The Bombay High Court set aside notices issued by the Maharashtra government demanding payment of about ₹374 crore from Bajaj Allianz General Insurance Company (BAGIC). The demand purported to require BAGIC to reimburse farmers in Osmanabad district for losses to their soybean crops caused by unseasonal rains, which the government had classified as a “localized calamity” under the Pradhan Mantri Fasal Bima Yojana (PMFBY).
Under the terms of the PMFBY, the State had entered into a Memorandum of Understanding with BAGIC to insure crops against “non-preventable natural risks” spanning pre-sowing through post-harvest phases. BAGIC contended that, following the operational guidelines in force at the time (the Revamped Operational Guidelines, or “ROG”), it had already paid out approximately ₹374.61 crore to farmers across all 42 circles in Osmanabad district for damages attributed to those rains, which occurred between September 23 and October 10, 2021. Soybean harvesting in that district had begun before the calamity, on September 17, 2021, and continued until November 11, 2021.
The State, however, disputed that, asserting that harvesting normally falls between October 15, 2021 and November 15, 2021, and argued that BAGIC should have paid the full amount of losses, not merely 50% of claims, as per its understanding of its obligations. On that basis, the State authorities issued communications demanding the additional payment and even directed that BAGIC’s bank accounts be frozen, claiming the amounts due were recoverable as arrears of land revenue under the Maharashtra Land Revenue Code, 1966.
BAGIC challenged those actions in High Court. The Court’s Division Bench (Justices Manish Pitale and Yanshivraj Khobragade) examined whether the demands and recovery steps were legally sustainable. The Court found several infirmities. It held that under the MoU, payments under the crop insurance scheme were made directly to the individual farmers and that the beneficiaries of the insurance contract were those farmers, not the State itself. Thus, the State had no legal basis to treat the amounts as something recoverable from the insurer in a land-revenue context. The MoU did not contain any clause treating amounts under it as arrears of land revenue, which is required if recovery under land-revenue law is to be valid.
The Court also considered crop yield data for the 42 circles of Osmanabad. It observed that actual yields exceeded the threshold yields in all of them. Since threshold yield is a benchmark under the scheme below which losses are adjudged, the excess yield indicated that the farmers had not suffered losses below threshold level; therefore, the Court was unable to agree with the State’s claim that BAGIC was being “rapacious” or that it had inappropriately withheld full amounts.
On these bases, the High Court quashed the notices demanding additional payment and ordered that the steps of freezing bank accounts etc. be set aside. The writ petition filed by BAGIC was disposed of in its favor, with the Court holding in effect that the State’s demand was not legally sustainable given the terms of the MoU, the scheme guidelines, and the factual yield data.
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