Companies Act | Supreme Court Rejects 'Vote-Cast-First' Rule For Societies In AGMs; Only Person Lawfully Authorised Can Vote: Supreme Court

The Supreme Court has observed that when there exists a dispute between the rival societies over the exercise of the voting rights at the Company's Annual General Meeting, where they hold shares, then the voting rights must be exercised by persons lawfully authorised under the society's governing documents and in accordance with the statutory framework governing corporate voting. “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.”, the Court held. A bench of Justice Vikram Nath and Justice Sandeep Mehta set aside the Calcutta High Court's Division Bench judgment, which adopted the vote-cast-first methodology, despite there being a dispute between the societies over the exercise of the voting rights in the Shareholding Company's AGM. The dispute arose from competing claims over the authority to exercise voting rights attached to shares held by three societies, Hindustan Medical Institution, Eastern India Educational Institution, and Belle Vue Clinic, in Birla Corporation Limited. Internal disputes within the societies had resulted in rival groups claiming authority to nominate representatives and cast votes at the company's annual general meetings. At the heart of the controversy was the High Court's interim direction that where rival claims existed, the vote cast first in time should be accepted and considered by the scrutiniser. The High Court said that the first vote cast on behalf of a society would prevail irrespective of whether it was cast through the Board of Trustees or the Managing Committee. The Supreme Court found this approach legally unsustainable. Disagreeing with this approach, the judgment authored by Justice Nath observed that the statutory scheme governing electronic voting under the Companies Act, 2013 and the Companies (Management and Administration) Rules, 2014 does not recognise chronology as the basis of validity. Rather, the law requires that a vote must be cast by a person duly authorised to act on behalf of the member. “…rival persons asserted competing authority to vote on behalf of the same society. In such a situation, the Court could not resolve the matter by according primacy to the vote cast first in point of time. To do so was, in effect, to substitute chronology for authority. Such an approach not only travels beyond the statutory framework governing remote e-voting but also disregards the internal hierarchy of authority established under the constitutive documents of the societies, as already discussed while dealing with the second issue.”, the court observed. “For the aforesaid reasons, we are of the view that the direction contained in the impugned judgment that the vote cast first would prevail, irrespective of the source of authority, is unsustainable in law. The statutory framework prevents the same member from changing its vote or voting again once a valid remote e-vote has been cast. It does not authorise the Court to hold that priority in point of time, by itself, determines the validity of a vote cast on behalf of a juristic member.”, the court added. Accordingly, the appeals were allowed. Cause Title: HINDUSTAN MEDICAL INSTITUTION VERSUS BIRLA CORPORATION LIMITED & ORS.Citation : 2026 LiveLaw (SC) 583Click here to download judgmentAppearance: For Petitioner(s) :Dr. Abhishek Manu Singhvi, Sr. Adv. Mr. Nalin Kohli, Sr. Adv. Mr. Avishkar Singhvi, Adv. Mr. Akash Agarwal, Adv. Mr. Ashish Choudhury, Adv. Mr. Abhishek Arora, Adv. Ms. Prachi Grover, Adv. Mr. Anshul Malik, Adv. Mr. Yash Johri, Adv. Ms. Sakshi Raman, Adv. Mr. Ayuushman Aroraa, Adv. Mr. Rohit Amit Sthalekar, AOR Ms. Madhavi Divan, Sr. Adv. Mr. Kunal Vajani, Adv. Mr. Kunal Mimani, AOR Mr. Shubhang Tandon, Adv. Mr. Randeep Dahiya, Adv. For Respondent(s) :Mr. Darius Khambatta, Sr. Adv. Mr. Debanjan Mandal, Adv. Mr. Sanjiv Kumar Trivedi, Adv. Mr. Vikrant Pachnanda, AOR Mr. Sanket Sarangwi, Adv. Ms. Mahima Cholera, Adv. Mr. Nalin Kohli, Sr. Adv. Dr. Abhishek Manu Singhvi, Sr. Adv. Mr. Avishkar Singhvi, Adv. Mr. Akash Agarwal, Adv. Mr. Ashish Choudhury, Adv. Mr. Abhishek Arora, Adv. Ms. Prachi Grover, Adv. Mr. Yash Johri, Adv. Ms. Sakshi Raman, Adv. Mr. Anshul Malik, Adv. Mr. Rohit Amit Sthalekar, AOR Mr. Ayuushman Aroraa, Adv. Mr. Gopal Shankar Narayanan, Sr. Adv. Mrs. Vanita Bhargava, Adv. Mr. Ajay Bhargava, Adv. Ms. Phalguni Nigam, Adv. M/S. Khaitan & Co., AOR Mr. Arvind Nayar, Sr. Adv. Ms. Rohini Musa, AOR Mr. Rajat Gupta, Adv. Mr. Akshay Joshi, Adv. Ms. Sanjukta Kaushik, Adv. Mr. Shyam Divan, Sr. Adv. Mr. Ankur Chawla, Adv. Mr. Aditya Samaddar, AOR Mr. R K Mohit Gupta, Adv. Mr. Shaunak Mitra, Adv. Ms. Madhavi Divan, Sr. Adv. Mr. Kunal Vajani, Adv. Mr. Kunal Mimani, AOR Mr. Shubhang Tandon, Adv. Mr. Randeep Dahiya, Adv. Mr. Rohit Amit Sthalekar, AOR Ms. Rohini Musa, AOR M/S. Khaitan & Co., AOR Ms. Pallavi...

Companies Act | Supreme Court Rejects 'Vote-Cast-First' Rule For Societies In AGMs; Only Person Lawfully Authorised Can Vote: Supreme Court

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Companies Act | Supreme Court Rejects 'Vote-Cast-First' Rule For Societies In AGMs; Only Person Lawfully Authorised Can Vote: Supreme Court

Yash Mittal

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