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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
A.P. Thaker, J.
Universal Sompo General Insurance Co. Ltd. – Petitioner
Versus
State Of Gujarat – Respondent
R/Special Civil Application No. 10523 of 2021
Decided On : 30-09-2022
PMFBY - INSURANCE - SUBSIDY - PREMIUM - STATE SHARE - DELAY IN RELEASE - INSURANCE COMPANY'S LIABILITY TO PAY CLAIMS - WRIT PETITION - MAINTAINABILITY - ALTERNATIVE REMEDY - JURISDICTION OF HIGH COURT - ARTICLE 226 - ARTICLE 142 - CONSTITUTION OF INDIA.
Fact of the Case:
The petitioner, an insurance company, filed a petition under Articles 226 and 227 of the Constitution of India, seeking a writ of mandamus or any other appropriate writ, order, or direction to quash and set aside the State Government's order directing the petitioner to pay claims to farmers in Surendranagar District towards their claims for Kharif Season 2019 in the PMFBY scheme, despite the State Government's failure to release the pending state share of subsidy. The petitioner contended that the State Government's action was contrary to the provisions of the scheme and the guidelines issued by the Central Government, and that it had suffered financial losses due to the non-release of the subsidy.
Finding of the Court:
The Court held that the State Government's action in directing the petitioner to pay claims to farmers without releasing the pending state share of subsidy was not sustainable in the eyes of law. The Court observed that the payment of prior premium is a Sine qua non of coming into force of any contract of insurance between the insured and insurer, and that the State Government's insistence on making payment to the farmers without payment of any prior premium was akin to putting a cart before the horse. The Court further held that the State Government's stand was contrary to the directions issued by the Central Government, which had consistently directed the State Government to release the "premium subsidy".
Issues: 1. Whether the State Government's order directing the petitioner to pay claims to farmers without releasing the pending state share of subsidy was sustainable in the eyes of law? 2. Whether the petitioner was entitled to seek relief under Articles 226 and 227 of the Constitution of India, despite the existence of an alternative remedy?
Ratio Decidendi: 1. The Court held that the State Government's action in directing the petitioner to pay claims to farmers without releasing the pending state share of subsidy was not sustainable in the eyes of law. The Court observed that the payment of prior premium is a Sine qua non of coming into force of any contract of insurance between the insured and insurer, and that the State Government's insistence on making payment to the farmers without payment of any prior premium was akin to putting a cart before the horse. The Court further held that the State Government's stand was contrary to the directions issued by the Central Government, which had consistently directed the State Government to release the "premium subsidy". 2. The Court held that the petitioner was entitled to seek relief under Articles 226 and 227 of the Constitution of India, despite the existence of an alternative remedy. The Court observed that the State Government's action was arbitrary and unreasonable, and that it had caused financial losses to the petitioner. The Court further held that the High Court had the jurisdiction to entertain the petition under Article 226 of the Constitution of India, as the matter involved a substantial question of law of public importance.
Final Decision: The Court allowed the petition, quashed and set aside the State Government's order, and directed the State Government to release the remaining requisite amount pending State share of the subsidy for Kharif season 2019 to the petitioner within four weeks. The Court also directed the petitioner to disburse the amount to the eligible farmers within one week of receiving the subsidy.
JUDGMENT :
1. With the joint request of the learned advocate for the parties, the matter has been heard finally at admission stage.
2. The petitioner has filed the present petition under Article 226 and 227 of the Constitution of India for the following reliefs :-
(B) As an ad interim ex-parte relief stay the order of the State Government at Annexure B.
(C) This Hon'ble Court be pleased to issue a Writ of Mandamus or any other appropriate writ, order or direction directing the Respondent No. 1 to release an amount of Rs. 216.93 crores towards the pending state share of subsidy for Kharif Season 2019 to the Petitioner.
(D) Your Lordships be pleased to pass such other and further orders as the facts and circumstances of the case may require.”
3. The brief facts giving rise to the present petition are as under:-
3.1. The Central Government has notified Pradhan Mantri Fasal Bima Yojana (hereinafter referred to as PMFBY) in the year 2016 for the benefit of the farmers against the loss/ failure of the crop due to natural calamities, paste and disease. The said scheme came to be revised by the Central Government from time to time. The object of the scheme was to provide insurance coverage to the farmers regarding unforeseen loss of crop, due to inundation and other perils. It is implemented through the agricultural department of the State Government.
3.2. The petitioner is the insurance company for the year 2019-20 for various districts as Surendranagar, Amreli, Anand and Patan etc. It is alleged by the farmers that in the year 2019, due to heavy rain, flood and excessive rain in whole district, Surendranagar and Morbi, most of the crops of the farmers were damaged and therefore they have allegedly suffered huge crop loss in both the districts. Many of the farmers who have intimated their claims were not paid. Therefore they approached this Court by filing a SPCA writ application No.12184 of 2020. This Court by an order dated 27.10.2020 dismissed the petition but directed the State Government to look into the representations of the farmers. On that basis the State Government has issued the impugned order no.2624-28/2021 dated 12.05.2021 by which it is directed to the petitioner to pay the claims by overriding the guidelines issued by the Central Government. This order of the Government has been challenged by way of this petition, and with the further direction to the State Government to release the pending subsidy of Rs.216,93,31,438/-.
3.3. It is contended by the petitioner that they have made several representations to the Government for releasing the subsidy. The petitioner has referred to various communications in the petition, requesting the State Government for release of the share of the premium and the subsidy thereof as per the scheme framed by the Central Government. According to the petitioner, due to non receipt of the premium of subsidy amount from the State Government, payment to the farmers are getting delayed. According to the petitioner, it is bound by the guidelines issued by the IRDAI and the Government from time to time. According to it, as per the regulations, the premium subsidy is to be received by the petitioner within a given time frame. It is also contended that the delay in the release of subsidy is resulting in the delay in settlement of the claims of the farmers and is also adversely affecting the financial position and solvency margin of the petitioner as mandated by IRDAI. The petitioner has also referred to various clauses of the operational guidelines which provides that the State Government has to release the State share of premium subsidy within three months from the premium requisition failing which the interest @10% per annum per month would levy penalty on the State Government.
3.4. The petitioner has also referred to variou
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