National Consumer Disputes Redressal
Gujarat State Consumer Protection ... vs General Insurance Corpn. Of India & Ors. on 24 February, 2005
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI ORIGINAL PETITION NO. 192 OF 1997 Gujarat State Consumers Protection Centre & Anr. Complainants Versus General Insurance Corpn. Of India & Ors. Opposite Parties ORIGINAL PETITION NO. 194 OF 1997 Gujarat State Consumers Protection Centre & Ors. Complainants Versus General Insurance Corpn. Of India & Ors. Opposite Parties ORIGINAL PETITION NO. 197 OF 1997 Gujarat State Consumers Protection Centre & Ors. Complainants Versus General Insurance Corpn. Of India & Ors. Opposite Parties ORIGINAL PETITION NO. 198 OF 1997 Gujarat State Consumers Protection Centre & Ors. Complainants Versus General Insurance Corpn. Of India & Ors. Opposite Parties ORIGINAL PETITION NO. 260 OF 1997 Gujarat State Consumers Protection Centre & Ors. Complainants Versus General Insurance Corpn. Of India Opposite Party ORIGINAL PETITION NO. 261 OF 1997 Gujarat State Consumers Protection Centre & Ors. Complainants Versus General Insurance Corpn. Of India Opposite Party ORIGINAL PETITION NO. 273 OF 1997 Gujarat State Consumers Protection Centre & Ors. Complainants Versus General Insurance Corpn. Of India Opposite Party BEFORE : HONBLE MR.JUSTICE M.B. SHAH, PRESIDENT DR. P.D. SHENOY, MEMBER For the Complainant: Mr. K.G. Vakharia, Advocate with Ms. Avani Mehta, Advocate For the Opp. Party : Mr. P.H. Parekh, Advocate with Ms. Shakun Sharma, Advocate MR. S. M. Suri, Advocate Dated : 24.02.2005 O R D E R
M.B.SHAH, J. PRESIDENT In these complaints the question involved for decision is limited, whereas the record is made bulky.
The decision in the matter has its bearing on a large number of poor farmers, i.e. more than a lakh who were the victims of a natural calamity drought, in a drought prone area. Despite the admitted fact that because of drought there was crop failure, the sum assured was not paid, the Primary Agricultural Credit Cooperative Societies and the nodal agencies accepted whatever the reduced assured sum paid by the G.I.C. Helpless poor indebted agriculturists could not raise their voice and approach the adjudicating authorities individually by filing separate complaints or suits for redressal of their grievances and for recovering small amounts varying from Rs.1,000/- to Rs.3,000/-. Their cause is taken up by the complainant, the Gujarat State Consumers Protection Centre (hereinafter called the Protection Centre).
Unfortunately, taking up the cause by the Protection Centre is objected by the respondents who are required to implement the benevolent provisions of the Consumer Protection Act, 1986.
The matter is about implementation of Comprehensive Crop Insurance Scheme launched countrywide by the Central Government. The main object of the scheme was for providing financial support to farmers in the event of crop failure as a result of drought, flood etc. and to support and stimulate production of cereals, pulses and oil seeds. The scheme was to be operated by the General Insurance Corporation of India (hereinafter referred to as GIC), the respondent No.1 herein, with the active involvement of the State Governments.
The geographical area for the purpose of scheme was a District/Tehsil/Taluk/Block or other small contiguous area, which was referred to in the Scheme as defined area.
The said scheme was extended with certain modifications from 1985 upto year 1999 vide various notifications issued by the Central Government.
In these complaints, on the basis of the scheme framed by the Central Government, we have to decide :
.1. whether the drought insurance coverage is to take into its fold each and every loanee who has taken loan for cultivation of groundnut;
or .2. whether the coverage is provided on the basis of total cultivation of ground nut in the village or Taluka; and .3. in case where one or some of the loanees commit default in not cultivating groundnut whether all the agriculturists of the area or village should be penalised by not paying them the sum assured, namely Rs.10,000/-.
At the outset, we would say that at the time of hearing on 31.8.2004 we passed an interim order directing the Respondent to pay at least 50% of the remaining amount. Pursuant to the said order, the State of Gujarat has agreed to pay its one-third share of the remaining sum assured. However, this was objected by the G.I.C. SUBMISSIONS:
Learned senior counsel, Mr. Vakharia, appearing on behalf of the Protection Centre submitted that the direction given by the G.I.C. to pay deduced assured sum is wholly arbitrary, unjustified and against the letter and spirit of the scheme.
Contra, learned Counsel Mr. Parekh appearing on behalf of the G.I.C. vehemently submitted that the decision to pay reduced amount on the basis of groundnut cultivation was taken after considering the report submitted by the Committee appointed by the Central Government. According to him the Committee has pointed out that in some villages groundnut was not cultivated by a number of agriculturists who have taken loan from the Primary Ag. Co-op. Society. He, therefore, submitted that the G.I.C. took a decision to reimburse at a reduced rate which on an average works out approximately 70% of the sum assured. However, this varies from village to village on the basis of the cultivation figures shown in the revenue record as submitted by the Taluka Development Officer (TDO).
Admittedly, in these cases, loans were given for cultivation of the groundnut crop in the Saurashtra area of the State of Gujarat. Undisputedly, there was drought for the years in question, namely, 1993 and 1995. After the event, the GIC arrived at the conclusion that its nodal agency, i.e. Primary Cooperative Banks have deducted certain amounts from the loan granted on the basis of share capital or overdues of previous year which is against the circulars issued by the G.I.C. and also that some of the loanees have not cultivated the crop as reflected by the statements submitted by the T.D.O. to the G.I.C. at the time of enquiry which was conducted by the Committee appointed by the Central Government.
For deciding the controversy, we would refer to Comprehensive Group Insurance Scheme framed by the Central Government. The relevant portion is as under:
I. The Central Government has decided to introduce a country-wide Crop Insurance Scheme commencing from Khariff 1985. The Scheme will be operated through the General Insruance Corporation of India (hereinafter referred to as the GIC) with the active involvement of the State Government concenred.
.II. OBJECTIVES:
The objectives of the Scheme are as under:
(i) To provide a measure of financial support to farmers in the event of crop failure as a result of drought, flood, etc.
(ii) To restore the credit eligibility of farmers, after a crop failure, for the next crop season, and
(iii) To support and stimulate production of cereal, pulses and oilseeds.
.III. SALIENT FEATURES:
The salient features of the Scheme are as under:
1. Crops to be covered
a) Rice, Wheat and Millets
b) Oilseeds and pulses
2. Farmers to be covered All farmers availing of crop loans from cooperative credit institutions, commercial banks and regional rural banks for raising the aforesaid crops.
3. Built-in Insurance coverage Insurance coverage will be built in as a part of the crop loan for raising crops in areas where the insurance scheme is extended.
4. Sharing of risk between GIC and State Governments The coverage in respect of crops insured in any State will be shared be between the GIC and the State Government concerned in the ratio of 2:1.
.5. ..
.6. ..
7. Nature of coverage
i) If the actual average yield per hector of the insured crop for the defined area determined on the basis of crops cutting experiments in the insured season, falls short of the specified threshold yield all the insured farmers growing that crop in the defined area are deemed to have suffered short-fall in their respective yields and the Scheme seeks to provide coverage against such contingency.
ii) Where data of yields obtained through crop cutting are not available, the methodology for assessing the short-fall will be decided upon by GIC in consultation with the Union Ministry of Agriculture.
8. Limit of coverage i.e. sum insured.
The sum insured per insured farmer shall be 150% of the loan sanctioned to him for growing the crop in the defined area during the insured season. The insurance charge will be calculated on the sum insured and the insurance will be an additionality to the scale of finance already available in respect of particular crop. The scale of finance is to comprise of cash and kind components. The cash component is to be made as ways and means advance and the kind component is meant for quality seeds, fertilizers, pesticides, etc Estimates have been made in respect of cost of cultivation for the five crops namely, paddy, wheat, millets, pulses and oilseeds. The cost of cultivation is nearly 150% of the present scale of financing in respect of these crops.
.9. Insurance charge (Premium) The charges for the built-in insurance coverage shall be 2% of sum insured for rice, wheat and millets crops and 1% of sum insured for oil seeds and pulses.
.10. Basis of indemnity:
If there is a shortfall in the actual average yield per hector of the insured crop, each of the insured farmers growing that crop in the defined area will be eligible for indemnity calculated as under:
Shortfall in yield* Claim = ------------------- X Sum insured of Farmer Threshold Yield (*Threshold yield of a crop for defined area)
11. .
IV. Management of scheme by G.I.C. G.I.C. will act as the leading insurer for the scheme and will establish Crop Insurance Cells at the State Cpaital, maintain close and constant liaison with the State Government, Reserve Bank of India, NABARD, State Cooperative Banks, Commercial and Regional Rural Banks.
V. Central Crop Insurance Fund:
The GIC will set up aspirate Crop Insurance Fund known as the Central Crop Insurance Fund. The main function of the Central Fund would be:
(a) to receive crop insurance premiums from the financial institutions and issue policies;
(b) to settle claims promptly;
(c) .
(d)
(e)
(f)
(i)
ii) The State Funds will be administered by a Committee headed by the Chief Secretary and consisting of Secretary (Cooperation), Secretary (Agriculture), Secretary (Finance), Director, Bureau of Statistics and Economics, Registrar of Cooperative Societies, Director of Agriculture, representatives of Ministry of Agriculture, Government of India, General Insurance Corporation of India, a representative of the convener Bank for State Level Committee, representative of Reserve Bank of India, representative of National Bank for Agriculture and Rural Development (NABARD) and Managing Director of the State Cooperative Bank. The main function of the state Fund would be :
(a). to authorize the fund to act as a co-insurer to the extent of 33.1/3% in respect of crop insurance Schemes introduced in the State;
(b). to administer the in-flow of Funds by way of premium income and out-flow by way of claims;
(c). to ensure proper and adequate conduct of crop cutting experiments on various crops taken up under crop insurance;
(d). to send the yield data for each crop and each defined area to GIC as well as to the India Agricultural Statistical Research Institute (AISRI), New Delhi.
(e). To ensure wide publicity of the Scheme; and
(g)
(ii) ..
VII. Role of Financial Institution:
(i). The Union Ministry of Agriculture would communicate to the Crop loaning Banks viz., Cooperative Banks, Regional Rural Banks and Commercial Banks (under advice to Department of Banking, Union Ministry of Finance and Reserve Bank of India (RPCD) the list of defined areas and crops to which this scheme would apply, the defined areas having been decided in consultation with the State Government;
i) The insurance charge shall be included as an additionality in the scale of finance and shall, at the time of disbursement be deducted from all crop loans to which the scheme applies
ii) Each public Sector Commercial Bank shall, with the concurrence of GIC fix nodal points which would deal with GIC on behalf of Branches at District, Divisional or State level as the case may be, in their area. The nodal points for cooperative Banks will be district Central Cooperative Banks and those for Regional Rural Banks their Head Offices;
iii) Each such nodal points would submit crop wise (area-wise) consolidated proposals to G.I.C.s State Level Cell concerned, in the prescribed form along with full insurance charge payable on all Crop loans coming under the purview of the scheme; and
iv) The Commercial Banks shall issue appropriate instructions to their nodal points as well as Crop Loan disbursing branches to ensure smooth functioning of the scheme.
VIII. Role of State Government:
The Scheme will be administered jointly and in close collaboration with the State Governments. It should be necessary for the State Government to:
(i) authorize the State Crop Insurance Fund to act as coinsurer to the extent of 33.1/3% in respect of Crop Insurance Schemes introduced in the State.
(ii) Subsidies 25% of the insurance charges in respect of small and marginal farmers insured in the State; and
(iii) Provide and strengthen infrastructural and administrative support in the matter of crop cutting experiments, assessment, yield data, feed back through field survey, publicity etc. IX. ..
X to XIII ..
XIV. Procedure for Determination and Payment of Claims:
(i). Within one month after crop cutting experiments off each insured crop, the State Government shall furnish to GIC the data of yields far each defined area (together with causes of loss) where the average yield falls short of the threshold yield as per crop insurance policies issued by GIC.
(ii). On receipt of yield data from the State Government, GIC shall (a) identify the defined areas and crops for which claims become payable and (b) determine the amount of claim payable to each bank in each such defined area;
(iii). GIC shall pay to banks and designated nodal points of commercial banks directly its share of claim;
(iv). Simultaneously G.I.C. shall furnish full details and advice the State Insurance Fund to enable the latter to settle its share of the claim.
(v). on receipt of claim remittance from GIC/State Crop Insurance Fund, the bank concerned shall relate the claim amount to the account of the loanee farmer concerned.
B. Vide letter dated 3rd May, 1985 addressed by the Ministry of Agriculture and Rural Development, Govt. of India, to Chief Secretaries of all the States and Union Territories, the guidelines for implementation of the Comprehensive Crop Insurance Scheme for implementation was communicated to them. The relevant portion thereof is as under:
Comprehensive Crop Insurance Scheme Implementation of
-
1. ..
2. The new comprehensive scheme is to be implemented from Kharif 1985 season. (A copy of the scheme is enclosed). The modalities of the implementation were fully gone into at the workshop held on 1.5.1985. Keeping in view the objectives of the scheme for providing a major financial support to farmers in the event of crop failure as a result of any natural calamities like drought, floods, hailstorms, etc; to restore the credit eligibility of the farmers in the event of crop failures and to support stimulated production of cereals, pulses and oilseeds, it has been decided that all farmers availing of crop loans from co-operative credit institutions, commercial banks and regional rural banks for raising the following crops will be automatically brought in the fold of insurance coverage:
i) Wheat, Paddy and Millets
ii) Pulses and Oilseeds.
The premium and losses will be shared by the G.I.C. and the State Government in the ratio of 2:1.
3. In respect of the State which were operating pilot crop insurance scheme of defined areas within the meaning of the new scheme, would be the same which were already covered by the previous scheme. In respect of new areas, the State Governments are immediately required to send yield figures for the last five years to the G.I.C. so that these areas could also be notified as defined areas. The yield data figures may be sent at taluka level or block level. In this regard it has been decided to reduce the size of the unit area of crop insurance in the country to a block level and for this purpose the present machinery for crop cutting experiments will have to be suitably augmented. The State may kindly work out the staff requirements for additional crop cutting experiments, with its financial implications. It is proposed to call a meeting in this respect in about a months time. The Central Government would financially assist the States on retching basis for strengthening crop cutting experiments would be needed for each crop in each block to have a fair degree of statistically accuracy.
4. The States which have not so far been participating in the pilot crop insurance scheme should immediately get themselves registered as insurance for clause of miscellaneous insurance business under Section 3 of the Insurance Act, 1938. Necessary application in this behalf is required to be made to the Controller of Insurance, Ministry of Finance, Department of Economic Affairs, Insurance Division, Nirwachan Sadan, New Delhi. They may also request the Controller under Section 36(2) for exempting the State Governments from the provision of General insurance business (Nationalisation Act, 1972) for the purpose of registration under Section 3 of the Insurance Act, 1938.
In terms of Section 3 it is also necessary that the proposed insurance fund should also comply with the requirements (before registration), of Section 6 and 7 of the Insurance Act, 1938. However, in case this requirement is likely to cause difficulty to the State Government, a request may be made for exemption under Section 118(c) from the provisions of the aforesaid sections to the Central Government along with the application for registration.
Simultaneously, these state governments should immediately send yield data for the last five years in respect of the above said crops immediately to the General Insurance Corporation of India and Indian Agricultural Statistics Research Institute, ( Library Avenue, Pusa, New Delhi).
Thereafter, the Government of Gujarat issued the Notification for continuation of CCIS (Comprehensive Crop Insurance Scheme) for Khariff Crop 1993 Season in the State with certain modified conditions.
(i) Crop to be covered:
Paddy, bajra, groundnut, tur, maize, ragi and jowar.
(ii) The indemnity limit of above crop shall be 60%.
(iii) The sum insured shall be limited to Rs.10,000/- per farmer irrespective of the quantum of the loan taken by the farmer.
(iv) The total sum insured will be 100% of the crop loan.
(v) All farmers availing of crop loans disbursed for the above mentioned crops, covered under C.C.I.S. by the Cooperative Credit Institutions/Commercial banks/Regional Rural Banks during 1.4.1993 to 31.8.1993 for all crops mentioned above, except TUR, shall be qualified under scheme for Kharif 1993 season. For TUR crop, the loaning period will be from 1.4.1993 to 30.9.1993.
(vi) The last date for submission of the declarations and premium charges in the General Insurance Corporation of India shall be 30.9.1993 for all crops except TUR. For TUR crop the last date shall be 31.10.1993.
(vii) The premium amount has to be sanctioned as an additional loan to the farmers and is not to be deducted from the loan amount.
Parties have not referred to any other scheme.
C. From the aforesaid scheme and the guidelines it is apparent that:
(i) the drought insurance coverage scheme was to be operated by G.I.C. and the State Government;
(ii) the share of the State Government is 33-1/3%, i.e. one third. That is to say, coverage in respect of crops insured in any State has to be shared between the G.I.C. and the State Government concerned in the ratio of 2:1.
The premium and losses are also to be shared by the G.I.C. and the State Government in the ratio of 2:1.
(iii) the main object was to provide a measure of financial support to farmers in the event of crop failure as a result of drought, flood, etc.
(iv) The insurance charge is to be included as an additionality in the scale of finance and shall, at the time of disbursement and is to be deducted from all crop loans to which the scheme applies. It is built-in-insurance coverage.
(v) All farmers taking loan for cultivation of groundnut, etc. were automatically brought in the fold of insurance coverage.
(vi) In theyear 1993 the maximum insured sum was limited to Rs.10,000/- per farmer, irrespective of the loan taken by the farmer.
(vii) For the purpose of operating the scheme an application is required to be made to the Controller of Insurance for granting exemption under Section 36(2) of the Insurance Act, 1938, because insurance business cannot be carried except being registered under the Insurance Act.
(viii) On the receipt of the claim from the G.I.C./State Crop Insurance Fund, the Nodal Bank concerned is required to credit the claim amount to the account of the loanee farmer concerned, so the beneficiary is the loanee farmer and not the bank or nodal agency.
(ix) The scheme also provides that the GIC has to set up a crop insurance fund known as Central Crop Insurance Fund, having the main function of receiving the crop insurance premiums from the financial institutions and issue policies to settle claims promptly.
The reason for settling the claims promptly does not require any elaboration, as marginal farmers are hit hard by the drought or flood.
The learned Counsel Mr. Parekh appearing on behalf of the opposite parties submitted that :
(i) the complaint involves several disputed questions of fact which cannot be decided in summary proceedings before this Commission;
(ii) the Credit Cooperative Societies while disbursing the crop loan to its members appear to have deducted the share capital and the crop insurance premium from the cash loan amount;
(iii) sanction and reporting of loans were for groundnut crop alone, while the cultivation in villages is for several crops;
(iv) while granting loan adjustment towards items like share capital, insurance charges, overdues, etc. were made by the Society;
(v) the loan was disbursed in the month of August after the crop loss was evident due to scanty rainfall;
(vi) there are instances of double insurance coverage;
(vii) deliberate classification of big farmer under small and marginal farmer to take benefit of subsidy;
(viii) the Committee appointed by the Central Government found that where groundnut crop has not been sown, yet, huge loan amounts were declared under the crop insurance;
(ix) It is well settled that a contract of insurance is a contract of uberrima fides and there must be complete good faith on the part of the assured and the insurer;
On the basis of the aforesaid submissions, learned Counsel Mr. Parekh submitted that general reduction of the assured sum was justified. By way of illustration he referred to a statement in tabular form to contend that reduction of the sum assured was justified.
Mr.Parekh also referred to the following letter dated 16th May, 1995 written by the Assistant Commissioner (Credit), Ministry of Agriculture, Govt. of India to the Assistant General Manager, G.I.C., which reads as under:
Subject: - Gujarat State Kharif 1993 season claims for Groundnut Crop in 5 districts of Saurashtra region.
Sir, I am directed to refer to your letters No.0/670/95 dated 24.04.1995 and letter dated 04.05.1995 on the subject mentioned above and to state that Government of India has no objection to approve the claims of Groundnut crops in 5 districts of Saurashtra region of Gujarat State for Kharif 1993 season amounting to Rs.146.45 crore, (District-wise breakup: Amreli Rs.9.31 crore, Bhavnagar Rs.23.79 crore, Jamnagar 43.87 crore, Junagadh Rs.11.16 crore, and Rajkot Rs.58.32 crore) of which central share would be Rs.97.63 crore provided the State Government would pay its 1/3rd share first and claims are otherwise in order and payable.
.2. You are also requested to furnish a comparison of the taluka-wise area sown figures as reported by the State Government in April 1994 and the taluka-wise area sown figures as reported by the TDOs in November/December 1994 so that adjustment if required, could be made subsequently.
For arriving at the aforesaid amount, reliance was placed on Revised Claim Statement for the Seasons for various districts.
For illustration Mr.Parekh has referred to revised claims statement for Junagarh District which is as under:
General Insurance Corporation of India Comprehensive Crop Insurance Scheme Revised Claim Payable Statement for the Season : KHARIF Crop : Groundnut 1993 State : Gujarat District : Junagarh Bank : Junagarh Cent. Distt. Coop. Bank Notified Area Sum Insured as per statement Revised Net Sum Insured T.Y. A.Y. Claims Amtount % of (2) 1 2 3 4 5 6 7 Bhesan 11524150.00 10955291.82 533 134 8201053.36 71.1641 Mangol 3445600.00 1876711.31 1038 142 1619974.32 47.0157 Manavadar 14224900.00 8004958.03 632 45 7434984.78 52.2674 Keshod 12553400.00 10167880.49 926 216 7796107.06 62.1036 Una 16203650.00 7755945.09 593 430 2131903.93 13.1569 Kutiyana 9864150.00 4688668.46 375 4 4638656.01 47.0254 Porbandar 3978500.00 2972664.97 560 0 2972664.97 74.7182 Ranavav 1382800.00 578727.24 624 0 578727.25 41.8518 Vanthali 6862350.00 6606715.66 653 222 4360634.67 63.5443 Visavadar 4262400.00 3350710.68 646 324 1670168.47 39.1838 District Total 84301900.00 56958273.78 41404874.82 Bank Total 84301900.00 56958273.78 41404874.82 The total area insured and the total area sown figures as per the TDO were different for groundnut crop for Kharif 1993 Junagadh Taluka Village Area Insured ( in Ha.) Total Area actually Sown for all farmers loanee and non-loanee as per TDO ( in Ha.) Area sown for loanee farmers (in Ha.) Una Bandharda 311 pg.646 153 pg.612 152 Una Bhacha 950 pg.647 128 pg.612 44 Una Thordi 428 pg.650 96 pg.613 33 Una Jamwala 283 pg.650 222 pg.613 75 Kutiyana Chhatrava 506 pg.651 78 pg.613 34 FINDINGS:
In our view, the entire exercise of reducing the assured sum is without any basis. Firstly, it is to be reiterated that insurance coverage is given to each and every farmer who has taken loan from the Primary Agricultural Credit Cooperative Society for cultivation of groundnut. Further, it is to be stated that groundnut is sown in the month of August and not in the month of June of the year. Further, if GIC had any information that in the month of June there was failure of rain and a drought situation was prevailing, it ought to have taken care at least in not accepting the insurance premium form thousands of farmers. If that was done, at least some of them could have saved amounts spent by them for cultivation of the groundnut and of taking water from other sources. The chart produced by the Respondent reveals that there was cultivation of groundnut in various districts. For calculating the loss suffered by the agriculturist and for payment of insurance amount, the scheme makes a specific provision. There is no provision in the entire scheme that if some or few loanees have committed default in cultivating the groundnut despite taking loan for cultivation of groundnut, all other loanees could be penalised by reducing the sum assured on an average basis. At the time of taking loan as per the scheme there is built in insurance coverage to each and every farmer who takes the loan.
The scheme nowhere provides such a procedure for settling insurance claim. The procedure prescribed for assessment of the loss is provided in the scheme. Firstly, it provides the nature of coverage as per clause 7 quoted above. There is a deeming provision in clause 7(i), which, inter alia, provides that on the basis crop cutting experiments in the insured season, if the actual average yield falls short of the specified threshold yield, then all the insured farmers growing that crop are deemed to have suffered the shortfall in their respective yields and the scheme provides coverage against such contingency. It was sought to be argued that for paying insurance coverage, the scheme provides average yield basis for determination of the loss suffered by the farmer. If this average yield basis is applied, then, the farmer who has suffered total loss, would be getting only 50% of the sum assured. Hence, the learned Counsel submitted that the scheme framed for CCIS (Comprehensive Crop Insurance Scheme) is on the basis of area sown in a particular village or taluka. This submission and approach by the G.I.C. is without any basis. For determining the loss average yield is to be taken into consideration and the loss of crop is to be paid to each farmer individually. However, there is no provision that a few loanees commit default in cultivation of groundnut after taking loans in a particular village or Primary Agricultural Credit Cooperative Societies commit some irregularity while granting loan, all other farmers who have taken loan for cultivation of groundnut should be penalised and the sum assured in their favour could be reduced. The scheme nowhere provides for such an exercise by the GIC. On the contrary, under Clause (10) there is a specific provision that after determination of shortfall in the actual average yield per hectare of the insured crop each of the insured farmers growing that crop in the defined area will be eligible for indemnity calculated as per the formula provided therein.
The aforesaid provisions leave no doubt that under the Comprehensive Credit Insurance scheme insured farmer is the basis and not the Credit Societies. Sufferer is the farmer because of the drought. Such farmers cannot be penalised because the credit Society commits some alleged irregularities, such as (a) while disbursing credit loan deducts the share capital and crop insurance premium; (b) adjustment towards share capital etc;
(c) reporting of loan is for groundnut alone, while cultivation in villages is for several crops; (d) mistake or error in classification of big farmers under small and marginal farmers for getting benefits of subsidy. Further, it is to be clearly understood that under the scheme the insurance charge has to be calculated on the sum assured and the insurance premium is an additionality to the scale of finance. This has been specifically provided in the scheme quoted above. The insurance charge is to be deducted from crop loan at the time of disbursement of the loan.
In any case, for such mistakes or irregularities assured farmer is not responsible. If Government wants to penalise, it may penalise the Primary Agricultural Credit Cooperative Society or the nodal Society - the district level society, but it cannot penalise the farmer by reducing the sum assured, which is meant for his benefit. Poor farmer who has suffered the natural calamity cannot be made to suffer further for the mistakes or irregularities committed by the office bearers of the Society or some other farmers.
Further, insurance premium is paid by each and every loanee separately. It is not recovered on the basis of villagewise loanee or loanees of a particular Primary Agricultural Credit Society. Clause (10) of the scheme also provides the basis of indemnity to each farmer by giving the following formula:
Shortfall in yield* Claim = ------------------- X Sum insured of Farmer Threshold Yield (*Threshold yield of a crop for defined area) Hence, in a case of drought where there is a total failure of crop the entire assured sum is required to be paid to the loanee farmer.
Mr. Parekh learned Counsel for the opposite party also submitted that the policy decision taken by Central Government to reduce the sum assured cannot be challenged by filing the complaint. In our view, this submission is required to be stated only for rejection. In a matter of insurance coverage, that too, when exemption is obtained by the State Government under section 36 of the Insurace Act it cannot be said that after the peril, the insurer has any right to reduce the sum assured.
Learned Counsel Mr. Parekh further submitted that even though the complaint by the Protection Centre is maintainable under the Consumer Protection Act, 1986, yet none of the banks have filed such complaints. This submission is also without any substance. Under the Consumer Protection Act, 1986 right to file such complaints is conferred on such voluntary consumer association. Secondly it is to be imagined, what would happen if agriculturists who are more than one lakh are required to file individual complaints that too for the loss of of only Rs.
One to three thousand.
Apart from the fact that the farmers would not be knowing their right to approach the consumer forums in the event where wrong criteria is applied for reduction of the sum assured by the mighty insurer, namely, the G.I.C., it would be difficult for such poor/marginal farmers who are beaten by the nature to come before the courts for getting relief.
Learned Counsel Mr. Parekh submitted that there is no deficiency in service by the G.I.C. because the sum assured is reduced after detailed investigation, inquiry and after obtaining several reports, information and the documents. In our view, the entire exercise undertaken by the GIC is without any basis as it was without considering the relevant provisions of the scheme. Hence, the reduction of the sum assured cannot be justified even though it is based on inquiry report or investigation carried out which is admittedly without considering the say of the loanee agriculturists. If the nodal agency commits mistake, irregularity or fraud, the insured farmer is not responsible for the same.
Conclusion:
In this view of the matter, the aforesaid complaints are allowed. It is held that reduction of the sum assured by the G.I.C. is de-hors the Scheme or the guidelines framed for Comprehensive Crop Insurance Scheme. Hence it is directed that the GIC shall pay the remaining assured sum to the agriculturists through the nodal banks with a specific direction that the amount shall be credited in the loan account of the farmers who had taken loan for cultivation of groundnut and to whom the insurance coverage was given.
Further, on the remaining assured sum, the loanee banks would not charge any interest for the respective years 1993 and/or 1995 from such loanees and if charged, it shall give rebate to the farmers, as all the disputes arose because of their so called mistakes or irregularities and inaction in protecting the farmers It would be for the nodal agencies to see that the amount as directed reaches the loanee farmers for the relevant years. The Opposite Party No.1. G.I.C. shall pay Rs.5,000/- as costs to the Complainant No.1 in each matter.
.J. (M.B.SHAH) PRESIDENT ....
(P.D.SHENOY) MEMBER