Statutory amendment of articles upheld where a pre-existing fund scheme became unenforceable under later insurance law.

A pre-existing dividing-scheme fund claim ceased to be enforceable once the Insurance Act, 1938 came into force, except to the extent permitted by the statute's distribution proviso. The association could validly amend its articles by special resolution to substitute a guaranteed scheme, because the statutory power to alter articles cannot be contracted away and remains effective if exercised within the statute, bona fide, and for the association's benefit. The amended articles were therefore binding on members, and the revised scheme prevailed over the challenge.

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Issues: (i) Whether the member's claim under the fund remained enforceable on the original dividing-scheme basis after the coming into force of the Insurance Act, 1938; (ii) whether the association, having been incorporated under the Companies Act, 1913, could validly amend its articles by special resolution so as to substitute a guaranteed scheme for the former dividing scheme.

Issue (i): Whether the member's claim under the fund remained enforceable on the original dividing-scheme basis after the coming into force of the Insurance Act, 1938.

Analysis: The original rules were founded on the dividing principle, which the Insurance Act, 1938 prohibited from being continued beyond the statutory period. Once the Act came into force, the earlier contractual basis ceased to be enforceable except to the extent permitted by the statutory proviso governing distribution. The member's claim therefore had to be tested by the statutory scheme and not merely by the pre-existing articles.

Conclusion: The claim was not enforceable on the original dividing-scheme basis, and the statutory proviso controlled the distribution.

Issue (ii): Whether the association, having been incorporated under the Companies Act, 1913, could validly amend its articles by special resolution so as to substitute a guaranteed scheme for the former dividing scheme.

Analysis: A company's statutory power to alter its articles by special resolution cannot be contracted away. That power is valid if exercised within the statute, in good faith, and for the benefit of the association as a whole. The challenged resolutions were passed regularly, and the altered scheme was adopted to meet the change brought about by the Insurance Act, 1938. The facts did not show any illegality or lack of bona fides in the amendment.

Conclusion: The association had power to amend its articles, and the amendment was binding on the member.

Final Conclusion: The appellate court's view was rejected, the suit remained dismissed, and the association's amended scheme prevailed over the respondent's challenge.

Ratio Decidendi: A company may validly alter its articles by special resolution notwithstanding prior contractual arrangements, provided the alteration is authorised by statute, made bona fide, and not inconsistent with law; where a pre-existing scheme becomes unenforceable under a later statute, the amended articles bind members.

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