Majority of Trustees Can Bind Society; First-Vote-Prevails Rule Struck Down
A Supreme Court bench of Justices Vikram Nath and Sandeep Mehta holds that a written majority-trustee resolution validly authorises a society, rejecting the Calcutta High Court’s unanimity and first-vote rules.
The Supreme Court has set aside a Calcutta High Court Division Bench order that had required all trustees of three registered societies to act in unanimity before their votes in Birla Corporation Limited could be counted, and that had further directed that whichever vote was cast first would prevail regardless of who authorised it. In a judgment dated 26 May 2026, a bench of Justice Vikram Nath and Justice Sandeep Mehta held that the by-laws of the societies expressly permitted delegation by a written resolution signed by a majority of trustees, that the Indian Trusts Act, 1882 itself carves out an exception where the governing instrument provides otherwise, and that the Companies Act, 2013 framework for electronic voting does not make temporal priority a substitute for lawful authority. The suits and interlocutory applications have been restored to the Calcutta High Court for fresh consideration.
How the Dispute Reached the Supreme Court
Three societies registered under the West Bengal Societies Registration Act, 1961 Hindustan Medical Institution, Eastern India Educational Institution, and Belle Vue Clinic each hold shares in Birla Corporation Limited. Hindustan Medical Institution holds 9.30 per cent, Eastern India Educational Institution holds 4.36 per cent, and Belle Vue Clinic holds 0.23 per cent.
Priyamvada Devi Birla died on 3 July 2004. Testamentary proceedings relating to her estate have been pending before the Calcutta High Court. By an order dated 23 August 2012, the Division Bench of that court appointed an Administrators Pendente Lite Committee for the administration and protection of the estate during those proceedings. The Supreme Court declined to interfere with that appointment on 26 November 2012.
Disputes arose within each of the three societies about who was authorised to act on their behalf in relation to the BCL shares. The societies relied on resolutions passed on 4 March 2021 by circulation of their trustees, asserting that those resolutions effected changes in their boards and managing committees and issued valid authorisations. Ms. Anamika Lodha contested those resolutions and instituted separate title suits. Applications for ad interim stay of the 4 March 2021 resolutions were declined on 10 March 2021, and no interim order in appeal was granted in her favour.
At BCL’s 2021 annual general meeting, votes cast on behalf of the societies through remote electronic voting were treated as invalid by the scrutiniser on account of rival claims. BCL then issued notice for its annual general meeting on 27 September 2022. The three societies filed suits on the Original Side of the Calcutta High Court C.S. Nos. 212, 213 and 214 of 2022 seeking injunctions directing BCL to act on the authorisations issued by their boards of trustees and restraining BCL from preventing their representatives from attending and voting.
By three separate orders dated 16 September 2022, the Single Judge declined ad interim relief. The Single Judge held that it was for each society to decide internally who would exercise its voting rights, that BCL had no role in resolving those internal questions, and that the scrutiniser could not be directed at the ad interim stage to accept one set of rival authorisations over another. The Single Judge also noted that the societies had not challenged the scrutiniser’s 2021 report except by letters and had waited about a year before filing suit.
The societies appealed. By a common order dated 26 September 2022, corrected on 27 September 2022, the Division Bench affirmed the Single Judge but added a caveat: the vote cast first by the plaintiff society, whether by the managing committee or the board of trustees, would be taken into consideration, and no subsequent communication could be used to invalidate it. The Division Bench reached that position by applying Section 48 of the Indian Trusts Act, 1882 and the Supreme Court’s decision in L. Janakirama Iyer v. Nilakanta Iyer to hold that trustees must act in consonance, and by reading Rule 20 of the Companies (Management and Administration) Rules, 2014 to mean that a vote once cast electronically cannot be displaced.
The annual general meeting was held on 27 September 2022. Disputes again arose at the stage of attendance and voting, and the scrutiniser invalidated the societies’ votes on account of rival claims. BCL submitted the voting results and scrutiniser’s report on 29 September 2022.
Six civil appeals reached the Supreme Court: three by the societies and three by Ms. Anamika Lodha. On 4 January 2023, the Supreme Court passed an interim order staying the operation of the Division Bench’s direction that trustees must act in consonance, clarifying that a majority decision of the trustees would be treated as the decision of the board, and directing that the interim order would not affect resolutions or decisions taken before 4 January 2023.
The Three Legal Issues the Court Identified
The Court confined its examination to three legal premises on which the Division Bench’s operative directions rested: first, whether trustees must act in unanimity; second, whether the managing committee and the board of trustees could be treated as interchangeable for the purpose of voting authority; and third, whether the vote cast first prevails irrespective of the source of authority. The Court was explicit that it was not adjudicating the factual validity of any particular resolution, authorisation, or appointment, all of which remain to be decided by the competent forum.
Issue I: Trustee Unanimity and the By-Laws
Clause 24 of the by-laws of each society provides that the trustees may regulate their meetings and proceedings as they decide, may by resolution authorise any one or more of them to act on their behalf, and may make such delegation by a general or special resolution passed without any meeting and “evidenced in writing under the hands of the majority of the trustees.” The clause further declares that a resolution so made shall be as valid and effectual as a resolution passed at a meeting of the trustees.
The Court read Clause 24 as a complete and deliberate structure: it confers the power, prescribes the mode, and attaches legal efficacy to the act. Applying the principle from Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. that interpretation must depend on both text and context, and the principle from J.K. Cotton Spinning & Weaving Mills Co. Ltd. v. State of U.P. that a construction rendering any word redundant is to be avoided, the Court held that accepting the Division Bench’s unanimity requirement would strip the words “under the hands of the majority of the trustees” and the deeming clause of all operative content.
The Court then turned to Section 48 of the Indian Trusts Act, 1882, which provides that when there are more trustees than one, all must join in the execution of the trust, “except where the instrument of trust otherwise provides.” The Court held that this exception is not incidental but is built into the statutory rule itself. Section 48 does not enact an absolute requirement of unanimity; it makes the governing instrument primary where it provides otherwise. Since Clause 24 of the by-laws expressly permits majority-backed delegation, Section 48 could not be applied as though it imposed an overriding unanimity requirement.
The Court also addressed the Division Bench’s reliance on L. Janakirama Iyer. That decision explains the general principle underlying Section 48, but it must be read subject to the same statutory qualification. A precedent explaining Section 48 cannot be used to nullify an express provision in the by-laws that permits majority-backed delegation. The error in the impugned judgment lay in lifting the general rule from Section 48 and L. Janakirama Iyer without giving effect to the express exception and to the societies’ own governing framework.
The Court held that a majority-backed decision falling within the framework of Clause 24 cannot be disregarded merely because there is dissent or non-joinder by one or more trustees.
Issue II: Board of Trustees and Managing Committee Are Not Interchangeable
Clause V of the Memorandum of Association of Hindustan Medical Institution and Eastern India Educational Institution, and Clause VI in the case of Belle Vue Clinic, together with the corresponding Rules 23 and 24 of their Rules and Regulations, establish a clear two-tier structure. All movable and immovable properties vest in the trustees. The trustees have power to nominate members of the managing committee and to delegate authority to it, and that power operates “notwithstanding” any decision by members in any general meeting. The managing committee is expressly stated to be entitled to exercise “only such powers as are delegated by the trustees from time to time.” Even the clause entrusting management to the managing committee is made “subject to” the preceding sub-clause.
The Court held that the words “notwithstanding,” “subject to,” and “only” are of decisive significance and are not drafting surplusage. The board of trustees is the source body; the managing committee is a body of delegated administration. Its authority is derivative and circumscribed by delegation.
The controversy concerned voting rights attached to shares held by the societies in BCL. Those shares form part of the assets and properties of the societies. Since the constitutive documents declare that the properties vest in the trustees, the authority to determine how rights flowing from those properties are exercised must be traced to the trustees, unless there is a valid and demonstrable delegation to the managing committee. The inquiry into voting authority had to begin with the trustees and with the existence or absence of delegation. It could not begin by assuming that the managing committee stood on the same footing.
The Division Bench had itself noticed that properties vest in the trustees and that the managing committee derives authority through delegation, yet its operative caveat directed that the vote cast first, whether by the managing committee or the board of trustees, would be counted. The Court held that this effectively collapsed the two bodies into one undifferentiated category, which the constitutive documents do not permit.
Issue III: Priority in Time Does Not Determine Validity of a Vote
Section 108 of the Companies Act, 2013 enables members to vote by electronic means. Rule 20 of the Companies (Management and Administration) Rules, 2014 prescribes the procedure. The BCL notice dated 8 August 2022 convening the 102nd Annual General Meeting set out the procedure for remote e-voting in implementation of that framework.
The Court examined Rule 20 and found that its provisions prevent the same member from changing its vote or voting again once a valid remote e-vote has been cast. The rule addresses the situation of a single member casting multiple votes and is directed at preventing double-voting. It does not address the situation where there are rival claimants purporting to act on behalf of the same juristic member. The statutory framework therefore does not authorise a court to hold that priority in point of time, by itself, determines the validity of a vote cast on behalf of a juristic member.
The validity of a vote cast on behalf of a society must rest upon lawful authority traceable to the governing documents of the society and the statutory framework governing voting. The direction that the vote cast first would prevail irrespective of the source of authority is unsustainable in law.
Ms. Anamika Lodha’s challenge to the first-vote direction succeeded on the same reasoning. However, to the extent she had supported the Division Bench’s view that trustees must act in consonance or that voting authority could be approached without regard to the governing structure of the societies, those submissions were rejected for the reasons recorded on the first and second issues.
Outcome
The civil appeals by Hindustan Medical Institution, Eastern India Educational Institution, and Belle Vue Clinic are allowed. The civil appeals by Ms. Anamika Lodha are allowed to the limited extent of her challenge to the first-vote direction.
The common judgment and order dated 26 September 2022, as corrected on 27 September 2022, passed by the Division Bench in APOT Nos. 180, 181 and 182 of 2022, is set aside. The orders dated 16 September 2022 passed by the Single Judge in G.A. No. 1 of 2022 in C.S. Nos. 212, 213 and 214 of 2022 are also set aside.
The Court held that a decision or delegation evidenced in writing under the hands of the majority of the trustees, in terms of Clause 24 of the by-laws, is capable in law of constituting a valid decision or authorisation on behalf of the society. The contrary view that trustees could bind the society only if they acted in consonance, and that absence of joinder by even one trustee would defeat the decision, is unsustainable.
The Court further held that the validity of a vote cast on behalf of a society cannot be determined merely by priority in point of time and must rest upon lawful authority traceable to the governing documents and the statutory framework.
The Court clarified that it has not adjudicated upon the factual or ultimate legal validity of any particular resolution, including the resolutions dated 4 March 2021, or of any subsequent authorisation, cessation, removal, nomination, or appointment. All such questions, including the maintainability of the suits and the entitlement of any particular person to act on behalf of the societies, shall be decided by the competent forum on their own merits and in accordance with law.
The suits and interlocutory applications are restored to the file of the Calcutta High Court. The Single Judge shall proceed to consider the same afresh, if anything survives for consideration, in accordance with law and in the light of the observations made in the judgment. There is no order as to costs.