Majority Decision Of Trustees Binding If Society By-Laws Permit; Priority In Time Doesn't Validate Unauthorised Vote: Supreme Court

"A vote cast first but without lawful authority cannot become valid merely by reason of priority in time. The law protects the first valid vote of the member against duplication or change. It does not validate the first unauthorised act of a rival claimant." Supreme Court, in a significant ruling dated May 26, 2026, held that the general principle of co-trustees acting unanimously under Section 48 of the Indian Trusts Act does not override specific provisions in a society’s by-laws that allow for majority-backed decisions.

A bench of Justice Vikram Nath and Justice Sandeep Mehta observed that the validity of a corporate vote cast by a juristic entity must rest on lawful authority traceable to its governing documents rather than a "race" to cast the electronic vote first.

The dispute arose between three societies—Hindustan Medical Institution, Eastern India Educational Institution, and Belle Vue Clinic—and Birla Corporation Limited (BCL) regarding the exercise of voting rights attached to shares held by the societies. Rival factions within the societies issued conflicting authorizations to vote at BCL’s Annual General Meetings. The Calcutta High Court had earlier directed that the "vote cast first" should prevail and held that trustees must act unanimously, leading to the present appeals.

The primary question before the court was whether Section 48 of the Trusts Act imposes an absolute requirement of unanimity even when society by-laws permit majority decisions. The court was also called upon to determine whether a Managing Committee stands on the same plane as a Board of Trustees regarding asset management and whether the "priority in time" of an electronic vote can substitute for lawful authorization.

Majority Rule Overrides Section 48 Trusts Act If By-Laws So Provide

The Court examined Clause 24 of the societies' by-laws, which expressly allowed for delegation of authority through resolutions evidenced in writing under the hands of the majority of the trustees. The bench noted that while Section 48 of the Trusts Act generally requires all trustees to join in the execution of a trust, the statute itself contains an exception: "except where the instrument of trust otherwise provides."

Court Interprets Scope Of Statutory Exceptions

The bench observed that the High Court erred by lifting the general rule of unanimity from Section 48 without giving effect to the express exception within the societies' own governing framework. The Court emphasized that a proper construction of the by-laws must give weight to the "deeming effect" built into the clause, which places a majority-backed resolution on the same legal footing as a resolution passed at a full meeting of trustees.

"Once that position emerges from the governing instrument itself, Section 48 of the Trusts Act could not have been applied as though it imposed an overriding requirement that all trustees must act in consonance."

Internal Hierarchy Between Trustees And Managing Committee

The Supreme Court clarified the two-tier structure of the societies, noting that the Board of Trustees is the "source body" while the Managing Committee is a "body of delegated administration." Under the constitutive documents, all movable and immovable properties vest in the trustees. The Managing Committee only exercises such powers as are specifically delegated to it by the trustees from time to time.

Trustees Remain The Primary Reservoir Of Authority

The Court held that the High Court was incorrect to treat the Board of Trustees and the Managing Committee as interchangeable or "normatively interchangeable" bodies. Since the shares in BCL form part of the assets of the societies, the authority to determine how those rights are exercised must be traced back to the trustees unless a valid delegation is proved.

"The constitutive documents do not permit the Board of Trustees and the Managing Committee to be treated as interchangeable bodies for all purposes... To do so would be to ignore the express textual arrangement."

Chronology Cannot Substitute For Lawful Authority In E-Voting

Dealing with the High Court's direction that the "vote cast first" should prevail, the Supreme Court held that neither Section 108 of the Companies Act, 2013, nor the 2014 Rules permit the counting of a vote merely because it was cast first. The statutory framework contemplates a fair and transparent scrutiny where the scrutinizer verifies the Board Resolution or authority letter under which the vote is cast.

Validity Of Vote Rests On Governing Documents Not Speed

The bench reiterated the principle from Babu Verghese v. Bar Council of Kerala that when the law requires a particular act to be done in a certain manner, it must be done in that manner or not at all. The Court noted that the "first vote" is only protected against duplication if it is, in law, a valid vote of the member. Priority in time cannot validate an act that lacks the foundational source of authority.

"The impugned caveat, therefore, substitutes chronology for authority. A vote cast first but without lawful authority cannot become valid merely by reason of priority in time."

The Supreme Court set aside the common judgment of the Calcutta High Court Division Bench and the interim orders of the Single Judge. The bench restored the original suits and interlocutory applications to the High Court for fresh consideration. It clarified that it has not adjudicated on the factual validity of any specific resolutions or appointments, which remain to be decided by the competent forum on their own merits in accordance with the legal observations made in this judgment.

Date of Decision: May 26, 2026