SC Rejects ‘First Vote Wins’ Rule, Says Only Authorised Representatives Can Vote At Company AGMs
· Free Press Journal
The Supreme Court has ruled that voting rights at a company's Annual General Meeting (AGM) cannot be decided simply based on who casts a vote first when there is a dispute over authority within a society holding shares.
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A bench comprising Justices Vikram Nath and Sandeep Mehta overturned a Calcutta High Court judgment that had allowed the first vote cast on behalf of a society to be treated as valid, regardless of who cast it.
The court said that voting rights must be exercised only by persons who are legally authorised under the society’s governing documents and in line with corporate laws.
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The case arose from a dispute involving three societies — Hindustan Medical Institution, Eastern India Educational Institution, and Belle Vue Clinic — which hold shares in Birla Corporation Limited.
Internal conflicts within these societies led to rival groups claiming the authority to nominate representatives and vote at the company’s AGMs.
To address the dispute, the Calcutta High Court had directed that the vote cast first should prevail, irrespective of whether it was cast through the Board of Trustees or the Managing Committee.
The Supreme Court disagreed with this approach.
Authority, Not Timing, Determines Validity
The apex court observed that the Companies Act, 2013, and the Companies (Management and Administration) Rules, 2014 do not recognise chronology as the basis for determining the validity of a vote.
According to the court, the crucial factor is whether the person casting the vote has lawful authority to act on behalf of the member society.
The bench stated that giving preference to the first vote cast effectively replaces legal authority with timing, which is not supported by the statutory framework.
The court further clarified that while a valid remote e-vote cannot be changed or recast, the law does not permit courts to decide voting disputes merely on a first-come-first-served basis.
The judgment reinforces that voting rights of juristic entities such as societies must flow from their internal rules and legally recognised authority structures.