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

The policy initially contemplated an annual turnover of ₹1,200 crore, with premium payable in two instalments. The policy also provided that the premium would ultimately be adjusted according to the actual turnover. 

During 2010, the respondent's turnover increased substantially. An email dated 17 May 2010 from the insurer's Divisional Manager stated, among other things, 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 41,481 cotton bales belonging to the respondent had been stored. A surveyor appointed by the insurer assessed the damage at approximately ₹22.01 crore. 

The insurer subsequently sought an additional premium of ₹86,86,125 for increasing the coverage to ₹1,500 crore. The additional premium was paid on 17 December 2010, more than a month after the fire. The endorsement specifically made the increased coverage effective from 17 December 2010. 

The insurer ultimately repudiated the claim, principally relying on Section 64VB of the Insurance Act, 1938, contending that the turnover had exceeded the insured amount before the fire and that the additional premium had not been paid before the risk arose. 

The NCDRC had directed the insurer to pay the assessed claim, relying substantially on the earlier email from the Divisional Manager. The insurer challenged that decision before the Supreme Court. 

The Court held that Section 64VB of the Insurance Act, 1938 creates a statutory restriction on an insurer assuming insurance risk before the requisite premium has been received or appropriately guaranteed. The Court found that the respondent's turnover had exceeded the insured amount on 10 July 2010, well before the fire on 7 November 2010. 

The Court further held that the subsequent payment of additional premium on 17 December 2010 could not retrospectively create insurance coverage for the loss that had occurred on 7 November 2010. The endorsement itself expressly operated from 17 December 2010. 

The Court also examined the authority of the insurer's Divisional Manager. Although an officer may have authority to administer and communicate regarding a policy, such authority does not automatically extend to creating a new risk, enlarging the insurer's liability or dispensing with a statutory requirement. 

The Court therefore treated payment of premium not merely as a contractual formality but as a statutory precondition to assumption of risk.

The policy was specifically structured around annual turnover. Although the policy initially contemplated coverage of ₹1,200 crore, the actual turnover had exceeded that amount before the fire.

The Court therefore concluded that the insured could not rely on the original policy to claim unlimited coverage after the insured turnover had already been exhausted.

The judgment provides an important discussion of agency law.

Under Sections 182, 186, 187 and 188 of the Contract Act, an agent's authority may be express or implied, but the authority extends only to acts that are lawful, necessary and ordinarily connected with the authorised business.

The Court distinguished ordinary policy administration from an act that would effectively create or enlarge the insurer's statutory liability.

The Court also considered Section 237 of the Contract Act concerning apparent authority. Even where a principal may ordinarily be bound by representations made by an agent, such authority cannot be used to circumvent a statutory prohibition.

Thus, the Divisional Manager's email could not create insurance coverage that Section 64VB prevented the insurer from assuming.

The additional premium was paid on 17 December 2010, while the fire occurred on 7 November 2010.

The Court placed importance on the endorsement, which expressly made the increased coverage effective from 17 December 2010. Consequently, the subsequent payment could not retrospectively cover the earlier loss.

The respondent argued that acceptance of the additional premium prevented the insurer from subsequently denying coverage.

The Court rejected this argument, reiterating the principle that estoppel cannot operate against or in contravention of a statutory provision.

Contractual representations, internal assurances or acts of an agent cannot override a mandatory statutory condition governing the assumption of insurance risk.

It also clarifies that acceptance of a premium after the occurrence of a loss does not automatically revive or retrospectively create coverage for that earlier loss.

The judgment is particularly relevant to marine insurance, turnover-based insurance policies, premium payment disputes, agency law and the statutory limits on an insurer's assumption of risk.