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Case Number

RP/2580/2012

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u/s 21(b) of the Consumer Protection Act, 1986

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Smart Summary

Structured Summary of Opinion delivered by Dr. B.C. Gupta, Presiding Member

Factual and Procedural Background

These 11 revision petitions concern a common question of law and fact involving interpretation of the National Agricultural Insurance Scheme (Rashtriya Krishi Bima Yojana) and related guidelines administered by the Agriculture Insurance Company of India (the petitioner), and arise out of consumer complaints by farmers claiming compensation for crop damage (e.g., due to deficient rainfall/drought) in Kustagi Taluka, Koppal District, Karnataka.

The petitions were filed under section 21(b) of the Consumer Protection Act, 1986 against an order of the Karnataka State Consumer Disputes Redressal Commission (the State Commission) dated 29.02.2012 (as identified in the opinion). The underlying consumer complaints had sought payment of insured loan amounts and compensation for mental agony arising from alleged failure of the Kharif 2002 groundnut crop and other crops.

Procedural history (as set out in the opinion):

District Consumer Forum, Koppal, initially dismissed earlier complaints (order dated 29.12.2009 after a prior decision), or in an earlier phase had allowed claims (order dated 30.09.2005) — those orders and appeals between forum, State Commission, and this Commission form part of the record.
The State Commission had allowed appeals by the complainants on the basis that the State Government had declared the area drought-affected, and had disbelieved the statistics furnished by the Directorate of Economics and Statistics as not being based on individual surveys.
The petitioner (Agriculture Insurance Company of India Ltd.) challenged the State Commission's order by way of revision petitions before this Commission; this Commission reviewed the matter and disposed of the 11 revision petitions together.

Legal Issues Presented

Whether the farmers are eligible to receive compensation under the National Agricultural Insurance Scheme for alleged crop losses, given (a) the Scheme's requirement of area-based (unit-area) assessment determined by crop-cutting experiments and threshold yield comparisons, and (b) a declaration by the State Revenue or other authorities that the area was drought-affected.
Whether claims under the Scheme can be settled on the basis of annavari (area-level drought declaration) or individual farmer declarations/annavari certificates, as opposed to the Scheme-prescribed area approach based on crop-cutting experiment data and threshold yields.
Whether the crop-cutting experiment data produced by State agricultural authorities (and used to calculate assessed yield) is the appropriate basis to allow or deny claims, and whether the complainants discharged any burden to show that such data was fabricated or erroneous.

Arguments of the Parties

Petitioner (Agriculture Insurance Company of India Ltd.) — Main Arguments

The Scheme (National Agricultural Insurance Scheme / Rashtriya Krishi Bima Yojana) settles claims on an area-approach basis: claims are determined by comparing assessed yield (from crop-cutting experiments) with the threshold yield for the defined unit area (e.g., taluka/block), not by individual farmer loss certificates.
The State Government supplied crop-cutting experiment data showing no shortfall in yield for groundnut and jawar in the relevant period; therefore, these farmers are not entitled to indemnity payments.
Claims cannot be decided on the basis of annavari declarations or gazette notifications declaring loss/drought for particular farmers; the Scheme's methodology (Shortfall in yield / Threshold yield x Sum Assured = Indemnity claim) must be followed.
The earlier order of this Commission dated 22.04.2009 correctly held that compensation must be based on crop-cutting experiment data and not on annavari declarations.

Respondents / Complainants — Main Arguments

The State Government had declared the taluka/area as drought-affected and granted remission of land revenue; therefore, the farmers should receive compensation.
The petitioners (insurance company and State agencies) failed to produce or adequately explain the crop-cutting experiment data and the basis on which yields were assessed; the crop-cutting experiments were alleged to not have been conducted in "real terms."
Counsel for respondents drew attention to an order of this Commission in Gujarat State Consumers Protection Centre & Anr. Vs. General Insurance Corporation of India & Ors. [III (2005) CPJ 1 (NC)], arguing that farmers should be compensated individually for losses to their crops.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Order of this Commission dated 22.04.2009 (referred to in the opinion)	Clarification in Frequently Asked Questions of the Scheme (Q.17): claims under the Scheme are to be settled strictly as per Scheme provisions and operational modalities; annavari/area declarations do not govern claim settlement.	The Court relied on this prior order to explain that compensation under the Scheme must be based on area-wise crop-cutting experiment data and threshold yield comparisons; it concluded that the lower fora had not followed this procedure and remitted/required reconsideration in accordance with the Scheme.
Gujarat State Consumers Protection Centre & Anr. Vs. General Insurance Corporation of India & Ors. [III (2005) CPJ 1 (NC)]	Appeared in submissions as authority suggesting farmers should be compensated individually for crop losses (as relied upon by respondents' counsel).	The opinion records that respondents' counsel relied on this authority to support individual compensation, but the Commission evaluated the Scheme's area-based methodology and prior clarifications and found compensation must follow Scheme provisions rather than individual annavari declarations.
FA No. 264/2010 — Agriculture and allied matters, Insurance Co. of India vs. Farmers Service Co-op. Society Limited (order dated 31.05.2016)	Held that a declaration by the Revenue Department that an area was drought-affected is of no consequence for entitlement under the National Agriculture Insurance Scheme; Scheme provisions govern.	The Court cited this recent Commission decision to support the proposition that Revenue declarations of drought do not displace the Scheme's requirement to base claims on crop-cutting experiment data and Scheme guidelines.

Court's Reasoning and Analysis

The Commission undertook a focused analysis framed by the Scheme's operational modalities and the record before the consumer fora. The Court's reasoning proceeded as follows:

Identification of the governing rule: The Scheme provides that claims are determined on an "area approach" (unit area such as taluka/block or equivalent) for widespread calamities and on an individual basis only for localized calamities. The Scheme relies on threshold yield and assessed yield derived from crop-cutting experiments to compute indemnity.
Review of the factual record: The District Forum had tabulated crop-cutting experiment data supplied by the Department of Agriculture and compared assessed yields with threshold yields. For sunflower there was a shortfall (and compensation had been paid), while for groundnut and jawar the assessed yield exceeded threshold yield and no indemnity was due. The State Commission had, however, given weight to the State Government's drought declaration and discounted the Directorate of Economics and Statistics' data because it was not based on surveys of individual farmers.
Application of Scheme principles to the dispute: The Commission reiterated that the Scheme's FAQ (Q.17) and prior orders clearly state that annavari or similar declarations by Revenue/Agriculture Departments do not determine claim settlement. Instead, the Scheme envisages compensation for area-wise yield differentials as assessed by crop-cutting experiments and threshold yields decided for the unit area.
Assessment of the parties' evidentiary contentions: The complainants alleged that crop-cutting experiments were not actually conducted and that the data supplied by State agencies was unreliable. The Commission rejected that assertion on the available record, observing that crop-cutting experiments are routine state departmental exercises, and the complainants had not proved that the Department's figures were wrong or baseless.
Reliance on prior Commission decisions: The Commission relied on its earlier order in FA No. 264/2010 (31.05.2016) holding that Revenue Department declarations of drought are of no consequence to the Scheme-dictated outcome, reinforcing that claims must be decided according to Scheme provisions.
Conclusion from analysis: Because the Scheme prescribes crop-cutting experiment data and threshold-yield comparisons as the determinative methodology, and because the complainants did not establish that the official yield data was unreliable, the State Commission's approach (treating the drought declaration as decisive and discounting area-wise assessed yield data) was erroneous.

Holding and Implications

Holding:

The revision petitions are allowed. The impugned order passed by the State Commission is set aside and the order passed by the District Consumer Forum (which dismissed the complaints on the basis that assessed yields exceeded threshold yields for the crops in question) is upheld.

Direct implications and orders made:

The District Forum's decision is restored as the correct application of the Scheme's provisions.
If any amounts were disbursed to farmers pursuant to orders in these proceedings, those amounts are to be recovered by the appropriate authorities from the farmers after following the prescribed procedure.
There shall be no order as to costs.

Broader implications: The opinion reiterates that entitlement under the National Agricultural Insurance Scheme must be determined according to the Scheme's area-based methodology and crop-cutting experiment data; it does not expressly purport to lay down a new, binding precedent beyond applying and reaffirming prior Commission guidance and decisions referenced in the opinion.

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AGRICULTURE INSURANCE CO. OF INDIA LTD. v. MANAGER, AGRICULTURE SERVICE CO-OPERATIVE BANK LTD. & 9 ORS.

-13- PER DR. B.C. GUPTA, MEMBER These 11 revision petitions are being disposed of through this single order, as a common question of law and fact, involving the interpretation of the Scheme and guidelines of the petitioner Agriculture Insurance Corporation of India, related to crop insurance for the farmers, is involved in all these cases.

2. The revision petitions detailed in the heading above, have been filed u/s 21(b) of the Consumer Protection Act, 1986 against the impugned order dated 29.02.2012, passed by the Karnataka State Consumer Disputes Redressal Commission (hereinafter referred to as the State Commission) in consumer complaints filed by the farmers, claiming compensation for damage to crops, due to rains/floods etc. As per this order, the order dated 29.12.2009, passed by the District Consumer Disputes Redressal Forum, Koppal, dismissing the said complaints, was set aside and the consumer complaints were allowed.

3. Briefly stated, the facts of the case are that the petitioner Agriculture Corporation of India Limited runs a Scheme known as the National Agricultural Insurance Scheme (Rashtriya Krishi Bima Yojana), under the aegis of the Ministry of Agriculture, Government of India, with the purpose to provide insurance coverage and financial support to farmers, in the event of failure of a notified crop, as a result of natural calamities etc. All farmers growing notified crops and availing Seasonal Agricultural Operations (SAO) loans from the financial institutions, known as the loanee farmers, are covered by the Scheme, whereas for other farmers, the Scheme was optional. The complainants in question are the Manager, Agriculture Service Cooperative Bank/Society and some farmers, being representatives of 291 farmers of Hanumanal, Hobli in Kustagi Taluka and they claimed crop insurance for Kharif 2002 ground-nut crop saying that they had availed crop loan of 18,96,550/- for the ground-nut crop and paid a total premium of 56,705/- through demand draft to the petitioner Agriculture Insurance Company of India. The complainants stated that the groundnut Kharif crop failed on account of less rainfall, and that the entire Kustagi Taluka was declared a drought affected area by the State Government. The farmers submitted a representation to the opposite parties / OPs which are the authorities of the State Government and also the petitioner Agricultural Insurance Company for the grant of compensation. The complainants filed the consumer complaints in question, seeking directions to the petitioner to award compensation of 18,96,550/- alongwith compensation for mental agony together with interest. As per the facts stated in the consumer complaints, different farmers had sown different crops like groundnut, jawar, sunflower etc. and had taken different amounts of loan from the financial institutions for growing their crops. In the consumer complaints, therefore, a prayer has been made for the grant of the loan amount, alongwith the compensation. -14-

4. It was stated in the written statement filed by the officers of the Department of Agriculture, State Government that the Agriculture Insurance Company of India was the nodal agency for implementing the Crop Insurance Scheme, and they were supposed to provide compensation, based on the data for threshold yield and actual yield for the crops under the Scheme. The Department of Agriculture stated that as per the data obtained by the crop-cutting experiments, there was no shortfall in yield / when compared with the average yield for the last 5 years and hence, the farmers were not eligible to get compensation under the Crop Insurance Scheme. It was stated by the officers of the Department of Revenue that a proposal was submitted to the Government for remission of land revenue after examining the Kharif crops bajra, jawar and ground nut and classifying them as good, medium and minimum.

5. The petitioner Agriculture Insurance Company Limited stated in their written version that the claims under the Scheme were settled on the basis of deferential yield, compared to the threshold yield of a crop in a particular season. The State Government had supplied the relevant data to them, based on the crop-cutting experiments for the crop in Kharif 2002-2003 season. They had settled all eligible claims of the farmers in respect of sunflower crop. However, there was no shortfall in yield in respect of jawar and groundnut crops, when compared to the threshold yield of these crops and hence, the farmers were not entitled to get the assured amount in such cases. It was stated that the sum assured was maximum limit and the claim was calculated as follows:-

Shortfall in yield / Threshold yield X Sum Assured = Indemnity claims

The petitioner stated that under the Scheme, there was no other methodology or basis for consideration of claims for compensation. It was specifically stated that the claims could not be given on the basis of annavari certificate or gazette notification of loss in yield, to individual farmers.

6. The District Forum after considering the averments of the parties, first decided the complaints on 30.09.2005 and allowed the claim on the ground that the Government had declared the area in question as drought area and granted remission of 100% of land revenue. They directed that the entire sum assured should be paid to the claimants for disbursement among farmers. A further amount was also awarded as compensation for mental agony etc. Being aggrieved against the said order, the petitioner filed appeals before the State Commission, which were dismissed vide order dated 23.01.07. Being aggrieved, the petitioners challenged the same before this Commission by way of revision petition which was allowed by this Commission on 22.04.2009. It was stated in the order of this Commission as follows:-

Dealing with the first set of cases, we only need to reproduce here the clarification on certain Frequently Asked Questions and answer to that by the Ministry of Agriculture, the mother of the Scheme, forming part of the Scheme and Operational Modalities of N.A.I. Scheme. -15- Question No. 17 and answer to that which forms part of the Scheme and Operational Modalities, reads as follows: Q.17: Whether annavari or any similar declaration/certification by the revenue or agriculture Departments of the State Govt. at village/block/district level has any bearing on claim settlement? Ans: No, claims under the Scheme are settled strictly as per the provisions and guidelines described in the foregoing 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. It flows from the above that mere declaration or area affected by drought would not make the insured eligible for any compensation for the simple reason that actual area-wise yield levels form the cropping season, and threshold level declared by the State Government are the basis, and threshold level declared by the State Government are the basis, and the difference between 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.

7. In pursuance of the above order, the consumer complaints were decided again by the District Forum, vide order dated 29.12.2009. All the complaints were ordered to be dismissed. While passing the said order the District Forum reproduced the figures of the threshold yield and the assessed yield in respect of various crops in Hanamappa Kustagi Taluka and concluded that in the case of sunflower only, there was shortfall in yield by 22 kg/hectare, for which the petitioner had already disbursed the compensation to the eligible farmers. However, in all other cases, the complainants were not eligible to get claims from the petitioner. The District Forum directed that -16- the amount already paid to the farmers should be refunded back by them. Being aggrieved against the said order of the District Forum, the complainants challenged the same by way of appeals before the State Commission. The State Commission, however, allowed the said appeals on the ground that the State Government itself had issued notification, declaring the area in question as drought area during the relevant time. The State Commission also observed that the statistics given by the Directorate of Economics and Statistics could not be relied upon, because they were not based on the survey conducted in respect of each individual farmer.

8. Being aggrieved against the above order of the State Commission, the Agriculture Insurance Co. Limited have filed the present revision petitions before this Commission.

9. During arguments, the Ld. Counsel for the petitioner has drawn attention to the salient features of the Scheme, as duly published and notified, saying that this Commission had rightly observed in their order passed on 22.04.2009 that compensation was to be allowed to the insured only on the basis of the data collected during the crop-cutting experiments to be done by the concerned Departments of the concerned State. Based on this data, there had not been any shortfall in the yield realised, as compared to the threshold yield and hence, the claims were not payable. The Ld. Counsel also stated that the claims could not be decided on the basis of the declaration made by the Revenue Department of the State Government with regard to drought etc. The Ld. Counsel stated that the Scheme was being run on area approach basis and not on individual approach basis. The order passed by the District Forum was, therefore, in accordance with law. The present revision petitions should, therefore, be accepted and the order passed by the State Commission be set aside and that of District Forum restored.

10. Per contra, the ld. Counsel for the respondents argued that the petitioners had failed to file relevant documents before the Consumer Fora below, explaining how the data was collected by the State Government agencies. He stated that the crop-cutting experiments were not conducted in real terms and hence the data furnished by the agencies was not correct. The complainants had made plea before the fora below for the production of such data and the basis on which it was collected, but the petitioners failed to produce the same. The Ld. Counsel has drawn attention to an order passed by this Commission in Gujarat State Consumers Protection Centre & Anr. Vs. saying that farmers General Insurance Corporation of India & Ors. [III (2005) CPJ 1 (NC)], should be compensated individually for losses to the crop. The order passed by the State Commission was, therefore, in accordance with law.

11. I have examined the entire material on record and given a thoughtful consideration to the arguments advanced before me. -17-

12. The main issue for consideration in all these matters is whether the farmers in question are eligible to be compensated under the terms and conditions of the Scheme, being run by the petitioners for alleged loss to their crops. The case of the petitioners is that as per the insurance Scheme being run under the orders of the Ministry of Agriculture, Government of India, the claims are decided on the basis of area approach, i.e., the defined areas for each notified crop for widespread calamities, and on individual basis for localised calamities, such as hailstorm, land-slides, cyclone, floods etc. The defined area / unit area of insurance may be gram panchayat, Mandal Hobali Circle, Firka Block, Taluka etc. as decided by the State Government. For the defined area, all the insured farmers growing that crop area were deemed to have suffered shortfall in their yields. The crops were notified and the areas were defined by the State Government at the beginning of each crop season (Kharif Rabi). Whenever a bank or financial institution disburse loan for an insurable crop, it also grants additional loan towards insurance charges. Since the loanee farmers were compulsorily covered, there was no requirement of filing any proposal form or issuance of policy to the farmers. Further, once the yield data was received from the State Government, the claims are worked out by the petitioners as per the declaration received from the financial institutions for each notified area. The petitioners then send the claims cheques to the respective nodal bank, which in turn disburse amount to the respective branches, which credit the account of the individual farmers.

13. The cases in hand are concerned with the crops of groundnut, jawar and sunflower in Kustagi Taluka of Koppal District in Karnataka. The District Forum in their order dated 29.12.2009 have tabulated the data, regarding the yield of these crops, based on the assessment made by the authorities of the Department of Agriculture on the basis of Crop-cutting Experiments, the District Forum compared the assessed yield with the threshold yield in each case and has drawn their conclusion. In those cases, where the assessed yield had been found to be less than the threshold yield, the petitioner company had already made calculation of the claim payable to eligible farmers. However, in other cases, the assessed yield was found to be more than the threshold yield, and as such the complainants were not eligible to get the claimed The District Forum concluded that in the case of groundnut and jawar crop, claimsamount. were not liable to be paid, because the average assessed yield was more than the threshold yield. The District Forum vide their order dated 29.12.2009, directed that the complaints in question should be dismissed. However, the State Commission in exercise of their appellate jurisdiction observed that the State Government had issued notification, declaring area in question as drought area during the relevant year. The State Commission observed that there was no doubt that the Directorate of Economics and Statistics had furnished the data to the effect that there had been no loss of crop or shortfall in the yield in the area, but these statistics could not be relied upon, as these were not based on the survey conducted in respect of each individual farmer. This view taken by the State Commission is, however, erroneous because as already discussed, the scheme in question operates on an area basis and the average assessed yield has to be taken into consideration, based on the data brought out by the crop-cutting experiments. The matter was considered in detail by this Commission, while passing the order dated 22.04.2009 already. It has been clearly observed that under the section, frequently asked questions, it had been stated in reply to question 17 that the claims are not to be settled according to declaration of flood, drought, Anawari by any agency/authority. It was also observed by this Commission that mere declaration of area affected by drought, would not make the insured eligible for any compensation for the simple reason that actual area-wise yield levels for the cropping season and threshold levels -18- declared by the State Government, are the basis and the difference between the two is actually compensated. It was observed by this Commission that the said procedure had not been followed by the consumer fora below and hence, the matter was remitted back to them for deciding the matter afresh. It is clear, therefore, from above that the view taken by the State Commission cannot be sustained, because the compensation cannot be given, based on the declaration of a particular area as drought affected area alone. The data provided by the concerned Department, assessing the yield of the crop, has to be taken into consideration, while deciding whether the compensation was payable or not.

14. The main line of argument taken by the ld. Counsel for the complainant says that there was no evidence that crop-cutting experiments were conducted and that the relevant data for assessment, has been supplied by the concerned Department, without any basis. This assertion of the complainant cannot be accepted by any stretch of imagination, because conducting crop-cutting experiments is a routine exercise, undertaken by the concerned Departments of the State Governments. The complainants have not been able to prove anywhere, that the figures given by the said Department were wrong or without any basis.

15. In a case recently decided by this Commission in FA No. 264/2010, Agriculture and allied matters, an Insurance Co. of India vs. Farmers Service Co-op. Society Limited order was made on 31.05.2016 and it was held as follows:-

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. Based on the discussion above, it is crystal clear that the decision about payment of compensation to the farmers insured under the National Agriculture Insurance Scheme, being run by the petitioner has to be taken in accordance with the provisions laid down under the Scheme. The order passed by the District Forum, therefore, reflects a correct appreciation of the facts and circumstances on record. The present revision petitions are, therefore, allowed and the impugned order passed by the State Commission is set aside. The order passed by the District Forum is upheld. It is made clear that if any amount has been disbursed to the farmers in pursuance of any order, passed in proceedings in these cases, the said amount shall have to be recovered by the appropriate authorities from the farmers, after following the procedure laid down. There shall be no order as to costs. -19- ...................... DR. B.C. GUPTA PRESIDING MEMBER -20-

AGRICULTURE INSURANC... v. MANAGER, AGRICULTURE...