1945 (2) TMI 12 - HC - Companies Law

General provisions with respect to memorandum and articles - Effect of memorandum and articles

Summary

Issues:
1. Interpretation of the rules of a benefit fund for railway servants.
2. Validity of amendments made to the rules of the association.
3. Application of the Insurance Act of 1938 to the benefit fund's rules.

Detailed Analysis:
1. The case involved a dispute between a railway servant, the respondent, and an association of railway servants, the appellant, regarding the interpretation of the rules of the All India Railwaymen's Benefit Fund. The respondent claimed entitlement to a specific amount based on the original rules of the fund, while the association contended that amendments were necessary due to the Insurance Act of 1938 abolishing the dividing scheme. The respondent argued that he should be governed by the rules in force at the time of his enrollment in 1932, which did not align with the amendments made by the association.

2. The lower appellate Court initially ruled in favor of the respondent, stating that the amendments made by the association were inconsistent with the original contract and constituted a breach. However, the High Court disagreed, emphasizing that the association, registered under the Companies Act of 1913, had the power to amend its articles for the benefit of the association as a whole. The Court cited legal precedents to support the view that such amendments were valid and binding on the members, provided they were made in good faith and for the benefit of the association.

3. The High Court further analyzed the application of the Insurance Act of 1938 to the respondent's claim. It highlighted that the Insurance Act prohibited business on the dividing principle, which was the basis of the original rules of the benefit fund. As a result, the respondent's contract with the association based on the original rules became unenforceable after the enactment of the Insurance Act. The Court calculated that under the provisions of the Insurance Act, the respondent had actually received more than he was entitled to, thereby dismissing his grievance and upholding the association's decision to pay him a lesser amount.

In conclusion, the High Court reversed the lower appellate Court's decision, ruling in favor of the association and restoring the decree that dismissed the respondent's suit. The Court emphasized the association's power to amend its rules and the applicability of the Insurance Act to the dispute, ultimately finding that the respondent had received the correct amount based on the legal framework in place at the time of his retirement.