Three sets of consumer complaints were disposed of by Gujarat State Consumer Disputes Redressal Commission in three orders pronounced on 27.12.2001, 10.1.2014 and 20.1.2014. All three arose out of implementation of National Agricultural Insurance Scheme (NAIS) in Jamnagar, Bhavnagar and Bharauch districts, respectively. In all cases, the consumer complaints were filed by the concerned Primary Agricultural Credit Society, called the Sewa Sahkari Mandali (SSM) together with and on behalf of individual farmers. Agricultural Insurance Corporation of India (AICI) was impleaded as OP No.1, State Government as OP No.2, Central Government as OP No.3 and the concerned District Central Co-operative Bank (DCCB) as OP No.4.

2.      All three orders have been challenged in three sets of appeals filed by the AICI, totalling 160 in all. The issues involved as well as the facts being similar, all the appeals have been taken up together for consideration and disposal through this common order. The records as submitted by the Appellants have been carefully considered. Mr Ashok Kumar Gupta Sr. Advocate, assisted by Mr Sanjeev Sharma, Advocate has been heard at length.

3.      As seen from the record, the complainant-SSMs had processed the case of their member-farmers for agricultural crop loans, advanced by the DCCBs and had subsequently taken up their claims for compensation under the National Agricultural Insurance Scheme (NAIS).  Before the state Commission, case of the complainants was that this was, inter alia, designed--

1. “To provide insurance coverage and financial support to the farmers in the event of failure of any of the notified crop as a result of natural calamities, pests and diseases. 
2.  To encourage the farmers to adopt progressive farming practices, high value in-puts and higher technology in Agriculture. 
3.  To help stabilize farm incomes, particularly in disaster years. 
4.  The scheme was applicable to loanee farmers. All complainants in the present complaints are loanee farmers.  

4.      All complainants had taken crop loan from Opponent No.4 for groundnut  (Tur Pulse and Cotton in case of Bharauch district) for Kharif 2000 and had paid premium along with declaration in the prescribed proforma. These crops partly failed due to drought conditions. The  Committee appointed by the State Govt. and Central Govt. (O P Nos. 2 and 3) carried out crop cutting experiments (CCEs) for these crops and submitted report to the State Govt. The scheme contemplated that if the ‘Actual Yield’ (AY) per hectare of the insured crop for the defined area, on the basis of requisite number of crop cutting experiments (CCRs) fell short of the specified “Threshold Yield” (TY), all  insured farmers growing that crop in the defined area were deemed to have suffered shortfall in their yield. ‘Indemnity’ under the NAIS was to be calculated as per the following formula:

                                                          (TY – AY)

     Eligibility under the NAIS   =     -----------     X  Sum Assured

                                                              TY

5.      Allegedly, Implementing Agency/OP No.1 calculated the claim as per shortfall but reduced the payable amounts on various grounds such as non-sowing of the particular crop by some farmers and also made deductions on account of share capital, insurance premium and outstanding loan of previous year.

6.      In all these three districts, the State Commission has examined the claims of some of the complainant societies to arrive at the representative picture. It was found that in case of a SSM in Jamnagar, district, insurance amount paid was only Rs.15,60,989/- as against claim of Rs.28,62,100/- for all the beneficiary farmers, who had availed groundnut crop loan. Similarly, in Bhavnagar, the claim of one SSM, as per the formula, was Rs.25,91,500/ but it was paid only Rs.54,403/-. In Bharauch, one SSM had claimed Rs. 3,49,950.00  but had received only Rs. 16,780.00. Thus, in all these cases, the cause of action arose when the claims of the farmers under the NAIS were allegedly not settled to the extent of the assured indemnification.

7.      De hors the above, the case of the AICI/O P No 1 was that the coverage of crop loans under the NCIS had to satisfy the following conditions—

          “(i)  Loans were required for raising crop;

          (ii)  Loans were actually advanced to farmers for cultivation;

          (iii) Loans were received and were actually used for raising crop;

          (iv) Farmers must have made efforts to raise crops;

          (v) There is resultant loss to the farmer for reasons stated in the

scheme; and

 (vi) Loans given by the concerned Society or Banks to the farmers and received by the farmers must be for productive purposes and not for repayment of old debts.”

It was urged that in order to alleviate the poor economic and social viability of the farmers who are dependent upon vagaries of the weather and in order to assist the farmers in promoting their agriculture and to maintain their creditworthiness, the scheme had been floated by the Central Government.

8.      The State Commission has allowed the complaints, with following directions to the O Ps--

“1. Complaint No.122 of 2003 and Complaint No.123 of 2003 to 138 of 2003, are partly allowed.

2. Opponent No.1-Agricultural Insurance Corporation of India, No.2- The State of Gujarat, No.3-Union of India are hereby Ordered to pay jointly and Severally the remaining assured amount deducted from Crop insurance claim of insured Farmers of Taluka- Botad of Bhavnagar district, with interest 6% P.A. from the date of Complaint till the date of Payment through nodal agency/Opponent No.4- The Bhavnagar District Co. Op. Bank Limited.

3. On receiving the amount, the Opponent No.4- The Bhavnagar District Co.op. Bank Limited is hereby Ordered to Credit the amount in the loan account of Farmers who have taken loan for cultivation of groundnut and whom the insurance coverage was given and settle the account accordingly.

4. Opponent No.1,2,3 and 4 are jointly & Severally  ordered to pay Rs.500/- by way of Cost for each complaint to Complainants.

5. Copy of this Judgment be sent to Hon’ble Minister for Agriculture (i) Union of India (ii) Hon’ble Chief Minsiter of the State of Gujarat and (iii) Hon’ble Agriculture Minister for State of Gujarat for necessary action in view of facts of the present Complaints in general and Para No.61 to 66 of this Judgment in Particular.

6. Copy of this Judgment be place in all other Complaints consolidated with main Complaint.

9.      In challenge to the above orders of Gujarat State Commission, nearly identical grounds have been raised in the three sets of appeals. The first is that the Sewa Sahkari Mandalis (SSMs) are not ‘consumers’ within the meaning of Consumer Protection Act, 1986  as permission of the State Commission was not taken to allow  them to file the complaints in representative capacity. In our view, this is an attempt to rely upon a hyper-technical point relating to the procedure for filing of complaints in representative capacity. It is also contended that the SSMs were a part of the delivery system for relief under the NAIS and therefore could not have come before the Commission as complainants. It is nothing more than an attempt to obfuscate the fact that the SSMs were the sole interface between the OPs and the loanee farmers, who were meant to be the ultimate beneficiaries under the scheme. The record shows that the SSMs were the agency that processed the claims of the farmers under the insurance scheme. We therefore find no merit in this argument.

10.    Another ground of appeal is that as the claims were huge they were got examined by Agricultural Finance Corporation Ltd (AFCL). As claimed, it was “revealed that there was excess coverage under the scheme and as per recommendations made in the report of the AFCL, the sum insured was corrected and modified to legitimate amount.”  In support, Appellants have filed copy of a letter of 23.4.2001 from AFCL to the General Insurance Corporation. Significantly, they have also filed copy a letter of 28.9.2000 written by Mr V P Khatana, Deputy Secretary, Agriculture and Co-operation department, Gujarat. We find that the problem with acceptability of its recommendation is clearly brought out in this letter. It says—

“As you know, we have been having problems regarding discrepancies between areas under various crops and areas insured from year to year.  The issue is raised by the GIC much after Kharif season is over, and at this time, there is no way to verify the facts.  Some formula is used, which creates other problems.

As Hon.C.M., Gujarat has already suggested as early as August 10,2000 to Govt. of India to undertake all the necessary verifications during the Kharif season itself.” 

11.    It is unfortunate that this letter has merely been placed on record by the Appellant/OPs without any explanation of the issue raised therein, viz. what verification could have been done when the crop season was already over. Learned counsel too failed to offer any explanation before us. In the background of this correspondence, following observations of the State Commission acquire greater force and acceptability—

 “25.  It should be noted here that the opponents have failed to furnish the specific details as to how the claim amount was deducted to that extent.  Over and above, opponents have not informed the nodal agency/bank about the reasons for deduction of claim.  It is for the first time opponents have given details in the reply about various points and reasons for deduction.

26.  Different points for deduction are already mentioned.  We may consider one by one. First of all it is contended that loan was not utilized for the crop for which it was advanced.  Now, opponents have not furnished specific details on this point.  It may be some of the farmers who may not have utilized loan for sowing groundnut crop.  It may be utilized for other purpose.  In that case, there is fault on the part of few farmers.  Therefore, all farmers can not be penalized for the fault on the part few persons.  It is totally based on the scheme clause No.13.  Opponents may take appropriate steps either civil or criminal against the persons who have mis-used the amount.  However, it is not permissible for the opponents to penalize all farmers of the notified area for the default on the part of few farmers.

27.  It is contended that groundnut crop sowed in less area than the mentioned in the declaration.  However, there is no specific detail on this point.  This is not permissible to the opponents specifically for the insurance company when declaration and premium is accepted.  If opponent No.1 is of the opinion that groundnut is sowed in less area, declaration and premium should not be accepted to that extent.  In that case, it was necessary for the opponents No.1, 2 and 3 to verify the actual area showed groundnut.  However, once premium and declaration is accepted, subsequently dispute cannot be raised about the less sowing of groundnut’s area.

28.   It is contended that nodal bank has deducted premium amount, share capital amount from the loan advanced to the farmers.  It is further contended that the nodal agency has adjusted the loan amount towards the dues of outstanding loan of some farmers.  This is the reason for deduction in sum assured in crop insurance scheme. Reason is hopeless, inapplicable and unacceptable.  This mistake committed by the nodal agency as well as bank.  In fact as per clause 5 of the scheme, premium amount should be amount minus loan amount, premium amount should not be deducted from the loan amount.  Similarly, share capital and outstanding loan deducted because some farmers’ default will not affect the right and interest of other farmers, which is totally against the basic concept and express provisions of the scheme (clause No.13).  State Govt. and Central Govt. may take appropriate steps against the concerned nodal agency or bank if they have committed any illegality or irregularity.  However, farmers can not be penalized for any illegality or irregularity committed by the agency/bank.” 

12.    Further it is contended in the Memorandum of Appeal that the State Commission has wrongly relied upon the judgment in Gujarat State Consumer Protection Centre Vs. General Insurance Corpn. of India. It is argued that  the present cases arise under the National Agriculture Insurance Scheme (NAIS) which has a provision (Para 7) empowering the government to scrutinise/examine a claim. On the other hand, the decision relied upon was in relation to claims under another scheme viz. the Comprehensive Crop Insurance Scheme (CCIS), which did not have a similar provision. The provision in Para 7 lays down the procedure for settlement of claims and reads as follows—

“PROCEDURE OF SETTLMENT OF CLAIMS:

“Once the yield data is received from the State Government as per the cut-off-dates decided, the claims will be worked out as per Declarations received from Fls for each notified area and approval is obtained.  The funds needed for payment of claims beyond the risk sharing limits of IA shall be provided by the Government to effect payment.  The claim cheques along with claim particulars will be released to individual Nodal points.  The Fl at the grassroot level in turn shall credit the accounts of the individual farmers and display the particulars of beneficiaries on the notice board.

Loss assessment and modified indemnity procedures in case of occurrence of localized perils, such as hailstorm, landslide, cyclone and flood, where settlement of claims will be on individual basis, shall be formulated by IA in consultation with State /UT. Govt.

 CLAIMS APPROVAL

Claims shall be approved by IA. However, the Government may at their option, scrutinize /examine a claim falling within their risk liability.

Disputed claims/sub-standard claims, if any will be referred to a Committee consisting of representatives of Ministry of Agriculture (GOI), concerned State Government and IA

Settlement/release of claims in the States/UTs which exceed set risk sharing limits of IA shall be subject to receipt of founds from the Government.”

13.    It is true that Para 7, as cited above, does state that the government may scrutinise/examine a claim. But we find that the Memorandum of Appeal has not attempted to elaborate whether any claims were so scrutinised and if yes, how. When questioned directly by the Bench, learned counsel for the Appellant informed that no such dispute was scrutinised by the committee contemplated in this provision. Be that as it may, it cannot be anybody’s case that in the absence of such a provision, claims could have been accepted without any scrutiny or examination. On the contrary, the NAIS itself lays down how crop cutting experiments were to be conducted on the basis of ‘Area Approach’ i.e. for each defined area and for each notified crop. As already detailed, claims were required to be admitted only to the extent actual yields fell below the threshold yields for each area. Therefore, this contention carries no weight.

14.    The State Commission has relied upon the decision of the National Commission in Gujarat State Consumer Protection Centre Vs. General Insurance Corpn. of India, in OP/192/1997 decided on 24.2.2005,  in the specific context of justifiability of deductions made by OP No. 1 from the claims on various grounds. This Commission had held, as also quoted in the impugned order:-

“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’ from 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 provisions.  There is no provisions in the entire scheme that if some or few loanes have committed default in cultivating the groundnut despite taking loan for cultivation of groundnut, all other loanees could be penalized 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.

36.      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 specific threshold yield, them 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 farmer 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 pensalized 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.

37.      The aforesaid provisions leave no doubt that under the Comprehensive Credit Insurance Scheme insured farmer is the basis and not the Credit Societies, Suffer is the farmer because of the drought.  Such farmers cannot be penalized 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 there 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.

38. In any case, for such mistake or irregularities assured farmer is not responsible.  If government wants to penalize, it may penalize the primary agricultural Credit Cooperative Society or the nodal Society- the district level Society, but it cannot penalize 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.

39.  Further, insurance premium is paid by each and every loanee separately. It is not recovered on basis village- wise 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:

Claim= Shortfall in yield x Sum insured of Farmer

             Threshold Yield   

(*Threshold yield of a crop for ‘defined are’)

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.

40.      Judgment of the Hon’ble National Commission is confirmed by the Hon’ble Supreme Court of India in Civil Appeals Nos.6352 of 2005 to 6358 of 2005 decided on 7.5.2013.  Hon’ble Supreme Court Confirmed and approved the reasoning and conclusions and observed.

“The Commission on appreciation of material on record came to the conclusion that there were deficiencies in service.  The Commission further held that reduction of the sum assured by the Appellant herein is de hors the scheme or the guidelines framed for Comprehensive Crop Insurance Scheme.

  Accordingly, the Commission directed the Appellant herein to pay the remaining assured sum to the agriculturists through the nodal bank.

  We are in agreement with the reasoning and conclusion of the Commission and therefore, do not intend to reproduce the same in the present order.”    

15.    The view taken by this Commission in the above case is on all fours with the facts in the present appeals.  It has also received full endorsement of Hon’ble Supreme Court of India.  The State Commission was therefore very right in applying it to the Consumer Complaints in the impugned orders.

16.    In view of the details examined above, we find ourselves in complete agreement with the State Commission that reduction in the sum assured is neither legally sustainable nor permissible as per the scheme. We hold that the impugned order is based on correct appreciation of the law as well as the evidence on record. Therefore, it merits no interference by this Commission. Consequently, the appeals are dismissed for want of merit.