Hasty Harvest: Legal issues with the Farmers Produce Act, 2020

On September 24, the Farmers Produce Trade and Commerce (Promotion and Facilitation) Bill, 2020 (Farmers’ Produce Act) received Presidential assent amidst widespread protests. In this author’s opinion, the Farmers Produce Act, at the very least, suffers from hasty drafting and at the most, suffers from the poisonous harvest of unconstitutionality.

Key Terms

Section 2(c) defines farmers’ produce as – (i) foodstuffs; (ii) cattle fodder and (iii) raw cotton, cotton seeds and raw jute. On the other hand, Section 2(j) defines "scheduled farmers’ produce" as agricultural produce specified under any State Agricultural Produce Market Committee (APMC) Act for regulation.

The definition of scheduled farmers’ produce does not refer to farmers’ produce. It instead refers to agricultural produce, which has not been defined under the Act. It further refers to State APMC Acts, the state-specific enactments that regulate the buying and selling of agricultural produce. The State APMC Acts are accompanied by schedules, which list out various items of agricultural produce. Thus, the term scheduled farmers’ produce refers to the collective set of all items of agricultural produce that are regulated under any State APMC Act. These include items such as cereals, pulses, fruits, vegetables, dairy products, flowers, tendu leaves, bamboo, timber, wool, honey wax, tulsi, catechu, tobacco etc.

However, not all of these items would fall under the purview of farmers’ produce. This is because items such as flowers, bamboo, camel hair etc., which are all items of scheduled farmers’ produce, do not fit in any of the three pigeon holes of the term farmers’ produce.

Therefore, the term scheduled farmers’ produce contains several items that do not come within the ambit of farmers’ produce.

The Consequence

Section 2(b) defines ‘farmer’ as someone who produces farmers’ produce. Likewise, Section 2(n) defines ‘trader’ as someone who buys farmers’ produce. Similarly, Sections 2(e) and 2(f) define inter-state and intra-state trade with reference to farmers’ produce. Therefore, under the Act, the key actors and activities are defined with respect to farmers’ produce and not with respect to scheduled farmers’ produce. Thus, illustratively, bamboo cultivators, tobacco growers and flower growers are not farmers under the Act, because these items are scheduled farmers’ produce that do not come within the purview of farmers’ produce.

The anomaly in Section 4(1)

Section 4(1) allows a trader to freely engage in inter-state and intra-state trade of scheduled farmers’ produce with a farmer or another trader.

As explained above, under the Act, inter-state and intra-state trade have been defined with respect to farmers’ produce and not with respect to scheduled farmers’ produce.

Therefore, in effect, Section 4(1) does not permit anything because in light of the definitions under the Act, there cannot be any inter-state or intra-state trade of scheduled farmers’ produce.

Taking the meanings of inter-state and intra-state trade in their ordinary sense, de hors the definitions under the Act, even then, the freedom to carry out the same has been conferred only on farmers and traders, as defined under the Act, ie: persons that grow/buy items that fall within the purview of farmers’ produce. Thus, Section 4(1) confers the freedom of inter/intra-state trade in scheduled farmers’ produce on persons that grow/trade in farmers’ produce. Strangely, even though the freedom is qua scheduled farmers’ produce, it is conferred on persons that exclusively grow/trade items that come within the purview of scheduled farmers’ produce but not within the purview of farmers’ produce.

Consequently, Section 4(1) leaves out a wide spectrum of growers that do not produce items that would fall within the purview of farmers’ produce, but produce items that would otherwise fall within the purview of scheduled farmers’ produce (such as tobacco, wool etc.). The same is the position for persons who exclusively trade in scheduled farmers’ produce.

In this author’s opinion, there is no intelligible differentia for excluding persons that exclusively grow/trade in scheduled farmers’ produce, but not grow/trade in farmers’ produce, from receiving the avowed benefits of the Act, especially given the wide definition of a trader and scheduled farmers’ produce under the Act.

Can a trader sell?

Interestingly, the definition of trader is also at odds with other provisions of the Act. Under Sections 2(e) and 2(f), which define inter/intra-state trade, two traders can buy/sell farmers’ produce with each other. However, Section 2(n), which defines trader, restricts the acts to only buying farmers’ produce.

These inconsistencies fully blossom in Section 4(3), which stipulates that a trader shall pay for the scheduled farmers’ produce to the farmer ideally on the same day or maximum within three days. Once again, the stipulation applies only to traders and farmers, as defined under the Act and excludes persons that do not produce/trade in farmer’s produce, but otherwise produce/trade in items that come within the purview of scheduled farmers’ produce. Furthermore, this section also excludes buying/selling of scheduled farmers’ produce between two traders.

Hence, the Act may fall foul with Article 14 of the Constitution of India, as it leaves out an entire category of persons without any reasonable justification.

Chapter III of the Act deals with Dispute Resolution. Section 8(1) provides that in case of any dispute between a farmer and a trader, the parties can seek conciliation by filing an application with the Sub-Divisional Magistrate (SDM).

However, the Act does not specify which SDM would exercise territorial jurisdiction. It could be the SDM of the area where the farmer resides or ordinarily works for gain and/or where the trader resides or ordinarily works for gain and/or of the trade area, where the transaction took place. At the moment, the Act gives all SDMs all-India jurisdiction.

Once again, the benefit of dispute resolution is unavailable in cases where the persons grow/trade exclusively in scheduled farmers’ produce, which does not fall within the definition of farmers’ produce, and/or if both parties are traders.

Under Section 8(5), if the conciliation between the parties fails, they can approach the SDM for settlement of such dispute. Under Section 8(7), the SDM (acting as the Sub-Divisional Authority - SDA) shall decide the dispute in a summary manner after giving the parties an opportunity of being heard. Thereafter, the SDA may pass an order of recovery of the amount or impose a penalty or pass an order restraining the trader in dispute from undertaking any trade and commerce of scheduled farmers’ produce, directly or indirectly under the Act for such period as she may deem fit.

There are numerous issues with this:

(i) No power to dismiss - Under Section 8(7), there is no stipulation for dismissal of the dispute. Thus, even when the SDA does not find any contravention, she cannot dismiss the dispute and has to award one of the reliefs specified in Section 8(7).

(ii) Mutually exclusive alternatives - The reliefs under Section 8(7) are mutually exclusive, as each of them is followed by the word ‘or’. Therefore, if the SDA orders recovery of money, then she cannot impose penalty, and vice versa.

(iii) Unguided and uncontrolled discretion -Thirdly, under Section 8(7)(c), the SDA can pass an order restricting the trade and commerce of the trader (restriction order). In this author’s opinion, this clause is violative of Articles 14 and 19(1)(g) of the Constitution of India.

The restriction order is in the nature of revocation of the trader’s license to freely engage in the trade and commerce of any scheduled farmers’ produce. The Act does not provide any guidance or principle on the basis of which such an order can be passed and/or the conditions/stipulations to be contained in such order.

Presently, the Act allows the SDA to summarily decide and restrain a trader from engaging in any trade and commerce of any specified farmers’ produce in any area for any period of time, as she may deem fit. In this author’s opinion, this amounts to conferring uncontrolled discretion on an administrative agency to revoke a license and ex facie violates Article 19(1)(g) of the Constitution of India.

Further, Section 8(7)(c) commits to the unrestrained will of a single individual to cancel the license in any way she chooses, thus imposing an unreasonable restriction upon the freedom of trade and business.

Appellate Procedure

Section 8(8) provides for an appeal from the SDA’s decision to the Collector (or the Additional Collector nominated by her). However, the appeal is meaningless because under the Act, there is no requirement for the SDA to record any reasons for her decision. In the absence of reasons, the appellate authority does not have the benefit of the basis of the SDA’s satisfaction. Moreover, there is no further appeal from the Collector’s order to any judicial authority, leaving only the remedy of a writ petition. Pertinently, Section 15 also bars the jurisdiction of civil courts.

Disproportionate Penalties

A restriction order can be passed for a contravention of Section 4. This contravention can either be – (i) that a trader does not have a PAN or such other document as may be notified; and/or (ii) that a trader has not paid the farmer’s dues within three days.

In this author’s opinion, a restriction order is grossly disproportionate to the second contravention. The non-payment of farmer’s dues is a contractual violation between the farmer and the trader, and therefore cannot have consequences in rem, such that the right of the trader to engage in trade and commerce is completely taken away. Pertinently, it is not the case that the revocation shall take place only on repeated default, as the Act does not contain any guidance to that effect. The defaulter trader can be weeded out of the business forever and in all geographies, at the very first instance of default.

It appears that the object of the providing such a strict penalty is to ensure that the farmers receive their dues in a timely manner. However, the consequence of “civil death” seems excessive and it appears to be a case of using a sledgehammer to crack a nut.

Conclusion

There is no doubt that the agrarian sector in India requires immense investment and legal reforms to achieve greater employment and productivity. However, bulldozing Acts during a pandemic that (i) exclude large number of persons; (ii) fail to provide elementary clauses; and (iii) confer unbridled and unguided powers upon administrative authorities, amounts to bad legislation and severely undermines the confidence of the farmers in the government.

An unconstitutional Act, in whole or in part, creates greater rifts between the three arms of the State. The government would do well to imbibe the patience and perseverance of the farmer when seeking to regulate their lives.

The author is an advocate based in Delhi.