Q.The Board of Nirmal Constructions Limited has a total strength of 9 directors. At a meeting called to approve a contract in which 7 of the 9 directors are personally interested, the remaining 2 directors are present, along with the 7 interested directors who attend only to be counted as present in the room. Can this meeting validly transact the business of approving the contract? Explain with reference to the quorum rules.

Interested directors are excluded from the quorum count for the very item they are interested in, and a special proviso applies once interested directors form two-thirds or more of the total strength, changing what counts as quorum for that item.

Under the proviso to Section 174, when the number of interested directors present at a meeting is equal to or exceeds two-thirds of the total strength of the Board, the remaining (disinterested) directors present — provided they number not less than two — themselves constitute the quorum for that particular item of business.

Here, the total strength of the Board is 9. Two-thirds of 9 is 6. The number of interested directors present is 7, which is greater than 6 — so the proviso applies.

Under the proviso, the quorum for this item is the remaining disinterested directors present: 9 − 7 = 2 directors. Since 2 is not less than the statutory minimum of 2 directors, this quorum of 2 is valid.

Therefore, the meeting CAN validly transact the business of approving this contract, with the 2 disinterested directors constituting quorum for that item — even though the Board's normal quorum (one-third of 9, rounded up to 3) would ordinarily require 3 directors for other, non-conflicted business. The 7 interested directors, though physically present, are excluded from being counted towards the quorum for this specific item and must also not vote on it.

Two-thirds of total strength = 9 × 2/3 = 6; interested directors present (7) ≥ 6, so proviso applies; quorum = remaining disinterested directors = 9 − 7 = 2; compare to minimum of 2 → valid.

Students sometimes apply the normal quorum rule (one-third of total strength, i.e. 3 directors here) without noticing that the interested-directors proviso has been triggered, which changes the applicable quorum for this specific item to the smaller number of disinterested directors present.