Whether remote e-voting is permissible in a court convened meeting under section 391 of the Companies Act, 1956 ?Online GST Certification Course by TaxGuru & MSME- Click here to Join
Provisions of Chapter XV of the Companies Act, 2013 (‘the Act’) have not yet been put into operation. As a result of which the powers of companies to compromise or make arrangements with creditors and members are still being governed by the provisions of sections 391 to 394 of the Companies Act, 1956 (‘1956 Act’).
Under the provisions of sections 391 to 394 of the 1956 Act, a compromise or arrangement by a company with its members or a class of its members, creditors or a class of its creditors will become operative only if the scheme or compromise is confirmed by the High Court having jurisdiction over the place where the registered office of the company is situate. Before the confirmation is accorded invariably a meeting of the shareholders of the company is convened on the orders of the High Court and a resolution is put to vote to ascertain as to whether the same has been assented to by the requisite majority as stipulated in section 391 of the 1956 Act. In this regard a question would arise as to whether the sense of the meeting convened on the orders of the High Court on the resolution could be ascertained, inter alia, by remote e-voting?
The proceedings before the High Court for confirmation of the scheme and the procedure for conduct of such meetings are governed by the Companies (Court) Rules, 1959 (‘the Rules’) framed by the Supreme Court in consultation with various High Courts. Rule 77 of the Rules provides that the decisions of the meeting or meetings held in pursuance of the order made under rule 69 of the Rules on all resolutions shall be ascertained only by poll. Rule 69 provide for the matters to be dealt with on the order of the High Court in the Judge’s summons moved in connection with the confirmation of the compromise or arrangement. The use of the word ‘only’ denotes the mandatory requirement of conduct of poll at such meetings.
In the light of the mandatory requirement of poll for ascertaining the sense of the meeting, it would be apparent that ascertaining the sense of the members through remote e-voting pursuant to the provisions of section 108 of the Act read with rule 20 of the Companies (Management and Administration) Rules, 2014 (‘Management Rules’) would be ultra vires rule 77 of the Rules.
It should be borne in mind that the meeting is convened on the orders of the court and not by the company and the resolution to be passed thereat is not the resolution of the company even though it is at its instance. The resolution is put to the meeting to ascertain on the orders of the court as to whether the same has received the acceptance of the requisite majority of shareholders present and voting at the meeting as stipulated in section 391 of the Act. It is a tool to the court in the process of according confirmation to the scheme or not. Also the persons participating in the voting process should be present at the meeting which is a condition precedent. Such a condition precedent cannot be complied with in a remote e-voting. Chapter XV of the Act has identical provisions in this regard and, therefore, unless the Act is amended, the remote e-voting cannot be a source for ascertaining the sense of the shareholders contemplated in section 391 of the Act.