Today is our topic of discussion The Operation of the Debt Settlement Boards .
The Operation of the Debt Settlement Boards
The problem of rural indebtedness was sought to be tackled through the Debt Settlement Boards, established under the auspices of the Bengal Agricultural Debtors Act of 1935, whereby the creditors and debtors were brought together and the creditors were induced to accept awards after the claims were reduced and brought within the paying capacity of the debtors on an absolutely voluntary basis.
The B.A.D. Act was first introduced in 16 districts out of 25 plain dis- tricts in the month of July, 1936, and thereafter extended gradually to the whole of the Province, excepting Darjeeling and the Chittagong Hill Tracts.
The Debtor’s Act laid down that the Ordinary instalments for arrear rents under the award should be spread over a period not exceeding four years and that the payment in cash of one year’s rent In advance should be insisted upon. The following provisions of the B.A.3. Act were made to safeguard the interest of the landlords and to make it cheap and easy for them to make prompt realisation of rent.
(i) The B.A.D. Act prevented reduction of the principal of the rent by the Debt Settlement Board.
(ii) The Act enabled the landlord to include arrears of rent por- tion of the award in his suit for the recovery of the rent which fell due after the award.
(iii) The B.A.D. Hules provided that the award should be drawn up in such a manner that the arrears of rent were paid up in four years.
(iv) A separate award was to be given for the rent portion of the debt as quickly as possible and also provided for the dis- missal of the debtor’s application when he had not paid one year’s rent within 12 months preceding the date of his appli- cation.
Bent debts stood on a different footing unlike other debts and non-payment of current rent affected the Government revenues adver sely. The collection of cents, whether it was due to government or private landlords, showed a serious deterioration during the period under review. In many cases arrear of rent was heavy, sometimes it was nearly half of the total debt.
The arrear rent sometimes included arrear rent for 4 years plus decretal amount for another 4 years plus cost and interest. Sometimes it exceeded the surplus income of debtor if it had to be paid in 4 instalments. If the landlords were given priority and repayment of debts of other creditors were kept in abeyance till all arrear rent had been paid, the creditors did not give consent for the settlement of debts.
The poor peasants sometimes stopped payment of rent because of the failure of crops. But it was reported by the Deputy Registrar, Co- operative Societies, that the debtors had got a habit of paying nothing to their creditors and they kept on hoping that they could indefinite- ly prolong this state of things. The provision of B.A.D.
Act for paying off all arrears of rent was unpopular and “any cultivators would pre- fer to go on keeping about four year’s rent permanently in arrears and making at the most one year’s payment to avoid a suit instituted to prevent limitation”. The Bakergan) Landholders’ Association complained that the debtors had used the rent provision of the B.A.D. Act to the great disadvantage of the landlords.
In a letter to the Secretary of the Board of Revenue, the Collector of Tippera complained that the Debtor’s Act was responsible for large scale arrears of rent. The D.S. Board strove to administer the B.A.D. Act to the positive advantage of the debtors who constituted the majority of the members. In consequence the appreciation of financial resources of the debtors was never accurate.
Besides, the official encouragement usually extended to those Boards which could scale down debts to the lowest figure had also strengthened the attitude of the D.S. Boards. It is also possible that the drying up of rural credit might have an appreciable effect on the realisation of rent. Moreover, the D.S.Board failed to attempt an early settlement of cents in advance of dealing with the claims of other creditors.
Since early in 1938 there had been complaints from landlords that the operations of the D.S. Boards were seriously hampering their collection of rent. In March, 1939, the Collector of Rangar sent a report verifying the allegations that the tenants were definitely show- ing a determination to postpone payment of rent as long as possible in the hope that in the end arrear rent does would be remitted altogether. In June, 1939, the Collector of Murshidabad wrote to the Qissioner of the Presidency Division that the establishment of D.S.
Boards had undoubtedly contributed to the deterioration in the collection of rent from 124% in 1936 to 84% in 1938. Towards the end of August, 1939 the Gamissioner of Chittagong Division wrote to the authority that “debtor- tenants were so commonly and so frequently taking advantage of D.S.
Boards to evade or postpone payment of rent” that he sent a circular throughout the Chittagong Division that “no more Debt Settlement Board would be established until the collection of rent had improved”. The working of the D.5.
Boards prevented zemindars from realising the arrears of rent through the Civil Courts and “the suspension of coercive measure such as certificate procedure for arrears of rent, the appoint- ment of Land Revenue Commission and various other committees to investi- gate their desirability of extending further rights and benefits to the tenantry, all these have strengthened their conviction that somer or later rents would be remitted and hence what is all the no-rent menta- lity”.
The Bakerganj Landholders’ Association complained that the ince- ssant stay orders issued by the Debt Settlement boards had made rent- suits ineffective, and wilful withholding of rents had also become the male rather than exception. The agriculturist debtors flocked to the D.S. Boards not for conciliating debts, but for defranding the creditors and landlords by abusing the rules of the B.A.. Act.
Above all circum- stances made the situation extremely difficult and in consequence, the realisation of rents from tenants was diminishing from list to Kist and it was suide far worse by “a vile and mischievous propoganda by a section of a people imbued with communistic views who intend to earn cheap popu- lacity by systematically painting the zamindars and landholders in the blackest possible colour and carrying on ‘no rent’ campaign with the aid of slogans such as ‘Down with zamindars”,”Away with Permanent Settlement” and “Land to the tiller” and so on”.
However, while hail- ing the other provisions of the B.A.D. Act with great approbation, the Barisal Anjuman demanded the exclusion of arrears of rent from the defi- nition of ‘debt of the B.A.D. Act.
The Barisal Anjuman put forward the arguments thus: “this provision has, in our opinion, rendered the tenants less careful than ever in discharging the primary obliga- tions attached to their holdings, namely regular payment of rent, and the evil consequence thereof has reached the superior landlords Includ ing the goverment at the ultimate of the chain. However, the inclu- sion of arrear rent in the purview of the B.A.D. Act was based on the following consideration:
(a) In embodying the B.A.D. Act the idea was to settle the whole of the liabilities of an agriculturist and to employ the whole of his surplus income in clearence of the liabilities.
(b) This was not possible if arrear of rent was left out of consideration.
(c) If the arrear of rent was not included in the ‘debt of an agriculturist, the landlord would be able to sell his property and might thereby reduce him to the state of a pauper. This would make the settlement of his other debt practically impossi- ble.
Consequently the whole object of the B.A.D. Act would be frustrated. “The exclusion of the arrear of rent from the definition of ‘debt would not benefit the landlord in the long run, for, unless the tenants can be saved and their indebtedness removed or at least reduced, the position of the landlord too in bound to be affected.”
The landlords were sostines responsible for such deteriora- tion of the collection of arrears of rent through D.S. Boards. This was partly because the landlords were ignorant of the provisions of the B.A.D.
Act and partly because their sense of traditional prestige forbade them to appear before D.5. Boards. It was reported by the District Officer of Rajshahi that “these boards are anthema and partly from false consideration of prestige, for the bigger landlords feel it is beneath their dignity to submit their cases for adjudication by persons (members of ordinary D.S. Boards) when they are accustomed 10 ordinarily to look down upon.” Moreover, many landlords having con- ceived a prejudice against the B.A.D.
Act discouraged their tenants either from filing applications to D.S. Boards at all or from including arrears of rents in the application. These two facts alternating as cause and effect reached upon each other in a vicious circle.
The problem of arrear of rent became so accurate that the authority suggested to increase the number of D.S. Boards and to being pressure on them to dispose the D.S. Board cases as early as possible.
Ewin it was considered necessary to appoint Masiffs to 0.5. Boards, because after the establishment of D.S. Boards the number of rent suit in the Civil Courts had gone down considerably. Accordingly the D.S. Boards were instructed to settle the portion of arrear rent quickly and to arrange some cash payment on the spot or at least at the next harvest. For the remaining amount, it was suggested to give partial mard to the principal amount which would be incorporated in the complete mard for the whole case.
It was provided that this partial settlement should immediately be embodied in an award and that this mard should be separately registered without waiting for passing of final orders in respect of other debts of the debtors.
It was also suggested to hold a conference of the leading landlords to explain then the benefit which could be accrued to then under the B.A.D. Act. The situation regarding the collection of rent became so crucial that A.K. Fazlul Hug, the Chief Minister of Bengal and the substantial leader of the Krishak Proja Party, had to make an appeal to the tenants for paying their dues to landlords. This appeal, in the form of a leaflet, had been widely distributed throughout the province.
Moreover, an attempt had been made to enlist the members of the legislature belonging to the Coalition Party whose help would be taken to remove the misapprehen- sion of the debtor and insist them of their prompt payment of rent. 11 However, the Bengal Agricultural Debtors Amendment Bill later provided that the D.S.
Boards could deal with arrears of rent accrued after 1940. before But this provision remained largely inoperative until all rent/1940 was either collected or bared by limitation. The landlord could not institute two separate processes for recovery of rent, one relating to rent before 1940 and the other after. 12 In consequence current collections were held up.
The no-rent campaign was neither unique in Bengal nor it had started as a result of the passing of the Bengal Agricultural Debtors Act. The problem was related to the existing landlord-tenant relation. Broader politics also contributed to no-rent attitude. The no-rent attitude had its far-reaching consequences in the economy of Bengal and also in the administration of D.5.
Boards as well. As a part of nation-wide non-co-operation movement, the Bardoli Satyagraha was started under the leadership of Gandhi who launched a no-tax campaign in Bardoli in 1921. During the second phase of the Civil Disobedience Movessent, Gandhi launched Dandi Salt March and started a ‘no-tax’ cam- paign.
Thenceforth the no-rent campaign formed a part of lor-to-operation Movement.13 Similtonously a movement was started in Queparan, Sarm, Patna, Moughye, Shahabad and Bengal for non-payment of Chaukidaci tax as a part of Non-Co-operation. In Bengal, non-payment of Qaukidari tax developed into a movement of no-rent campaign.
The Divil Disobedience Movement had generated among the peasantry a spirit of defiance against landlords. Meanwhile the activities of the various peasant organizations like Kishan Sabha, Krishak Proja Party and political parties had stirred up pensant consciousness.
However, throughout 1930, no-cent attitude among the peasantry was more or less common in several districts of Bengal.14 In 1936, it was alleged that the local leaders of Krishak Samiti of Noakhali were encouraging the peasants not to pay rents to landlords.
In 1937, the British Indian Association lodged a series of complaints against the unconstitutional activities of the Kishan Sabla affecting the collection of rents, In addition to non-payment of rent, slogans such as ‘Down with landlords, Land belongs to plonghen were being preached, furthered and propagated – which undoubtedly bore the commistic sentiment of the movement.
The British Indian Association expressed its sentiment by observing that “it is regreatable that commistic activities with emphasis on Marxian doctrine which are opposed to the given basis structure of Government are being propagated with impunity”, 16 The British Indian Association was alarmed that the no-rent campaign might finally affected the land revenue of the government by taking away the economic solvency of the Landlords.
Act and the premature publica- tion of the provisions of the Bengal Tenancy Amendment Bill had misled many agriculturists into the belief that the payment of rent was no longer necessary. In consequence of this pernicious no-rent attitude there was a total stoppage of rent collections.
The Burdwan Landholders Association remarked: “The inprossion is fast gaining ground in the country-side that landholders are not entitled to any interest on arrears of rest and that no-payment of rent to the landlords is necessary under the Bengal Tenancy Amendment Bill and further that the zemindary is going to be abolished.”
To save the properties of landholders from early disintegration the Revenue Department of the Government of Bengal formed a committee to initiate some economic and general programme for the welfare of the agriculturists. In 1938, an agitation was started in Trans-Damodar area of Howrah District to resist the process of assess- ing rent by ‘kuth’ system and a donand was made to fix a lump rent per bigha in rupee.
In the 24 Parganas the leaders of Krishak Samiti encoura ged the tenants of Canning Sandeskall and Harsha Police Stations to re- sort to lawlessness such as the forcible ploughing of zenindars khas lands or the forcible reaping of paddy therefor. In certain areas of Tippera and Noakhali districts krishak propaganda tended to create a tense relation between landlords and tenants.
The peasant agitation of Howrah was followed by a movement in 1939 by the bhag-chashis of Anta Police Station in Howrah not to deliver any share of the produce to the landlord-owners and finally the peasants were incited to remove the entire crops from the field of the landlords.
To improve the situation arising out of the no-rent spirit of the agriculturists, some of the landlords of Tippera and Noakhali granted remission of interest on arrears of rent to encourage voluntary payment. This was a local arrangement and had its impact on a limited area. In 1940, the Howrah District Landholders’ Asso- ciation suggested the following measures to be taken for casing the situation:21
1. To grant facilities of loan to rural cultivators to counteract the abominable effect of the B.A.D. Act and to repeal it forthwith.
2. To grant relief to the landlords in the matter of payment of their dues like cess, embankment charges, sluice charges etc., so that they might be able to grant similar relief to their tenants.
3. To declare the agitation for non-payment of rent an offence and punish all such agitators for its breach; and to have strict control over all Kishan organization of the district and their programme of work.
4. To withhold levy of any new tax like education cess, so that the people should have sufficient time to recover from the pre- sent economic impasse and the agitators shall not be given fresh ground to start anti-landlord agitation on whom should primarily fall the burden of collecting cost.
But the Government of Bengal was reluctant to initiate any new measure in this regard. Only the Home Political Department issued a circular instructing the local officer of the districts to take steps to counter the no-rent mentality. However the rise in prices finally minimized the situation. Good harvests of winter paddy coupled with an appreciable rise in prices helped to improve the collection of rents.
However, several factors were responsible for a country-wide no-rent attitude by the agriculturists. The introduction of the B.A.D. Act had its diverse effect on the peasan mentality.
Under the auspices of the B.A.D. Act numerous D.S. Boards were set up which reduced the debts of the agriculturists by scaling down the orignal debts. The rent of the agriculturists was not included in the purview of the B.A.D. Act, but an idea increasingly gained ground among the agriculturists that the debt legislation was applicable even to the payment of rent.
This, however, strengthened the no-rent spirit and finally led to its can- paign in several districts. Moreover, the propaganda of D.S. Board members resulted in misunderstanding among the debtors. This was, to some extent,responsible for such no-rent mentality. The B.A.D. Act had also prevented the landlords from realising the arrears of rent through Civil Courts.
Shyama Prasad Barman, a member of Bengal Legislative Assembly remarked during his speech on 24 March, 1939 that “an active form of no-rent campaign is going on in every union where D.S. Boards have been established, not by the political agitators, not by the leaders of Krishak Prois Party, not by anybody else, but by the Government then- selves, by the Debt Conciliation Department of the Goverment through the Chairmen and members and clerks of the D.5.
Boards”, 22 Besides this, the unfulfilled promises and expectations held out to agriculturists during the election of 1937 were to some extent responsible for such no-rent attitude. For enticing more votes, electoral candidates made a propaganda for the amelioration of tenants a prominent plank in their electioneering platform.
Explaining the situation, Townend, the Commi ssioner of Burdwan Division remarked:
“The tendency of refuse rents undoubtedly has its origin in the irresponsible electioneering speeches made by candidates of all parties who sought election to the legislature .
To get the cultivators’ vote they spoke as if the interests of the cultivators alone would be considered in future. There was talk of the abolition of the Permanent Settlement, which understood to mean the abolition of all tenures, and everything possible was done to arouse discontent and to inflate expectations”.
Such an expectation was further strengthened by several pro- debtor measure undertaken by the Government e.g., the amendment of the Bengal Tenancy Act, the appointment of the Land Revenue Commission, and Rent Enquiry Committee and the withdrawal of certificate procedure etc.
The gradual amendment of the Bengal Tenancy Act towards improvement of the status and conditions of tenants brought about a corresponding lower- ing in the hold of landlords over their tenants.
Moreover, the settle- ment operations practically opened up the eyes of the tenants in assert- ing their legal rights. Far more important were the activities of the Krishak Samities and political parties which created a large scale con- sciousness among the peasantry which sometimes interfered in the national politics.
However, the situation was so complicated that the Bengal Land Revenue Commission had to admit the fact that the growth of a no-rent attitude among the peasantry had threatened the stability and security of the land syston of Bengal as a whole.
Since the beginning of economic depression in Bengal (C.1930-31), the agriculturists had not been able to pay off their already existing debts. Moreover they had to go on borrowing money at higher rates of interest by pawning household valuables like ornaments and mortgaging and leasing out lands in order to carry on their agricultural operations and to meet their other pressing needs including maintenance and payment of rents to landlords.
The agriculturists were practically left with very little security both movable and immovable for incurring further loans. Consequently the creditors failed to realise the money already invested and had very little hard cash to spare
. Immediately after the introduction of the B.A.D. Act and after the establishment of D.5.Boards, there was a large scale clamour about the shrinkage of rural credit. The political parties, various landed interest groups and the Bengal Mahajan Sabha held B.A.D. Act responsible for such contraction of credit.
But the contraction of credit cannot therefore prisarily be attributed to the introduction of D.S. Boards. The operation of D.S. Boards sight, however, to some extent have aggravated the already existing stringency of credit of rural Bengal.
The low price of grain during depression prac tically reduced the repaying capacity of the cultivators. And owing to the fall in the value of land, the Mahajans, on the other hand, were finding it increasingly difficult to realise their does from the culti- vators even with the aid of courts.
It sees that the accumulation of debts was one of the important factors of such shrinkage of rural credit. The moneylenders were also responsible for such accumulation of debt.
The lack of kerness among money lenders to insist on regular repayment of loans so long as they remained secure and fetch interest had largely been responsible for accumilation of agricultural debts and over-indebtedness of the agricul- turists.
Of course, during 1930″ the pro-debtor tendency of legislation frightened the creditors. The uncertainity of legislation made creditors suspicious and they thus withdrew their capital from loan transaction.
In this regard the collector of Bakergan) remarked that “oving to un- certainity about legislative changes, and to the Debt Settlement Boards, landlords are not prepared nor indeed, are they able to help their tenants as they used to do; while most of them have left the village, to seek safety in town against apprehended violence”. 27 Moreover un- usual delay in the disposal of cases by D.S.
Boards not only resulted in contraction of credit but also gave a handle to the recalcitrant debtors to avoid payment even when they could pay according to their repaying capacity. The Government of Bengal did not consider that the rural credit had completely shrunk. Usually, the supply of credit always depends upon its security and security makes an individual credit worthy.
So according to official opinion the credit worthiness of the individual was still a factor of considerable importance, and an agriculturist whose personal reputation for honesty or economical living was good could obtain credit from private sources, 28 It was believed that the mahajans had surplus money in stock which they could lend out to the cultivators. This was evident from the fact that credit still could be obtained from the moneylenders either by panning gold or silver ornaments or by outright sale of landed property.
In some areas, particularly in the districts of West Bengal, cultivators were mostly financed by their landlords or rich peasants whose land they cultivated either as raiyat, under ralyat or thag- chashis.
To get the lands cultivated, this class of credit suppliers kept the credit flow normal for their own interest. Of the villages of Noakhali about 15% were solvent, about 35% were semi-solvent and the rest were insolvent. The semi-solvent people with few exceptions were already members of co-operative credit societies and had become so over-burdened with debts that these societies were unwilling to advance more money to them. The insolvent people had absolutely no credit at all.
In Howrah, the creditors were reluctant to advance any fresh loans to agriculturists unless adequate security in the form of ornaments were pledged with them. Moreover, the introduction of B.A.D.
Act made them panicky. Persons who were not professional money-lenders but used to lend their surplus money to the agriculturists in the hope of getting it back with high interest, were not willing to lend any more, because they fenced that whatever would be lent to the agriculturists would not be recovered except in very small instalmenta 30 shop over several years without any interest. Even/keepers were similarly reluctant to sell anything to the agriculturists on credit.
In 1937, Frank Owen Bell, the Settlement Officer of Dinajpur, made an enquiry about the shrinkage of rural credit in Dinajpur in accor- dance with the request of the Director, Debt Conciliation, Eastern Circle. The main points of enquiry were about the restriction of rural credit as a result of the B.A.D. Act and the influence of restriction on dehri system of advancing grain by nahajan to aboriginal tribes.
Some of the District Officers considered the contraction of credit a temporary phone of the affair and there was nothing to be alarmed at this. It could not be said with any amount of certainity that the establishment of D.S.Boards was the only factor which contributed to the shrinkage of capital.
With the general fall in peices of the agricultural produce the money-market became tight and the circulation of money strictly limited an there was hardly any return of the sun already advanced.
The general economic depre- ssion seams to be the main factor in the shrinkage of capital. 31 so res- triction of rural credit which was more acute due to depression becate complete after the passing of the Bengal Agricultural Debtors Act and the Bengal Money-Lenders Act. Mortgages were replaced by outright sales of land in case of urgent need for money and land was sold at a nominal price.
There were instances of debtors having sometimes to execute a bond for twice the amount of loan actually taken as a protection against the scaling down of debts by the D.S. Boards. Meanwhile the Provincial Co- operative Bank issued instructions prohibiting short-term loan grant to persons who had either applied to the B.S. Boards for the settlement of their debts or night apply for such settlement
. Karim, an officer of Dinajpur settlement operation remarked:
“When this is the attitude of the semi-government organisation it is no wonder that the private mahajans will take recourse to absolute lock out. It must also be said that it has served as a boon to the borrowing agriculturists as it has absolutely stopped easy credit facilities which have brought about a ruin of the majority of the agricultural population”,
1. Karin suggested two remidies for getting rid of this situation: firstly to increase the purchasing power of the agriculturists and secondly to devise means for the supply of capital in urgent and genuine needs.
F.A. Amed, Director, Debt Conciliation, Eastern Circle, possessed an altogether different view of the problem. He considered that the shrinkage of rural credit was rather a propaganda inspired by the vested interests who were opposed to debt conciliation programme. 33 Hovere, the dehri system of paddy advance was not in fact that much oppressive, oilyn julek- system of paddy mixance was not in fact that mods sppesten.
Ordinarily the dehri was not taken unless there was a failure of crops, and quantities of dehri taken remained always within the paying capacity in the next har- vest. The loan under the system of dehri generally accumulated less than cash loan. For this, as recurring loans, paddy advances were more readily available then cash loans.
This paddy loans came within the scope of the B.A.D. Act and the Usurious Loans Act and courts might cut down the in- terest if the transaction was excessive and unconscionable. However, the D.5. Boards had been instructed not to entertain any application for settling debts of paddy loans, so that B.A.D). Act did not affect the dehri. system to any appreciable extent.
However, the country-wide clamour against contraction of rural credit engaged the attention of the Government of Bengal for its solution. The Goverment found it necessary to arrange co-operative societies to be ready to supply the shortage of genuinely necessary agricultural credit. Before initiating such a credit programme on the part of the co-operative societies it was decided in 1937 to make an enquiry on the following lines
(i) To what extent agriculturists had brought to real difficulties during any particular year through want of short-term loans either for cultivation purposes or for maintenance during two or three months preceding the main harvest.
(ii) To what extent the agriculturists were likely to be in such difficulty during the following two or three years.
(iii) To what extent the prospect of puntual recovery of any such short-term loans might be considered to be good.
Every district collector turned up to this general circular. As regards the first point the reports of the District Collectors generally revealed the fact that there was undoubtedly a shrinkage of rural credit and short-term loans were not available excepting necessary securities.
llowever, the cultivators were accustomed to the contraction of credit and had been gradually improving their condition through successful crop but without credit. As regards the second point on the duration of credit difficulties, it is reported that such condition depended on the follow- ing factors:
(a) the yield of crops and their market price;
(b) the extent to which payments were due on Instalments under award of the D.S. Board;
(c) the concentration of credit expected to result from the restric tions on mortgage of lands introduced on the Bongal Tenancy Amendment Bill.
To avoid such an extraordinary burden of continuous supply of short-term loan, the Goverment of Bengal was expecting an economic re- vival for the perpetual solution of the probles.
It was hoped that: “It the debt-settle-boards are worked in the right spirit and the debtors faithfully pay the amounts awarded by the Boards it is expected that better relation will soon be established between the creditors and the debtors which will considerably ease the present contraction of credit”,” 37 As regards the prospect of punctual recovery of short-term loans opinions of the district collectors were sharply divided.
However, considering the drawbacks of granting much short-term loan it was suggested that short- ters loans should be granted on adequate security of certain property preferably movable which could be put to sale immediately on default. 38 But unfortunately those who needed the loans were mostly people unable to pay and had no adequate movable property.
Like the Bengal Cumber of Commerce and the British Indian Asso- ciation, the Indian Quamber of Commerce represented the vested interests who were in many instance opposed to legislative measures aimed at ane- Liorating the condition of the agriculturists.
Keeping in view the Bengal Agricultural Debtors Act, the Bengal Honey-lenders Act, the Bengal Agri- cultural Produce Marketing bill, the Indian Chamber of Commerce in an address pointed out that: “a constant supply of cheap credit is essential for agriculture and industrial development and that if undue restrictions are placed in the way of the business of money-lending and in the way of social flow of credit, as some of the provisions of these Bills he to effect of doing, the position of the agriculturists may become worse”.
Three major points came out from the address of the Indian Chamber of Commerce : firstly, supply of cheap credit was essential for agricul- tural and industrial development; secondly, undue restrictions were being placed in the way of money-lending business and the normal flow of credit by way of legislative measures and finally, the condition of the agricul- turists were likely to be worse due to such measures.
Firstly, was the supply of credit ever cheap for the agriculturists and did it help agricultural development in any way 7 To this the official attitude was not favourable. It was remarked that: “Prior to 1930, cer- tainly, abundant credit was available, but it was never cheap. At that time the normal rate of interest payable by a number of an agricultural credit society was 15%, while the normal rate of interest to a mahajan was 25%, and very often such higher. This cannot be called cheap credit.”
Secondly, the dry for some measures to relax the restriction upon rural credit in the interest of the Bengal agriculturists case from money-lend- ing classes whose interest had been the guiding ideas of the demand. Finally, legislative measures did not aim at destroying rural credit for good. This legislation would also help the mahajans by a quick re- covery of their outstanding debts.
So legislative measures had, therefore, been undertaken not to place restrictions in the way of money-lending business or normal flow of credit, but “to regulate the same with a view to see that capitalists may get reasonable return for their invest- ment and borrower’s unhealthy and ruinous tendencies may be curbed to 41 enhance their money-value”.
Boards, held different views of the problem of shrinkage. The Secretary of the Revenue Department expressed his doubt on the information collected by the District offi- cer. He was convinced that the procedure of debt settlement was itself responsible for the contraction of credit. The main argument that the Secretary of the Revenue Department favoured were the following 42
(i) the proceedings for settlement of debts under B.A.D. Act vere dilatory, causing harrassment and annoyance to the creditors. To this the long procedure of the issue of notices, fixing date for production of documents, determination of debts after hear- ing parties and recovery of instalments were mentioned.
(ii) The creditors had to content in many cases with an award by the D.S. Boards of the bare principal.
(iii) Instalments were sometimes allowed to spread over 20 years, which caused distrust to the creditors.
(iv) The detitors could apply for settlement of his debts to the D.S. Board within 5 years of its establishment in that locality.
(v) The operation of B.A.D. Act considerably affected the collec- tion of arrears of rent which had antagorise the landlord- creditor class.
However, the Revenue Department was finally convinced that the restriction of rural credit was perceptable due to the economic depre- ssion even when the B.A.D. Act was not in existence. But it could not be denied that the passing of the B.A.D. Act had done a good deal of te worsen the position of rural credit.
The report of the Bengal Land Revenue Commission of 1940 recog nized the tact that all its witnesses had severely criticised the Agricultural Debtors Act on the grounds that it is an interference with the sanctity of contract, and that its working and procedure are detec tive and it has killed all rural credit”,43 On the shrinkage of rural credit the opinion of all the landholders’ Association was unanimous : that the contraction of rural credit was obvious as a consequence of the B.A.D. Act.
The Mymensingh Landholders’ Association proceeded too far with the remark that “This Act is a political stunt and is broad- casting ruin with a free land alike to tenants and to landlords”,” 44 Their opinion was certainly based on their class interest and B.A.D.
Act had acted against their interest. Their main arguments followed their specific grievances that the adoption of artificial way of wiping out the debts must have its serious repercussions. The B.A.D. Act had shaken the very foundation of rural credit system which would finally lead to the progressive pauperization of the agricultural commity.
Describing the entire situation and pointing out the possible solution of the probles, the hurdan Landholders’ Association remarked: “Two things are certain; one that the Government cannot possibly finance all the cultivators and the other that the dishonest tactics will be an obstacle to the setting up of any alternative form of finance through Co-operative Societies and Mortgage Banks”, 45 However, the suggestion offered by the landholders’ Association was to establish agricultural banks in every union to provide finance to agriculturists in times of need with short-term credit.
They also demanded the accomodation of healthy and suitable provisions in the Bengal Honey- lenders Act which could, according to their opinion, render permanent and substantial relief to the agriculturists. In reply to the question- naire of the Floud Commission, the Bakerganj District Krishak Proja Party recognised the fact that in consequence of the operation of B.A.D. Act all urban and rural credit and confidence had been lost causing dead- lock to money-lending transaction.
The Collector of Bakergan) considered the shrinkage as a politically motivated problem. In a letter to the Secretary of the Land Revenue Department he remarked: “There is also a type of persons which, for personal, financial or political ends, fosters the cry for loans, and acquires merit by sponsoring the applica tions which its own agitation has created”. However, the Bengal Agri- cultural Debtors Act was in operation while the Bengal Money-Lenders Bill was on the legislative awil.
All these legislative measures were pro-debtor and anti-creditor in spirit. In the face of these legislations, from private money-lenders restrained themselves, financing agriculture. In consequence of these legislative measures, the rural money market which had already dwindled, became extremely shy. It is evident from the legis- tration Department data (table annexed herewith) that in between 1936 to 1940 the land sale became nearly double both in terms of the number of deeds and the aggregate value.
It seems that the agriculturists were alienating their lands freely for raising money for cultivation as well as for their maintenance.The contraction of rural credit may be explained under the general economic theory of demand and supply.
During economic depression, the fall in prices had resulted the reduction of income of the agriculturists, but it did not reduce their demand for credit as it was always necessary for cultivation and also tor their family expenditure. The depression on the other hand resulted in the accumulation of rents and debts which had also affected the capital of Landlords and money-lenders, who were the princi- pal credit suppliers.
In this circumstances, the demand for credit was higher than its supply. so theoretically credit was bound to shrink-W.. Wordsworth remarked during his speech in the Bengal Legislative Assembly: “The difficulty terriably increased while the debts of the agriculturists have increased, their need of credit has increased while their conditions have made them less credit-worthy”.
It cannot be denied that the opera- tion of debt legislation without making any substantial change of the structure of debt and credit certainly had an adverse reaction on peasant economy of Bengal. According to Neil Charlesworth “economic and social reality, not legislative diktat, shaped the character of credit system”.
The introduction of the Decem Agriculturists’ Relief Act of 1879 had nearly similar consequence in terms of supply of credit. The general is- plication of the Deccan Agriculturists’ Relief Act was that “all the cre- ditors had to take greater care over their lending operations”.
The establishment of D.5. Boards under the B.A.D. Act from the middle of 1936 onwards hurriedly caused the money-lenders to take alarm and throughout the period from 1937 to 1941 facilities for credit had become progressively constricted. In Bar Libraries, Newspaper officers and political circles there was a widespread talk on the stoppage of mahajani credit.
At the initial stage shrinkage was not very acute and the solution of the problem was not directed to any definite policy. The shrinkage of rural credit could be observed in some districts and also where the U.S. Boards had yet to be established. In 1938, Mr. Graham, the Collector of Murshidabad, made a special enquiry of the result of the operation of 0.5.
Boards on rural credit and at the same time he started a policy of listening to the nahajan and persuading them to make loans on joint bond system. However, after enquiry Graham found that the “settle- ment is so small in proportion to the amount of debt that mahajani nee- vousness is purely anticipatory”, 50 Earlier, the Collector of Murshidabad suggested to exclude the co-operative debts from the jurisdiction of D.S.
Boards and to set up special D.S. Boards to deal with co-operative debts In order to secure at least one measures of fluidity in the old frozen loans. However, Mr. Graham suggested two matters of policy for the solu- tion of credit contraction, firstly to reduce the rate of interest usually charged on agricultural loans and secondly to undertake a role by the Government of Bengal analogous to the rural money-lenders. Mr.
Graham tried to emphasise the alternative solution other than co-operative arietie
Suggestions on the solution of the problem were demanded offici- ally. In response to this the Sub-divisional Officer of Tangail suggested not to interfere with the collection of small short-term loan for agri- cultural purpose.
The Sub-divisional Officer of Tangail also proposed the establishment of credit Boards to bring cultivators and mahajans together. However, a common solution of the problem of credit contraction proposed by the official intellectuals, middle class people and members of Legis- lative Assembly was to extend the scope of the co-operative movement.
Firstly, it was hoped that extensive grant of short-term crop loan through Co-operative Credit Bank might serve the purpose. 51 Secondly, small muber of efficient co-operative societies could serve large population.
But the success of this idea depended partly on the amount of money that the public might invest and partly on the amount of con- tidence that the co-operative societies might create in public minds.” 52 Moreover, it was hoped that money-lenders would again be interested in their business.
Because they were not slow to discover that the debtors would not be allowed to come to the D.S. Boards more than once for relief. It was being impressed on then that once the debtor’s position was settled by the D.S. Board, the money-lenders would not have any special difficulty to encounter in the matter of future loans. In accordance with this the B.A.D.
Act was amended in 1940) which excluded the debt incurred after January, 1940. Similarly a new rule was annexed to the B.A.D. Act which prohibited the reduction of small loans atter 1st January, 1939.” the problem of providing seasonal credit to the agriculturists for ordi- nary agricultural operation finally necessitated certain policy in this regard. In order to help the agriculturists out of this impasse, the Government felt the necessity of establishing agricultural credit socle- ties throughout Bengal for advancing seasonal crop loan.
Accordingly. budgetory provision under the head of co-operation was made. On the strength of this general assurance the Director of the Provincial Co- operative Bank set apart 10 lakh rupees for tinancing Central thanks for short-term crop loan. On the other hand to distribute long-term loos to the agriculturists more tive land Mortgage tanks was declared to be established shortly.
The introduction of the B.A.D. Act initially produced tense relation between creditors and debtors and also between landlords and tenants resulting in inactive attitude of the rural people. To give wide publicity of the Act and to encourage debtor and creditor to come under the terms of the Act, the Government of Bengal launched active propaganda which aimed at quick disposal of cases.
It was neither possi- ble for the Government to replace rural money-lending system by an orga nised credit machinery nor to keep the agriculturists without credit. So the initiative of the Goverment was directed to the quick scaling down of debts of the agriculturists and to set rural economic life where it was.
The propagando so carried for popularising the D.S. Boards and the B.A.D. Act was divided into two parts viz. individual and mass. It was anticipated that mass propaganda could be carried on by displaying magic Lanterns slides and charts which might have positive appeal to the ille- terate cultivators to come to the D.S. boards.
Such lantern slides would demonstrate the fact that the compromise and settlements the debtors were being able to pay off their liquidated debts gradually with- out alienating their lands while the good relationship between the cre- ditors and debtors were preserved.
But individual propaganda for con- vincing each individual could be taken up by the special officers by meeting of persons casually either alone or in small groups when agri- culturists assembled either for gossiping or for some social meeting.
However, the special officers of 1.5. Boards, Jute Restriction Officers, Health Officers and Sanitary Inspectors were employed to demo- nstrate lantern slides. But there was a risk in such propagands that if the agriculturist debtors were allowed to nurse the idea that the main object of the B.A.D.
Act was to enable them to get rid of their debts or to postpone payment for long time, the landlords would suffer from arrears of rent. So it was decided to start propaganda in favour of the payment of arrears of rent. Besides active official propaganda, the news of the activities of the D.S.
Boards of every district would be published in different newspapers under the direction of the publicity department. Moreover, ‘Banglar Katha’ a government newspaper regularly published the news of the progress of the D.S. Boards. The Chairman of Jashi D.S. Board of Faridpur started a weekly newspaper thatak in 1938 which continued upto 1940.
The ‘Bhatak devoted all its colums primarily to matters concerning D.S. Boards, 57 On the other hand, depart- mental propaganda was conducted by means of lantern slides which were effective in their own way. But with a view to creating more abiding interest among the agriculturists, some films were produced and sent out to rural areas for free demonstration.
These films were written by the officers of debt conciliation and among the films ‘Matir Maya” or “The Love of Land’ was very popular, the success of such propaganda can be noticed from the fact that the filing of applications to D.5. Boards by agriculturist debtors increased after the demonstration of the film. Besides, some gramophone records were prepared for the same purpose and one of these records bore the speech of A.K. Fazlul Hoq.
The main aspect, on which these plays focussed were the common village life, the circum- stances which led to the incurring of debts, how borrowing was done, what obstruction the B.A.D. Act had to face at the start, how debt settle- ment was only one of the programes of rural upliftment etc. Moreover, the Government of Bengal began to reinforce the activities of D.S.Boards through marding present to the chairman of the D.S. Boards.
Besides this, it was proposed and agreed to that a review of the working and effects of the debt legislation was necessary because “it may have pro- found repercussion on the structure and working of the rural credit machinary, some of which might be over looked, in spite of the exercise of care, when the measures were enacted.
n practical operation some of the Acts may prove inadequate or ineffective or unduly rigorous, and 59 loophols and deficiencies may come to light”. But there was individual propaganda against the debt conciliation scheme.
Such propaganda was much stronger when the Bengal Honeylenders Bill of 1940 had been on the legis lative anvil. There was wide spread remour that with the passing of the Bengal Maney-lenders’ Act the D.5. Boards would be automatically abolished and there was no use for the debtors to file applications for the settle- ment of debts. With a view to avoiding the award fees there was a strong trend among the debtors to settle their debts privately.
Because as a rule the award fees were to be paid on debt determined before any amicable settlement was made. Private settlements of debts were sometimes made as the debtors liked to keep creditors in good humour. Moreover some of the debtors were afraid of permanently alienating the good will of the mahajans and thereby crippling up the source of local credit.So official propaganda was directed in this line to motivate the debtors to make their settlement of debts through D.5. Boards.
Practically, the contraction of rural credit was the result of the great economic depression. But the operation of the B.A.D. Act had aggravated the situation of credit contraction. The agriculturists could not obtain credit without adequate security.
In consequenc, the sale of land increased rapidly. It is probable that the surplus money of the money-lenders and landlords was invested in the Post Offices and Joint Stock Banks where credit had considerably swelled up during the depre- ssion. To face such a situation of credit contraction, the supply of short-term loan to the agriculturists through the co-operative credit Banks was proposed.
On the other hand to encourage the money-lenders to supply necessary finance to the agriculturists, short-term loan given after January, 1939 and debt incurred after January, 1940 were kept out of the jurisdiction of the B.A.D. Act.
Moreover, more Land Mortgage Banks were established in different districts to supply long-term credit to the agriculturists. At the same time, active propaganda was started in favour of quick scaling down of debts and restoration of traditional rural credit system.
The depression left sone disastrous effects on the rural economy of Bengal which adversely affected the agriculturists. So both ameliora- tive and Legislative measures were undertaken simultaneously with a view to resettling the rural life. large scale agricultural and crop loon and gratuitous relief were distributed in every district according to the need.
In consequence of the depression many raivati lands had been transferred to the non-agriculturists. To counter this trend of alienation of land it was proposed that legislative measures be adopted restricting alienation of raivati lands to non-agriculturists. It be ese essential during 1943 when the great famine devasted Bengal.
Ultimately the Bengal Alienation of Agricultural Land Ordinance, 1943, was promulgated which restricted the per- manent alienation of lands of the small agriculturists.
The D.S. Boards had started its work in 1936 and continued to work upto 1944.
During this time all civil and revenue cases were postponed. The object of the B.A.D. Act was to scale down the debts of the agriculturists and to give them a new life to begin with. The actual performance of the D.5. Boards and the consequences of the legislative measures will be discussed in the next chapter.
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