Rashtriya Kisan Mazdoor ... vs Union Of India Thru' Secy. & 3 ...
2015 Latest Caselaw 2916 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

AFR
 
Chief Justice's Court
 

 
Case :- PUBLIC INTEREST LITIGATION (PIL) No. - 26615 of 2015
 

 
Petitioner :- Rashtriya Kisan Mazdoor Sangathan Thru' Its Convenor
 
Respondent :- Union Of India Thru' Secy. & 3 Others
 
Counsel for Petitioner :- V.M. Singh (In Person)
 
Counsel for Respondent :- C.S.C.,A.S.G.I./2015/1005,Abhijeet Mukherjee,Purshottam Maurya,Vikas Budhwar
 

 
Hon'ble Dr. Dhananjaya Yeshwant Chandrachud,Chief Justice
 
Hon'ble Yashwant Varma,J.

On 5 August 1998, the Reserve Bank of India1 advised banks to introduce a Kisan Credit Card Scheme on the lines of a scheme which was prepared by the National Bank for Agriculture and Rural Development.2 Subsequently, revisions took place on 4 October 2004 and on 11 May 2012. Prior to 7 August 2011, crop insurance was not compulsory. It came to be made compulsory by a circular of the RBI dated 7 August 2012.

The Union Government in the Department of Agriculture issued a circular on 4 February 2014 on the National Crop Insurance Programme3 / Modified National Agricultural Insurance Scheme4. The salient aspect of the scheme envisages the selection of an insurance company from amongst empanelled insurance companies of the Department of Agriculture in the Union Government by the State Governments which implement the scheme in the States. At the level of the State Governments, the department which was looking after the implementation of the National Agricultural Insurance Scheme5 and Weather Based Crop Insurance Scheme6 was designated as the nodal department for implementation of the MNAIS component of NCIP. A State Level Coordination Committee on Crop Insurance7 which was overseeing the implementation of the erstwhile NAIS was authorized to oversee the implementation of MNAIS. All farmers, including sharecroppers and tenant farmers growing notified crops in notified areas were eligible for coverage. The compulsory component of the scheme envisages that all farmers availing of Seasonal Agricultural Operation8 loans from financial institutions for notified crops would be compulsorily covered. The scheme is optional for non loanee farmers. The scheme envisages that the nodal bank system under the erstwhile pilot scheme will continue after MNAIS. The implementing insurance company is required to deal with the designated nodal bank branches generally at the district/regional level.

RBI has stated that a review of the data in respect of the number of farmers covered to gauge the implementation of NCIP is done in district level review committee meetings on a quarterly basis in all districts chaired by the District Collectors, besides being attended by RBI representatives. A review of crop insurance is part of the agenda of such meetings. At the State level, the State Level Banker's Committee9 holds meetings which are attended by officers of the RBI.

On 24 July 2015, RBI addressed a communication to the controllers of the concerned banks in the State of Uttar Pradesh, inter alia, highlighting the following concerns:

"During the course of deliberations in various fora i.e. SLBC Committee Meetings held on February 25, 2015 and June 26, 2015; and High Level Round Table Conference held on June 15, 2015 by the Government of Uttar Pradesh and chaired by the Chief Secretary, several concerns were expressed by officials of the State Government on the shortcomings on the part of the bank branches in the implementation of the insurance schemes under the National Crop Insurance Programme. It has been brought to our notice the instances wherein bank branches have not debited the account of the loanee farmer with insurance premium for covering eligible crops, such premia after debiting have not been remitted to the office of the concerned insurance company in time and also that bank branches have failed to pass on the insurance claims received from the insurance companies to the concerned beneficiary farmers for various reasons. It is a matter of serious concern that occurrence of such shortcomings and irregularities, besides putting the concerned farmers to avoidable hardships and difficulties, also deprives them of the benefit of the crop insurance scheme, which in turn may have adverse effect on the sustainable living of the farmer." (emphasis supplied)

In the State of Uttar Pradesh, as on 31 March 2015, the responsibility of implementing the scheme has been assigned to nine lead banks between whom the seventy five districts of the State are distributed. These banks are (i) Bank of Baroda; (ii) Allahabad Bank; (iii) Punjab National Bank; (iv) Union Bank of India; (v) Syndicate Bank; (vi) Bank of India; (vii) State Bank of India; (viii) Central Bank of India; and (ix) Canara Bank.

Since the petition raises issues in regard to the implementation of the scheme, this Court by its order dated 12 May 2015 called for counter affidavits from the State Government, the Union Government and RBI. RBI has in its affidavit set out details in regard to the scheme which have been adverted to in the earlier part of this order. As we have noted above, on 7 August 2012, RBI issued a circular notifying a revised Kisan Credit Card Scheme under which, inter alia, it was envisaged that coverage under the MNAIS would be compulsory for farmers availing of loans for Seasonal Agricultural Operations from financial institutions. Clause 24.4 provides for the roles and responsibilities of financial institutions/banks in the following terms:

"24.4 Role & Responsibilities of Financial Institutions/Banks:

24.4.1 For purpose of MNAIS, scheduled banking institutions engaged in disbursing Seasonal Agricultural Operations (SAO) loans as per relevant guidelines of NABARD/RBI shall be reckoned as Banks.

24.4.2 The existing system of Nodal Banks under erstwhile NAIS would continue to service the MNAIS. The Banks in States which have not implemented NAIS, would create the Nodal Bank system.Each Scheduled Commercial Bank/Cooperative Banks/Regional Rural Bank shall fix Nodal Points which would deal with insurance companies on behalf of its branches in the District/Region/State. However,

a. Commercial Banks will consider designating Nodal Bank-Branches at District level. Preferably, controlling branch in that area may be designated as Nodal Bank.

b. Cooperative Banks may designate District Central Cooperative Banks (DCCB) as Nodal Bank.

c. Regional Rural Banks (RRB) may designate their Head Office as Nodal Bank.

d. Nodal Bank shall be responsible for discharging their assigned roles under the Scheme on behalf of its branches, in its designated jurisdictional area.

24.4.3 Notification, as well as other directives, guidelines, etc., shall flow as insurance company - Nodal Bank - Service (subordinate) Bank Branch/PACS. While compensation remittance to and from insurance companies shall follow same route, the remittance of premium shall follow the reverse route."

Clause 24.4 also lays down the functions of the nodal bank, lending banks and roles of financial institutions. Roles and responsibilities have also been assigned, inter alia, to insurance companies. RBI has filed a supplementary affidavit during the course of the proceedings setting out details of the Crop Insurance Scheme including the payment of premium for the State as well as the disbursement of insurance claims to beneficiary farmers. The data which has been furnished indicates that as on 19 August 2015, Syndicate Bank had debited a total amount of Rs.5.78 crores by way of premium which was remitted to the insurance company. Union Bank of India as on 31 August 2015 had debited insurance premium of Rs.4.76 crores of which an amount of Rs. 4.53 crores was remitted to the insurance company. An amount of Rs.29,39,509/- is stated to have been rejected by the insurance company. Annexure B to the statement sets out the position in regard to disbursement of insurance claims to beneficiary farmers. For the aforesaid two banks, it appears that as on 19 August 2015, Syndicate Bank had disbursed an amount of Rs.13.29 crores out of the insurance claims of Rs.16.42 crores, whereas Union Bank of India as on 31 August 2015, disbursed Rs. 9.61 crores out of the total claims received leaving in balance an amount of Rs.12.43 lacs.

In the affidavit which has been filed by the Senior Economist in the State Ministry of Agriculture, it has been stated that the State Government has implemented NCIP and MNAIS in 65 districts and the WBCIS in 10 districts. Details of the amounts which have been paid for 2014-15, are set out in the following table:

Claim amount paid in 2014 - 15

Season

Insured Farmer

(In Lakh)

Benefited

farmer

(In Lakh)

Claim amount paid (In Crore Rs.)

Kharif - 2014

7.36

3.22

156.26

Rabi -2014-15*

9.52

6.38

398.15

* It is tentative

The State Government has pointed out that under NCIP, there are three stakeholders, namely, the insurance company, the State Government and financial institutions which distribute crop loans, for the implementation of insurance schemes. It is the duty of the financial institutions to ensure that the premium is deducted on the loans disbursed for notified crops in a notified area. Upon deduction of the premium, the requisite details have to be furnished to the insurance company. Information pertaining to crop loans of notified insurance units is made available to the concerned bank and hence, the bank would be held responsible for not covering the whole loan distributed for the notified crop under the Crop Insurance Scheme. The circular issued by the Government of India on 31 May 2014, clearly specifies that if as a result of the mistake of the nodal bank/branch a farmer is not able to obtain the benefit of insurance, then and in such an event, the concerned agency will be held liable and would be bound to compensate the farmer.

The affidavit which has been filed on behalf of the Union of India in the Ministry of Agriculture sets out the salient features, inter alia, of MNAIS, WBCIS and of NCIP. Significantly, the affidavit of the Union Government also accepts the position that since all loanee farmers are automatically covered under the scheme, it is mandatory for the banks to deposit the premium with the insurance company. Since the scheme has been made compulsory for loanee farmers, the premium collection and disbursement of claims is automatic and does not involve any aspect of consent or agreement. The scheme operates on an area approach basis and the assessment of crop loss is made on the basis of the unit area of insurance which is decided by the implementing state. The figures which have been provided in the affidavit would indicate that in the State of Uttar Pradesh, an amount of Rs.1317 crores has been disbursed against claims of Rs.1619 crores.

Evidently, concerns do subsist in the context of the State of Uttar Pradesh particularly, having regard to the unseasonal heavy rains and hailstorms which took place in 2014-15 as a result of which the rabi crops suffered a heavy loss. The figures which have been supplied by the State Government indicate that 73 districts were affected by natural calamity. The total affected area works out to about 84.09 lac hectares. The estimated damage is stated to be Rs.7543.14 crores. In this background, the concerns which have been expressed by the RBI in its letter dated 24 July 2015 are disturbing and directly impinge on the right to life of the farmers under Article 21 of the Constitution. These concerns emerged, inter alia, out of the SLBC meetings which took place in the months of February and June 2015 and a conference which was chaired by the Chief Secretary of the State Government on 15 June 2015. The State Government pointed out several shortcomings on the part of the implementing banks. These shortcomings include cases where the branches concerned had not debited the account of the loanee farmer with insurance premium for covering eligible crops. In other cases, despite debiting the premium, steps were not taken to remit the premium to the office of the concerned insurance company. In certain cases, the branches of the banks had failed to pass on the insurance claims received from the insurance companies to the beneficiary farmers. Such instances defeat the object and purpose of the Scheme and cause untold hardship to the farmers. The monitoring mechanism has been put into place under the scheme must be made effective by proper coordination between the Union and the State Governments and RBI.

In the present proceedings, none of the nine lead banks which are connected with the scheme are before the Court. In the very nature of things, it may not be possible for the Court to monitor compliance by each of the lead banks separately with reference to the areas within their own jurisdiction. The purpose of envisaging a monitoring mechanism is to ensure that the implementation of the scheme is duly assessed and shortcomings are rectified. Evidently, the monitoring mechanism needs to be geared up by the RBI, the Union Government and the State Government since the admitted figures which have been placed before the Court are indicative of the fact that despite the existence of a review mechanism there are serious deficiencies in the implementation of the scheme.

In the circumstances, we issue a direction to the effect that in the course of the SLBC meetings which will take place under the scheme, as envisaged, due and proper steps shall be taken to monitor compliance and to hold any bank in default accountable for its obligations in terms of the scheme. The scheme, as we have observed earlier, envisages that since coverage has been made compulsory in the case of the loanee farmers, any default in compliance should not be placed at the door of the unfortunate farmer who has no option on whether or not to consent to be covered by the scheme. This evidently makes it obligatory on the part of the implementing agency to ensure that the obligations under the scheme are fulfilled and benefits are passed on. From this perspective, it is but necessary and proper that all the stakeholders in the process including the Union of India, State Government, Reserve Bank of India, financial institutions and insurance companies ensure that the performance of the scheme including the discharge of obligations under the scheme by the agencies concerned is duly monitored and steps are taken to enforce accountability. We, accordingly, issue a direction to that effect and direct that all the concerned stakeholders shall take necessary and proper steps to ensure that the purpose of the scheme is not defeated and the object of alleviating the hardship of the farmers is fulfilled.

The petition is, accordingly, disposed of. There shall be no order as to costs.

Order Date :- 6.10.2015

VMA

(Dr. D.Y. Chandrachud, C.J.)

(Yashwant Varma, J.)