Chairman Of The Board And Chairman Of The General Meetings

 II.               CHAIRMAN OF THE GENERAL MEETINGS

Generally the AOA of a Co. provides that the chairman of the board shall preside over the General Meetings as the chairman and it may also provide for the manner and procedure for the election of the chairman.[22] If the board has appointed a chairman and the AOA of the Co. is lines appointment of the chairman. If the chairman appointed is not present for the meeting within fifteen minutes of the appointed time or is unwilling to chair then the directors among themselves may elect one to be the chairman and if no director is willing to chair then members among themselves shall choose among themselves to be the chairman.[23] If the AOA is not in lines with regulation 50, 51 and 52 in Table A, then a resolution is to be passed either at the board or general meeting to authorize Chairman of the board to preside at all general meetings. Section 175 of the companies act comes into picture only when the AOA has not provided anything in regard to the chairman of the board. The chairman is appointed only for the purposes of the General Meeting and is deprived of managerial and executive powers.

A.    APPOINTMENT OF THE CHAIRMAN

According to Sec. 175(1) of the Companies Act, the members present at the meeting shall amongst themselves choose to be the chairman.[24] In other words, the members of the company shall be the chairman for the purposes of General Meeting. However, this general rule does not apply when the AOA of the company otherwise provides. According to Art. 50 of Table A of the Companies Act, 1956 says that the chairman of the Board shall preside over the General Meeting of the Company. If this provision is followed in the strict terms, then this may result in undesirable consequences because under Art. 54 of Table A, the chairman has a second or casting vote in case of tie. Hence a person who is not a shareholder will become entitled to a casting vote despite the fact that he does not have his first voting right. But the courts have taken a different view. In the case of Halcyon Heights Estates Ltd., Re,[25] it was held that when the chairman is not a member or holds non voting shares then he does not have a casting vote.

B.     MANNER OF THE ELECTION OF THE CHAIRMAN.

Any candidate for the office of the chairman shall not preside over the election of the chairman as per the common law rule and the chairman who seeks re election shall also vacate the chair pending the election unless he is elected by a show of hands or as the AOA otherwise provide.[26] A temporary or provisional chairman may be appointed to run the meeting until a proper chairman for the purpose of the General Meeting is appointed. Once the appointment of the chairman is done, any objection as such shall be made immediately, or else any irregularity may be cured by acquiescence.[27]

The manner of appointment and election of the chairman shall be in consonance with the articles of the company. In the case of Tamil Nadu Water Investment Co. Ltd. v. Aidqua Holdings (Mauritius) Inc (No. 2)[28], the Articles of the Company provided that the chairman of the BOD shall be the chairman of the General Meetings. If this was not possible, then any other director elected by the shareholder would chair the General Meeting.

At the first instance the election of the chairman shall be show of hands and the elected persons shall preside over the meetings. If at a later stage a poll is demanded then the chairman elected by show of hands shall preside over the meeting till the result of the poll is announced. If someone else is elected as the chairman then the newly elected chairman shall preside over rest of proceedings of the meeting.[29]

C.    REMOVAL OF THE CHAIRMAN

A chairman, when elected by the meeting may also be removed by the meeting. The general procedure that is followed is that a member would propose a vote of no confidence against the chairman and this move is seconded by another member. The chairman against whom the motion is moved gets the right of representation and then the matter is put to vote. If he loses then he shall vacate the office.

When the appointment of the chairman is done under the articles of the company, then the members do not have the right to propose against the removal of the chairman. Although the meeting may remove the chairman if the act done is in bad faith, partiality or abuse of authority. However, such a case will be governed by the articles and a provision may be provided for the challenge of the ruling against the chairman. The chairman shall vacate the office when the challenge to his ruling is debated.[30]

D.    POWERS OF THE CHAIRMAN

1.      Casting vote of the Chairman

The casting vote is generally referred to as the second vote and this power is given to the chairman to resolve he deadlock. Although he has no common law right but this power is generally given in the AOA of the Co. this is also known as second vote. The concept of second vote is drawn from the practice in the House of Commons wherein the speaker had to decide when the votes were equal.[31] Hence a casting vote is a vote which is decisive in nature and it tilts the scale on one side or another.[32]

There is no Common Law Right to a casting vote.[33] The Chairman of the General Meeting may have a casting vote in the Board Meetings and General Meetings, if he is empowered through the AOA of the company as per Regulation 74(2) of Table A of Schedule I. If the AOA is in accordance with Art. 54 of Table A of the Companies Act, 1956, the chairman can exercise his casting vote either through show of hands or through poll. However, this position is in conflict with Sec. 87 of the Companies act which says that voting rights in a poll shall be in accordance with the paid value of the equity shares. In the case of Weakley v. Amalgamated Union of Engineering Works, The Times,[34] it was held that in the case of equality of votes, the chairman cannot exercise his right of casting vote if he is presiding over a meeting where he is not a voting member. If there is no provision in the AOA with regard to casting of vote in case of a tie, then there is no need for an ordinary resolution to be passed to that effect. In Re, Medefield Pty. Ltd.,[35] it was held that when two persons form a joint venture company and both of them have equal voting power (control), then there is no necessity for a casting vote.

It is upon the discretion of the chairman as to whether to use it or not to use it at all and the manner of the use of his power. But it generally becomes pertinent for him to exercise this power when there is division of opinion in a representative meeting and there is no majority in favor or against the proposed motion and maintaining the status quo would not be for the benefit of the company. In the case of R v. Bradford Metropolitan Council[36], it was held that if the chairman elects to cast his casting vote then it is not necessary for him to use it the same way as he did it in his first vote. Also in the case of AES OPGC Holding (Mauritius) v. Orissa Power Generation Corpn. Ltd.[37], it was held that the casting vote of the chairman shall not be exercised in such a manner that may affect the exercise of executive powers of the Managing Director in the affairs of the company.

It is well settled that the chairman of the meeting does not have an inherent right of casting vote. Such a power is conferred on the chairman through the articles of the co. The institution of the casting vote for the first time was introduced in the common law for the purpose avoiding the deadlock which would otherwise ensue.[38]

2.      Powers of the Chairman under common law

The chairman also posses certain powers under the common law such as power to adjourn the meeting and the power to bring the discussion close to any discussion. However, these powers cannot be misused by the chairman by acting in a malafide manner.

In the case of absence of specific provisions in AOA with regard to the details of the proceeding then it must be regulated by the chairman and in case the decision of the chairman is quarreled then it shall be regulated by the majority of those present.[39] The decision of the chairman shall be final and binding to all his successors given at any stage of the meeting.[40] The validity of a vote shall be decided by the chairman and his decision shall be final and the courts shall not interfere with such a decision unless bad faith or fraud is proved.[41] Also the decisions with regard to the validity of proxies is also final.[42] At the time of the election of a chairman of the general meeting, a person assumes the office of the chairman for the purposes of the election, then in such cases the rulings of the chairman is challengeable and the courts shall decide as to the entitlement of vote. In the case of Re Bradford Investments Ltd.[43] the court held that both ordinary shareholders and the equity shareholders are entitled to vote even when the dividends of the ordinary shareholders was in arrears.

3.      Power of adjournment and postponment

Under the common law the chairman has no right to adjourn the meeting at his own will and pleasure. Consent of the meeting has to be taken before the adjournment is pronounced.[44]  But the power of adjournment can be exercised by the chairman when unruly conduct interferes with the functioning of the business. In the case of John v. Rees[45] it was held that when it is demanded for the adjournment of the meeting and no conclusion is reached then in such a case the chairman has the power to suspend the meeting to a later date until the result of the poll is known. Hence it could be inferred that residual power lies within the chairman who in other sense of the term would amount to adjournment.[46] This is the position in the common law, the AOA may provide for the chairman with the power of adjournment under certain restrictions as the case may be.

However the chairman™s decision of adjournment will be invalid if it is based on the following grounds:

• The decision taken was in bad faith and did not take into account relevant factors
• Irrelevant factors were taken into consideration.
• The conclusion reached for adjourning the meeting was taken on such grounds as no reasonable chairman would do.

The above principles have been enunciated in the case of Associated Provincial Picture Houses Ltd. v. Wednesbury Corpn.[47] The same approach was adopted in the case of Second Consolidated trust Ltd. v. Ceylon Amalgamated Tea and Rubber Estates Ltd.[48]

4.      Power of expulsion

Since it is the duty of the chairman to regulate the conduct of the meetings and therefore it shall be the power of the chairman to expel any member from the meeting if he seriously interferes with the conduct of the meeting. However expulsion can be made only after the concerned member has been warned of his conduct and consequences. Force shall not be used and approval of the majority can be obtained for expulsion.

5.      Power to withdraw resolution

If the chairman erroneously withdraws a resolution then he may be liable to vacate the office. In the case of PIK Securities Ltd. v. United Western Bank (P) Ltd.[49] a special resolution was tabled at the meeting and the chairman unilaterally withdrew without the consent of the members and also prevented them from giving their opinion on the subject matter of the resolution. It was held that the members had the right to elect a new chairman and conduct the rest of the meeting.

6.      Power as to amendments to resolutions

The chairman while permitting an amendment has to comply with the legal requirement that a complete identity has to be maintained between the substances of the resolution as it was notified to the members and as it is passed in the meeting.[50] The chairman has the discretion to put the amended resolution to vote without following the formalities that the amended resolution shall first be moved by a voter and then seconded by another.[51] The chairman has no right to refuse to put an amendment before the meeting which a fairly arises and which is specified in the notice of the meeting. Such an amendment may be proposed and passed in the meeting.[52]

7.      Power to order poll

Sec. 179(1) gives discretionary power to the chairman to order poll on any resolution, either of his own motion or when it is demanded by the members. This is however not a personal right to be exercised by the chairman rather in the interests of the whole body including the proxies this right is to be exercised to ascertain the true sense of the meeting. Sec. 179 confers chairman™s power or the prerogative and not a duty or obligation. In the case of Jetu Jacques Tara Lalwani v. JBA Printing Inks Ltd.[53] it was held that there is no provision in the act, rules or the AOA which says that there is an obligation on the chairman of the meeting to order the poll. However the poll may be ordered by the chairman ˜before™ or ˜on™ the declaration of the result of voting by show of hands. It is upon the chairman to fix a time within 48 hours to take the poll. Notice of such a time is not necessary to be given. The section is silent as to whether poll can be taken at a place other than the place where meeting was held, if the place is not available for taking the poll.[54] As per sec. 185 the chairman shall also have the power to regulate the manner of the conduct of the poll.

 8.      Role of the chairman during discussions at General meetings

In the following cases the chairman has the power to stop the discussion of any matter relating to any business in the agenda of the meeting:

• When the point of discussion is such that it would be either defamatory for the management, directors or any other person.
• When the point of discussion is sub judice, that is when the point of discussion is such that a suit or legal proceeding is pending before the Court of law in relation to it.

However, fair comment does not prejudice a trial.[55]

E.     Duties of the chairman

1.      Impartiality and absence of interest

a)      Impartiality

It shall be the duty of the chairman to see that a reasonable chance is given to all the members to discuss on any proposed resolution and all the views are adequately taken into consideration. Care should also be taken to see that the minority is in no way oppressed and he must bow to the majority vote in respect of matters where he has to take decision.[56]

b)     Absence of interest

This can be understood with the help of the following case law. In Nagappa Chettiar v. Madras Race Club[57] in this case the chairman was a candidate for the election of the managing committee and when objections were raised on certain rulings the chairman ruled in favour of his nominations. The court held that the chairman was in the position of a quasi judicial officer and hence there was a conflict between his duty and interest. The maxim that no man shall be judge in his own cause is of universal application and therefore the meeting was invalid.

2.      Duty to appoint scrutineers

As per Sec. 184, it shall be the duty of the chairman to appoint two scrutineers, where a poll is to be taken, to scrutinize the votes given on poll and to report to him. It shall be the power of the chairman to remove any scrutineers from the office, at any time before the result of the poll, and fill the vacancies arising from such removal or any other cause.

3.      Duty regarding conduct of meetings

The following are the duties of the chairman with regard to the conduct of the meetings are as follows[58]:

1. The meeting is properly convened and constituted i.e., there was proper notice and quorum of members present and that his appointment was regular and in order.
2. All the requirements of statutory rules, standing orders, regulations and all relevant rules are duly observed.
3. Items of the business are taken out in order as set out in the agenda paper.
4. Sufficient opportunity is given to those who wish to speak particularly the minority.
5. Prevent irrelevant discussions
6. Putting the motions and amendments in the proper form.

 F.     Non applicability of Sec. 175

When AOA of a Co. is silent with regard to the chairman then provisions of Sec. 175 is to be applied for the purposes of election and appointment of the chairman. However there may be a situation when Sec. 175 may be non applicable. A private co. which is not a subsidiary of a public Co. can in its AOA provide for the appointment and the manner of election of a chairman for the purposes of General Meetings in a manner other than as prescribed under sec. 175.[59]

In Janaki Printers Pvt. Ltd v. Nadar Press Ltd.[60] it was held that where the chairman did not arrive within half an hour of the appointed time of the meeting but a quorum was present and the meeting commenced after the arrival of the chairman then it cannot be said to be invalid meeting as the irregularity in delayed holding of the meeting is deemed to have been waived by the members present.