PMFBY: Insurer & Bank Jointly Liable For Data Entry Errors If Premium Not Refunded, Citing State Notification: Chhattisgarh State Consumer Commission - 2025-07-28

Insurer and Bank Jointly Liable for Crop Insurance Errors, Rules Chhattisgarh Consumer Commission

Raipur, C.G. - In a significant ruling impacting farmers under the Pradhan Mantri Fasal Bima Yojana (PMFBY), the Chhattisgarh State Consumer Disputes Redressal Commission has held that both the insurance company and the nodal bank are jointly and severally liable for compensating farmers when data entry errors by the bank lead to claim denial. The Commission, led by President Justice Gautam Chourdiya and Member Shri Pramod Kumar Varma, emphasized that an insurance company cannot escape liability by merely blaming the bank, especially if it failed to refund the premium in a timely manner as stipulated by state government notifications.

The decision came while disposing of a batch of eleven appeals filed by the Agriculture Insurance Company of India Limited (AIC) against various orders from District Commissions in Mahasamund and Rajnandgaon.

Background of the Cases

The appeals involved numerous farmers who were denied their crop insurance claims for the years 2020 and 2021. The core issue in all cases was a deficiency on the part of the nodal banks. The errors included: - Incorrectly entering the farmer's village or Revenue Inspector Circle (R.I.C.) into the national insurance portal. - Failing to upload the farmer's details altogether.

Due to these errors, the farmers, despite having paid their premiums, were deprived of their rightful insurance benefits following crop losses. The respective District Commissions had initially ordered the insurance company, either solely or jointly with the bank, to pay the claims. AIC appealed these orders, seeking to shift the entire liability onto the banks.

Arguments Presented

Appellant (Agriculture Insurance Company of India Ltd.): The counsel for AIC, Shri Sunil Kumar Patel, argued that as per Clause 35 of the revised PMFBY guidelines, the nodal bank is solely responsible for ensuring the accuracy of farmer data. The guideline states that in case of any error or omission, the concerned agency (the bank) must bear the entire loss. The insurer relied on a National Commission judgment ( Agriculture Insurance Co. of India Ltd. Vs. Branch Manager, Bank of India ) to contend that only the erring bank should be held liable.

Respondents (Farmers and Banks): The farmers' advocates argued that they had fulfilled their obligation by paying the premium and should not suffer due to procedural lapses between the bank and the insurer. The banks, having not appealed the District Commissions' orders, had accepted the initial rulings against them.

Commission's Rationale and Legal Application

The State Commission meticulously distinguished the national PMFBY guidelines from the specific implementation notifications issued by the Government of Chhattisgarh. The bench, presided over by Justice Chourdiya, pointed to crucial clauses in the state's notification (No. 2976 dated 16.06.2020) that governed the scheme's implementation for the 2020-23 period.

Key excerpts from the judgment's reasoning: - Clause 28 of State Notification: The Commission highlighted this clause, which mandates that if a financial institution fails to provide correct information, the insurance company must refund the premium within three weeks. The judgment noted, "if the insurance company failed to refund the premium amount... within the stipulated period," the liability to pay the claim would fall on the insurer. In one case, the premium was returned after a year, a clear violation of this condition.

Clauses 29 & 30 of State Notification: These clauses explicitly state that if a farmer is deprived of benefits due to errors by the bank, financial institution, or the insurance company, the "concerned institution" will be responsible for claim payments, implying shared accountability.

Reliance on Precedent: The Commission cited a recent National Commission order ( M/s. Reliance GIC Ltd. Vs. Parameshwar Sahu & Ors. ) which held that it was the duty of both the bank and the insurer to coordinate and reconcile farmer details. Quoting the precedent, the Commission stated, "Both have failed to perform their respective duties. Hence we hold that Petitioner – Insurance Company... and... Bank are jointly and severally liable."

The Commission concluded that AIC could not absolve itself of its responsibility. By retaining the premium beyond the stipulated period, it implicitly accepted the risk, making it jointly liable with the bank for the deficiency in service.

Final Decision and Implications

The State Commission dismissed several appeals, upholding the joint and several liability ordered by the District Commissions. In other appeals where the District Commission had held only the insurer liable, the orders were modified to impose joint and several liability on both the Agriculture Insurance Company and the respective nodal bank.

This landmark order provides significant relief to farmers, ensuring they are not caught in the crossfire of blame between financial institutions and insurance companies. It establishes a clear precedent within Chhattisgarh that all stakeholders in the PMFBY chain have a duty of care towards the farmer, and a failure by one does not automatically absolve the other.