The Osmanabad District Collector in Maharashtra sought to recover ₹374.6 crores (~USD 45M) from Bajaj Allianz (BAGIC) under the Maharashtra Land Revenue Code because of claims allegedly due under the Pradhan Mantri Fasal Bima Yojna. With our assistance, BAGIC filed a writ petition, which was allowed by the Bombay High Court (Aurangabad Bench), resulting in the quashing of the District Collector's direction.
Background
BAGIC was selected to implement the PMFBY Scheme, a nationwide crop insurance scheme, in the Osmanabad District of Maharashtra. In September/October 2021, unseasonal rains damaged the soybean crops, leading to more than 300,000 farmer claims.
Based on a sample survey, the State of Maharashtra directed BAGIC to pay ₹ 748.61 crores (~USD 90M). BAGIC disbursed ₹374.61 crores but withheld the balance relying on clause 21.5.10.1 of the PMFBY Revised Operational Guidelines (ROG), which provides that if adverse weather occurs within 15 days of "normal harvest" (the actual harvest dates), claims must be assessed on a 50:50 basis: 50% by a sample survey, and 50% through Crop Cutting Experiments (CCEs).
The CCE data demonstrated that actual yields exceeded the threshold yields in all 42 crop circles. This meant that no further loss was payable. The State disagreed. It said that "normal harvest" had to be interpreted based on the crop calendar it had issued, not the ROG and clause 21.5.10.1.
The District Collector then invoked the Maharashtra Land Revenue Code (MLRC) to attach BAGIC's accounts and recover the alleged balance due of ₹374 crores.
BAGIC filed a writ petition with the Bombay High Court (Aurangabad Bench). In parallel, famers' representatives also filed a PIL demanding that BAGIC pay the remaining ₹374 crores.
Decision
The Bombay High Court quashed the District Collector's order and dismissed the PIL, holding as follows:
- No jurisdiction under the MLRC: The State's invocation of the MLRC to recover dues under the PMFBY scheme was without jurisdiction. Claim payments under scheme are contractual obligations payable directly to farmers and cannot be equated with land revenue recoverable by the State. Crops cannot be treated as "benefits arising out of land".
- "Normal harvest" means actual harvest: The rains in question fell within 15 days of the normal harvest, so squarely within the time period allowed by clause 21.5.10.1.
- CCE Data is Determinative: The CCE data is the cornerstone for claim assessments in crop insurance. Since the actual yield was greater than the threshold yield, no further disbursement by BAGIC was due.
- Maintainability of Writ: Rejecting a writ petition on the ground of the availability of an alternate remedy is a "matter of prudence, not a rule of law". The grievance redressal mechanism provided under the ROG was not an "efficacious remedy", and thus the writ petition was maintainable. The Court also ruled that issues relating to the interpretation of a contract can be decided in a writ petition.
- The PMFBY Scheme Prevails: Issues of indemnification under the PMFBY scheme are to be decided based on the four corners of the scheme and the ROG, and BAGIC had acted within the framework of the scheme.
Conclusion
The Bombay High Court's ruling is a significant win for Insurers, affirming their right to rely on the contractual terms and scientific data under the PMFBY, while curbing overreach by state recoveries. The key takeaway: public insurance schemes must operate within their defined frameworks, ensuring fairness, transparency, and protection for all stakeholders.
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