About 50% of the proxy votes - counted on Tuesday - backed the deal, which values the shares at up to �2.55 each and the company at �500m.

Railtrack chairman Geoffrey Howe said that this means that the deal will be passed, even though other votes, including those from private shareholders, have not been counted yet.

These smaller shareholders are still angry that the government forced Railtrack into administration and oppose the deal, believing it undervalues the company.

Most of the proxy shares have been cast by big institutional investors, which control 80% of the shares.

The result will be confirmed on Wednesday.

Angry debate

Prior to the results of the proxy vote, the Railtrack board had faced angry questioning from private shareholders.

At Arnhem they carried on fighting, and that's what I am going to do

Private shareholder from Rochdale

At the meeting, Mr Howe had advised the shareholders to approve the deal, including its valuation of the Railtrack shares.

"It is only 10% less than the share price on the day our subsidiary Railtrack plc went into administration and it is a significant advance on the Government's initial position that shareholders would receive nothing."

Railtrack plc was put into administration last October by the then Transport Secretary Stephen Byers.

At the point when its shares were suspended, they were worth �2.80. In 1998, shares had reached a high of over �17.

Tough questioning

Hundreds of private shareholders attended the meeting on Tuesday.

While we are in agreement that there are strong emotional grounds in favour of litigation, on economic grounds, we cannot recommend it

David Harding Chief executive

One woman, who asked why the company had not done more to oppose Mr Byers' move to put the company into administration, she received a round of applause.

A man who runs a fish and chip shop in Rochdale said: "If this offer is accepted, I stand to lose �4,500.

"At Arnhem they carried on fighting, and that's what I am going to do."

Litigation threat

Now that shareholders have backed the deal, Railtrack Group, the owner of Railtrack plc, will not pursue legal action against the government for pushing the company into administration.

Chief executive David Harding sympathised with the private shareholders, but said at the meeting that the company had to support the deal.

"The government acted improperly in putting [Railtrack] plc into administration," he said to cheers and applause.

"But with litigation, there was always uncertainty, and people must be realistic.

"While we are in agreement that there are strong emotional grounds in favour of litigation, on economic grounds, we cannot recommend it."

Tax payers' money

Last month, a deal was agreed to put it in the hands of Network Rail.

Some �300m of the �500m price tag will be provided by the government - or in other words tax payers.

But the new rail company, which is made up of train operators, rail unions and passenger groups will inherit Railtrack's debts of �7bn.

Railtrack's stake in the Channel Tunnel Rail Link is also being sold to the London & Continental Railways company for �375m.

Shares in Railtrack began trading again on the London Stock Market on 27 June.