The main legal point established in the judgment is that shareholder participation at an actual meeting is vital to shareholders' rights and cannot be replaced by postal ballot and electronic voting.

G.S. Patel, J.

1. Following the recent extensive amendments to the Companies Act, 1956 and bringing into force of various sections of the Companies Act, 2013, a question has been raised in this Company Summons for Direction, viz., whether in view of the provisions of Section 110 of the Companies Act, 2013 (“the 2013 Act”) and SEBI Circular dated 21st May 2013, a resolution for approval of a Scheme of Amalgamation can be passed by a majority of the equity shareholders casting their votes by postal ballot, which includes voting by electronic means, in complete substitution of an actual meeting. In other words, whether the 2013 Act, read with various circulars and notifications, has the effect of altogether eliminating the need for an actual meeting being convened.

2. In the facts peculiar to the present case, an actual meeting may not be necessary. 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 intent in providing for postal ballots and electronic voting is not only unexceptionable but entirely salutary: it is clearly directed toward greater inclusiveness and encouraging more shareholders to vote. It would seem, although this is anecdotal and there is no empirical data before me, that in many meetings, where postal ballot or electronic voting have not been provided, the attendance of members of shareholders and members attending is very low. Sometimes, this is because a shareholder has to travel a great distance to attend the meeting or because these meetings are held at inconvenient location. Shareholders are often dispersed throughout the country and find it difficult to attend such meetings in person.

5. At this stage, I must note that in Section 2(65) of the 2013 Act, “postal ballot” is defined to mean “voting by post or through any electronic mode”. Therefore, every reference in this judgment to postal ballot includes, where necessary a reference to electronic voting.

6. Section 110 of the 2013 Act reads thus:

Postal ballot.

110. (1) Notwithstanding anything contained in this Act, a company —

(a) shall, in respect of such items of business as the Central Government may, by notification, declare to be transacted only by means of postal ballot; and

(b) may, in respect of any item of business, other than ordinary business and any business in respect of which directors or auditors have a right to be heard at any meeting, transact by means of postal ballot, in such manner as may be prescribed, instead of transacting such business at a general meeting.

(2) If a resolution is assented to by the 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.”

7. This is said to be in substitution of Section 192A of the 1956 Act, which was introduced by the 2001 amendment and reads thus:

Passing of resolution by post