Informal relationships

Ajay Shah writes about the value of informal traditional business relationships (landlord and tenant, lender and borrower, large firm and suppliers etc) in times of crises like the Covid 19. He says that enforceable legal contracts are central and essential to creating the complex edifice of advanced capitalism and prosperity. This would help firms to not have to limit their search for partners/suppliers to friends and family. The limited point he makes is that contracts-based capitalism handles a novel shock-like Covid-19 poorly. In contrast, there is greater room for negotiation and accommodation in the Indian arrangements of contracting with friends and family.

 

I am reminded of one’s informal relationships that once existed between landowners and landless poor class in Indian villages. Informal relationships also existed between the tenants and landlords of agricultural land. Government of Andhra Pradesh had, as a reform measure, brought in the Andhra Pradesh (Andhra Area) Tenancy Act, 1956 to formalize the tenancy arrangements and protect tenants from eviction. The Act shifts the balance towards the tenants and made it near impossible for landlords to repossess land. The act had a feature that presumed tenancy to be permanent and the entire burden of proof was totally on the landowner to prove his need for possession of land.

 

The question that arises is, whether the legislation was able to meet the objectives that it set forth to achieve. The present crop of tenancy acts does not provide any protection to the rights of the landowner.

 

As a result, landowners are on willing to register the name of the tenant either in a bank document or on any revenue records. All tenancy is informal and it has been continuing so for several years based on informal relations. The very same situation that was prevailing even before the tenancy act came into force. They act only sensitized the landowners into preventing any kind of recording of tenancies. This has worked against the interests of the cultivators, as they are unable to access credit from banks as well as any kind of subsidized inputs provided by the government. It has also failed to protect the tenure of tenancy or from their eviction at the desire of the landlord. I feel that on one hand it has failed to meet its objectives, while on the other hand, has created mistrust between the landowner and the tenant.

 

The Government of AP has tried to bring in greater balance between the rights of the landowner and the tenant. The Andhra Pradesh Legislative Assembly passed a Bill to aid tenant farmers and to recognize their rights as cultivators. Tenant farmers are those who own little or no land and take up agricultural land on lease. The Andhra Pradesh Corp Cultivator Rights Bill, 2019, which was passed by a voice vote, seeks to provide all amenities, including banking and insurance benefits, to the tenant farmer without affecting the rights of the landowner. Tenant farmers will be issued Crop Cultivator Rights Card, which will ensure they receive all benefits prescribed in the Bill.

 

The Act balances the rights of the cultivators and landowners. Section 4 of the act provides that the land shall be reverted back to the landowner on expiry of the agreement period without any encumbrances. Section 5D of the act provides that the cultivator shall vacate the agricultural land immediately at the end of the term of the agreement without any encumbrances. These provisions override the provisions of the AP Tenancy Act 1956 and remove any presumption about permanency of tenancy. Tenancy is limited to the period of the agreement entered between the landowner and tenant which is in the form of crop cultivator rights card.

 

Section 4(b) of the act requires the landowner to put the cultivator in possession of the agricultural land on the first day of the agreement and he shall not interfere with his possession as long as the cultivator complies with the agreement. The cultivator is entitled for undisturbed possession irrespective of change in ownership during period of agreement. Tenant shall also be entitled to crop loans, crop insurance, crop damage compensation or any other facilities provided to cultivators by the government. These new facilities were not available in the previous Act as landowners worked actively against the same. The new Act creates a situation where such facilities can be availed by the tenant without the landowner being uncooperative or working against it.