Bank is not responsible for mistake of Insurance Company

The National Consumer Disputes Redressal Commission, led by Mr. Subhash Chandra and AVM J. Rajendra, has ruled in favor of a farmer in a dispute involving Sarva Haryana Gramin Bank and the  insurance coverage under the Prime Minister Fasal  Bima Yojna (PMFBY). The Commission held that the bank, acting as an intermediary, cannot be held responsible for the mistakes of the insurance company.

The case arose when a farmer, Rajinder Singh, who owns 7 acres of land, applied for crop insurance for his paddy crop through the bank. The bank deducted Rs. 2,695 from his account as the premium for the insurance coverage. Unfortunately, heavy rains destroyed his crop, and when he filed a claim, it was rejected. The reason: the bank had entered incorrect village details in the government portal, causing a mismatch in the insurance records.

The farmer filed a complaint with the District Forum, which ruled that the bank had failed in its duty to upload the correct details. The Forum ordered the bank to pay Rs. 92,527 to the farmer for his crop loss, along with Rs. 10,000 for mental distress and Rs. 5,000 for litigation costs, to be paid within 45 days. The bank appealed to the State Commission of Haryana, which upheld the District Forum’s decision, prompting the bank to take the matter to the National Commission.

In its defense, the bank argued that it had not received the premium and should not be held liable for the crop loss. The bank claimed that since the insurance company received and retained the premium, it should be responsible for compensating the farmer.

The National Commission, however, observed that the bank’s role was limited to acting as a facilitator between the farmer and the insurance company. The Commission referred to previous rulings, including the Gurmel Singh case and a 2021 Bombay High Court order, which established that the bank’s involvement did not create a contractual relationship with the insured. The Commission also noted that the insurance company did not deny receiving the premium but instead claimed that the incorrect details were the reason for denying the claim.

The Commission concluded that, while the bank was responsible for uploading the correct details, the insurance company had received the premium and was liable for compensating the farmer. The Commission ruled that the lower forums had erred in holding the bank accountable for the insurer’s failure.

As a result, the National Commission allowed the bank’s revision petition and directed the insurance company to pay the farmer Rs. 92,527 for the crop loss, along with Rs. 25,000 in litigation costs.