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Sigh Of Relief Or Sigh Of Grief?

Published on Tue, Jun 17,2014 | 19:50, Updated at Tue, Jun 17 at 19:50Source : 

By: Vinod Kothari, Director - Vinod Kothari Consultants

Unclear provisions, and belated clarifications: For some, it is a sigh of relief, and for lots of others, it is a sigh of grief.

Sigh of relief first: The MCA’s so-called clarification no 20/2014 of 17 th June says e-voting will not be mandatory till 31 st Dec 2014. In other words, all AGMs this year may go the traditional way and may not offer e-voting facility in the coming AGM.

Now for the sigh of grief: For many large companies, the AGM notices have already been approved, printed, and many have actually already posted their notices. These notices have given the e-voting facility already. It is  settled law that even if e-voting facility is not mandatory, the company may still offer the facility – so, if the notice sent by the company has already provided the facility, the circular of 17th June does not help the company at all.

A bigger issue still – Clause 35 B of the Listing Agreement, immediately effective, has also made evoting mandatory for all listed companies. Unless MCA and SEBI work in absolute coordination, it is unlikely that SEBI will have deferred clause 35B as well upto 31 st Dec 2014. If not, listed companies will still be bound by the stricter of the two rules, and therefore, will have to offer e-voting in the coming AGM. If SEBI does not issue a similar relaxation, then the benefit of the MCA circular will be available only to unlisted companies having 1000 or more shareholders – which actually are just be a handful.

What exactly is e-voting?

E-voting is a process where a shareholder, who is not able to personally attend a company meeting, sends his vote by logging into his computer, through a special URL allocated by the company. The company makes arrangements with service providers such as CDSL for this purpose.

E-voting, known by various names such as remote voting, advance voting, absentee voting, is common in several countries already. The European Union made it mandatory in 2007. Australia, Malaysia etc have also made it mandatory. In several of the States in the USA also, such a voting option is mandatory.

The MCA incorporated Rule 20 of Companies (Management and Administration) Rules 2014 which mandates listed companies and companies having 1000 or more shareholders must provide e-voting facility for their general meetings.

Show of hands ruled out!

One of the most convenient ways of conduct of a meeting is to offer a resolution for voting by show of hands. The MCA Circular refers to Sec 107 of the Act to say that show of hands is ruled out in company meetings.

This is, regrettably, not a correct interpretation of the law. There are several other countries, for instance, Australia, which offer show of hands alongside electronic voting. The result of show of hands is added by the result of head-counts in electronic voting, and the chairman thus announces the results, unless a poll is demanded.

However, the MCA circular mandates that show of hands will be ruled out altogether. This interpretation will make company meetings a chaotic and marathon affair, as all resolutions will have to put to vote by poll.

Unlike a show of hands, which can be concluded within minutes, a poll requires an extremely elaborate exercise. The secretarial department of the company has to issue and hand out voting slips, which shareholders fill, sign and drop in ballot boxes. The poll slips are later verified, counted, and tallied by a “scrutineer”. Since this amounts to physical verification, signature verification, preparation of a  tally of votes, etc., the entire process is time-consuming!

The law allows a company to take a poll within 48 hours. Most companies actually do that – they fix a day for the poll, within 48 hours. This would mean the shareholders have to come again for voting on a poll.

The whole exercise of poll adds a perfunctory burden on companies, and makes the exercise of poll-taking cumbersome both for companies and for shareholders.

Will there be a demand for poll?

Para 6 of the Circular have left people guessing as to what will be the voting at the meeting like? Will there be no voting at all? Of course, that cannot be the intent or interpretation of the law. E-voting is a facility and not a compulsion. Recently the Bombay High court in the Godrej Industries/Wadala Commodities case  held that the right of a member to vote electronically is not to the exclusion of his right to vote at the meeting. He may exercise the right either way.

Therefore, the true meaning of Para 6 will be that the voting at the meeting will be by way of a poll only. The question of a show of hands does not arise –as already ruled out by the very first paragraph. Hence, there is also no question for members or proxies demanding for a poll. The chairman of the meeting will, therefore, necessarily have to order a poll.


The purpose of the law permitting e-voting is to make shareholder participation in meetings more democratic, more convenient, and not to make meetings chaotic or cumbersome. No purpose of law is being served by insisting on a poll for every resolution. Section 107 will not be so cumbersome if companies are allowed to use show of hands as well. But if all the language of sec 107 (1) is a hindrance,  the MCA could have used its powers for removal of difficulties by inserting appropriate language changes in sec. 107 (1). We cannot presume ourselves to be the victim of the law, if law-making itself has led to the difficulty.


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