APPEARED AT THE TIME OF ARGUMENTS

In F.A. No. 264/2010

In F.A. No. 342/2010

In F.A. No. 382/2010

PRONOUNCED ON:  31^st   MAY,  2016

O R D E R

PER DR. B.C. GUPTA, PRESIDING MEMBER

          These three appeals have been filed, challenging the impugned order dated 19.05.2010, passed by the Andhra Pradesh State Consumer Disputes Redressal Commission (hereinafter referred to as “the State Commission”) in Consumer Complaint No. 62/2003, The Farmers’ Service Co-operative Society Ltd. vs. The General Insurance Corporation of India & Ors., vide which, the complaint filed by the Farmers’ Service Cooperative Society,
which is also the appellant in one of the appeals, has been allowed. 

2.      The facts of the case are that the Farmers’ Service Cooperative Society Ltd. (hereinafter referred as ‘the Society’) is a registered Cooperative Society, comprising small and marginal farmers of the area as its members.  The Society has been adopted by the State Bank of India, Sullurpet Branch (District Nellore, Andhra Pradesh) under a scheme evolved by the Govt. of India, known as ‘the National Agriculture Insurance Scheme’ (NAIS) (Rashtriya Krishi Bima Yojana).

3.      The implementing agency of the said scheme is Agricultural Insurance Company of India, who is appellant in First Appeal No. 264/2010.  This crop insurance scheme operates on the basis of ‘area approach’.  The Insurance Company indemnifies the insured farmers in that area in terms of money for loss or damage, from the corpus fund created by contributions from a large number of similarly exposed farmers.  As per the scheme, if the actual average yield of a notified insured crop in a notified area, falls short in the insured season than the threshold yield fixed over the area, all the insured farmers in that particular area growing that crop, are deemed to have suffered shortfall in their yield and are eligible for compensation in such contingency.  The NAIS Scheme is in the shape of joint venture of the Central and State Government and the shortfall in the yield is calculated by the experts as per the formula provided in the scheme.

4.      In the instant case, 1560 farmers, who were members of the Society as mentioned above, had taken crop loan from the State Bank of India, which in turn deducted insurance premium from their loan accounts and paid to the Insurance Company towards crop insurance for Rabi season 2000-2001 under NAIS.  It has been stated that during Rabi season 2000-2001, Sullurpet Mandal was severely hit by drought and was declared a drought hit area by the State Government of Andhra Pradesh.  The Revenue Department of Andhra Pradesh evaluated the crop loss for the year 2000-2001 as 75.85% and published in the District gazette dated 03.05.2001.  The case of the complainant is that they were entitled to payment of compensation under the Scheme, as they suffered crop loss due to drought, but the Insurance Company refused to make payment to them, although they paid compensation for crop losses for the same season to the insured farmers of Doravarisatram and Tada Mandals of Nellore District, which are the villages adjunct to the villages coming under Sullurpet Mandal.  The complainants sent a legal notice to the OP/Respondent, but without any effect.  The complainants then filed a writ petition no. 14304/2002 in the Andhra Pradesh High Court at Hyderabad, but the same was decided as infructuous, as there was no crop loss as per the version of the Insurance Company.  However, the complainants were given liberty to challenge the decision of the Insurance Company before an appropriate forum.  The complainants then filed the consumer complaint in question, saying that 1560 farmer members of the Society, who had paid crop insurance premium for the Rabi season 2000-2001, should be compensated for the crop loss as declared by the District Collector at 75.85%, subject to over all limit of Rs. 1 crore for all the farmers put together and also to award compensation of Rs. 2 lakhs for mental harassment. 

5.      The complaint was resisted by the OP-1, Agriculture Insurance Company of India, saying that under the Scheme, the farmers are eligible to get compensation only, if the actual yield determined through the crop-cutting experiments (CCE) by the State Government, Bureau of Economics & Statistics is less than the threshold yield, which is the average of the yield of the past three years for that crop.  The case of the OP Insurance Company is that during Rabi 2000-2001 season, the threshold yield for paddy crop in Sullurpet was 1611 kg per hectare, but the actual yield determined from the CCE was 1799 kg per hectare.  In this way, there was no shortfall in the yield obtained by the farmers and hence, the claim was not payable to them.  The Insurance Company repudiated the claim by sending letter dated 30.09.2002 to the President of the Society, explaining the said position.  The State Commission vide their order dated 08.06.2006, decided the consumer complaint, saying that since the loss in the area due to drought was admitted, the members of the complainant Society were entitled for payment of compensation from the OP-1 under the NAIS, and they directed the Insurance Company to settle the claim as per the insurance policy.  Being aggrieved against this order, an appeal was filed before this Commission by the Agricultural Insurance Company, First Appeal No. 362/2006, which was decided by this Commission alongwith other similar appeals/revision petitions vide order dated 22.04.2009.  This Commission set aside the order dated 08.06.2006 of the State Commission and remanded the matter back to the State Commission for passing an order on merits, after carefully going through the terms and conditions of the NAIS and the guidelines issued in this regard.  It was observed by the National Commission in that order that the Scheme envisages compensation for the yield differential between threshold level as arrived at by a Committee envisaged under the Scheme and the actual yield level on an area approach, which will be taluka/block or its equivalent.  It was also observed by this Commission that mere declaration of the area affected by drought would not make the insured eligible for any compensation for the simple reason that the actual area-wise yield levels for the cropping system, and the threshold level declared by the State Government are the basis and the difference between the two is really compensated.

6.      After the case was remanded to the State Commission, the Department of Agriculture and Cooperation, Government of Andhra Pradesh through its Principal Secretary, the Commissioner of Agriculture, Government of Andhra Pradesh and the Director, Bureau of Economics and Statistics Hyderabad were impleaded as respondents in the case.  Before the State Commission, counter replies were filed by the Department of Agriculture and Cooperation as well as the Director, Bureau of Economics and Statistics.  It was submitted by the Department of Agriculture and Cooperation that under the scheme, the crop-cutting experiments were to be undertaken per unit area/per crop on a sliding scale.  A technical advisory committee, comprising the representatives from National Sample Survey Organization, Ministry of Agriculture and the implementing agency was to be constituted at National Level to decide the size of crop-cutting experiments (CCE) and other matters.  It also constituted a committee consisting of the officers from the Department of Agriculture and Cooperation and Director of Economics & Statistics and included the representatives from the Ministry of Agriculture, Government of India, the Banks, NSSO etc.  The Department of Agriculture took the stand that as per the crop-cutting experiments conducted by the Bureau of Economics & Statistics, the actual yield in Sullurpet Mandal was found to be 1799 kg per hectare, which was more than the threshold yield of 1611 kg per hectare.  The selection of plots was done on Multistage Stratified Random Sampling Method.  It was also stated that the estimates of Revenue Department or any other agency cannot be sustained for assessment of loss under this scheme.  It was also stated before the State Commission by the Director, Bureau of Economics & Statistics by filing the written version that the declaration by Revenue authorities for declaring the Sullurpet Mandal as drought hit area has no relevance.  The CCE were conducted as per the procedure laid down by NSSO, based on scientifically designed methodology followed in all 22 States and 4 Union Territories, where NAIS is being implemented.  The Director, Bureau of Economics & Statistics stated that in the year 2000-2001 in Sullurpet Mandal, 12 experiments were conducted in six villages and the average yield was found higher than the threshold yield. 

7.      The State Commission, after considering the contentions raised by the parties, passed their impugned order, allowing the consumer complaint, saying that the farmers were entitled for compensation towards loss of crop for the Rabi season 2000-2001, limited to Rs. 1 crore.  The State Commission also observed that by virtue of orders of National Commission in First Appeal No. 362/2006, the entire amount due to the farmers was deposited and they had withdrawn the same on furnishing bank guarantee.  The State Commission also observed that Committees envisaged under the Scheme were not constituted and proper authority for conducting the crop-cutting experiments was not given to the Bureau of Economics & Statistics.

8.      Being aggrieved against the impugned order of the State Commission, these three appeals have been filed before this Commission.  First Appeal No. 264/2010 has been filed by the Agriculture Insurance Company of India, whereas First Appeal No. 382/2010 has been filed by the Department of Agriculture and Cooperation, Government of Andhra Pradesh, stating that the orders passed by the State Commission deserved to be set aside.  On the other hand, First Appeal No. 342/2010 has been filed by the Farmers’ Service Cooperative Society, seeking enhancement of the compensation given to them for the alleged deficiency in service on the part of the OPs.

9.      During the course of hearing before me, the learned counsel for the Agriculture Insurance Company of India argued that the complaint was not maintainable as the complainant Society was not a consumer under the provisions of the Consumer Protection Act and there was no privity of contract between the Society and the appellant, Agriculture Insurance Company of India.  The

learned counsel vehemently argued that even if, any compensation was to be allowed to the farmers, it had to be under the provisions of the scheme i.e. NAIS, according to which detailed procedure had been prescribed for determining the loss to crops by carrying out crop-cutting experiments in the area as per the procedure well defined.  The provisions of the scheme had also been upheld, as indicated from the orders of the Hon’ble High Court.  The procedure of the settlement of claims had also been prescribed under the guidelines listed therein.  The learned counsel has drawn attention to a brochure titled, ‘National Agriculture Insurance Scheme’, issued by them, which contains the details of the scheme and the guidelines.  The learned counsel argued that since the crop yield as per the crop-cutting experiments was more than threshold yield, the farmers were not entitled for compensation. 

10.    At the time of arguments before me, the Department of Agriculture and Cooperation, Government of Andhra Pradesh was represented by the counsel appearing for the Director, Bureau of Economics & Statistics, Government of Andhra Pradesh.  The learned counsel argued that they were carrying out the crop-cutting experiments every year for various crops under the standard procedure adopted by them.  As per the results obtained by them, the average crop yield was 1799 kg per hectare, which was more than the threshold yield of 1611 kg per hectare.  The results of the experiments had been submitted before this Commission and a document signed by their Assistant Director had been placed on record, indicating that the average crop yield for that season was 1799 kg per hectare.  In another affidavit filed by the Manager, Agriculture Insurance Company of India, it had been explained that the average yield for the previous three years was 1611 kg per hectare in the Sullurpet Mandal of Nellore District, which was the threshold yield in question.  The claim is, therefore, not payable. 

11.    Per contra, the learned counsel for the Society vehemently argued that the Society consisted of about 6000 members, out of which 1560 farmers had got enrolled under the scheme NAIS.  As representatives of these farmers, the Society was very much covered under the definition of ‘Consumer’ as laid down in the Consumer Protection Act, 1986.  The learned counsel has further drawn attention to the previous orders of this Commission dated 22.04.2009, saying that as observed by this Commission, the OPs had not followed the guidelines, listed in their own scheme.  The learned counsel further stated that while carrying out the crop- cutting experiments, the OP, Director, Bureau of Economics & Statistics had made selection of greener plots and hence, the results obtained by them did not reflect the correct status of crops.  There was loss of crops in the area as declared by the Revenue Department of the State Government.  The learned counsel further stated that under the guidelines of the scheme, the technical committees, constituted for the purpose by Government of India as well as the State Government were required to lay down in specific terms, the number of crop-cutting experiments etc. to be carried out in the area and also to determine the sample size.  The OPs had not been able to prove on record, whether they had been given any proper authority by any technical committee, based on which, they selected the sample size and decided on the number of experiments to be conducted.  The learned counsel also stated that once the Revenue Department of the Government had declared the area as drought-hit area and the Collector had declared that there was 75.85% loss in the area, there was no need for the Society or any of their members to lead further evidence in support of their claim for compensation.  The learned counsel further stated that as per the orders of the National Commission, the amount in question already stood disbursed to the farmers and hence, taking practical view of the situation, the present appeals should be dismissed and the orders passed by the State Commission upheld. 

12.    I have examined the entire material on record and given a thoughtful consideration to the arguments advanced before me.

13.    The main issue for consideration in the case is whether the farmers in question are entitled to obtain compensation for alleged damage to crops under the provisions of the National Agriculture Insurance Scheme (Rashtriya Krishi Bima Yojana), run by the Agricultural Insurance Company of India Ltd.  It is seen from the facts on record that there are two different kinds of estimates for loss, being projected in the matter – one by the Revenue Department of the State Government, according to which drought was declared in the area in question and as per the estimate given by the District Collector, there was 75.85% damage to the crop.  On the other hand, the Bureau of Economics and Statistics of the same Government had given their estimates of crop production, based on the crop-cutting experiments, according to which, the yield realized for the crop in question was more than the threshold yield for the same crop in that area and hence, the Insurance Company was not liable to pay the said claim.  In fact, the Department of Agriculture and Cooperation of the same State Government i.e. the Government of Andhra Pradesh had filed one of the appeals in question, challenging the order of the State Commission, by which the said compensation had been ordered to be given. 

14.    The matter came up for consideration of this Commission earlier also and order dated 22.04.2009 was passed by this Commission in a bunch of Revision Petitions/Appeals on the same issue.  The bunch of these petitions included First Appeal No. 362/2006 concerned with the matter in question.  It was observed in the said order as follows:-

            “There cannot be any doubt that the area is declared affected by drought based on ‘annawari system’, which is based on instructions given by the revenue department of each State keeping in view the local conditions.  Question before us is that applicability of the Scheme in terms of area declared affected by drought?  Like the answer given to the query above, our answer also would be ‘No’.  If anyone at the District Forum or State Commission had gone through the provisions of the Scheme, it is clear that the Scheme envisages compensation for the yield differential between ‘threshold level’ as arrived at by a Committee envisaged under the Scheme, and the actual yield levels on an ‘area approach’, which will be taluka/block or is equivalent.  If flows from the above that mere declaration of the area affected by drought would not make the insured eligible for any compensation for the simple reason that the actual area-wise yield levels for the cropping system, and ‘threshold level’ declared by the State Government are the basis, and the difference between the two is really compensated.  This procedure has not been followed by both the lower fora, while making the petitioner liable to pay the amounts awarded in respect of each case.  These orders passed in such cases cannot be sustained in view of provisions of the scheme and clarification of those schemes given by Government of India, the relevant portion of which has been reproduced earlier.”

          It was further observed by this Commission as follows:

          “In the aforementioned circumstances, orders passed by the District Forum and State Commission are set aside, and are directed to pass order on merits, especially, after carefully going through the terms and conditions of the scheme of National Agriculture Insurance Scheme and Guidelines issued in that regard.  They should first appreciate and understand the terms and conditions carefully as well as the ‘clarification’ given on each point by Ministry of Agriculture on ‘Frequently Asked Questions’ and then go on to pass orders on merits after affording an opportunity to all the parties to argue the case on merits in terms of scheme in question.”

15.    The First Appeal No. 362/2006 was remitted to the State Commission with the direction as contained above that an order should be made on merits, after going through the terms and conditions of the National Agriculture Insurance Scheme and the guidelines issued in that regard.  It is very clear, therefore, that the declaration made by the Revenue Department of the State Government, saying that it was a drought affected area is of no consequence, in so far as the outcome of the present case is concerned.  The farmers in question have been got insured under the provisions of the National Agriculture Insurance Scheme and hence, the decision is to be taken, based on the provisions of the scheme.  The Department of Agriculture and Cooperation of the State Government have also taken this plea in their appeal filed before this Commission that the decision has to be based on the guidelines issued in the scheme.

16.    A perusal of the impugned order passed by the State Commission indicates that they have based their conclusion on the ground that the State Government was supposed to constitute a state level coordinating committee and also notify the crops and to lay down guidelines to conduct requisite number of crop-cutting experiments.  The State Commission also observed that there was no proof that estimation of the crop yield was entrusted to the Bureau of Economics & Statistics and also, when that Bureau had estimated the yield, it did not take the representatives of NSSO, MOA etc. alongwith them.  In this regard, the Department of Agriculture and Cooperation, in their grounds of appeal, have clarified in unambiguous terms that state level constitution committee was constituted vide GOM No. 142 dated 12.06.2000, called the state level coordination committee on crop insurance scheme (SLCCCI) and this committee had representatives of the Government of India, NSSO, Reserve Bank of India, besides the officers of relevant departments of the State Government including the Director, Bureau of Economics & Statistics.  Vide this order, a state level technical committee was also constituted for monitoring and supervising the quality and adequacy of crop-cutting experiments for the implementation of the National Agriculture Insurance Scheme w.e.f. kharif 2000 season.  It is very clear, therefore, that the requirement of constitution of the Coordination committee and technical committee as laid down in the scheme had been duly met by the State Government.  It can be safely presumed, therefore, that the necessary supervision for conducting the crop-cutting experiments etc. had been carried out by the said committee and the State Commission have taken an erroneous view that the estimation of the crop was not done in accordance with the instructions on the subject.

17.    It is further observed that the Bureau of Economics & Statistics is a part of the Government of Andhra Pradesh and they carried out the crop-cutting experiments as a part of their routine duty, in accordance with the technical guidelines laid down for different crops.  The estimates of crops made by them cannot simply be brushed aside on technical grounds and more so, when there is no evidence to the contrary that they did not perform their task in a proper manner.

18.    On record, is an affidavit filed by the Manager, Sh. P. L. Narayanappa of the Agriculture Insurance Company of India, in which the yield for rice in the Sullurpet Mandal of Nellore District for the three years, 1997-1998, 1998-1999, 1999-2000 have been given.  Taking into account these yields, the average for three years has been calculated to be 1611 kg per hectare.  It is also not denied or controverted anywhere that the average yield during the crop in question for Rabi 2001 was 1799 kg per hectare.  It is very clear therefore that since the yield during the crop was more than the threshold yield, the concerned farmers were not liable to be compensated by any stretch of imagination, based on the provisions of scheme and all the facts and circumstances on record.

19.    Based on the discussion above, it is crystal clear that the order passed by the State Commission does not reflect correct appreciation of the facts and the legal position and the said order deserves to be set aside and I order accordingly.  The appeals filed by the Agriculture Insurance Company of India and the Government of Andhra Pradesh are, therefore, allowed and it is held that the farmers are not entitled to any compensation under the crop insurance scheme for the relevant period.  The appeal filed by the Farmers’ Cooperative Society is ordered to be dismissed, based on the same discussion.  It is, therefore, stated that the amount, if any disbursed to the farmers as an interim measure shall have to be recovered from them by following due procedure by the State Government/Agriculture Insurance Company of India, as per law.  The three appeals stand disposed of accordingly and there shall be no order as to costs.