Section 64VB Bars Retrospective Cover; Agent’s Assurance Cannot Override Statutory Bar on Insurance Risk

A Division Bench of the Supreme Court held that an insurer’s agent cannot waive Section 64VB of the Insurance Act, 1938, even by written assurance, to extend cover beyond premium paid.

The Supreme Court has allowed two civil appeals filed by The New India Assurance Co. Ltd. against a judgment of the National Consumer Disputes Redressal Commission, setting aside directions to pay a fire-damage claim of over Rs. 22 crores to a commodities trading company. The Division Bench, comprising Justice Sanjay Karol and Justice Nongmeikapam Kotiswar Singh, held that Section 64VB of the Insurance Act, 1938, places an absolute statutory embargo on an insurer assuming risk without prior premium, and that neither an agent’s written assurance nor the doctrine of estoppel can override that provision. The judgment also contains a detailed concurrent opinion by Justice Kotiswar Singh analysing the limits of an agent’s actual, implied, and ostensible authority under the Indian Contract Act, 1872.

The Dispute: A Fire, a Turnover Policy, and a Repudiated Claim

M/s Louis Dreyfus Commodities India Pvt. Ltd. held a Marine Cargo Annual Turnover Policy from The New India Assurance Co. Ltd., Policy No. 350200/21/09/14/00000369, covering the period 01.01.2010 to 31.12.2010. The policy was issued for an expected annual turnover of Rs. 1,200 crores, with premium payable in two equal half-yearly instalments. The sum insured was structured as Rs. 1,200 crores annually and Rs. 600 crores for each half year.

By mid-2010, the respondent’s turnover had expanded rapidly. Its cumulative turnover crossed Rs. 600 crores before June 2010, and by 10 July 2010—the day after the second premium instalment was paid—the total turnover had already crossed Rs. 1,200 crores, exhausting the entire annual sum insured. On 07.11.2010, a fire broke out at a Container Freight Station where the respondent had stored 41,481 cotton bales. The insurer was informed the same day.

The surveyor appointed by the insurer assessed damages at Rs. 22,01,29,271. However, the insurer also appointed a second surveyor, whose report was allegedly not shared with the respondent. The insurer, by email dated 14.12.2010, requested an additional premium of Rs. 86,86,125 to enhance coverage to Rs. 1,500 crores. That amount was paid on 17.12.2010, and an endorsement was issued effective that date. The claim was eventually repudiated on 27.07.2012, and the respondent filed a complaint before the NCDRC.

What the NCDRC Held

The NCDRC allowed the complaint and directed the insurer to pay the sum assessed by its own surveyor. The Commission relied on an email dated 17.05.2010, in which the Divisional Manager of the insurer had written to the respondent’s broker clarifying that “after payment of 2nd instalment, all the transits are covered till the expiry of policy even if it crosses 1200 crores.” The NCDRC treated this as a binding assurance that coverage would continue irrespective of turnover exceeding the insured amount.

The insurer’s central defence before the NCDRC was that the respondent’s turnover had crossed the insured amount well before the fire, and since no additional premium had been paid for the excess period, there was no active coverage on 07.11.2010. The insurer also argued that the email of 17.05.2010 was sent by an officer without authority, and that Section 64VB of the Insurance Act prohibited any such retrospective extension of risk.

The Supreme Court’s Holding on Section 64VB

The Court found that Section 64VB applies directly to the facts. The provision prohibits an insurer from assuming any risk unless the premium payable is received in advance or guaranteed to be paid within the prescribed time. Sub-section (2) makes clear that risk cannot be assumed earlier than the date on which the premium is actually paid.

Applying this to the Marine Cargo Annual Turnover Policy, the Court held that because the respondent’s turnover exceeded the Rs. 1,200 crore cover by 10.07.2010, it was incumbent upon the respondent to either extend coverage by paying an additional premium based on estimated turnover, or at least guarantee payment within a specified period. Neither was done before the fire on 07.11.2010. The additional premium was paid only on 17.12.2010, and the endorsement expressly stated its effect would accrue from that date.

The Court rejected the respondent’s argument that payment of additional premium after the incident estopped the insurer from refusing the claim. It drew a distinction between instalments forming part of the original agreed premium, where Section 64VB would not be a shield, and a payment that was effectively an attempt at post-facto regularisation after the coverage based on turnover had already been surpassed. The latter is squarely hit by Section 64VB, which “provides no possibility for post facto regularisation.”

The Court also relied on its earlier decision in Deokar Exports (P) Ltd. v. New India Assurance Co. Ltd., (2008) 14 SCC 598, affirming the settled position that risk cannot be assumed before premium is received.

The Agent’s Authority: Why the Email of 17 May 2010 Did Not Bind the Insurer

The respondent’s most significant argument was that the Divisional Manager’s email of 17.05.2010 constituted a binding assurance from the insurer that coverage would survive beyond the Rs. 1,200 crore threshold. The Court declined to accept this.

The insurer had placed on record guidelines issued by its Head Office on 16.10.2006, circulated to all regional offices, expressly stating that premium adjustment was to be done “only downwards, in view of the provisions of Section 64VB.” The Court held that while a principal is generally liable for the acts of its agent done in the regular course of duty, the Divisional Manager could not have been expected to give an assurance contrary to a clear internal directive. The circumstances of the case did not permit the officer to be treated as having authority to enlarge the coverage.

The Court applied Harshad J. Shah v. LIC of India, (1997) 5 SCC 64, which held that where statutory regulations expressly prohibit an agent from a particular act, neither implied nor apparent authority can be inferred from conduct. It also cited State of Orissa v. United India Insurance Co. Ltd., (1997) 5 SCC 512, where a Branch Manager who incorporated an unauthorised guarantee into an insurance policy was held not to have bound the insurer, as his act exceeded the authority held out by the principal.

Estoppel, the Court held, cannot operate against or in contravention of a statute. It cited Shyam Telelink Ltd. v. Union of India, (2010) 10 SCC 165, Electronics Corpn. of India Ltd. v. Secy., Revenue Deptt., Govt. of A.P., (1999) 4 SCC 458, and State of W.B. v. Gitashree Dutta, (2022) 19 SCC 388, in support. Since Section 64VB itself enjoins that risk cannot be assumed without prior premium, any statement by an employee promising otherwise carries no legal force.

Justice Kotiswar Singh’s Concurrent Opinion: Mapping the Limits of Agent Authority

Justice Kotiswar Singh wrote separately to elaborate on the law of principal and agent as it applies to the insurer’s Divisional Manager. He examined Sections 182, 186, 187, 188, 226, 227, and 237 of the Indian Contract Act, 1872.

He accepted that the Divisional Manager, as an officer of the policy-issuing office who responded to a query about an existing policy and dealt with premium and coverage, possessed at least usual and implied authority to correspond about and explain the policy. The email could not therefore be discarded as a purely private communication. However, authority to administer or explain a policy is not authority to rewrite it.

Section 188 of the Contract Act, he noted, confines incidental and usual authority to every “lawful thing” necessary or usually done in the authorised business. An agent cannot acquire, by implication, authority to undertake a liability which the governing statute does not permit the principal to assume. The respondent established that the Divisional Manager had authority to correspond about the policy, but did not establish, as required under Dilawari Exporters v. Alitalia Cargo & Ors., (2010) 5 SCC 754, that the insurer had held the Divisional Manager out as having authority to independently enlarge the turnover-based risk or to dispense with the statutory requirement for attachment of additional risk.

Justice Kotiswar Singh distinguished Delhi Electric Supply Undertaking v. Basanti Devi & Anr., (1999) 8 SCC 229, which the respondent relied upon for the proposition that an undisclosed limitation on an agent’s authority cannot defeat ostensible authority. He held that Basanti Devi involved LIC itself placing DESU in a position to collect premium, so the ostensible authority related to an act the principal had itself arranged. In the present case, the disputed part of the email concerned continuation of risk beyond the statutory permissible limit—an act the principal itself could not lawfully perform without fresh premium. Basanti Devi, he held, does not support the proposition that an undisclosed limitation allows an agent to undertake that which the principal is statutorily barred from undertaking in that manner.

On ratification, Justice Kotiswar Singh held that the endorsement of 17.12.2010 expressly took effect prospectively. Its prospective commencement was inconsistent with any intention to ratify, retrospectively, an assurance that cover had attached before the November 2010 fire. Further, ratification under Section 196 of the Contract Act cannot be used to defeat a mandatory statutory requirement. He applied the principle qui facit per alium facit per se—what is done through an agent is done by the principal—but noted that the maxim applies only to acts within the agent’s authority; it does not enable an agent to confer upon the principal a liability the agent was neither authorised nor legally competent to assume.

Order

Both Civil Appeal Nos. 7687–7688 of 2025 were allowed. The judgment and order dated 21.05.2025 of the NCDRC was set aside. Pending applications, if any, were disposed of. The order was passed on 18 August 2026.