The New India Assurance Company Limited & Ors. v. M/s Louis Dreyfus Commodities India Pvt. Ltd., 2026

The policy contemplated an annual turnover of ₹1,200 crore, with the premium payable in two instalments. The policy also contained a condition that the premium would be adjusted according to the actual turnover during the policy period. 

The respondent's turnover increased substantially during 2010.

In an email dated 17 May 2010, the insurer's Divisional Manager communicated that after payment of the second instalment, transits would remain covered even if the turnover crossed ₹1,200 crore.

On 7 November 2010, a fire broke out at a Container Freight Station where the respondent's cotton bales were stored. The respondent claimed insurance compensation.

The insurer's surveyor assessed the loss at approximately ₹22.01 crore.

Subsequently, the insurer demanded an additional premium of ₹86,86,125 for increasing the coverage to ₹1,500 crore. The respondent paid this amount on 17 December 2010, more than a month after the fire.

The insurer ultimately repudiated the claim, contending that the required additional premium had not been paid before the risk arose and that Section 64VB of the Insurance Act, 1938 prevented retrospective assumption of risk. 

The NCDRC, however, accepted the respondent's case and directed the insurer to pay the amount assessed by its surveyor, relying substantially on the earlier communication from the insurer stating that coverage would continue even if the turnover exceeded ₹1,200 crore. 

The insurer challenged the NCDRC decision before the Supreme Court

The Court placed particular emphasis on Section 64VB of the Insurance Act, 1938. It held that the provision creates a statutory restriction on an insurer assuming risk before the requisite premium has been received.

The Court noted that the respondent's turnover had exceeded the applicable coverage on 10 July 2010, whereas the additional premium was paid only on 17 December 2010. Therefore, the enhanced coverage could not operate retrospectively to cover the fire that had occurred on 7 November 2010. 

The Court further rejected reliance on the Divisional Manager's email. Although an agent may have actual, implied or apparent authority in appropriate circumstances, such authority cannot be used to override a statutory prohibition.

The Court treated the payment of premium as more than a mere procedural formality. Where additional coverage depends upon additional premium, the risk cannot retrospectively attach merely because the insurer subsequently accepts payment.

The Court's discussion of Sections 182, 186, 187 and 188 of the Contract Act makes clear that an agent's authority is not unlimited. A Divisional Manager may administer a policy and communicate with an insured, but that does not automatically confer authority to create a new risk or waive a statutory requirement.

Justice Nongmeikapam Kotiswar Singh specifically explained that apparent authority must arise from a representation attributable to the principal; an agent cannot create such authority merely by asserting that he possesses it.

The respondent argued that the insurer should be estopped from denying coverage because it had accepted the additional premium. The Supreme Court rejected this argument because estoppel cannot operate in contravention of a statute.

The endorsement issued on 17 December 2010 specifically made the additional coverage effective from that date. Thus, the Court found no legal basis for extending that coverage backward to the date of the fire.

The decision reinforces the principle that policyholders must maintain adequate coverage and make the necessary premium payments before the additional risk materialises. Subsequent payment may not cure an already uninsured loss.

The judgment is also significant beyond insurance law because it demonstrates that agency principles cannot be used to enlarge an agent's authority beyond statutory limits.