Crop Insurance: Bank of Baroda, Agriculture Insurance Company Ordered To Pay Insured Amount with 9% Interest under PMFBY
Moneylife Digital Team 10 July 2024
In a big relief to farmers from Khandwa district in Madhya Pradesh (MP), the national consumer disputes redressal commission (NCDRC) held Bank of Baroda (BoB) and Agriculture Insurance Company of India Ltd responsible for furnishing inaccurate information and not taking timely action to reconcile the details for the crop insurance scheme. NCDRC directed them to pay the sum insured to the farmers along with an interest at 9%pa (per annum) from the date of complaint. About ten farmers from Khandwa district approached the consumer forum after failing to receive insured money under the Pradhan Mantri Fasal Bima Yojana (PMFBY).
In an order last week, the NCDRC bench of Dr Inder Jit Singh (presiding member) says, "In 10 cases covered under this order (20 revision petitions-RPs, 10 filed by the insurance company and 10 filed by the Bank), as the BoB furnished inaccurate or incomplete details, which were material information for insurance company to issue the insurance policy, we hold that in all these cases, the Bank is responsible for furnishing of inaccurate information. The insurance company is also responsible for not taking timely action to reconcile the details and/ or take up the matter with the Bank to rectify mistakes or inaccuracies, taking a decision, whether accepting or rejecting the proposal and refunding the premium within a reasonable period of about three months. Hence, in these 10 cases, Agriculture Insurance Company and Bank of Baroda are held liable jointly." 
"In these cases, although we may not agree with some of the observations of the state commission, in view of our detailed observations and findings, we are in agreement with the final decision of the state commission with respect to both the insurance company and Bank being liable jointly and to share the liability. Hence, we direct that in these 10 cases, Agriculture Insurance Company and Bank of Baroda will share the liability of sum insured to the complainants - farmers in equal proportion, i.e. 50:50," the bench says.
These cases are related to the insurance coverage of loanee farmers who were compulsorily insured under the PMFBY for the Kharif 2017 season for soybean. For the 2017 Kharif season, the Union government, in a letter on 12 July 2017, directed head offices of all banks that insurance proposals for the Kharif crops can be accepted only through the crop insurance portal and premium subsidies from Union and state government will be released only against persons insured through the crop insurance portal. 
Due to natural calamity, these farmers' crops were destroyed. As the Agriculture Insurance Company, the designated insurance company, did not pay the requisite insurance claims, these farmers approached the district forum concerned.
The district forum vide various orders allowed the complaints holding the insurance company solely liable and directed Agriculture Insurance Company to pay the claims or compensation. 
Aggrieved by the orders of the district forum, Agriculture Insurance Company filed appeals before the MP state commission. The state commission, vide various orders, modified the orders of the district forum, holding both Agriculture Insurance Company and BoB liable jointly and severally in equal proportion.  
Aggrieved by the orders of the state commission, both Agriculture Insurance Company and BoB approached NCDRC.
During a hearing on 19 January 2024, Agriculture Insurance Company and BoB categorically stated that they are contesting the present RPs filed by them regarding their liabilities against each other and not contesting the farmers' entitlement to the benefits under the PMFBY.  
According to the Bank, it is the Agriculture Insurance Company that is liable for the claims for the losses suffered by the farmers while, according to the insurance company, it is BoB that is liable for the losses suffered by the farmers. 
Dr Singh from NCDRC observed that the main issue is not about the entitlement of insurance claims of farmers but the liabilities of the insurance company and the bank for the losses suffered by farmers. 
The counsel representing the Agriculture Insurance Company submitted that details sent by BoB were incomplete or incorrect and were sent after the prescribed timeline, and in many cases, even the names of the farmers were missing. NCDRC directed the Agriculture Insurance Company to file a chart showing details of the ten cases and the nature and extent of incompleteness or incorrectness of information sent by the Bank.
In addition, the insurance company was directed to file copies of correspondence they made with the Bank, after receipt of such incomplete or incorrect details and whether they got any reply from the Bank.
The counsel for BoB submitted that the farmers had availed Kisan credit card agriculture loans for soybeans, which were insured by the Agriculture Insurance Company. On 21 August 2017, the consolidated insurance premium amount was remitted to the insurance company by BoB in respect of 512 farmers. 
The counsel also shared information on communication and reminders sent by BoB to the Agriculture Insurance Company regarding details of the farmers.
However, the counsel for the Agriculture Insurance Company pointed out that due to an error on the part of BoB, the details of the ten farmers from the Khandwa district were neither uploaded on the crop insurance portal nor was the same supplied in the 34-column Excel sheet by 2 July 2018, in terms of the Union government letter on 23 May 2018. 
He says, "Although Agriculture Insurance Company received a consolidated premium of Rs12.12 lakh on 21 August 2017, for the entire Khandwa region, out of the list of 512 farmers, only one entry was made on NCIP by Bank of Baroda. Despite repeated communications from the insurance company, BoB did not submit the complete and correct details of the farmers. Even the details finally submitted by the Bank on the finally extended timeline of 30 November 2018, which were submitted after office hours on that day i.e. at 22:05 hours, were incorrect and incomplete." 
Due to errors, omission, or commission committed by BoB, the farmers were deprived of their soyabean crop insurance cover, he added.
The counsel for BoB argued that on 30 November 2018, the requirement of uploading on the portal had already been undertaken in spite of glitches. "The role of the Bank is of a mere facilitator. Recognising this, the district forum ordered insurance benefit payments by the insurance company, and the state commission went wrong in fixing liability on both the Bank and Agriculture Insurance Company jointly and severally. The premium was refunded (by Agriculture Insurance Company) after a gap of more than four years, i.e. on 26 October 2021. As Agriculture Insurance Company retained the premium for such a long time and enjoyed the benefits of such retention, it alone had to compensate."
Talking about the delay in refunding the premium, NCDRC says, "It was incumbent on Agriculture Insurance Company, on having received the proposal and premium during August 2017, to have processed the same within a reasonable period of about one to two months and taken a final decision, either to accept the proposals or reject the same giving reasons thereof or referred the matter back to Bank of Baroda for rectifying the defects or errors, by giving case and farmers wise list of deficiencies or inaccuracies. Had such an exercise been done, this situation could not have arisen."
The bench noted that PMFBY is a multi-agency scheme with well-defined roles of banks, insurance companies and other stakeholders, who are all expected to work together in a coordinated way to achieve the scheme's objectives and to ensure that farmers' interests are protected. "The insurance company ought to have facilitated BoB in timely submission of proposals with complete and correct details and its uploading on the portal. In the facts and circumstances of the present cases, Agriculture Insurance Company have also failed to discharge its role properly and effectively. Hence, we hold that in these cases, Agriculture Insurance Company is equally responsible and liable to compensate the farmers."
"It was a collaborative exercise, where both Agriculture Insurance Company and Bank of Baroda were to play an active role, but both have failed in the proper discharge of the duties and responsibilities envisaged under the scheme guidelines. Hence, both are held responsible and liable to compensate the affected farmers, jointly and severally in equal proportion," NCDRC says.
NCDRC also directed BoB to rectify all the defects, provide complete and correct details in all ten cases and return the refunded premium to the Agriculture Insurance Company within 30 days of the order. "As regards insurance premium subsidy from the state or Union government with respect to these cases is concerned, the insurance company shall make an application to the concerned authority within two weeks of this order as per prescribed procedure, citing this order. The concerned authorities of state and Union governments shall consider such request for the release of premium subsidy in these cases notwithstanding the delay and non-uploading of details on the portal, subject to other usual verification. In these cases, the final decision of the state commission is upheld with suitable modifications and RPs are disposed off accordingly," the order says.
(Revision Petition No1588 of 2022 Date: 3 July 2024)
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