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Casting Vote

Raman R (Partner) (248 Points)

23 April 2009

There are five directors on the Board.

The Articles of the company provides that the Managing Director will have a casting vote. It also provides that the Chairman will have a casting vote.

For a resolution three directors vote against it. The Managing Director execises his casting vote and it becomes a tie up. Then the Managing Director who is also the Chairman casts his casting vote as Chairman and the resolution is passed on majority.

Is this valid?

Is this possible in a Listed Company and is this permissible within the Law??

R. Raman

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11 Replies

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 23 April 2009

Hi Raman,

Kindly observe as you know a board resolution is required to be passed by simple majority except 2-3 cases.

In your case there are 5 directors in the board and out of them 3 directors voted against the resolution as mentioned by you. For me this is the end of the story because there is clear mandate against the resolution by the board (2-3) and there is no possibility for casting vote of chairman.

Provisions related to casting vote can be invoked only in case of equality of votes which is not present in your case.

I believe you completely misunderstood the provision as in your case MD is voting as a director first and he voted again as chairman without any necessity because there is no equality of votes present in your case.

I have prepared a statement regarding provisions of CASTING VOTE OF CHAIRMAN for your record and reference. Please find attached herewith the same statement.

In case of further query please post it.

Best Regards

Ankur Garg

Attached File : 59 casting vote of chairman.pdf downloaded: 973 times

Vrnanda (auditor) (110 Points)
Replied 24 April 2009

Hi Raman,

I completely agree with the explanation given by mr. Ankur

Only chairman of the meeting can exercise the casting vote and the same can be exercised only when there is equality of votes. that to in only ordinary resolution. as there will not be such case in special resolution.

Thanks.

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 24 April 2009

Thanks and I have seen your reply. Please go through my query again. Totally there are five directors and one is a Managing Director. Three voted against the resolution and two (including the Managing Director) voted for the resolution. Now the Managing Director exercises his additional vote and it becomes a tie up. Then the Chairman exercises his casting vote. Is this valid??

24/04/2009 10

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No, this is not valid at all.

Yes, you have completely misunderstood the provisions. A director can not vote in 3 capacities.

1. One as Director

2. Two as Managing Director

3. Three as Chairman

You are saying that Managing Director exercises his additional vote and it becomes a tie up.

This is completely wrong my friend. In company law no additional vote is available to the Managing Director as mentioned by you.

Your resolution has been defeated in the board meeting due to 3 votes cast against it.

For further clarity please revert.

Best Regards

Ankur Garg

Raman R (Partner) (248 Points)
Replied 24 April 2009

I understand that the Articles of Association of a Private Company can make provisions to this effect. If this is prohibited under the Companies Act, will you please quote the relevant provisions?

I do agree that this is not permitted in a Listed Company.

Regards,

R. Raman

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 24 April 2009

Here I disagree with you. You can not write anything in the Article and overrule the Company Act, 1956.

As per Section-9 provisions of Company Act, 1956 have over-riding effect over Memorandum and Article of Association of the Company.

It is not necessary or possible to specifically prohibit or allow things in law by making provisions. Nobody can draft the law in such a way as to provide each & every possible thing. Some times we must appreciate and give some respect to the intention of law and its maker.

Further it does not make any difference whether it is a Public or Private or Listed or Unlisted Company.

If law allow a director to cast vote in 3 or 4 capacity then manipulation is due like in your case.

Well the discussion above is based on my personal understanding of law. Looking forward for more fruitful discussion from your side.

Best Regards

Ankur Garg

Raman R (Partner) (248 Points)
Replied 25 April 2009

Dear Mr. Ankur,

Shall be thankful for specifically quoting the relevant provisions from Companies Act, 1956. Please note that the company is a private company. If there is any specific prohibitions in the Act, I would like to know. I am not talking about ethics and I would like to know the legality when there is specific provisions in the Articles permitting additional voting rights.

Regards,

R. Raman

CS Gaurav Jain (Consultant) (63 Points)
Replied 25 April 2009

Dear Raman

I agree with opinion of Mr. Garg.

As stated by you, MD and Chairman have Casting Votes.

Question of casting Vote is only in case of equality of votes.

In your case the primary requirement of equality of votes is not fulfilled.

When 3 out of 5 has voted against the resolution , the resolution can't be passed by using castng vote.

CS Gaurav Jain

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 30 April 2009

Thanks Gaurav for supporting my view.

Mr. Raman,

I surrender

Ajay Mishra (Company Secretary) (74332 Points)
Replied 30 April 2009

I think Mr. Ankur is absolutely right and makinig valuable effort to give answere on casting vote, if any body have a different view, plese give their view.

Thanks Ankur

Regards

Ajay

Kanchi Agarwal (Technical Support & Student) (479 Points)
Replied 30 April 2009

Really surprised to see that Mr. Raman is not ready to accept the legal provision.

He is not bothered about ethics. Wow...

yes resolution has been defeted by 2-3. Thanks Mr. Ankur for valuable sharing.

Raman R (Partner) (248 Points)
Replied 30 April 2009

Dear All.

I do bother about ethics but at the same time I would like to know the correct legal position and that is the reason I posted this query.

Please managing director has got additional casting vote and the tie up arises only on exercising this. Subsequent to this, the Articles permit the Chairman to use his casting which he exercises only such tie up. If our colleagues can go through the company law books by experts, it clearly says that the Chairman who is also a Director can vote favouring the resolution as a Director and while exercising his casting vote he can, as Chairman, vote against the resolution.

The law is not quite clear especially when the Articles permit additional vote to the Managing Director.

Mr. Ankur, you need not surrender as constructive argument always ends in good and appreciable solution.

I shall be thankful for all the members to understand and appreciate the situation and please note that I am also a professional and my intention is not to waste the valuable time of my colleagues.

Thanks and Regards,

R. Raman