IN THE HIGH COURT OF GUJARAT AT AHMEDABAD Letters Patent Appeals Nos.1000 to 1008 of 1996 And Letters Patent Appeals Nos.1128, 1130,1131, 1060, 1061, 1119 and 1276 of 1996 And Letters Patent Appeals Nos.7 to 11 of 1997 and Letters Patent Appeals Nos.1387 and 1389 of 1996 And Letters Patent Appeal Nos.12 and 1396 of 1997 For Approval and Signature: Hon'ble MR.JUSTICE M.R.CALLA and Hon'ble MR.JUSTICE RAVI R.TRIPATHI ============================================================ 1. Whether Reporters of Local Papers may be allowed : YES to see the judgements? 2. To be referred to the Reporter or not? : YES 3. Whether Their Lordships wish to see the fair copy : NO of the judgement? 4. Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? J 5. Whether it is to be circulated to the Civil Judge? : NO @ GENERAL INSURANCE CORPORATION OF INDIA Versus DHARI VIVID KARYAKARI SAHAKARI MANDAL LTD -------------------------------------------------------------- Appearance: Ms.Harsha Devani, learned AGP for State of Gujarat in all these matters. Mr.P.V.Nanavati for the General Insurance Corporation. Mr.B.M.Mangukia for Paravadi Seva Sahakari Mandli Ltd., The Sukhpar Seva Sahakari Mandali Ltd., Pansada Sitapur Sahakari Mandali Ltd., Surangar Seva Sahakari Mandali Ltd. Motivavadi Group Multipurpose Co-operative Society Ltd. Mr.Tushar Mehta for Dhari Vivid Karyakari Sahakari Mandali Ltd. Mr.Mehul K. Vakharia for Gujarat State Co-operative Bank. Mr. Shrish Joshi for Bhavnagar District Co-operative Bank. Mr.Jayant Patel for District Central Co-operative Bank Ltd., Amreli. -------------------------------------------------------------- CORAM : MR.JUSTICE M.R.CALLA and MR.JUSTICE RAVI R.TRIPATHI Date of decision: 06/08/2001 CAV COMMON JUDGEMENT (Per : MR.JUSTICE M.R.CALLA) 1. This group of 25 Letters Patent Appeals is directed against the common order dated 7.8.96 passed in a group of nine Special Civil Applications and order dated 14.8.96 (based on the earlier order dated 7.8.96) passed in the Special Civil Application No.1041/88. Out of these 25 Letters Patent Appeals, 7 Letters Patent Appeals Nos.7/97 to 11/97 and Letters Patent Appeal No.1387/96 and Letters Patent Appeal No.1389/96 have been filed by State of Gujarat against the common order dated 7.8.96, 9 Letters Patent Appeals Nos.1000 to 1008 of 1996 have been filed General Insurance Corporation against very same common order dated 7.8.96, 7 Letters Patent Appeals Nos.1128, 1130, 1131, 1060, 1061,1119 and 1276 of 1996 have been filed by different Co-operative Societies and the Bhavnagar District Co-operative Bank - all against common order dated 7.8.96 and 2 Letters Patent Appeals Nos.12/97 and 1396/97 have been filed by State of Gujarat and General Insurance Corporation respectively against the common order dated 14.8.96. Nine Special Civil Applications i.e. Special Civil Applications Nos.1410/87, 1409/87. 350/87, 982/87, 1991/87, 3182/87, 1541/87, 1410/87 and 1991/87 were decided by common judgment and order dated 7.8.96 by learned single Judge. Against this common judgment and order dated 7.8.96 State of Gujarat preferred the following seven Letters Patent Appeals as under:- 1. L.P.A.No.7/97 (In Special Civil Application No.1410/87) 2. L.P.A.No.8/97 (In Special Civil Application No.1409/87) 3. L.P.A.No.9/97 (In Special Civil Application No.350/87) 4. L.P.A.No.10/97 (In Special Civil Application No.982/87) 5. L.P.A.No.11/97 (In Special Civil Application No.1991/87) 6. L.P.A.No.1387/96 (In Special Civil Application No.3182/87) 7. L.P.A.No.1389/96 (In Special Civil Application No.1541/87) No Letters Patent Appeals by State of Gujarat are there before us against the order dated 7.8.96 in Special Civil Application No.1655/87 and Special Civil Application No.1842/87. Against this very common judgment and order dated 7.8.96, General Insurance Corporation of India preferred 9 Letters Patent Appeals as under:- 1. L.P.A.No.1000/96 (in Special Civil Application No.1541/87 2. L.P.A.No.1001/96 (In Special Civil Application No.1842/87) 3. L.P.A.No.1002/96 (In Special Civil Application No.3182/87) 4. L.P.A.No.1003/96 (In Special Civil Application No.1655/87) 5. L.P.A.No.1004/96 (In Special Civil Application No.350/87) 6. L.P.A.No.1005/96 (In Special Civil application No.982/87) 7. L.P.A.No.1006/96 (In Special Civil Application No.1409/87) 8. L.P.A.No.1007/96 (In Special Civil Application No.1410/87) 9. L.P.A.No.1008/96 (In Special Civil Application No.1991/87) Against the very same common judgment and order dated 7.8.96, the Letters Patent Appeals as under were filed:- 1. L.P.A.No.1130/96 in Special Civil Application No.1410/87 by Paravadi Seva Sahakari Mandli Ltd. (through Mr. B.M. Mangukia). 2. L.P.A.No.1131/96 in Special Civil Application No.1991/87 by The Sukhpar Seva Sahakari Mandali Ltd. (through Mr. B.M.Mangukia). 3. L.P.A.No.1060/96 in Special Civil Application No.1409/87 by Pansada Sitapur Sahakari Mandali Ltd. (through Mr. B.M.Mangukia). 4. L.P.A.No.1061/96 in Special Civil Application No.1409/87 by Surangar Seva Sahakari Mandali Ltd. (through Mr. B.M.Mangukia). 5. L.P.A.No.1128/96 in Special Civil Application No.1991/87 by Motivavadi Group Multipurpose Co-operative Society Ltd. (through Mr.B.M.Mangukia). 6. L.P.A.No.1276/96 in Special Civil Application No.1410/87 by The Bhavnagar District Co-operative Bank Ltd. (through Mr.Shrish Joshi). 7. L.P.A.No.1119/96 in Special Civil Application No.1541/87 by Dhari Vivid Karyakari Sahakari Mandali (through Mr. Tushar Mehta). Against the judgment and order dated 14.8.96 (based on the order dated 7.8.96) in Special Civil Application No.1041/88 the two L.P.As. as under were filed:- 1. L.P.A.No.12/97 in Special Civil Application No.1041/88 by the State of Gujarat. 2. L.P.A.No.1396/97 In Special Civil Application No.1041/88 by General Insurance Corporation. 2. All these 25 Letters Patent Appeals are directed against the impugned common judgment and order dated 7.8.96 and impugned judgment and order dated 14.8.96 (based on the earlier order dated 7.8.96) passed in different Special Civil Applications, referred to as hereinabove. The State of Gujarat, General Insurance Corporation of India as well as the Co-operative Societies and the Bhavnagar District Co-operative Bank are all aggrieved against these two common judgments and order dated 7.8.96 and the order dated 14.8.96. In all these Appeals grievances are raised by the parties, which are required to be considered on identical facts and involve common question of law and, therefore, we propose to decide all these 25 Letters Patent Appeals by this common judgment and order as under:- 3. Central Government introduced a countrywide Crop Insurance Scheme for Kharif 1985. It was decided to operate this Scheme through General Insurance Corporation of India with the involvement of the concerned State Government. The object of the Scheme was to provide a measure of financial support to farmers in the event of crop failure as a result of drought, flood etc. and to restore the credit eligibility of farmers, in case of crop failure and to support and stimulate production of cereals, pulses and oil seeds. For the purpose of implementation of this comprehensive Crop Insurance Scheme, Ministry of Agriculture and Rural Development (Department of Agriculture and Co-operation), Government of India sent a letter dated 3.5.85 to Chief Secretaries of all the State Governments and the Union Territories. This new comprehensive Scheme was to be implemented for Kharif 1985 season. Government of Gujarat thereupon decided to implement this Scheme for Kharif season of 1985 in collaboration with General Insurance Corporation and Government of India and the Resolution to this effect was passed on 1.8.85 by the State Government of Gujarat in Agriculture and Rural Development Department. A meeting was then held on 21.10.85 for implementation of the Clauses in the Scheme. It was considered in this meeting that even though the cut off date for sending declaration and premium was 31.10.85, most of the District Co-operative Banks had not sent the necessary declarations and the premium amount and, therefore, the cut off date was required to be extended by another 10 days. Accordingly all the Nodal Banks were to see that necessary declarations for the specified crop in specified defined areas, the amount of premium should be sent to General Insurance Corporation on or before the cut off date as 10.11.85. The Scheme provides for the collection of the premium from the farmers, who are growing insured crops through the agency of primary Agricultural Co-operative Credit Societies, District Co-operative Banks and the State Co-operative Banks. Farmers availing the crop loans from Co-operative Credit Institutions, Commercial Banks and Regional Rural Banks for raising insured crops were entitled to the benefits of the Scheme and premium chargeable was 2% of the sum insured for rice, wheat and millet crops and 1% of the sum insured for oil seeds and pulses. The sum insured was 15% of the loans disbursed in respect of the insured crops for the Kharif 1985 which was the insured season. This Scheme was in fact announced on the Floor of Parliament in February 1985 at the time of introduction of the Budget and the Government of India had organised a Workshop so as to apprise the concerned institutional authorities regarding the steps to be taken for the implementation of the comprehensive Crop Insurance Scheme. The National Workshop on Crop Insurance was held on 1.5.85 and the need for the facilities to be given for the disbursement of the loans to the farmers was emphasised. By the time the State Government of Gujarat responded to the proposal of Government of India by the Government Resolution dated 1.8.85, Kharif season had already commenced. Kharif season ends by October or November every year, depending upon the rainfall in the area. The rainfall in the Amreli District in the year 1985 was late inasmuch as it had commenced on or after 15.7.85 instead of 10.6.85. This late rainfall pushed ahead the Kharif season to November 1985 in Amreli District. The farmers were required to take loans and advances right from the month of January onwards till the end of November or middle of December depending upon the rainfall in the area. The Co-operative Institutions, which are disbursing the loans to the farmers, are, therefore, disbursing agricultural loans right from January onwards till the end of October or November. The Primary Co-operative Societies were, therefore, required to advance agricultural loans towards insured crops in the months of October and November in Amreli District. Out of total 104 crop cutting experiments in Amreli District, 40 crop cutting experiments were carried out in the month of October and rest of the crop cutting experiments were carried out in the month of November, suggesting that there was a standing insured crop like groundnut and Bajri in the month of October and November 1985 in Amreli District. This gave rise to the grievance that the crop loans for Kharif 1985 were to be calculated from the month of January, 1985 to the end of November, 1985. The Primary Co-operative Societies, therefore, challenged the decision of the General Insurance Corporation fixing the dates of 1.4.85 and 30.9.85 as the two cut off terminal dates as well as the decision to refund the premium for the period prior to 1.4.85 and not to calculate the amount of damages on the basis of the crop loans advanced between January 1985 to 31.3.85 and 1.10.85 to 10.11.85. The Special Civil Applications were, therefore, filed for quashing and setting aside the decision of fixing the dates of 1.4.85 and 30.9.85 as the cut off dates for the purpose of settling the insurance claims of the farmers for the insured crops for 1985 Kharif season and for a direction against the respondents to take into consideration the crop loans disbursed between January 1985 to 31.3.1985 and 1.10.85 to 10.11.85 for the purpose of settling the insurance claims for the insured crops for Kharif 1985 season with consequential reliefs with 15% interest per annum. 4. The common grievance, which was raised in different Special Civil Applications arising from different Districts, was that their claims had not been entertained on the ground that the loans for the Kharif 1985 season commenced only after 1.4. 1985 and ended on 30.9.85, although in State of Gujarat Kharif season had commenced from January and lasted upto November; that for the purpose of agricultural operation right from the month of January 1985 the farmers are required to take loan and advances from the Primary Co-operative Societies. 5. The learned single Judge, after narrating the sequence of events, has discussed:- A Special Civil Applications arising from different Districts of Saurashtra region- Special Civil Applications Nos.1541/87 and 1842/87 arising from Amreli District. Special Civil Application No.3182/87 from Bhavnagar District. Special Civil Application No.1655/87 from Jamnagar District. In these petitions direction was sought for setting aside the dates of 1.4.1985 and 30.9.1985 as the cut off dates for the purpose of settling the insurance claims of the farmers for the insured crops of 1985 Kharif season. The common grievance raised before the learned single Judge on behalf of petitioners was that the claims had not been entertained by the respondents on the ground that the Crop Loans for Kharif 1985 season commenced only after April 1985 and ended on 30.9.1985. The case of the petitioners in these matters was that in the State of Gujarat, Kharif season commences from the month of January and extends till November every year, depending upon the rainfall in the area; right from the month of January, the farmers are required to take loans and advances from Primary Co-operative Societies, in the year 1985 rainy season started late, first rainfall was on or about July 15, 1985 and, therefore, Kharif season was upto the end of November 1985, that the respondents had accepted the premium on the basis of which loans were disbursed from January 1985 to 10.11.1985 without raising any objection and, therefore, their claims could not be rejected on the ground that the loans prior to 1.4.1985 and beyond 30.9.1985 were not covered under the Scheme. It was also submitted that the Scheme was introduced as late as in the month of August 1985 and was implemented in October 1985 in the State of Gujarat. With reference to the discussion in the National Conference on Crop Insurance held on July 17, 1985 at New Delhi it was submitted that the consensus in the conference was that all Crop Loans disbursed for the specified crops from 1.4.85 should be covered under the Scheme and the claims for the period prior to 1.4.85 had been given up, that there was no mention of the cut off date of 30.9.85 in any of the letters or the circulars or the Minutes of any meeting or conference, that once the premium had been accepted, it was not open for the General Insurance Corporation of India to refund the premium and deny the liability and that General Insurance Corporation was only an instrumentality of the Scheme sponsored by Government of India. While placing reliance on the Summary of the record of the Conference dated 17.7.85 it was submitted that under clause (2) it was agreed by all concerned that loans shall be disbursed from 1.4.85 and no outer limit of the period had been provided, cut off dates for sending the proposal to General Insurance Corporation for Kharif season was 30.10.85 and for this purpose the Dictionary meaning of Kharif, as given in the English short Oxford Dictionary and "Bhagwat go Mandal" (Gujarati Dictionary) was also relied upon. B. Special Civil Applications Nos.350/87 and 982/87, arising from Ahmedabad District. The case of the petitioners was that Talukas of Sanand and Viramgam of Ahmedabad District were covered in respect of the crops of paddy and bajri. It was stated that the Agreement came to be entered into between GIC and the Gujarat State Co-operative Bank, on behalf of Ahmedabad District Co-operative Bank. As per this Agreement, the Insurance coverage was provided and that as per the practice, the Crop Loan for Kharif season is disbursed from January. It was submitted that the Scheme was first adopted in the State of Gujarat in August, 1985 and the District Banks were instructed to sanction additional loan amount to the borrowing members to cover up the costs of insurance premium in respect of Crop Loans for the crops covered. The District Banks had forwarded the declarations, including the loans disbursed from January 1985, and the insurance premium was paid accordingly. After accepting the premium, after almost an year's time, in September, 1986 the GIC tried to return the premium when it had become clear that there was complete drought and full insurance coverage was required to be paid. It was also stressed that GIC and the State are estopped from questioning the loans advanced by Banks and Credit Societies from January as per the prevailing usage since long. It was submitted that the petitioners were, therefore, entitled to Insurance coverage from 1.1.85 to 31.3.85 also. It was also submitted that the Crop Loan Insurance was a matter between the Co-operative Bank and the GIC and, therefore, there was no question of any intervention by Union of India. It was also pointed out that the GIC had not taken any independent decision in fixing the cut off date,but it had acted under the instructions of Union of India. C. Special Civil Applications Nos.1049/87, 1410/87 and 1991/87 and arising from the District of Bhavnagar and their case was the same as has been stated hereinabove with regard to the Special Civil Applications mentioned as above. D. Special Civil Application No.1041/88 decided on 14.8.96. 6. According to Mr. Mangukia, appearing on behalf of the Co-operative Societies the Scheme of 1985 was a Crop Insurance Scheme and not Crop Loan Insurance, that no time limit had been prescribed under the Scheme as such and the State/Union of India/GIC could not enforce any time limit, once the proposals for insurance were accepted and the GIC had agreed to indemnify, it could not be permitted to go back without following the due process of law. Mr. Mangukia has submitted that GIC had taken a decision not to cover the Loans disbursed prior to April 1, 1985 under instructions of Government of India, Ministry of Agriculture, which on the face of it was illegal as the GIC had not taken any independent decision and, therefore, it was clear that the cut off date had been applied only to escape the liability. 7. The stand taken by Gujarat State Cooperative Bank supports the case of the original petitioners and the stand of District Co-operative Banks supports the case of the Gujarat State Cooperative Bank. On behalf of Gujarat State Co-operative Bank, its General Manager Mr.M.M.Vyas had filed a reply stating therein, that in his capacity as the Chief Executive of the Gujarat State Co-operative Bank he had attended the National Workshop on Crop Insurance on May 1, 1985. According to him the comprehensive Crop Insurance Scheme is essentially and basically a Scheme prepared by the Government of India and the Conference was convened not for any discussion but for the purpose of giving information regarding the implementation of the Scheme and the implementation of the Scheme during Kharif 1985 was not the subject matter of discussion as the same had already been approved by the Cabinet and in the conference only operational problems were considered. That at no point of time it was ever clarified that the loans and advances only after 1.4.85 and before 30.9.1985 will be covered, that the entire loans and advances for notified Kharif crop were covered under the Crop Insurance and the premium from the farmers were collected by Primary Co-operative Societies on that basis. The premium so collected were to be paid to the GIC through the District Co-operative Banks and the GIC accepted the premium. In the Conference, the participants were only asked to report on the progress of the implementation of the Scheme, that the State Government had adopted the Scheme under Resolution dated 1.8.85 and even in the said Resolution, the cut off dates 1.4.85 and 30.9.85 had not been given. He has made reference to the letter dated 12/13-2.1987 sent by the Registrar, Co-operative Societies, that Gujarat State Co-operative Bank Ltd. had made special efforts in insuring the maximum coverage of Crop Loan in the State of Gujarat and it was at their instance and advice that the farmers had taken the Crop Insurance. Had the 1985 Kharif Crop would not have failed on account of insufficient rain, the GIC could have made a profit out of the amount paid by farmers. The Kharif crop failed because of the failure of the monsoon and, therefore, the farmers were seriously affected and, therefore, it was legitimate for the farmers to expect the insurance claim. On behalf of the State Co-operative Bank it was also argued that essentially it was a Crop Insurance Scheme and the loan was only a standard. In the original Resolution of Gujarat State dated 1.8.85 also there was no cut off date. Loans were disbursed even after 1.4.85 and to introduce the cut off date at a later stage amounts to modification of the Scheme. 8. On behalf of Union of India, the Under Secretary of the Government of India, Ministry of Agriculture, Department of Agriculture and Co-operation, one Shri Alok Bhatnagar has filed his affidavit in reply to Special Civil Application No.350/87. Mr. Bhatnagar has also referred to the workshop which was held on 1.5.85 and the National conference held on 17.7.85 and has stated that it was agreed between all the parties concerned i.e. Reserve Bank of India, NABAD, State Governments and GIC etc. that the Scheme will cover the Crop Loans disbursed on and from 1.4.85 and the Government of Gujarat had accordingly agreed to introduce the Crop Insurance Scheme in July 1985 for the Kharif period of the said year keeping in mind that the Scheme will cover the loans disbursed on and from 1.4.85. He has also referred to the Manual of the Agriculture Credit Department of the Reserve Bank of India which lays down that the Kharif loaning starts from 1.4.85 and asserted that GIC is the agency of Government of India and as such it was bound by the Kharif period as provided in the Manual of the Agriculture Credit Department, that the Conference was attended by representatives of the implementing States/Union Territories including the Government of Gujarat as also the representation from the Agencies involved in the implementation of the Scheme and that in this Conference, a decision was taken that the loans advanced for crops covered under the Scheme subsequent to 1.4.85 would only be considered for the purpose of extending insurance cover envisaged in the Scheme, that the State of Gujarat had adopted the Scheme knowing it fully well that it does not cover the loans disbursed prior to 1.4.85. According to him the Scheme was compulsory for all the farmers availing the Crop Loans from concerned Institutions for raising wheat, paddy, millets, oil seeds and pulses, that there was an inbuilt insurance coverage as a part of Crop Loan for raising crops in the defined areas, where the insurance Scheme is extended, that the Loan amount for each crop for the given area is decided with reference to the scale of finance fixed by a Technical Committee constituted from time to time for each Districts in the State, that the total sum which is incurred and not the crop which is raised is covered under the Scheme, that out of the total indemnity, claims paid by the GIC was to the tune of Rs.83 crores of Kharif season 1985 and share of the State of Gujarat was the highest i.e. Rs.53.55 crores and looking to the unexpected huge claims from the State of Gujarat, a central team was deputed to examine the matter and it was found that in the Amreli and Bhavnagar Districts of the region, the loan of nearly Rs.20 crores had been advanced fraudulently to the farmers without any justification during the period of January to March 1985, when the Scheme was not in operation and even during the period of October to November 1985, by which time the crop had either been harvested or was about to be harvested, that the Co-operative Credit Institutions, Commercial Banks and Regional Rural Banks in the State of Gujarat could not unilaterally bind the GIC for the purpose of Crop Insurance, merely by completing procedural formalities regarding loan and advancement unless and until such proposals were verified and found to be in order and accepted by the Insurers, that the petitions had not been filed by the farmers, who could be the real claimants, but had been filed by the Banking and other Financial Institutions or Agencies, who had only forwarded the