Supreme Court: Validity of Shareholder Votes Depends on Lawful Authorisation, Not on Who Voted First

June 2, 2026 : The Supreme Court has ruled that when rival factions within a society dispute the authority to exercise voting rights attached to shares held in a company, the validity of the vote must be determined by lawful authorisation under the society’s governing documents and applicable statutory provisions, rather than by the order in which competing votes were cast.

A Bench comprising Justice Vikram Nath and Justice Sandeep Mehta delivered the judgment while setting aside a decision of the Calcutta High Court Division Bench, which had held that where competing votes were submitted on behalf of the same society, the vote cast first in point of time would prevail.

The dispute concerned voting rights attached to shares held by three societies, Hindustan Medical Institution, Eastern India Educational Institution, and Belle Vue Clinic, in Birla Corporation Limited. Internal disputes within these societies had led rival groups to assert competing claims over their authority to nominate representatives and exercise voting rights at the company’s Annual General Meetings (AGMs).

The controversy arose from an interim arrangement framed by the High Court, under which the scrutiniser was directed to recognise and count the vote that was cast first whenever competing votes were submitted on behalf of the same society. The High Court had reasoned that the first vote cast would prevail irrespective of whether it was exercised through the Board of Trustees or the Managing Committee.

The Supreme Court rejected this approach, holding that neither the Companies Act, 2013 nor the Companies (Management and Administration) Rules, 2014 recognise chronology as the deciding factor for the validity of votes cast through remote electronic voting. The Court emphasised that voting rights can only be exercised by a person who is duly authorised to act on behalf of the member concerned.

The Bench observed that disputes involving rival claims of authority over a juristic entity cannot be resolved merely by giving preference to the vote cast earlier in time. Such an approach, it noted, improperly substitutes chronology for legal authority and disregards the governance structure established under the society’s constitutive documents.

According to the Court, the validity of a vote cast on behalf of a society must be traced to lawful authority derived from the society’s governing instruments and the statutory framework regulating corporate voting. The determination cannot rest solely on which vote was cast first.

The Court further clarified that while the statutory framework prevents a member from changing or recasting a valid remote e-vote once it has been exercised, it does not permit a court to treat the first vote cast as automatically valid regardless of whether the person casting it was authorised to do so.

Holding that the “vote-cast-first” principle has no basis in company law or in the statutory framework governing electronic voting, the Supreme Court concluded that the High Court’s direction was legally unsustainable. The appeals were accordingly allowed, and the Division Bench judgment was set aside.