The Supreme Court has allowed two appeals filed by The New India Assurance Company Limited and held that an insurance policy cannot be retrospectively extended to cover a risk that arose before the required additional premium was paid.
A Bench of Justice Sanjay Karol and Justice N. Kotiswar Singh ruled that Section 64VB of the Insurance Act, 1938 prevents an insurer from assuming additional risk unless the premium has been received or validly guaranteed in advance.
Background of the Case
The dispute arose from a Marine Cargo Annual Turnover Policy issued to M/s Louis Dreyfus Commodities India Pvt. Ltd. for 2010, with an annual turnover coverage of ₹1,200 crore and premium payable in two instalments.
On November 7, 2010, a fire broke out at a Container Freight Station where 41,481 cotton bales had been stored. The insurer was informed on the same day. A surveyor appointed by the insurer assessed the damage at about ₹22.01 crore.
The insurer later sought an additional premium of ₹86.86 lakh to enhance the coverage to ₹1,500 crore. The amount was paid on December 17, 2010, after the fire had already occurred. The insurance claim was subsequently repudiated.
The National Consumer Disputes Redressal Commission (NCDRC), however, directed the insurer to pay the amount assessed by its surveyor. It relied, among other things, on a May 17, 2010 email from the insurer's Divisional Manager stating that transit would remain covered even if turnover crossed ₹1,200 crore.
Supreme Court's Observation
The Supreme Court examined Section 64VB of the Insurance Act, which provides that an insurer cannot assume a risk unless the premium has been received or properly guaranteed.
Justice Sanjay Karol observed that the policy's turnover-based structure was central to the insurance arrangement. The insured amount had already been exceeded by July 10, 2010, well before the November fire. The Court held that the additional coverage therefore required payment or a valid guarantee in accordance with the statutory requirement.
The Bench also considered the Divisional Manager's email. The Court held that an employee may have authority to administer or explain a policy, but that does not automatically give the employee authority to enlarge the insurer's liability or bypass a statutory requirement.
Justice Nongmeikapam Kotiswar Singh explained the distinction, observing that
“Authority to administer or explain an existing policy is not equivalent to authority to rewrite it.”
The Court further held that acceptance of the additional premium after the incident could not retrospectively create insurance coverage. The endorsement expressly made the enhanced coverage effective from December 17, 2010.
Decision
The Supreme Court accordingly allowed both appeals. It held that the May 17, 2010 email could not operate as an independent source of additional or unlimited insurance coverage, and the subsequent premium payment could not retrospectively attach the additional risk.
Case Details:
Case Title: The New India Assurance Company Limited & Ors. v. M/s Louis Dreyfus Commodities India Pvt. Ltd.
Case Number: Civil Appeal Nos. 7687-7688 of 2025
Judge: Justice Sanjay Karol and Justice Nongmeikapam Kotiswar Singh
Decision Date: August 18, 2026
