'Crop Insurance Not Like Commercial Policy' : Supreme Court Affirms Direction To Insurer To Compensate Farmers For Harvesting Loss

The Supreme Court bench comprising Chief Justice U.U. Lalit and Justice Ravindra Bhat, on Monday, 5th September 2022, upheld the Bombay High Court's order directing Bajaj Allianz General Insurance to compensate, under the Pradhan Mantri Fasal Bima Yojana, 3,57,287 farmers in the Osmanabad District of Maharashtra for post harvesting losses caused to Soya bean Crop in the Kharif Season 2020 on account of heavy rainfall.

While addressing the submissions of Senior Advocate Vivek Tankha, appearing for Bajaj Allianz, that there were different policies for National Disaster Relief as opposed to localised incidents and that the company would be "adversely affected" since they were offering compensation even to farmers who had not filed claims within the 72-hour period, according to the policy document, the bench stated–

"This is a human problem and not an ordinary commercial policy. You are treating it as a commercial policy."

Accordingly, the court also rejected the Solicitor General Tushar Mehta's argument that the state was planning to challenge the part of the judgement that made the government responsible for paying insurance payout to the farmers in case the company is not able to do so.

The court remarked that–

"These kinds of incidents are going to increase with climate change. What would happen if you continued to exclude farmers from the policy?...The claimants are poor farmers who may not have the wherewithal to lodge a claim within 72 hours...Crop insurance for farmers is of a very different nature and it affects the very existence of the farmer and his family."

With this, the court upheld the Bombay High Court's decision.

CJI Lalit, while narrating the order, stated that–

"Mr Vivek Tankha, learned Senior Advocate, has relied upon the affidavit in response filed on behalf of Respondent no. 2 in the instant Special Leave Petition. He has also invited our attention to paragraph 75-80 of the orders passed by the Division Bench of the High Court, which is presently under challenge. Having considered the entirety of the matter, in our view, the conclusions drawn by the High Court call for no interference in our jurisdiction under Article 136(1) of the Constitution. The instant Special Leave Petitions therefore are dismissed. The amount of Rs. 200 crores which was deposited in the registry of this court along with interest accrued thereon shall now be remitted to the credit of the District Treasury and the disbursement form out of that sum as well as any additional claims shall be done strictly in accordance with law under the supervision of the District Collector."

Bombay High Court's Order

In the impugned order, the High Court noted that it is not in dispute that the Union of India had floated a scheme namely Pradhan Mantri Fasal Bima Yojana 2020 which was applicable for three years; that the state of Maharashtra was implementing the said scheme and had issued Government Resolution dated 29th June, 2020 through the department of Agriculture. It noted that Clause 7 of the said scheme provided for the protected object of the said scheme; that Clause 7.5 provided for post harvest losses; that the said scheme was applicable to large number of agriculturists in the district; that the state government had executed memorandum of understanding with the insurance company for implementation of the insurance scheme; and that the state government was a nodal agency between the agriculturists and the insurance company.

The High Court further observed that the insurance company did not dispute that there was a post harvesting loss for Soyabean crop in Kharip season 2020 due to heavy rain during the month of October 2020; that the insurance company however, has though cleared claims of large number of agriculturists, though made after 72 hours of the incident, did not pay the claims of large number of agriculturists including these petitioners on the ground that there was no intimation or complaint made by the agriculturists within 72 hours and thus they were not entitled for such benefit under the said scheme; that the insurance company also has not disputed that due to such heavy rainfall during the relevant period, the phone lines of the agriculturists were affected and it was not feasible to intimate the insurance company within a period of 72 hours, and that the said heavy rain fall continued for number of days.

"The insurance company has acted illegally and arbitrarily. The Insurance company has already paid large number of similarly situated agriculturists without those agriculturists availing any alternate remedy pursuant to the directions issued by the state government or otherwise. Two of the petitioners have filed public interest litigation considering he huge loss and trauma suffered by large number of agriculturists of Osmanabad district. The alternate remedy in this situation would not be an efficatious alternate remedy. In our view, the petitioners have thus made out case for reliefs claimed", the High Court had held.

CASE TITLE: M/S BAJAJ ALLIANZ GENERAL INSURANCE CO. LTD. v. DNYANRAJ & ORS. SLP(c) 10391/2022