Part-2: Agriculture Marketing Reforms - Constitution Ignored - Farmers exploited

Part-2: Agriculture Marketing Reforms

(To read earlier parts, please search on this blog with keyword 'Marketing')

Constitution Ignored - Farmers exploited

By
Vijay SARDANA, 
Advocate, Delhi High Court
Techno-legal Expert on Agribusinesses 
& Consumer Products Industries
& 
Priyanka Sardana, Advocate, Supreme Court of India
& 
Aastha Sardana, Researcher on Legal Matters

The Constitution of India secures the freedom of Trade, Commerce and Intercourse within the Territory of India under Article 301, subject to reasonable restrictions & public interest ranging from Article 302-307. It is worth mentioning that Part XIII (Article 301-307) is in addition to Articles 14 & 19.

The purpose of the APMC Act for farmers has not explained anywhere, why?

Why Indian farmers were allowed to sell or trade their products freely anywhere in the country when the constitution permits this? When every other product and the commodity is allowed to be traded anywhere in the country why restrictions were imposed on the farmers? 

What was the motive behind these restrictions; it is not explained in any APMC Act of any state government. Please read all the APMC Acts of all states it says:

1.  to regulate the marketing of agricultural and certain other products in market areas and markets, 

2.  to confer powers upon Market Committees; 

3. to establish Market Fund for purposes of the Market Committees. 

Nowhere it is mentioned what is the purpose of APMC markets for farmers and consumers. How they will help farmers in their welfare.

Existing Agriculture Marketing Rules are against Indian farmers 

India has accepted free and fair-trade regime as a member of WTO i.e. "One World- One Market", why the same is not accepted as "One Country - One Market" in India?

As a country, we have agreed to free and fair marketing environment at the global stage, but we are not keen to offer the same to the farmers for their own agriculture produce for the benefit of farmers and consumers of India. The same we have decided for all other sectors within the country and to facilitate that we introduced GST taxation system. Why the same benefit is not there for Indian farmers and why this discrimination in the agriculture sector? 

This is one of the single most reason for acute poverty in rural India where farmers live and work hard but never get due share of their hard work. The exploitation of farmers by licensed cartels promoted and supported under the outdated laws of the state governments is the biggest tragedy of India. These laws were created when India was in short supply and there was no infrastructure and no mobile technology. The world has changed but exploitation of farmers continues because laws created for exploitation remain in force. No amount of justification to continue with the existing system has any logic. Let APMCs’ compete with open market buyers and let farmers decide which is the right place for them to sell their produce. Why APMC traders’ cartel wants a monopoly on farmers’ crop?

In India, Imported farm produce enjoy the freedom the produce of Indian farmers, Why?

Imported wheat, rice and pulses can e traded without any restrictions, but Indian farmers’ wheat, rice and pulses have to go through outdated and exploitative APMC mandi system route, Why? 

Why there is no level playing field for farmers of India?

Articles 301 & 304 (a) rings a bell or two regarding a well- known concept in International trade i.e. Regional Trade Agreements or Free trade Agreements (RTA or FTA) & National treatment.

The GATT- WTO regime has put in place a well-organized system of free trade/ trade without barriers amongst member Nations. India is a founder member of this treaty, but when it comes to Indian farmers, we do not provide them with the same free and fair market environment.

The tragedy in India is imported agriculture produce, as per WTO agreements, which can move freely within India without any restrictions, but the farm produce of Indian farmers cannot move freely within India. This is a unique example in the world where state governments in India are creating a problem for their own products and own trade against the imported products.

This is making the Indian economy inefficient by increasing the cost of the transaction and by creating legal hurdles for investments and employment generation. 

Existing APMC law violates fundamental rights:

Article 19 (1) (g), a fundamental right confers on the citizens the right to carry any profession or carry on any lawful occupation trade or business. State APMC Acts violates this fundamental right for both buyer and seller of farm produce. Should we restrict any transaction between farmer and buyer of his crops? The state laws are imposing restrictions on free trade in India between various citizens of India located in various parts of India. The legality of the state laws should be questioned. Who is benefiting from these trade restrictions?

Misinterpretation of constitutional provisions by States created an exploitative environment: 

The list mentioned under Article 246, Schedule VII is not a source of power. The decision by the Constitutional Bench in the case of Ujagar Prints vs Union of India, reported in [1988 (38) ELT 535 (SC)] is a classic milestone. Arguments by Stalwarts and Erudition of the Bench had brought to light certain foundational principles.

The Hon'ble Supreme Court had laid down the following principle: Entries to a legislative list are not sources of legislative power but are merely topics or fields of legislation and must receive a liberal construction, inspired by a broad and generous spirit and not in a narrow pedantic sense. (para 18)

Let us now analyze what are provisions in the legislative lists:

In our view, these legislative lists are defined for better governances and to enhance the welfare of the people of India, not for the exploitation of them. 

> Union List: Entry 42: Inter-State Trade and Commerce: Agriculture and Livestock Produce is a commodity for trade. Farmers are growing crop and livestock for trade. Union government is duty-bound to ensure that transactions between farmers and buyers are unrestricted within India. Union Law should facilitate the same. There is no exception given in this regard in this list.

> State List: Entry 14: Agriculture, including agriculture education and research, protection against pests and prevention against diseases. This is clearly defined that agriculture i.e. pre-harvest activity. It means crop production is the domain of the state.  The state may advise farmers, based on agro-climatic consideration and to conserve natural resource state, which crop should be promoted or discouraged, can be decided by the state. 

The post-harvest output like grains, oilseeds, fodder, cotton, jute, etc. is not agriculture. They are commodities for trade. The drafting team of the constitution understood this because food has to travel for consumption. Food security of citizens cannot be at the mercy of one state when other states are suffering due to shortage or inflation. That is why trading of agriculture outputs was placed in Union list.

> State List - Entry 28: Markets and fairs: It is true that state governments are allowed to frame the law in these domains. Let states create mandies, fairs and markets and manage them as their state assets. If they are useful and beneficial farmers and traders will use them. If they are not, states cannot force them to use them or pay for them. The government can collect user changes from those who use but cannot force mandatory user chargers from those who do not want to use them because of poor location or bad infrastructure or unsuitable to do fair trade.  

According to the constitution, these rules and regulations must not infringe the fundamental rights of the citizens. The Constitution Chapter-13 says actions of the states must not restrict trade and commerce and should not kills the entrepreneurial spirit of the people of India. Any law which acting against this spirit must be reviewed and challenged in the national interest.

> Concurrent List: Entry 7: Contracts, including partnership, agency, contracts of carriage and other special forms of contract, but not including related to agriculture land. Union government can make laws to promote contracts between buyer and seller of agriculture commodities. The contract can be verbal or in writing. The scope of the contract is a mutual decision of the parties involved.

> Concurrent List: Entry 33: Trade and commerce in, and the production, supply and distribution of,-

(a) the products of any industry where the control of such industry by the Union is declared by Parliament by law to be expedient in the public interest, and imported goods of the same kind as such products

(b) foodstuffs, including edible oilseeds and oils

(c) cattle fodder, including oilcake and other concentrates

(d) raw cotton, whether ginned or not ginned and cottonseed; and

(e) raw jute.

All output from farms will fall in the above categories. The union government has the power to frame the law in this regard.

While discussing farmers right to trade let us serious study the full chapter of Constitution of Trade and Commerce.

What are the options before the Union Government?

In the interest of the welfare of people and the development of India, the Union government can always frame a law under various provisions. 

State Governments are always free to improve the free market, in place of having restrictions, which may hurt the welfare of the citizens of India. Any restrictive practices to hurt the interest of farmers and consumers by any state must be opposed by all.

The Way Forward:

All state should be ranked base on restrictive agriculture trade laws. The ranking of the state should suffer for creating and supporting cartels, rent-seeking mindset and increase in transaction costs.

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Email: technolegalsardana@gmail.com

Disclaimer: This article is for general information. For any specific techno-legal discussion, you may contact the authors.

Part-1: Agriculture Marketing Reforms and Constitutional Provisions

Part-1

Agriculture Marketing Reforms and Constitutional Provisions

Indian Constitution & The Doctrine of Pith and Substance

By:

Vijay SARDANA

Advocate, Delhi High Court

Techno-legal Expert on Agribusiness 

& Consumer Products Industries

& 

Priyanka Sardana, Advocate, Supreme Court of India

& 

Aastha Sardana, Researcher on Legal Matters

Introduction:

In "Atmnirbahar Bharat" (Self-reliant India) announcement many people started debating the role of the union government in policy reforms. Most of the articles and debates are based on perceptions and common narrative which was flooded in the market. There is a major confusion due to the use of wrong terminologies to explain the point.

Examples: 

1. The terms "Agriculture" and "food grains" are the same or different?

2. Whether "market" and "trade" are the same thing or different?

Let us first understand what the constitution says:

Whenever there is a debate on agriculture marketing policy reforms in the country, the first question that comes to the mind is who should do it - State Government or Union government. Who's domain is this?

Before I go into the detailed analysis, let me explain the legal position of the Union & State domain under the constitution. 

This post is concerned with a ‘Doctrine of Pith and Substance’. The basic purpose of this doctrine is to determine under which head of power or field i.e. under which list (given in the Seventh Schedule) a given piece of legislation falls.

This is essentially a Canadian Doctrine now firmly entrenched in the Indian Constitutional Jurisprudence. 

This doctrine found its place first in the case of Cushing v. Dupey. In this case, the Privy Council evolved the doctrine, that for deciding whether impugned legislation was intra vires, regard must be had to its pith and substance.

Doctrine is the foundation of the Indian Federal structure:

Pith means ‘true nature’ or ‘essence of something’ and Substance means ‘the most important or an essential part of something’.

The doctrine of Pith and Substance says that where the question arises of determining whether a particular law relates to a particular subject (mentioned in one List or another), the court looks to the substance of the matter. Thus, if the substance falls within the Union List, then the incidental encroachment by the law on the State List does not make it invalid.

Need for the Doctrine of Pith and Substance in the Indian Context:

The doctrine has been applied in India also to provide a degree of flexibility in the otherwise rigid scheme of distribution of powers. The reason for the adoption of this doctrine is that if every legislation were to be declared invalid because it encroached powers, the powers of the legislature would be drastically circumscribed.

“It is settled law of interpretation that entries in the Seventh Schedule are not powers but fields of legislation. The legislature derives its power from Article 246 and other related articles of the Constitution. Therefore, the power to make the Amendment Act is derived not from the respective entries but under Article 246 of the Constitution.

The language of the respective entries should be given the widest scope of their meaning, fairly capable to meet the machinery of the Government settled by the Constitution. Each general word should extend to all ancillary or subsidiary matters which can fairly and reasonably be comprehended in it. When the vires of enactment are impugned, there is an initial presumption of its constitutionality and if there is any difficulty in ascertaining the limits of the legislative power, the difficulty must be resolved, as far as possible in favour of the legislature putting the most liberal construction upon the legislative entry so that it may have the widest amplitude.”

Incidental or Ancillary Encroachment:

The case of Prafulla Kumar Mukherjee v. The Bank of Commerce succinctly explained the situation in which a State Legislature dealing with any matter may incidentally affect any Item in the Union List. The court held that whatever may be ancillary or incidental effects of a Statute enacted by a State Legislature, such a matter must be attributed to the Appropriate List according to its true nature and character.

Thus, we see that if the encroachment by the State Legislature is only incidental in nature, it will not affect the competence of the State Legislature to enact the law in question.

Also, if the substance of the enactment falls within the Union List then the incidental encroachment by the enactment on the State List would not make it invalid.

However, the situation relating to Pith and Substance is a bit different concerning the Concurrent List. If a Law covered by an entry in the State List made by the State Legislature contains a provision which directly and substantially relates to a matter enumerated in the Concurrent List and is repugnant to the provisions of any existing law concerning that matter in the Concurrent List, then the repugnant provision in the State List may be void unless it can coexist and operate without repugnancy to the provisions of the existing law.

Important Supreme Court Judgments on the Doctrine of Pith and Substance

There are hundreds of judgments that have applied this doctrine to ascertain the true nature of the legislation. The prominent judgments of the Supreme Court of India that have interpreted and resorted to this doctrine are given below:

1.The State of Bombay and Another vs F.N. Balsara- This is the first important the judgment of the Supreme Court that took recourse to the Doctrine of Pith and Substance. The court upheld the Doctrine of Pith and Substance and said that it is important to ascertain the true nature and character of legislation to determine the List under which it falls.

2. Ms. Atiqa Begam & Anr. v. Abdul Maghni Khan & Ors.– The court held that to decide whether the impugned Act falls under which entry, one has to ascertain the true nature and the character of the enactment i.e. its ‘pith and substance’. The court further said that “it is the result of this the investigation, not the form alone which the statute may have assumed under the hand of the draughtsman, that will determine within which of the Legislative Lists the legislation falls and for this purpose, the legislation must be scrutinized in its entirety”.

3. Zameer Ahmed Latifur Rehman Sheikh v. State of Maharashtra and Ors.– Doctrine of Pith and Substance has been beautifully explained in this case:

“This doctrine is applied when the legislative competence of the legislature concerning with regard to a particular enactment is challenged with reference to the entries in various lists. If there is a challenge to the legislative competence, the courts will try to ascertain the pith and substance of such enactment on a scrutiny of the Act in question. In this process, it is necessary for the courts to go into and examine the true character of the enactment, its object, its scope and effect to find out whether the enactment in question is genuinely referable to a field of the legislation allotted to the respective legislature under the constitutional scheme.

This doctrine is an established principle of the law in India recognized by various Courts.

In brief, we can say:

Whenever there is a challenge to the constitutional validity of a particular State Act with reference to a subject mentioned in any entry in List I, the Court has to look to the substance of the State Act and go for detailed analysis and examination.

If it is found that in the pith and substance, it falls under an entry in the State List but there is only an incidental encroachment on any of the matters enumerated in the Union List, the State Act would not become invalid merely because there is incidental encroachment on any of the matters in the Union List.

In the next article, we will discuss what are the constitutional provisions related to the following activities:

• Agriculture
• Agriculture produce
• Market
• Agriculture trade
• Commerce
• Import and Export

Please keep in mind that all these terminologies are not the same and are NOT interchangeable. The wrong interpretation was leading to confusion, concerns and disputes.

In the next article, we will discuss these issues in detail. 

Follow this blog and visit again, more analysis in upcoming articles. Follow on Twitter and Linkedin for regular updates.

If any clarification is required you may contact the authors.

Do send your queries to us at email address: 

Email: technolegalsardana@gmail.com

Disclaimer: This article is for general information. For any specific techno-legal discussion, you may contact the authors.