Shareholder Meetings

AAYUSHI SINGH
Sec. 96 - Annual general meeting (AGM)
(1) Every company other than a OPC shall in each year hold in addition to any other meetings, a general meeting as its
AGM and shall specify the meeting as such in the notices calling it, and not more than 15 months shall elapse
between the date of one AGM of a company and that of the next:
 Provided that in case of the first AGM, it shall be held within a period of 9 months from the date of closing of the first
financial year of the company and in any other case, within a period of 6 months, from the date of closing of the
financial year:
 Provided further that if a company holds its first AGM as aforesaid, it shall not be necessary for the company to hold
any AGM in the year of its incorporation:
 Provided also that the Registrar may, for any special reason, extend the time within which any AGM, other than the
first AGM, shall be held, by a period not exceeding 3 months.
 (2) Every AGM shall be called during business hours, that is, between 9 a.m. and 6 p.m. on any day that is not a
National Holiday and shall be held either at the registered office of the company or at some other place within the
city, town or village in which the registered office of the company is situate:
 Provided that the Central Government may exempt any company from the provisions of this sub-section (2) subject to
such conditions as it may impose.

 Explanation—For the purposes of this sub-section, “National Holiday” means and includes a day declared as National Holiday
by the Central Government.
S. 97 – tribunal has the authority to call or direct the calling of AGM, on the application by a member, if any
default is made in holding the AGM.

S. 99 – if any default is made in holding the AGM or in contravention to S. 97, the company and every
officer in default shall be punishable with fine which may extend to Rs. 1,00,000/-, with a further fine
which may extend to Rs. 5,000/- for every day during which the default continues.

Notice of not less than 21 days to the shareholders – S. 101

The basic concept is that the control of the company should be in hands of the shareholders – therefore, once a year the
shareholders should meet to review the performance, decide on dividend and take other important decisions

Some very common decisions made – review profit and loss statements, declare dividends, appoint directors in
place of retiring, change in AoA or MoA, if needed, to review the affairs of the company.

Shree Meenakshi Mills Co. Pvt. Ltd. v. Asst. Registrar of Joint Stock Companies, AIR 1938 Mad 640 – An AGM
was to be held on Dec 30, 1934, which was adjourned to March 31, 1935. The meeting was held on that day and the next
meeting was held on February 28, 1936. The company was prosecuted for not conducting the AGM in 1935 – the court held
that the meeting held in 1935 was of 1934 and an AGM should be held every calendar year.
 Extraordinary General Meeting

 - Purpose of EOGM is to discuss a matter which cannot be postponed till the AGM.
 - normally convened to transact a special business.
 S. 100 - Calling of extraordinary general meeting (EOGM):

 (1) The Board may, whenever it deems fit, call an EOGM of the company.
 (2) The Board shall, at the requisition made by—
 (a) in the case of a company having a share capital, such number of members who hold, on the date of the receipt
of the requisition, not less than one-tenth of such of the paid-up share capital of the company as on that date
carries the right of voting;
 (b) in the case of a company not having a share capital, such number of members who have, on the date of
receipt of the requisition, not less than one-tenth of the total voting power of all the members having on the said
date a right to vote,
 call an extraordinary general meeting of the company.
 Pre-requisites of Meetings

1. Authority to call for meetings – Board or Tribunal on application from members or directors

2. S. 101 – Notice of Meeting:

(1) A general meeting of a company may be called by giving not less than clear 21 days’ notice either in writing
or through electronic mode in such manner as may be prescribed:

Provided that a general meeting may be called after giving a shorter notice if consent is given in writing or by
electronic mode by not less than 95% of the members entitled to vote at such meeting.

(2) Every notice of a meeting shall specify the place, date, day and the hour of the meeting and shall contain a
statement of the business to be transacted at such meeting.

(3) The notice of every meeting of the company shall be given to—
(a) every member of the company, legal representative of any deceased member or the assignee of an insolvent
member;
(b) the auditor or auditors of the company; and
(c) every director of the company.

(4) Any accidental omission to give notice to, or the non-receipt of such notice by any member or other person
who is entitled to such notice for any meeting shall not invalidate the proceedings of the meeting.
A shareholder can challenge the resolution passed if no notice was served on him.

As a general practice now, due to large shareholdings, meetings are conducted at different places, other than
the registered office, and have been held to be valid.

The 21 days period can be further extended by AoA but not shortened.

A fair notice should clearly spell out what the matters are for consideration, so as to allow the shareholder
can make an informed decision of attending or skipping the meeting

S. 102 - Statement to be annexed to notice

A statement setting out material facts to be transacted at a general meeting, shall be annexed to the notice
calling such meeting. The matters discussed in EOGM are called special business and the ones discussed in AGMs
are called general business.
Section 102

 (1) A statement setting out the following material facts concerning each item of
special business to be transacted at a general meeting, shall be annexed to the
notice  calling such meeting, namely:—
 (a) the nature of concern or interest, financial or otherwise, if any, in respect of
each items of—
 (i) every  director and the manager , if any;
 (ii) every other key managerial personnel ; and
 (iii) relatives of the persons mentioned in sub-clauses (i) and (ii);
 (b) any other information and facts that may enable members to understand the
meaning, scope and implications of the items of business and to take decision
thereon.
 Special business

(2) For the purposes of sub-section (1),—

(a) in the case of an annual general meeting, all business to be transacted thereat shall be deemed
special, other than—

(i) the consideration of financial statement  and the reports of the Board of Directors and auditors;
(ii) the declaration of any dividend;
(iii) the appointment of directors in place of those retiring;
(iv) the appointment of, and the fixing of the remuneration of, the auditors; and
(b) in the case of any other meeting, all business shall be deemed to be special:
S. 103 – Quorum for Meetings; (minimum members to be present for the meetings)

(1) Unless the articles of the company provide for a larger number,—
(a) in case of a public company,
(i) 5 members personally present if the number of members as on the date of
meeting is not more than 1,000;
(ii) 15 members personally present if the number of members as on the date of
meeting is more than 1,000 but up to 5,000;
(iii) 30 members personally present if the number of members as on the date of the
meeting exceeds 5,000
(b) in the case of a private company, 2 members personally present.

(2) If the quorum is not present within half-an-hour from the time appointed for
holding a meeting of the company—

(b) the meeting shall stand adjourned to the same day in the next week at the same
time and place, or to such other date and such other time and place as the Board
may determine; or
(c) the meeting, if called by requisitionists under S. 100 (EOGM), shall stand
cancelled:
Provided that in case of an adjourned meeting or of a change of day, time or place of meeting under
clause (a), the company shall give not less than 3 days notice to the members either individually or
by publishing an advertisement in the newspapers (one in English and one in vernacular language)
which is in circulation at the place where the registered office of the company is situated.

(3) If at the adjourned meeting also, a quorum is not present within half-an-hour from the time
appointed for holding meeting, the members present shall be the quorum.

Sharp v. Davies (1876) 2 QBD 26 – A meeting cannot be attended by one member, therefore, the requirement
under 103(3) may not be enough to constitute a meeting, however, there is an exception to this rule. If the
Tribunal has called for a meeting and states that even if one person is present, the meeting is deemed to
constitute or where the entire preference shares are held by one person, then the meeting of preference
shareholders is said to have constituted.
4. Chairperson – Presides over the meetings - Usually Articles state the way of electing one – if not,
then the members can decide and elect one amongst themselves
- he decides, can demand for a poll, can exercise casting vote in case of a tie (if AoA permit),
ensure proceedings of meetings are correctly recorded

5. Ways of Voting – Meetings are conducted for shareholders to vote on resolutions

Ordinary Special

S. 114 - (1) A resolution shall be an ordinary resolution if the notice required under this Act has
been duly given and it is required to be passed by the votes cast, whether on a show of hands, or
electronically or on a poll, as the case may be, in favour of the resolution, including the casting
vote, if any, of the Chairman, by members who, being entitled so to do, vote in person, or where
proxies are allowed, by proxy or by postal ballot, exceed the votes, if any, cast against the
resolution by members, so entitled and voting.

- Simple majority in general meetings

- Articles, Appoint a person as an auditor, declare dividends, voluntary winding up,
inspection of subsidiary books of account, increase in authorized capital
(2) A resolution shall be a special resolution when—
(a) the intention to propose the resolution as a special resolution has been duly specified in the notice calling
the general meeting or other intimation given to the members of the resolution;
(b) the notice required under this Act has been duly given; and
(c) the votes cast in favour of the resolution, whether on a show of hands, or electronically or on a poll, as the
case may be, by members who, being entitled so to do, vote in person or by proxy or by postal ballot, are
required to be not less than three times the number of the votes, if any, cast against the resolution by
members so entitled and voting

- 75% in favour of it
- Alteration of AoA or MoA, reduction of share capital, public to private company, issue of shares

VOTING

by show of hands on a poll electronically postal ballot proxy

 The voting was conducted via postal ballot. Shareholders (A, B, C) having 20% voting
power, voted against the resolution. Derek (holding 30% voting power) and Eritrea voted in
favour of the resolution. Eritrea holds 2% voting power. Felicity (20%) abstained from
voting, and Grace’s (20% VP) vote was cancelled. Discuss whether the resolution will be
passed.

 Against – 20%
 Favour – 32%
 Abstained – 35%
 Cancelled – 20%
Voting rights
 Sec. 47 – Voting Rights

Equity
Preference
(a) every member of a company limited by
shares and holding equity share capital
therein, shall have a right to vote on every (2) Every member of a company limited by shares and
resolution placed before the company; and holding any preference share capital therein shall, in respect
of such capital, have a right to vote only on resolutions placed
before the company which directly affect the rights attached
to his preference shares and, any resolution for the winding up
of the company or for the repayment or reduction of its equity
or preference share capital and his voting right on a poll shall
be in proportion to his share in the paid-up preference share
(b) his voting right on a poll shall capital of the company:
be in proportion to his share in the
paid-up equity share capital of the
company

Provided further that where the dividend in

respect of a class of preference shares has not
been paid for a period of two years or more,
such class of preference shareholders shall
Provided that the proportion of the voting have a right to vote on all the resolutions
rights of equity shareholders to the voting placed before the company.
rights of the preference shareholders shall
be in the same proportion as the paid-up
capital in respect of the equity shares bears
to the paid-up capital in respect of the
preference shares:
 S. 106 -
Restriction
on voting
rights:

On a poll taken at a
meeting of a
… the articles of a company, a
company may provide that A company shall member entitled to
no member shall exercise not, except on the more than one
any voting right in respect grounds specified
of any shares registered in vote, or his proxy,
in sub-section (1), where allowed, or
his name on which any
calls or other sums prohibit any other person
presently payable by him member from entitled to vote for
have not been paid, or in exercising his him, as the case
regard to which the voting right on any may be, need not,
company has exercised any other ground. if he votes, use all
right of lien. his votes or cast in
the same way all
the votes he uses.

Shareholders may at a meeting discuss a
resolution – special or an ordinary – and
recommend any amendments to
resolutions, if required. Once this is done, vote
has to be cast to assess the resolution so
proposed and once passed, the company can
perform what it intended to.
The voting rights attached to any particular shares
depend on the articles of the company and any terms
of issue imposed when the shares were created. The
vast majority of shares are ordinary shares which
the
carry a right to one vote per share. There may,
however, be different classes of shares which may
have no voting rights or restricted rights (e.g. can
only vote in certain circumstances) or may have
additional voting rights (e.g. 10 votes per share) or
enhanced voting rights in particular circumstances.
 S. 107 - Voting by show of hands

(1) At any general meeting, a resolution put to the vote of the meeting shall, unless a poll is demanded
under S. 109 or the voting is carried out electronically, be decided on a show of hands.

(2) A declaration by the Chairman of the meeting of the passing of a resolution or otherwise by show
of hands under sub-section (1) and an entry to that effect in the books containing the minutes of the
meeting of the company shall be conclusive evidence of the fact of passing of such resolution or
otherwise.
Show of hands
 Poll

S. 109 – Demand for Poll

(1) Before or on the declaration of the result of the voting on any resolution on show of hands, a poll
may be ordered to be taken by the Chairman of the meeting on his own motion, and shall be ordered to
be taken by him on a demand made in that behalf,—
(a) in the case a company having a share capital, by the members present in person or by proxy, where
allowed, and having not less than one-tenth (10%) of the total voting power or holding shares on which
an aggregate sum of not less than five lakh rupees or such higher amount as may be prescribed has been
paid-up; and
(b) in the case of any other company, by any member or members present in person or by proxy, where
allowed, and having not less than one-tenth of the total voting power.
(2) The demand for a poll may be withdrawn at any time by the persons who made the demand.
(3) A poll demanded for adjournment of the meeting or appointment of Chairman of the meeting shall
be taken forthwith.
(4) A poll demanded on any question other than adjournment of the meeting or appointment of
Chairman shall be taken at such time, not being later than 48 hours from the time when the demand was
made, as the Chairman of the meeting may direct.
(5) Where a poll is to be taken, the Chairman of the meeting shall appoint such number of persons, as he
deems necessary, to scrutinize the poll process and votes given on the poll and to report thereon to him
in the manner as may be prescribed.
 The Chairman may appoint – scrutinizers, who are independent people and have no
interest in the subject-matter – to overlook the process of Poll, count the votes and give a
report to him, assist the Chairman

Section 108 - Voting through electronic means

The Central Government may prescribe the class or classes of companies and manner in
which a member may exercise his right to vote by the electronic means.

Rule 20 of Companies (Management and Administration) Rules, 2014, issued by the

Ministry of Corporate Affairs – (1) Every listed company on a stock exchange or a company
having not less than 1,000 shareholders (essentially a public company) shall provide to its members
E-voting or electronic means

facility to exercise their right to vote at general meetings by electronic means.

(2) A member may exercise his right to vote at any general meeting by electronic means and
company may pass any resolution by electronic voting system in accordance with the provisions of
this rule.

The NOTICE sent for the meeting shall clearly state that e-voting is applicable, the time,
details with regard to Login ID, password.

- Scrutinizer can be appointed to overlook and conduct the voting a fair manner
 Proxy

S. 105 - Proxy

(1) Any member of a company entitled to attend and vote at a meeting of the company shall be entitled to
appoint another person as a proxy to attend and vote at the meeting on his behalf:
Provided that a proxy shall not have the right to speak at such meeting and shall not be entitled to vote except
on a poll:
Provided further that, unless the AoA of a company otherwise provide, this subsection shall not apply in the
case of a company not having a share capital:
Provided also that the Central Government may prescribe a class or classes of companies whose members shall
not be entitled to appoint another person as a proxy:
Provided also that a person appointed as proxy shall act on behalf of such member or number of members not
exceeding 50 and such number of shares as may be prescribed.
 S. 110 - Postal ballot – (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.

- Listed or not – postal ballot applies

- Vote from home since shareholders are scattered and many do not wish to attend AGMs
- Notice should be sent by courier, registered post along with the resolution asking for an assent or
dissent, giving out the date of expiry to vote, commencement of voting, person to contact for grievances
and all other such details
Postal Ballot

- If voting is done through postal ballot, it is assumed that AGM was validly held, however, this will not
hold true in cases where the financial accounts of the company has to be placed (as it is considered ordinary
business of the company) or where the directors were removed and they have been asked to present their case
– the correct forum for that is an AGM and postal ballot cannot work then.
 Minutes of the Meeting

S. 118 - Minutes of proceedings of general meeting and Board Meetings-

(1) Every company shall cause minutes of the proceedings of every AGM and EoGM of any class of shareholders
or creditors, and every resolution passed by postal ballot and every meeting of its BoD or of every committee
of the Board, to be prepared and signed in such manner as may be prescribed and kept within 30 days of the
conclusion of every such meeting concerned, or passing of resolution by postal ballot in books kept for that
purpose with their pages consecutively numbered.

(2) The minutes of each meeting shall contain a fair and correct summary of the proceedings thereat.

(3) All appointments made at any of the meetings aforesaid shall be included in the minutes …..

…..(5) There shall not be included in the minutes, any matter which, in the opinion of the Chairman of the
meeting,—
(a) is or could reasonably be regarded as defamatory of any person; or
(b) is irrelevant or immaterial to the proceedings; or
(c) is detrimental to the interests of the company.

(6) The Chairman shall exercise absolute discretion in regard to the inclusion or non-inclusion of any matter in
the minutes on the grounds specified in sub-section (5).
 Minutes of the Meeting

(7) The minutes kept in accordance with the provisions of this section shall be evidence of the proceedings
recorded therein.

(8) Where the minutes have been kept in accordance with sub-section (1) then, until the contrary is proved, the
meeting shall be deemed to have been duly called and held, and all proceedings thereat to have duly taken place,
and the resolutions passed by postal ballot to have been duly passed and in particular, all appointments of
directors, key managerial personnel, auditors or company secretary in practice, shall be deemed to be valid….

……..(11) If any default is made in complying with the provisions of this section in respect of any meeting, the
company shall be liable to a penalty of Rs. 25,000/- and every officer of the company who is in default shall be
liable to a penalty of Rs. 5,000/-.

(12) If a person is found guilty of tampering with the minutes of the proceedings of meeting, he shall be
punishable with imprisonment for a term which may extend to two years and with fine which shall not be
less than Rs. 25,000/- but which may extend to Rs. 1,00,000/-.

Minute book available for inspection – S. 119 - to be signed by

the Chairman and kept in the registered office
 orts s
E sc C a
a v. mp
Indi 9 Co
of ] 5 FACTS:
C 6 8
LI . [198 54
d
Lt The GoI along with RBI formulated a “Portfolio Investment Scheme” (via several
circulars) with a view to earn foreign exchange by attracting NRIs of Indian nationality or
origin to invest in shares of Indian companies. The scheme provided incentives to such
individuals under Foreign Exchange Regulation Act (now FEMA).

Paragraph 4(a) of the Scheme provided that under NRIs will be permitted to make
portfolio investment in shares quoted on stock exchanges in India with full benefits of
repatriation of capital invested and income earned.

The net result of all the circulars was that NRIs of Indian nationality/origin as well as overseas companies,
partnership firms, societies, trusts and other corporate bodies which were owned by or in which the beneficial
interest vested in NRIs of Indian nationality/origin to the extent of not less than 60% were entitled to invest, on a
repatriation basis, in the shares of Indian companies to the extent of 1% of the paid up equity capital of such Indian
company provided that the aggregate of such portfolio investment did not exceed the ceiling of 5%. It was
immaterial whether the investment was made directly or indirectly. What was essential was that 60% of the
ownership or the beneficial interest should be in the hands of NRIs of Indian nationality/origin. Though a limit of
one per cent was imposed on the acquisition of shares by each investor there was no restriction on the acquisition of
shares to the extent of one per cent separately by each individual member of the same family or by each individual
company of the same family (group) of companies.
 orts s
E sc C a
a v. mp
Indi 9 Co
of ] 5
C 6 8
LI . [198 54 FACTS:
d
Lt
13 Overseas companies expressed desire to take advantage of the said Scheme and to
invest in the shares of Escorts Ltd., (an Indian company). In the 13 th company, 98% shares
were held by Caparo Group Ltd. which was incorporated in England and that 61.6% of
the shares thereof were held by the Swaraj Paul Family Trust - 100% of whose
beneficiaries are one Swaraj Paul and the members of his family, all NRIs and requested
the RBI to accord their approval for conducting investment operations in India.

These 13 companies designated PNB as their banker (authorized dealer) and M/s. Raja Ram Bhasin & Co. as
their broker for the purpose of such investment. Swaraj Paul remitted $1,30,000 equivalent to Rs. 19,63,000/- to
PNB for the purpose of opening on N.R.E. account in the name of Swaraj Paul.

PNB wrote to Escorts to transfer shares but Escorts refused stating that there are irregularities in the 13
companies.

GoI, RBI wrote to Escorts again for transfer – but it refused the second time stating that the circular of RBI
asking for investments is against FERA rules and it filed a Writ Petition stating that it is being forced to transfer
its shares against its will.
 orts s
E sc C a
a v. mp
Indi 9 Co
of ] 5
C 6 8
LI . [198 54
d
Lt

LIC and other financial institutes which held about 52% of the total shares in Escorts
while the Writ was pending called for an EOGM to remove the 9 directors who took
the decision of filing the writ petition. The meeting was held and a resolution to
remove the directors was passed.

Escorts claimed that the EOGM and the resolution passed was
malafide, arbitrary, illegal and bad in law.
 Judgment

It shows that the financial institutions which held 52% of the shares of the company and, therefore, had a very big stake in
its working and future were aggrieved that the management did not even choose to consult them or inform them that a
writ petition was proposed to be filed which would launch and involve the company in difficult and expensive litigations
against the GoI and RBI. The financial institutions were instrumentalities of the state and so was RBI and it must have
been thought unwise to launch into such a litigation. The institutions were, therefore, anxious to withdraw the writ
petition and discuss the matter further. As the Management was not agreeable to this course, LIC thought that it had no
option but to seek a removal of the non-Executive Directors so as to enable the new Board to consider the question whether
to reverse the decision to pursue the litigation.

Evidently the financial institutions wanted to avoid a confrontation with the GoI and RBI and adopt a more conciliatory
approach. It is, therefore, difficult to accuse LIC of having acted mala fide in seek to remove the nine non-Executive
Director and to replace them by representatives of the financial institutions. No aspersion was cast against the Directors
proposed to be removed. It was the only way by which the police which had been adopted by the Board in launching into a
litigation could be reconsidered and reversed, if necessary.
 orts s
E sc C a
a v. mp
Indi 9 Co
of ] 5
C 6 8
LI . [198 54
d
Lt

The holder of the majority of the stock of a corporation have the power to appoint, by election, Directors of their choice
and the power to regulate them by a resolution for their removal. And, an injunction cannot be granted to restrain the
holding of a general meeting to remove a director and appoint another. Every shareholder of a company has the right,
subject to statutorily prescribed procedural and numerical requirements, to call an extraordinary general meeting in
accordance with the provisions of the Companies Act. He cannot be restrained from calling a meeting and he is not bound
to disclose the reasons for the resolutions proposed to be moved at the meeting, nor are the reasons for the resolutions
subject to judicial review. It is true that under the Companies Act, shareholders shall be annexed to the notice of the
meeting a statement setting out all material facts concerning each item of business to be transacted at the meeting
including, in particular, the nature of the concern or the interest, if any, therein, of every director, the managing agent if
any, the secretaries and treasurers, if any, and the manager, if any. This is a duty cast on the management to disclose, in
an explanatory note, all material facts relating to the resolution coming up before the general meeting to enable the
shareholders to form a judgment on the business before then. It does not require the shareholders calling a meeting to
disclose the reasons for the resolutions which they propose to move at the meeting.
 orts s
E sc C a
a v. mp
Indi 9 Co
of ] 5
C 6 8
LI . [198 54
d
Lt

LIC of India, as a shareholder of Escorts Limited, has the same right as every shareholder to call an
EoGM of the company for the purpose of moving a resolution to remove some Directors and
appoint others in their place. LIC cannot be restrained from doing so nor is it bound to disclose its
reasons for moving the resolutions. When the State or an instrumentality of the State (LIC)
ventures into the corporate world and purchases the shares of a company, it assumes to itself the
ordinary role of a shareholder, and dons the robes of a shareholder, with all the rights available to
such a shareholder. There is no reason why the State as a shareholder should be expected to state
its reasons when it seeks to change the management, by a resolution of the Company like any other
shareholder.
 e v.
har 89) FACTS:
nt K , (19 C
raka Kale 21 S
nd ram as 1 After the election of Members, the first meeting of the Aurangabad Municipal
a
Ch nta p C Corporation was held on May 6, 1983 at 2 P.M. and the Municipal Commissioner
a m
Sh 5 Co announced that the polling for the offices of Mayor, Deputy Mayor and Members of
6 the standing Committee would commence from 2.30 p.m. onwards. But at 2.30 P.M.
some of the Councilors belonging to the Opposition Party sat on the ballot boxes and
some others surrounded the Municipal Commissioner and demanded that the
meeting be adjourned to a subsequent date.

The Councilors belonging to the ruling party demanded that the meeting and election be held later on that
day. Total confusion and bedlam prevailed and the rival groups started throwing Chairs at each other,
leading to a pandemonium. When the situation was brought under control, the Municipal Commissioner
announced that the meeting would continue and the elections would be held at 4.30 p.m. The petitioner filed
a protest at 4.15 p.m. stating that the meeting had been adjourned by the Municipal Commissioner for the day
and, therefore, the holding of the meeting later on the same day would be improper and illegal. Thereafter,
the opposition group abstained from participating in the meeting held at 4.30 p.m., in which Mayor and
Deputy Mayor were elected and 8 as Members of the Standing Committee.

In a Writ Petition filed before HC, the appellant questioned the election, on the basis that the meeting in which the election
was held, was invalid. The High Court held that the meeting was not adjourned for the day or sine die, but was only
postponed, to be held as soon as peace was restored on the very day and upheld the election.
 e v.
har 89)
nt K , (19 C
raka Kale 21 S
and ram as 1
Ch nta p C
a m
Sh 5 Co
6

Issue

The Respondents contended that the meeting had not been adjourned sine die but the proceedings had
merely been suspended at 2.45 p.m. and the adjourned meeting held at 4.30 p.m. was a continuation
of the original meeting and no new notice of an adjourned meeting had to be given.
HELD:

1. A properly convened meeting cannot be postponed.

The proper course to adopt is to hold the meeting as
originally intended, and then and there adjourn it to a
more suitable date. If this course be not adopted,
members will be entitled to ignore the notice of
postponement, and, if sufficient to form a quorum,
hold the meeting as originally convened and validly
transact the business thereat. Even if the relevant rules
do not give the chairman power to adjourn the
meeting, he may do so in the event of disorder. Such
an adjournment must be for no longer than the
chairman considers necessary and the chairman must,
so far as possible, communicate his decision to those
present.

2. The HC was right in holding that the first meeting of

the Municipal Corporation fixed by the Municipal
Commissioner for May 6, 1988 was not 'adjourned for
the day' but had only been put off to a later hour i.e.
the proceedings had only been suspended, to re-
commence when peace and order were restored.
 e v.
har 89) HELD:
t K (19
k an ale, SC
d ra K 121
han aram Cas 3. There is nothing on record to substantiate the petitioner's submission that the first meeting
C nt
ha omp scheduled to be held on May 6, 1988 at 2 P.M. was 'adjourned for the day' without transacting
S 5C any business i.e. without consideration of the agenda for the day. On the contrary, it is not in
6
dispute that the business for the day was partly transacted when the Councilors met at 2 p.m.
as scheduled and the Municipal Commissioner declared that the polling would commence
from 2.30 p.m. onwards.

The trouble started at 2.30 p.m. when the Councilors belonging to the petitioner's party prevented the casting of
votes by snatching away the ballot boxes from the polling booths and sat upon them. There was a pre-determined
plan on their part not to allow the first meeting to be held on that day. But the Municipal Commissioner did not
give way to the commotion and pandemonium and he did not put off the meeting to another day. In the prevailing
situation, the Municipal Commissioner had no other alternative but to adjourn the meeting. Under the scheme of
the Act, when the term of the elected Councilors is a period of five years which in terms of S. 6(2) of the Act is
deemed to commence on the date of the first meeting, the Municipal Commissioner obviously could not adjourn the
meeting for another day. If the contention that the meeting having been adjourned without specifying a definite
point of time were to prevail, it would give rise to a serious anomaly. The effect of adjourning the first meeting to
another day would imply the coming into existence of another deemed date under s. 6(2) of the Act for
commencement of the term of the Councilors. The fact that the Municipal Commissioner did not leave the House or
vacate the seat lends support to the version that he had merely suspended the proceedings till order was restored.
 n v. .
oda ) Ltd
uso (P. C)
adh udi 5 (S FACTS:
. M um 6 9
S a L
M. la K 6 SC
e re 3) 4 4 brothers owned the family business - ‘Kerala Kaumudi’ - newspaper.
K 00 3 brothers - Srinivasan, Ravi and Mani – re against the 4 th - M.S. Madhusoodan. The company
(2
had a total share capital of Rs. 20 lakhs divided into 2,000 shares of Rs. 1,000/- each. The
shareholding:
Name of shareholder No. of shares
Mani 222 Madhusoodhan was appointed as MD and
Valsa Mani (Mani’s Daughter) 84 editor of the company for life. Srinivasan and
Sukumaran Mani (Mani’s Son) 84 Ravi were appointed GM and director
respectively for life. AOA were amended to
Madhusoodhan [MD] 390 reflect the changes.
Srinivasan [GM] 390
Ravi [Director] 390 Sukumaran was succeeded by his wife
Madhavi after his death as chairman.
Madhavi [Chairman] 3
Sukumaran (MD + Chairman) 9 Various disputes b/w the brothers – so two
Kaumudi Investments Pvt. 3 agreements were entered into to divide the
Ltd. business amongst the four brothers.

Total 1575
 n v. .
oda ) Ltd
u so (P. C) FACTS:
adh udi 5 (S
M m 9
. S. Kau CL 6
M la 6 S
r e 4
Ke 003) One of the two agreements - Kerala Kaumudi’s control was given to M.S. Mahusoodhanan.
(2

Later a third agreement (16.1.1986) was entered into between Madhavi (the widow) and the 4
brothers, according to which, Mani and his children transferred all their shares to
Madhusoodhan and his children.

This meant that out of the 1575 shares - Mashusoodhan’s two children now held – 84 shares each and
Madhusoodhan held 612 shares with the other two brothers – Srinivas and Ravi – 222 shares each and
Madhavi still continued to hold 3 shares – rest shares held by other parties.

Later, two board resolutions were passed, as per which, Maadhusoodhan was ousted as MD and in the
second, issuance of further 425 shares of Rs. 1,000 each was passed. These shares were issued to Ravi and
Srinivasan and later Ravi transferred one share to Mani.
Doubts were raised towards the
transfer of 320 shares of Mani
and his children to
Madhusoodhan as void +
Madhusoodhan disputed his
removal and contested that he
continued to be the MD and that
the resolutions and the EOGM,
where the decision of removing
him was taken was ultra vires
the AOA. He demanded
cancellation of 425 new shares
allotted to Ravi and Srinivasan.
 n v. .
oda ) Ltd
u so (P. C) HELD:
adh udi 5 (S
M m 9
. S. Kau CL 6
M la 6 S
r e 4
Ke 003)
(2

Mani and his children argued that the transfer of shares that had taken place were invalid
because there was no adequate consideration paid, no proper documents were executed and
the minor children had no knowledge about the transfer of shares.

Madhusoodhan stated that the decisions taken in the meetings ousting him and issue of additional shares
were invalid because when these resolutions were passed he was not present at these meetings because no
notice for such meeting was served to him and according to the charter documents 75% votes were required to
amend the AOA and Madhusoodhan along with his family and KIPL held 50% shares of the company.

There should have been atleast 21 days prior notice for holding the meeting and stating the intention of the
resolution and 75% vote was required for passing the resolution. There was no proper delivery of the notice
informing Madhusoodhan of the meeting for issuance of additional shares. The records kept are also unclear
as to whether the sealed envelope delivered to the assistant of Madhusoodhan did in actuality have the notice
for the meetings.
The share transfer of Mani’s children was valid because the
minutes of the meeting in which the shares were transferred by
Mani and his children to Madhusoodhan were signed by Mani.
There were resolutions showing that Mani had resigned from
the directorship position. The court held that even though the
agreement allowed for the determination of consideration at a
later stage, the intention to transfer can be clearly seen from the
minutes of the meeting. The court also held that S. 9 of the Sale
of Goods Act allows for such a transaction.
 n v. .
oda ) Ltd
uso (P. C)
adh udi 5 (S
M m 9
. S. Kau CL 6 HELD:
M la S
e re 3) 46
K 00 The transfer of the shares of Mani and family to Madhusoodhan was also recorded in the
(2
company ledger. There was a notice publication in the newspaper stating the transfer of
shares to Madhusoodhan. There should be proper documents in place for transfer of the
shares and that fixation of a price was not a condition precedent.

For the meeting - The notice for the meeting did not have the fact that the deletion of article 74 would be considered.
According to section 189(2)(a) of the Act, the notice should be sufficiently specific so to inform each member of the actual
resolution to be passed. The notice is to be frank and clear. If not then the notice is bad and the special resolution is vitiated
and cannot be acted upon. Hence, deletion of article 74 was wrong and Madhusoodhan continues to be the MD of the
company. Also according to S. 53 of the Act here are only two methods envisaged of serving the notice which are personal
service or service by post. But neither method was used for informing Madhusoodhan and KIPL of the meeting. The notice
for the holding of the meeting has not been produced and there is a presumption against Srinivasan and others. Although
the Act does provide that if a document is sent by post in the manner specified "service thereof shall be deemed to be
effected". The word "deemed" literally means "thought of“ or, in legal parlance "presumed”. This is a rebuttable
presumption even though the words used are ‘shall presume”. There are letters by Madhusoodhanan to Madhavi which
prove that he was not aware of the meeting in which the resolution to issue additional shares were taken. Thus, the
additional issuance and allotment of shares are invalid.