Corporate Updates 24 May 2014

Case Law:

Conducting the meeting by way of an electronic voting and postal ballot, as purportedly mandated under the new provisions of the Companies Act 2013 is an additional facility to dispense with the requirement of holding a physical meeting of shareholders ???

Hon’ble Mumbai High Court in the matter of Approval of Scheme of Amalgamation of Wadala Commodities Limited With Godrej Industries Limited has observed that postal ballot and e-voting is an additional facility and cannot have the effect of dispensing the general meeting at all. Further, the court stated that gazette copy of many MCA rules are not available… hence in the opinion of the court they are not binding so far or at least from 1st April 2014.


1. In February this year, Godrej Industries announced that it would merge Wadala Commodities, which is in the business of bulk trading of vegetable oil, with itself.
2. The scheme of amalgamation of Wadala Commodities with Godrej was approved in the third quarter in FY 13-14, when Godrej Industries boosted top line by 16.6 per cent in the vegetable oil sector year-on-year.
3. Godrej decided to issue 1 fully paid share for every 108 shares of Wadala, thinking that the amalgamation would boost revenue and help in strengthening market share in the vegetable oil segment.
4. 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.
5. Both parties later requested the High Court to dispense with the requirement of holding a physical meeting of shareholders, and instead let them conduct the meeting by way of an electronic voting and postal ballot, as purportedly mandated under the new provisions of the Companies Act 2013.


1. Hon’ble Bombay high court declined the request and reiterated the importance of physical meetings in corporate democracy, and the right of shareholders to discuss and deliberate actions proposed to be undertaken by the company.
2. Bombay High Court recommended that until the issues raised by the High Court on the exclusion of physical shareholder meetings are finally settled, no company should insist upon a postal-ballot-only-meeting.
3. The High Court also held that all provisions for compulsory voting by postal ballot and by electronic voting to the exclusion of a physical meeting do not apply to court-convened shareholder meetings. At such meetings, provision must be made for shareholders to allow them to vote through postal ballots or electronic voting, in addition to the voting right at the physical meeting.
4. The High Court has directed the Additional Solicitor General, Registrar of Companies and SEBI to make further submissions before it on this issue”
5. The court has also taken steps to elevate the issue to a larger bench.
6. The order says: “…….till such time as these rules are gazette, or there is some provision made for the dispensation of official gazette notification, none of the rules in the Ministry of Corporate Affairs PDF document that are not yet gazette can be said to be in force.”


This order of High Court treats the doctrine of indoor management and the right of shareholders to be heard in a meeting as sacrosanct. The decision reinforces the shareholders’ ability to take an informed decision and raised questions with regards to the implementation of the Companies Act 2013, and highlighted some key gaps such as the notification of the rules. “Such matters require urgent regulatory attention.”

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