Q1. The board meeting of MNO Ltd. was held on 10th May,2008 at Chennai at 11a.m.

ai at 11a.m. At the time of starting the board

meeting the number of directors present were 7.The total number of directors were 10. The board transacted ten items in
the board meeting. At 12 noon after the completion of four items in the agenda 4 directors left the meeting. Examine the
validity of these transactions explaining the relevant provisions of the Companies Act, 1956. (5 Marks)(N08)

ANS- QUORUM: Section 287 of the Companies Act, 1956 provides for the quorum for meeting. The quorum for a meeting
of the Board of Directors of a company shall be one third of its total strength (any fraction contained in the said one third
being rounded off as one), or two directors, whichever is higher. Where at any time the number of interested directors
exceeds or its equal to two thirds of the total strength, the number of remaining directors, that is to say, the number of
directors who are not interested present at the meeting being not less than two shall be the quorum during such time. In
this case, the quorum is 4(i.e. 1/3rd of 10=3 1/3 rounded of as 4).Hence the quorum was present at the time of
commencement of meeting. As a rule, in the case of a meeting of the Board of Directors, the meeting cannot transact
any business, unless a quorum is present at the time of transacting the business. It is not enough that a quorum was
present at the commencement of the business. The quorum of the Board is required at every stage of the meeting and
unless a quorum is present at every stage, the business transacted is void. (Balakrishna V. Balu Subudhi AIR 1949 pat
184). In the given situation four items were transacted with the quorum and thus they are valid. Six items were transacted
after 4 Directors left the meeting resulting in the reduction of quorum as only 3 Directors were present as against the
required quorum of 4 Directors. Such six transactions are void.

Q2. The Board meeting of Governance Ltd. has the following schedules:
1st Meeting - 1st January, 2005
2nd Meeting - 30th June, 2005
3rd Meeting - 1st July, 2005.
4th Meeting - 31st December, 2005.
State whether the Board Meetings are as per order/compliance of the provisions of the
Companies Act, 1956. What would be your views if the meeting to be held on 30th June,
2005 is adjourned due to lack of quorum? (RTP N 08)

ANS- As per Section 285, in the case of every company, a meeting of the Board of Directors shall be held at least once in
every three months and at least four such meetings shall be held in every year. The section does not state the gap
between two board meetings. In the present case four meetings have been scheduled for the year 2005 even though the
gap between two board meetings is more than 3 months. However, as per the section there appear to be no contravention.
If the Board meeting to be held on 30th June, is adjourned due to lack of quorum, again a meeting is held on some other
date, the company shall not be deemed to have contravened the provisions of Section 285. If the said meeting is held on
30th June, 2005 and was adjourned for want of quorum, the meeting automatically stand adjourned by virtue of Section
288 (1) till the same day in the next week, at the same time and place. And if the same day is a public holiday, then the
meeting stands adjourned till the next succeeding day which is not a public holiday.

Q3. . Part of a question
Some urgent items are left over in the agenda of Board meeting which concluded
and decision cannot be deferred till its next meeting. What course of action you would suggest? (RTP N08)


ANS- Items of business left unconsidered at the Board meeting and which cannot be
deferred till the next Board meeting may be referred to the Directors for
consideration by circulation in terms of Section 289. For the purpose, of passing a
resolution by circulation, requirement is that the draft resolution should be circulated
to all the directors in India, who are not below the quorum fixed for a board meeting
and to all other directors at the usual address in India and the resolution should be
approved by the directors in India or by a majority of them.





Q4. The Board of Directors of Encompass Ltd. has 15 directors and wants to prescribe the quorum for meetings of the
Board by the Articles. Referring to relevant provisions of the Companies Act, 1956, advise as are following situation:
- Whether articles can prescribe the quorum limit.
- How total strength of the Board is to be determined at a Board meeting?
- If out of 15 directors, 13 happen to be interested directors, what shall the quorum for the Board meeting?
- If all the 15 directors were interested directors, how would you resolve the situation? (RTP N08)

Ans- A quorum is the prescribed minimum number of qualified persons authorised to transact the business at a meeting. In
relation to a Board meeting quorum implies fully qualified and disinterested directors who must be present at the meeting
so as to enable the Board of which they are the constituents to legally transact the business thereat. Can the articles of a
company fix such a quorum? No, in view of Section 287 which has fixed the quorum of the Board meeting. Accordingly
such a quorum is one third of the total strength of Board (any fraction contained in the said one third being rounded of as
one) or two directors whichever is higher. The total strength is to be derived after deducting the number of directors whose
offices are vacant. Therefore, the Quorum = 1/3 (of the total strength vacancies). Where total number of directors are 9
and 2 offices of the directors have fallen vacant, we find: 1/3 of (9-2) = 1/3 of 7 = 21/3 directors. If the fraction of 3rd were to
be rounded off as one then 3, i.e. 2+1 directors would constitute the quorum for the Board meetings. If at any time the
number of the remaining directors exceeds or is equal to two thirds of the total strength, the number of the remaining
directors who are non-interested but present at the meeting, not being less than two shall constitute the quorum. For
example, there are in all 15 directors and the Board meeting commences with all the 15 directors. During the currency of
the meeting, an item comes up for discussion in respect of which 13 happen to be interested directors. In this case,
in spite of the excess of the interested directors being more than two-thirds, the prescribed minimum number of non-
interested directors constituting the quorum, namely, 2 present at the meeting are to transact the particular item of
business. Now suppose all the 15 directors cited in the above illustration are equally interested in that particular item of
business and the time is so vital that but for a decision thereon, the business of the company will be greatly hampered.
How to resolve this impasse? The act has not made any direct provision to take with such a situation, but the Article 48
of Table A of Schedule 1 of the Act, provides a remedy. According to the said article, the Board may, whenever it thinks fit,
call an extraordinary general meeting. By invoking this Article, the Board should get the aforesaid impasse resolved by the
shareholders at the general meeting. Since according to Section 173(1) (b), all business in the case of any other meeting
than the annual general meeting is to be deemed special, by virtue of subsection (2) the notice of the extraordinary
meeting must annex to it a statement setting out all the material facts concerning the item of business, including, in
particular, the nature of the concern or interest there in of every director.

Q5. A meeting of the Board of Directors of a company was convened to be held on 15
th
December, 2006, but the meeting
could not be held for want of quorum. The last meeting of the Board of Directors was held on 16th August, 2006. Advise in
the light of provisions contained in the Companies Act, 1956, whether contravention was made? (RTP N08)

ANS- As per Section 288, of the Companies Act, 1956 if a meeting of the Board could not be held for want of quorum, then
unless the articles provide otherwise, the meeting shall automatically stand adjourned to, the same day in the next week,
at the same time and place or if that day is a public holiday till the next succeeding day which is not a public holiday. Sub-
section (2) of Section 288 further provides that the provisions of Section 285 shall not be deemed to have been
contravened merely by reasons of the fact that meeting of the Board which has been called in compliance with the terms of
that section, could not be held for want of quorum.

Q6. (a) ABC Ltd is contemplating to fix a higher quorum for the Board meeting than prescribed by the Companies Act,
1956? Advise. (b) There are 9 directors and 2 offices of the directors have fallen vacant in a company. What would be the
quorum for the meeting of the Board? In a case, where there are 15 directors in a company and of which 13 are happen to
be interested directors, what would be the quorum? [RTP N08 ]

ANS- A quorum is the prescribed minimum number of qualified persons authorised to transact the business at a meeting.
In relation to a Board meeting quorum implies fully qualified and disinterested directors who must be present at the
meeting so as to enable the Board of which they are the constituents to legally transact the business thereat. In view


of Section 287 which has fixed the quorum of the Board meeting, the articles cannot fix the higher quorum.. Accordingly
such a quorum is one third of the total strength of Board (any fraction contained in the said one third being rounded of as
one) or two directors whichever is higher. The total strength is to be derived after deducting the number of directors whose
offices are vacant. Therefore, the Quorum = 1/3 (of the total strength vacancies). Where total number of directors are 9
and 2 offices of the directors have fallen vacant, we find: 1/3 of (9-2) = 1/3 of 7 = 2 1/3 directors. If the fraction of 3rd were
to be rounded off as one then 3, i.e. 2+1 directors would constitute the quorum for the Board meetings. If at any time the
number of the remaining directors exceeds or is equal to two thirds of the total strength, the number of the remaining
directors who are non-interested but present at the meeting, not being less than two shall constitute the quorum. For
example, there are in all 15 directors and the Board meeting commences with all the 15 directors. During the currency of
the meeting, an item comes up for discussion in respect of which 13 happen to be interested directors. In this case, in
spite of the excess of the interested directors being more than two-thirds, the prescribed minimum number of non-
interested directors constituting the quorum, namely, 2 present at the meeting are to transact the particular item of
business.

Q7. Chairman of Board of Directors of ABC Ltd. came across a matter, which required the
approval by way of a board resolution. In the prevailing circumstances, it is not possible
to convene and hold a Board Meeting. The Chairman approaches you to advise him of
the way and the relevant procedure to obtain such approval without holding the Board
Meeting. You are required to advise him on the matter as per the provisions of the
Companies Act, 1956. (5 Marks) ( J09 :5 marks, May 12 :8marks) (but answer is same
thats ICAI !!)

Ans - As per the provisions of the Companies Act, 1956 several Board Resolutions are
required in course of carrying on the affairs of a limited company. But, it may sometimes
so happen that a Board Meeting can not be held. To meet such eventualities, the
Companies Act, 1956 contains the solution in Section 289. According to this section, the
board resolution can be passed by way of circulation. It may, however, be noted that the
matters listed in the provisions of Section 292 requiring passing of resolution at the board
meetings only can not be passed by way of circulation.
The chairman of ABC Ltd. is advised that the approval in the form of a Board Resolution
may be obtained by way of passing the relevant resolution by circulation if the matter is
not covered by Section 292 of the said Act.
Assuming that the present resolution required to be passed is not falling within the items
listed in Section 292 of the said Act, the resolution can be passed by circulation.
The procedure to be adopted for the purpose of passing a resolution by circulation is as
follows:-
(i) Send the draft of the resolution in duplicate together with the necessary papers, if
any, to all the directors then in India. It is to be ensured that the number of such
directors is not less than the directors required to form the quorum for a Board
Meeting.
(ii) Send that draft of the resolution in duplicate together with the necessary papers, if
any, to all other directors at their usual address in India.
(iii) Obtain one copy of the draft resolution duly signed by the directors, whether
approving the resolution or disapproving the same. It may be noted that the
resolution shall be deemed to be passed by the Board if all the directors then in


India or majority of all directors as are entitled to vote on the matter approve the
resolution by signing one copy and returning the same to the company.
(iv) The resolution passed by circulation shall be placed before the next Board Meeting
for confirmation.
(v) The resolution shall be recorded in the minutes of the next Board Meeting

TEACHERS NOTE - SEE STUDENTS NORMALLY WILL DESCRIBE sec 289(resolution by
circulation) but you also have to explain sec 292 i.e exceptions where only resolutions passed at
BM is allowed and circulation not possible . Plz try to interlink law sections while writing your
answer wherever applicable to get full marks !!


Q8. ABC Ltd. has 12 directors on its Board and has the following clause in its Articles of
Association:
The questions arising at any meeting of the Board of Directors or any Committee thereof
shall be decided by a majority of votes, except in cases where the Companies Act, 1956
expressly provides otherwise.
In one of the meetings of the Board of Directors of ABC Ltd., 8 directors were present.
After completion of discussion on a matter, voting was done. 3 directors voted in favour
of the motion, 2 directors voted against the motion while 3 directors abstained from
voting.
You are required to state with reference to the provisions of the Companies Act, 1956
whether the motion was carried or not. It is clarified that the motion being voted upon
was not concerning a matter which requires consent of all the directors present in the
meeting. J09, 5 marks

Ans - Regulation 74(1) of Table A of Schedule 1 to the Companies Act, 1956 provides that
save as otherwise expressly provided in the Companies Act, 1956, questions arising at
any meeting of the Board shall be decided by a majority of votes.
In the problem given in the question, the similar article exists in the Articles of
Association of ABC Ltd. In the given case, only 8 directors out of a total strength of 12
directors are present and out of those 8 directors present only 5 directors have
exercised their votes. In such a case, only those directors who are present and vote on a
motion are considered for determining whether the motion is carried or not. That means
out of the 5 directors who voted on the motion are to be considered. Accordingly, since
number of directors who voted in favour of the motion being 3, is higher than the number
of directors who voted against the motion being 2, the motion is carried or is considered
to be passed by majority.







Q9. Proximo Limited has 9 Directors out of whom 3 Directors have gone abroad. The
Chairman had an urgent matter to be approved by the Board of Directors which could not
be postponed till the next Board meeting. The Company, therefore, circulated the
resolution for approval of the Directors. 4 out of 6 Directors in India approved the
resolution. The Company claimed that the resolution was passed. Examine with
reference to the provisions of Section 289 of the Companies Act, 1956 the validity of the
resolution. (5 Marks) N09: 5 marks

ANS- According to Section 289 of the Companies Act, 1956, a resolution by circulation shall
not be deemed to have been passed, unless the resolution has been circulated in a draft,
together with the necessary papers, if any to all the directors then in India (not less in
number than the quorum fixed for a meeting of the Board) as the case may be, and all
other directors at their usual addresses in India, and has been approved by such of the
directors as are then in India or by majority of such of them, as are entitled to vote on the
resolution. In this case, the resolution has been approved by 4 directors out of 6 in India;
the majority of total number of directors who were entitled to vote was 5 as against 4
directors who approved the resolution. Thus both the alternate conditions were not
fulfilled. The resolution cannot be deemed to have been passed.

Q.10. Pipliya Powders Limited has four Directors. A Board meeting was convened. It was
attended by two Directors only and they appointed Mr. Soorajbhan who was related to
both of them, as an Additional Director. Decide, whether the said appointment is valid
under the provisions of the Companies Act, 1956? (May 12 -4 marks)

Ans- Section 300 of the Companies Act, 1956, provides that a director shall not take part in the discussion of or vote
on any contract or arrangement entered into or to be entered into by or on behalf of the company if he is in anyway
whether directly or indirectly concerned or interested in the contract or arrangement. The Department of Company
Affairs (Now, Ministry of Corporate Affairs) has clarified that the word interested as used in the section should be
given a restrictive interpretation and thus excludes a director who has no pecuniary interest. Accordingly, the
relationship of the director with the contracting party will not per se make the director concerned or interested in the
contract or arrangement.
The Madras High Court has decided in the case of Madras Tube Co. Ltd. vs. Hari Krishan Somani that although
appointment as director does not come within the scope of the expression contract because the position of a
director may be conferred on a person by any method other than contract, became interested directors. Without them
there was no independent quorum.
Later in the case of Shailesh Harilal Shah vs. Matushree Textiles Ltd., the Bombay High court, came to the
conclusion that the appointment as an additional director of a person who is related to a director does not violate the
requirement of Section 300(1) because the position of a director may be conferred on a person by any method other
than contract but it would amount to an arrangement. The attending directors, therefore, became interested directors.
Without them there was no independent quorum. Thus, in the instant case, appointment of Mr. Soorajbhan as an
Additional Director in Pipliya Powders Limited is not valid.

PLZ SEE ICAI `answer is way too complicated and full of case laws .
My answer would be :
Explain Sec 300 highlighting interested director not part of quorum (director`s chapter)
Then explain Sec 287 quorum provisions 1/3
rd
of Total BOD or 2 whichever is higher (Board meeting chapter)
Then in given case
- Minimum 2 dir needed for quorum as per sec 287
- But as per sec 300 two directors present and voting not eligible to vote and not part of quorum
- Hence appointment of additional director is not valid (always give conclusion of your answer)



Q11. State the legal requirements to be complied with by a public company in respect of a Board Meeting.
Examine with reference to the provisions of the Companies Act, 1956 whether notice of a Board Meeting is required
to be sent to the following persons:
(i) Alternative Director;
(ii) An interested Director;
(iii) A Director who has expressed his inability to attend a particular Board Meeting;
(iv) A Director who has gone abroad. (8 Marks)(MAY 13)
ANSWER - Legal requirements to be complied with by a public company in respect of a Board
Meeting:
(i) Frequency of meeting: According to Section 285 of the Companies Act, 1956, a meeting of its Board of directors
shall be held at least once in every three months and at least four such meetings shall be held in every year.
(ii) Notice of meeting: According to Section 286 of the Act, notice of every meeting of the Board of directors of a
company shall be given in writing to every director for the time being in India, and at his usual address in India to
every other director. (iii) Quorum for meetings: According to Section 287 of the Act, the quorum for a
meeting of the Board of directors of a company shall be one-third of its total strength (any fraction contained in that
one-third being rounded off as one), or two directors, whichever is higher.

(iv) Adjourned meeting: According to Section 288 of the Act, if a meeting of the Board could not be held for want of
quorum, then, unless the articles otherwise provide, the meeting shall automatically stand adjourned till the same day
in the next week, at the same time and place, or it that day is a public holiday, till the next succeeding
day which is not a public holiday, at the same time and place.
Notice of Board meeting
(i) Alternate Director: Where a director goes abroad for a period of more than 3
months and an alternate director has been appointed in his place under
Section 313, the notice should be served to the alternate director as well as on
the original director who is outside India for the time being although there is no
legal precedence in this regard, it would be a prudent practice on strictly
construing Section 286.

(ii) An Interested Director: Notice must be given to a director even though he is
precluded from voting at the meeting on the business to be transacted [John
Shaw & Sons (Salford) Ltd. v Peter Shaw & John Shaw [1935] 2 KB 1132].

(iii) A Director who has expressed his inability to attend a particular Board
Meeting: If a director states that he will not be able to attend the next Board
meeting, notice must be given to that director [Re Portuguese Consolidated
Coffee Mines Steels Case 42 Ch. D. 160].

(iv) A Director who has gone abroad: A director is entitled to a notice even
though he is outside India provided he has made sufficient arrangement with
the company for sending such notice to him. The right to receive notice cannot
be waived. [H.M. Ebrahim Sait v. South Indian Industrial Ltd., (1938) 8 Com
Cases 308: AIR 1938 Mad 962 and Young v. Ladies Imperial Club, (1920) All
ER Rep 223 (CA)].

DEAR FRIENDS YOU CAN SEE FROM THIS ANSWER ICAI EXPECTS STUDENTS TO WRITE CASE LAWS .
YOU CANNOT LEARN SO MANY IN LAW .So try to learn sections at least and write correct points in an answer.
You will definitely get good marks !!! ALL D VERY BEST TO ALL OF YOU.