The Kerala High Court observed that the credit rating of farmers who effectively sell their paddy to the government under the Paddy Procurement [or Paddy Receipt Sheet (PRS)] Scheme could never be affected, as the court had already held that they could not be construed to be borrowers by any bank.
The court also held that the banks cannot insist on any security document being executed by the farmers, nor could they impose on them any condition akin to a borrower.
The court reiterated that farmers could not be treated as borrowers by any bank. It was only because the government required time to make payment against it that the farmers were forced to avail themselves of such schemes.
Justice Devan Ramachandran made the observations in an order passed on a petition filed by farmers from Palakkad and Alappuzha seeking a directive to the Kerala State Civil Supplies Corporation (Supplyco) to pay them the full prices of the paddy procured from them. The petitioners said that in spite of the High Court judgment, they were treated as borrowers and their credit rating was affected.
The counsel for the Supplyco submitted that “under the PRS Scheme, the borrower is the Supplyco and not the farmers.” Therefore, the fear of the petitioners that their credit rating would be affected had no reason.
The court asked the counsel whether the Supplyco was willing to inform the banks that the farmers were not the borrowers and that their credit rating could not be affected by “PRS loans”.