Supreme Court of India· 18 August 2026
Can an assurance of extended coverage by an insurer's Divisional Manager bind the insurer where the company's own directive confines premium adjustment to downward revision?
THE NEW INDIA ASSURANCE COMPANY LIMITED & ORS v. M/S LOUIS DREYFUS COMMODITIES INDIA PVT. LTD
2026 INSC 876 · Civil Appeal Nos. 7687-7688 of 2025
Coram: Sanjay Karol; Nongmeikapam Kotiswar Singh
Answer
No. While a principal is liable for the actions of its agents, the same should be done in accordance with the rules and regulations of the principal, that is, in the regular course of duty by the agent, and an agent is expected to be cognizant of the directives issued by the principal. An authority to an agent need not be expressed and may be implied from circumstances, but the appellants' guidelines of 16.10.2006 stating that premium adjustment is to be done only downwards in view of the provisions of Section 64VB meant that the circumstances did not permit such authority, so no occasion arose for the Divisional Manager to assure extension of coverage.
Headnote
Insurance Act, 1938 — s.64VB — Indian Contract Act, 1872 — ss.182, 188, 226, 237 — Marine Cargo Annual Turnover Policy — assumption of risk without premium — authority of an agent — estoppel against a statute —
Insurance Act, 1938 — s.64VB — statutory embargo on assuming risk before premium —
Held: Section 64VB places a statutory embargo on an insurer assuming risk before the premium is received or guaranteed to be paid, and sub-section (2) bars assumption of risk earlier than the date on which the premium has been paid. (¶10)
Insurance Act, 1938 — s.64VB — turnover-based policy — premium for the excess turnover —
Held further: Where the amount for which the insured stood insured is exceeded, it is incumbent upon the insured to extend the coverage by paying the amount based on estimated turnover, or at least guaranteeing to pay it, before the additional risk can attach. (¶11)
Indian Contract Act, 1872 — implied authority of an agent — internal directive of the principal —
Held further: A principal is liable for the actions of its agents only where done in accordance with the rules and regulations of the principal; a clear directive confining premium adjustment to downward revision leaves circumstances that do not permit such authority. (¶12)
Insurance Act, 1938 — s.64VB — estoppel and waiver against a statute — post facto regularisation —
Held further: Acceptance of additional premium after the incident works no estoppel, since estoppel cannot apply in contravention of a statute and Section 64VB provides no possibility for post facto regularisation; the endorsement operates only from the date of payment. Appeals allowed. (¶13, 14)
In the Court's own words
Paragraph 12Undisputedly, the extent of the insurance coverage was extended post the incident. As the endorsement dated 17.12.2010 extracted supra shows, the responsibility of the appellants accrues from the said date. As per the respondent, it is not so, for, one of the grounds pressed into service by the respondent was the email dated 17.05.2010 assuring the respondents that coverage would continue even if the turnover would exceed the insured amount. This was accepted by the NCDRC, but we find it difficult to do so. The appellants have placed on record guidelines of the company issued on 16.10.2006 by the Head Office to all its Regional Offices clearly stating that – “6. Premium adjustment to be done only downwards, in view of the provisions of Section 64VB.” While it is a settled position of law that a principal is liable for the actions of its agents, it is also trite that the same should be done in accordance with the rules and regulations of the principal or, in other words, in the regular course of duty by the agent. It can only be expected, and reasonably so, by the appellants that its agent would be cognizant of the directives issued by it. In that view of the matter, no occasion arose for the Divisional Manager of the appellants to assure the respondent of extension of coverage. In Harshad J. Shah v. LIC of India,[^6] it has been provided that an authority to an agent need not be expressed and it may be implied from circumstances. Granted that an agent of the appellant was dealing with the respondent’s case and would ordinarily have the authority, but in view of the clear directive of 2006, the circumstances do not permit such authority. [See also: State of Orissa v. United India Insurance Co. Ltd.[^7] and State Bank of India v. Shyama Devi[^8]]
Paragraph 12The Respondent also relies upon the subsequent demand and acceptance of additional premium. Section 196 of the Act provides that where an act is done on behalf of another without authority, the person on whose behalf it was done ‘may elect to ratify or to disown such acts’, and that ratification gives the act the same effect as if originally authorised. Ratification, however, must be a conscious adoption of the very act in question. Here, the endorsement enhancing the sum insured expressly took effect from 17 December 2010. Its prospective commencement is inconsistent with an intention to ratify, retrospectively, an assurance that additional cover had already been attached before the losses occurred earlier in November 2010. Further, ratification may cure an absence of authority, but it cannot be employed to defeat a mandatory statutory requirement governing the assumption of insurance risk.
Acts & Sections
s.64VB Insurance Act, 1938s.182 Indian Contract Act, 1872s.188 Indian Contract Act, 1872s.226 Indian Contract Act, 1872s.237 Indian Contract Act, 1872s.196 Indian Contract Act, 1872s.23 Consumer Protection Act, 1986One judgment a day. That's the whole habit.
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