scrutinizer – Corporate Laws

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•The Companies Act,1956
• Listing Agreement
• SEBI -Delisting Guidelines 2009
• Companies (Court) Rules
scrutinizer – Corporate Laws

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Who can be a “Scrutinizer”
The person so appointed is independent
person and is not interested in the subject
matter of the resolution.
scrutinizer may be:
 a retired judge
 Practicing Company Secretary
 Any other independent competent
professional
Scrutinizer is a person appointed by the
Chairman of the General Meeting or by the
Board of a company to scrutinize the
process of voting.

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Need for a Scrutinizer
In a country like India wherein majority of
shareholders are largely inactive on the
exercise of their voting.
 The role of a Scrutinizer is also to ensure
that noncontrolling shareholders are
protected from exploitation by insiders and
controlling shareholders”, and that
preventing such exploitation is “the most
serious corporate governance challenge.

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Instances of Scrutinizer
Demand for Poll
 Postal Ballot Process
 Appointment by Company Law Board
 Appointment by High Court for Court Convened
Meeting(s) in regard to a Scheme of
Arrangement/Reconstruction

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“Scrutinizer” can be appointed for following events
DEMAND FOR POLL:
• Two Scrutinizer should be appointed.
• One of them should be member of the company.
• Should not be employee or officer of the company.
DEMAND FOR POSTAL BALLOT:
• One Scrutinizer should be appointed.
• He should not be in employment of the company.
• He will be in position for a period of 35 days from the date of issue of
notice of annual general Meeting.

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“Scrutinizer” can be appointed for following events
APPOINTMENT BY COMPANY LAW
BOARD :
• Company Secretaries in Practice as
proficient persons for the purpose of
scrutinizing the process
• Company Law Board is now a days
recognizing the Company Secretaries in
Practice as proficient persons for the
purpose of scrutinizing the process of
voting adopted at the General Meeting of
Company in the matters relating to the
Section 397/398 of the Companies Act,
1956

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“Scrutinizer” can be appointed for following events
APPOINTMENT BY HIGH COURT FOR
COURT CONVENED MEETING(S) IN
REGARD TO A SCHEME OF
ARRANGEMENT / RECONSTRUCTION :
• In case of a Scheme of
Arrangement/Reconstruction of company(s)the
High court orders a meeting of shareholders or
class of shareholders or creditors of the Company
• Scrutinizes the voting mechanism adopted at the
meeting.
• Submits a report to the High Court conveying the
outcome of the meeting

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JUDICIAL PRONOUNCEMENTS
•M/s. HCL Info systems Limited - Demerged company
• HCL Technologies Limited - Resulting company
• HCL Infinite Limited - Transferee company.
Present Case:
• Company Secretary was appointed as one of the
scrutinizer
• Mr. D.C. Kottayam, member was appointed as the other
scrutinizer by the Chairperson.
• Query Raised : Contended that both the scrutinizers are
the employees of the company which violated the
provisions of Section 184 of the Companies Act.
• Applicability : As per “Section 184” one of the two
scrutinizers appointed by the Chairperson should be the
member and not an officer or an employee of the company
present at the meeting.

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JUDICIAL PRONOUNCEMENTS
Conclusion:
• It is proved and admitted that Mr. D.C.
Kottayam is a contractor/consultant.
• He was present in the meeting not as an
employee of the company but as a member.
• When the Chairperson was satisfied that he
was not an employee of the company and
thereafter was appointed as one of the
scrutinizers.

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Scrutinizers at poll
Where a poll is to be taken, the chairman
of the meeting shall appoint two scrutinizers
The chairman shall have power to remove
a scrutinizer from office.
One of the two scrutinizers appointed
under this section, shall always be a
member (not being an officer or employee of
the company)

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Manner of taking poll and result
Chairman of the meeting shall have
power to regulate the manner in which
a poll shall be taken
The result of the poll shall be deemed
to be the decision of the meeting.

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Postal Ballot ???
Postal Ballot” includes
voting by share holders by
postal or electronic mode
No obligation of voting
personally by presenting for
transacting businesses in a
general meeting of the
company.

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Postal Ballot pursuant to Section 192A
Every Listed Public Company should in
respect of any other item of business as
may be decided by the Board and its
Members.
It shall obtain the approvals of its
Members by means of voting through
Postal Ballot
It can be Ordinary or Special
Resolution

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Steps involved in the Postal Ballot Process
Notice of Board meeting to all the Directors
along with agenda.
Convene Board Meeting.
Approval of notice of the Resolution along with
the Explanatory Statement.
Authorize Company Secretary or any Director
to issue the notice and Supervising process of
postal ballot.
Appointment of a Scrutinizer.
Authorizing Managing/ Whole time Director fix
the remuneration of Scrutinizer.

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Steps involved in the Postal Ballot Process ….contd
Determining the date for reckoning
voting rights
ascertain the Shareholders to whom the
Notice and Postal Ballot Forms should be
sent
Time within which the Forms should be
dispatched and returned by the
Shareholders.
Authorizing a Company Secretary to
retain custody of the Postal Ballot Forms
received from the Scrutinizer.
Date of announcement of Results

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Steps involved in the Postal Ballot Process ….contd
Approving Calendar Events
assent or dissent within 30 days of postage of
notice
Pre-paid Envelope for the shareholders to give their
reply
 Notice either by Registered Post acknowledge
due or under Certificate of Posting.
Advertise in one leading English newspaper in on
vernacular newspaper circulating in the State.
The Scrutinizer should submit his report after the last
date of receipt of the Forms.

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Steps involved in the Postal Ballot Process ….contd
Ballot papers should be kept in safe custody of
Scrutinizer.
Declaration of Results on the basis of the
Scrutinizer’s Report,
Record in the Minutes Book of proceedings of
General Meetings including result of the voting.
Display the results in the Notice Board of the
Company.
Submission of the same to ROC within 30days.
A Resolution passed by Postal Ballot should not
be rescinded.

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PRECAUTIONS FOR POLL
 Keeping the accurate database
of list of shareholders.
 Arranging the proxies.
Through scrutiny of institutional
shareholders their authorization.
 Checking of AOA Provisions.

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PRECAUTIONS FOR POSTAL BALLOT
 Preparing of calendar of events.
 Notice to the members shall be sent by
registered post acknowledgement due or any
other method prescribed by Central
Government
 Notice should include a Postage pre-paid
envelope for facilitating the assent/ dissent of
the shareholders.
 Ensure the signatures of the shareholders on
the postal ballot forms should be tallied with that
of the specimen signatures.

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 Appointed to report his
findings and the facts
on the meeting
observed,
 Cannot give his opinion
on the outcome of the
meeting.
 Empowered to give
opinion on the outcome
of the meeting.
 Can give his opinion on
the outcome of the
meeting.
Observer Scrutinizer
Scrutinizer v/s Observer

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FUTURE SCENARIO
 The profession of Company Secretaries
has taken a new turn and is now days being
recognized as Scrutinizer by the Company
Law Board apex body governing the
Company laws.
 The efforts of the Institute of the Company
Secretaries of India (ICSI) to make the
profession enter new ventures are fruitful.
But we have to be more dynamic and active
in approach to achieve higher scales of
Successes.

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CONCLUSION
 To conclude, I feel proud to mention that our profession of
Company Secretaries is gaining recognition in the eyes of
the Quasi Judicial Body as well.
 The role of a Scrutinizer being a highly accountable and
responsible in nature, it is not wrong to say that the
Character and Charisma of a Company Secretary is a perfect
blend to deliver the results desired by the Corporate World
and the Society at large.

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