2005 (7) TMI 366 - HC - Companies Law

Summary

Issues Involved:
1. Validity of a power of attorney executed by the first holder for shares held jointly.
2. Whether a power of attorney can be considered a proxy.
3. The ruling of the Chairman regarding the invalidity of votes cast by the power of attorney holder.
4. The scope of judicial review concerning the Chairman's ruling.
5. The impact of the invalidation of votes on the outcome of special resolutions.

Detailed Analysis:

1. Validity of a Power of Attorney Executed by the First Holder for Shares Held Jointly:
The primary issue was whether a power of attorney executed by the first holder in respect of shares held jointly is valid. The Chairman at the 28th Annual General Meeting ruled that such a power of attorney was invalid because it was executed only by the first holder and not by all joint shareholders. The learned Company Judge reversed this ruling, holding that the power of attorney executed by the first holder is valid. Article 101 of the Articles of Association was pivotal, stating that the first holder is empowered to vote in respect of shares held jointly, thus allowing the first holder to confer that power to a specified person through a power of attorney.

2. Whether a Power of Attorney Can Be Considered a Proxy:
The learned Company Judge held that a power of attorney could be considered a proxy, as neither the Companies Act nor the Articles of Association required a proxy to be executed in any prescribed form. Article 109 of the Articles of Association indicated that the instrument of proxy should be as near as practicable to the form set out in Schedule IX of the Act. The power of attorney executed by the first holder contained all necessary particulars, thus qualifying as a proxy.

3. The Ruling of the Chairman Regarding the Invalidity of Votes Cast by the Power of Attorney Holder:
The Chairman invalidated the votes cast by the power of attorney holder on two grounds: the power of attorney was executed only by the first holder, and the votes cast exceeded the number of shares authorized. The learned Company Judge found this ruling erroneous. Even if the votes were in excess, only the excess votes should have been invalidated, not all votes.

4. The Scope of Judicial Review Concerning the Chairman's Ruling:
The appellants argued that the scope of judicial review of the Chairman's ruling is limited and should be overturned only if fraud or mala fides were established. The learned Company Judge, however, found that the ruling was legally erroneous and did not require allegations of fraud or mala fides to be overturned.

5. The Impact of the Invalidation of Votes on the Outcome of Special Resolutions:
The invalidation of 4301 votes cast by the power of attorney holder led to the passing of special resolutions Nos. 6, 7, and 8 by a margin of 86 votes. The learned Company Judge held that even if the votes cast in respect of shares held jointly were invalid, the 960 votes cast for shares held individually by the first holder should be valid. Consequently, the special resolutions would be defeated if these 960 votes were considered.

Conclusion:
The High Court upheld the learned Company Judge's decision, affirming that:
- The power of attorney executed by the first holder for shares held jointly is valid.
- A power of attorney can be considered a proxy if it meets the requirements of Schedule IX of the Companies Act.
- The Chairman's ruling was erroneous, and the votes cast by the power of attorney holder should be considered valid to the extent of the shares mentioned in the power of attorney.
- The special resolutions Nos. 6, 7, and 8 were wrongly declared passed and should be reconsidered in a special general meeting.

The appeal was dismissed, and the judgment of the learned Company Judge was upheld.