Bombay High Court Directs Bank to Disburse Crop Loan to Farmers Without Payment of Interest

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Bombay High Court

This current PIL is about the disbursement of crop loans to farmers filed in Bombay High Court by RTI Activist Kishor Tangade. Bombay High Court directed Aurangabad District Central Co-operative Bank to mobilize loans for farmers without payment of interest.

Brief Facts of the Case 

The Maharashtra government issued an order dated 17.01.2020. The order directed the banks to give crop loans to farmers without payment of interest. This move aimed to supplement the Mahatma Jotirao Phule Shetkari Debt Waiver Scheme. However, the bank failed to follow the order described above and denied crop loans to eligible farmers.

Petitioner’s Submissions

The Petitioner submitted that despite the government order, the bank denied loans to the farmers. This was due to non-payment of interest accrued from 01.10.2019. The sowing season began in June, but due to the unavailability of funds, the farmers have not been able to sow seeds. Furthermore, the Petitioner stated that 49.62% of eligible farmers received a loan. This was only due to payment of interest accrued for which many farmers had to sell their valuables.

The Petitioner contended that the government issued the order by exercising its powers. This order was issued under Section 79A of the Maharashtra Co-operative Societies Act. Consequently, it led to the binding obligation of the government order on the bank.

Respondent’s Submissions

The counsel representing the government agrees with the contentions raised by the Petitioner. It is also submitted that the government has transferred the amount of loan waiver to the bank. The counsel for the bank states the reason for denying of crop loans by the bank without payment of interest. Here, they stated that denying loans was due to the financial situation of the bank.

The bank fears that it might lose out on the interest amount if loans are disbursed before payment of the interest. Counsel also expressed the intention of the bank to challenge the order issued by the government.

Court’s Observations

The Court stated that the choice to challenge the government order is the right of the bank. The order passed by the government was in the exercise of its powers under Section 79A of the Maharashtra Co-operative Societies Act. Thus, the bank was bound by the government order, whether it chose to challenge it or not.

Court’s Decision

The Court observed that the order passed by the government was in the exercise of its powers. Additionally, the sowing season is in full swing, and hence, time is of the essence.

The Bombay High Court issued notifications to the Aurangabad District Central Co-operative Bank. This directed the bank to disburse the loan funds without payment of interest. The Court highlighted that the question of whether the bank could recover accrued interest could be decided at a later stage.


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