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TMI Blog2021 (11) TMI 1188X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, 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 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 High Court in the impugned judgment has observed that the scheme is both under-inclusive and over-inclusive since the total extent of land held by a person is calculated based on the information in the landholding register which permits discrepancies. It also held the scheme to be under-inclusive for not extending the benefit to 'other farmers' or the 'large farmers'. The meaning and ambit of under-inclusiveness ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal is allowed and the judgment of the Madras High Court at the Madurai Bench dated 4 April 2017 is set aside. - DR. D.Y. CHANDRACHUD AND A.S. BOPANNA, JJ. For the Appellant : D. Kumanan, AOR For the Respondent : Muthu Krishnan, S. Manoj Selvaraj, Mohammad Javed Malik, Advs. and N. Rajaraman, AOR JUDGMENT DR. D.Y. CHANDRACHUD, J. 1. A Division Bench of the Madras High Court at the Madurai Bench allowed the writ petition filed by the Respondent Under Article 226 of the Constitution for quashing G.O. Ms. No. 50 which granted loan waiver to small and marginal farmers. The High Court held the grant of loan waivers only to small and marginal farmers to be arbitrary and directed the Appellant to grant the same benefit to all farmers irrespective of the extent of landholding. 2. The Government of Tamil Nadu issued G.O. Ms. No. 50 dated 13 May 2016 ( Scheme ) granting a waiver of outstanding crop loans, medium term (agriculture) loans and long term (farm sector) loans issued to small and marginal farmers. G.O. Ms. No. 59 dated 28 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agricultural loan are not required to disclose all their landholdings. It would be sufficient for securing a loan if a farmer only mentions the total extent of land for which the loan is sought. Similarly, if a farmer has land in more than one village, the loan application would only mention the extent of land that falls within the specific bank's jurisdiction. Therefore, the reliance on the total landholding mentioned in the 'landholding register' at the time of sanction of the agricultural loan for classifying farmers as 'marginal farmers' and 'small farmers' is irrational; and (v) The irrational method of classification leads to over-inclusiveness and under-inclusiveness. 4. Notice was issued by this Court on 3 July 2017 and the judgment of the High Court was stayed. By an order dated 18 September 2019, a two-judge Bench consisting of Justices R. Banumathi and A.S. Bopanna observed that it is open to the Government of Tamil Nadu to grant any other 'limited benefits' to other categories 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 Governm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Tamil Nadu. Statutes, notifications, ordinances, or Government orders are means for the implementation of the policy of the State. Therefore, it is not possible to completely appreciate the law without reference to the policy behind the law. The judicially evolved two-pronged test to determine the validity of the law vis- -vis Article 14 of the Indian Constitution, refers to the objective of the law because the 'policy' behind the law is never completely insulated from judicial attention. 10. However, it is settled law that the Court cannot interfere with the soundness and wisdom of a policy. A policy is subject to judicial review on the limited grounds of compliance with the fundamental rights and other provisions of the Constitution. Asif Hammed v. State of Jammu Kashmir, 1989 Supp (2) SCC 364; Sitaram Sugar Co Ltd. v. Union of India, (1990) 3 SCC 223; Khoday Distilleries Ltd. v. State of Karnataka, (1996) 10 SCC 304; Balco Employees Union v. Union of India, (2002) 2 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany Limited. Rejecting the challenge, it was observed that that the wisdom of economic policies is not subject to judicial review: 92. In a democracy it is the prerogative of each elected Government to follow its own policy. Often a change in Government may result in the shift in focus or change in economic policies. Any vested interests. Unless any illegality is committed in the execution of the policy or the same is contrary to law or mala fide, a decision bringing about change cannot per se interfered with by the Court. 93. Wisdom and advisability of economic policies are ordinarily not amenable to judicial review unless it can be demonstrated that the policy is contrary to any statutory provision or the Constitution. In other words, it is not for the courts to consider relative merits of different economic policies and consider whether a wiser or better one can be evolved. For testing the correctness of a policy, the appropriate forum is Parliament and not the courts. 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 end ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State Policy. In view of the observations in Subramaniam Balaji (supra), the scheme cannot be held to breach Article 14 since it does not impose a burden but affords a benefit. We, however, deem it imperative to determine if the scheme violates the fundamental rights, in particular Article 14 of the Indian Constitution. 14. The equality code in Article 14 of the Indian Constitution prescribes substantive and not formal equality. 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. A classification is reasonable, when the twin tests as laid down by Justice S.R. Das in State of W.B. v. Anwar Ali Sarkar 1952 SCR 284 are fulfilled: (i) The classification must be based on an intelligible differentia which distinguishes persons or things that are grouped, from others left out of the group; and (ii) The differentia must have a rational relationship 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... economic and social justice is well recognized by Article 38. It needs to be determined if the classification based on the extent of landholding has a rational nexus to the object sought to be achieved. 20. One of us (Dr. D.Y. Chandrachud) in Navtej Singh Johar v. Union of India (2018) 10 SCC 1 accentuated the inadequacies of the two-pronged test which seeks to elevate form over substance. The over-emphasis on the 'objective' of the law, instead of its 'effect'-particularly when the objective is ostensible-was observed not to further the true meaning of the equality clauses under the Indian Constitution. The traditional two- pronged classification test needs to be expanded for the Courts to undertake a substantive review of Article 14 violations, away from the formalistic tendency that the twin test leans towards. Within the broad parameters of the two-pronged test, we find it imperative to undertake a much more substantive review 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 gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficient; they do not have borewells to overcome the drought. These farmers are usually dependent on large farms to access land, water, inputs, credit, technology, and markets. It was found that almost 40% of the irrigated land of large farmers was from canals, while less than 25% of the land of small and marginal farmers was irrigated by canals or borewells and they often resort to renting water from larger landholdings. The output of produce in a small and marginal farm, for instance, paddy would not be sufficient even to feed the small farmer's family. Thus, a majority of them purchase grains at a subsidized rate from the Public Distribution System (since these farmers fall below the poverty line) so they can sell their produce. Parijat Gosh, Farmers Protest: Why are small and marginal farmers protesting against the farm acts?, (December 11, 2020) https://en.gaonconnection.com/farmers-protests-why-are-small-and-marginal-farmers-protesting-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-ae90-5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions. 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 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. 26. The High Court in the impugned judgment has observed that the scheme is both under-inclusive and over-inclusive since the total extent of land held by a person is calculated based on the information in the landholding register which permits discrepancies. It also held the scheme to be under-inclusive for not extending the benefit to 'other farmers' or the 'large farmers'. The meaning and ambit of under-inclusiveness and over-inclusiveness 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t there is no fair reason for the law which would not require with equal force its extension to those whom it leaves untouched , to state that the judiciary must exercise self-restraint in such cases. In N.P. Basheer v. State of Kerala 2004 (2) SCR 224, a two judge Bench of this Court held that if the extent of over-inclusiveness and under-inclusiveness is marginal, then it could not be held to be violative of Article 14 of the Constitution. 28. The determination of whether the classification is under-inclusive is closely related to the test that is undertaken by the Court while determining the relationship of the means to the end. This Court follows the two-pronged test to determine if there has been a violation of Article 14. The test requires the court to determine if there is a rational nexus with the object sought to be achieved. Justice P.N. Bhagwati (as the learned Chief Justice then was) in E.P. Royappa v. State of Tamil 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 unreasonabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cle 15(1) of the Indian Constitution specifically states that the State shall not discriminate on the grounds of 'religion, race, caste, sex, place of birth or any of them'. Since the 'protective discrimination' in Anuj Garg (supra) was based on one of the grounds in Article 15, the Court thought it fit to test its constitutionality on a higher degree of scrutiny. A similar line of reasoning was taken up by Justice Indu Malhotra in Navtej Singh Johar (supra) where she held that Section 377 Indian Penal Code does not fulfil the rational nexus test because the legislation discriminates on the basis of an intrinsic and core trait of an individual, it cannot form a reasonable classification based on an intelligible differentia . 31. While non-classification arbitrariness is tested based on the proportionality test, where the means are required to be proportional to the object, classification arbitrariness 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 'unde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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