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
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 9Section 64VB of the Insurance Act reads as under:
Paragraph 9While applying the above principles to the present case, the Divisional Manager’s mail cannot be treated as a purely private communication unrelated to the insurer. The email was issued by the Divisional Manager of the policy-issuing office, in response to a query concerning the operation of an existing policy, and dealt with premium and coverage. The officer, therefore, possessed at least the usual and implied authority to correspond concerning and explain the policy. The communication is consequently relevant as a contemporaneous representation of the issuing office and cannot be discarded merely because it was sent by an employee. That conclusion, however, does not answer the distinct question whether the officer had authority to alter the contractual risk. Authority to administer or explain an existing policy is not equivalent to authority to rewrite it. Section 188 of the Contract Act deliberately confines incidental and usual authority to every ‘lawful’ thing necessary or usually done in conducting the authorised business. An agent cannot acquire, by implication, authority to do that which the principal has not authorised, or to undertake a liability which the governing statute does not permit the principal to assume in that manner. The respondent has, therefore, established that the Divisional Manager possessed authority to correspond concerning and administer the policy, but what it has not established, as required by Dilawari Exporters (supra), is that the appellant had, by its words, conduct or course of dealing, held the Divisional Manager out as possessing authority independently to enlarge the turnover-based risk undertaken under the policy or to dispense with the statutory requirement governing attachment of such additional risk.
Paragraph 10A perusal of the above reveals that there is a statutory embargo on an insurer assuming risk if the premium has not been paid to them, either prior to such assumption or within the stipulated time period in which it is guaranteed to be paid. Sub-section (2) also makes this clear that the risk cannot be assumed earlier than the date on which the premium has been paid. [See: Deokar Exports (P) Ltd. v. New India Assurance Co. Ltd.[^5]] Sub-sections (3) and (4) are procedural stipulations regarding refund, and the latter accounts for a situation where an agent collects the premium on behalf of the insurer. Sub-sections (5) and (6) grant power to the Central Government to relax requirements and for the Authority to specify the manner of receipt of payment by the insurer, respectively.
Paragraph 10The decision in State of Orissa v. United India Insurance Co. Ltd., (1997) 5 SCC 512 is directly instructive. The Branch Manager had incorporated in an insurance policy a guarantee relating to non-supply of bulldozers. This Court held that the High Court has recorded the finding that the Branch Manager of the Insurance Company exceeded his authority as an agent by underwriting in the policy the guarantee for the non- supply of bulldozers. The principal is not bound by such an undertaking, by operation of Section 237 of the Contract Act. This Court, thereafter, concluded that, the Manager having no authority to undertake such liability by subsequent incorporation into the policy, the insurance company was not bound by his act. The ratio is that a managerial designation does not, by itself, confer authority to add an undertaking which lies outside the policy and outside the authority held out by the insurer.
Paragraph 11We are of the considered view that Section 64 VB of the Insurance Act would be attracted in the present case. In the policy secured by the respondent i.e., the Marine Cargo Annual Turnover Policy, the turnover of the respondent was a central aspect in the functioning of the insurance cover so provided. The agreement was extended to INR 1200 Crores and was adjustable, under the special conditions, in accordance with the actual turnover. The amount for which the respondent stood insured was exceeded in terms of turnover on 10.07.2010 itself, well before the incident. It was, therefore, incumbent upon the respondent, in view of the clear stipulation under Section 64VB, to either extend the coverage by paying the amount based on estimated turnover or at least guaranteeing to pay the same within a particular time period.
Paragraph 11Section 227 of the Contract Act also permits the authorised part of an agent’s act to be separated from the excess. It provides that where an agent does more than he is authorised to do, and the authorised part can be separated from the unauthorised part, ‘so much only of what he does as is within his authority is binding’. Accordingly, the email may be recognised as a valid clarification insofar as it concerned payment of the scheduled instalments and operation of the policy within the sum lawfully insured. It cannot, however, merely by reason of the same communication, be treated as an independent undertaking of unlimited or retrospectively enlarged cover.