Seshagiri Aiyar, J.
1. Both the junior members of the Bar who appeared in this case argued it very ably. The fasts are not in dispute. A policy was effected on the life of one Nagammal on the 29th of May 1906. The premia were payable monthly. The assured made 61 payments and then discontinued the payment. She died on the 6th of April 1914 and the present suit was instituted on the 11th of April 1917. The District Munsif dismissed the suit. On appeal the Subordinate Judge gave a decree for the amount of the premia paid by the deceased. I agree with the conclusion of the lower Appellate Court, though not for the reasons given by it. When the insurance was effected the rule of the company stood thus [see Exhibit E, Clauses (b) and (c)]. 'The policy-holders mentioned above who have been making payments duly in that manner, will be paid interest at the rate of Rs. 6 per annum. It is only after the death of the policy holder that the life assurance amount will be determined. (c) If the present policyholders desire they may pay the entire amount for 69 months and stop (paying) the monthly premium. it was under this last clause that Nagammal paid for 60 months and then stopped payment. That she was justified in discontinuing payment is clear from two exhibits, C and C (1), which were letters written by the Secretary of the Company to the assured. In these letters it is pointed out that as she has discontinued payment she is not entitled to interest. There is no suggestion that the policy had lapsed owing to nonpayment of the premium. In or about January 1911 the share holders held ah extraordinary meeting at which they passed resolutions to the effect that the premium should be continued tit be paid till the death of the assured. Rule 70 is 'premiums shall be payable until the death of the policy-holder.' It is common ground that no notice was given to the assured about this extraordinary meeting. The contention on behalf of the company is that as under the new rules the premia ought to have been continued till the death of Nagammal, she forfeited her right even for the payment of the amount paid by her as the policy had lapsed by nonpayment.
2. The Subordinate Judge has not discussed the real question for decision, apparently as the arguments in the Court below were not directed to it. He has referred to Section 65 of the Contract Act and has held that, as the contract has become void, the promisee is entitled to the refund of the moneys paid under it. There can be no doubt that, if there has been failure to pay the stipulated premia, the assured is not entitled to a refund of the sum actually paid. The principle is stated very succinctly in Crawley's book on insurance as to when and under what circumstances the premium will be re-paid. Roughly speaking, in three classes of cases the assured can claim refund, where there has been fraud on the part of the company in inducing the assured to insure in the company, or where the policy has become void ab initio or where no risk has been incurred by the insurer. Macgillivray quoted by Mr. Venkatarama Aiyar for the appellant states the law thus: 'The general rule applicable to claims for the return of premium is that if the insurers have never been on the risk they have not earned the premium and ought to return it. Thus if a contract of insurance is set aside on the ground of misrepresentation or mistake or for some other reason the policy is held to have been void ab initio or to have been avoided before the risk began to run, the assured is, in the absence of any express condition to the contrary, entitled to claim re-payment of any premiums which he may have paid. Bermon v. Woodbridge (1781) 2 Doug. 781 : 99 E.R. 497; Anderson v. Fitzgerald (1853) 4 H.L.C. 484 : 17 Jur. 995 : 10 E.R. 551 : 49 R.R. 202; Goldstein v. Salvation Army Assurance Society (1917) 2 K.B. 291 : 86 L.J.K.B. 793 : (1917) W.C. & I. Rep. 192 : 117 L.T. 63; Moses v. Pratt (1815) 4 Camp. 297 : 16 R.R. 794; Pritchard v. Marchant's and Tradesman's Mutual Life Assurance Society (1858) 3 C.B.N. (N.S.) 622 : 27 L.J.C.P. 169 : 4 Jur. (N.S.) 307 : 6 W.R. 340 : 140 E.R. 885 : 11 R.R. 777 all bear out this statement of law. The next question is when the risk was run by the company. In Canning v. Farquhar (1886) 16 Q.B.D. 727 : 55 L.J.Q.B. 225 : 54 L.T. 350 : 34 W.R. 423 it was stated that, in the absence of a provision to the contrary, the risk commences at the time when a binding contract of insurance is concluded. Applying this principle the risk commenced against the defendant company on the execution of Exhibit A, the policy of insurance, on the 29th of May 1906, and if the assured is bound by the new rules passed by the company at its extraordinary meeting, there can be no doubt, on the principles of the decisions already quoted by me, the heirs of the assured will not be entitled to claim the return of the premium.
3. Now comes the question which has been raised by the learned Vakil for the respondent, whether the new rules were binding upon Nagatnmal. The right principle is, that ordinarily a concluded contract cannot be re-opened by one of the parties to it making a change in regard to the terms of trie contract. The principle is well illustrated by Allen v. Gold Reefs of West Africa Limited (1900) 1 Ch. 656 : 69 L.J. Ch. 266 : 43 W.R. 452 : 82 L.T. 210 : 16 T.L.R. 213. In page 663 Lord Justice Romer put this question to the Counsel. 'Can you alter articles so as to affect past transactions?' The answer was: 'We do not propose to alter the relation of debtor or creditor.' In the same judgment Lindley, M.R., says at page 672: 'But then comes the question whether this can be done so as to impose a lien or restriction in respect of a debt contracted before and existing at the time when the articles are altered. Again, speaking generally, I am of opinion that the articles can be so altered, and that, if they are altered bona fide for the benefit of the company, they will be valid and binding as altered on the existing holders of paid-up shares, whether such holders are indebted or not indebted to the company when the alteration is made. But, as will be seen presently, it does not by any means follow that the altered article may not be inapplicable to some particular fully paid-up share holder. He may have special rights against the company, which do not invalidate the resolution to alter the articles, but. which may exempt him from the operation of the articles as altered.' And then at the end of page 673 the learned Lord Justice says: 'A company cannot break its contracts by allering its articles, but, when dealing with contracts referring to revocable articles, and especially with contracts between a member of the company and the company respecting his shares, care must be taken not to assume that the contract involves as one of its terms an article which is not to be altered.' Vaughan Williams, L.J., who differed from the majority of the Bench says: 'A resolution may alter the regulations of a company but cannot retrospectively affect existing rights.' Lord Justice Romer also said that if there was a concluded contract, the company will not be Justified in altering its terms by subsequent resolution. The case before the Court of Appeal was one affecting a share-holder. A share-holder would usually have notice of the proposed change in the articles of association. He would have an opportunity of contesting the proposal to change the rule. His case is, therefore, not in pari materia with that of a stranger who is a policy-holder and who is not given notice of meetings of the company. Therefore, while the observations contained in this decision are certainly in favour of the view that a concluded contract should not be altered to the prejudice of the promisee by anything done behind his back and to which he had not submitted himself, the suggestion of the learned Vakil for the appellant that a policy-holder is as much bound as a share-holder by any change that may be made in the rules is not borne out by this judgment. He, however, relied upon the decision of the House of Lords in British Equitabls Assurance Co. Ltd. v. Baily (1906) A.C. 35 : 75 L.J. Ch. 73 : 94 L.T.I : 13 Manson 13 : 22 T.L.R. 152. That was undoubtedly a case of a policy-holder and the question there was whether he was affected by a new rule passed at an extraordinary meeting of the company. The reservations contained in the judgment of the noble Lords support the view taken in Allen v. Gold Reefs of West Africa Limited (1900) 1 Ch. 656 : 69 L.J. Ch. 266 : 43 W.R. 452 : 82 L.T. 210 : 16 T.L.R. 213. In that case the facts were these: The assured entered into a contract which contained these terms: 'I agree to conform to and abide by the deed of settlement and by laws, rules and regulations of the company in all respects.' Another provision to which ha submitted was this: 'l shall pay all such other sums, if any, as the company by their directors may have ordered to be added to such an amount by way of bonus or otherwise according to their practice for the time being.' What was done at the extraordinary meeting was to set apart a certain amount of the profits for a reserve fund. The assured contended that as the prospectus on the faith of which he assured his life did not provide for allocating a portion of the profits to the reserve fund, the action of the company was not binding on him. Lord Macnaghten at the very outset of his judgment quotes these observations of Cozens Hardy, L.J.--'A company cannot, by altering its articles, justify a breach of contract' and then proceeds: 'No one, I should think, would be inclined to dispute the proposition thus asserted.' The noble Lord then refers to the fact that the assured had bound himself to abide by any changes that may be made by the company and then says: 'It will be observed that the prospectus does not purport to give an assurance of any sort that the allocation of profits would never be altered.' Finally he concludes: 'l am at a loss to understand how the Court of Appeal came to the conclusion that the statements in this prospectus constituted a collateral contract or are to be treated as incorporated in the contract of insurance.' Lord Robertson used similar language. Lord Lindley, who took part in the decision in Allen v. Gold Reefs of West Africa Limited (1900) 1 Ch. 656 : 69 L.J. Ch. 266 : 43 W.R. 452 : 82 L.T. 210 : 16 T.L.R. 213 says at the bottom of page 42: 'A by-law to the effect that no creditor or policy-holder should be paid what was due to him would, in my opinion, be clearly void as an illegal excess of power.' The noble Lord, like Lord Macnaghten, prints out that the prospectus on the faith of which the policy-holder entered into the contract was not part of the contract and, therefore, as the assured had bound himself to abide by any changes that may be made regarding the distribution of profits, he should not be heard to say that the company had no power to change its rules. Now applying these principles to the present case, it is clear in the first place that Nagammal did not bind herself to abide by any other alterations that may be made by the company in future. Mr. Venkatarama Aiyar referred to this sentence in Exhibit A: 'The company shall be subject and liable to pay...to the assured or her assignee S. Kuppanna Row, son or heirs or to whomsoever she assigns such sums that shall become due and payable by virtue of the rules contained on the back hereof agreeable to the regulations of the company.' That only related to the amount that may be found due. The assured did not submit herself to any changes that may be made by the company in its rules. Moreover the contract between Nagammal and the company had become concluded and it was not open to the company to change any of its terms by its one-sided action. It seems to me, therefore, that the action of the company, so far as assurances which were completed before they passed new rules were concerned, was ultra vires and could not bind the policy-holder. In this view, in my opinion, the decision of the Subordinate Judge is right and this appeal should be dismissed with costs.
4. The facts in the case are simple and may be shortly stated. Plaintiff's mother took out a policy in the Tanjore Life Assurance Company on the 29th May 1806. The policy provided that if the assured paid the future premium at one rupee per mensem until 20th May 1921 or till her death, the company would be liable to pay her or her assignee (the plaintiff) 'such sum as shall become due and payable by virtue of the rules contained on the back hereof agreeable to the regulations of the company on the completion of 15 years' premiums or on satisfaction of proof of death and title of the assured.' It is not disputed that plaintiff's mother paid the premia for 61 months; that is till May 1911, that she made no further payments and that she died on 6th April 1914. The suit was brought to recover the amount which might be found due on taking accounts with interest thereon from 15th April 1914 and the claim was valued at Rs. 143-12-0, viz., twice the amount of the premia paid plus interest.
5. The District Munsif dismissed the suit, on the ground that the policy had lapsed on account of the non-payment of premiums. In appeal plaintiff gave up a portion of his claim. The Subordinate Judge reversed the decree of the District Munsif and held that plaintiff was entitled to recover Rs. 61 the amount of the premiums paid. The principal question for decision in this appeal is whether the plaintiff is entitled to claim a refund of premiums paid by his mother. Under the rules of the company which were in force when the policy was issued, policy-holders had the option of discontinuing the payment of monthly premiums after they had paid for 60 months. See Rule 33(c), which provided that if the present policy-holders so desired they might pay the entire amount for 60 months and stop paying the monthly premium. An extraordinary general meeting of the directors was held on 29th December 1910, and it was resolved to alter the existing rules in view of the unsatisfactory financial position of the company. Another extraordinary general meeting was held on 15th January 1911, and it was resolved that the amended rules be confirmed and adopted agreeably to the special resolution framed on the 29th december 1910, which was confirmed. See Exhibit D. The resolution of the 29th December 1910 was communicated to the Registrar of Joint Stock Societies and recorded by him. Rule 49 of the new rules provided that if premiums be not paid for four successive months on a policy, the policy would lapse without any notice being given by the company to the defaulter. But a lapsed policy might be renewed within six months from the date of the lapse on payment of a fee for renewal and arrears of premia (Rule 50). Rule 70 says that premiums shall be payable till the death of a policy-holder. Rule 33(c) of the old rules was not altered by any express rule in Exhibit D but I doubt whether the Subordinate Judge is right in saying that Rule 49 applies only in the case of those policy holders who have not paid premia for 60 months and that Rule 70 in Exhibit D must be read with the old Rule 33(c). The Subordinate Judge goes on to say 'A lapsed policy means a void policy. The insurance company must be ready to refund the premia paid in the case of a lapsed policy on the date of the death of the policy holder. In the absence of an express stipulation for the forfeiture of the premia on avoidance of the policy it seems that in order to obtain cancellation the insurer must, at least in the absence of fraud, be ready to return the premia.'
6. The Subordinate Judge has, I think, misunderstood the law on the subject, and it appears to be clear from the authorities to which the learned Vakil for the appellant has referred us that, when a policy lapses owing to non-payment of premium, the assured is not ordinarily entitled to claim a return of the premium paid. 'When the policy is void ab initio or in any case where a premium has been paid but the risk has not been run, whether this has been owing to the fault, pleasure or will of the assured or to any other cause, the premium shall be returned by the insurers but if the risk has once commenced there shall be no apportionment or return of the premia afterwards.' Bunyan on Life Insurance, 5th Edition, page 109; Bermon v. Woodbridge (1781) 2 Doug. 781 : 99 E.R. 497. The law as to the right of an assured to claim a return of the premium in the case of the policy being or becoming void is the same in life assurance as in marine insurance. Halsbury's Laws of England, Volume XVII, at page 557. Where a policy which is not illegal is void ab initio and no risk is run, the assured is entitled to a return of the premium he has paid but if the risk has once commenced the premia cannot, in the absence of fraud, be reclaimed. On the other hand if the assured is entitled to have the policy cancelled on the ground of his having been induced to enter into the contract of insurance by the fraud of the insurers, he is entitled to recover the premium he has paid. Halsbury's Laws of England, Volume XVII, page 558. The Subordinate Judge was of opinion that plaintiff was entitled under Section 65 of the Contract Act to a refund of the premium paid by his mother, but Section 65 applies only to cases where the agreement is discovered to be void or the contract becomes void at law for any of the reasons specified in the Contract Act. Oriental Government Security Life Assurance Co. Limited v. Narasimha Chari 25 M.P 183 : 11 M.L.J. 379.
7. It remains, however, to consider the question whether the new rules of the society infringed the rights of the policyholder and are binding on the plaintiff's mother. Rule 70, which required policy, holders to continue making payments until death, undoubtedly introduced an important change in the rules. The contract between the parties is contained in the policy of insurance and plaintiff's mother did not take out the policy subject to the rules then existing as well as to the rules which might be framed or altered afterwards. The words in the policy are 'The company shall be liable to pay to the assured such sums as shall become due and payable by virtue of the rules contained on the back hereof agreeably to the regulations of the company on the completion of payment of 15 years' premiums.' It is significant that the letters, Exhibits C and C 1, from the Secretary merely say that as plaintiff's mother had discontinued payments, she would be not entitled to interest, thereby implying that she was justified in discontinuing the payments. As regards the extent to which a company can affect the rights of members by an alteration in the articles, I may refer to Lindley on Companies, Volume 1, 6thEditioh at page 463: 'When considering contracts referring to revocable articles, it must not be assumed that the contract involves as one of its terms that the articles shall not be altered and the terms of the contract thereby varied, If there be such an agreement, these rights cannot be altered by an alteration of the articles. If there is no such agreement, they can be altered provided the alteration does not affect rights which have ripened into claims for something done under the contract in its original form. See Allen v. Gold Reefs of West Africa, Limited (1900) 1 Ch. 656 : 69 L.J. Ch. 266 : 43 W.R. 452 : 82 L.T. 210 : 16 T.L.R. 213'
8. British Equitable Assurrance Co. Ltd. v. Baily (1906) A.C. 35 : 75 L.J. Ch. 73 : 94 L.T.I : 13 Manson 13 : 22 T.L.R. 152 was strongly relied on by the learned Vakil for the appellant. The House of Lords decided in the case of a life assurance Company that the company could alter its by-laws and alter its practice in the distribution of profits and thereby vary its contract with a policy-holder, but it appears to be clear from the judgments of the learned Lords that the decision of the case turned on the question whether the prosectus formed part of the contract. Lord Lindley says at page 41: 'The prospectuses not being referred to in the policies cannot, in my opinion, be legitimately referred to in order to construe the contracts into which the policy-holders have been induced to enter. These contracts are to be found in the policies themselves.' Lord Macnaghten did not dissent from the proposition stated by Cozens Hardy, M.R., that the company cannot, by altering its articles, justify ft breach of contract. For the foregoing reasons I agree with my learned brother that the insurance company by altering its rules had no power to affect the rights of policy-holders whose contracts were concluded and that the appeal should be dismissed with costs.