The Court held that accepting the additional premium could not retrospectively create insurance coverage for an incident that had already occurred.The Supreme Court has held that an insurer cannot be made liable for an insurance risk that had already arisen before the requisite premium was paid, holding that Section 64VB of the Insurance Act, 1938 prohibits retrospective regularisation of insurance coverage.A Bench of Justice Sanjay Karol and Justice Nongmeikapam Kotiswar Singh allowed appeals filed by The New India Assurance Company Limited against an order of the National Consumer Disputes Redressal Commission (NCDRC), which had directed the insurer to pay a claim arising from a fire that destroyed cotton consignments belonging to Louis Dreyfus Commodities India Pvt. Ltd.The Court held that although an insurer’s officer may have authority to administer or explain an existing policy, such authority does not automatically extend to enlarging the insurer’s risk or dispensing with a statutory requirement for the attachment of that risk.“An agent cannot, by invoking actual or ostensible authority, confer upon the insurer a capacity which the statute itself withholds.”Justice Kotiswar Singh, in supplementary observations, further clarified the distinction between an officer's authority to administer a policy and his authority to alter the contractual risk.“Authority to administer or explain an existing policy is not equivalent to authority to rewrite it.”Fire Destroyed Cotton Consignments During Policy PeriodLouis Dreyfus Commodities had obtained a Marine Cargo Annual Turnover Policy from New India Assurance for the period 01.01.2010 to 31.12.2010. The policy carried an annual turnover limit of Rs 1,200 crore, with a half-yearly turnover limit of Rs 600 crore. The premium was payable in two equal instalments. The policy also contained a special condition stating that the premium was subject to the annual turnover and would be charged according to the actual turnover during the policy period.During the year, the respondent's turnover increased substantially.On 07.11.2010, a fire broke out at a Container Freight Station where 41,481 cotton bales belonging to the respondent had been stored. The insurer was informed of the incident on the same day. A surveyor appointed by the insurer assessed the damage at approximately Rs 22.01 crore. The dispute, however, centred not on the occurrence of the fire but on whether the insurance coverage was operative on the date of the loss.Insurer Said Turnover Had Already Exhausted CoverageThe insurer asserted that the respondent's turnover had crossed the insured limit well before the fire. According to the insurer, the turnover had reached Rs 1,016.35 crore by 30.06.2010, exceeding the Rs 600 crore coverage applicable for the first half of the year. The second instalment of premium was paid on 01.07.2010. By July 10, however, the turnover had crossed Rs 1,200 crore.By the date of the fire on November 7, 2010, the respondent's turnover was stated to have reached approximately Rs 1,724.12 crore. The insurer therefore argued that the coverage had been exhausted before the incident and that no additional premium had been paid to extend the risk.The respondent, on the other hand, relied upon an email dated 17.05.2010 from the insurer's Divisional Manager, which stated that after payment of the second instalment, all transits would remain covered until expiry of the policy even if the turnover crossed Rs 1,200 crore.Additional Premium Was Paid After FireThe insurer subsequently emailed the respondent on 14.12.2010, seeking an additional premium of Rs 86,86,125 to enhance the coverage. The amount was paid on 17.12.2010, and an endorsement was issued enhancing the coverage from that date. The insurer nevertheless repudiated the claim in July 2012.It relied, among other things, on Section 64VB of the Insurance Act, which provides that an insurer cannot assume a risk unless the premium has been received in advance or has been guaranteed in the manner prescribed.The NCDRC, however, accepted the respondent's case and directed the insurer to pay the amount assessed by its surveyor. The Commission relied substantially upon the earlier communication from the insurer stating that the coverage would continue despite the turnover exceeding Rs 1,200 crore.The insurer approached the Supreme Court.SC Explains Section 64VB: Risk Cannot Begin Before PremiumThe Supreme Court first examined Section 64VB.The provision creates a statutory restriction on an insurer assuming risk where the required premium has not been received or otherwise secured in the prescribed manner. The Court observed that sub-section (2) makes the position particularly clear: where the premium can be ascertained in advance, risk cannot be assumed before the date on which the premium is paid.The Bench held that Section 64VB was directly attracted to the case.The Court observed that turnover was a central component of the Marine Cargo Annual Turnover Policy and that the insured amount had already been exceeded on 10.07.2010, several months before the fire. It was therefore incumbent upon the respondent to extend the coverage by paying the additional premium based on the increased turnover, or at least provide a guarantee for payment within the prescribed period.The Court concluded:“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.”May An Insurer's Officer Extend Coverage By Email?The respondent's principal defence was the Divisional Manager's email dated 17.05.2010, which stated that all transits would remain covered even if turnover exceeded Rs 1,200 crore.The Supreme Court rejected the argument that this communication could extend the insurer's statutory liability. The insurer had produced internal guidelines dated 16.10.2006, issued by its Head Office, which stated:“Premium adjustment to be done only downwards, in view of the provisions of Section 64VB.”The Court held that the Divisional Manager could not, contrary to these directions and the statutory requirement under Section 64VB, enlarge the insurer's liability.Justice Sanjay Karol noted that while a principal may ordinarily be liable for acts of its agent, such authority must operate within the rules and regulations governing the principal and within the ordinary course of the agent's duty.Agent Can Explain Policy, But Cannot Rewrite ItJustice Kotiswar Singh's separate observations focused particularly on the law of agency under the Indian Contract Act, 1872. The judgment examined Sections 182, 186, 187, 188, 226 and 237 of the Contract Act concerning actual, implied and apparent authority.The Court explained that an officer may have authority to communicate with policyholders, explain an existing policy and deal with premium matters. But that does not mean that the officer has authority to create an entirely new risk.The Court said:“A Divisional Manager entrusted with administration of a policy may ordinarily communicate with the insured, explain the policy and call for premium, but that does not establish authority to create a new risk, enlarge the sum insured or enlarge the scope of liability of the insurer or dispense with a statutory precondition for attachment of risk.”The Court therefore distinguished between authority to administer a policy and authority to alter the risk undertaken by the insurer.Internal Restriction Cannot Always Defeat Apparent AuthorityThe judgment also considered the doctrine of apparent or ostensible authority under Section 237 of the Contract Act.Referring to Harshad J. Shah v. LIC of India, (1997) 5 SCC 64, and Delhi Electric Supply Undertaking v. Basanti Devi, (1999) 8 SCC 229, Justice Kotiswar Singh explained that an internal restriction on an agent's authority does not necessarily defeat an otherwise established case of apparent authority if the principal itself had held out the agent as possessing that authority. However, the Court drew an important distinction in the present case.The question was not merely whether the Divisional Manager had authority to communicate with the respondent. He plainly did. The question was whether he had authority to enlarge the insurance risk in a manner that the insurer itself could not lawfully undertake without compliance with Section 64VB. The Court held that he did not.“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.”Acceptance Of Additional Premium Did Not Revive Earlier RiskThe respondent also argued that the insurer had accepted the additional premium and was therefore estopped from denying coverage.The Supreme Court rejected this submission.The additional premium was paid only on 17.12.2010, after the fire had occurred on 07.11.2010. More importantly, the endorsement itself expressly stated that the enhanced coverage would take effect from 17.12.2010.The Court held that accepting the additional premium could not retrospectively create insurance coverage for an incident that had already occurred. It further held that the doctrine of estoppel cannot operate against a statutory prohibition.The Court observed:“The rule of estoppel … cannot apply against or in contravention of a statute.”The Court therefore rejected the argument that the insurer had waived the protection of Section 64VB through its conduct.The Supreme Court ultimately held that the respondent's insurance coverage had not extended to the loss that occurred on 07.11.2010, since the additional premium necessary for the increased risk had not been paid before the risk arose.The subsequent endorsement dated 17.12.2010 could not retrospectively regularise the coverage.Justice Kotiswar Singh summed up the position in his supplementary observations:“It does not enable an agent to confer upon the Principal a liability which the agent was neither authorised nor legally competent to assume on its behalf.”The Court accordingly allowed both appeals filed by New India Assurance and disposed of the pending applications.CIVIL APPEAL NOS. 7687-7688 OF 2025The New India Assurance Company Limited & Ors. v M/S Louis Dreyfus Commodities India Pvt. Ltd.Date of Decision: 18.08.2026Appearance:For Appellant: Mr. Salil Paul, AdvFor Respondent: Mr. Joy Basu, Adv(The author of this article, Vatsal Chandra is a Delhi-based Advocate practicing before the courts of Delhi NCR.)