TMI Blog1999 (12) TMI 757X X X X Extracts X X X X X X X X Extracts X X X X ..... complaint under sections 205 and 207 of the Companies Act ( The Act ) against the petitioners herein. According to the complainant, the first respondent is a shareholder in the first petitioner-company holding 46,600 shares. Petitioners 2 to 4 are the directors of the first petitioner-company. The first petitioner declared a dividend of 10 per cent for the accounting year 1994-95 in the annual general body meeting held on 30-12-1995. By virtue of the said decision, the first respondent is entitled to a sum of Rs. 46,600 as dividend on the shares held by him in the first petitioner-company. The complaint of the first respondent is that in spite of the declaration of the dividend for the year 1994-95, no dividend in fact had been paid to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd it becomes relevant and necessary for the respondent to establish that no such amounts were never despatched by way of cheques. For the purpose of establishing that the amounts were not despatched, it also becomes necessary and relevant to examine the documents and to examine the Branch Manager of the Central Bank of India, Adoni Branch. 6. Section 205 declares that no dividend shall be declared or paid by any company for any financial year except out of the profits of the company for that year. The manner of arriving at the fact that there was a profit for the financial year is further described under section 205. 7. Section 205A of the Act provides that where a dividend is declared by a company but the same is not paid or claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 205A of the Act may arise in more than one way. The failure could be : (1) on account of the non-opening of a special account (unpaid dividend account); (2) it could be on account of failure to transfer the amounts lying in the special account for more than 3 years to the general revenue account of the Central Government. 9. Section 205B of the Act enables the person entitled to receive any dividend to claim the same even after the amount is transferred to the general revenue account of the Central Government subject to the procedure prescribed under the said sub-section. 10. Section 205, sub-section (3) declares that no dividend shall be payable except in cash. In my view, the expression cash is used in contradistinction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eholder presents either the cheque or the dividend warrant for encashment etc. 13. The amount earmarked for the payment of dividend of a particular year would continue to be in the general pool funds of the company for a period of 42 days from the date of the declaration of the dividend. After 42nd day, if for any one of the reasons mentioned earlier, some of the shareholders do not actually receive the payment, the amount due to such members shall be transferred to the special account known as unpaid dividend account . The purpose in making the provision appears to be that the amount earmarked for the payment of the dividend shall not be available to the company any more for the purpose of the utilisation of the same in its day-to-day ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discharge its responsibility by adopting one of the alternatives mentioned above, the company and the persons responsible for the administration of the company as mentioned in section 207 are made liable for punishment. 16. Wherever there is a complaint by the shareholder that for a particular financial year, the company declared dividend but he did not receive the dividend pursuant to the declaration, he can only establish (1) that the company declared a dividend for that financial year, (2) that he was a shareholder who is legally entitled to receive the dividend pursuant to the declaration. The fact that he did not receive the payment cannot be established by the shareholder as it is a negative fact. A shareholder can only make an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dend account specially created as required under section 205, the company discharges its responsibility and is no more liable for any punishment. 17. In the present case, the burden of establishing that the company took all the requisite steps as indicated above were taken, is on the company and the petitioners herein. In my view the first respondent- de facto complainant took an unnecessary step in seeking to summon the documents as it is no part of his obligation to establish the negative facts. Further even if the documents of the Central Bank of India, Adoni Branch are summoned and even if it is established that the company did not open a special account for the unpaid dividend amount in that Bank, the guilt of the petitioners is n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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