Amount Due Under Crop Insurance Contract Not Recoverable As Land Revenue Under MLR Code: Bombay High Court - 2025-09-20

Bombay HC: Insurance Payouts Under PMFBY Not 'Land Revenue'; Backs Insurer's Assessment Method

MUMBAI: In a significant ruling on the implementation of the Pradhan Mantri Fasal Bima Yojna (PMFBY), the Bombay High Court has declared that amounts allegedly due from an insurance company under the scheme cannot be recovered as arrears of land revenue. The Aurangabad bench, comprising Justice Manish Pitale and Justice Y. G. Khobragade , quashed recovery notices issued by the Maharashtra government against Bajaj Allianz General Insurance Co. Ltd., including an order to freeze its bank account for over ₹374 crores.

The court held that the state authorities acted "wholly without jurisdiction" by invoking the Maharashtra Land Revenue Code, 1966 (MLR Code) to enforce a contractual insurance claim. It also delved into the merits of the dispute, upholding the insurer's interpretation of the scheme's guidelines for calculating crop loss, thereby absolving it of any further liability.

Case Background

The dispute arose from crop insurance claims for the Kharif 2021 season in Osmanabad district. Farmers, insured by Bajaj Allianz under the PMFBY, suffered crop damage due to unseasonal rains—a "localized calamity"—between September 23 and October 10, 2021.

Following a joint sample survey, Bajaj Allianz disbursed ₹374.61 crores to the affected farmers. However, the State of Maharashtra contended that this payment represented only 50% of the total assessed loss and demanded an equivalent additional amount. When the company refused, the District Collector of Osmanabad initiated recovery proceedings under the MLR Code, culminating in an attachment warrant to freeze the insurer's bank account.

Bajaj Allianz challenged these actions in a writ petition, while a group of farmers filed a Public Interest Litigation (PIL) supporting the state's demand.

The Core Arguments

Bajaj Allianz's Position:

• Jurisdiction: The company argued that the MLR Code is meant for recovering government dues related to land, not for settling contractual disputes under an insurance policy. The amount claimed is not "land revenue" as defined under Section 2(19) of the Code.
• Merits: The insurer asserted that it correctly applied Clause 21.5.10 of the PMFBY's Revamped Operational Guidelines (ROG). This clause mandates that if a localized calamity occurs within 15 days of the "normal harvest," loss assessment must be based on a 50:50 weightage of a sample survey and Crop Cutting Experiments (CCEs). Bajaj Allianz argued "normal harvest" means the actual start of harvesting, which, according to the state's own CCE records, began on September 17, 2021. Since the calamity occurred within 15 days of this date, they paid the 50% based on the sample survey. The remaining 50% depended on CCE data, which showed that the actual crop yield was higher than the pre-determined threshold yield, indicating no further payable loss.

State of Maharashtra's Position:

• Jurisdiction: The state claimed the amount was recoverable as land revenue because crops are "benefits arising out of land," bringing the insurance contract under the ambit of the MLR Code.
• Merits: The government argued that "normal harvest" refers to the notified harvest period in the state's official crop calendar, which was October 15 to November 15, 2021. Since the calamity occurred before this period, the 50:50 rule was inapplicable. They insisted that the entire 100% compensation should be based on the sample survey alone, which indicated a near-total loss.

Court's Pivotal Findings

The High Court decisively sided with the insurance company on both grounds of jurisdiction and merits.

On Jurisdiction:

The bench found the state's attempt to use the MLR Code for recovery to be a gross misapplication of law. It observed that for an amount to qualify as "land revenue," it must be a sum legally claimable by the state on account of land held by the person from whom it is being recovered.

The Court noted, "...the amount being claimed from the petitioner - insurance company falls [outside] the four-corners of ‘land revenue’... even if the amount is found to be payable... it is payable to the individual farmers... it is not legally claimable by or on behalf of the State."

The court emphasized that the MOU and the PMFBY guidelines do not contain any clause permitting recovery of dues as arrears of land revenue. Thus, the actions taken by the Collector were declared to be without jurisdiction.

On Merits and Interpretation of 'Normal Harvest':

The court meticulously interpreted the scheme's guidelines, particularly the distinction between the "harvest date as notified" and "normal harvest."

"It is of significance that while component I uses the words ‘harvest data as notified in the State notification’; component II uses the words ‘normal harvest’," the judgment highlighted.

Since "normal harvest" is not defined in the ROG, the court applied a logical interpretation.

"We accept the contention raised on behalf of the petitioner

- insurance company that, in the facts of the present case, on the basis of the undisputed documents issued by the respondent

- State authorities themselves, pertaining to CCEs being conducted at least from 17.09.2021, the normal harvest began from 17.09.2021."

Since the calamity occurred within 15 days of this actual harvest date, the court concluded that the 50:50 assessment formula was correctly applied. Given that the state's own CCE data showed no actual loss (as actual yield exceeded threshold yield), no further payment was due from the insurer.

Final Decision and Implications

The Bombay High Court allowed Bajaj Allianz's writ petition, quashing all recovery notices and orders issued by the state authorities. Consequently, the PIL filed by the farmers was dismissed.

This judgment serves as a crucial precedent, clarifying the limits of state power in enforcing claims under the PMFBY. It establishes that state governments cannot use coercive land revenue laws to settle contractual insurance disputes. Furthermore, it provides vital interpretative guidance on assessing crop loss, reinforcing the role of scientific data from Crop Cutting Experiments in the final claim settlement process.