AGENDA
AND MEETINGS
The subject matter to be
discussed indicated in the notice is called the agenda of the meeting. The
agenda must not be vague but should be clear and definite. Keye V. Croydon Tramways,
(1898) 1 Ch 358. The agenda of a
meeting whether it is a board meeting or any other meeting lists out the things
to be done at a meeting and businesses to be discussed and transacted at a
meeting. The Companies Act, 1956 does
not have any provision for the preparation or for the requirement of sending
agenda for the board of directors meeting or general meetings but although not
statutorily required laying down agenda for a meeting cannot be totally
abondoned. The order of businesses to be set out in the agenda is usually fixed
in consultation with the chairman of the meeting and routine items such as
confirmation of minutes of previous meeting and consideration of leave of
absence of directors are mentioned first.
"Meeting" meaning of (Ss. 165,
166, 169, 285)
In the context of the subject
under discussion, the word "meeting" is to be understood in the sense
of meeting of two or more minds in order that a consensus is reached for taking
a decision. The word "meeting" also connotes that there should be at
least two persons to constitute a meeting. This general rule is, however,
subject to a statutory exception where even one person may validly constitute a
meeting, e.g., a class meeting of
preference shareholders, the entire class of preference shares being held by a
single shareholder, or a class meeting of creditors, there being only one
creditor. East v. Bannet Bros. Ltd.,
(1911) 1 Ch 163. Similarly, the
Company Law Board may, under section 167 and Section 186 of the Companies Act, 1956,
order that a single person shall constitute a valid meeting. The Court may
also order a meeting to be called with a single member attending the meeting. Sticky Fingers Restaurant Ltd. Re, 1992 BCLC
84 (Ch D). Except in such exceptional
cases, meeting means and implies, meeting of more than one person. Under the
Companies Act, 1956 there can be
board meeting, general meeting and class meeting. In definitions given under
Secretarial Standard-1, board meeting means a meeting duly convened and
constituted of the Board or any Committee thereof' and under in definition
giving Secretarial Standard-2, meeting or general meeting or
extraordinary general meeting means a meeting of members duly convened by the
Board or on the requisition of members.
'Notice' necessity of (Ss. 171, 286)
Since the purpose of meeting
is to arrive at a consensus on a matter oil which decision is required to be
taken, it is necessary that the persons meeting must know before hand the
matter under discussion so that they come prepared and take the right decision.
From this it follows that there cannot be any meeting without a proper notice
indicating tile subject matter to be discussed at the meeting. Henderson v. Bank of Australia, (1890) 45 Ch
D 330. It is a general rule of common
law that a corporate body is not properly constituted unless the notice of
Meeting is Given to every member. Mahabir
Prasad Jalan v. Bajrang Prasad, [20001 102 Com Cases 81 (Cal).
Place, time and proper authority of notice
(Ss. 170, 172, 286)
A chance meeting of two or
more shareholders in the street or two or more Directors in a Coffee Shop is
not a meeting either of the shareholders or of the Directors. Barron v. Potter, (1914) 1 Ch 895. The
logical necessity of a notice of a meeting, Smyth
v. Darley, (1849) 2 HLC 789, further implies that the persons attending the
meeting must know the place as well as the time where and when the meeting is
to be held. There is also implicit in the requirement of notice that the notice
is issued by proper authority for otherwise every member of a body of persons
may issue notice thereby creating confusion. Of course, unless otherwise
prohibited by any statutory provision, the members can agree to waive the
requirement of notice. Hooper v. Kerr, (1900)
83 LT 729.
Paragraph 1.1 of Secretarial
Standard- I provides that unless the articles of association provides
otherwise, any director of a company may and the manager or secretary on the
requisition of a director should, at any time summon a meeting of the Board.
Paragraph 1. 1 of Secretarial Standard-2 provides that a general meeting
should be convened on the authority of the Board.
Adjournment of meeting [Ss. 174(3)(4),
288]
Unless the bye-laws or
the regulations constituting the body convening the meeting permit or unless
there is a specific statutory provision to this effect, a meeting, once
convened, cannot be postponed by subsequent notice and before the meeting is
convened. Smith v. Paringh Mines, (1906)
2 Ch 193. Of course, once convened, the meeting can always adjourn, itself to
finish its unfinished business or to take up the entire business of the meeting
on some other date. A meeting can also be adjourned for want of quorum. The
meeting itself will indicate the date, time and place when and where the
adjourned meeting is to be convened. If the bye-laws or regulations of
the body permit, a meeting can be adjourned sine die but then, a separate
notice is required to be given for holding the adjourned meeting. However, in
the event of disorder, even if the relevant rules do .not give the Chairman
power to adjourn the meeting, he may do so. Such an adjournment must be for no
longer than the Chairman considers necessary and the Chairman must, so -far
as possible communicate his decision to those present. Chandrakant Khare v. Dr. Shantaram Kale, (1989) 1 CLA 142 (SC).
Quorum at the Board Meeting (S. 287)
As a rule, in the case of a
meeting of the Board of Directors, the meeting cannot transact any business,
unless a quorum is present at the time of trausacting the business. It is not
enough that a quorum was present at the commencement of the business. The
quorum of the Board is required at every stage of the meeting and unless a
quorum is present at every such stage, the business transacted is void. Balakrishna v. Babu Subudhi, AIR 1949 Pat 184. Section 287(2)
provides that at least two dis-interested directors or one third of the
total strength, whichever is higher must be present at the meeting in order to
constitute the quorum. As regards meetings of committee of directors where
there is no provision of a quorum, the whole of the committee must meet.
Under definitions heading
and also in Paragraphs 3.1 and 3.2 of Secretarial Standard- 1, provide
for quorum of meetings of the Board under definitions, quorum is mentioned as
meaning the minimum number of directors whose presence is necessary for a
meeting. Sub-paragraphs 3.1.1 and 3.1.2 of paragraph 3.1 provide that
quorum should be present throughout the meeting, and no business should be
transacted when the quorum is not so present and that where the member of
directors is reduced below the minimum, fixed by the articles of association,
no business should be transacted unless the number is first made up by the
remaining directors through a general meeting. Paragraph 3.2 provides that in
the case of meetings of committees, the presence of' all the members of any
committee constituted by the Board is necessary to form the quorum for meetings
of such committee unless otherwise stipulated by the Board while constituting
the committee.
Quorum at the General Meeting (S. 174)
The quorum required is the
quorum to be present at the time of' beginning to consider the business; and it
need not be present throughout or at the time of taking the vote on any
resolution. Re, Hartly Baird Ltd., (1954)
3 All ER 695 (Ch D). 11' no
quorum is present, then there is no meeting and the proceedings are invalid. Re, Romford Canal Co., (1883) 24 Ch D 85. Where at the time of transacting
business, the number of members is less than the quorum fixed for the meeting
the business cannot be transacted; it will be a nullity. Re, London Flats Ltd., (1969) 2 All ER 744 (Ch D). If there be any irregularity as to quorum, third
parties without notice will not be affected. County of Gloucester Bank v. Rudry Merthyr Steam & House Coal
Colliery Co., (1895) 1 Ch 62~. The
representative of a body corporate appointed under section 187 or the representative of the President or a Governor of a State
under section 187 A is a member
personally present for purposes of counting a quorum. Re, Kelantan Coconut Estates, 1920 WN 274. An attorney as distinct
from a proxy of a member will also not be counted towards quorum. R. Harris Ltd., AIR 1956 SC 207. If two or more corporate bodies who are members of a
company are represented by a single individual, each of the bodies corporate
will be treated as personally present through that individual representing it.
If, for instance, he represents three corporate bodies, his presence will be
counted as three members being present in person for purposes of quorum. Macleod (Neil) & Sons Ltd., Petitioners,
1967, Scottish Law Times 46. But
a single member present in dual capacity, one as a member and another as a
representative, cannot constitute quorum for a single person cannot constitute
a meeting. Prain & Sons Ltd.,
Petitioners, 1947 SC 325.
Quorum when to be present (Ss. 174 (3) (5)
and 288)
In the absence of any
statutory provision in this regard or in the absence of any specific
requirement in the bye-laws or regulations governing the body, requisite
quorum for holding the meeting where at least two members, Sharp v. Dawes, (1876) 2 QBD. 26, must be present. Quorum actually
means the minimum number of persons entitled to hold a meeting. Where the
Statute requires the quorum to be present when the meeting proceeds to business
it means that quorum needs be present only at the time when the meeting first
assembles and if the number of persons present in the meeting afterwards falls
short of the quorum, the meeting is not invalid. In re : Hartley Baird Ltd., (1954) 3 WLR 964.
Chairman & his duties (S.
175/Regulations 50 to 54 and 76)
A meeting is orderly conduct
of certain business for taking certain formal decisions. It is, therefore,
considered to be an essential requirement of a meeting that there must be a
Chairman of a meeting. Blair Open Hearth
Furnace Co. v. Reigart, (1913) 108 LT 665. The Chairman is a person who has
been put in the chair by the persons constituting the meeting as 11' by an
agreement amongst themselves, to regulate the conduct of the meeting within
reasonable bounds. To preserve orderliness in the conduct of the proceedings of
a meeting, to conduct the proceedings in accordance with established procedure
and to record the sense of the meeting correctly, National Dwellings Society v. Sykes, (1894) 3 Ch 159, are some of the duties of the
Chairman. The Chairman's further duties include the duty to decide all points
of order raised in the meeting as also the duty to stick to the decision
already taken. Henderson v. Bank (~f
Australia, (1890) 45 Ch D 330. The Chairman must be fair and impartial, Reg. v. D'oyly, (1840) 12 A & E 139, to all the members present and,
unless the bye-laws or regulations of the body or the statute permit, he
should not exercise his casting vote. Nell v.
Longbottom, (1894) 1 QB 767. The
Chairman must not also adjourn the meeting unless such adjournment is necessary
in the interest of the business in hand. Salisbury
Gold Mining Co. v. Hathorn, (1897) AC 268. In view of the recent trend of
not prescribing qualification shares for Directors and generally the Chairman
of the Board of Directors presides over General Meetings, a non-member
Chairman can preside over General Meetings of companies. Of course he cannot
vote at such meetings if he is not a shareholder. But he can have a casting
vote, provided the regulations or bye-laws permit the same.
Common
law, motion and resolution
The entire body of law
relating to meetings, it must be understood, I s not codified by statute.
Therefore, the legal answer to a question concerning meetings, if the answer is
not found in the Companies Act, 1956, must
be found in decisions at common law. Thus, that there is no need for a motion
to be moved by one person and seconded by another in the absence of any
specific regulation or law is supported only by judicial decision. Horbury Bridge Coal, In Re, (1884) 26 Ch
D 70. Similarly, although the
Chairman of the meeting can refuse to accept all irrelevant amendments to a
proposed resolution, his refusal to accept a relevant and material amendment
may lead to a more serious consequence of the entire resolution being struck
down. Henderson v. Bank of Australia.,
(1890) 45 Ch D 330. Where the statutory law is silent as to the manner of
ascertaining the sense of the meeting, the common law decision that the same
should be ascertained by a show of hands is good law. In re : Horbury Bridge Coal Co., (1879) 11 Ch D 109. Further,
although the statutory law laid down in the Companies Act provides that the
decision of the Chairman as to what happened in the meeting is final, a
resolution, apparently duly passed may be set aside where an alleged fraud is
proved or where there is a prima facie error
in the declaration of the results on a poll. In re : Caratal (New) Mines, (1902) 2 Ch 498. Similarly, in the absence of a statutory prohibition, a non-member
attending the meeting has a right to participate in voting even on a show of
hands. Ernest v. Loma Gold Mines, (1897)
1 Ch 1. The other common law decisions relevant for a discussion of the
subject of meeting have been alluded to at appropriate places in what follows.
MEETINGS
For Board Meetings its Agenda constitutes importance as it not only
lists out businesses to be transacted of the Meeting but also gives in brief
the reasons and necessity of transacting Such businesses in the nature of
notes. An agenda should be able to assist directors to know in advance the
items of business to be discussed in the board meeting and give them a chance
to make up their mind as to the outcome of those businesses. The Companies Act,
1956 does not contain any provision for attaching an Agenda with the Notice of
the Board Meeting.
There is no prescribed form
of an Agenda but usually and generally it should be distinct, clear and
definite and important items of business to be transacted should be given
preference. Matters which are routine in nature should be placed first and
thereafter other matters should be mentioned. There should always be kept an
item as any other business to be transacted with the permission of the Board to
give some flexibility to the decision making process of the Board. Vote of
thanks to the Chairman should be the concluding item. Meetings of Board should
try to follow the order of the Agenda unless it is absolutely necessary to
change the order and that should be done only with the consent of all the
directors present at the meeting.
AnneXUre B of Secretarial
Standard- I gives illustrative list of items of business for the agenda
for the first meeting of the Board of Directors of the company and Annexure C
of Secretarial Standard-l gives illustrative list of items of business
for the agenda for the meeting of the Board of Directors of which annual
accounts, etc. are to be considered. These anneXUres are given below:
ANNEXURE B
Illustrative list of items of business for the Agenda for the First Meeting of the Board of Directors of the Company
1. To appoint the Chairman of the Meeting.
2. To note the Certificate of Incorporation of the company,
issued by the Registrar of Companies.
3. To take note of the Memorandum and Articles of Association
of the company, as registered.
4. To note the Situation of the Registered Office of the
company.
5. To confirm/note the appointment of the first Directors of
the company.
6. To read and record the notices of disclosure of interest
given by the Directors.
7. To consider the appointment of Additional Directors.
8. To consider the appointment of the Chairman of the Board.
9. To fix the financial year of the company.
10. To consider the appointment of the first Auditors.
11. To adopt the Common Sea] of the company.
12. To appoint Bankers and to open bank accounts of the company.
13. To authorise printing of share certificates
14. To authorise the issue of share
certificates to the subscribers to the Memorandum and Articles of Association
of the company.
15. To approve preliminary expenses and preliminary contracts.
16. To consider the appointment of the
Managing Director/Whole time Director/Manager and Company Secretary, if
applicable and other senior officers.
ANNEXURE 'C'
Illustrative list of items of business for the Agenda for the Meeting of the Board of Directors at which annual accounts, etc. are to be considered
(Besides regular Agenda
items, such as confirmation of Minutes, granting leave of absence to Directors,
reading Notices of disclosure of interest of Directors)
1. To consider and approve matters arising
out of the accounts such as commission to Directors, write-offs,
provisions, legal cases, etc.
2. To consider and approve transfers to Reserves and other appropriations.
3. To consider recommendation of dividend
4. To consider and approve the Balance
Sheet and the Profit and Loss Account as well as the abridged Accounts or
statement of financial results.
5. To approve the cash flow statement
6. To consider and take note of the Directors to retire by
rotation at the Annual General Meeting.
7. To consider the draft Notice of the annual General Meeting
and to authorise issuance thereof.
8. To consider the appointment of Auditors
and the payment of remuneration to them, to be proposed for members'
consideration.
9. To take note of the draft Auditor's report.
10. To consider the draft Directors' Report and to autborise
issuance thereof.
11. To open a Bank Account for payment of dividend.
12. To approve/note the closure of the
Register of Members and the Share Transfer Books for the purposes of the Annual
General Meeting.
13. To approve the text of the advertisement inviting fixed
deposits.
14. To discuss the Compliance Certificate issued by a secretary
in whole-time practice.
Agenda of General Meetings
contains only the items of business and the proposed resolutions under separate
heading of ordinary resolution and special resolution. In Annual General
Meetings, the Agenda contains two separate headings of first the ordinary
business and then the special business. In all other general meetings all
businesses mentioned in the Agenda are special. There is no provision for
Agenda also in the Companies Act, 1956 and neither there is any form prescribed
by the said Act. The form of Agenda adopted has come down to the present form
through years of secretarial practice.
Quorum
for holding the general meeting (S. 174)
Quorum in a meeting and adjournment thereof.-A valid meeting presupposes
the presence of the minimum number of persons statutorily required to be
present at a meeting for transacting business. Section 174 of the Companies Act, 1956, stipulates the quorum for holding a General Meeting
as under:
(i) Public company Five
members personally present (eligible to vote thereat)
(ii) A company deemed to be Two
members personally present (eligible to public under section 43A.
vote thereat)
(iii) Private company Two members personally present (eligible to
vote thereat)
The articles of a company
may provide higher number of members to be present at a meeting for the purpose
of quorum. In that event, such higher number of members shall form a quorum for
a meeting of that particular company.
Section 174 also provides
that if within half an hour from the time appointed for holding a meeting of
the company, a quorum is not present, the meeting, if called upon the
requisition of members, shall stand dissolved. In any other case, the meeting
shall stand adjourned to the same day in the next week, at the same time and
place, or to such other day and at such other time and place as the Board may
determine. If, at the adjourned meeting also, a quorum is not present within
half an hour from the time appointed for holding the meeting, the members
present, even if they fall short of the quorum, shall form the quorum.
The representative of a body
corporate appointed under section 187 or the representative of the President or
a Governor of a State under section 187A is a member 'personally' 'present' for
purposes of counting a quorurn. Re,
Kelantan Coconut Estates Ltd., 1920 WN 274.
Absence
of quorum in a meeting [S. 174 (3) (4) (5)]
Quorum, when present and absent.-In the absence of a quorum in a
meeting, any resolution passed thereat is a nullity as the meeting itself
cannot be said to have been validly held.
Proceedings at a General Meeting are largely regulated by the articles of the company. Clause 49, Table A of Schedule I to the Companies Act, 1956, would indicate that no business should be transacted at any General Meeting unless a quorum of-' members s present at the time when the meeting proceeds to business'. This clause also forms the standard article in most of the Articles of Association of' public companies. The strict legal view is also to the effect that the quorum should be present at the beginning of the meeting and may not affect the proceedings of the meeting if it falls shorter than the required number subsequently. A shareholder can thus materially vitiate the decisions of a meeting by initially forming quorum and then withdrawing from the meeting subsequently. Again, a quorum is presumed to be present unless it is questioned at tile meeting or the record shows that a quorum was not in fact present. The American practice, which is more logical, makes a departure from these common law principles. Thus
"A quorum must be
present not only to begin a meeting but to transact business. Thus, if, during
the meeting a number of shareholders (members) depart, leaving less than a
quorum present, tile meeting must be discontinued by adjournment. However, if a
meeting is once organised and all the parties have participated, no person or
faction, by withdrawing capriciously and for the sole purpose of breaking the
quorum, can render the subsequent proceeding invalid". American Encyclopaedia Dictionary of
Business, Prentice Hall, New York.
Quorum
in the case of joint members
Quorin for joint and other types of shareholders. -S
hares may be registered in Joint names. There is no statutory limit as to the
number of Joint members which really depend on the provisions made in the
Articles of Association of a company. Shares may be registered in the name of
limited companies also. The standard practice presently followed by companies
is to limit the Joint holders either to three or four persons, any or all of
whom may be limited company. If more than one of the Joint members are present
at a meeting then, unless articles provide otherwise, only one of the holders
should be considered for purpose of forming quorum.
The presence of non-members
at a meeting will not by itself invalidate a meeting, unless they have taken
part in the proceedings. Carruth v.
Imperial Chemical Industries, 1937 AC 707. Thus, a preference shareholder may
be allowed at a General Meeting but unless he has voting right (there cannot be
any voting right for the preference shareholder except where there are arrears
of dividend for a particular period), he cannot be counted for the purpose of
forming quorum for the meeting,
For equity shares, two joint
holders attending the meeting will be treated as two members of the company. Jamail Singh v. Bakshi Singh, (1960).30 Com
Cases 192.
The quorum should be of the
effective members, that is, members qualified to take part at and decide upon
question brought before the meeting. Henderson
v. Lonttit, (1894) 21 Rettis 674
A
body corporate as a member (S. 187)
A body corporate is eligible to hold shares subject to the limitations contained ill section 372 and other applicable provisions of the Companies Act, 1956, and the articles of a company; and in accordance with section 187(l ) of the Act, a corporate member can appoint a representative by a resolution of its Board oil' Directors to represent it at a General Meeting of a company.
Representative when deemed to be personally present.-The representative of' a company or a body corporate, by virtue of' the
provisions of section 187 or the representative of the President or a Governor
of a State, by virtue of the provision of section 187A, is a member personally
'present' for the purposes of constituting the quorum. If representatives of
bodies corporate of required number are present they can form a quorum for the
meeting. It may happen that a single person has been appointed representative
to represent two companies at a General Meeting. In such event, even the single
person should be counted as two members personally present at the meeting of
the members because each of the companies will be treated as personally present
through representation by a single individual as if that individual has a
number of persons.
As against the above view,
it may be urged that a single individual acting as representative of the
required number of companies cannot form a valid quorum, since each company or
body corporate is considered to be a single member and can be represented
through only one individual. This is because it would amount to a meeting by a
single individual which is against the basic principles of a meeting. A meeting
prima facie means, a gathering of two
or more persons and the Courts have consistently held that there cannot, in
general, be a meeting of one person. In
re: Sanitary Carbon Co., (1877) WN 223. Such is the case even where a
single shareholder holds the proxies of all the remaining shareholders. In re .- James Prain & Sons Ltd., -
(1947) SC 3 25.
In the course of a judgment,
Lord Coleridge made a remark that "it is, of course, possible to show that
the word 'meeting' has a meaning different from the ordinary meaning", and
this was shown in a case, East v. Bannet
Brothers Ltd., (1911) 1 Ch 163. where
a person himself only can constitute the class meeting if he holds all the
shares of a class. In that case, the memorandum provided that no new shares
could be issued so as to rank equally with or in priority to the existing
preference shares, unless the issue was sanctioned by an extraordinary
resolution of the holders of the preference shares at a separate meeting of the
holders specially summoned for the purpose. The existing preference shares
being all in the hands of one person, and there being nothing provided in the
articles of the company to the contrary, the word 'meeting' was held to be
applicable to the case of a single shareholder. This is, however, an
exceptional case and is a departure from the general practice.
Procedure
for the appointment of a representative
(Ss. 187, 187A and 187B)
Persons competent to act as representatives.- Sections 187, 187A and 187B of the
Companies Act, 1956, deal with the
representations of bodies corporate, Government or trustees (under certain
circumstances, e.g., section 187B) to
represent such body corporate at a General Meeting of the company. A
representative pursuant to section 187 of the Act, shall be appointed by a
resolution of the Board of Directors of such company. The body corporate, which
is a member of a company, should communicate well in advance to the company of
which it is a member furnishing them with a certified copy of the Board
Resolution making the appointment of the representative. Unless an
authenticated copy of the resolution of the Board of Directors or other
governing body authorising a person by name or description to attend a meeting
of the company is filed, no one claiming to represent the body corporate is
entitled to attend or otherwise take part in the meeting. The resolution must
specify the company and the meeting or the meetings at which the representative
shall be eligible to function or act. A donee of a general power of attomey cannot
act as a representative of a body corporate to participate in the General
Meetings of a company of which that body corporate is a member.
If any person claims to be
the representative of a body corporate, he should carry an authenticated copy
of the Board resolution with him so that if called for, he may immediately
produce before meeting his authority for the participation at the meeting. The
procedure that usually should be followed in cases of appointment of
representatives is to send a certified true copy of the resolution concerning
appointment of the person concerned as representative directly to the company,
in time.
Appointment
of more than one representative
Altemate representative members.-Usually, the Board resolution appointing
a representative is drawn in such a way that enough leverage is reserved for
representation at a General Meeting by the company if the sole or the first
named representative is either not available or is otherwise disqualified to
represent such body corporate at any General Meeting, by adding few names in
the resolution who can represent such body corporate.
The specimen Board
resolution in regard to appointment of representative will indicate that a body
corporate in most of the cases appoints more than one person to represent but
it always gives preference to such person in order of the names indicated therein. The wording used that appointment of
A failing him 'B failing him 'C', etc.
is quite significant. For so long as 'A' is present at the General Meeting
as a representative of such member-body corporate, 'B that is the next
person, cannot act as a representative of the same member-body corporate.
In any event, if both 'A' and 'B' are present at the same General Meeting of a
company, only 'A' will be counted as the sole representative of such member-body
corporate and only he will rank for the purpose of quorum, voting and all other
matters concerning participation at such General Meeting.
Presence
of more than one representative
Order
of procedure among the representative members.-Problem
is often
faced where more than one body corporate being members of the same company
appoint the same set of persons as the representative to represent a company at
a General Meeting. For example, A & Co. Ltd., B & Co. Ltd. and C &
Co. Ltd., who are members of & Co. Ltd., appoint the same set of persons,
say, either Mr. M or Mr. N or Mr. P to represent all the three companies at any
General Meeting of X & Co. Ltd., Mr. M, Mr. N and Mr. P all being present
at the meeting of X & Co. Ltd. represent to the Chairman thereof that Mr. M
will represent A & Co. Ltd., Mr. N will represent B & Co. Ltd. and
consequently Mr. P will be a representative of the remaining C & Co. Ltd.
In actual practice, subject to the acceptance of the contention of the
representatives, the Chairman of the meeting may accept the representations of
Mr. M, Mr. N. and Mr. P in the order they desired either for quorum or
participation in the proceedings of the meeting thereof.
Limited
representation and period of validity
Restricted representative.-Because of the shifting of personnel
from one department to another or from one place to the other, the financial
institutions who are members of most of the
reputed companies in India appoint a representative only for a particular
meeting of the company in question. The resolution of such institutions
appointing representatives specifically indicate the limitation of the
representative to act only at the ensuing General Meeting. The validity of such
representation is short-lived and limited to the General Meeting
mentioned therein. If no further fresh representation is received in relation
to any subsequent General Meeting, the old representative can no more act as a
representative.
Usually a resolution passed
by the Board without limiting and indicating any terms will be valid for any
General Meeting of the company to be held oil any future date and until a fresh
resolution is received from the member-body corporate changing the
earlier panel of representatives.
A
representative to act as a member [S. 187 (2)]
Representative's right co-extensive with member's.-A resolution of a body
corporate can only authorise a representative to discharge its functions as a
member of such corporate body. Being appointed as a representative, he can
exercise the rights and powers as an individual member including right to vote
by proxy and can move any resolution in his own name, participate in any
discussion and propose amendment and do any act or take any action as if he is
the member himself. He is, however, not eligible to be appointed in his
capacity as a representative, as a Director of the company in the same way as
an individual member may be, or exercise other rights of a member such as
signing a requisition for a meeting, receiving dividends, etc. The authority of
the representative does not extend further than representing the body corporate
at the General Meeting.
There is however nothing to
prevent the authorised representative from contesting an election to the Board.
Dinkar Rai D. Desai v. R.P. Bliasin, (1982)
3 Comp Cases U 198 (Del); Motion Pictures Association, Re: (1984) 55 Com Cases
375 (Del). One such representative can be appointed irrespective of the amount
of shareholding. There is neither any need for nor any question of joint
representatives. Manoj Kumar Sonthalia v. Nariman Point Building Services and
Trading P. Ltd., (1995) 84 Com Cases 559 (Mad).
Representative's
authority to appoint proxy [S. 187 (2)]
Representative's authority prevails over proxy's.-If a representative is not in a
position to act personally at a General Meeting, it is possible for him to
appoint a proxy to attend the General Meeting in his stead in the same way a
shareholder can appoint a proxy. Pursuant to the provisions of section 187 of the
Companies Act, 1956, the appointment of a representative is limited to the
authority given by the Board of Directors of the member-body corporate
and a representative, therefore, cannot appoint any further representative to
act for him. A corporation may either appoint a representative under section
187 or a proxy pursuant to section 176 of the Act. In this event, however, a
body corporate appoints both a representative and a proxy to act at the same
meeting, the appointment and attendance of a representative will prevail over
the proxy, and the latter's attendance at the same meeting will have the effect
of canceling the proxy.
Pursuant to section 187 of
the Act, the power of appointment of a representative is only given to the
Board of Directors who, of course, can pass a resolution in this regard either
in a meeting of the Board or adopt such resolution by circulation of the
subject matter among the Directors and getting their approval thereto. But
within the meaning of section 187, there is no scope for the Board of Directors
to delegate its power of appointment of a representative to any of its
committee or any other Director or the Managing Director, if any.
President and Governor's
representative.- The President of India or the Governor of a State, if he is a member of
a company, may appoint such person as he thinks fit to act as his
representative at any meeting of the company or at any meeting of any class of
members of the company.
A person appointed to act,
as aforesaid, shall, for the purposes of this Act, be deemed to be a member of
such a company and shall be entitled to exercise the same rights and powers
(including the right to vote by proxy) as the President, or as the case may be,
the Governor could exercise as a member of the company.
The status of a member
company and that of a representative appointed by an order of the President or
the Governor, as the case may be, although basically appointed for the
identical purpose are different. A representative appointed by the
President/Governor has more power and can act in a wider sphere as compared to
a representative appointed by a member company under section 187 of the Act.
Thus, a representative appointed by the President or the Governor of a State,
though the appointment is for acting as a representative at meetings of the
company, is deemed to be a member for all purposes of this Act. Subject to any
terms/conditions restricting or limiting his activities at the time of his
appointment, it is considered that a representative appointed by the
President/Governor may be eligible for appointment to the office of Director,
give valid discharge for the dividend payable to the President or the Governor,
as the case may be and exercise all other rights of a member of a company.
Appointment of a
representative by the President or by the Governor of a State is a
discretionary power and he can appoint any person (otherwise not unfit) at his
will, as he thinks fit. This, in other way, is a pointer that such
discretionary power cannot be delegated and a representative under this section
shall only be appointed by an order issued by and in the name of the President
or the Governor of a State, as the case may be.
Exercise
of voting rights in respect of shares held in trust (S. 187-B)
Trustees as members.-S
hares
are quite often allotted/transferred in the names of the trustees for the
benefit of a trust either private or discretionary or for the benefit of the
general public. In such cases, as the company, pursuant to section 153 of the
Act, is not to take any notice of any trust, express or implied or
constructive, the company is obliged to consider the trustees of the trust as
the apparent owner of the shares and enter their names in the register of
members who can act as a member irrespective of the fact that they are merely
acting on behalf of a beneficiary.
Provision of Section 187B
will be attracted only when there is an expressly created trust within the
meaning of section 3 of the Indian Trust Act. New Batik of India Ltd. v. Union of India, (1981) 51 Com Cases 375
(Delhi).
Trusts
coming under the scope of section 187B
Suspension of membership
rights of trustees.-This section provides that notwithstanding,
anything contained in any other provisions of the Companies Act, 1956, or any
other law or any contract, memorandum or articles, where any shares in a
company are held in trust by a person (trustee), the rights and powers
(including the right to vote by proxy) exercisable at any meeting of the
company or at any meeting of any class of members of the company by the trustee
as a member of the company shall
(i) cease to be exercisable by the trustee as such member; and
(ii) become exercisable by the Public Trustee.
Pursuant to section 153B(5)
of' the Act, the following kinds of trusts attract the aforesaid provision:
(a) Where a trust is created by an instrument in writing;
AND
(b) the value of the shares in, or debentures of a company held
in trust is not less than one lakh of rupees;
OR
(c) exceeds one lakh of rupees but does not
exceed either five lakhs of rupees or twenty-five per cent of the paid-up
share capital of the company, whichever Is less;
OR
(d) where the trust is created, to set up a
Mutual Fund or Venture Capital Fund or such other fund as may he approved by
the Securities and Exchange Board of India established under sub-section
(1) of section 3 of the Securities and Exchange Board of India Act, 1992.
The entire purpose of shifting the voting rights of the trustees in favour of the Public Trustee (appointed by the Central Government) is that holding of securities privately through trust should not be used by a group of persons for the purpose of augmenting their own voting rights. Public Trustee is appointed by the Central Government under section 153A of the Act by notification in the official gazette.
Section 187 B does not
substitute the public trustee as a shareholder in place of the trustee who
holds the shares but it only vests the right of voting attached to such shares
in the public trustee. C.I.T v. Indian
Hotels Co. Ltd., (1980) 53 Com Cases 500.
Under section 9(2) of the -Depositories
Act, 1996, the provisions of section 187B are not to apply to the securities
held by a depository on behalf of beneficial owners (investors).
It may be observed that
voting rights exercisable by a Public Trustee is based on the holding of
shares/debentures of a particular company. If the paid-up capital of a
company is just more than one lakh of rupees and the entire shares of that
company are held in trust, the voting power of the trustee of that trust in a
General Meeting in respect of that company will devolve only to the Public
Trustee. In the event of the particular trust holding securities in other
companies, the aggregate value of which exceeds five lakhs of rupees without
hitting the restrictions contained in section 153B, the Public Trustee shall
have no jurisdiction over the trustees of such trust in regard to the voting
rights exercisable at any General Meeting of any of the companies whose
shares/debentures are so held in trust.
To summaries the provisions
in regard to the applicability of this section (section 187B), the following
pattern emerges:
Example I
Name o the Paid-up share Securities of such Voting right exercisable at
company capital/debenture paid-up value held by a General Meeting by the
the trust Public
Trustee / Trustees
A Rs.
1,00,00,000 Rs. 4,00,000 Trustee
B Rs.
1,25,00,000 Rs. 4,60,000 Trustee
C Rs.
1,50,00,000 Rs. 4,90,000 Trustee
Total securities held Rs. 13,50,000 by the trust
The voting power in all the
three companies, that is A, B and C, at any General Meeting will be exercisable
by the trustees only and not by the Public Trustee.
Example 2
Name o the Paid-up share Securities of such Voting right exercisable at
company capital/debenture paid-up value held by a General Meeting by the
the trust Public
Trustee / Trustees
AB Rs. 1,00,000 Rs. 1,00,000 Trustees
CD Rs. 10,00,00,000 Rs. 4,90,000 Trustees
DE Rs. 30,00,00,000 Rs. 4,50,000 Trustees
Total
securities Rs.
10,40,000
held
in trust
The voting power in all the
three companies, that is, AB, CD and DE will be exercisable by the trustees at
General Meetings. Although the trust holds the entire paid-up shares
(debentures, if any) of AB, because of the exemption under section
153B(4)(b)(1) (the holding of securities does not exceed one lakh of rupees)
the voting power in company AB remains with the trustees although the trustees
hold the entire paid-up capital of the company.
Example 3
Name o the Paid-up share Securities of such Voting right exercisable at
company capital/debenture paid-up value held by a General Meeting by the
the trust Public
Trustee / Trustees
X Rs.
10,00,000 Rs. 4,00,000 Public Trustee
Y Rs.
1,00,00,000 Rs. 6,00,000 Public Trustee
z Rs.
30,00,00,000 Rs. 4,90,000 Public Trustee
Total securities Rs. 14,90,000 held in
trust
The voting power of the
companies at X and Y above attract the provisions of section 153B and hence the
voting power at a General Meeting of X and Y will devolve on the Public.
Trustee and not on the trustees in whose names the shares of these companies
have been registered. In the case of Z, as the holding of securities in trust
is less than five lakhs of rupees and is also less than twenty-five per
cent of the paid-up share capital of that company, the same will not call
for the exercise of the voting right in a General Meeting by the public
trustee.
According to a circular
issued by the Department a society registered under the Societies Registration
Act, 1860, is a person within the meaning of section 187B and if such society
holds shares in trust, it should conform to the requirements of this section'.
Public Trustee, rights and duties.-The company whose shares and
securities are registered in the name of trustees (the trustees are bound to
give notice in such cases to the company concerned) and by virtue of section
153B/187B of the Companies Act, 1956, the voting power at any of the General
Meeting of such companies or class meeting of such companies is to devolve on
the Public Trustee, the company shall send the relevant notice(s) of any such
meetings to the Public Trustee. In fact, the Public Trustee is entitled to
receive notices of meetings of the company and such balance-sheet and
other documents as any member is entitled to receive, and he may have the same
right as a member, to inspect books and other papers (available for inspection
of the members) of the company.
Having regard to the
interests of the trust and of the
beneficiaries, the Public Trustee may use his own discretion and decide
whether or not to attend any meeting and whether or not to appoint a proxy to
attend and vote at any meeting. If he appoints a proxy, he can either appoint
an officer of Government or the trustees of the trust but not any other person.
One finer point arises when the Public Trustee appoints a proxy instead of his
attending the meeting. Unlike a proxy appointed to represent at a General
Meeting of the company and possesses limited power at the time of poll only, a
proxy who is a trustee of the trust appointed by the Public Trustee may
exercise all rights and powers of a shareholder.
There is nothing
objectionable if a trustee of the trust itself is appointed as a proxy to
represent the Public Trustee at a General Meeting of a company. This enables
such a trustee who gets a proxy from the Public Trustee to be not a mere dumb
voter as invariably proxy holders are but take an active part in any
proceedings of the company.
It is otherwise if the proxy
appointed by the Public Trustee is not a trustee of the same trust. In the
event of an officer of the Government appointed a proxy, such proxy will have
the same limited rights as any other proxy appointed by a member under the Act
has. Such a proxy cannot speak or take part in any debate, or vote by a show of
hands.
The trustee of the trust,
when Pubic Trustee attends a meeting may also attend a meeting but cannot
participate in any proceedings thereof except advising the Public Trustee some
line of action, if there be any, which may be adopted by him, in the interest
of the trust or the beneficiaries thereof; he/they can also communicate to the
Public Trustee his/their own views in respect of certain proposed action, but
it entirely depends on the Public Trustee either to accept such suggestion or
reject them completely. The Public Trustee, however, should act for the benefit
of the trust as such and the beneficiaries there for and in such line as he
thinks expedient. He is protected by law and his action at a meeting cannot be
taken up by the trustees of a trust as unjust and no suit, prosecution or other
legal proceeding shall lie against the Public Trustee either at the instance of
the trustee of the trust or any other person on his behalf.
Public Trustee appointed
under section 153B takes place of the trustee who is a member of the company
only at a meeting of that company. So, the right to give consent for shorter
notice under section 171(2) cannot be exercised by the Public Trustee because
it 2 is not a right exercisable at a meeting of a company.
For the purpose of quorum,
the presence of the Public Trustee shall be considered as a member personally
present.
Chairman of a General Meeting (S. 175)
Who can act as Chairman.-The standard provision in almost all the Articles
of Association of the company is drafted in the following lines
The Chairman of the Board
shall be entitled to take the chair at every General Meeting. If there be no
such Chairman, or if at any meeting he shall not be present within fifteen
minutes after the time appointed for holding such meeting, or is unwilling to
act, the members present shall choose another Director as Chairman and if no
Director be present, or if all the Directors present decline to take the chair,
then the members present shall on a show of hands or on a poll if demanded,
elect one of themselves being a member entitled to vote, to be the Chairman.
A convenient summary may be
drawn up of the persons who are entitled to take chair at a General Meeting of
the members (in order of preference):
(a) The Chairman of the Board of Directors:
The Board should designate a Chairman by a resolution passed at a Board meeting
making such person as the Chairman for any of the meeting of the Board.
The Chairman of the Board is
allowed time up to fifteen minutes from the scheduled time to attend the
meeting, after lapse of which in ordinary circumstances such Chairman may be
considered a person as absent.
In the event, a company has
no designated Chairman a person who usually takes chair at the Board meeting
normally may be appointed a Chairman at a General Meeting of the members. Only
formality that seems to be required to be observed in the latter case is some
of the members present will have to propose such person to take the chair and
some of the members present will follow seconding the proposal.
(b) In the absence of the regular Chairman
of the Board or the person who usually takes chair at a Board meeting,
preference will be given to a Director of a company as may be decided by the
members present to be Chairman of that General Meeting.
(c) If no Director is present at the meeting
or all the Directors present decline to take the chair, then the members
present will elect one of them to take the chair at the said General Meeting.
Although the provision of
the Articles of Association of a company is given priority in regard to
selecting a Chairman of a General Meeting, provision in this regard has also
been made under section 175 of the Companies Act which provides that
(1) Unless the articles of the company
otherwise provide, the members personally present at the meeting shall elect
one of themselves to be the Chairman thereof on a show of hands.
(2) If a poll is demanded on the election of
the Chairman, it shall be taken forthwith in accordance with the provisions of
the Companies Act, the Chairman elected on a show of hands exercising all the
powers of the Chairman under the said provisions for the purpose of poll.
(3) If some other person is elected Chairman
as a result of the poll, he (such other person) shall be Chairman for the rest
of the meeting.
Paragraphs 5.1 and 5.2 of
Secretarial Standard-I provides for Chairman of a board meeting and its
committees, Paragraph 5.1 provides that every company should have a chairman
who would be the Chairman for meetings of the Board. Paragraph 5.2 provides
that the Board while constituting any committee should also appoint the
Chairman of that committee, unless such appointment is to be made in pursuance
of any other applicable guidelines, rules or regulations.
Paragraphs 5.15.2, 5.3 and
5.4 of Secretarial Standard-2 (SS-2) provide for Chairman of a
general meeting. Sub-paragraph 5.1.1 of paragraph 5.1 provides that where
the articles of association so provide, the Chairman of the Board should take
the chair and conduct the meeting. If there is no Chairman or if he is not
present within 15 minutes after the time appointed for holding the meeting or
if he is unable to act as Chairman of the meeting, the directors present should
elect one of themselves to be the Chairman of the meeting. If the directors are
unable to do so or if no director is willing to take the chair, the members
present shall elect one of themselves to be the Chairman of the meeting. Sub-paragraph
5.1.2 of paragraph 5.1 of SS-2 provides that in the absence of any
express provision contained in the articles of association, members personally
present at the meeting shall elect one of themselves to be the Chairman of the
meeting. Paragraph 5.2 of SS-2 provides that the Chairman should explain
the objective and implications of each resolution before the resolution is put
to vote. Paragraph 5.3 of SS-2 provides that the Chairman should provide
a fair opportunity to members who are entitled to vote to raise questions
and/or offer comments and ensure that these are answered. Paragraph 5.4 of SS-2
provides that the Chairman should not propose any resolution in which he is
deemed to be concerned or interested nor should he participate in the
discussion or vote on any such resolution.
Quorum should not comprise of non-member
Chairman.-Functions
of a Chairman of a General Meeting has been evolved mostly out of convention
and precedents. The articles of a company usually spell out Chairman's powers,
obligations and functions in so far they relate to the conduct of the meeting.
A Chairman, however, need not be a member of the company. But then, by virtue
of his being the Chairman of the Board, he is automatically entitled to take
the chair at any General Meeting of the members. If the articles of a company
do not provide for the Directors to hold any qualification shares, the Chairman
of the Board, need not hold any share in the share capital of the company. In
that event, since the Chairman is not a member of the company, his presence
cannot be considered while ascertaining quorum for the General Meeting of a
company.
Chairman's powers and functions (S. 178)
Chairman's powers and functions.-(a) The Chairman, having taken
the chair, will ascertain that a proper quorum of members is present. This
depends on the articles. Sometimes, a specified number of members form a quorum
and sometimes it is otherwise ascertainable on the basis of holding of shares
of specified amount (quite often so in the case of a class meeting). In order
to ascertain that a quorum is present, it may be necessary to refer to the
register of members or the attendance list. The Chairman shall see that if
there is no quorum present within the time fixed by the articles, the meeting
is dissolved or adjourned, according as the provisions of the articles may
require.
(b) The Chairman has prima facie authority to decide all
questions arising in the course of discussions at a General Meeting. He should
be impartial and should abide closely by the enactments, articles and
procedures applicable to the company. He has full authority to conduct a
meeting in accordance with the provisions of the Companies Act and the articles
and to apply his own interpretation of the said provisions, But a member, by
submitting to his ruling and voting upon a resolution which the Chairman
allowed to be put, is not precluded from claiming in subsequent litigation that
he was wrong. Pursuant to the provisions of section 178 of the Companies Act, a
declaration by the Chairman in accordance with the provisions of section 177 of
the Act that on a show of hands, a resolution has or has not been carried
either unanimously or by a particular majority, followed by an entry to that
effect in the books containing the minutes of the proceedings of the company,
is conclusive evidence without proof of the number or proportion of the votes
cast in favour of or against such resolution. An incorrect statement by the
Chairman as to the effect of, or of what is intended to be done under a
resolution in connection with the approval to an agreement to be entered into
will not modify or affect the contents of the agreement so long as it is
approved by the members.
(c) The duty of the Chairman
is to conduct the meeting with utmost care and attention, peacefully and with
dignity. He should conduct the proceedings with regularity and as per the
agenda and take care that the sense of the meeting is properly ascertained as
regards any question before it. He should move in order of the business as per
the agenda and should not take the last one first or change the serial at his
whims. Of course, when a meeting is convened and held under the order of the
Court, any motion, amendment or resolution not coming within the terms of the
Court's order may be rejected by the Chairman. Bello v. Co-operative Navigation Co., (1924) 26 Bom LR 907.
Chairman's power to adjourn.-(d) A meeting properly convened
cannot be cancelled or adjourned at the pleasure of the Chairman and except as
otherwise provided by the articles and in accordance therewith. The Chairman,
however, has every right to adjourn a meeting if such adjournment is necessary
for the proper conduct of the business but not to frustrate it. He has no power
to stop a meeting at his own will and pleasure. If he does so, the meeting can
itself resolve to proceed with the business for which it has been convened and
elect another Chairman to conduct the rest of the business. Catesby v. Burnett, (1916) 2 Ch 325. In the absence of proper authority
or provision in the articles, once a meeting has been convened, the Chairman
should continue with the meeting until its conclusion and is not bound to
adjourn it on his own motion. Salisbury
Gold Mining Co. v. Hathoman, (1817) AC 268. A well drafted article of a
company would usually make the following provisions in regard to the powers of
a Chairman and authority regarding adjournment of a meeting:
(i) The Chairman of a General Meeting may,
with the consent of the meeting, adjourn the same from time to time and from
place to place but no business shall be transacted at any adjourned meeting
other than the business left unfinished at the meeting from which the
adjournment took place.
(ii) When a meeting is adjourned, it shall
not be necessary to give any notice of an adjournment of the meeting or of the
business to be transacted at an adjourned meeting unless such adjournment
extends to more than one month from the date of the original meeting.
In a case before the
Rajasthan High Court, Seth Sobhag Mal
Lodha v. Edward Mill Co. Ltd., (1972) 42 Comp Cases I (Raj), the Chairman's
authority to adjourn a meeting was explained in the following terms:
"It is a settled law
that when a meeting is called, no Chairman can arbitrarily adjourn it or
disperse it at his own choice without the consent of the members, unless the
business for which it was convened has been concluded. The power of adjournment
rests in the majority of those present at the meeting. If the Chairman should
vacate the chair or adjourn the meeting regardless of the views of the
majority, those remaining, even if a minority, can appoint a Chairman and
conduct business left unfinished by -the former Chairman."
(e) Impartiality on the part
of the Chairman . is an essential part of conducting a meeting. There could be
matters to be decided in the meeting in which he may be personally interested
or to which he may be strongly opposed. In spite of his say in the matter, he
must give a reasonable chance to the members present to discuss any proposed
resolution, and ensure that all the views are adequately heard. He may,
however, insist that the discussion must be kept within reasonable limits and
should not hesitate to stop discussion on any resolution, after it has been
reasonably debated. While it will be his look-out to that the minority
shareholders are not harassed or oppressed in any way, he must go by the
majority vote in respect of all matters where he has to take a decision. C.F. Wall v. London Northern Assets Corporation,
(1898) 2 Ch 469. He should not
use the 'closure' to prevent discussion or the proper hearing of minorities,
but after the minorities have had sufficient opportunity of stating their case,
he may, with the consent of the meeting, apply the 'closure' and put the
question to vote. He may be called upon to decide difficult questions and must
decide them to the best of his ability.
(f) Among other matters, he
must decide as regards persons present at the meeting as to who is a member and
who is a non-member or being a member, not entitled to vote on the
proposed resolution. He should see that the proxy holders are allowed to
participate in the proceedings of the meeting only on a poll. The proxy holders
usually only intermingle with the members and sometimes interfere with the
proceedings of the meeting. If a Chairman acts in good faith in this respect
and only subsequently detects any irregularity in voting due to such mix-up,
he is protected from liability in damages for refusing, on mistaken grounds, to
allow the voting by a shareholder.
(g) Where the Chairman of a
meeting was himself a candidate the Madras High Court has held that such a
Chairman's ruling in favour of validity of nominations including his own was
not valid as the meeting itself was not legal and members were not duly
elected. Nagappa Chettiar v. Madras Race Club, (1949) 19 Com Cases 175 (Mad).
The said High Court also held that it was immaterial whether the ruling of the
Chairman was correct or incorrect but since there was a conflict between the
Chairman's duty and his interest and his was as a Chairman in the position of
quasi-judicial officer he should have vacated the Chair and another
member should have taken the Chair. The maxim that no man shall be a judge in
his own cause is elementary and of universal application. But Calcutta High
Court distinguished this judgment of Madras High Court and held that in a
shareholder's meeting the Chairman's power is limited and cannot decide on the
resolution proposed at the meeting and the resolutions will have to be voted on
by the shareholders, so long there is no equality of votes and possibility of
Chairman's casting vote is absent, the Chairman's ruling will be valid. Bengal
and Assam Investors Ltd. v. JX Eastern
Industries (P) Ltd., (1957) 27 Com Cases 86 (Cal). This view of the Calcutta
High Court was followed by Bombay High Court also. Kishore Y. Patel v. Patel
Engineeri . ng Co. Ltd., (1992) 3 Comp U 98 (Bom).
A Chairman of a meeting can,
however, exert his absolute authority where a meeting is convened and held
under the orders of a Court and any motion, amendment or resolution not coming
within the terms of the orders of the Courts may be rejected by the Chairman.
But he has no power to stop or adjourn a meeting at his will. Second
Consolidated Trust Ltd. v. Amalgamated Tea and Rubber Estate, (1943) 2 All ER
567. But where there is serious disorder, the Chairman has an inherent power to
adjourn. John v. Rees, 2 All ER 274
(Ch D).
Any member of a company entitled to attend and vote at a meeting of the company shall be entitled to appoint another person (whether a member or not) as his proxy to attend and vote instead of himself but a proxy so appointed shall not have any right to speak , In every notice calling a meeting of a company which has a share capital or the articles of which provide for voting by proxy at the meeting, there should appear, with reasonable prominence, a statement that a member entitled to attend and vote is entitled to appoint a proxy or where that is allowed, one or more proxies to attend and vote instead of himself and that a proxy need not be a member. If default is made in complying with this requirement as respects any meeting, every officer of the company who is in default will be punishable with fine of upto Rs. 5,000/- There is, however, a time schedule within which a proxy in the prescribed form is required to, be deposited with the company. Sub-section (3) of section 176 of the Act provides that any provision in the articles of a public company or of a private company which is a subsidiary of a public company, which specifies or requires a longer period than forty-eight hours before a meeting of the company, for depositing with the company or any other person ally instrument appointing a proxy or any other document necessary to show the validity or otherwise relating to the appointment of a proxy in order that the appointment may be effective at such meeting, shall have effect as if a period of forty-eight hours had been specified in or required by such provision for such deposit. Paragraph 7.2 of Secretarial Standard-2 [ICSI] provides for Form of proxy. Sub-paragraph 7.2.1 provides that an instrument appointing proxy should be either in the Form specified in the articles of association or in any of the Forms set out in the Act. Sub-paragraph 7.2.2 provides that an instrument of proxy duly filled stamped and signed, is valid only for the meeting to which it relates including any adjournment thereof. This only emphasises that the provision in the article contrary to this provision will have no validity. The usual provision in any standard article 4 in regard to proxy is something to the following effect
(a) An instrument appointing a proxy shall
be in writing under the hand of the appointer or of his attorney duly
authorlsed in writing or if such appointer is a body corporate, be under its
common seal or the Hand of its officer or attorney duly authorised. A proxy who
is appointed for a specified meeting only shall be called a special proxy. Any
other proxy shall be called a general proxy.
(b) A person may be appointed a proxy though
he is not a member of the company and every notice convening a meeting of the
company shall state this and also the fact that a member entitled to attend and
vote at the meeting is entitled to appoint a proxy to attend and vote instead
of him.
(c) The instrument appointing a proxy and
the power of attorney or other authority (if any) under which it is signed, or
a certified copy of that power or authority, shall be deposited at the office
not less than forty-eight hours before the time for holding the meeting
at which the person named in the instrument purports to vote in respect
thereof. In default, the instrument of proxy will not be treated as valid.
Deposit
of Proxy under SS-2 [ICSI]
Paragraph 7.6 of Secretarial Standard-2
[ICSI] provides for deposit of proxies.
Subparagraph 7.6.1 provides that
proxies should either be deposited with the Company in person or received
through post not later than 48 hours
before the commencement of the meeting at which they are to be used and a proxy
should be accepted even on a holiday if the last date by which it could be
accepted is a holiday. Proxies may be accepted at a shorter period, being not
less than 24 hours before the
commencement of the meeting if the
articles of association so provide. Sub-paragraph 7.6.2 a member who has not appointed a proxy to attend and vote on
his behalf at a meeting may appoint a proxy for any adjournment of the meeting not later than 48 hours before the time of such
adjourned meeting.
On the question whether a
proxy form can be filed through fax, a beginning has been made with a creditors
meeting (S. 500). It has been held
that a creditor can attend a meeting through a proxy by sending the proxy
nomination by fax. A Debtor (No. 2021 of
1995). ex parte, Re, (1996) 1 BCLC 538
(Ch. D); IRC v. The Debtor, (1996) 1 BCLC
538 (Ch. D). It was also held that a
proxy form would be deemed to be signed if it carried same distinctive or
personal mark placed by the creditor, that is to say, signed by electronic
devices or by a rubber stamp (ibid). In
order to avoid any dispute or controversy the original proxy form should be
sent immediately after fax transmission. It would also be advisable to have an
authority in the company's articles to accept faxed proxy forms.
Proxy
for the adjourned meeting
The purpose of appointment
of a proxy by a member is to record his support or otherwise of any resolution
to be moved at a meeting even in his absence. If, therefore, a meeting is
adjourned, it seems possible that a member can appoint a fresh proxy to attend
and vote in his stead on the business to be transacted at the adjourned meeting
if the articles of the company so provide. The requirement as to deposit of the
proxy before forty eight hours of the time of the meeting is, however,
indispensable.
This is so because Sub-section
(3) of section 176 provides for submission of instrument appointing proxy
before 48 hours of a meeting and not 48 hours of a meeting or tile adjourned
meeting. McLaren v. Thompson.
Form
of Proxy [S. 176 (6) Schedule IX]
In re,,ard to form of proxy,
the Companies Act, 1956, in Schedule IX, prescribes a form of proxy and it is
stated therein that an instrument appointing a proxy in any of the forms set
out in the said Schedule, shall not be questioned on the ground that it falls
to comply with any special requirements specified for such instrument by the
articles. This form of proxy requires the date of the meeting to be mentioned.
This is a 'must' for otherwise the possibility cannot be ruled out of the use
of those undated proxy forms also at meetings subsequent to the meeting for
which they were meant. (Circular No. 2/52/58PR,
dated 25-10-1958).
Paragraph 7.4 of Secretarial
Standard-2 provides for execution of proxies. Subparagraph 7.4.1 provides
that in addition to the member appointing a proxy, the proxy holder also should
sign the instrument of proxy. Sub-paragraph 7.4.2 provides that an
authorised representative of a body corporate or of the President of India or
of the Governor of a State, holding shares in a company, may appoint a proxy
under his signature.
Issue
of proxy by joint holders
Shares may be held in the
name of more than one person depending on the provisions in the articles of the
company. Unlike other rights being exercisable by the first named, considered
to be valid, execution of the proxy is not valid unless executed by all the
joint holders. A proxy, being in the nature of an instrument appointing an
agent, creates a contractual relationship which can be effective only when all
the principals Jointly execute it or when it is executed by one of them acting
under the authority of all.
A proxy, in effect, is an
agent of his principal, the shareholder or the shareholders. A proxy once
executed by a shareholder can be revoked and a new proxy appointed therefor,
provided this is done in the prescribed time within the meaning of section 176
of the Companies Act, 1956. Proxy is bound to act according to the direction of
the principal but in the absence of any specific direction, a proxy may vote at
a General Meeting according to his discretion. In re : Tata Iron and Steel Co. Ltd., AIR 1928 Bom 80.
A proxy once appointed may
be revoked or annulled by the issue of a fresh proxy in the name of some other
pet-son, the company being informed 'In this behalf'. If a shareholder
having executed a proxy, himself attends the meeting personally, the authority
of the proxy, even if he is also present at the meeting, is revoked
automatically. Cousins v. International
Bricks Co., (1931) 2 Ch 90. On the death of a shareholder, after he had
appointed a proxy, the proxy is revoked if a written notice of death is served
on the company before the meeting. If the instrument of proxy is not properly
stamped, it is not valid.
If a letter is given
revoking a proxy such a letter is due information to the company even through
the said letter IS undated. Firestone
Tyre & Rubber Co. v. Synthetic & Chenfical Ltd., (1971) 41 Com
Cases 377 (Bom).
Paragraph 7.7 of Secretarial Standard-2 (SS-2) [ICSI] provides for revocation of proxies. Sub-paragraph 7.7.1 of the said paragraph provides that if a proxy had been appointed for th6 original Meeting, any proxy given for the adjourned meeting revokes the proxy given for the original Meeting. Sub-paragraph 7.7.2 provides that a proxy later in date revokes any proxy/proxies dated prior to such proxy. Sub-paragraph 7.7.3 provides that a proxy is valid until written notice of revocation has been received by the company before the commencement of the Meeting or adjourned Meeting, as the case may be. If a proxy need not be informed of the revocation of the proxy issued by the Member. Even an undated letter of revocation of proxy should be accepted. Unless the Arti6les provide otherwise, notice of revocation should be signed by the same person who had signed the proxy.
Legal
position of a proxy in case of death of the shareholder
As already mentioned, in the
event of death of the shareholder appointing a proxy, the authority of the
proxy is revoked if the company has proper notice of death before the meeting.
Every standard articles of a company provides a safeguard in this regard in its
Articles of Association in the following terms, which are in line with
Regulation 63, Table 'A' of Schedule I to the Companies Act, 1956 :
"A vote given in accordance
with the terms of an instrument of proxy 'shall be valid, notwithstanding the
previous death or insanity of the principal or the revocation of the proxy or
of the authority under which the proxy was executed, or the transfer of the
shares in respect of which the proxy is given :
Provided that no intimation in writing of such death, insanity, revocation or
transfer shall have been received by the company at its office before the
commencement of the meeting or adjourned meeting at which the proxy is used."
If the same shareholder in
respect of his same shares gives two or more proxies then the proxy bearing the
earlier date will be superseded by the proxy bearing the later date. Devadeshi Polytex Ltd. Re, (1988) Comp
Cases 709 (Del).
Battle to collect proxy to
carry through a proposed resolution or to block a resolution is quite common
and, very often the Directors or other interested parties collect blank proxy
forms. A blank proxy form, if duly signed by the member with date and handed
over to the interested person who wants to utilise the proxy is of no avail
unless the instrument of proxy, complete in all respects, is deposited with the
company. A proxy is not a deed of contract and it is to be used for the limited
purpose of voting at the meeting only and, therefore, no objection to the blank
form being filled up by the agent of the appointer, even though appointed by
parol can be raised. Virendra Kumar Goel
v. Raghu Raj, 1987 Tax LR 177S (Del.)
Paragraph 7.5 of Secretarial
Standard-2 [ICSI] provides for proxies in blank and incomplete proxies.
Sub-paragraph 7.5.1 provides that a proxy form which does not state the
name of the proxy should not be considered valid. Sub-paragraph 7.5.2
provides that if an undated proxy, which is otherwise complete in all respects,
is lodged within the prescribed time limit, it should be considered valid. If
the company receives multiple proxies for the same holdings of a Member, which
are either not dated or bear the same date without specific mention of time,
all such multiple proxies should be treated as invalid.
The instrument in a blank of
proxy case is not complete till it is filled up and affixed with proper stamp.
The present stamp duty on proxy is thirty paise 5. If a proxy is not duly
stamped, the instrument is not valid and may not be taken into account.
A proxy bearing uncancelled
stamps is an unstamped proxy and is unenforceable in law. TM. Shanmugam v. Mylapore Hindu Permanent Fund
Ltd., (1990) TLNJ 52 (Mad.). In case of a proxy executed outside India, it
should be properly stamped within three months of its receipts in India. Saudagar Singh v. Gurdip Singh Gill, (1980)
50 Com Cases 591 (1313) (P & H).
Proxies executed by
shareholders in a State though bearing the stamps of another State are valid. Firestone Tyre & Rubber Co. v.
Synthetics and Chemicals Ltd., (1971) 41 Com Cases 377, 458 (Bom).
Paragraph 7.3 of Secretarial
Standard-2 [ICSI] provides for stamping of proxies. It provides that an
instrument of proxy is valid only if it is properly stamped. Unstamped or
inadequately stamped proxies or proxies upon which the stamps have not been
cancelled are invalid.
The power and authority of a
proxy is limited either by the Act, the Articles of Association of the
particular company, or by the instrument of appointment. His status remains the
same if he is appointed under an instrument of proxy specifically for a General
Meeting (special proxy) or with general power to attend and vote at any meeting
of the members or class of members (general proxy), as the case may be. A proxy
ordinarily is entitled to vote only on poll. He cannot participate in any
discussion on any business transacted in the General Meeting nor can he speak
or move any resolution. He cannot be counted as a member personally present
and, therefore, cannot rank with other members to form a quorum. Normally, he
cannot participate in voting by show of hands, going by the relevant provisions
in Table 'A' of Schedule I to the Companies Act, 1956. He can only function by
casting his vote on a poll. Since he is not a member who can participate in
voting on a show of hands, he cannot also join others in demanding a poll.
Paragraph 7.8 of Secretarial
Standard-2 [ICSI] provides for inspection of proxies. Subparagraph 7.8.1
provides that requisitions, if any for inspection of proxies should be received
in writing from a member at least three days before the commencement of the
meeting. Sub-paragraph 7.8.2 provides that proxies should be made
available for inspection during the period beginning 24 hours before the time
fixed for the commencement of the meeting and ending with the conclusion of the
meeting. Sub-paragraph 7.8.3 provides that a fresh requisition,
confirming to the above requirements, should be given for inspection of proxies
in case the original meeting is adjourned.
Register
for recording proxies
The company should maintain
a register for recording the lodgement of proxies. At the time of entry in the
register, the validity or otherwise of the instrument of proxy may be checked
in every respect and if any proxy is to be rejected, such rejection may be
intimated preferably before the date of the meeting so that the person with
defective proxy may be prohibited from entering into the General Meeting of the
members for which he was authorised to attend. Preferably the register should
have simple columns stating the following :
(a) the name and address of the member,
(b) description of the instrument appointing a proxy,
(c) whether such proxy is special or general,
(d) the name and address of the proxy,
(e) initial of the person who checked the entry.
Regarding voting on a proposed resolution, Table 'A
makes the following provisions:
(i) no objection shall be raised to the
qualification of any voter except at the meeting or adjourned meeting at which
the vote objected to is given or tendered and every vote not disallowed at such
meeting shall be valid for all purposes;
(ii) any such objection made in due time
shall be referred to the Chairman of the meeting, whose decision shall be final
and conclusive.
This, however, cannot afford
protection to any member or proxy holder found to have committed fraud or acted
mala fides. Walls v. Exchange Investment
Corporation, (1926) Ch 143.
Paragraph 7.9 of'
Secretarial Standard-2 [ICSI] provides for record of proxies.
Subparagraph 7.91 provides that all proxies received by the company should be
recorded chronologically in a register kept for that purpose. Sub-paragraph
7.9.2 provides that in case any proxy entered in the register is rejected the
reasons therefor should be entered in the remarks column.
Sub-section (4) of
section 176 prohibits issue of any invitation to appoint a proxy a person or one
of a number of persons specified in the invitations at the company's expense to
any member entitled to have a notice of a meeting sent to him and to vote
thereat by proxy. If this prohibition is not followed every officer of the
company who knowingly issues the invitations as aforesaid or willfully
authorises or permits their issue will be punishable with fine of Rs. 10,000/-.
Attendance
at a General Meeting
It is a common practice with
big companies with large number of shareholders to send an 'attendance slip'
along with the notice of the meeting for the use of the members. Such slips
duly filled in are required to be deposited at the gate with the secretarial
staff employed by the company. These are then serially or alphabetically
arranged and kept with the Chairman of the meeting for his use.
Attendance slips could also
be used for recording of attendance at the meeting by the members for which a
separate bound attendance book may be maintained. For a specimen attendance
slip, see Annex. 11.
A Statutory Meeting is a
General Meeting of the members of a public company which must be held by a
company limited by shares, or limited by guarantee and having a share capital,
not less than one month and not more than six months from the date at which the
company is entitled to commence business
Paragraph 2.1 of Secretarial
Standard-2 [ICSI] provides that every public company having a share
capital and every public company limited by guarantee and having a share
capital should, after one month but not later than six months from the date on
which it is entitled to commence business, hold a meeting called statutory
meeting.
The notice convening the
Statutory Meeting must clearly state that is the Statutory Meeting and that all
the requirements of the Act have been complied with. Gardner v.Iredale, (1912) 1 Ch 700. The notice of this meeting
should be accompanied by a report of the Board of Directors called Statutory
Report containing information/particulars in regard to the total number of
shares allotted against cash and separately showing against consideration other
than cash, the total amount of cash received by the company against issue of
shares, an abstract of the receipts and payments accounts of the company,
particulars of the amount of cash remaining in hand and an estimate of the
preliminary expenses of the company showing separately any commission or
discount paid or to be paid on the issue or sale of shares or debentures. The
report should also contain the details of the management of the company and
other information as provided in section 165 of the Act. The object of the
meeting is to give shareholders the opportunity of making themselves acquainted
with the promotion and floatation of the company, both by means of the Statutory
Report and also by means of discussion at the meeting. The Statutory Report is
required to be certified by two Directors of the company as to the correctness
of the contents thereof and also by the Auditor in so far as the report relates
to the shares allotted by the company, the cash received in respect of such
shares and the receipts and payments of the company. The Statutory Report is to
be prepared in Form No. 22 giving abstract of receipts and payments from the
date of incorporation up to a date within the previous seven days from the date
of the report.
Immediately after the report
is despatched to the members, a copy, certified as above, must be delivered to
the Registrar of Companies for registration. If the company is listed on a
recognised Stock Exchange, then six copies of the Statutory Report must be
forwarded to the concerned recognised Stock Exchange and a copy each to all
recognised Stock Exchanges in India as soon as it is issued to the members.
At the commencement of the
meeting, a list must be produced, showing the names and addresses of the
members, with their respective holdings, and this must remain open and
accessible to any member during the meeting. Sub-section (8) of section
165 of the Act provides for the adjournment of the meeting from time to time
and at any adjourned meeting, any resolution of which notice has been given in
accordance with the provisions of the Act, whether before or after the former
meeting, may be passed. The provision, as is drafted, appears that the power of
'adjournment' of the meeting does not lie
on the Chairman of the meeting as in the case of other General Meetings. It
would seem that at a Statutory Meeting the majority can compel the Chairman to
adjourn a meeting. The adjourned meeting has the same powers as the original
meeting and it may pass any resolution of which notice has been given in
accordance with the articles, either before or after the original meeting.
The provision of section 165
of the Act in regard to Statutory Meeting have no applicability to a private
company. The provision of this section do not apply to a public company
governed by section 43A, for such a
company still retains its private character by not altering its Articles of
Association to delete the restriction as to invitation to make subscription
towards its share capital and matters specified in clause (iii) of sub-section
(1) of section 3 of the Act. But, if a private company, on its becoming public,
alter its articles, thus, throwing open the public subscription towards its
capital, it will have to comply with the provisions of section 165 of the Act,
regarding holding a Statutory Meeting, of course if such conversion takes place
within six months of commencement of business. Similarly if a private company
becomes public within six months of its being entitled to commence business,
that is the date of its incorporation as such private company 10, such
converted public company must hold Statutory Meeting having regard to the
provisions of sub-section (1) of section 165 of the Act. If a private
company, however, becomes a public company after six months of its
incorporation as a private company, it would be outside the scope of sub-section
(1) of the aforesaid section. The provisions of this section also do not apply
to Government Company. [Notification GSR
578(E), dated 16-7-1985]. If there is failure to hold a statutory
meeting as provided in section 165 or there is default in delivering the
statutory report to the Registrar of Companies, every director or every officer
of the company who is in default is punishable with fine of Rs. 5,0001-.
The Companies Act, 1956
provides the shareholders a forum of protection and that forum is the general
meeting of the shareholders. The holding of the general meeting is compulsory
every year. There are other meetings, the holding of which is the choice of the
management or of a given percentage of shareholders to exercise their power to
compel the company to convene a meeting. The following meetings are required to
be held for administration of the affairs of the company
(a) General Meeting of members
(1) The Annual General
Meeting; and
(2) The Extraordinary
General Meeting.
(b) Meetings of a class or classes of shareholders.
(c) Board Meetings-discussed in Chapter-3
of this part.
Company to hold Annual General Meeting
each year.-Section
166 provides that every company is required to hold each year a general meeting
as its Annual General Meeting in addition to any other meetings. The notice of
the meeting should specify it as an Annual General Meeting. Not more than
fifteen months shall elapse between the date of one general meeting and that of
the next.
First AGM to be held within eighteen months of incorporation. -The first annual general meeting is required to be held within eighteen
months from the date of incorporation of the company and there is no provision
for granting an extension of time in this case. If such meeting is held within
that period, it shall not be necessary for the company to hold any annual
meeting in the year of incorporation or in the following year. For instance it
will not satisfy the provisions of the Section, if an annual general meeting is
held say in December of a year and the next annual general meeting in January
of the year next after the one following [Smedley
v. Registrar of Companies, (1991) 1 KB 97]. The word "year" is
not defined in the Act but it is defined in the General Clauses Act, and it
means a calendar year. Gibson v. Barton, (1875)
LR 10 QB 329; Park v. Lawton, (1911)
I KB 588. Failure to convene annual general meeting is a continuing default for
which there is provision for punishment and such a provision will be applicable
even if that meeting is postponed by company under bona fide belief that holding of such meeting would be against
spirit of judgment of Court in another proceeding. T. V. Mathew v. Nadukkara Agro Processing Co. Ltd., (2002) 1 Comp U 289 (Ker.)
Secretarial Standard-2 [ICSII.-Paragraph 2.2 of Secretarial Standard-2
provides that every company should, in each year, hold a meeting called the
annual general meeting.
Extension
of time for holding Annual General Meeting [S. 166 (1) Second provision]
Power of Registrar to extend time.-The Registrar of Companies is empowered
to extend time for holding an annual general meeting for special reasons by a
period not exceeding, three months.
The second proviso to sub-section
(1) of section 166 of the Act empowers the Registrar of Companies, for any
special reason, to extend the time of holding an Annual General Meeting (not
being the first Annual General Meeting) by a period not exceeding three months.
The power is absolutely a discretionary one to be used by the Registrar only in
appropriate cases. But such extension should on no account be made due to apprehended
or actual delay in the completion of the audit of the annual accounts. (Press Note, dated 29-1-1959
issued by the Department of Company Affairs).
The Department is of the
view that the Registrar can grant extension of time without any restriction up
to a limit of three months for special reasons even though such extension
results in the holding of the Annual General Meeting beyond the calendar year. (Letter No. 34/11/69-CL-111,
dated 13-1-1972).
For obtaining extension of
time for holding the Annual General Meeting the application should be made to
the Registrar of Companies before the expiry of the period mentioned in section
166 (1) and not after that. (Company News and Notes 1-7-1963).
There is no prescribed form of this application. As per the citizen's charter
of the Department of Company Affairs, Schedule 111, Serial No. 5. The approval
should be given within 10 days. [Press Note No. 9/99, dated 9-8-1999].
In case of Government Companies, the said application for extension of time
should be made to the Central Government. [Modification made by SRO 355, dated
7-1-1957].
Department is also of the
view that for the purpose of section 159 (relating to annual return to be filed
by the company), the time within which the Annual General Meeting should be
held is governed only by section 166 and not also by section 210. [Circular No. 2/79118/35(159/166)/78-CL-V/28/38/78-CL-II],
dated 15-9-1979].
Venue
of Annual General Meeting [S. 166 (2)]
An annual general meeting
can be held only in the city, town or village where the registered office of
the company is situate and not elsewhere or out of business hours.
The venue should be within
the postal limits of the city in which the company's registered office is
situated. Circular No. 1/1/80 CL. V, dated 16-2-198 1.
Section 166(2) does not
apply to section 25 companies, provided that the time, date and place of each
annual general meeting are decided upon beforehand by the board of directors
having regard to the directions, if any, given in this regard by the company in
general meeting. [S.O. No. 1578, dated 1-7-1961].
Annual
General Meeting not to be held on public holiday
No Annual General Meeting
shall be held on a public holiday. Public Holiday is defined in section 2 (38)
of the Act. According to the Negotiable Instruments Act, the expression
"Public Holiday" includes Sundays, New Year's Day, Christmas, if
either of such days falls on a Sunday, the next following Monday, Good Friday
and any other day declared by the Central Government by notification in the
official gazette to be a Public Holiday. Banks observe their closing days for
accounting purposes on April, I and September, 30 each year. Although these two
days are declared as holidays under the Negotiable Instruments Act, these two
days are not public holidays.
The proviso of section 2
(38) also says that no day declared by the Central Government to be a public
holiday shall be deemed to be such a holiday in relation to any meeting unless
the declaration was notified before the issue of the notice convening such
meeting.
Power
of Central Government to exempt
The Central Government may
exempt any class of companies from the provisions of sub-section (2) of
section 166 subject to such conditions as it may impose. It is to be noted that
no such exemption can be given to an individual company but only to class of
companies.
The second proviso to sub-section
(2) of section 166 provides that a
public company or a private company which is a subsidiary of a public company
may by its articles fix the time for its annual general meeting and may also by
a resolution passed in one annual general meeting fix the time for its
subsequent annual general meeting.
Annual
General Meeting of a Private Company
[S. 166 (2) Second proviso]
In the case of a Private
Company which is not a subsidiary of a public company, both the time and place
of meeting may be fixed either by the articles or by a preceding annual general
meeting or by a resolution agreed to by all its members.
The word 'Time' mentioned in
the second proviso to sub-section (2) of section 166 indicates only the hour and the date of the commencement of the
meeting. Letter No. 8/16/(1)61-PR,
9-5-1961.
Annual
General Meeting and laying of accounts of the company thereat
Failure to lay accounts at AGM, consequence of.-As mentioned
above, holding of Annual General Meeting in accordance with the provisions of
section 166 on the one hand and the laying of the accounts of the company duty
audited accompanied by the reports of the Directors and Auditors on the other
are two separate functions. The default in not laying the balance-sheet
before a General Meeting constitutes an independent offence, distinct from the
offence arising out of the default in not calling a meeting. Vishwanathan v. Asstt. Registrar of Joint Stock
Companies, (1953) 1 MLJ 408 : AIR
1953 Mad 558.
Pursuant to the second
proviso to sub-section (1) of section 166, only the Registrar of
Companies, at his discretion can extend the time of holding of an Annual
General Meeting by three months. Nothing in the Companies Act empowers any
authority to grant extension of time beyond this period, and an Annual General
Meeting should be called by the Directors in due time whether or not the
accounts, the consideration of which can only be made at an Annual General
Meeting, are ready".
Irrespective of the fact
that a default has been made knowingly or unknowingly, it must be proved that
the Directors had no mala fide intention
in not calling the Annual General Meeting. The only way open for the defaulting
Directors and the company is to apply to the High Court of appropriate
jurisdiction to grant relief within its general power, reserved under section 633 of the Act. In Gautam Kanoria v. AROC, (1999) 2 Comp LJ 27 (Bom) the court granted
relief to the company for failure to hold annual general meetings and to file
returns as the company was under takeover by the government. The relief
contemplated under this section relates to civil liabilities only and Court
cannot grant any relief in criminal proceedings. The Court may grant relief
either wholly or in part and upon such terms as it thinks fit. The granting of
relief is discretionary. Ramakrishna
Dalmia v. Registrar of Joint Stock Companies, Delhi, (1962) 32 Comp Cases 341.
If the accounts are not laid
before the Annual General Meeting within the statutory period, it would not
invalidate the said meeting. Sunil Dev v.
Delhi and District Cricket Association, (1990) 2 Comp U 254 (Del).
Matters
dealt with at an Annual General Meeting
Modification of decisions taken at AGM, if possible.-Matters
dealt with at the meeting and the resolution adopted thereat should not be
altered even if there were mistakes or the decision was wrong. A case of
revision/rectification of balance-sheet and/or profit and loss account
which were earlier approved at an Annual General Meeting came up for
clarification before the Department of Company Affairs. The following
clarification has been issued by the Department:
"I am directed to say
that the Board has had under consideration the question as to whether the
annual accounts of a company can be reopened, after adoption by the company in
Annual General Meeting with a view to rectifying errors of some magnitude or to
incorporating omission which may have come to the notice of the Board of
Directors at a later date. In view of the Board, the annual accounts of a
company should be deemed as conclusive once the accounts are adopted by the
company in an Annual General Meeting. While there can be no objection to the
Board of Directors correcting any minor or obvious errors in the accounts
subsequently, any substantial errors and acts of omission or commission cannot
be rectified by attempting to introduce corrections in the accounts already
adopted of by recasting such accounts. The Board feels that the necessary
rectification should be done in the accounts of the company for the succeeding
financial year." [Circular No. 3(50)-CL-VI/65,
dated 30-3-1966].
Annual General Meeting and Annual Accounts (Ss. 166, 210)
The combined reading of section
166 and section 210 requires
compliance with the following where Annual General Meetings and the placing of
accounts before shareholders is concerned:
(1) There must be one meeting held in each calendar year.
(2) Not more than 15 months must elapse between one
general meeting and another.
(3) The period of 15 months may
be extended to 18 months by the Registrar.
(4) Except in the case of the first annual
general meeting, the accounts must relate to a period beginning with the day
immediately after the period for which they were last submitted and ending with
a day which must not precede the day of the meeting by more than six months or
six months and the extension granted by the Registrar under section 166, i.e., a maximum period of nine
months.
If any person being a
director of a company, falls to take all reasonable steps to comply with the
provisions of this section, he will in respect of each offence be punishable
with imprisonment for 6 month or with
fine of Rs. 10,000/- or with both. Any person other than the director who
has been charged by the board of directors with the duty of seeing that the
provisions of this section are complied with makes default, he will also be
punishable as above.
Length of notice for calling the Annual General Meeting (S. 171)
A general meeting of a
company be called by giving not less than twenty-one days' notice in
writing. An annual general meeting may be called at shorter notice than 21
days' clear notice if consent is accorded thereto by all the members entitled
to vote thereto. Not less than 21 days has been construed as meaning 21 clear
days, i.e., excluding both the date
on which notice is served and date of the meeting. Further the time for
effecting service of notice of meeting, i.e.,
forty-eight hours as per section 53(2)(b) is also to be excluded.
Business to be transacted at Meeting (S. 173)
At an Annual General Meeting four items constitute
ordinary business. They are:
(1) To consider Balance-sheet and Profit & Loss
Accounts, Auditor's Report thereon and Directors' Report.
(2) To declare dividend.
(3) To appoint directors in place of those retiring.
(4) To appoint auditors and to fix their
remuneration. At an Annual General Meeting, all other business is special
business. At an Extraordinary General Meeting every business is special
business. It may be remembered that special business does not require special
resolution unless specifically required by the Act.
Any other item except the
aforesaid four items considered in the Annual General Meeting will constitute
special business and therefore will require explanatory statement.
Meaning
of Ordinary Business and Special Business given under Secretarial Standard-2
[ICSI]
Under the heading "Definitions" of Secretarial Standard-2
ordinary business means business to be transacted at an annual general meeting
relating to the (i) consideration of the accounts, balance sheet and the
reports of the Board of Directors and Auditors; (ii) the declaration of a
dividend; (iii) appointment of Directors in the place of those retiring; and
(iv) the appointment of, and the fixing of the remuneration of the Auditors.
Under said heading special
business means business other than the ordinary business to be transacted at an
annual general meeting and all other business to be transacted At any other
general meeting.
Adoption of Annual Accounts (S. 210)
The circumstances that no
Annual General Meeting was held will not absolve the Directors from liability
as they were themselves responsible for holding the meeting and have failed in
their duty to do so. Assistant Registrar
of Companies, West Bengal v. Mati Begum Safaram Khatoon, (1979) 49 Comp
Cases 651. The accounts are to be prepared and should contain the information
in the manner required in Schedule VI to the Act.1n the case of a new company
which has not commenced production and the question of profit or loss has not
arisen, there will be no objection to the company preparing the expenditure
account of construction etc.
The default in not laying
the balance-sheet before a General Meeting constitutes an in dependent
offence distinct from the offence arising out of the default in not calling the
meeting. Appaya v. State, (1952) 22
Comp Cases 78, The Directors of a company cannot evade liability for failure to
lay the accounts and balance-sheet before the Annual General Meeting
merely by stating that the Auditors had not sent the same. Registrar of Companies, West Bengal v. Proshad, (1986) 59 Comp
Cases 780 (Cal).
It has been held that an
acknowledgment in the balance-sheet if it was colourable and not bona
fide will not be good as an acknowledgment so as to save limitations. Babulal
Bal Mukund v. Official Liquidator, (1969) 39 Comp Cases 4 : (1968) 1 Comp LJ 1.
A balance-sheet showing fees due to Directors has been held not to amount
to an acknowledgment on the ground that it is not competent for the Board of
Directors to promise to pay to themselves since each is interested in the
matter and is capable of binding the company by passing any resolution. Re :
Colisium (Barrow), (1930) 2 Ch 44.
Even Chit Fund Companies
working under the Chit Funds Act, 1982 cannot take away their right to file
accounts within the period allowed under section 210 under their rulemaking
power. Madurai Ramanathapuram Mavatta Seetu Companigal Sangam v. Union of India, (1994) 80 Com Cases 686 (Mad).
Section 220(2) has been
amended by the Companies (Amendment) Act, 1988. Now the company not adopting
the balance-sheet in an Annual General Meeting or adjourning the meeting
without adopting the balance-sheet, is required to send a statement to
that effect and of the reasons thereof to the Registrar of Companies along with
the balance-sheet.
Holding of Annual General Meeting where the annual accounts are not ready or available (S. 220)
Accounts not ready for laying, effect of.-As per sub-section (2) of
section 220 amended by the Companies (Amendment) Act, 1988, in case the annual
accounts are not laid in the Annual General Meeting and the meeting is
adjourned, the balance-sheet etc. will have to be filed by companies
along with a statement containing reasons therefor. The amendment has thus
plugged the lacuna, as a company was hitherto not required to file its balance-sheet
etc. with the Registrar in case the Annual General Meeting was held in time and
adjourned to a subsequent date, without the annual accounts having been laid
thereat.
Directors' Duty to call Meeting.-There is a clear statutory duty on
the directors to call the meeting whether or not the accounts the consideration
of which is only one of the matters to be dealt with at an annual general
meeting are ready or not (Re El Sombrero Ltd., (195 8) 3 All ER I (Ch D).
The company becomes
punishable for its failure to do so per se because there is no excuse even on
the ground of sufficient cause.
Thus if the accounts are not
placed at the Annual General Meeting or at the adjourned Annual General Meeting
within the statutory period, the directors of the company are responsible for
such lapse and may be prosecuted. Bijoy Kumar Karnani v. Assistant Registrar of Companies (W.B.) (1985) 58 Com Cases
293 (Cal D.B.)
The default in filing
accounts within time is a continuing offence and that even after retirement a
director can come in the category of an officer in default. Amita Chadha v.
ROC, (1999) 96 Com Cases 265 (Delhi).
In the case of a sick
industrial company, the court has ordered that since the officers of the
company were not able to get access to company's premises in spite of police
help and therefore could not comply with the requirements of the Companies Act,
1956, the officers should prepare and file the accounts in accordance with the
statutory requirements within 6 months from the date of revival of the company
and till then no proceedings should be launched against them. Sanjay Modi v.
Registrar of Companies, (1995) 82 Com
Cases 681 (Raj).
General
Meeting to be called on authority of Resolution
Subject to the provisions in
the articles, any General Meeting of the Company can be called only on the
authority of a resolution of the Board of Directors and if the managing
director, manager, secretary or other officer calls a meeting without such
authority it will not be effectual unless the Board ratifies the effect before
the meeting is held. [Re: Haycraft Gold
Reduction and Mining Co., (1900) Ch 230]. For this reason only the notice
calling the General Meeting always contains the words, "by order of the
Board."
Adjournment of Annual General Meeting (S. 166 read with Regulation 53)
Adjournment, a continuation of the original
meeting.-Articles usually make provisions relating to
adjournment of a General Meeting. The model provisions in the articles of a
company are somewhat as follows
(a) The Chairman may, with the consent of
the company at which a quorum is present and shall, if so desired by the
meeting, adjourn the meeting from time to time and from place to place.
(b) No business shall be transacted at any
adjourned meeting other than the business left unfinished at the meeting from
which the adjournment took place.
(c) When a meeting is adjourned for thirty
days or more, notice of the adjourned meeting shall be given as in the case of
an original meeting.
(d) Save as aforesaid, it shall not be
necessary to give any notice of an adjournment or of the business to be
transacted at an adjourned meeting.
An adjourned meeting is a
mere continuation of the original meeting and so the proxies appointed for the
original meeting are available for the adjourned meeting also. W.B. Subramania Iyer v. United India Insurance
Co., (1928) 55 MLJ 385 : AIR 1928 Mad 1215.
Where provision, as in (c)
above, is made in the Articles of Association of a company, the requirement of
notice, when a meeting is adjourned for thirty days or more is mandatory and
must be strictly complied with. Rubber
Bachellor & Sons v. Bachellor, (1945) 1 All ER 522.
It is not necessary to give
notice of the adjourned meeting to the members of the company if the date of
the adjourned General Meeting is decided at the original meeting and if that
adjourned meeting falls on a holiday, it would not amount to contravention of
section 166(2). If the date of the adjourned General Meeting is fixed at the
original meeting and the Directors of the company fix another date for that
meeting, then a notice is to be given to the members of the company in
accordance with the provisions of the Companies Act, 1956. [Letter No. 8/61(1)/61 -PR, dated 19-5-1961
The adjourned meeting should
also be held within the statutory time period allowed by section 166. Mundra (MD) v. Asstt. Registrar of Companies
(W.B.), 1980 50 Com Cases 346 (Cal-DB).
Secretarial
Standard-2 [ICSI] on Adjournment of General Meeting
Paragraph 14 of Secretarial
Standard-2 [ICSI] provides for adjournment of general meetings.
Sub-paragraph 14.1
provides that a duly convened meeting should not be adjourned arbitrarily by
the Chairman. The Chairman may adjourn a meeting with the consent of the
members and shall adjourn a meeting if so directed by the members. Meetings may
be adjourned for want of requisite quorum. The Chairman may adjourn a meeting
in the event of disorder or other like causes, where it becomes impossible to
conduct the meeting and complete its business.
Sub-paragraph 14.2 provides that it' a meeting is
adjourned stne-die or for a
period or thirty days or more, a Notice of the adjourned meeting should be
given in accordance with the provisions contained hereinabove relating to
Notice.
Sub-paragraph 14.3 provides that if a meeting is
adjourned for a period of less than 30 days in the case of listed companies
with more than 5000 members, notice thereof specifying the day, date, time and
venue of the meeting should be published immediately in a newspaper having a
wide circulation within such States of India where more than 1000 members
reside.
Sub-paragraph 14.4 provides that if a meeting other
than a requisitioned meeting stands ad , journed for want of quorum, the
adjourned meeting should be held on the same day, in the next week at the same
time and place or on such other day and at such other time and place as may be
determined by the Board. In the case of listed companies with more than 5000
members, notice thereof specifying the day, date, time and venue of the
meeting, should be published immediately in a newspaper having a wide
circulation within such States of India where more than 1000 members reside.
Sub-paragraph 14.5 provides that if within half an
hour from the time appointed for holding a requisitioned meeting, a quorum is
not present, the meeting shall dissolved.
Sub-paragraph 14.6 provides that at an adjourned
meeting, only the unfinished business of the original meeting should be
considered.
Power of Company Law Board to call meeting (S. 167)
Section 167 provides what
should be done when default occurs in holding the annual general meeting within
the stipulated time. Only the Company Law Board has the power to order the
convening of a meeting after the statutory time has elapsed.
Default.- Default can be said to have
been made in holding the meeting only after the expiry of the period mentioned
in the second proviso to sub-section (1) of section 166 of the Act.
Member's right to apply to Company Law Board.-If default is made in holding
an annual general meeting in accordance with the provisions contained in the
section 166 of the Act, any member of
the company may apply to the Company Law Board and the Company Law Board may
call or direct the calling of a general meeting of the company. The Company Law
Board may give such ancillary or consequential directions as it thinks
expedient in relation to the calling, holding and conducting of the meeting.
The underlying policy is to
exercise the power only where the management is found to be unwilling to
convene an annual general meeting of the company with a view to keeping the
shareholders in the dark about the affairs of the company or where the
management is unable to convene the meeting on account of party faction or
other like reasons.
When Company Law Board will exercise power.-In case of default in holding the annual general meeting,
the Company Law Board will exercise the power to call or direct the calling of
the annual general meeting but only on the application of the member.
Application to Company Law Board for
direction to call Annual General Meeting. An application is to be made as per the Company
Law Board Regulations, 1991 to the
concerned Bench of the Company Law Board setting out therein the facts in
regard to failure to call the general meeting.
Documents to be attached with the application
1. Affidavit verifying the
application.
2. Bank
draft evidencing payment of application fee of Rs. 500/-.
3. Memorandum
of Appearance or executed Vakalatnama.
Company Law Board has no power to
rectify violation of Articles.-The remedy of a member complaining that an annual
general meeting was held in violation of the articles of the company is to move
the Court and not the Company Law Board to rectify the action of the Company.
The Company Law Board has power to direct a company to call a meeting under
Section 167 but not to rectify violation of the articles if any committed by
the company. [Prakasam (R) v. Sree
Narayana Dharma Paripalana Yogam, (1980) 50 Comp Cases 611 ].
One member to constitute a meeting.-For one member to be deemed to constitute a
meeting, the direction of the Company Law Board is necessary, otherwise, at
least two persons are necessary for a meeting. [State of Kerala v. West Coust Planter's Agencies Ltd., (1958) 28
Comp Cases 13 (DB) (Ker)]. Gates Corporation d/b/a The Gates Rubber Co. v. Anand Gates (India) P. Ltd., (1999) 98 Com
Cases 708 (CLB).
Order for calling meeting when time lapsed.-The
Company Law Board ordered an annual general meeting to be held where the time
for holding it lapsed in order to ensure the validity of such a meeting because
a meeting held by a company out of time cannot be a valid meeting. While
ordering such a meeting to be held the Company Law Board directed that the
business of the meeting should be restricted to the ordinary routine business
only. Taihan Electric Wire Co. Ltd. v.
TDP Copper Ltd., (1999) 96 Com Cases 415 (CLB).
Default in holding Annual General Meeting (S. 168)
Section 168 which contains
penalty provisions provides that if default is made in holding a meeting of the
company in accordance with Section 166 or in complying with any directions of
the Company Law Board under sub-section (1) of Section 167, the company
and every officer of the company who is In default shall be punishable with
fine which may extend to Rs. 50,0001- and in case of continuing default
with a further fine which may extend to Rs. 2,500/- for every day after
the first during which such default continues. When the books of the company
have been seized by the police and produced in Criminal Court the default is
beyond the control of the company and should not be punished. [In re: Bank of Deccan Ltd., (1960) 30
Comp Cases 204].
Calling of Extraordinary General Meeting when requisitioned by members (S. 169)
Section 169 provides that
the Board of Directors of the company shall forthwith proceed to call an
extraordinary general meeting of the Company in regard to any matter on the
requisition of member, in the case of a company having a share capital, holding
at least one-tenth of the paid-up capital carrying voting rights in
respect of that matter and in the case of the company not having share capital
on the requisition of members having at least one-tenth of the total
voting power carrying voting rights in respect of that matter. The requisition
shall contain the specific purpose for which the meeting is proposed to be called.
In case any special resolution is to be passed at the meeting, the special
resolution as well as the explanatory statement should accompany the
requisition.
When requisitionists call
the meeting they need not annex the explanatory statement to the notice. S. Vardarajan v. Venkateswara Solvent
Extraction P. Ltd., (1994) 80 Com Cases 693 (Mad).
No form prescribed for requisition.-There
is no form
prescribed in which the requisition is to be sent by the requisitionists. It
may be in the form of a letter signed by all requisitionists addressed to the
Board of Directors of the Company. There may be several letters also for the
same purpose. If a requisition consists of two or more distinct matters its
validity has to be determined in respect of each matter. The requisition may be
deposited at the Registered Office of the company or it may be sent by
registered letter addressed to the company at the Registered Office.
The requisition made by the
requisitionists must be valid and lawful. Sivaraiman (B) v. Egniore Benefit Societv Ltd., (1992) 75
Com Cases 198 (Mad).
Board to decide whether the
meeting requisitioned is to be called or not.-On receipt of the
requisition, the Board of Directors of the company will decide as to whether a
meeting should be called or not. If it is decided by the Board to call the
meeting, a resolution to this effect will be passed fixing the day, time and
place of the meeting. The Board is required to take a decision to this effect
within 21 days of the deposit of the requ1sition and the meeting is to be held
within 45 days of the deposit of the requisition. The Board has to send notice
of the meeting within 21 days of the deposit of the requisition by giving 21
days' clear notice.
Even if the resolution
proposed to be passed at the Extraordinary General Meeting by the
requisitionists is illegal, the meeting is required to be called by the
Directors. Cricket Club of Indla v. Madhav
L Apte.
Failure of Director to call
Meeting-Consequences.-If the Board of Directors fails to call the meeting
within 21 days from the date of deposit of a valid requisition on a day not
later than 45 days from the date of deposit of the requisition; then it will
amount to contravention of the provision of Section 169 of the Act and for such
contravention the Directors shall be liable to prosecution and fine which may
extend to Rs. 500/-(S. 629A).
On failure of Director requisitionists themselves can call meeting.-On
the failure
of the director to call the meeting the requisitionists themselves may convene a
meeting. However, when the meetina is called by the requisitionists themselves
the expenses incurred in this connection will have to be repaid by the company
and which in turn can be recovered by the company from the directors who are in
default.
When directors fail to issue notice requisitionists themselves may issue
notice of meeting. -Where the directors fall to issue notice of the
meeting within 21 days of the deposit of the valid requisition, the
requisitionists themselves will issue the notice of the meeting within three
months from the date of deposit of the valid requisition. In the case of' a
company having share capital by the requisitionists as represent a majority in
value of the paid-up share capital held by all of them or not less than
1/10th of the paid-up share capital as on that date carries the right of
voting in regard to the matter for which meeting is called and in the case of a
company not having share capital by such of the requisitionists as represent
not less than 1/10th the total voting power of all the members having on the
said date a right of vote in regard to the matter.
Notice to mention
Extraordinary General Meeting convened by requisitionists.- The notice of the meeting
should mention that the meeting called is an Extraordinary General Meeting of
the company and is being convened at the requisition of the shareholders of the
company. The notice issued by the requisitionists should also mention that the
meet1 n g is being convened by the requisitionists as the directors of the
company have failed to call the meeting It has been held that failure to
mention the name of the meeting makes the meeting invalid [Gardner v. Iredale,
(1912) 1 Ch 700].
It has also been held that
the right of members to requisition a meeting is not lost because a receiver
has been appointed in respect of their share. [Bal Krishan Gupta v. Swadeshi
Polytex Ltd., (1985) 58 Comp Cases
563].
The Act does not require
that a general meeting other than an annual general meeting must be held at the
re,,istered office or in the city, town or village where the registered office
of the company is situate. However, unless the meeting is held in or near the
place of the registered office, the purpose of the requisitionists will not be
served if the Directors of the Company decide to convene the meeting at a far
off place where the requisitionists or other members may not have access.
A requisition for an
extraordinary general meeting drafted by one shareholder who has the locus standi and signed by the
prescribed number of shareholders has been held to be valid. B.G. Somayaji v. Karnataka Batik Ltd.,
(1995) 83 Com Cases 649 : (1995) 3 Comp
LJ 334 (Kant).
Power of Company Law Board to order calling of General Meeting (S.186)
Section 186 provides that, if for any reason, it is impracticable to call a
meeting of a company other than an annual general meeting, in the mannert in
which meetings of the company are to be called or to hold or conduct the
meeting in the manner prescribed by the Act or the Articles of the company,
then the Company Law Board either of its motion or on the application being
made by any director or any member of the company having the right to vote at
the meeting order that the meeting of the company be called and held and issue
such other directions for conducting the meeting as it thinks expedient. The
directions issued by the Company Law Board may also include a direction that
one member of the company present in person or by proxy shall be deemed to
constitute a meeting. The meeting called, held and conducted in accordance with
the orders of the Company Law Board shall be deemed to be a meeting of the
Company duly called, held and conducted.
Power confined to calling of Extraordinary General Meeting.-The
Section gives
power and Jurisdiction to the Company Law Board only in the case of meetings
other than Annual General Meetings. After 1st June 1988 even Annual General Meetings can be
called by the Company Law Board under section 167, on the application of any member of the company.
By whom the application can be presented.-By any director or
member of the company.
Contents of the application. -The application shall set out clearly the
facts as regards the impracticability of the company to call a meeting.
1. Evidence in proof of
status of the applicant
2. Affidavit verifying the
petition
3. Bank draft evidencing
payment of application fee
4. Memorandum of appearance
with the copy of the executed Vakalatnama.
Fee payable on application
is Rs. 500/-.
Court cannot exercise power of Company Law Board.-The Court
cannot execise the power of Company Law Board even under its inherent powers
because this power cannot be invoked where statutory provisions exist. Ashok Mathew Zacharia (Dr.) v. Majestic
Kuries and Loans (P.) Ltd., (1987) 62 Comp Cases 865.
Impracticable to be interpreted in a reasonable manner. -'Impracticable'
should be interpreted in a reasonable manner and from the common sense point of
view of ordinary businessmen, taking to account the circumstances of each case.
The power conferred on the
court (now Company Law Board) under the section to call a meeting of a company
should be exercised with caution and only when it was not practicable to call a
valid meeting under the constitution of the company. Lothian Jute Mills Co. Ltd. In re: (1951) 21 Comp Cases 290.
It was held, on the facts,
that were serious doubts and controversy as to who were the directors and there
was a possibility that meeting called by any particular group of directors might
be invalid, a situation Would be held to have arisen when it has become
impracticable to call a meeting of the company. The power under the Section
should be exercised when it cannot be stated with reasonable approach to
certainty, or even prima facie, that
a meeting called in exercise of the powers contained in Its regulations could
be valid.
Intpracticability-
condition precedent.- The condition precedent for ordering a meeting of a company under section 186 is the
impracticability of calling such a meeting in the usual course for any reason.
If such a condition exists, then the Company Law Board can exercise its power
and direct the calling of such a meeting. Baptist
Church Trust Association v. Member Company Law Board, (1986) 60 Comp Cases
381.
The word impracticable
should be distinguished from the word impossible the former is more limited in
scope than the later word. Payne v. Coe, (1947)
1 All ER 841 (Ch D).
Exercise of power by Company Law Board.-As to the circumstances under
which the Court (Company Law Board) could exercise its power under this
section, Re.- Clive Mills Co. Ltd.,
(1964) 1 Comp LJ 301 , that the power of the Court (Company Law Board)
under this section is very wide and extraordinary power which should be used
sparingly and with great caution, because it is for the company to manage its
own affairs including the calling of a General Meeting and the Court will
intervene only if it is satisfied that it is impracticable to call or hold the
meeting. Where the shareholders themselves are in a position to requisition an
extraordinary General Meeting but without availing themselves of that
procedure, make an application to the Court (Company Law Board), the Court
should not accede to it.
Main guiding Principles.-The main principles that should guide
the Court (now CLB) as regards ordering a meeting to be called are the
following: Ruttonjee & Co. Ltd., (1970)
40 Comp Cases 491 (Cal).
1. The Court (now CLB) would not
ordinarily interfere with the domestic management of a company which should be
conducted in accordance with the articles.
2. The discretion granted under section
186 should be used sparingly with caution so that the Court (now CLB) does not
become either a shareholder or director of the Company trying to participate in
the internecine squabbles of the company.
3. The word 'Impracticable' means impracticable from a
reasonable point of view.
4. The Court (now CLB) should take a
common sense view of the matter and must act as a prudent man of business.
5. A prudent man of business has not a
sensitive officious view of intervention in case of every rivalry between two
groups of directors; prudence demands that the Court (now CLB) should
ordinarily keep itself aloof from participating in quarrels of rival groups of
directors or shareholders.
6. But where the meeting can be called
only by the directors and there are serious doubts and controversy as to who
are directors or where there is a possibility that one or other or both the
meetings called by the rival groups of directors may be invalid, the Court (now
CLB) ought not to expose the shareholders to uncertainties and should hold that
a position has arisen which makes it "impracticable" to convene a
meeting in any manner in which meetings of the company may be called.
7. The Court (now CLB) should exercise its
power under section 186, when, upon considering all the facts and circumstances
of a case, it can with a reasonable approach to certainty or even prima facie that a meeting called in the
manner in which meetings are ordinarily called under the Act or under the
articles, would be invalid.
8. Before the Court (now CLB) exercises
its discretion under section 186, the Court (now CLB) must be satisfied when a
director or a member moves an application, that it has been made bona fide in the larger interests of the
company for removing a deadlock otherwise irremovable."
Power after calling meeting.-Power under the Section can be exercised
only when, in the opinion of the Company Law Board, it is found impracticable
to call a meeting of the Company. After a meeting has been called, the Company
Law Board has no power to come and intervene for the purpose of appointing a
chairman, regulating the proceedings or advising their course or conduct. If a
meeting already convened by the company has become disorderly or otherwise
impossible to be proceeded with, the proper course is to apply to the Company
Law Board to exercise its powers under the Section. R. Rangachari v. S. Suppiash, (1975) 45 Comp Cases 641 (SQ.
An outsider cannot be
appointed as the observer in a meeting which has been already convened. Menon TMY. Universal Film (India) Pvt. Ltd.,
(1982) 52 Com Cases 371 (Mad).
Order can prescribe the business to be transacted.-The order of the Company Law Board
calling a meeting can also prescribe the business to be transacted at the
meeting. Motion Pictures Association, In
re: (1974) 44 Comp Cases 298 (Del).
Single Member.-Except in such case, as is
mentioned in the Explanation to subsection (1), a single member cannot
constitute a meeting. [Re, London Flats
Ltd., (1970) 1 Comp LJ 28].
Filing.-A certified copy of the order of the Company Law Board under this Section
should be filed with the Registrar of Companies concerned along with Form No. 2
1.
Requirement
under Companies (Compliance Certificate) Rules, 2001
Companies having paid-up
share capital of less than Rs. 2 Crores
but equal to or more than Rs. 10 lakhs are required to obtain a
Compliance Certificate from a secretary in whole-time practice to be
filed with the Registrar of Companies mentioning therein inter alia that the annual general meeting for the financial year
ended on a specified that was held on a particular date after giving due notice
to the members of the company and the resolutions passed thereat were duly
recorded in the Minutes Book maintained for the purpose and the extraordinary
meetings were held during the financial year after giving due notice to the
members of the company and the resolutions passed thereat were duly recorded in
the Minutes Book maintained for the purpose as per paragraphs 6 and 7 of the
Form of Compliance Certificate appended to the Companies (Compliance
Certificate) Rules, 2001.
Class meetings (S. 106 read with Annexure B to the Rules)
Variation within the same class, if possible.-The articles of a company
invariably make provision for meetings of different classes of shareholders,
with a view to enabling a specified majority of a class to bind all of them to
a variation of the rights of the class.
Section 106 of the Companies
Act provides that where the share capital of the company is divided into
different classes of shares, the rights attached to the shares of any class may
be varied with the consent in writing of the holders of not less than three-fourths
of the issued share capital of that class or with the sanction of a Special
Resolution passed at a separate meeting of the holders of the issued shares of
that class
(a) if provision with respect to such
variation is contained in the memorandum or the articles of the company; or
(b) in the absence of any such provision in
the memorandum or articles, if such variation is not prohibited by the terms of
the issue of the shares of that class.
Regulation 3 of Table 'A' of
Schedule I to the Act, contains a standard article for the variation of rights
of a particular class of shares. This regulation reads as follows:
(1) If at any time the share capital is
divided into different classes of shares, the rights attached to any class
(unless otherwise provided by the terms of issue of the shares of that class)
may, subject to the provisions of sections 106
and 107, and whether or not the
company is being wound up be varied with the consent in writing of the holders
of three-fourths of the issued shares of that class or with the sanction
of Special Resolution passed at the separate meeting of the holders of the
shares of that class.
(2) To every such separate meeting,
the provisions of these regulations relating to General Meetings shall mutatis mutandis apply, but so that the
necessary quorum shall be two persons at least holding or representing by proxy
one-third of the issued shares of the class in question.
The provisions of the
particular article must be carefully observed in convening and holding a class
meeting, special care being exercised in ensuring that the necessary quorum is
present. Carruth v. Imperial Chemical
Industries Ltd., 1937 AC 707. It
was held, in a case (Homans v. Hotchkiss
Ordnance Co., (1899) 1 Ch 115) that
where no quorum was present at a class meeting convened pursuant to an article
similar to the one in Table 'A', and the meeting, therefore, stood adjourned in
accordance with the provisions in that respect relating to General Meetings,
the quorum prescribed by the articles for the holding of a class meeting was
still required at the adjourned meeting, and those members present who held
less than one-third of the shares of the class were not a sufficient
quorum.
What amounts to variation of rights (Ss. 106, 107)
Any modification of the
rights conferred either at the time of issue of the series of the particular
class of shares, or any commutation, abrogation or alteration of the conditions
of the issue may be deemed to be a variation of the terms or rights and may
attract the provisions of section 106 of
the Act subject, however, to the provisions contained in the articles of the
company. What amounts to variation of rights and privileges of a class of share
has always been a matter of drawing a fine line and a very delicate legal
issue. The usually accepted notion is that if the variation of right(s)
attached to a class of shares is somehow prejudicial to that class, it amounts
to a variation. But enhancement of right(s) of such class of shares which is
rather beneficial to the class as a whole is not prejudicial to the class and
may not be deemed to amount to variation of right and may not attract the
provisions. A variation which merely affects the enjoyment of a right without
modifying the right itself does not come within this section. In re : Hindustan General Electric Corporation,
AIR 1959 Cal 679: 62 Cal WN 889.
The variation contemplated
by section 106 is not any variation
adding to or enhancing rights of any class of shareholders. A cancellation of
preferred shares by repayment of the capital paid upon those shares and in
accordance with the right attached to those shares does not involve a variation
of the rights of any other shareholders of the company. In re: Saltdean Estate Co. Ltd., (1968) 3 All ER 829 : (1969) 39 Comp Cases 387. Sub dividing of any class of shares
which has the effect of diminishing the voting power of other shares cannot be
said to affect the right attached to any shares. Greenhalgh v. Arderne Cinenias Ltd., (1946) 1 All ER 5 12.
Abrogation or decreasing and affecting the right to vote is really a variation
pre , judicially affecting the rights of' the class of shareholders so
affected, but from the above legal decisions, it may be concluded that simple
variation of' voting power though attached to the particular class of' shares
did not give rise to a cause of action under the aforesaid section as it is
felt that mere variation of voting rights within the normal activities of the
company does not amount to variation of rights.
It' a variation is affected
in a manner satisfying the provisions of the section and in accordance with the
memorandum and the articles, the variation becomes complete and effectual and
no further step is necessary. In re:
Rampuria Cotton Mills Ltd., 63 CWN 11: AIR 1959 Cal 253. Where a variation of the right(s) of a class of shares is part
of a scheme of' arrangement carried through Court of law under section 391 of the Act, the provisions of either
section 106 or the relevant articles
do not have any application. In re:
Hindustan General Electric Corporation, AIR 1959 Cal 679: 62 Cal WN
889. Thus, the conditions to the issue of
a class of' shares, together with the conditions as laid down in the
Memorandum or the Articles of Association of a company are the criteria to be
followed to find out as to whether or not there has been any variation of'
rights attached to that class of shares. In the event neither the memorandum
nor the articles of the company provide any clause in record to variation of
rights, then the applicability of section 106
of the Companies Act becomes a non-issue.
Section 107 of the Act
provides a remedy against unfair use of the
power to modify the rights of any
class of shareholders. It provides that holders of 10 per cent or more of the
shares of the class may apply to the Court to get the variation cancelled if
they are affected by the variation and in such a case the variation will not be
effective unless confirmed by the Court. This application must be made to the
Court within twenty-one days from the date of the consent given or the
resolution passed. The shareholders presenting the above application to the
Court should be the persons who have not consented to or voted in favour of the
resolution for the variation. On getting the order of the Court, a copy of it
must be filed with the Registrar of Companies within thirty days of the service
of the order on the company.
Annexure 'B' to the
Companies (Central Government's) General Rules and Forms, 1956, prescribes the procedure to be followed in any class meeting.
Meeting of the debenture-holders (Ss. 117, 120, 121 read with Annexure C to the Rules)
The guidelines in regard to
the meeting of the debenture- holders are usually contained in the trust
deed entered into between the trustees for the debenture-holders and the
company covering the issue of a particular series of debentures. Otherwise the
company can also follow the guidelines laid down in Annexure C to the Companies
(Central Government's) General Rules and Forms, 1956, referred to in rule 7 of the said Rules. The practice
followed with regard to the meeting of the debenture-holders is as
follows :
(a) The trustee or the trustees or the
company respectively may at any time convene a meeting of the debenture-
holders. Whenever the company is about to convene any such meeting, it shall
forthwith give notice in writing to the trustees of the place, day and hours
thereof and of the nature of the business to be transacted. The trustee(s)
shall convene such meeting upon a requisition in writing of the holders of one-fifth
or more of the nominal amount of the debentures for the time being outstanding.
(b) At least clear 21 days' notice
specifying the place, day and hour of the meeting should be given prior to any
meeting of the debenture- holders and such notice should be given by post
to all the debenture-holders. It is not necessary to specify in any such
notice the nature of the business to be transacted at the meeting thus
convened.
(c) In any such meeting, persons holding or
representing by proxy or attorney one quarter of the nominal amount of the debentures
for the time being outstanding shall form a quorum for the transaction of
business and no business shall be transacted at any meeting unless the
requisite quorum be present at the commencement of the business.
(d) Some person nominated by the trustee(s)
shall be entitled to take chair at any such meeting and if no such person be
nominated or if at any such meeting the person nominated shall not be present
within ten minutes after the time appointed for holding the same, the debenture-
holders present shall choose one of their members to be the Chairman. The
trustee(s) and his solicitors and any Director and any member may attend any
such meeting.
(e) If within half an hour from the time
appointed for any such meeting of the debenture-holders a quorum is not
present, the meeting shall stand adjourned to the same day in the next week at
the same time and place and if at such adjourned meeting also a quorum be not
present, the meeting shall stand dissolved.
(f) Every question submitted to a meeting of
the debenture- holders shall be decided in the first instance by a show
of hands and in case of an equality of votes, the Chairman shall both on a show
of hands and at the poll have a casting vote in addition to the vote or votes
(if any) to which he may be entitled as a debenture- holder or as a proxy
or attorney of a debenture- holder.
(g) At any General Meeting of the debenture-holders,
unless the Chairman considers it expedient that a poll should be taken or
unless a poll be demanded by at least three debenture-holders present in
person or by proxy or attorney, a declaration by the Chairman that a resolution
has been carried or carried by any particular majority or lost or not carried
by a particular majority shall be conclusive evidence of the fact.
(h) If at any meeting, the Chairman
considers it expedient that a poll should be taken or a poll be demanded by
three or more debenture- holders present in person or by proxy or
attorney, it shall be taken in such manner and either at once or after an
adjournment as the Chairman directs and the result of such poll shall be deemed
to be the resolution of the meeting at which the poll was demanded.
(i) The Chairman may with the consent of
any such meeting adjourn the same from time to time and from place to place.
(j) Any poll demanded at any such meeting
on the election of the Chairman or on any question or adjournment shall be
taken at the meeting without adjournment.
General Meetings of the debenture-holders (Annexure C to the Rules)
All meetings of the debenture-holders
are in the nature of General Meetings and generally the above procedure
outlined above is followed. The matters that
are dealt with at the General Meeting of the debenture-holders are
usually the following:
(i) sanctioning
the release of any of the mortgaged premises;
(ii) handing
over the possession back to the company;
(iii) sanctioning any abrogation, modification
or compromise of the right of the debenture holders against the company or
against the mortgaged premises whether such rights shall arise under the
debenture or otherwise but concerning their rights;
(iv) according assent to any abrogation of
modification of the provisions contained in the trust deed proposed by the
company and recommended by the trustee(s); and
(v) according assent, subject to such
conditions and stipulations as may be prescribed, to the issue of further
debentures ranking either pari passu or
otherwise to the series of existing debentures.
Minutes of the meeting of the debenture-holders (Annexure C to the Rules)
The company should record the minutes of all resolutions and proceedings of the General Meeting of the debenture-holders in the books to be provided at the expense of the company and the same should be signed by the Chairman thereof either immediately or by the Chairman of the next succeeding meeting of the debenture-holders.
Duties
of the Secretary [S. 2 (45)]
While the Chairman is the
key figure in conducting a meeting, enjoying as he does, certain privileges and
preferences at the meeting, the Secretary is the king pin whose duty covers the
whole gamut of the process of General Meeting either before the meeting itself
or after it is over and he is the man behind all the arrangements for the
smooth conduct of a meeting by the Chairman.
The Companies (Amendment)
Act, 1988, has brought the definition of 'Secretary' in line with the
definition of 'Company Secretary' in the Company Secretaries Act, 1980. Section
2(45) now defines 'Company Secretary' a person who is a member of the Institute
and includes any other individual possessing the prescribed qualifications and
appointed to perform the duties which may be performed by a Secretary under
this Act and any other ministerial or administrative duties.
Every company having a paid-up
share capital as may be prescribed by the Government from time to time shall
have a whole-time Company Secretary and where the Board of Directors of
any such company comprises only two Directors, neither of them shall be the
Secretary of the Company (section 383A). The Central Government has prescribed
that every company having a paid-up share capital of Rs. 50 lakhs and
above shall have a whole-time Company Secretary.
Companies (Amendment) Act,
2000 has inserted proviso to sub-section (1) of section 383A w.e.f. 13-12-2000
to provide that every company having a paid-up share capital of Rs. 10
lakhs or more but less than Rs. 2 crorest must file a certificate with the
Registrar of Companies from a secretary in whole-time practice in such
form and within such time and subject to such conditions as prescribed by the
Companies (Compliance Certificate) Rules, 2001.
If a company fails to comply
with the provisions of sub-section (1) of section 383A, the company and
every officer of the company who is in default will be punishable with fine of
upto Rs. 5001- for every day during which the default continues.
In the list of duties of a
Secretary under several sections of the Act, his main function appears to
consist of reporting matters to the Registrar or other authority, to certify certain
documents either for filing or for records, and nowhere the Act specifically
fixes his duties or functions in regard to the General Meeting. Functions of a
Secretary, no doubt, varies between one company to another but some of the
duties, such as convening of a General Meeting and helping the Chairman in
conducting such a meeting are common to all Secretaries of all companies.
Although the duty of a Secretary largely consists of ministerial or
administrative duties, the duty to maintain several registers required under
the Companies Act or helping the Board in its functions to organise meetings
etc. may as well be considered as statutory duty.
Secretary
in relation to a General Meeting
The usual duties of a
Secretary in relation to a General Meeting start much before the date of the
meeting. His duties in this regard are threefold, beginning with
(a) formalities to be completed in regard to
approval of the notice of the meeting etc., that is, functions prior to the
meeting and continuing with;
(b) functions at the meeting and ending with;
(c) formalities subsequent to the meeting.
His functions in regard to an Annual General Meeting
and other meetings are
(1) The issue of notices for the Statutory
Meeting (section 165); Annual General Meeting under section 166 or if asked by
the Company Law Board under section 167; calling of Extraordinary General
Meeting on requisition (section 169); class meetings pursuant to the provisions
of the Memorandum or the Articles of Association of the company and of the
debenture- holders in terms of the provisions in the trust deed covering
the issue of the debentures. These duties he performs on express authority of
the Board of Directors. As regards form of a notice in convening any of the
meetings as mentioned above except an Annual General Meeting convened under the
direction of the Company Law Board (section 167), the Board of Directors at a
prior Board meeting decide the contents of the notice and the business to be
transacted thereat. Except with the express authority of the Board of
Directors, the Secretary cannot issue a notice of a General Meeting including
class meetings and debenture-holders' meeting.
(ii) It is his duty to see that each notice of
a General Meeting specifies the place (which should be either the registered
office or some place within the local limit of the registered office of the
company), the day and hour of the meeting and a statement of items of business
to be conducted thereat (section 172). A General Meeting must be held on a
working day of the company and should begin at convenient business hours.
(iii) The statutory requirements under section
173 in regard to ordinary business, special business, notice of an ordinary
resolution and Special Resolution are to be strictly observed in drafting the
notice of the meetings.
(iv) The circulation of notice of a resolution
pursuant so section 188 of the Act, dealing with the notice and, if necessary,
circulating notice under section 257 through press with the approval of the
Board of Directors; serving notice of every General Meeting to the Auditors of
the company (section 172) and the Pubic Trustee, where applicable, in terms of
section 153 B read with section 187B.
(v) A proviso added to section 172(2)
enumerates the provisions of section 53 in regard to service of notice through
press advertisement requires.
That where the notice of a
meeting is given by advertising the same in a newspaper circulating in the
neighbourhood of the registered office of the company under sub-section
(3) of section 53, the statement of material facts referred to in section 173 need not be annexed to the notice as
required by that section but it shall be mentioned in the advertisement that
the statement has been forwarded to the members of the company. In order to avoid
any lapse on the issue of notice to the members of the company, it has become
customary for a company to publish the contents of a notice of the Annual
General Meeting or other meeting in a newspaper circulating in the
neighbourhood of the registered office of the company in the manner as provided
in section 172.
(vi) Section 53(3) provides that a document
advertised in a newspaper circulating in the neighbourhood of the registered
office of the company shall be deemed to be duly served on the day on which the
advertisement appears, on every member of the company who has no registered
address in India and has not supplied to the company an address within India
for the giving of the notices to him.
(vii) Any medium or big company's shares are
usually listed with one or more recognised Stock Exchanges in India. It is the
duty of the Secretary to notify the ,exchange' at least two days in advance of
the date of the meeting of its Board of Directors at which the recommendation
of declaration of a dividend or a right or a bonus issue of the passing over of
dividend is due to be considered as per the listing Agreement.
It is also his duty to
intimate to the 'Exchange' by a letter or if the meeting is held outside the
local limit, then by telegram, immediately
after the meeting of the Board of Directors (preferably within the next
twenty-four hours of the meeting) held to consider any of the items
mentioned herein below :
(a) All dividend recommended or declared or the decision to pass
any dividend or interest payment;
(b) the total turn-over, gross
profit/loss, provisions for depreciation, tax provisions and net profits, for
the year (with comparison with previous year) and the amounts appropriated from
reserves, capital profits, accumulated profits of past years or other special
source to provide wholly or partly for the dividend, even if this calls for
qualification that such information is provisional or subject to audit. It is
also necessary to notify the 'Exchange' at least twenty-one days in
advance of the date on and from which the dividend will be payable and to
arrange to issue the dividend warrants which shall be encashable at par at all
the branches of its bankers, simultaneously so as to reach the shareholders on
or before the date fixed for payment of dividend.
(c) before the notice of the relevant
General Meeting but immediately after the meeting of its Board of Directors,
the Secretary should arrange to intimate the 'Exchange' the decision of the
Board in regard to following matters :
1. Short particulars of any increase of
capital whether by issue of bonus shares through capitallsation, or by way of
right shares to be offered to the shareholders or debenture- holders, or
in any other way;
2. Short particulars of the re-issue
of forfeited shares or securities, or the issue of shares or securities held in
reserve for future issue, or the creation in any form or manner of new shares
or securities or any other rights, privileges or benefits to subscribe to;
3. Short particulars of any other alteration of capital,
including calls;
4. Any other information necessary to
enable the holders of the listed securities of the company to appraise its
position and to avoid the establishment of a false market in such listed
securities.
(viii) It is also necessary to arrange sending
out of notices of the General Meeting in time pursuant to the provisions of
section 171 read with section 53, giving clear twenty-one days' notice
for convening an Annual General Meeting, that is excluding the time for service
of a notice of General Meeting (forty-eight hours) if sent by post in
accordance with the provisions of section 53(2)(b). In large companies, the
envelopes containing notices convening the Annual General Meeting (also for
other General Meeting) are either addressographed or computorised, and it is
necessary to ensure that changes of address, dividend request and other
instructions are noted on the plates or a new card prepared well in advance of
the last day for sending out the notices.
(ix) Where the meeting is to be held at a
place other than the registered office of the company, adequate arrangement
should be made by the Secretary for holding of the meeting beforehand.
(x) In some cases, the Secretary of the
company is entrusted not only with the collection of relevant facts and figures
for the preparation of the aforesaid reports, but also probably deputed to
prepare the Directors' Report for the approval by the Board. Section 217
dealing with the requirement for the preparation of the Board's report
enumerates certain information to be statutorily included. These are :
(a) the state of company's affairs;
(b) the amounts, if any, which it proposes to carry to any
reserves in such balance-sheet relative to report;
(c) the amount, if any, which it recommends should be paid, by
way of dividend.
(d) material changes and commitments, if
any, affecting the financial position of the company which have occurred
between the end of the financial year of the company to which the balance-sheet
relates and the date of the report.
Preparation of Director's Report.-These are some of the items of the long list
of requirements for the preparation of a Directors' Report under section 217.
The Board's report shall also have to include a statement giving full
particulars of employees, if employed throughout the year who were in receipt
of remuneration of not less than Rs. 24 lakhs or such other amount as may be
prescribed and if employed for a part of the financial year who were in receipt
of remuneration of Rs. 2 lakh p.m. or such other amount as may be prescribed,
under the Companies (Particulars of Employees) Rules 1975.
By the Companies (Amendment)
Act, 1988, the companies are now required to disclose the prescribed
particulars regarding conservation of energy, technology absorption, foreign
exchange earnings and outgo. The particulars of those employees who are drawing
remuneration higher than the remuneration drawn by managerial personnel and
holding not less the 2% of the equity share capital have also to be disclosed
in the Directors' Report. If the Secretary is entrusted with the preparation of
the Chairman's speech, he should give the details and adopt the features of
general type, such as fiscal policy affecting the particular trade, national
and international and current political considerations in general having regard
to the general impact on the industry as a whole.
By the Companies (Amendment)
Act, 1999 w.e.f. 31-10-1998, companies are also required to specify
in the Board's report the reasons for the failure, if any, to complete the buy-back
within the time specified in sub-section (4) of section 77A. By the
Companies (Amendment) Act, 2000, w.e.f. 13-12-2000, companies are
further required to include in the Board's report a Directors' Responsibility
Statement indicating therein the matters specified in sub-section (2AA)
of section 217.
(xi) The agenda of a General
Meeting, in addition to covering the matters referred to in the notice of the
meeting, should contain the names of proposers and seconders of motions, if
available at the time of preparation of the agenda and the copies should be
distributed to the Directors who are present at the General Meeting as also the
proposers and seconders and those who have a direct interest in the
proceedings.
(xii) Secretary should keep ready at the meeting
all statutory books of general meetings, such as, register of directors'
shareholdings, minutes book, register of members (where necessary), etc. along with sufficient blank pads,
poll cards, printed copies of the accounts and Chairman's report and Chairman's
Speech copies of Memorandum and Articles of Association and the documents which
are mentioned in the explanatory statements, if any.
Secretary's
duty relating to matters at the meeting
(i) Recording of attendance
of the members-It is the duty of the Secretary that persons who are
entitled to attend the meeting are only accommodated inside the meeting hall.
He should arrange to receive the attendance slips from the members attending
the meeting at the gate and, if occasion arises, the signature in the
attendance slips verified with the signature of the members recorded with the
company. Though very difficult, he may arrange the proxies to be segregated
from the general members for the systematic conduct of the meeting. The arrangement
should also include preparation of lists of members and the proxies at the gate
itself from the information collected from the attendance slips and making
available the list to the Chairman of the meeting before the meeting starts.
(ii) After the Chairman
takes the chair, the first thing for the Secretary to perform is to read the
notice of the meeting, but this formality is usually obviated by the members
present by their acceptance of the 'notice' for the meeting as read. The
Secretary is to present at the commencement of every Annual General Meeting the
register of directors' shareholdings and shall allow the register open and
accessible to any member during the commencement of the meeting [Section 307(7)].
(iii) Either the Secretary
himself or any other person appointed by him, should read the full Auditor's
Report to the members, before the company in General Meeting. In addition, he
should also see that any member may have an easy access to the Auditor's Report
for inspection. As the reading of the Auditor's report is a statutory
obligation pursuant to section 230, (although
time consuming) the Chairman and the assembly of the members should go through
the formalities laid down in section 230.
(iv) Reading of Chairman's
report in the meeting is not compulsory but it is helpful if the Chairman's
report, in printed form, is circulated to the members before the meeting. It is
more or less customary to give publicity of the Chairman's report through
press. The secretary should take steps to book space in relevant newspapers
beforehand and release the text of the report immediately after the meeting.
(v) It is helpful to keep a
stenographer or arrange for tape recorders to record in detail of the
proceedings of a General Meeting. The questions put by the members and the
answers given therefor by the Chairman may form
part of the proceedings, though not the minutes. The selection of parts of
such proceedings as minutes, however, depends largely on the Chairman of
company.
(vi) The Secretary should,
as far as possible, assist the Chairman of the meeting in conduct of the
meeting and, if necessary, point out the provisions of the relevant sections of
the Companies Act and the Articles of Association in matters being dealt with
at the meeting. He should also assist the Chairman to count the votes cast by
show of hands etc. for and against
any resolution and advise him the results thereof. In case poll is demanded by
the members, he should advise the Chairman the relevant provisions of the Act
and the articles therefor.
There are several other matters for which the
ultimate responsibility lies on the Chairman, although the Secretary's
assistance and advice are often sought to sort out any problem so as to ensure that the meeting is a valid
meeting, that all necessary formalities have been complied with, that a quorum
is present, and that a resolution passed at the meeting has been validly
passed.
Secretary's
duty after the meeting
The Secretary's duty in
relation to a General Meeting continues till all the papers/documents are filed
or reported and proceedings of the meeting are minuted and recorded in the
minute book(s) besides
(1) The questions put by the members and the answers
given thereto by the Chairman neatly reproduced should be sifted and approved by
the Chairman of the meeting. The ,Chairman has discretion with regard to the
inclusion of such materials as part of the proceedings of the meeting. [Sec.
193(5) Explanation].
(ii) The matters discussed
and resolutions passed at the meeting collected together, and /then the minutes
of the meeting should be recorded immediately after the meeting. In preparing
the minutes, the Secretary should see that these recordings are expressive, in
concise form, of the business transacted at the meeting; the names of the
proposers and seconders of each motion is recorded with a note to the effect
that the motion was put to the vote by the Chairman and duly carried. The draft
minutes should be approved by the Chairman before writing them in the minute
books.
(iii) The Secretary should
see that in recording the minutes of a General Meeting, the provisions of
section 193 are strictly observed. He should take care to see that in no case
the minutes of the proceedings or any of General Meeting are attached to the
pages of the register maintained for recording the minutes, that is, the entire
minutes of the proceedings and the resolutions passed thereat are completely
entered in writing up the book within thirty days of the conclusion of every
such meeting; that each page of such minute book is initialled or signed by the
Chairman of the meeting and the last page of the record of proceedings of each
meeting in such books is dated and signed. The minute books should be in bound
form and their pages consecutively numbered.
(iv) The Secretary is
responsible for seeing that an annual return of the company (having a share
capital) is filed in the prescribed form within sixty days from the day on
which Annual General Meeting is held (Section 159 of the Act). The said return
shall be in the form set out in Part II of Schedule V of the Companies Act,
1956, or as near thereto as circumstances admit and where the return is filed,
even though the Annual General "Meeting has not been held on or before the
latest day by which it should have been held in accordance with the provisions
of the Companies Act, the company should file with the return a statement
specifying the reasons for not holding the Annual General Meeting. Every sixth
year's return must be a full return. [Section 159 (i) proviso].
(v) The Annual Return, where
it is to be filed by a company whose shares are listed on a recognised Stock
Exchange, the copy of such Annual Return shall also be signed by a Secretary in
whole-time practice. A Secretary in whole-time practice is one who
has been given a Certificate of Practice by the Institute of Company
Secretaries and who is not in full time employment (S. 45A).
(vi) Filing of distribution
schedule under the listing agreement-Most of the medium and large sized
companies , shares are listed with any one or more than one of the recognised
Stock Exchanges in India for dealing in shares of the company. The listing
agreement provides a provision under which a company is obliged to file with
the Stock Exchange immediately after each Annual General Meeting a schedule in
the form prescribed by the Stock Exchange showing the distribution of its
securities listed on the exchange as on the date of the Annual General Meeting
and the names and holdings of large holders as required therein.
(vii) The filing of return
is one of the duties of the Secretary which should be done preferably within
one month of the holding of the Annual General Meeting of the company. Separate
forms should be completed for each class of security, e.g., debentures, preference shares, ordinary shares, etc. Similarly, separate forms should be
completed for shares of the same class which are not identical in all respects.
Shares are identical in all respects only if
(a) they are of the same
nominal value of the same amount per share has been called up;
(b) they are entitled to
dividend at the same rate and for the same period so that distribution of the
dividend payable on each share will amount to exactly the same sum net and
gross; and
(c) they carry the same
rights in all other respect.
In the case of a firm or
limited company where the shares have distinctive numbers, the holding of each
partner or the Directors of the company should be shown separately. The
distribution schedule which has been prescribed for the purpose of reporting
the shareholdings of the members is more or less the same for all for
recognised Stock Exchanges in India because of the standardization maintained
among the different Stock Exchanges. For the form of distribution schedule, see
Annex. 4.
(viii) Secretary's function
to supervise the filing of various returns immediately after the Annual General
Meeting or Extraordinary General Meeting is quite elaborate:
(a) pursuant to section 220,
he is to see that after the balance-sheet and the profit and loss account
as laid before the company at the Annual General Meeting, three copies of these
are filed with the Registrar within thirty days from the date duly
authenticated under the signature of either the Managing Director, Manager or
Secretary of the company or by a Director together with three copies of all the
documents which are required by this Act to be annexed or attached to such
balance-sheet or profit and loss account.
(b) pursuant to section 192,
a Secretary is to arrange filing of a copy of every resolution (together with a
copy of the statement of material facts annexed under section 173 to the notice of the meeting in
which such resolution has been passed) or agreement in Form No. 23" to
which this section applies within thirty days of the passing or making thereof
and under the signature of an officer of the company.
Filing of Resolution. -According to the clarification given by the
Department of Company Affairs to the FICCI, thirty days would start from the
date on which all information has been received by the company. Section 92
applies to
(i) Special Resolutions;
(ii) resolutions which have been agreed to by
all the members of a company but which, if not so agreed to, would not have
been effective for the purpose unless they had been passed as Special
Resolutions;
(iii) any resolution concerning appointment, re-appointment
or renewal of the appointment or variation of the terms of appointment of a
Managing Director either passed at a General Meeting or Board of Directors'
meeting of the company;
(iv) resolutions or agreements passed or agreed upon at a meeting of
the particular class of shareholders;
(v) resolutions according consent to the
exercise of power to the Board of Directors by the members of the company at a
meeting under clauses (a), (b) and
(d) of sub-section (1) of section 293;
(vi)
resolutions approving the
appointment of sole selling agents under section 294 or section 294AA; I
(vii) copies of the terms and conditions of
appointment of sole selling agent(s);
(viii) resolutions requiring a company to be wound
up voluntarily passed pursuant to sub-section (1) of section 484.
Where the Special Resolution
is passed in connection with the alteration of the Articles of Association, a
copy of the resolution should be annexed to every copy of the articles issued
after the passing of the resolution. The company need not annex a copy of the
resolution to its articles unless it has received clearance to the proposal
contained in it and where it does not issue a copy of the articles after the
passing of the resolution. [Letter No. 8/35(192)/6
I-PR, dated 31-1-1962].
Other
duties of a Secretary prior to a General Meeting
Secretary's duty in regard
to a General Meeting starts usually from the making of an arrangement of a
Board meeting to consider the annual accounts, Directors and the Auditors'
report thereon and a notice to convene a General Meeting including approval of
the contents thereof.
Usually the Secretary is
authorised by the Board to sign the notice which forms part of the booklet
containing balance-sheet and the profit and loss accounts. The Secretary
is the person who usually arranges for the printing and circulation of the
notice of a General Meeting along with the accounts of the company in
stipulated time.
Notices are also to be given
to the Auditors, the bankers, and the concerned Stock Exchange if the shares of
the company are listed. Necessary arrangement is also to be made to record all
proxies coming at least forty-eight hours before the time of the meeting and
for newspaper insertion regarding closing of the registers of the
members/debenture holders in terms of section 154 of the Companies Act, 1956.
All transfers/change of
address or any other change during the notice period should be very carefully
noted and arrangement should be made to complete the register of
members/debenture-holders immediately and for preparation of the new
addressograph to send out copies of the accounts to the newly registered
members.
Length of notice for calling meeting (S. 171)
A General Meeting, be it an
Annual General Meeting or any other General Meeting or a meeting requisitioned
by the members pursuant to section 169 of the Act, may be called by giving not
less than twenty-one days' notice in writing. The provisions of section
171 should be read with the provisions of section 53 of the Act dealing with
the procedure for service of documents on members by the company and if the
document is a notice of a General Meeting or any of the aforesaid meetings the
service shall be effective only at the expiration of forty-eight hours
after the letter containing the same is posted. Annual General Meeting or any
other General Meeting may be called after giving shorter notice with the
concurrence of the members of the company
(i) in the case of an Annual
General Meeting, by all the members entitled to vote thereat; and
(ii) in the case of any
other meeting, by members holding 95 per cent of the paidup share capital with
a right to vote at the meeting or members holding not less than 95 per cent of
the total voting power where the company has no share capital.
Motions
for consideration before the meeting
Motion is the proposition
placed before a meeting for the members' consideration. When a proposition in
the form of a motion is placed, the members present are free to ask any
question relevant to the issue (or even as often happens outside the realm).
But when a meeting is convened and held under the orders of the Court, any
motion for amendment of resolution not coming within the terms of the Courts'
order may be rejected by the Chairman. Bello
v. Co-operative Navigation Co., (1924) 26 Bom LR 907.
In every General Meeting of
the members or class meeting and meeting of the debenture-holders, the
meeting starts with the Chairman being elected unless there is a Chairman of
the Board of Directors who is usually entitled to be the Chairman in any
General Meeting or the class meeting of the members as per provisions of the
articles.
The Chairman should enquire
of the Secretary who is present at the meeting if quorum is present in
accordance with the articles of the company/provisions of the Companies Act,
1956. With the quorum being present, the Chairman may proceed with the business
placed before the meeting for which due notice was served on members.
After the preliminaries, the
Chairman invites comments of the members on the reports and accounts placed
before the members. This is the stage for discussion, and members in a well
attended meeting, invariably rise and speak in support of or in opposition to
the accounts 'or ask for various other information including comparative
performance by other companies belonging to the same industry. The duties of a
Chairman are to preserve order in the face of various odds and take a cautious
and patient view as far as practicable in order to properly ascertain the sense
of the meeting with regard to any question before it. National Dwelling Society v. Sykes, (1894) 3 Ch 159.
Discussions being over, the
Chairman would as k the proposer of the motion to read out the business before
the members viz., 'that the profit and loss account and the balance sheet as at
along with the Directors and Auditors
reports' thereon be received and adopted'. Sometimes, some of the members may
want to modify the formal motion by counter motion or amendment which may or
may not be in order. Here, the Chairman has to exhibit his tact and presence of
mind, especially if the meeting is divided into distinctly two groups, one in
favour of the motion and the other against it.
A motion has to be proposed
by a member before it is placed by the Chairman for the consideration of the
members. Usual procedure that is followed in every General Meeting is to get
each motion seconded. Of course, legally it is not necessary that any motion
put to a meeting should be seconded either by the Chairman or by any member. Berar Trading Co. Ltd. v. Gajanan Gopal Rao
Dixit, (1972) 42 Comp Cases 48. If
the Chairman acts bona fide, a motion
can be put before the members without its having been proposed by a member,
provided that the members clearly understand the matter on which they are
voting.
A Chairman conducts the
meeting by virtue of his being the Chairman and irrespective of whether or not
he is a member of the company.
After a motion has been
placed before the meeting, the members present can put any question to the
Chairman relating to the motion under consideration. If the members are
satisfied with the explanation given by the Chairman or he has no comments to
offer, the Chairman puts the proposal in the form of resolution for passing by
the members by show of hands. Section 177
of the Act lays down that at any General Meeting a resolution put to vote
shall, unless a poll is demanded under section 179, be decided on a show of hands. Regulation 56 of Table 'A' of
Schedule I to the Act provides that on a show of hands, every member present in
person shall have one vote on the principle of 'one man one vote'. In a voting
by show of hands, the duty of the Chairman, unless the articles otherwise
provide, is to count the hand held up and to declare the results accordingly,
without regard to the number of votes that a member holding the hand possesses.
Unless the articles of a company otherwise provide, a proxy shall not be
entitled to vote except on a poll (section 176). The Chairman should be
cautious enough to see that no proxy participates in exercising voting right of
the proxy holders by show of hands. Even if articles provide for proxies voting
on a show of hands, if a proxy is himself a member, he cannot be counted except
for himself as a member on a show of hands as on a show of hands each hand can
be taken into account for one vote only, although it may be the hand of the member
for himself or as a proxy for an absent member. If a proxy is a nonmember, his
hand will not be counted for the member whom he represents, because of the
provisions of section 9 of the Act,
allowing the Act to override memorandum and the articles of a company.
Where a corporation is
represented by a person (section 187), the corporate body is deemed to be
'present in person' within the meaning of either the articles or the Companies
Act, 1956 and its vote will be counted on a show of hand. In re : Kelantan Coconuts Estates, 1920 WN 274. In the case of an
interested Director, although he is not entitled to vote as Director in a Board
Meeting, in respect of any contract in which he is interested (section 300), he
is, nevertheless, entitled to vote in furtherance of his own interest when
voting as a shareholder at a General Meeting. North West Transportation Co. v. Beat6, (1887) 12 App Cases 589.
As between shareholders and
company, the only person entitled to the right of voting is the person whose
name is entered in the register as a shareholder. Neither an executor of a
deceased member nor the receiver of an insolvent member can exercise the right,
unless he gets himself registered as a member. In re : Tata Iron and Steel Co. Ltd., AIR 1938 Bom 80.
In the case of joint
holders, the vote of the senior who tenders a vote, whether in person or by
proxy, shall be entitled to vote only on poll and the company shall accept such
vote to the exclusion of the votes of other joint holders. For this purpose, seniority
shall be determined by the order in which the names stand in the register of
members. But, it should be ensured that proxy form is executed on behalf of all
the Joint holders.
Pursuant to the provisions
of section 178 of the Companies Act 1956, the Chairman, on a show of hands,
would declare results of the voting and passing of the resolution. But,
immediately after the declaration of the results by the Chairman, on a show of
hands, a poll can be demanded by the required number of members having voting
rights.
Poll at a General Meeting (S. 179)
A poll indicates voting by
the members on the basis of their holding of shares in the share capital of the
company, having voting rights as against the principle of 'one man one vote' by
show of hands which is considered as a rough and ready method of taking the
sense of the meeting. Pursuant to section 179 of the Act, demand for poll may
be made
(i) before or on the declaration of the result of the voting on
any resolution on a show of hands by the Chairman;
(ii) a poll may be ordered to be taken by the
Chairman of the meeting of his own motion and shall be ordered to be taken by
him on a demand made in that behalf by
(a) In the case of a public company having a
share capital by any member or members present in person or by proxy and
holding shares in the company
-which confer a power
to vote on the resolution not being less than one-tenth of the total
voting power in respect of the resolution, or
-on which
an aggregate sum of not less than Rs. 50,000/-has been paid up;
(b) in the case of a private company, by one
member having the right to vote on the resolution and present in person or by
proxy if not more than seven such members are personally present andby two such
members present in person or by proxy if more than seven such members are
personally present; or
(c) in the case of any other company by;
(d) any member or members present in person
or by proxy and having not less than one tenth of the total voting power in
respect of the resolution.
(iii) The demand for a poll
may be withdrawn at any time by the person or persons who made the demand.
It is mentioned that a poll
can be demanded by persons of required number or any person(s) holding proxies.
In the case of a public company where proxy is held by a single person for five
or more members, there is nothing in the
Companies Act 1956, to prohibit his demanding a poll in his capacity as
proxy for all these five members. The words used in section 179(l) of the Act
are 'before or on the declaration on the result of voting etc.' which signify that a poll may be demanded before the result
of the vote by show of hands. Thus, the wording enables a poll being demanded
and ordered to be taken even without going through the formalities of show of
hands. CF. Holmes v. Lord Keys, (1958)
2 All ER 129 : (1958) 28 Comp Cases 419. As regards right to vote, standard
articles of any company would make follow' Ing provisions:
(a) No member shall be entitled to vote at
any General Meeting unless all calls or other sums presently payable by him in
respect of shares in the company have been paid (Regulation 59 of Table 'A').
The disability under this regulation has been held to attach also to a buyer or
re-allottee of the shares forfeited so long as the calls on the shares
remained unpaid. Rendt Gold Mining Co. v.
New Balties Erstelling Ltd., (1903) 1 KB 461 (CA).
(b) Where the shares having voting rights
are held by the trustees, only the first name will be allowed to exercise his
vote.
(c) A member of unsound mind or in respect of
whom an order has been made by any Court having jurisdiction in lunacy may
vote, whether on a show of hands or on a poll, by his committee or other legal
guardian, and any such committee or guardian may, on a poll, vote by proxy
(Regulation 58 of Table 'A').
(d) No objection can be raised as to the
qualification of any voter except at the meeting or adjourned meeting at which
the vote objected to is given or tendered and every vote not disallowed at such
meeting shall be valid for all purposes. Any objection made in due time should
be referred to the Chairman of the meeting, whose decision is final and
conclusive. (Regulation 60 of Table 'A').
(e) On a poll, each member or proxy is
entitled to one vote for each share (having voting right) held as per the
register of members.
Paragraph 6.3.1 of
Secretarial Standard-2 provides that a member present in person or by
proxy shall, on poll, have votes in proportion to his share of the paid up
equity capital of the company, subject to differential rights as to voting, if
any, attached to certain shares as stipulated in the articles of association or
by the terms of issue of such shares.
Section 179 dealing with
demand for poll has been amended by the Companies (Amendment) Act, 1988,
considering wide dispersal of shareholdings. The amendment has been made to
ensure that the shareholders having some minimum specified interest should
alone demand a poll.
Earlier the Act provided
that a poll can be ordered by the chairman of the meeting on demand made by the
person or persons specified below:
(a) in the case of a public
company by at least five members having the right to vote on the resolution and
present in person or by proxy,
(b) in the case of a private
company by one member having the right to vote on the resolution and present in
person or by proxy if not more than seven such members are personally present
and by two such members present in person or by proxy if more than seven such
members are personally present,
(c) by any member or members
present in person or by proxy and having not less than one-tenth of the
total voting power in respect of the resolution, or
(d) by any member or members
present in person or by proxy and holding shares in the company conferring a
right to vote on the resolution being shares on which an aggregate sum has been
paid-up which is not less than one-tenth of the total sum paid up
on all the shares conferring that right.
Now the poll can be demanded
(a) in the case of a public company with
share capital by any member or members present in person or by proxy, holding
1/10th of the voting power or holding shares up to the paid-up value of
Rs. 50,0001-;
(b) in the case of private company with
share capital, by one member present in person or by proxy (if there are up to
7 members) or two members (if there are more than 7 members);
(c) in the case of any other company, any member holding 1/10th
of the voting power.
A private company which is
not subsidiary of a public company, if it makes its own provisions by its
articles as regards the matters in this section, is not bound to follow the
provisions of this section
The Company Law Board has held that where a valid
demand of poll has been made and the chairman refused it, the business on the
agenda for which poll was demanded and which was carried through by show of
hands became invalid. Namita Gupta v.
Cachar Native Joint Stock Co. Ltd., (1999) 98 Com Cases 655 (CLB).
Paragraph 6.3.1 of Secretarial Standard-2
[ICSI] provides that while a proxy cannot speak at the meeting, he has the
right to demand or joint in the demand for a poll.
Conducting of voting by poll (S. 180, 181, 182, 183)
When at a General Meeting poll is demanded in
respect of more than one resolution, each resolution must be put to the poll
separately. Blair Open Hearth Furnace Co.
Ltd. v. Reigart, (1913) 108 Law Times 665.
Section 180 of the Act provides for the time of
taking, that is,
(i) a poll demanded on a
question of adjournment shall be taken forthwith;
(ii) a poll demanded on any
other question (not being a question relating to the election of a Chairman
which is provided for in section 175) shall
be taken at such time not being later than forty-eight hours from the
time when the demand was made, as the Chairman may direct.
Though the Chairman may fix
the time of taking the poll, he cannot, as long as votes are coming in, close
the poll on the ground that the period of time allotted by him is over. But
after waiting for some time and affording reasonable time to the voters to cast
their votes, if no more voters are turning up, he, may declare the poll closed.
If he closes the voting time improperly or allows insufficient time to the
possible voters to cast their votes, the poll will be invalid.
Where there is a break-down
of the voting arrangement on a poll or on the date fixed for taking poll, the
incident or the accident shall not be taken as plea to end the taking of poll,
even if the forty-eight hours' period would have expired by then. The
Chairman, in such circumstances, must appoint and notify another date for the poll and give an opportunity to
voters to have the poll taken on that appointed date. He cannot refuse to grant
the poll. M.K. Srinivasan v. Watrap
Subramania 1yer, AIR 1932 Mad 100.
Section 182 of the Act prohibits
any restrictions on the exercise of voting rights. Thus a public company or a
private company which is subsidiary of a public company, shall not prohibit any
member from exercising his voting right on the ground that he has not hold his
share or other interest in the company for any specified period preceding the
date on which the vote is taken, or on any other ground except the restriction
put on voting due to calls in arrears.
Secretarial
Standard-2 [ICSI] on conduct of poll
Paragraph 8 of Secretarial
Standard-2 provides for conduct of poll. Sub-paragraph 8.1 provides
that when a poll is demanded on any Resolution, the Chairman should get the
validity of the demand verified and should order the poll forthwith, if it is
demanded on the question of appointment of the Chairman or adjournment of the
Meeting, and, in any other case, within forty eight hours of the demand for
poll. Sub-paragraph 8.2 provides that in the case of a poll which is not
taken forthwith, the Chairman should announce at the Meeting the date, venue
and time of taking the poll and duration of the poll to enable Members to have
adequate and convenient opportunity to exercise their vote. The Chairman should
also announce that any Member who so desires may be present at the time of counting
of votes. Sub-paragraph, 8.3 provides that each Resolution on which a
poll is demanded should be put to vote separately. Sub-paragraph 8.4
provides that the Chairman should appoint two scrutineers to ensure that the
scrutiny of the votes cast of poll is done fairly, accurately and properly. At
least one of the two scrutineers should be Member who is not an officer or
employee of the company.
Based on the scrutineers'
report, the Chairman should declare the result of the poll, with details of the
number of votes cast for and against the Resolution and the final result as to
whether the Resolution has been carried or not. Sub-paragraph 8.5
provides that the result of the poll should be displayed on the notice board of
the company at its Registered Office and its Corporate/Head Office, if such
office is situated elsewhere, and also placed on the website, if any, of the
company. In the case of listed companies with more than 5,000 Members, the
result of the poll should also be published in a leasing newspaper circulation
in the neighbourhood of the Registered Office of the Company.
Section 183 of the Act
confers right to a member proxy to vote differently. Thus on a poll taken at a
meeting of a company, a member or his proxy or other person entitled to vote
for him, as the case may be, need not, if he votes, use all his votes in the
same way for all the resolutions. The purpose of this section is to afford a
trustee of a trust which holds shares in a company to vote differently
according to the wishes of the beneficiaries, or it may happen that the same
trustee(s) is a member of more than one trust and it may be inappropriate for
the trustee whose name appears on the list of members to use all the votes
belonging to the different trusts in the same way. The total votes split
trustwise may be exercised by the trustee according to the wishes or interest
of the beneficiaries. It is only on a poll that this distributive method of
voting is possible, for on a show of hands no member can register more than one
vote. Mahaliram v. Fort Gloster Jute
Manufacturing Co. Ltd., (1954) 24 Comp Cases 311.
On acceptance of the demand
for poll, whether taken immediately or at an adjourned meeting and with the
beginning of the process, each member/proxy should be given a poll card to
record his vote in favour of or against the proposed resolution. A specimen of
a poll card (in a very simple form) is given in Annex. 5. In this specimen instead of writing the full resolution or
resolutions, provision has been made only to provide for the number of the
proposed resolution as it appears in the notice of the meeting. The card is
provided with two columns under the heading 'For' and 'Against'. In case the
member votes in favour of the resolution, he can tick mark the portion meant
for that and put in his name and signature in that portion. The process will be
the same in case he votes against the resolution, with the difference that he
will put in his tick mark to indicate that he is against the resolution.
Appointment of scrutineers (S. 184)
When at a General Meeting
poll is demanded in respect of more than one resolution, each such resolution
must be put to the poll separately. Blair
Open Hearth Furnace Co. Ltd. v. Reigart, (1913) 108 Law Times 665. Of the two scrutineers appointed
one shall always be a member present at the meeting provided such a member is
available and willing to be so appointed. Such a member should neither be an
employee or officer of the company.
Scrutineers to supervise the poll (S. 184)
Section 184 of the Companies Act, 1956, casts the duty on the Chairman of
the General Meeting to appoint two scrutineers to scrutinise the votes given on
the poll and to report thereon to him. The Chairman shall have power, at any
time before the result of the poll is declared, to remove a scrutineer from
office and to fill vacancies in the office of scrutineer arising from such
removal or from any other cause. Of the two scrutinisers appointed under this
section, one shall always be a member (not being an officer or employee of the
company) present at the meeting, provided such a member is available and
willing to be appointed.
Quite often, the Chairman,
on demand of a poll adjourns the meeting for the purpose of taking poll within the
statutory period of forty-eight hours. This adjournment is necessary to
allow the secretarial staff time for the preparation of taking poll. Some
companies maintain list of members showing the names and addresses of the
members and their holding of shares. This type of list or register may be
conveniently kept ready at the beginning of the meeting. The list usually
serves two purposes, namely
(a) to check the attendance slips collected at the time before
the meeting commenced; and
(b) to make a scrutiny of the entitlements
of the votes of the members/proxies while counting number of votes 'for' or
'against' the proposed resolution.
The only lacuna of the
procedure is that the list or the register cannot be used as a record for
specimen signature also, as it is usually done in the case of register of
members.
The scrutinisers will first
collect the attendance slips and arrange them alphabetically if the turn-out
of the members is heavy. They will then check up with either the list or
register or the register of members and find out whether the attendance slips
are correct. Thereafter they will put the serial code and the name of the
members on the poll cards following the serials as appear either in the list or
the register of members. Proxies are also to be similarly treated, with the
only difference that both the names of the members and the proxy should be
recorded on the poll cards. At the back of the poll cards, the number of shares
held by the members may also be put from the basic records and the cards
distributed serially to the members present. The members/proxies exercising
their votes for or against the resolution should put their specimen signature
on the cards as recorded with the company. In case of any doubt, the
scrutineers may arrange checking the specimen signature as recorded with the
company in the register of members. If any member or proxy has split his vote
differently, then it is to be carefully looked into. The scrutineers or the
secretarial staff employed by the company may then arrange collection of the
poll cards recording votes for or against the motion, and record immediately in
sheets of paper the codes and the numbers of votes for or against the motion.
The two scrutineers should come closer to help each other. Thus, after collection
of the poll cards, one of the scrutineers may keep with him only those cards
casting vote in favour of the motion and the other against the motion. A member
voting as proxy for another will record his own name and signature indicating
the name of the proxy. The two scrutineers, after preparation of the lists may
exchange the papers and the poll cards for each other's scrutiny to ensure
correct recording of the votes 'for' and 'against' the motion. After satisfying
themselves that the list recording votes 'for' and 'against' have been
correctly recorded, the scrutineers appointed by the Chairman of the meeting
shall submit in writing the result of the poll to the latter. The result of the
poll shall be deemed to be the decision of the meeting on the resolution on
which the poll was taken. There is no set form in which the report of the poll
result is to be submitted by them. Neither Table 'A' of the Schedule I of the
Companies Act nor any of the sections provide for any such form. A suggested
form of report to be made by the scrutineers to the Chairman of the meeting is
given in Annexure 6.
Procedure of taking poll (S. 185)
Usually, the poll procedures
are not embodied in the articles of a company and, therefore, these may vary
from company to company in minor details. As regards the manner of taking poll
and results thereof, section 185 of the
Act provides that the Chairman of the meeting shall have power to regulate the
manner in which a poll shall be taken, and that the result of the poll shall be deemed to be the decision of the meeting on the resolution on which the poll is taken. The
Chairman, however, cannot substitute his opinion or decision on the report of
the results of the poll made by the scrutineers. He may check the cards and the
statements recording the votes 'for' and 'against' once again and if there is
any patent or latent mistake, he may cause the scrutineers to change the
results in accordance with his findings and the altered results will be results
of the voting on the resolution(s) placed before the meeting,
In regard to a meeting,
where poll is taken, it should be considered as a continuing one until the
ascertainment of the result of the poll. Holmes
v. Lord Keys, (1958) 2 All ER 129:
(1958) 28 Com Cases 419.
Statutory limitation of time
to take a poll within forty-eight hours must be honoured, but once a poll
has started, there is no limitation of time up to which the process of poll is
to be continued. If poll could not be concluded in one day, the same may be
repeated in the day next following if such day is not a holiday. Thus, a
meeting reconstituted after poll is continuance of the same meeting and the
poll itself is part of the meeting. Jakson
v. Hamlyn, (1953) 1 All ER 887.
Treatment
of amendment of a motion
In conducting a General
Meeting, the Chairman should take utmost precaution that the whole proceedings
of the meeting remain unbiased and at
no stage tinged with motive of protection of interest of the majority. The
majority cannot refuse the minority a fair hearing. A shareholder is entitled
to be heard in reasonable terms and for a reasonable time. The question whether
a denial of his right vitiates a resolution depends on the circumstances of
each case. Wall v. London & Northern
Assets Corporation, (1898) 2 Ch 469.
Should an amendment be
moved, this should be disposed of before the original question is voted upon.
The following points regarding the amendments should be noted:
(a) An amendment which is not strictly within the scope of the
notice convening the meeting is out of order.
(b) Amendments substantially altering the
motion or a new motion cannot be put through without proper notice but a poll
may be ordered to sense the tune of the meeting as to whether such amendment
should be accepted or not. In the meantime, pending poll, the Chairman may
direct that, 'this meeting do proceed to the next business'.
(c) A motion should be considered out of
order if it aims to prevent the consideration of the reports and accounts with
a view to either adopting or rejecting them. Thus, it will be out of order to
accept a motion 'that the report and accounts be received, but not adopted'.
(d) Only one amendment at a time should be
considered, and an amendment put when another amendment is under consideration
should be ruled out of order.
(e) If the Chairman improperly refuses to put
a valid and reasonable amendment, the resolution carried will be invalidated. Henderson v. Bank of Australia, (1890) 45 Ch
D 330.
When the views of the
minority have been fairly heard, the Chairman may move the closure and, if the
motion is carried by the meeting, he may declare the discussion closed and put
the question to vote. It was observed in a case (Wall v. London & Northern Assets Corporation, (1898) 2 Ch 469)
that where a minority complained of the Chairman stopping discussion as to
closure, it should be contended that the Chairman, supported by the majority,
could not put a termination to the speeches of those who were desirous of
addressing the meeting. The meeting should allow a small minority or even a
member or two to tyranise over the majority.
Chairman's casting vote (Regulation 54)
A standard clause is added
in almost all articles to the effect that the Chairman of the meeting shall
have a casting vote and in case of equality of votes, both on a show of hands
and on a poll, he will be entitled to casting vote in addition to the vote to
which he may be entitled as a member. The clear emphasis is the Chairman's
reserve power to take things to a conclusion and this casting vote is exercisable
in appropriate cases by him even if he is not a member of the company. If the
articles do not have any provision with regard to the casting vote of a
Chairman. he cannot exercise a casting vote.
It may be observed that the
casting vote is a special entitlement of a Chairman of a meeting and such vote
can be used only in such cases where there is an equality of valid votes either
on a show of hands or on a poll. This special right, however, should be used
sparingly if the Chairman's reputation for impartiality is to be preserved. A
motion may be lost if he declines to exercise his casting vote in favour. The
Chairman may give a contingent or hypothetical casting vote to come into force
if it should subsequently appear that there is an equality of valid votes. Bland v. Buchanan, (1920) 2 K13 75.
Paragraph 6.4 of Secretarial Standard-2
[ICSI] provides that if the articles of association so provide, the chairman
shall have a casting vote.
Declaration of results of voting (S. 178)
Section 178 of the Act
confers a statutory power to declare that a resolution has been carried or lost
and unless a poll is demanded, if it is to be deemed conclusive evidence of the
fact in the case of any resolution, either ordinary or special. The question as
to how many votes were in fact given cannot afterwards be discussed. Arnot v. United African Lands Co.,
(1901) 1 Ch 518 : 17 TLR 245. But a
declaration which is erroneous on the face of it in point of law is not
conclusive. In re : Caratal New Mines, (1902)
2 Ch 498 (1900) 3 All ER (Rep) Ext
1259.
Results by voting by poll is
declared by the Chairman by mentioning so many votes in favour and so many
votes against and calling the resolution as carried or not carried.
Resolution
passed at an adjourned meeting
Where a resolution is passed at an adjourned meeting
of
(a) a company; or
(b) the holder of any class
of shares in a company; or
(c) the Board of Directors
of a company,
the resolution shall, for
all purposes, be treated as having been passed on the date on which it was in
fact passed and shall not be deemed to have been passed at any earlier date.
Resolution passed at an adjourned meeting is not to be taken as passed on the
date of the original meeting. This, in substance, contradicts the accepted
dictum that an adjourned meeting is a continuation of the original meeting and
that at an adjourned meeting only such business that has been left incomplete
at the original meeting, can be dealt with unless new notice is properly given
as required by sections 171, 172 and 173 of the Act.
But at the same time any
resolution passed at an adjourned meeting cannot be given retrospective effect
from the date of the original meeting but has to be given effect from the date
of its passing.
ANNEXURE-1
Proxy Form
SCHEDULE - IX
(See Article 62 of the Table
'A' and also Section 176(6))
FORM OF PROXY
I
General Form
.................. Name of Company
I/We of in this district of being a member/members of the above-named company, hereby appoint .................................................. of in the district of or failing him ... ..................... of in the district of as my/our proxy to vote for me/us on my/our behalf at the annual general meeting/general meeting (not being an annual general meeting) of the company to be held on the day of and at any adjournment thereof.
Signed this day
of
Form for affording members an opportunity of voting for or against a
resolution
................. Name of Company
I/We of in the district of being a member/members of the above-named company, hereby appoint ......................... of in the district of as my/our proxy to vote for me/us on my/our behalf at the annual general meeting/general meeting (not being an annual general meeting) of the company, to be held on the day of 20 and at any adjournment thereof.
Signed this day
of 2002
This form is to be used in
favour of/against the resolution. Unless otherwise instructed the proxy will
act as he thinks fit.
Form
of Proxy given in Annexure A to Secretarial Standard-2 [ICSI]
ANNEXUREA
FORM OF PROXY
Name of the Company
.............................................................................
Registered Office.... .
. .
I/We of being a member of
the above-named company, hereby appoint the following as my/our Proxy to
attend and vote [on a poll] for
me/us and on my/our behalf at the Annual
General Meeting/General Meeting of the Company, to be hold on at a.m./p.m.
and at any adjournment thereof:
1.
Mr./Mr
(Signature),
or failing him
2.
Mr./Mr
. (Signature),
or failing him
3. Mr./Mr
. (Signature), or failing him
I/We direct my/our Proxy to
vote on the Resolutions in the manner as indicated below:
|
Resolutions |
For |
Against |
|
Resolution
No. I |
|
|
|
(To
specify) |
|
|
|
Resolution
No. 2 |
|
|
|
(To
specify) |
|
|
|
Resolution
No. 3 |
|
|
|
(To
specify) |
|
|
|
Resolution
No. 4 |
|
|
|
(To
specify) |
|
|
Number of Shares held Signature
of Proxy
Affix 30 Paise
Revenue
Stamp
Signed this day
of 2003 ...............................
Reference Folio No/DP ID & Client ID Signature
of Member
Delete if the Articles give a proxy-holder the
right to vote even on a show of hands.
Notes
1. The Proxy, to the effective should be
deposited at the Registered Office of the Company not less than FORTY-EIGHT
HOURS before the commencement of the Meeting.
2. A Proxy need not be a member of the Company.
3. In the case of joint holders, the vote
of the senior who tenders a vote, whether in person or by proxy, shall be accepted
to the exclusion of the vote of the other joint holders. Seniority shall be
determined by the order in which the names stand in the Register of Members.
4. This form of Proxy confers authority to demand or joint in
demanding a poll.
5. The submission by a member of this form
of proxy will not preclude such member from attending in person and voting at
the Meeting.
6. This is optional. Please put a tick
mark (P) in the appropriate column
against the Resolutions indicated in the Box. If a member leaves the 'For' or
'Against' column blank against any or all the Resolutions, the proxy will be
entitled to vote in the manner he/she thinks appropriate. If a member wishes to
abstain from voting on a particular Resolution, he/she should write
"Abstain" across the boxes against the Resolution.
7. In case a member wishes his/her votes
to be used differently, he/she should indicate the number of shares under the
columns 'For' or 'Against' as appropriate.
ANNEXURE - 2
Form of an attendance slip
RUSHABH
MANAGEMENT & INFOSYS.
Regd. Office:
301, Pitru Ashirwad,
Opp. CNS Bank
Anand 388 001
Attendance slip
Please complete this attendance slip and hand it over at the entrance
of the venue of the meeting
I hereby record my presence at the Annual General Meeting held on the 2002 at the compound of the ............. at Anand 388 001.
Name of the shareholder .........................
(in block letters)
Signature of the shareholder/proxy
..........................
Reference Folio .........................
ANNEXURE - 3
Form of list of members for
the use at a Statutory Meeting
RUSHABH MANAGEMENT &
INFOSYS
List of members for
submission to the Statutory Meeting
(Pursuant to sub-section
(6) of section 165 of the Companies Act, 1956)
Names of the Address Occupation Number of Distinctive
members shares
held by number of
each member shares
ANNEXURE 4
Form of distribution schedule
DISTRIBUTION SCHEDULE
(To be made out for each class of security)
.
(Name of the Company)
Distribution of
.. as on
. 2002
(kind of security)
Total nominal value Rs .
.........................................
Nominal value of each share/unit Rs
......................
Total number of shares
...........................................
Paid-up per share Rs
...............................................
TABLE 1
Number of share Share (or
debenture) holding of Number
of shares or de
holders (or deben- nominal value of bentures
amount in Rs.
ture-holders)
Up to 10,000
10,001-20,000
20,001-30,000
30,001-40,000
40,001-50,000
50,001-1,00,000
1, 00, 001 and above
TOTAL
TABLE II
Name of the highest holders Number
of shares (or debentures)
amount in Rs.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
TOTAL
TABLE III
|
Names of the Directors, Managing Director and Manager |
Official relation ship to the company |
Number of shares (debentures) amount in Rs. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certified correct
.................................................................
(Signature of Managing
Director)
Dated, the 2002
Note :
Separate forms should be completed for each class of securities, i.e., debentures, preference shares,
equity shares, etc. Similarly,
separate forms should be completed for shares of the same class which are not identical
in all respects. Shares are identical in all respects only if
(i) they are of the same
nominal value and the same amount per share has been called up;
(ii) they are entitled to dividend at the same rate
and for the same period so that at the next ensuing distribution of the
dividend payable on each share will amount to exactly the same sum net and
gross; and
(iii) they carry the same
rights in all other respects.
ANNEXURE - 5
Form of poll card
POLL CARD
RUSHABH MANAGEMENT &
INFOSYS
ANNUAL GENERAL MEETING HELD
ON:
Votes cast on Resolution No.
(SEVEN)
FOR AGAINST
Name: Name:
Signature: Signature:
Membership No. Membership
No.
Remarks : Scrutineer(s)
If the meeting is an Extraordinary General Meeting
score off the word 'Annual'.
ANNEXURE - 6
Form of report by the
scrutineers
REPORT BY THE SCRUTINEERS
On the results of the poll
taken as
on 2002 Resolution No
The Chairman,
RUSHABH MANAGEMENT &
INFOSYS
We, ABC and BCD, having been
appointed by you as the Scrutineers to arrange poll on proposed Resolutions
Nos. 3 and 5, forming part of the
notice dated
.the
.2002 vof the
Annual General Meeting of the company held on ......................... 2002 have scrutinised the poll papers. We have
verified the signatures thereon with the specimen maintained by the company.
We have also examined the proxies. We have found all the ballot papers in
order. The results on poll on the above proposed resolutions which are as
under:
Proposed Resolutions Votes in favour Votes against
No. 3 3,52,720 36,500
No. 5 2,17,390 1,71,830
Place: Anand Sd/ABC Sd/-BCD
Date: 2002 Scrutineer Scrutineer