Company Law Board
In Re: United Western Bank Ltd. vs Unknown on 21 February, 2002
JUDGMENT
S. Balasubramanian, Vice Chairman
1. In the course of hearing the abovementioned 4 petitions, CP No. 23 of 2001 filed under Section 250, CP No. 42 of 2001 filed under Section 247/250, CP No. 43 of 2001 filed under Section 409 and CP No. 45 of 2001 filed under Section 250(3) of the Companies Act, 1956 ('the Act') wherein there are prayers to freeze the voting rights in respect of the shares impugned in those petitions, it was brought to our notice that annual general body meeting of the bank was to be held on 23-8-2001 and since all the above 4 petitions related to acquisition of shares on which voting rights were to be exercised in the said meeting, with the consent of the parties, this Bench passed an order on 20-8-2001 appointing Shri C.R. Mehta, a former member of this Board, as Chairman of the said meeting and he was also authorized to appoint two independent scrutinizers. It was also directed in that order that all the resolutions relating to the appointment/reappointment of directors shall be by poll. Accordingly, a poll was taken on appointment/reappointment of directors. Even though liberty had been given to the Chairman to announce the results of the poll, yet, he did not do so, since according to him, the result of the poll might not be authentic in view of various infirmities pointed out by him in regard to the maintenance of specimen signatures, folios, etc., by the bank. Therefore, he had referred the matter for a decision by this Bench. The report of Shri Mehta was considered in the hearing on 11-9-2001 and at the suggestion of the counsel for all the parties, it was decided to have a fresh scrutiny of all proxies by the same independent scrutinizers - Shri Narayan Rathi, Shri Anant Khamankar. Thereafter, two more scrutinizers, namely, Shri R. Joshi, Secretary of the bank and Shri Hemant Patki, Company Secretary of SICOM were also appointed as scrutinizers. The scrutinizers were given the liberty to approach Shri C.R. Mehta for advice and guidance in case of any difficulty and they were to submit their report through Shri C.R. Mehta.
2. After a fresh scrutiny of the proxies and the ballots, the scrutinizers have submitted two reports - one jointly prepared by Shri Narayan Rathi, Shri Anant Khamankar and Shri Hemant Patki (majority report) and the other by Shri R. Joshi. On the basis of these two reports, Shri Mehta has submitted his report. According to his report, out of 301 ballot papers issued on the basis of which the votes were cast, in respect of 295 ballot papers, there is a consensus among all scrutinizers but there has been a difference of opinion between the majority and that of Shri Joshi's in respect of six ballot papers comprising of ballot paper Nos. 170, 181, 230, 231, 266 and 285. In addition, there is a doubt as to whether votes cast in respect of 2003 folios, the specimen signatures of which were obtained after the poll date could be counted as valid or not. While in respect of ballot papers 170 and 181, the majority has doubted the validity of the right to vote on these shares, in respect of ballot papers 230, 231, 266 and 285 the minority report suggests rejection of the votes cast in relation to these ballot papers on various grounds. In view of the difference of opinion among the scrutinizers, Shri Mehta has left the entire matter to be decided by this Bench.
3. Copies of all the reports were made available to the parties. The bank has filed an application CA No. 20 of 2002 challenging the validity of the votes cast in respect of ballot papers 230,231,266 and 285 and in the reply to the application, the respondents have challenged the votes cast in respect of ballot papers 170 and 181.
4. We heard the counsels extensively on the validity or otherwise of the votes cast in respect of these six ballot papers and the same is discussed ballot paper wise :
(a) Ballot Paper No. 170 : UWB Karamchari Sangh - 14,94,000 shares and Ballot Paper No. 181 : UWB - Officers' Organization - 9,42,889 shares :
The report of the Chairman on these ballot papers is as follows :
"the proxies, number 170 and 181 belong to UWB Karamchari Sangh and UWB Officers' Organization, respectively, who have casted their 14,94,000 and 9,42,889 votes, respectively. The 3 scrutinizers have felt that their votes should not be taken into consideration for the reasons indicated in their report. Briefly, according to them, the signatures arc not independently verifiable from bankrecords. The resolution under Section 187 of the Companies Act, 1956 lodged with the bank is general in nature and does not authorize specifically a person concerned to attend and vote at the annual general meeting in question. Further, the signatures authorized forwarded along with resolution have not been authenticated by a person other than the authorized person. Shri Joshi is of the view that the resolutions have been properly passed as per the requirement of Section 187 and the authorized persons who have casted the vote are known to the bank and, hence, their votes should be taken into account, Hon'ble CLB may kindly take the appropriate view in the matter considering the views expressed by the scrutinizers in their respective reports and also taking into consideration that the shares in question have been transferred during the book closure period."
Seeking for rejection of the above votes, Shri Sarkar and Shri Choudhary argued: After the date of book closure, if any shares are acquired, no voting is permissible on those shares as the company is prohibited from registering transfer of shares after the date of book closure. In the present case, the book closure date was 12-8-2001 and the shares were registered in the name of the Sangh and the Organisation only on the 13th August. Further, as per the details furnished by the bank, the Sangh and the Organization had entered into an agreement with UWB Employees Equity Trust which was holding all these shares for transfer of these shares on payment of 10 per cent of the prevailing market rate in respect of the Sangh and the balance within a period of one month thereafter and in case of the Organization, the terms of payment were that Rs. 10 lakhs will be paid immediately and the balance within one month of the agreement. This agreement is in violation of Section 13 of the Securities Contract Regulation Act, 1956 ('the SCR Act') inasmuch as there could be no purchase of shares of a listed company except between members of a recognized stock exchange in notified areas. Mumbai, wherein the transfer had taken place is a notified area. The only exception is spot delivery contracts, in which case the payment and the delivery of certificates should be simultaneous. Since the agreements with the Sangh and the Organization do not provide for immediate payment, the same cannot be considered to be spot delivery contracts within the meaning of Section 2(0 of the SCR Act and as such the acquisition itself is invalid. In A.K. Menon v. Fairgrowth Financial Services Ltd. [1995] 16 CLJ 364, the Special Court has held that such transactions are void and invalid. Further, both the Sangh and the Organization acquired the shares only on 13-8-2001 as is evident from the computer print out of the Depository. However, the Sangh had passed a resolution on ........ authorizing its Secretary to vote in respect of the shares acquired by it. As per Section 187 of the Act, a corporate entity can pass a resolution only if it is a member on the day of passing the resolution. In other words, the resolution passed by the Sangh in respect of shares of which it had not acquired membership cannot be considered to be a valid resolution to permit the Sangh to vote on these shares. Likewise, in respect of the Organization, the time noted on the print out from the depository is 2.45 p.m. on 13-8-2001 while the Organization had passed a resolution at 4.00 p.m. on the same day which is unrealistic. Further, the specimen signatures of the persons authorized by the Sangh and the Organization are not available for verification. In addition, the signatures of the persons authorised to represent the Sangh and the Organisation had not been attested by any one and the same had been attested by the same persons who had been authorized to represent. It is also to be noted that the resolutions do not indicate the date of the AGM for attending which the authority had been given. Therefore, considering all these aspects, the votes cast by both Sangh and the Organization should be rejected as invalid.
Shri Datar appearing for the bank submitted ; Since the Sangh and the Organization had already decided to purchase the impugned shares and had also entered into an agreement for the same, they had become owners of the shares on 7th August itself and, therefore, they were entitled to pass the respective resolutions. Since shares are movable properties, they had acquired interest on the day when they entered into the agreement. In Vasudev Ramchandra Shelat v. Pranlal Jayanand Thaker AIR 1974 SC 1728 it has been held that transfer of property rights in shares may be antecedent to actual vesting of all or full rights in accordance with the provisions of the Act. Likewise in L/C of India v. Escorts Ltd AIR 1986 SC 1370, the Apex Court has held that a transfer between the transferor and the transferee is compete inter se between them and the transferee becomes the beneficial owner of the shares immediately notwithstanding pending registration. Therefore, on the day of passing the resolution the Sangh had acquired beneficial interest even though it had not become a member. Further, as far as the Organization is concerned, it passed the resolution only at 4.00 p.m. on 13-8-2001 after its name had been entered as a member in the records of the depository. Further, Section 187 does not mandate that only when a company holds shares, it could pass a resolution under that Section. Such a resolution could be passed in anticipation of the acquisition of shares also. As far as authentication of the signatures of the persons authorized to vote by these resolutions, even in case of Makharia Group, no such authentication has been made while forwarding the resolutions of the companies which had appointed Shri 'Ashish Makharia as a proxy to represent the company. Further, passing of a general resolution authorizing someone to attend general body meeting and vote is not prohibited under Section 187. This is notwithstanding the fact the provisions of Section 187 are not applicable to a trade union.
(b) Ballot Paper Nos. 230 and 231 of SICOM-14,94,500 and 14,70,270 shares :
Shri Mehta's report reads :
"In respect of ballot paper numbers 230 and 231, SICOM Ltd. have exercised the votes to the extent of 14,94,500 and 14,70,270 votes respectively totalling to 29,64,770 votes. Briefly according to Shri R. J. Joshi, these votes should be treated as invalid and should not be taken into consideration, as the SICOM has not separately filed authenticated copy of the resolution under Section 187 of the Act, with the bank. According to the other 3 scrutinizers, during the course of the scrutiny, they have noted that the relevant resolutions have been attached with the ballot papers and as such is due compliance of the provisions of Section 187 and authorized person has cast the votes. Hence, the same may be allowed. CLB may take appropriate view on the matter."
Shri Choudhary submitted : SICOM had passed a resolution under Section 187 on 2-8-2001. It was a composite resolution proposing the names of 4 persons for appointment as directors of the bank and also authorizing 3 of the SICOM employees as authorized representatives (as alternate) to attend the AGM on 23-8-2001. The 2nd resolution specifically indicates that it was in terms of Section 187. This copy of the resolution was furnished to the bank on the basis of which the names of the persons proposed by SICOM were included in the notice for the AGM for election as directors. Section 187 does not indicate how and when the resolutions should be lodged with the company. As long as the company has the knowledge of the requisite resolution under Section 187, it cannot take a stand that at the time of AGM, the same had not been filed separately. Therefore, it is not correct to say that proper resolution has not been filed. Further, a copy of the resolution was attached to the ballot paper and at the time of original verification, the same was considered to be valid by all the three scrutinizers. Therefore, the voting by the authorized representatives of SICOM cannot be considered to be invalid.
Shri Datar submitted : Any resolution passed under Section 187 should be separately filed. In the present case, SICOM failed to do so. According to Ramaiya on Companies Act, an authenticated copy of the resolution under Section 187 has to be separately filed to entitle the person authorized by the resolution to represent the company in a general meeting to attend and vote, (page 1666 - 15th edn.). Mere attaching the resolution with the ballot paper is not sufficient and, therefore, the voting on the shares by the authorized representatives has to be rejected.
(c) Ballot No. 266 - Ashish Makharia - 2,36,850 shares :
The report of Shri Mehta reads :
"In respect of ballot paper number 266, it relates to the votes casted by Mr. Ashish Makharia in respect of 2,36,850 votes. According to Shri R.J. Joshi, Shri Ashish Makharia has signed his ballot paper in the name of Shri Ashish Makharia whereas the name of the shareholder appearing in the Members register is Ashish, who in his opinion is a different person. Therefore, he is not entitled to sign the ballot paper under this folio and hence the relevant paper be treated as invalid and be rejected. Further according to him the signature of the person concerned is also not available in the computerized system and hence not verifiable. The other three scrutinizers are of the view that the votes cast should be taken into consideration for the reason that verification of the signatures was carried out by the bank officials and subsequent to verification the person concerned has signed the Ballot paper after affixing the rubber stamp with the words 'Signatures Verified'. Subsequently the signature on the said ballot paper was also verified on the basis of the signature available on the computer system by the scrutinizers themselves, during the course of their scrutiny carried out immediately after the conclusion of the Annual General Meeting on 23-8-2001. According to them now non-availability of the signature of Shri Ashish Makharia on the computer system of the bank could be due to system failure. According to them since the signatures were earlier verified, they have taken that the Ballot paper as valid."
Shri Sarkar and Shri U.K. Choudhary submitted : At the time of verification before the poll, the signatures made on the ballot papers were verified by the bank itself with the signatures available on the computer system after which they have put a rubber stamp 'signatures verified' and permitted voting. Now, the bank cannot claim that his signature is not available on the computer system nor that the same differs from the signature in the transfer instruments. Further, the bank knows the identity of Mr. Ashish Makharia and in CP No. 23 of 2001 filed by the bank, the shares held by Shri Ashish Makharia have been impugned. Therefore, there is no ground to reject the votes cast in respect of the shares held in the name of Shri Ashish Makharia especially when he had voted on the shares in person. When a shareholder is present in person, he cannot be denied the voting purely on the basis of either non-availability of his specimen signature or difference in the signature from the one available on record.
Shri Datar submitted : The identity of Shri Makharia is irrelevant. The shares are held in the name of Ashish and the votes have been cast by Ashish Makharia. The signature that is available on the transfer instruments which is the basis for capturing specimen signature on the computer is completely different from the signatures in the ballot paper. Even though, his specimen signature was not available on the computer, yet, when the same was verified with the signature in the transfer instruments, the same did not tally and, therefore, the votes cast by him should be rejected. It is to be noted that the majority scrutinizers have rejected certain ballot papers on which rubber stamp impression made before the poll as 'signature verified', on re-verification. Further, on the ground of signature differences or that signatures are not available on the computer system, more than 21 lakh votes cast were rejected. Therefore, following the same principle/procedure, the votes cast by Shri Ashish Makharia should also be rejected.
(d) Ballot Paper No. 285 - Proxies in favour of SICOM - 5,24,280 shares :
The report of Shri Mehta reads :
"In respect of ballot paper 285 under which votes to the extent of 5,24,280 shares have been casted by the proxy holder given in favour of SICOM Ltd./J.S.Pal/H.M. Patki. According to Shri RJ. Joshi, this ballot paper is purported to be executed by SICOM Ltd. Since there is no separate authorization in favour of the person who cast the vote given by the SICOM Ltd., the subject ballot paper be treated as invalid and be rejected. According to the other three scrutinizers the proxies for aforesaid votes have been given in favour of SICOM Ltd. or Shri J.S. Pal or Shri H.M. Patki. Further according to them the board of directors of SICOM Ltd. vide their resolution dated2-8-2001 have also authorized the aforesaid two officials to exercise voting rights on behalf of SICOM Ltd. Thus, according to them Shri J.S. Pal who exercised the voting rights in respect of the aforesaid proxies through the ballot paper in question is valid one and be taken into consideration. During the scrutiny of the proxies attached with the aforesaid Ballot Paper, it was found that there were signatures differences in case of proxies representing 1,18,150 shares, signatures were not found for proxies representing 1,82,050 shares. Only proxies representing 1,66,559 shares were tallied with the signatures available on the banks records."
Shri Datar submitted: No member can appoint a company to be his proxy as according to Section 176 of the Act, a member is entitled to appoint another person as his proxy to attend and vote instead of himself. The term 'person' signifies a natural person meaning thereby an individual since a company cannot attend a meeting. In construing a term which is not defined in an Act, the purpose and object of the whole Section should be considered as held by the Full Bench of the Kerala High Court in Kamalakshi Vasantha Kumari v. Sankaran Sadasivan AIR 1979 Ker. 116. Therefore, on this ground alone, the proxies given in favour of SICOM which is a company should be rejected. Alternatively, if a company could be appointed as a proxy, then, by a separate resolution of the Board of that company, someone should be authorized to attend and vote in respect of the proxies held by the company. In the present case, Shri Pal has voted on behalf of the proxies held in the name of SICOM without any authority of the Board. The resolution under Section 187 pertains only to the shares held by SICOM in the bank and not the proxies held by it. Therefore, on this score also the votes cast by Shri Pal on the proxies in the name of SICOM should be declared as invalid.
Shri Choudhary submitted : A company could be appointed as a proxy. Since the Companies Act does not define the term 'person', the definition given in the General Clauses Act, 1897 should be adopted. In that Act, a 'person' includes a company. Further, the proxies which were in the name of SICOM were not exclusively in the name of SICOM only. These proxies had three alternative names, namely, SICOM or Shri J.S. Pal or Shri H.K. Patki. These two persons had been authorized by the Board by a resolution dated 2-8-2001 to represent SICOM and vote in respect of shares held by it in the bank. Therefore, even in case of proxies in the name of SICOM, either of these two could exercise the right to attend and vote. Further, Shri Pal being an alternate proxy, could himself exercise the right to attend and vote as a proxy in respect of all these shares. Further, out of 5,34,280 shares for which proxies were given in favour of SICOM/J.S. Pal/H.K. Patki, votes cast only in respect of 1,66,559 shares were considered valid. Since, Shri Pal was also an alternate proxy, the votes cast by him cannot be invalidated.
5. Shri Choudhary suggested that, notwithstanding the various objections raised on these ballot papers, all the votes cast in respect of these ballot papers may be considered as valid and the result of the poll be declared on that basis. He pointed out that statement No. 7 of Shri Mehta's report indicates the position of votes cast for and against the resolutions relating to appointment/re-appointment of directors after taking into account all the votes polled in respect of the above ballot papers including those cast on 2003 folios in respect of which signatures were obtained after the poll date and as such the result of the poll be declared on the basis of this statement.
6. We have heard the arguments of the counsels. At the out set, we would like to record that this Bench had observed at the initial stage itself that in proceedings under Section 250 or under Section 409 this Bench does not have the powers to regulate the conduct of a general body meeting of a company. However, since, at the joint request of parties we passed various orders in respect of this meeting, we are dealing with the results of the poll of the AGM held on 23-8-2001.
7. First we shall take up the case of the Sangh and the Organization. The main objection in relation to the voting exercised on these shares is that the shares were acquired during the book closure period and as such no voting rights on the shares could be exercised, that these shares were acquired in violation of the provisions of the SCR Act and that the resolution of the Sangh was prior in time to the acquisition of shares and that the signatures of the authorized representatives were not available for verification. As far as violation of the SCR Act is concerned, we do not propose to examine the same not only in view of the fact that certain substantive proceedings have to be initiated in this regard to get a declaration that the acquisition is void, but also considering the fact that there is already a challenge on the exercise of votes on shares acquired by Makharia and SICOM, in the petitions before us on the ground that the acquisition is invalid in terms of SEBI Takeover Code but both have exercised their voting rights. In other words, when the acquisition by Shri Makharia group and SICOM is pending adjudication, they have exercised the voting rights and to deny the same right to the Sangh and the Organization when there are no proceedings pending challenging their acquisition would not only be illogical but also unjustified. Therefore, on this ground, their voting cannot be challenged. As far as the acquisition during book closures is concerned, Section 154 of the Act deals with book closure. This Section does not elaborate the object and purpose of book closure. However, clause 16 of the listing agreement indicates the purpose of book closure. The purpose is for declaration of dividend, issue of bonus/right shares, etc. In other words, the purpose is to keep a cut of date for deciding the members who would be entitled for the benefits of dividend/rights and bonus shares and not for determining the voting rights. Voting right is an inherent right attached to the shares and one of the basic rights of a member is to attend and vote in general meetings of the company and anyone whose name is borne on the register of members of a company on the date of the general meeting is entitled to attend the meeting and vote, irrespective of when he became a member. That is why clause 16 of the listing agreement is silent on the voting rights. Section 87 makes it clear that every member shall have a right to vote on every resolution placed before the company. No doubt, in cases where the shares are held in physical form, the company itself would not register the transfer of shares during the book closure period and, therefore, becoming a member after the book closure date would not normally arise but in respect of shares which are held in a fungible form in a depository wherein registration of transfer is instantaneous bringing the name of the transferee as a beneficial owner in the records of the depository in terms of Section 41(3) of the Act, until and unless such a transfer is also either prohibited or stopped during the book closure period voting rights on the shares so acquired cannot be taken away, as every shareholder whose name is on the register of members on the day of the general body meeting will have a right to attend and vote as he is the one who will be interested in the affairs of the company as a shareholder on the day of the meeting. Therefore, the timing of the acquisition of the shares is immaterial as far as voting rights are concerned. Since, in the present case, the Sangh and the Organization were the members on the register of members on the day of the meeting, they are entitled to exercise voting rights on those shares notwithstanding the fact that the shares were acquired during the book closure period. In regard to the resolution of the Sangh being prior to the date of acquisition of the shares which according to the counsel for the respondents is not in accordance with Section 187, they have relied on Section 187 which begins "A body corporate (whether a company within the meaning of this Act or not) may if it is a member of a company within the meaning of this Act" to contend that only if at the time of passing the resolution, the Sangh was a member, it could have passed that resolution. We do not agree. The word 'may' used in the Section indicates that this provision is an enabling provision to clothe the company with the discretion to pass such a resolution in case it desires to vote in respect of the shares held by it in another company. It would mean that without a resolution under this section authorising someone to attend and vote on behalf of the company in the general meeting of another company in which the company holds shares, the other company will not allow anyone to attend and vote on the shares held by that company. Therefore, if a company were to pass a resolution without being a member of a company, it would only mean that the resolution is infructuous, as without holding-shares, its representative cannot attend the general meeting of the other company. There is nothing specific in that section to indicate that prior membership is necessary to pass such a resolution and if a company passes a resolution in anticipation of acquisition of shares, then the same cannot be considered as invalid. The purpose of a resolution under Section 187 is two fold. One is to enable the company to attend/vote and the other is to satisfy the other company in which shares are held that the person attending the meeting has been duly authorized. As long as the name of a company is in the register of members on the date of the meeting of the other company, and the board of directors had passed a resolution under Section 187 on any day prior to the meeting and present the same to the other company before or at the time of the meeting, the other company need not have to look into whether the shares were acquired before or after the date of the resolution.
8. In regard to ballot papers 230 and 231 of SICOM Ltd., we do not find much substance in the objection of the bank. As we have mentioned in the earlier paragraph, as long as a resolution under Section 187 is available with the company, more for the purpose of satisfying itself that the person attending the meeting has the authority of the Board to represent the company holding shares, the timing of passing or presentation of the resolution is of no consequence. It can be presented earlier to or at the time of the meeting. As a matter of fact, the Chairman of the meeting should be satisfied that a resolution under Section 187 is available with the person who is attending the meeting at the time of the meeting. In this case, not only the said resolution was lodged with the company at the time of proposing 4 persons for appointment of directors but also the same was enclosed with the ballot paper. Therefore, the voting by the nominee of SICOM cannot be invalidated.
9. Ballot No. 266 - Shri Ashish Makharia : The purpose and object of verification of specimen signatures is to ensure that voting on the shares is exercised by or on behalf of a shareholder. In case of a proxy, since the shareholder would not be present in person, the verification becomes necessary to ensure that the proxy really represents the shareholder by comparing his specimen signature on the record with the one on the proxy form. In respect of cases where a member is personally present and has identified himself as the right person holding the shares, neither nonavailability of specimen signatures nor differences in the signatures could affect his right to attend and vote. In other words, once the identity of a member is established to the satisfaction of the company/scrutinisers, his right to attend and to vote cannot be denied for want of specimen signature. Verification of signatures is not with the object of denying the right to vote but to ensure that the right and the entitled person exercises the right to vote. In the present case, the bank has not expressed any doubt about the identity of Shri Ashish Makharia as the member holding the impugned shares and as a matter of fact, these very shares have been shown against his name in the petition seeking for restraining his voting rights on these shares. Further, there is no report that votes cast by any other shareholder being present personally had been rejected on account of either non-availability of specimen signatures or differences in the signatures. Further, at the time of verification before the poll, the ballot papers had been stamped with 'signatures verified'. Even though we ourselves noticed that there is no likeness between the signature of Shri Ashish on the transfer instrument and the one on the ballot paper yet, for the reasons stated above, since he was present in person and his identity had not been questioned, we cannot disallow the votes cast by him.
10. Ballot No. 285 - Proxies in favour of SICOM Ltd.: This has raised an interesting question as to whether a company could be appointed as a proxy. For this purpose, it is appropriate to extract Section 176(1) which reads: "Any member of a company entitled to attend and vote at a meeting of the company shall be entitled to appoint another person (whether a member or not) as his proxy to attend and vote instead of himself: but a proxy so appointed shall not have any right to speak at the meeting." According to Shri Datar, the term 'person' means a natural person or an individual while according to Shri Choudhary, it could be a company also inasmuch as the term 'person' includes a company as per the General Clauses Act. He also submitted that wherever the Legislature intended a natural person, it has also used the term 'individual' in various Sections of the Act. We find that neither the term 'person' nor 'proxy' has been defined in the Act and, therefore, we have to construe this term 'person' with reference to the object with which the same has been used in section 176(1). This section authorizes a member, who is unable to attend a general meeting of a company, to appoint another through an authorisation known as a proxy to attend and vote instead of the shareholder himself. Further, the section also says that the proxy shall not have any right to speak. As a rule, a proxy can demand a poll. No company, being an artificial entity can be present, vote and speak or demand a poll. Only a natural person/individual could do all the above. Therefore, the term 'person' used in the section means only a natural person/individual and the definition of the General Clauses Act cannot be applied in respect of the term 'person' as is used in Section 176. In this connection, we may also refer to Schedule IX of the Act wherein two forms of proxy in terms of Section 176(6) are exhibited. In both the forms, for appointing an alternate proxy, the words used are 'failing him'. The word 'him' would indicate that the proxy has to be an individual. Another reason as to why a company cannot be a proxy is that a proxy is a personal representative of the shareholder and the relation between them is that of a principal and an agent. Since a company cannot attend and vote in a meeting, it has to authorize some individual to represent it in its capacity as a proxy holder in that meeting. It would mean an agent appointing another to act on behalf of the principal. Since a proxy holder is a personal representative of a shareholder, the principle of delegatus non potest delegare will apply. Thus, from the object and purport of Section 176, it is very clear that a proxy has to be an individual and cannot be a company. In other words, a company cannot be appointed as a proxy. In this connection, we may beneficially refer to the English Insolvency Rules which lays down that a proxy has to be an individual of aged 18 years or over. (Rule No. 8.1). Even though Shri Choudhary argued that since under Section 187 the company has passed a resolution regarding its own shares in the company authorizing Shri Pal to represent SICOM and vote on its behalf, the same authority should extend to the proxies given in favour of SICOM. Since we have already held that a company could not have been appointed as a proxy, its authorizing someone else to vote in respect of the said proxy does not arise. Even otherwise, the authority given under Section 187 is only in respect of shares held by a company in another company and not in respect of shares which it does not hold in the other company. A separate authorization by the Board would be necessary in respect of the proxies held by it, which is not in the present case. Shri Choudhary made another submission that since Shri Pal was an alternate proxy along with SICOM, all the votes cast by him could be treated as votes cast by him in his capacity as a proxy. For considering this submission we have to examine as to in which capacity he cast the votes - whether as a representative of SICOM or in his individual capacity as the proxy. The details have not been furnished to us. Therefore, our direction would be that the Chairman should, with the assistance of the scrutinizes, examine the ballot paper 285 and find out whether Shri Pal has voted on these shares in his capacity as a representative of SICOM or in his capacity as a proxy. In case, he has voted as a representative of SICOM, the votes cast will be rejected and where he has voted in his capacity as a proxy, the same be taken as valid.
11. Insofar as the votes cast in respect of 2003 folios in respect of which fresh signatures were obtained after the poll are concerned, we consider that the same should be taken on record and the votes cast in respect of these folios should be counted for the simple reason that the purpose of poll is to ascertain the consensus of the general body and the absence of the specimen signature is not at the fault of those shareholders. It is not that no votes had been cast at the meeting on behalf of these folios, but authenticity could not be verified for want of specimen signatures. Since at the time of re-verification the specimen signatures were available, we feel that the votes cast in respect of these folios should be taken into account and, accordingly, direct so.
12. Having given our findings on the 6 issues on which there have been differences of opinion between the majority and minority scrutinizers and also on the 2003 folios, we have given a very serious thought as to whether after recomputing the results on the basis of our findings, the Chairman of the meeting should be asked to declare the result of the poll. Due to unfortunate improper maintenance of records, a substantial number of votes cast in this meeting have not been taken into account. In the original report of the Chairman, he had computed the results of the poll on the basis of taking all the votes polled as valid and the number of such votes was of the order of about 2.07 crores. In his report furnished after the fresh scrutiny, he has indicated that nearly 22 lakh votes cast had not been taken into account for want of specimen signatures, differences in signatures and absence of folio numbers. We have a chart prepared by Shri Mehta as Statement No. 7 which takes into account all six ballot papers considered in this order as valid and also the votes cast in respect of 2003 folios also as valid. From this statement, we find that the difference between the votes for and against on the proposals for appointment/reappointment of directors is just about 1 lakh votes. With our directions relating to Ballot No. 285, the difference may either remain as the same or get marginally changed. When there is such a meagre difference in the votes cast for and against, elimination of nearly 22 lakh shares from the results of the poll would not and cannot reflect the majority decision of the shareholders. It is the prerogative of the members to elect their representatives on the Board and such a prerogative has been denied to a large number of shareholders by the bank due to improper maintenance of the records. Therefore, it could have been just and equitable that we declare the entire process of the poll as invalid and order a fresh meeting to be held with the direction to the bank to update all its records relating to membership before holding the meeting. However, considering the fact that updating may take a number of days, even after which it is doubtful whether there would be complete updating, we have decided that the results of the poll should be declared.
13. We note that Shri Datar sought for deferring the declaration of the results of the poll till the conclusion of the proceedings on the main petitions. We do not think that a decision on the matter relating to the results of the poll should wait till the disposal of the petitions, as in RG Shaw & Co. v, Shaw Wallace & Co. Ltd [ 1987] 1 SCC 82 the Apex Court had allowed the holding of AGM and EOGMs, for the purposes of appointment and removal of directors, notwithstanding the challenge on the acquisition of shares pending before the High Court. Whatever may be the outcome of the results of the poll, the same will have to be subject to the final order on the pending petitions.
14. Accordingly, the results of the poll will be declared on the basis of the findings that have been given on the various issues that all the votes cast in respect of ballot Nos. 170, 181; 230, 231 and 266 shall be treated as valid and as far as ballot paper 285 is concerned, Shri CR Mchta will examine the ballot papers in the presence of all the four scrutinizers and find out whether the votes cast by Shri Pal in respect of the ballot papers was in his capacity as an authorised representative of SICOM or in his individual capacity as an alternate proxy. Wherever he has voted in his capacity as a representative of SICOM, these votes cast by him will be rejected and in cases where he has voted in his capacity as a proxy, the same will be treated as valid. Such exercise will be restricted to only those 1,66,559 votes which have been taken as valid in statement No. 7. The finding of Shri Mehta shall be final on this issue. On the basis of his finding, he will re-compute statement No. 7 of his last report insofar as this ballot paper is concerned and declare the over all result on the resolutions relating to appointment/reappointment of directors, latest by 10-3-2002. The results announced by him will remain stayed for a period of 3 weeks from the date of declaration, to enable the parties to prefer an appeal against this order, if they so desire.
15. Before we conclude this order, it is essential to record that the Sangh and the Organization filed applications CA Nos. 30 and 31 of 2002 seeking themselves to be impleaded as parties to the proceedings since the shares held by them and voted upon have been challenged. Extensive arguments took place as to whether they should be impleaded or not. Since we have held that votes cast by them are valid and they have not been affected in any way, there is no need to implead them.
16. In view of the enormity of the exercise involved in the detailed examination of the proxies/ballots, computation and preparation of the reports, we consider it necessary to adequately compensate the Chairman and the two independent scrutinizers. Accordingly, we direct the bank to make a payment of Rs. 10,000 each to the Chairman and the two independent scrutinizers. This will be over and above whatever has been paid to them as per our earlier orders. These payments should be effected within 10 days of this order.