Arrest for Income Tax Arrears is Off the Statute Book. Kurki and Nilami for the Kisan are Not…..by KBS Sidhu

The Tehsildar’s menu of coercion, gazetted for the Punjab in 1887 and franchised across British India in 1890, is still being served to the farmer.

On Thursday, 17 September 2026, the Central Board of Direct Taxes (CBDT, the apex policy body of the Income Tax Department) notified the Income-tax (Fourth Amendment) Rules, 2026.

The notification strikes out arrest of a tax defaulter and detention in prison as modes of recovery under Rule 225, together with the sub-rules that prescribed how it was to be done. It does so retrospectively from 1 April 2026. By Monday, ET Government’s headline called it a shift “from coercion to trust”.

The Rules carrying the power of arrest were notified on 20 March 2026. Five days later the amended Finance Bill was moved to remove that very power from both the 1961 and the 2025 Income-tax Acts, the explanatory memorandum reasoning, with admirable economy, that “other modes of recovery are considered sufficient.” Parliament acted in March, the Rules caught up in September, and a retrospective clause papered over the six months in between.

Good. I have no quarrel with the reform. My quarrel is with its address.

This is one more instance of the business community, the large industrialist and the corporate sector being lifted, one statute at a time, out of the coercive recovery machinery the Raj built. The cultivator is left inside it, still answerable to arrest, kurki and nilami. The Indian State has, broadly, three doors through which it makes a defaulter pay: the Taxman’s Door, the Tribunal’s Door and the Tehsildar’s Door. On 17 September the first was unbolted. The second has, for a decade, opened onto generous haircuts. The third, behind which kurki and nilami still wait, has not been oiled since 1890.

The Tehsildar’s Door, Bolted Since 1890

The Revenue Recovery Act, 1890 moves a demand from one district to another and leaves the coercion to local law. It was enacted on 14 February 1890 at the urging of the Governments of the North-Western Provinces and Oudh and of the Punjab, because a process to recover an arrear in one province could not be enforced in the next. The cure was elegant and unforgiving. A Collector’s certificate naming the defaulter and the sum is conclusive proof of its contents. The Collector who receives it recovers the amount as though it were an arrear of land revenue of his own district. A man who disputes the debt must pay first, under written protest, and sue for his money afterwards. A proclamation by beat of drum then freezes his land, and any sale, gift or mortgage made after it is void against the Government. Co-operative dues, cesses and a long tail of State demands are routinely made “recoverable as arrears of land revenue”, so the 1890 Act is the pipe that carries each of them to the tehsil.

The coercion sits at the tehsil end, in the Punjab Land Revenue Act, 1887. Its menu runs from a writ of demand to arrest and detention, and then to distress and sale of movable property and of uncut or ungathered crops. That is kurki and nilami, in the vocabulary of the tehsil. After that come transfer, attachment and sale of the holding, and proceedings against the defaulter’s other immovable property. A revenue officer may keep the defaulter under personal restraint for up to ten days and then produce him before the Collector. The Collector may commit him to the district civil jail for up to one month. That is forty days, give or take, for a man whose wheat failed. Walk into any tehsil complex in Punjab, even the newly built ones with their glass fronts and fresh paint, and you will find the hawalaat (the lock-up in which that personal restraint is served) still drawn into the building plan as a standard fixture. The Raj built the hawalaat into the tehsil; the Republic still builds it into the new ones. The 1887 Act, to its limited credit, left the defaulter seed-grain and enough produce to feed his family until the next harvest, and exempted women and minors from arrest.

As Deputy Commissioner of Amritsar I held the Collector’s pen that could send a defaulter to civil jail. That pen, the courts have held, reaches natural persons only. A Hindu Undivided Family, as a body, cannot be jailed, a point the Punjab courts took up as far back as Kuldip Singh v. Tehsildar (1958). A company cannot be jailed either. Nor, since Jolly George Varghese v. Bank of Cochin (1980), should anyone be sent to civil prison for poverty alone, without proof of wilful refusal to pay. A writ of demand, however, does not stop to ask.

The civil jail has always had a narrow door: too narrow for a company, too high for a tycoon, and cut to the exact measure of a smallholder with seven acres and a tractor loan. The draftsmen of 1890 knew whom to spare; their Act declines to authorise arrest for the recovery of municipal taxes. The ratepayer of Lahore was safe. The peasant of Gujranwala was not.

Karza, Kurki, Nilami: Khatam — Nearly

Kurki and nilami (attachment, followed by auction) are the two words of revenue jargon every Punjabi village understands. Akali and Congress governments alike have claimed to have banned them. The Congress fought the 2017 Assembly election on “karza kurki khatam, fasal di poori rakam”. A notification of 21 July 2017 duly dropped Section 67-A of the Punjab Cooperative Societies Act, 1961. However, it reached only the co-operative banks, which carry perhaps a tenth to a seventh of farm lending. In 2018 a petition in the High Court sought an outright ban on kurki and nilami. The State replied that none was needed since farmers were receiving loan waivers and compensation. In the same breath it conceded that the kurki and nilami provisions of the Code of Civil Procedure, 1908, being over 110 years old, needed complete revision.

Land revenue itself was abolished by the Punjab Land Revenue (Abolition) Act, 1997. Yet the High Court has held that sums recoverable as arrears of land revenue can still be pursued through the 1887 machinery. The tax was abolished; its bailiff was retained on the establishment. Balwinder Singh, a 65-year-old farmer, ended his life outside the Muktsar Deputy Commissioner’s office, where he had sat on dharna against orders of kurki and nilami.

The Tribunal’s Door, Opening on a Haircut

Now walk across to the National Company Law Tribunal (NCLT). By June 2026, resolution plans under the Insolvency and Bankruptcy Code, 2016 had returned creditors about ₹4.35 lakh crore, or 30.56 per cent of their admitted claims. In 355 of 1,164 cases analysed, the haircut exceeded 90 per cent. Aircel’s lenders accepted a 99 per cent haircut on some ₹20,000 crore.

Only weeks ago, in the personal insolvency of Subhash Chandra, the NCLT approved a plan paying creditors ₹6.25 crore against claims of about ₹22,006.57 crore. That is a haircut of 99.97 per cent, granted to an individual, the same class of debtor a tehsildar may hold in the hawalaat. Union Bank of India, which voted against the plan along with Canara Bank and LIC Housing Finance, has said it will challenge it. Subhash Chandra faced no tehsildar, no ten days’ restraint, no kurki, no nilami and no drum. My letter of 28 August to the Union Finance Minister asked for a disclosure trigger on precisely such low-recovery plans.

Then there are the write-offs. Parliament was told on 10 August 2026 that banks had written off ₹9.95 lakh crore lent to large industries and services over twelve financial years. The Minister of State for Finance stressed that a write-off is only an accounting step and that the borrower stays liable. The statement is technically correct, and politically revealing. When the borrower is a corporation, forgiveness is bookkeeping. When the borrower is a cultivator, it is moral hazard.

The Mandi Gate, Where the Farmer Pays a Tax Nobody Names

The standard objection to farm-debt relief is that subsidies distort markets and waivers corrupt credit discipline. It has the arithmetic upside down. The OECD (Organisation for Economic Co-operation and Development) finds India’s producer support negative. Its farmers are implicitly taxed, because budgetary transfers do not offset the price-depressing effect of domestic marketing rules and trade policy. That implicit tax was estimated at $169 billion in 2022, with export curbs on wheat and rice doing much of the work. For 2023 it was $120 billion, the highest of 54 countries, as restrictions extended to rice, sugar and onions. Across 2021–23, net support came to minus 15.4 per cent of gross farm receipts.

The farmer subsidises the urban thali every time an export ban is notified to steady the consumer price index. His double jeopardy is that he is controlled on the way out when world prices rise, and met with kurki and nilami on the way down when his harvest fails.

What Parliament Did for the Taxpayer, the Vidhan Sabha Can Do for the Tiller

Three steps follow, none of them radical.

First, the Punjab Government should delete arrest and detention from the Land Revenue Act, 1887, borrowing Parliament’s March reasoning word for word. If other modes of recovery suffice against an income-tax defaulter owing crores, they suffice against a farmer owing lakhs.

Second, the Union should amend the 1890 Act so that no certificate travelling under it can end in the arrest of an agriculturist. That would extend to the kisan the courtesy the Act has shown the municipal ratepayer for 136 years.

Third, the IBC already contains a fresh-start process for small individual debtors (annual income up to ₹60,000, qualifying debts up to ₹35,000), still un-notified a decade after enactment. Notify it, and raise its thresholds to the size of a real crop loan.

The kisan would then get the moratorium every debtor admitted to the Tribunal gets, under which no kurki and no nilami can proceed, followed at the end of the process by a discharge. He would walk through the same Tribunal’s Door that swung open for Aircel and Subhash Chandra.

The trust the CBDT extended on 17 September stops at the income-tax defaulter. The door of the civil jail has been shut for him; the Vidhan Sabha can shut it for the farmer.

September 21, 2026.