TMI Blog1970 (2) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... orders set aside. Appeal allowed. - 225 TO 232 OF 1966 - - - Dated:- 24-2-1970 - J.M. SHELAT AND G.K. MITTER, JJ. H.R. Gokhale, K.K. Jain, Bishamber Lal and H.K. Puri for the Appellant. JUDGMENT Shelat, J . All these appeals, founded on a certificate granted by the High Court of Allahabad, raise a common question as to jurisdiction. The appeals arise from complaints filed by the respondent in the Court of First Class Magistrate at Meerut under section 207 of the Companies Act, 1956, on an allegation of failure on the part of the appellant, the director-in-charge of M/s Iron Traders (Private) Ltd., to pay to him dividends on shares held by him, although the dividends were declared by the company for the respective years. The question being common, all these appeals are disposed of by a common judgment. The appellant contended that the Magistrate at Meerut had no jurisdiction to try the complaints and that the Magistrate at Delhi, where the company's registered office is situate, who would have the jurisdiction. The Magistrate rejected the contention and held that as the dividend had to be paid at the registered address of the respondent, which was at M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er or to his bankers, or where a share warrant has been issued to the bearer of such warrant or to his bankers. Section 207 lays down the penalty for failure to distribute dividends declared by the company and provides that where a dividend has been declared by a company but has not been paid or a cheque or a warrant in respect thereof has not been posted within 42 days from the date of declaration to any shareholder entitled to the payment of the dividend, every director of the company, its managing agent or secretaries and treasurers shall, if he is knowingly a party to the default, be punishable with simple imprisonment for a term which may extend to 7 days and shall also be liable to fine. But the section further provides that no offence shall be deemed to have been committed within the meaning of the foregoing provision in the cases therein set out. A dividend once declared is a debt payable by the company to its registered shareholders. It is clear from section 205 that although under sub-section (3) no dividend shall be payable except in cash, sub-section (5) authorises a company to pay the dividend by a cheque or a warrant. Therefore, dividend can be said to have been pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t provided in section 205(5) is incorporated in the articles of association of the company by article 132. That article reads: "Unless otherwise directed by the company in general meeting any dividend may be paid by cheque or warrant sent through the post to the registered address of the member entitled or in the case of joint holders to the registered address of that one whose name stands first on the register in respect of the joint holding and every cheque so sent shall be made payable to the order of the person to whom it is sent." Section 36 of the Act, which is in the same terms as section 20 of the English Companies Act, 1948, provides that subject to the provisions of the Act the memorandum and articles of association, when registered, bind the company and the members thereof to the same extent as if they respectively have been signed by the company and by each member, and contained covenants on its and his part to observe all the provisions of the memorandum and of the articles. It is well established that the articles of association constitute a contract between a company and its members in respect of their ordinary rights as members (see Hickman v. Kent or Romney ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Companies Act, 1845, it was within the power of the directors to fix the date at which and the mode in which dividends should be paid, subject of course to the control of a general meeting. The stockholders of the company at their general meeting had declared the amount of dividend as proposed by the directors but had passed no resolution as to how payment was to be made. It was held that though no such resolution was passed by the stockholders, they had notice as to how the directors proposed to pay the dividends and as no alteration was made in those proposals, the stockholders were held to have decided among themselves by a proper resolution that the dividend should be paid on a certain day and in the manner proposed by the directors. Such a conduct was equivalent to a request, and, therefore, the stockholders became entitled to payment in that way and in that way alone. Consequently, when the dividend warrant had been sent by post the dividend was paid and the company's obligation to pay stood discharged. If follows, therefore, that once a mode of payment of dividend is agreed to, namely, by posting a cheque or a warrant, the place where such posting is to be done is the plac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the place where the failure to discharge that obligation arises, namely, the failure to post the dividend warrant within 42 days. The venue of the offence, therefore, would be Delhi and not Meerut, and the court competent to try the offence would be that court within whose jurisdiction the offence takes place, i.e., Delhi. This should be so both in law and commons use, for, if held otherwise, the directors of companies can be prosecuted at hundreds of places on an allegation by shareholders that they have not received the warrant. That cannot be the intention of the legislature when it enacted section 207 and made failure to pay or post a dividend warrant within 42 days from the declaration of the dividend an offence. This view is also in accord with the principle laid down by Maule J. in Regina v. James Mihier 175 ER 122 that the felony of not surrendering at a district court to a fiat in bankruptcy, under Stat. 5 and G, Viet. c. 122, section 32, is committed at the place where the district court is situate ; and an indictment for the offence cannot be sustained in a different county from that in which the person was a trader or in which he committed an act of bankrup ..... X X X X Extracts X X X X X X X X Extracts X X X X
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