TMI Blog2014 (5) TMI 825X X X X Extracts X X X X X X X X Extracts X X X X ..... s, 2014. As presently advised, these Rules are yet to be gazetted; this is another matter on which I will comment a little later. Absent evidence of any such gazette notification, they are referred to here only for such interpretive value as they might have. Rule 22(xvi) contains a very long list of ten items of business that, apparently, are intended to be transacted only by means of a postal ballot. All provisions for compulsory voting by postal ballot and by electronic voting to the exclusion of an actual meeting cannot and do not apply to court-convened meetings. At such meetings, provision must be made for postal ballots and electronic voting, in addition to an actual meeting. Electronic voting must also be made available at the venue of the meeting. Any shareholder who has cast his vote by postal ballot or by electronic voting from a remote location (other than the venue of the meeting) shall not be entitled to vote at the meeting. He or she may, however, attend the meeting and participate in those proceedings. The effect, interpretation and implication of the provisions of the Companies Act, 2013 and the relevant SEBI circulars and notifications, to the extent that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of the Companies Act, 2013, a question has been raised in this Company Summons for Direction, viz., whether in view of the provisions of Section 110 of the Companies Act, 2013 ( the 2013 Act ) and SEBI Circular dated 21st May 2013, a resolution for approval of a Scheme of Amalgamation can be passed by a majority of the equity shareholders casting their votes by postal ballot, which includes voting by electronic means, in complete substitution of an actual meeting. In other words, whether the 2013 Act, read with various circulars and notifications, has the effect of altogether eliminating the need for an actual meeting being convened. 2. In the facts peculiar to the present case, an actual meeting may not be necessary. Yet, this order is necessitated because the application as original made in this Company Scheme for Directions sought precisely such a dispensation. This is an issue that is likely to recur in several matters; hence this order. 3. I have heard Mr. Mehta, learned senior counsel for the petitioners. Mr. Gaurav Joshi, learned senior counsel also assisted the Court as amicus. Mr. Mehta's submission is that the clear legislative mandate of the 2013 Act is to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of the shareholders by means of postal ballot, it shall be deemed to have been duly passed at a general meeting convened in that behalf. 7. This is said to be in substitution of Section 192A of the 1956 Act, which was introduced by the 2001 amendment and reads thus: Passing of resolution by postal ballot . 192A. (1) Notwithstanding anything contained in the foregoing provisions of this Act, a listed public company may, and in the case of resolutions relating to such business as the Central Government may, by notification, declare to be conducted only by postal ballot, shall, get any resolution passed by means of a postal ballot, instead of transacting the business in general meeting of the company. (2) Where a company decides to pass any resolution by resorting to postal ballot, it shall send a notice to all the shareholders, along with a draft resolution explaining the reasons therefor, and requesting them to send their assent or dissent in writing on a postal ballot within a period of thirty days from the date of posting of the letter. (3) The notice shall be sent by registered post acknowledgement due, or by any other method as may be prescribed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed amount out of the money so raised; issues of shares with differential rights as to voting or dividend; variation in the rights attached to a class of shares or debentures or other securities; sale of the whole or substantially the whole of an undertaking of a company; giving of loans or extending guarantee or providing security in excess of certain specified limits; and so on. 9. The second part of Section 110 is in Section 110(1)(b). This says that for any item of business, other than ordinary business and any business in respect of which directors or auditors have a right to be heard at any meeting, a company may transact by means of postal ballot in such a manner as may be prescribed to transact such business in such manner as may be prescribed instead of transacting it at a general meeting. Sub-section (2) of Section 110 contains a deeming fiction which says that if a requisite majority of shareholders has assented to a resolution by postal ballot, it is deemed to have been duly passed at a general meeting convened for that purpose. 10. It is on this basis that Mr. Mehta founds his submission. He also refers to a SEBI circular dated 17th April 2014 relating to Clauses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmation that has been send to him by post or email seems to me to be completely contrary to the legislative intent and spirit to the express terms of the SEBI circular and amended Listing Agreement's Clauses 35B and 49. 12. There are other reasons also why this question of voting exclusively by postal ballot and electronic means is still very much a grey area. Even the new Act contains specific sections regarding quorum for meetings (Section 103). If voting is to be done only by postal ballot, how is that statutory requirement of a quorum to be met? Mr. Mehta's answer is that the non-obstante clause in Section 110 eliminates the need for any such quorum. I find that hard to accept. The edifice of this submission seems to have a uniform glassy fa ade: it suggests that the information sent to shareholders is fixed, unalterable and immutable. That is seldom so. Agenda items and proposals are frequently amended with suggestions from the floor or even by the Board at the meeting. Often, Schemes of Arrangement or Compromise are amended at a meeting itself; again, these amendments come from the floor or even perhaps from the Board itself. That amendment is then put to vote. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BI circulars or guidelines or notifications that make electronic voting or postal ballot the exclusive method of voting on such schemes are clearly unlawful and contrary to the intent of Sections 230/232 of the 2013 Act and of Sections 391/394 of the 1956 Act. There is no question of matters at a Court-convened meeting being decided by postal ballot instead of at a general meeting; the postal ballot and electronic voting may be permitted or may even be required in addition to but not in replacement of an actual general meeting. 16. Mr. Joshi is justified in his submission that rather than considering a situation of a complete ouster of all meetings, a more appropriate interpretation would be to hold that the provision for a postal ballot is an additional facility to be provided, so that there is greater inclusiveness and that a shareholder or member then has an option of voting either by a postal ballot or electronic voting or in person. This would meet the requirements of Section 103 which provide for a quoram of persons personally present. Casting a vote by postal ballot or by electronic voting cannot possibly constitute personal presence, at least not without significant vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g could be further from the mandate of corporate law and governance. We strive today to greater transparency; that means that more should be given the opportunity to speak and to exercise their rights as shareholders. But that cannot come at the price of their right to speak, to be heard, to persuade, even to cajole. What corporate governance demands is the government of the tongue, not the tyranny of a finger pressing a button. 18. Far too many grey areas that still persist - the SEBI circular of 17th April 2014 is apparently differed; the Management Administration Rules are not yet gazetted; Sections 230 and 232 of the 2013 Act are not yet brought into force; there is an apparent conflict between the requirements for a quorum coram and Section 110; it is doubtful whether Section 110 or any SEBI circular mandating exclusive voting by postal ballot can apply to a court-convened meeting - I do not think it is possible at this stage to grant a kind of order that Mr. Mehta's application, as originally cast, seeks. That would, in my view, simply be unsafe. It would erode to a very large extent the shareholders right to know, their right to be informed, and their right to take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctronic votes. Ex-facie, this is an untenable mechanism. If, as I have said, electronic voting is not limited to voting from a remote location but must also include electronic voting at the meeting in addition to postal ballots received, then it is a sum total of all these votes that must be taken into account. 21. This means that while a meeting must be held, provision must also be made for electronic voting at the meeting by those shareholders who desire it. Every shareholder being given that option of exercising their votes by postal ballot or by electronic voting, the latter being either from a remote location or at the meeting itself. 22. The concepts of electronic voting and postal ballots have been in use in other jurisdictions for several years, where similar concerns have been expressed. There is material to suggest that a very early entirely electronic meeting held in Delaware saw less than satisfactory shareholder participation. The question of not holding a meeting at all never arose. The importance of debate and deliberation is far too high, some have said, for it to be foregone altogether. Comments from Australia, also by Dr. Boros, are to the effect that even i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertain items of business by postal ballot (which includes electronic voting) to the exclusion of an actual meeting are matters that require a fuller consideration. The Central Government, through the Additional Solicitor-General, and SEBI will both need to be heard. The Company Registrar shall send an authenticated copy of this order to both the learned Additional Solicitor General and to SEBI requesting them to appear before the Court when this matter is next taken up for a consideration of this issue. On a prima-facie view that the elimination of all shareholder participation at an actual meeting is anathema to some of the most vital of shareholders' rights, it is strongly recommended that till this issue is fully heard and decided, no authority or any company should insist upon such a postal-ballot-only meeting to the exclusion of an actual meeting. Since this is evidently a matter of some importance, the Company Registrar is directed to make a submission and obtain necessary directions on the administrative side to have the matter placed before an appropriate Bench. At such a hearing, further safeguards can also be evolved. For instance, it is entirely possible to have a Co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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