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TMI Blog2014 (5) TMI 825X X X X Extracts X X X X X X X X Extracts X X X X ..... sary. Yet, this order is necessitated because the application as original made in this Company Scheme for Directions sought precisely such a dispensation. This is an issue that is likely to recur in several matters; hence this order. 3. I have heard Mr. Mehta, learned senior counsel for the petitioners. Mr. Gaurav Joshi, learned senior counsel also assisted the Court as amicus. Mr. Mehta's submission is that the clear legislative mandate of the 2013 Act is to do away altogether with all meetings other than those required in certain limited circumstances. Shareholders must express their views only by voting through postal ballot or electronic voting (electronic voting being included in the new definition of "postal ballot"). It seems to me, on a closer reading of several provisions of the 2013 Act, as also the Companies Act, 1956 ("the 1956 Act") and, too, various Rules to which I will presently refer, that this is altogether too extreme a proposition especially if it is sought to be applied to all meetings other than those limited ones where the statute requires a meeting to be held. 4. Before I discuss these provisions, I must note that in principle the apparent legislative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e business in general meeting of the company. (2) Where a company decides to pass any resolution by resorting to postal ballot, it shall send a notice to all the shareholders, along with a draft resolution explaining the reasons therefor, and requesting them to send their assent or dissent in writing on a postal ballot within a period of thirty days from the date of posting of the letter. (3) The notice shall be sent by registered post acknowledgement due, or by any other method as may be prescribed by the Central Government in this behalf, and shall include with the notice, a postage pre-paid envelope for facilitating the communication of the assent or dissent of the shareholder to the resolution within the said period. (4) If a resolution is assented to by a requisite majority of the shareholders by means of postal ballot, it shall be deemed to have been duly passed at a general meeting convened in that behalf. (5) If a shareholder sends under sub-section (2) his assent or dissent in writing on a postal ballot and thereafter any person fraudulently defaces or destroys the ballot paper or declaration of identity of the shareholder, such person shall be punishable with imprison ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transact such business in such manner as may be prescribed instead of transacting it at a general meeting. Sub-section (2) of Section 110 contains a deeming fiction which says that if a requisite majority of shareholders has assented to a resolution by postal ballot, it is deemed to have been duly passed at a general meeting convened for that purpose. 10. It is on this basis that Mr. Mehta founds his submission. He also refers to a SEBI circular dated 17th April 2014 relating to Clauses 35B and 49 of the Equity Listing Agreement to say that SEBI has now made voting by postal ballot mandatory. There is some dispute as to whether this circular is yet in effect, for a clarification from the National Stock Exchange of India Limited indicates that the amendments in SEBI circular are deferred till 1st October 2014. In any case, Clause 49(I)(A) of the SEBI circular speaks of the rights of the shareholders. These include the right to "participate in and to be sufficiently informed on decisions concerning fundamental corporate changes"; "the opportunity to participate effectively and vote in general shareholder meetings"; "the opportunity to ask questions to the board, to place items on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of this submission seems to have a uniform glassy façade: it suggests that the information sent to shareholders is fixed, unalterable and immutable. That is seldom so. Agenda items and proposals are frequently amended with suggestions from the floor or even by the Board at the meeting. Often, Schemes of Arrangement or Compromise are amended at a meeting itself; again, these amendments come from the floor or even perhaps from the Board itself. That amendment is then put to vote. In a postal ballot no such amendment is possible. If we were to restrict ourselves to a postal ballot, no shareholder or any director could ever suggest any amendment. The scheme would stand or fall only in its original form. This is contrary to the mandate of Sections 391 and 394 of the 1956 Act. This corresponds to Section 230 and 232 of the 2013 Act, yet to be brought into force. Even so Section 230, as currently framed, still speaks of "the calling of a meeting" and "not merely putting the matter to vote". It has to be remembered that all schemes that are put to the meeting of the shareholders are proposed schemes. This is necessarily means that they are subject not only to approval by voting b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the provision for a postal ballot is an additional facility to be provided, so that there is greater inclusiveness and that a shareholder or member then has an option of voting either by a postal ballot or electronic voting or in person. This would meet the requirements of Section 103 which provide for a quoram of persons personally present. Casting a vote by postal ballot or by electronic voting cannot possibly constitute personal presence, at least not without significant violence to the language. Mr. Mehta's response is, again, that the non-obstante clause eliminates all need for any quorum. Section 110 plainly speaks of transacting certain items of business by postal ballot "instead of transacting such business at a general meeting". Therefore, Mr. Mehta says, this Section does away with a general meeting altogether. There are rules in place regarding postal ballot since there was a provision under Section 192A of the 1956 Act. These Rules, the Companies (Passing of Resolution by Postal Ballot) Rules, 2001 provide for the manner in which a postal ballot is to be conducted. I am also informed that e-voting is provided on the electronic platform of the National Securit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requirements for a quorum coram and Section 110; it is doubtful whether Section 110 or any SEBI circular mandating exclusive voting by postal ballot can apply to a court-convened meeting - I do not think it is possible at this stage to grant a kind of order that Mr. Mehta's application, as originally cast, seeks. That would, in my view, simply be unsafe. It would erode to a very large extent the shareholders right to know, their right to be informed, and their right to take an informed decisions. A shareholder cannot be restricted to this level where all he can do is say aye or nay but not seek any clarifications, express any doubts or reservations, or raise any questions. 19. There is one other matter that needs discussion. Mr. Mehta's understanding of electronic voting was that it would be limited to people using the Internet to vote on the agenda business from remote locations. I disagree. There is nothing to so indicate. Rule 26 of the proposed Management & Administration Rules requires this facility of electronic voting to be made available to every listed company and a company having at least 1000 shareholders. Electronic voting is a method by which the votes cast b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use in other jurisdictions for several years, where similar concerns have been expressed. There is material to suggest that a very early entirely electronic meeting held in Delaware saw less than satisfactory shareholder participation. The question of not holding a meeting at all never arose. The importance of debate and deliberation is far too high, some have said, for it to be foregone altogether. Comments from Australia, also by Dr. Boros, are to the effect that even in a fully electronic meeting, there must be a "reasonable opportunity to participate" at the meeting. Voting is part of this opportunity, indicating that "participation" connotes something more than merely voting. If participation is not possible, then the electronic voting should not be used. These are the express words of the Explanatory Memorandum to the Company Law Review Bill, para 10.43. 23. A final word about the manner in which these rules and sections are purportedly being brought into force. The website of the Ministry of Corporate Affairs has, on its front page, a link to a single scanned PDF file entitled "COMPANIES ACT 2013 - STATEMENT OF NOTIFICATION OF RULES". Some 21 rules are listed. They are all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... most vital of shareholders' rights, it is strongly recommended that till this issue is fully heard and decided, no authority or any company should insist upon such a postal-ballot-only meeting to the exclusion of an actual meeting. Since this is evidently a matter of some importance, the Company Registrar is directed to make a submission and obtain necessary directions on the administrative side to have the matter placed before an appropriate Bench. At such a hearing, further safeguards can also be evolved. For instance, it is entirely possible to have a Company Scheme Petition, one that follows an order on and compliance with a Company Summons for Direction, uploaded to the case status system of this Court. All such Company Scheme Petitions must have appended to them the report of the Chairman of the court-convened meeting and the scrutineers' report. Making the petition available in its full form on a free and publicly accessible website such as the High Court, in addition to reports now being uploaded to the websites of the company and the stock exchanges would go a long way to ensuring the necessary information spread. The Ministry of Corporate Affairs must also immedi ..... 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