Section 110 of the Companies Act, 2013 (“the Act”) is a provision of controlled delegation. It allows the shareholder franchise to be exercised without the physical assembly of a general meeting, but it does so through a mechanism tightly regulated by statute and rules. The postal ballot is not a general-purpose substitute for the AGM or EGM. It is a targeted instrument for a defined set of decisions that the Central Government has declared must, or may, be transacted through postal ballot.
The Two-Tier Structure of Section 110
Section 110(1) creates a distinction between compulsion and election. Clause (a) empowers the Central Government to notify items of business that shall be transacted only by means of postal ballot. Clause (b) permits a company to transact any item of business through postal ballot, except items that are required to be transacted only at a general meeting. The Act thus preserves a core of meeting-only business—such as the consideration of accounts and the declaration of dividend—while allowing the remainder to be routed through the postal mechanism.
The mandatory list is contained in Rule 20 of the Companies (Management and Administration) Rules, 2014, read with the notification issued under Section 110(1)(a). It includes the alteration of the objects clause of the memorandum; the alteration of articles of association in relation to insertion or removal of provisions which, under Section 2(68), are required to be included in the articles of a private company; the change of registered office outside the local limits of any city, town, or village; the buy-back of shares under Section 68(1); the election of a director; the sale of the whole or substantially the whole of the undertaking; and the giving of loans, guarantees, or security under Section 185. The list is not illustrative. It is a closed code, and any attempt to add to it by board resolution is ultra vires.
The Procedural Spine: Notice, Explanatory Statement, and Voting Period
Rule 20 prescribes a notice period of not less than twenty-one days, computed in the same manner as Section 101. The notice must be sent to all members, along with a draft resolution and an explanatory statement setting out the material facts and the reasons for the proposed resolution. The notice must specify the postal ballot form (Form MGT-12) and the manner in which the form is to be returned.
The voting period is a critical operational parameter. The rules require the company to complete the postal ballot process within a period not exceeding thirty days from the date of dispatch of the notice. The Board must appoint a scrutinizer who is not in employment of the company and who is, in the opinion of the Board, capable of conducting the scrutiny fairly and independently. The scrutinizer’s independence is not a formality. It is a jurisdictional condition for the validity of the postal ballot.
The scrutinizer prepares a report in Form MGT-13, which is submitted to the Chairman or the authorised officer of the company. The report is the authoritative record of the votes cast in favour and against each resolution. The resolution is deemed to have been passed on the date of the declaration of the result, and the result must be announced and displayed on the company’s website and, for listed companies, communicated to the stock exchanges.
The Interface with Remote E-Voting
Section 110 must be read alongside Section 108 and Rule 20(4)(xii). The rules expressly permit the company to provide an option for remote e-voting alongside the postal ballot. Where remote e-voting is provided, the scrutinizer’s report must consolidate the votes cast through both channels. The Securities and Exchange Board of India (“SEBI”) has mandated remote e-voting for listed companies in respect of resolutions passed at general meetings, and the postal ballot process for listed companies must be conducted in a manner that does not exclude the electronic channel.
The distinction between postal ballot and remote e-voting is substantive. Postal ballot is a statutory procedure under Section 110; remote e-voting under Section 108 is a facility that may be provided at a general meeting. A resolution under Section 110 is not a resolution passed at a general meeting in the conventional sense, and the notice requirements, the role of the scrutinizer, and the record date mechanics differ. Treating them as interchangeable is a common drafting error that can vitiate the resolution.
Judicial and Regulatory Scrutiny
The NCLT and the NCLAT have consistently held that the postal ballot procedure is mandatory where Rule 20 applies, and that a resolution passed at a general meeting in respect of a Rule 20 item is not a valid substitute. The rationale is that the postal ballot protects the absent shareholder—the member who cannot attend a meeting—by ensuring that the decision is taken with a documented, written expression of will. A company that bypasses the postal ballot in favour of a physical meeting disenfranchises the very constituency the provision was designed to protect.
The scrutinizer’s report is not a mere formality. It is the evidentiary foundation for the declaration of the result. Where the report is defective—where votes are improperly rejected, where the independence of the scrutinizer is compromised, or where the report does not reconcile the postal and electronic votes—the resolution is vulnerable to challenge under Section 245 (class action) and under the NCLT’s supervisory jurisdiction.
A compliant postal ballot is a document-intensive exercise. It requires a notice that anticipates objections, a voting form that is unambiguous, a scrutinizer whose independence is unimpeachable, and a report that withstands forensic scrutiny.
Call to Action
Anuj Desai & Associates assists companies in designing and executing postal ballot processes that are technically defensible—from the Rule 20 item classification and notice drafting to scrutinizer appointment, Form MGT-13 reporting, and the interaction with remote e-voting for listed entities. If you are planning a postal ballot or remediating a defective one, we can help you build a record that stands up to challenge.
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