New Delhi: One of the most talked-about offerings of the 2019 Congress manifesto is its promise to treat loan default by farmers as a civil and not criminal offence. Only, loan default already is a civil offence in Indian law.
Farmers who are unable to return loans they take from banks will no more face criminal but only civil cases, Congress president Rahul Gandhi was quoted as saying at the manifesto launch Tuesday.
The primary difference between a criminal and civil offence is that while the former is considered an outrage against society — theft, rape murder — the latter comprises disputes between individuals and entities such as contract violations. While criminal law seeks to punish, its civil variant seeks to redress and generally involves settlements between the sparring parties.
“The mere inability to return borrowed money does not constitute a crime,” former adviser to the Indian Banks’ Association (IBA) M.R. Umarji told ThePrint.
When asked why the Congress decided to make this pre-poll promise, MP Rajeev Gowda, convener of the party’s manifesto drafting committee, said the issue of criminal FIRs for loan default was a “pain point” for farmers.
“During our many meetings, they raised the concern that they were criminally charged for defaulting on loans,” Gowda said. “We realised this is not something that should be happening.”
Committee chair P. Chidambaram told ThePrint that the move was taken because “banks launch criminal proceedings against farmers alleging cheating”.
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Loan default not a criminal offence
The bank lobby has been clamouring for wilful loan default to be treated as a criminal offence for sometime now, and there have been allegations that some farmers deliberately withhold repayment in the hope of eventually getting a waiver.
However, even though loan default remains a civil offence, there have been instances in India where banks have filed criminal complaints against farmers who didn’t pay back loans. Just this February, farmers staged protests in Punjab, demanding that criminal charges filed against loan defaulters be withdrawn.
Experts in the banking sector say a loan default invites a criminal charge only if it’s classified as fraud.
“Criminal charges cannot be slapped on defaulting farmers even now,” corporate lawyer Manoj Kumar, a managing partner at law firm Hammurabi and Solomon, told ThePrint.
“Criminal charges can be slapped only in case of serious frauds where there is misrepresentation of facts,” he added.
Subject experts say it is this very caveat that banks have been taking advantage of to turn what would be a civil offence into a criminal one, which can land defaulters in jail for up to seven years.
The blank cheque
According to the experts, some banks often demand blank cheques as additional security even though they are not mandatory to avail of loans.
Talking to ThePrint, food and agriculture specialist Devinder Sharma said thousands of farmers stepped into the realm of criminal offence with the “noose of the blank cheque around their neck”.
“Banks, especially the more local ones, demand blank cheques from farmers when they sanction loans,” Sharma told ThePrint.
“When they fail to repay the loan, they fill in an amount and [seek to] cash the cheques. Once the cheque bounces, they file charges of cheating and forgery against the farmers,” he added.
The farmers in question can consequently be charged with cheating or forgery and sentenced to up to seven years in prison.
Dr Balbir Singh, the president of the Bhartiya Kisan Union in Haryana, said there had been frequent cases of banks misusing their power.
“They ask us to submit blank cheques. The amount we owe them keeps magnifying, and one day one of us lands up in jail,” he told ThePrint.
“The banks are using blank cheques as a way to recover loans,” said Umarji, the former IBA adviser. “There is no stipulated condition that mandates a blank cheque must be submitted when one obtains a loan.”
Another senior agriculture expert who chose to stay anonymous backed the claim, but added that only a minuscule number of farmers faced such charges.
“The farmers desperately need the money, they don’t think twice before handing over a blank cheque,” the expert said.
Even so, the expert added, the Congress’ promise will help bolster farmers’ morale.
Singh, however, is sceptical since he feels most political parties have a “track record of breaking promises”.
“Either they stay in power too long or they leave too early, no one really cares,” he said.
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With inputs from Mahua Venkatesh