The Supreme Court has held that a decision taken by a majority of trustees, if supported by the governing by-laws of a society, can validly bind the society and that courts cannot apply a “first vote cast prevails” principle while determining the validity of votes exercised on behalf of a juristic entity. 

The bench of Justice Vikram Nath and  Justice Sandeep Mehta set aside the Calcutta High Court judgment which had treated trustee decisions as requiring complete consonance and had given primacy to whichever competing vote was cast first. 

The ruling came in a batch of appeals involving disputes surrounding the exercise of voting rights attached to shares held by Hindustan Medical Institution, Eastern India Educational Institution and Belle Vue Clinic in Birla Corporation Limited (BCL). The dispute arose after rival groups claimed authority to represent these societies and vote at company annual general meetings. 

The issue raised was whether the High Court was justified in holding that trustees had to act unanimously and whether voting rights could be determined based merely on which claimant voted first. 

The controversy stemmed from internal disputes within the societies concerning resolutions allegedly passed in March 2021 that changed trustees and managing committees. Rival claims emerged as to who had authority to issue authorisations and cast votes relating to the societies’ shareholding in Birla Corporation. Because of competing claims, votes cast in previous annual general meetings had reportedly been invalidated. 

The Supreme Court examined Clause 24 of the societies’ by-laws which expressly permitted delegation of authority through written resolutions signed by a majority of trustees. The Court found that the High Court had wrongly relied on Section 48 of the Indian Trusts Act, 1882, which generally requires co-trustees to act together. The Court stressed that Section 48 itself contains an exception permitting a different arrangement where the trust instrument provides otherwise. 

According to the Court, the by-laws created a complete framework by conferring authority, prescribing the method of delegation and attaching legal consequences to majority-backed decisions. Ignoring those provisions would effectively make important language in the by-laws meaningless. 

Rejecting the High Court’s approach, the Supreme Court observed that the requirement of unanimity cannot be imported where the governing framework specifically recognizes majority-based decision making. It held that a majority-backed decision falling within the by-law framework cannot be disregarded merely because one or more trustees dissent or do not participate. 

The Court also examined the governance structure of the societies and found that the Board of Trustees and Managing Committee did not stand on equal footing. The Memorandum of Association and Rules made it clear that all properties of the societies vested in the trustees and that the Managing Committee could exercise only those powers specifically delegated to it. 

The Bench noted that voting rights attached to company shares are rights arising from the societies’ assets. Therefore, the authority to determine how such voting rights should be exercised had to originate from the trustees unless valid delegation was shown. Treating the Managing Committee and Board of Trustees as interchangeable authorities, according to the Court, was inconsistent with the societies’ governing structure. 

On the issue of electronic voting, the Supreme Court held that the High Court’s direction giving primacy to the first vote cast was unsupported by either the Companies Act, 2013 or the Companies (Management and Administration) Rules, 2014. The statutory scheme only prevents duplication or later modification of a valid vote. It does not create a rule that the first person to vote automatically succeeds, regardless of whether such person possessed lawful authority. 

The Court observed that the statutory framework requires verification of the authority under which a non-individual shareholder votes. Therefore, authority is foundational to the voting process and chronology alone cannot determine validity. A vote cast first without lawful authority cannot become valid simply because it was earlier in time. 

Allowing the appeals, the Supreme Court set aside both the Division Bench and Single Judge orders. It held that a decision or delegation evidenced in writing under the hands of a majority of trustees is legally capable of constituting a valid authorization. The Court also declared that the validity of votes cast on behalf of societies must rest upon lawful authority under governing documents and cannot depend merely on which claimant acted first. 

However, the Court clarified that it had not decided the factual validity of the disputed 2021 resolutions or any subsequent appointments, removals or authorisations. Those questions will continue to be examined independently by the competent forum.

Case Details

Case Title: Hindustan Medical Institution Versus Birla Corporation Limited & Ors

Citation: JURISHOUR-1416-SC-2026

Case No.: SLP (C) NO. 1182 OF 2023

Date: 26/05/2026

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