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2019 (5) TMI 484 - HC - Companies LawNon-distribution of dividend to the complainant - Whether the process and summons issued under section 127 of the Companies Act without taking into account the provision of section 127(c) of the Companies Act can be granted? HELD THAT:- There is a dispute regarding the right to receive dividend, as the matter was referred to National Company Appellate Law Tribunal and if the dispute regarding right to receive dividend exists, then no offence under the section shall be deemed to have been committed. Thus, non-payment of dividend to the shareholder is an offence, which invites penal action. However, non-payment of dividend to the shareholder will not be called an offence if the payment is not made because the dispute between the parties exists. The dispute regarding entitlement to receive the dividend exists. The act of non-payment of dividend by the directors of the company can be justified because according to them, a particular shareholder is not entitled to receive dividend. Mere having opinion or holding view that a shareholder is not entitled to receive dividend is not sufficient but there should be existence of a dispute as understood by law. Mere denial of the entitlement is not enough to get the benefit of Section 127(c) but the real dispute between the parties should exists. Similarly, mere denial of existence of dispute by the shareholder after pursuing litigation against the company and its directors cannot render dispute non-existing. Indeed this can be ascertained on the basis of the facts and circumstances of each case - In the present case, admittedly the dispute exists between the shareholder and the directors and it was pending in Company Law Tribunal and National Company Appellate Law Tribunal. It was also pending before the Arbitrator. In absence of such litigations before the Company Law Tribunal and arbitrator, it would have been difficult to state that there is a dispute between the petitioner and the respondent, then the fact of dispute should have been the subject matter of trial and evidence and it would not have been considered at the stage of quashing of process. The record placed before the learned trial Judge itself discloses the proviso of Section 127(c) of the Companies Act and if material placed before the Court clearly fulfills the requirement of the proviso or an exception, then it cannot be ignored and the learned trial Judge after taking into account the material placed before and the proviso, should have formed opinion that offence under section 127 is not constituted. Application disposed off.
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