Punjab National Bank Liable To Compensate Farmers After Crop Insurance Failed Due To Its Negligence: Calcutta High Court
The Calcutta High Court has held that the Punjab National Bank (PNB) is liable to compensate a group of farmers who were deprived of benefits under the West Bengal Government's Bangla Shasya Bima (BSB) crop insurance scheme after the bank failed to complete the mandatory process for issuance of insurance policies. The Court held that the bank's failure to upload the particulars of insured...
The Calcutta High Court has held that the Punjab National Bank (PNB) is liable to compensate a group of farmers who were deprived of benefits under the West Bengal Government's Bangla Shasya Bima (BSB) crop insurance scheme after the bank failed to complete the mandatory process for issuance of insurance policies. The Court held that the bank's failure to upload the particulars of insured farmers and submit the required declarations prevented the policies from ever coming into existence, leaving the farmers without insurance coverage despite deduction of premium from their loan accounts.
Justice Sabyasachi Bhattacharyya simultaneously recalled the Court's earlier orders which had directed revival of the expired insurance scheme, holding that the Court lacked jurisdiction to virtually revive a government policy after it had already ceased to operate.
"The Scheme was a dead horse, not capable of revival. Hence, on such count alone, the impugned orders are not sustainable in law, being de hors the jurisdiction of this Court," the Court observed.
The Court directed PNB to refund the entire premium amounts deducted from the farmers along with 12% annual interest within 30 days. It further directed the farmers to submit claims quantifying the crop losses suffered due to the absence of insurance coverage, which the bank must assess and compensate after conducting an appropriate inquiry.
Background
The petitioners, agriculturists from Kotulpur in Bankura district, had enrolled under the State Government's Bangla Shasya Bima Scheme for the Rabi 2019-20 season. Although premiums were deducted and deposited through Punjab National Bank, the farmers' insurance claims were later rejected as no insurance policies had actually been issued.
In December 2023, the High Court had directed the National Insurance Company to extend the time for acceptance of premiums and required PNB to deposit the outstanding premiums, effectively reviving the scheme. Alleging non-compliance, the farmers initiated contempt proceedings.
During those proceedings, the National Insurance Company sought recall of the earlier orders, contending that the Court could not revive an insurance scheme which had already expired and that the failure lay with the bank, which had not uploaded the farmers' particulars or forwarded the required declarations despite remitting part of the premium.
Court's Findings
The Court first rejected the contention that the recall applications were barred by limitation, holding that the High Court, as a court of record under Article 215 of the Constitution, possesses inherent powers to correct jurisdictional errors in its own orders.
On the merits, the Court accepted the insurance company's argument that the earlier directions effectively revived a scheme which had already lapsed in February 2020.
"The benefits of a Scheme are not renewable by the fiat of the Court, coming entirely within the domain of policy decision of the Executive," the Court observed.
However, the Court found that this did not absolve the bank of responsibility.
Examining the operational guidelines of the Bangla Shasya Bima Scheme, the Court noted that the nodal bank was required not merely to deposit premiums but also to furnish consolidated declarations and upload farmer-wise data within the prescribed timelines. The bank admittedly failed to perform these mandatory obligations.
Rejecting PNB's defence of a "technical glitch," the Court observed:
"Taking shelter under a vague and fudged concept of 'technical glitch' is evidently a convenient escape route for the bank to deny its palpable liability for the breach of its mandatory duties under the Scheme."
The Court noted that the bank had produced no material explaining the duration or nature of the alleged glitch and had also failed to communicate the necessary particulars through alternative modes such as email or physical correspondence.
The Court further distinguished the Supreme Court's decision in D. Srinivas v. SBI Life Insurance Co. Ltd., which held that acceptance of premium ordinarily creates a binding insurance contract, observing that the present dispute arose under a special government welfare scheme where compliance with statutory procedures was essential before any insurance policy could come into existence.
According to the Court, the insurance company could not assume liability until the bank completed the mandatory process prescribed under the scheme.
Holding that the farmers had suffered solely because of the bank's negligence, the Court concluded:
"The liability lies squarely on the bank, and none else, for the insurance policies never materializing."
- Recalling the earlier writ orders, the Court directed Punjab National Bank to:
- Refund the entire premium amounts deducted from each farmer along with 12% annual interest within 30 days.
- Receive detailed compensation claims from the farmers by August 31, 2026.
- Assess the crop losses by appointing valuers, obtaining meteorological and other expert reports where necessary, and pass reasoned orders determining compensation by October 31, 2026.
- Grant the farmers an opportunity of hearing before determining compensation.
The Court clarified that any farmer dissatisfied with the compensation assessed by the bank would be free to challenge the determination before the appropriate forum.
Consequently, all connected contempt proceedings were dismissed following recall of the original writ orders.
Case Title: Sk. Ali Hossain & Ors. v. K.G. Ananta Krishan & Ors. (Connected Matters)