The Supreme Court has asserted that where the constitutive by-laws of a society expressly provide that delegation or authorisation may be made by a resolution evidenced in writing under the hands of the majority of the trustees, such majority-backed decision is valid in law and cannot be disregarded merely because all trustees have not concurred. Section 48 of the Indian Trusts Act, 1882 does not override such a provision, since it expressly applies only except where the instrument otherwise provides.
Further, the Apex Court clarified that where the constitutive documents vest the properties of the society in the trustees and limit the powers of the managing committee to those delegated by the trustees, authority to exercise voting rights attached to shares forming part of the society’s assets must be traced first to the trustees and not assumed to inhere equally in the managing committee.
Finally, under the statutory framework governing remote e-voting, the validity of a vote cast on behalf of a juristic member depends on lawful authority traceable to its governing documents and the prescribed procedure; it cannot be determined merely by priority in point of time. On that basis, the Supreme Court set aside the High Court’s view requiring trustees to act in consonance and its direction that the vote cast first would prevail.
A Two-Judge Bench comprising Justice Vikram Nath and Justice Sandeep Mehta observed that the controversy before it was limited to the legal premises adopted in the impugned appellate order and did not extend to a final adjudication on the factual validity of any particular resolution, authorisation, cessation, nomination or appointment. On construction of Clause 24 of the societies’ by-laws, the Court observed that the clause expressly permits delegation or authorisation by a resolution evidenced in writing under the hands of the majority of the trustees and declares such resolution to be as valid and effectual as a resolution passed at a meeting.
The Court therefore rejected the Division Bench’s reliance on Section 48 of the Indian Trusts Act, 1882, to insist upon unanimity, holding that Section 48 itself operates subject to the instrument of trust otherwise providing. The Court further observed that the governing structure of the societies created a clear hierarchy in which the trustees were the source body and the managing committee a body of delegated administration; accordingly, voting authority in respect of shares vested in the trustees unless validly delegated.
The Court also held that neither Section 108 of the Companies Act, 2013 nor Rule 20 of the Companies (Management and Administration) Rules, 2014 recognises a rule that whichever rival claimant acts first must prevail. The statutory framework protects the first valid vote of the member, but does not substitute chronology for lawful authority.
Briefly, the appeals arose from a common judgment of the Calcutta High Court concerning the exercise of voting rights attached to shares held in Birla Corporation Limited by three societies, Hindustan Medical Institution, Eastern India Educational Institution and Belle Vue Clinic, each registered under the West Bengal Societies Registration Act, 1961. Under their constitutive documents, the movable and immovable properties of the societies vested in the trustees, while the managing committee could exercise only such powers as were delegated by the trustees.
Disputes emerged regarding the internal authority to act on behalf of the societies in relation to those shares, particularly after resolutions dated Mar 04, 2021 were said to have been passed by circulation by the trustees, leading to rival claims as to who was entitled to authorise representatives and cast votes. For the 2022 annual general meeting of BCL, the societies instituted suits seeking interim relief to ensure that BCL recognised the authority asserted by them and permitted their nominated representatives to attend and vote.
The Single Judge declined ad interim relief, and the Division Bench affirmed that order, but held that trustees must act in consonance and further directed that the vote cast first by the plaintiff society, whether through the managing committee or the board of trustees, should be taken into consideration.
