that the classification was required since the small and marginal farmers suffer a greater degree of harm because of their limited capacity and aid. It is judicially recognized that the legislature is free to recognize degrees of harm and may confine its restrictions or benefits to those cases where the need is the clearest. Ram Krishna Dalmia v. SR Tendolkar AIR 1958 SC 538; Mohd. Hanif Quareshi v. State of Bihar AIR 1958 SC 731; Binoy Viswam v. Union of India, (2017) 7 SCC 59. In State of Maharashtra v. Indian Hotel and Restaurants Association (2013) 8 SCC 519, Section 33-A(1) of the Bombay Police Act which prohibited dance performances in eating houses, permit rooms, or beer bars, and Section 33-B which allowed such dances in establishments with restricted entry or three starred or above hotels was under challenge. The State contended that the degree of harm in the class which is covered by Section 33A(1) is greater. It was held by the two-Judge Bench that the State must have sufficient material to reach the conclusion o....
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....sting-against-the-farm-acts/. 23. The Situation Assessment of Agricultural Households and Land and Holdings of Households in Rural India, 2019 https://www.mospi.gov.in/documents/213904/301563//Report_587m1631267040957.pdf/3793650e-8cf1-7872-ae90-51470c8d211c 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. For instance, the average monthly income of an agricultural household possessing less than 0.01 hectares of land (0.02 acres) from crop production is Rs. 1,435 and from wages is Rs. 6,435. When compared to an agricultural household that possesses 2-4 hectares of land (4.94-9.88 acres), the income from crop production is Rs. 7,945 and the income from wages is 3,548. A comparative graph of the figures is as under. The x-axis indicates the percentage of income from farm produce, wages, and other sources. The y-axis indicates the land held by the farmers (in hectares): 24. The report also tabulates the total amount of outstanding loans held by each category of farmers. The computation shows that households that have lands less than 0.01 he....
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....nclusiveness has been discussed in an erudite exposition by Justice K.K. Mathew, writing for a Constitution Bench in State of Gujarat v. Ambica Mills (1974) 4 SCC 656: 55. A classification is under-inclusive when all who are included in the class are tainted with the mischief but there are others also tainted whom the classification does not include. In other words, a classification is bad as under-inclusive when a State benefits or burdens persons in a manner that furthers a legitimate purpose but does not confer the same benefit or place the same burden on others who are similarly situated. A classification is over-inclusive when it includes not only those who are similarly situated with respect to the purpose but others who are not so situated as well. In other words, this type of classification imposes a burden upon a wider range of individuals than are included in the class of those attended with mischief at which the law aims. Herod ordering the death of all male children born on a particular day because one of them would some day bring about his downfall employed such a classification. 56. Since the classification does not include all who are similarly situated with resp....
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....il Nadu (1974) 4 SCC 3 held that arbitrariness of State action is sufficient to constitute a violation of Article 14. Thus, it came to be recognized that the equality doctrine as envisaged in the Constitution not only guarantees against comparative unreasonableness but also non-comparative unreasonableness. See Tarunabh Khaitan, 'Equality: Legislative Review Under Article 14' in Sujit Choudhry, Madhav Khosla, Pratap Bhanu Mehta (eds), The Oxford Handbook of the Indian Constitution (Oxford University Press 2016) This Court in Modern Dental College and Research Centre v. State of M.P. (2016) 7 SCC 353, invoked the proportionality test while testing the validity of the statute and Rules that sought to regulate admission, fees and provided reservations for postgraduate courses in private educational institutions. In Subramanian Swamy v. Union of India (2016) 7 SCC 221, the Court used the proportionality test to determine if the offence of criminal defamation prescribed Under Sections 499 and 500 of the Indian Penal Code violates the freedom of speech and expression Under Section (sic) Article 19(1)(a). In Justice Puttaswamy (9J) v. Union of India (2017) 10 SCC 1, a nine judge B....
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....ness is tested on the rational nexus test, where it is sufficient if the means share a 'nexus' with the object. The degree of proof under the test would impact the judgment of this Court on whether the law is under-inclusive or over-inclusive. A statute is 'under-inclusive' if it fails to regulate all actors who are part of the problem. It is 'over-inclusive' if it regulates actors who are not a part of the problem that the statute seeks to address. The determination of under-inclusiveness and over-inclusiveness, and degree of deference to it is dependent on the relationship prong ('rational nexus' or 'proportional') of the test. 32. The nexus test, unlike the proportionality test, is not tailored to narrow down the means or to find the best means to achieve the object. It is sufficient if the means have a 'rational nexus' to the object. Therefore, the courts show a greater degree of deference to cases where the rational nexus test is applied. A greater degree of deference is shown to classification because the legislature can classify based on the degrees of harm to further the principle of substantive equality, and such classificat....