SC: Farmer eking out livelihood through buyback agreement is a consumer

The Hon’ble Supreme Court, on 6th March 2020, in the matter of M/S Nandan Biomatrix Ltd. v. S. Ambika Devi & Ors. pronounced that in cases where the farmer has purchased goods or availed of services in order to grow produce in order to eke out a livelihood, the fact that the said produce is being sold back to the seller or service provider or to a third party cannot stand in the way of the farmer amounting to a “consumer” under the Consumer Protection Act, 1986.

The Hon’ble Supreme Court observed that:

Though the question regarding whether the purpose for which goods have been bought or services rendered is a “commercial purpose” is to be answered on the facts of each case, a person buying goods and using them himself exclusively for the purpose of earning a livelihood by means of self-employment would be covered by the definition of “consumer” within the 1986 Act, even if such use is commercial use. (Para 8.1)

In matters  where the agriculturist buys the foundation seeds from the seed company, or the company itself reaches out and requests the farmers to generate the seeds so that it may market the same. By accepting such an offer, and after purchasing the foundation seeds from the seed company, the agriculturist, with hard labour and sweat, produces seeds to be marketed by the seed company. Thus, the agriculturist is not reselling any product, but grows his own product by utilizing the foundation seeds. There cannot be any dispute that the agriculturist has to sell his product in the open market or to the seed company, as the case may be, in order to eke out his livelihood. In other words, the agriculturist sustains himself by selling his product. This cannot be termed as resale or activity in furtherance of a “commercial purpose” bringing him out of the purview of the definition of “consumer” under Section 2(d). Rather, it is purely for the purpose of earning his livelihood by means of self- employment. (Para 9.1) Cases such as these cannot be compared to activities undertaken by industrial concerns, for example, where the employment of raw materials to produce finished goods for sale has also been held to amount to resale or being for a commercial purpose (Para 9.2)

An agreement for buyback by the seed company of the crop grown by a farmer cannot be regarded as a resale transaction, and he cannot be brought out of the scope of being a “consumer” under the Consumer Protection Act, 1986 only on such ground. (Para 10.1)

Even where the farmer has the freedom to sell the produce on the open market if the farmer is able to obtain a better price, this aspect would not take away from the conclusion that the farmer had entered into an agreement for growing the crop for the purpose of earning a livelihood, since an agriculturist would always have to sell his produce in order to earn his livelihood. (This inference has been drawn on the basis of Para 10.1)

the view that a consumer dispute may not arise out of a contractual arrangement is erroneous since it falls foul of the clear stipulation under Section 2(f) of the Consumer Protection Act, 1986 that a deficiency in service may arise out of “any fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance which is required to be maintained by or under any law for the time being in force or has been undertaken to be performed by a person in pursuance of a contract or otherwise in relation to any service”. (Para 13.5)

In cases where the farmer has purchased goods or availed of services in order to grow produce in order to eke out a livelihood, the fact that the said produce is being sold back to the seller or service provider or to a third party cannot stand in the way of the farmer amounting to a “consumer”. (Para 13.6)

Indian agricultural scenario, today, is in a very imperilled state. Agriculturists have to deal with serious environmental concerns like topsoil depletion, contamination of food, water and soil due to toxic fertilizers and pesticides, and the vagaries of the weather, which are becoming more and more severe and unpredictable as the climate deteriorates. In some parts of the country, such as Punjab, pesticides being used are toxic enough to have led to unprecedented incidence of diseases like cancer. The mechanization of farms has undoubtedly led to many advances in the food security of the country, but this has come at a grave cost. (Para 16)

Practices such as crop diversification and rotation, which are crucial to species diversity and thus to maintain soil health and ensure farm security, and are in-built in traditional forms of farming, are under threat from the increasing inroads being made into the Indian farm by corporates of all sizes, which come with the promise of increased yields and attractive returns. This is true with regard to the sale of seeds as well, even though Indian law protects plant material including seeds from patentability. (Para 16.1)

Most Indian farmers own only small landholdings, which require expensive inputs such as irrigation, electricity, seeds, fertilizer, and pesticide, but do not generate sufficient output to cover the costs of the same. Though the sway of seed companies over small farmers in India is, as of now, minimal, when agriculturists with such small landholdings do enter into agreements to grow crops on terms dictated by seed companies, it is in the hope of earning some profit that would offset the cost of their inputs and generate some income for the household. (Para 16.2)

Needless to say, the success or failure of the crop would make or break the income of the farmer for the entire season. This can result in situations where small and medium scale farmers find themselves trapped in contracts where they buy expensive seeds which turn out to be defective, resulting in a failed season and severe financial hardship. The problem of indebtedness further worsens the plight of the armer, and, all too often, manifests in the tragedy of suicide. Farmer suicides are indeed a systemic issue that has persisted, and perhaps worsened, over the last few decades. (Para 16.2)

The summary redressal available to the farmer under the Consumer Protection Act, 1986 may go a small but crucial way to provide instant relief in a sector which is already facing stress on several counts. Undoubtedly, farmers faced with grievances against seed companies, may, in suitable cases, opt for other remedies such as a civil suit, relief under the Seeds Act, 1966 (the reform of which has been under process for some time), and so on. But excluding such farmers from the purview of the Consumer Protection Act, 1986 would be a complete mockery of the object and purpose of the statute. (Para 16.3)

Compelling small agriculturists to spend unnecessarily on litigation in order to secure relief for themselves, amounting to a sum which probably exceeds even the quantum of relief claimed. This tendency to resist even the smallest of claims on any ground possible, by exploiting the relatively greater capacity of seed companies to litigate for long periods of time, amounts to little more than harassment of agriculturists. (Para 16.4)

Copy of judgement: Judgement_06-Mar-2020

-Adv. Tushar Kaushik

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