Those opting for contract farming are not engaged in commercial activity: Top court

The case pitted Ambika Devi, a small muesli grower from Kerala, against the Hyderabad-based Nandan Biomatrix. The company had sold her seeds of white muesli for experimental cultivation with a promise to buy back the grains at an “attractive price”.
When confronted with a large company, such farmers qualify for all protections under the Consumer Protection Act, 1986, the Supreme Court verdict delivered on March 6 said.(Sunil Saxena/HT File Photo)
When confronted with a large company, such farmers qualify for all protections under the Consumer Protection Act, 1986, the Supreme Court verdict delivered on March 6 said.(Sunil Saxena/HT File Photo)
Published on Mar 15, 2020 11:25 PM IST
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Hindustan Times, New Delhi | By

A small farmer has prevailed over a seed firm in the Supreme Court (SC), leading to new legal rights for agriculturists, when the judge in the case ruled that cultivators growing seeds for companies and selling the harvest back to them under contracts were not engaged in any commercial activity, but merely eking out livelihoods.

In a country like India, where agriculture was in a “very imperiled state”, a farmer, even if he or she undertakes contract farming, is a “consumer”, not a commercial agent, the judge said. When confronted with a large company, such farmers qualify for all protections under the Consumer Protection Act, 1986, the SC verdict delivered on March 6 said.

The case pitted Ambika Devi, a small muesli grower from Kerala, against the Hyderabad-based Nandan Biomatrix. The company had sold her seeds of white muesli for experimental cultivation with a promise to buy back the grains at an “attractive price”.

Devi moved court when the company did not buy the harvest, causing financial losses to her.

The dispute, at a basic level, was whether farmers who carry out farming under a contract that obliges them to buy the seeds from a firm and sell the produce back to the same company is a commercial agent or a consumer.

The verdict by Justice Mohan Shantanagoudar, experts say, has larger implications in contract farming, which is widely practised in the country. Food companies commonly enter into large-scale commercial buyback contracts with farmers. For instance, US snack and beverage giant PepsiCo offers exclusive, protected potato seed varieties to farmers for use in manufacturing branded snacks.

“There are very few cases where farmers have successfully established their rights as consumers under the Consumer Protection Act at the Supreme Court,” said Kavitha Kuruganti of the Alliance for Sustainable and Holistic Agriculture.

Kuruganti said the SC verdict was significant in the context of a “lack of legal backing for contract farming” in the country. “The Union government does have a Model Contract Farming Act and some states do have provisions, but there is very little enforcement on the ground,” she said.

The status of a “consumer” invoked all protections under the Consumer Protection Act, 1986, while saving Devi from the complexities of commercial contract laws, which are disproportionately won by industrial players. The court viewed Devi as a consumer who bought a “service” from the company, which was supposed to not only buy back the produce but also provide technical guidance, which it didn’t.

“The judgement sets a precedent for all buyback contract farming,” lawyer Santosh Paul, who appeared for Devi, said.

Devi said the verdict means companies would now not be able treat farmers “like me unfairly”.

The primary point was that the SC said there was no resale of any product in the market in “furtherance of a commercial clause” by farmer, Bobby Agustine, another lawyer for Devi, said.

The lawyer for the seed company, Raghenth Basant, said the court rejected his plea that the cultivation and sale of muesli by the farmer was for a “commercial purpose”.

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  • ABOUT THE AUTHOR

    Zia Haq reports on public policy, economy and agriculture. Particularly interested in development economics and growth theories.

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