Supreme Court upholds TN govt loan waiver to small farmers; says Article 14 does not bar reasonable classification

The Supreme Court on Tuesday upheld an order of the Tamil Nadu government which had granted loan waiver to small and marginal farmers (State of Tamil Nadu vs. National South Indian River Interlinking Agriculturist Association)..The top court while upholding the State government decision, stated that the equality code in Article 14 of the Constitution prescribes substantive and not formal equality and it allows reasonable classification..“It is now a settled position that classification per se is not discriminatory and violative of Article 14. Article 14 only forbids class legislation and not reasonable classification,” observed the Bench of Justices DY Chandrachud and AS Bopanna..The Bench was hearing a challenge by the Tamil Nadu government against an order of the Madurai Bench of the Madras High Court quashing a Government Order (GO) which had granted loan waiver to small and marginal farmers. The High Court had reasoned that the same was arbitrary, discriminatory and violative of Article 14. Further, the Court had directed that the scheme be extended to all farmers including farmers whose landholding exceeded 5 acres..The State government (appellant) argued that there was an intelligible differentia in providing loan waiver only to small and marginal farmers since they were the most affected class.On the other hand, the respondents submitted that the State had failed to prove that small and marginal farmers constitute a class in themselves, especially because the farmers holding larger landholdings were better contributors and suffered greater losses..The Court, in order to determine if the classification is reasonable, adverted to the twin tests as laid down by the Supreme Court in State of W.B v. Anwar Ali Sarkar. Firstly, the classification must be based on an intelligible differentia and secondly, the differentia must have a rational relationship to the object of the statute..In this background, the Bench said that in the instant case, the purpose of providing a waiver of agricultural loans was to uplift distressed farmers facing the brunt of erratic weather conditions, low produce, and fall in prices because of market conditions and what was needed to be determined was whether the classification had a rational nexus to the object..The Court also examined the judgment in Navtej Singh Johar v. Union of India where it was held that a law or a scheme of the government cannot be tested on the anvil of majoritarian morality but only on constitutional morality..Additionally, the Bench relied on the Situation Assessment of Agricultural Households and Land and Holdings of Households in Rural India, 2019 which showed that households with lands less than 0.01 hectare used 93.1% of the agricultural loans for non-agricultural purposes. Whereas, households that owned 10 hectares of land only used 17.1% of the agricultural loan for non-agricultural purposes.“This depicts the poverty that envelops the class of small and marginal farmers,” the Court opined..Therefore, it concluded that applying the scheme to small and marginal farmers alone was justified for the following 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.”.Hence, the appeal by the State government was allowed and the order of the Madras High Court was set aside..[Read Judgment]