Supreme Court Sets Aside HC Ruling In Birla Corp AGM Vote Dispute; Says Majority Trustees Can Authorise Voting

The Supreme Court on Tuesday set aside a Calcutta High Court ruling that had held that once an e-vote is cast in the Annual General Meeting (AGM) of Birla Corporation Ltd., it could not subsequently be invalidated through later communications. The High Court had also held that the first vote cast on behalf of the societies must prevail.

A Bench of Justices Vikram Nath and Sandeep Mehta held that the Division Bench erred in concluding that trustees could bind the societies only if all trustees acted in consonance. It also held that the absence of even one trustee would not invalidate the decision.

“The Civil Appeals arising out of SLP (C) Nos. 1185 of 2023, 1187 of 2023 and 22799 of 2022, preferred by Ms. Anamika Lodha, are allowed to the limited extent with respect to her challenge to the direction in the impugned judgment that the vote cast first would prevail must also succeed for the reasons recorded while dealing with the third issue. However, insofar as the impugned judgment was supported by her on the basis that the trustees could bind the societies only if they acted in consonance or that the matter of voting authority could be approached without due regard to the governing structure of the societies, the same cannot be sustained for the reasons already recorded.", the Court said. 

The Supreme Court held that the Calcutta High Court erred in concluding that trustees could bind the societies only if all trustees acted together.

“It is held that, in the case of the present societies, a decision or delegation evidenced in writing under the hands of the majority of the trustees, in terms of Clause 24 of the by-laws, is capable in law of constituting a valid decision or authorization on behalf of the society. The contrary view taken in the impugned judgment, namely, that the trustees could bind the society only if they acted in consonance and that absence of joinder by even one trustee would defeat the decision, is unsustainable and stands set aside."

It also set aside the Division Bench's direction that the first vote cast on behalf of the societies would automatically prevail.

“It is further held that the direction in the impugned judgment that the vote cast first by the plaintiff society, irrespective of whether it was cast through the Managing Committee or through the Board of Trustees, shall be taken into consideration, is unsustainable in law and is set aside. The validity of a vote cast on behalf of a society cannot be determined merely by priority in point of time and must rest upon lawful authority traceable to the governing documents of the society and the statutory framework governing voting."

Background

The dispute arose from voting rights in the Annual General Meeting (AGM) of Birla Corporation Ltd. scheduled for September 27, 2022. Eastern India Educational Institution, Hindustan Medical Institution, and Belle Vue Clinic approached the Calcutta High Court alleging that votes cast by them in the AGM could again be invalidated through later communications.

They said their by-laws provided that the Board of Trustees could authorise voting. A Single Judge bench by order dated September 16, 2022, declined to grant the relief sought by the societies, following which appeals were filed before the Division Bench.

On appeal, the Division Bench held that once an e-vote is cast, it cannot subsequently be invalidated through later communications from rival factions.

The Court directed that the first vote cast by the appellant societies must be counted by the scrutinizer, while clarifying that disputes regarding the validity of votes could be raised separately before a competent court.