Voting, Poll and Postal Ballot
Chapter Thirty-Two
Syllabus topic 2, "ORGANISATION AND MANAGEMENT"
Pages 168 to 173 of 998
In one line
A resolution is decided by a show of hands unless a poll is demanded or the voting is electronic, and the difference matters because a show of hands counts people while a poll counts shares, so the minority in capital may win on hands and lose on a poll.
In exam wording: under section 107(1) a resolution put to the vote at a general meeting is decided on a show of hands unless a poll is demanded under section 109 or the voting is carried out electronically; under section 109(1) a poll may be ordered by the Chairman on his own motion and shall be ordered on a demand by members having not less than one-tenth of the total voting power or holding shares on which an aggregate of not less than five lakh rupees or such higher prescribed amount has been paid up.
Why the law has this at all
The two counting methods embody two different ideas of what a company is, and the Act keeps both because each is right for a different purpose.
A show of hands is quick and democratic in a personal sense. Every member present has one hand, regardless of holding. It suits routine business where nobody's economic stake is really in issue, and it lets a meeting move.
A poll counts votes attached to shares. It reflects the proprietary reality: a member who has risked ten thousand rupees should not be outvoted by ten members who have risked ten rupees each. It is slower and needs scrutiny, so it is not the default.
The tension between the two is the whole design. If the show of hands were final, the majority in capital could be defeated by a majority in bodies; if the poll were the only method, every routine item would need a count. So the Act makes the show of hands the default and gives a substantial minority the right to convert it into a poll. That right is the safeguard, and s.109's thresholds are its measure.
Electronic voting and the postal ballot answer a third problem, dispersion, and reflect a recognition that for a listed company with lakhs of members, physical presence is the exception.
Section 106: who may be stopped from voting
106(1) allows the articles to provide that no member shall exercise any voting right in respect of shares registered in his name on which calls or other sums presently payable by him have not been paid, or in regard to which the company has exercised any right of lien.
106(2) is the protection: a company shall not, except on the grounds specified in sub-section (1), prohibit any member from exercising his voting right on any other ground. So the two grounds are exhaustive, and an article disenfranchising a member for any other reason is bad.
Voting, Poll and Postal Ballot
106(3) provides that on a poll, a member entitled to more than one vote, or his proxy, need not, if he votes, use all his votes or cast them all in the same way. This is what makes split voting possible, and it matters for institutional and nominee holders voting for different beneficial owners.
Sections 107 and 108: hands and electrons
107(1) makes the show of hands the default, displaced by a poll under s.109 or by electronic voting.
107(2) gives the Chairman's declaration its evidential force: a declaration by the Chairman of the passing of a resolution or otherwise by show of hands, and an entry to that effect in the minutes, is conclusive evidence of the fact of passing the resolution or otherwise.
Note how strong that is, and note its limits. It is conclusive of the fact of passing, so a member cannot afterwards call for a recount of hands. It says nothing about whether the resolution was validly proposed, whether the notice was good, or whether the meeting was properly constituted, and those remain open to challenge.
108 is a bare enabling provision: the Central Government may prescribe the class or classes of companies and the manner in which a member may exercise his right to vote by electronic means. Everything operative about e-voting, which companies must offer it, the notice period, the cut-off date, the scrutiniser, is therefore in the Rules, and an answer should say so rather than invent statutory detail.
Section 109: the poll
109(1): who may demand. Before or on the declaration of the result of a vote on a show of hands, a poll may be ordered by the Chairman on his own motion, and shall be ordered on a demand by:
- in a company having share capital, members present in person or by proxy where allowed, having not less than one-tenth of the total voting power, or holding shares on which an aggregate sum of not less than five lakh rupees, or such higher prescribed amount, has been paid up; and
- in any other company, by any member or members present in person or by proxy where allowed, having not less than one-tenth of the total voting power.
109(2): withdrawal. The demand for a poll may be withdrawn at any time by the person or persons who made it.
109(3) and 109(4): timing. A poll demanded for the adjournment of the meeting or the appointment of the Chairman shall be taken forthwith; a poll demanded on any other question shall be taken at such time, not later than forty-eight hours from the time the demand was made, as the Chairman may direct.
Voting, Poll and Postal Ballot
109(5) to 109(7): conduct and effect. Where a poll is to be taken, the Chairman shall appoint such number of persons as he deems necessary to scrutinise the poll process and the votes given, and to report to him in the prescribed manner, s.109(5); the Chairman has power to regulate the manner in which the poll shall be taken, s.109(6); and the result of the poll is deemed to be the decision of the meeting on the resolution on which it was taken, s.109(7).
The last words matter: once a poll is taken, the show of hands is superseded entirely, whatever the Chairman had declared. That is the mechanism by which a minority in bodies but a majority in capital wins.
Section 110: the postal ballot
110(1) provides, notwithstanding anything in the Act, that a company shall, in respect of such items of business as the Central Government may by notification declare to be transacted only by postal ballot, and may, in respect of any item other than ordinary business and any business in respect of which directors or auditors have a right to be heard at a meeting, transact that business by postal ballot in the prescribed manner instead of at a general meeting. A proviso permits an item required to be transacted by postal ballot to be transacted at a general meeting by a company required to provide electronic voting under s.108.
110(2) provides that where a resolution is assented to by the requisite majority of shareholders by means of a postal ballot, it shall be deemed to have been duly passed at a general meeting convened in that behalf.
Two exclusions are worth stating precisely because they are the section's logic. Ordinary business is excluded, so the accounts, dividend, retiring directors and auditors must still be dealt with at a meeting, which is what keeps the annual general meeting from being hollowed out. And business on which directors or auditors have a right to be heard is excluded, because a ballot has no hearing: an auditor being removed, or a director resisting removal, must be able to speak, and that right cannot survive being reduced to a postal form.
A worked example
Konkan Marine Limited holds a general meeting with 300 members present. The company's issued capital is one crore rupees. A resolution to approve a related-party contract is put to the vote. On a show of hands, 180 hands are against, 120 for, and the Chairman declares it lost. The 120 include institutional holders whose combined paid-up holding is sixty-five lakh rupees.
Voting, Poll and Postal Ballot
The demand. Before or on the declaration of the result, members with one-tenth of the total voting power, or shares on which at least five lakh rupees is paid up, may demand a poll, and the Chairman shall order one. The institutional holders satisfy both limbs comfortably, so the poll is not discretionary.
When it is taken. Because this is not a question of adjournment or the election of the Chairman, the poll is taken within forty-eight hours of the demand, not necessarily at once. The Chairman appoints scrutinisers and regulates the manner of taking it.
The outcome. On the poll, the votes attached to sixty-five lakh rupees of paid-up capital defeat those attached to thirty-five lakh, and the result of the poll is deemed to be the decision of the meeting. The Chairman's earlier declaration on the show of hands, though it would have been conclusive under s.107(2) had no poll been taken, is superseded.
A member who cannot vote at all. Suppose one member has unpaid calls of two lakh rupees. If the articles so provide, s.106(1) lets the company deny him the vote on those shares. If the articles say nothing, it cannot: s.106(2) confines disenfranchisement to the two stated grounds.
A member splitting votes. A bank holding shares for three different clients votes half in favour and half against. Section 106(3) expressly permits this: a member with more than one vote need not use all of them or cast them all the same way.
And by ballot instead. Suppose the company wishes to pass a special resolution altering its objects without calling a meeting. It may use a postal ballot under s.110(1)(b), that being business other than ordinary business on which no director or auditor has a right to be heard, and the resolution, if assented to by the requisite majority, is deemed duly passed at a general meeting. It could not use a postal ballot to adopt the accounts, that being ordinary business, nor to remove the auditor, who has a right to be heard.
Distinctions
| Show of hands, s.107 | Poll, s.109 | Postal ballot, s.110 | |
|---|---|---|---|
| What is counted | Members present, one each | Votes attached to shares | Votes returned by post or electronically |
| Proxy | Cannot vote | Can vote | Not applicable; the member votes directly |
| Who decides it happens | Default method | Chairman suo motu, or must on a qualifying demand | Notified items compulsorily; other non-ordinary business at the company's option |
| Evidential effect | Chairman's declaration plus minute entry is conclusive of passing | Result deemed the decision of the meeting | Resolution deemed passed at a general meeting |
| Excluded business | Ordinary business, and business where directors or auditors have a right to be heard |
Voting, Poll and Postal Ballot
What it does NOT mean
Not that the Chairman's declaration ends everything. It is conclusive of the fact of passing on a show of hands; it does not cure defective notice, want of quorum or an improperly proposed resolution, and it is displaced if a poll is taken.
Not that a company may disenfranchise a troublesome member. Section 106(2) makes the two grounds in s.106(1) exhaustive.
Not that e-voting details are in s.108. The section is purely enabling; the operative requirements are prescribed by the Central Government.
Quick revision
s.106: articles may deny votes for unpaid calls or sums presently payable, or where the company has exercised a lien, and on no other ground, s.106(2); a member may split his votes, s.106(3). s.107: show of hands is the default; Chairman's declaration plus the minute entry is conclusive of passing. s.108: Central Government prescribes classes and manner of electronic voting. s.109: poll by the Chairman suo motu or on demand by holders of one-tenth of the voting power or shares with five lakh rupees paid up, or, in a company without share capital, one-tenth of the voting power; demand withdrawable, s.109(2); taken forthwith on adjournment or appointment of the Chairman, s.109(3), otherwise at a time not later than forty-eight hours as the Chairman directs, s.109(4); scrutinisers appointed, s.109(5); manner regulated by the Chairman, s.109(6); the result is deemed the decision of the meeting, s.109(7). s.110: compulsory for notified items; optional for business other than ordinary business and business where directors or auditors have a right to be heard; a resolution so assented to is deemed passed at a general meeting.
Test yourself
1. Who may demand a poll in a company having share capital? Members present in person or by proxy having not less than one-tenth of the total voting power, or holding shares on which an aggregate of not less than five lakh rupees, or such higher prescribed sum, has been paid up; the Chairman must then order it.
2. When is a poll taken? Forthwith if demanded for the adjournment of the meeting or the appointment of the Chairman, s.109(3); otherwise at such time, not later than forty-eight hours from the demand, as the Chairman directs, s.109(4).
3. How conclusive is the Chairman's declaration on a show of hands? It is, with the entry in the minutes, conclusive evidence of the fact of passing; it does not validate defective notice or an improperly constituted meeting, and it is superseded if a poll is taken, whose result is deemed the decision of the meeting.
4. Which business may never be transacted by postal ballot? Ordinary business, and any business in respect of which directors or auditors have a right to be heard at a meeting, s.110(1)(b).
Voting, Poll and Postal Ballot
5. On what grounds may a member be denied his vote? Only those in s.106(1), and only if the articles so provide: unpaid calls or other sums presently payable on the shares, or shares over which the company has exercised a lien. Section 106(2) forbids any other ground.
The rest of this subject
These notes are cut from the University's printed syllabus. Open the syllabus itself, or the past papers, for the same subject.