Ms. Stuti Bansal
The present article deals with proxies and provisions regarding its stamping as per the laws applicable in India.Section 176 of the Companies Act, 1956 discusses and details the aspects of a proxy. According to Section 176 of the Act, any member of a company, entitled to attend and vote at a meeting of the company, shall be entitled to appoint any person (whether a member or not) as his/her proxy to attend and vote instead of himself at a General Meeting. Thus, the section provides for the persons entitled to appoint a proxy and also for persons disallowed to do so.
Interpreting the section, only an individual can be appointed as a proxy. An artificial or judicial person cannot be appointed as a proxy. Any person whether he is member or not can be appointed as a proxy. In other words, to be appointed as a proxy it is not necessary to be a member of the company. A person who is not a member of the Company is equally eligible for appointment as proxy.Another important provision relating to proxies is that, for a proxy to be valid, it should be properly executed and should contain the date of its execution as also should be duly stamped.This brings us to the definition of ‘Duly stamped’.‘Duly stamped’ has been defined under section 2(11) of the Indian Stamps Act, 1899 as the following –
“Duly stamped” as applied to an instrument, means that the instrument bears an adhesive or impressed stamp of not less than the proper amount and that such stamp has been affixed or used in accordance with the law for the time being in force in India.It is thus a requirement that a proxy be duly stamped and cancelled before it is submitted to the Chairman failing which, the proxy is considered invalid. An unstamped proxy is considered invalid and cannot be taken into account.
The Guidance Note on General Meetings, issued by the Institute of Company Secretaries of India (ICSI), in its clause 7.3 provides for the “Stamping of Proxies”. It states that, for a proxy to be valid, it must be adequately stamped in accordance with the rates prescribed under the Indian Stamps Act, 1899 and where a proxy is not duly stamped or effectively cancelled by signing and dating or initialing and dating or in any other effective manner as required by Section 12 of the Act, the proxy will be considered invalid. A vote cast on an unstamped proxy is invalid has been held in In Re. Tata Iron and Steel Co. Ltd.
In this regard, the Hon’ble High Court of Bombay has also held in a case that affixation of a stamp subsequent to execution is not affixation according to law and where a receipt stamp was affixed subsequent to execution but before its production in court it was held to be inadmissible in evidence.
Further, Section 12 of the Indian Stamp Act, 1899 provides that whenever a stamp is affixed on a document or instrument, and is not cancelled, the instrument is considered to be unstamped. Such a document has to be cancelled at the time of the execution of the instrument and in case of instruments already executed, at the time when the stamp is affixed.
“12. Cancellation of adhesive stamps
(1) (a) Whoever affixes any adhesive stamp to any instrument chargeable with duty which has been executed by any person shall, when affixing such stamp, cancel the same so that it cannot be used again; and
(b) whoever executes any instrument on any paper bearing an adhesive stamp shall, at the time of execution unless such stamp has been already cancelled in manner aforesaid, cancel the same so that it cannot be used again.
(2) Any instrument bearing an adhesive stamp which has not been cancelled so that it cannot be used again, shall, so far as such stamp is concerned, be deemed to be unstamped.
The person required by sub-section (1) to cancel an adhesive stamp may cancel it by writing on or across the stamp his name or initials or the name or initials of his firm with the true date of his so writing, or in any other effectual manner.”Reading together, clauses (a) and (b) of section 12 stated above, it becomes clear that the stamp to be affixed on the proxy must be affixed by the person executing the proxy and should be cancelled by the same person by either signing across or in any other manner appropriate for effective cancellation.
This has also been held in the case of Nuddea Tea Co. Ltd. vs Asok Kumar Saha and Ors.” –
“It is the requirement under Section 12(1)(a) of the Indian Stamp Act, 1899, that whoever affixes any adhesive stamp to any instrument chargeable with duty which has been executed by any person shall, when affixing such stamp, cancel the same so that it cannot be used again. Therefore, under Section 12 of the Indian Stamp Act, 1899, such cancellation of stamp should be made at the time of execution of the document. If any instrument does not bear the requisite stamps and if such stamps are not cancelled, then such instrument shall be deemed to be unstamped.”
In another case, Dayaram v. Chandulal, it has been held that when an adhesive stamp affixed to an instrument was cancelled by a third person on a date subsequent to the date on which the instrument was drawn, by putting the date across the stamps, there was no proper cancellation of the stamp.
While there is no fixed format of a valid cancellation of a stamp, the true test for determining the same is whether after the cancellation, the stamp is capable of being used again. After cancellation, the stamp must not be in a position to be used again and the intention to cancel must show the intention to cancel.
Here is it worthwhile to mention that it has been provided under section 18 of the Indian Stamps Act, 1899, that if a proxy sent from abroad is stamped within three months of its receipt in India, it is valid in law.
As far as the mode of cancellation of the stamp affixed on the proxy is concerned, there is no special method provided for the same in any Act. Sub section (3) of section 12 to the Indian Stamp Act, 1899, only provides for guidance on the ways a stamp may be cancelled. The section simply provides that the cancellation should be such as would prevent the stamp being lawfully or conscientiously used again.
Thus, drawing lines across and adhesive stamp, drawing of two parallel lines across three stamps used on a promissory note, and drawing of two lines crossing each other across the face of the stamp, by the person executing the document, have all been held to be effectual cancellation of stamps.
To conclude this discussion, in order that a proxy may be complete and valid, it must be duly stamped by the person executing the proxy and the stamp affixed on it must be cancelled by the same person by either signing across it or cancelling it in any other effectual manner.
 Jetibai v. Ramchandra, 13 Bom 484
 1988 64 CompCas 775 Cal