Delhi High Court on section 205A of Companies Act, 1956

Last updated: 09 May 2008

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Court :
High Court

Brief :
Section 205A of the Companies Act, 1956 - Unpaid dividend to be transferred to special dividend account - Respondent filed a complaint under section 205A alleging that petitioner-company had declared dividend but did not transfer amount of dividends to special dividend account in respect of those dividends warrants which had been posted within stipulated time but had not been encashed - From perusal of complaint, it was apparent that complaint related to balancesheet of company as of 31-3-1981 - Whether in view of section 205A(1) as it existed prior to amendment on 15-6-1988, requirement of transfer of unpaid dividend account was only when either dividend warrant was not posted within 42 days to shareholder or was not otherwise tendered - Held, yes - Whether since in instant case petitioner-company had already posted dividend warrant within stipulated time in view of aforesaid legal position, complaint filed against it was to be quashed - Held, yes

Citation :
Yet to Report

FACTS The respondent filed a complaint under section 205A alleging that the petitioner had declared dividend but did not transfer the amount of dividend to special dividend account in respect of those dividends/warrants which had been posted within the stipulated time but had not been encashed due to some reason or the other. On petition: HELD Perusal of section 205A(1) as it existed prior to the amendment on 15-6-1988, reveals that warrant in respect of a dividend has to be posted to the shareholder within 42 days from the date of declaration of dividend. [Para 9] The requirement of transfer of unpaid dividend account was only when either dividend warrant was not posted within 42 days to the shareholder or was not otherwise tendered. [Para 10] Warrants which may be not encashed and amount continuing to be retained by the company was a serious lacuna which stands addressed by the amendment incorporated on 15-6-1988. [Para 11] The words ‘or the warrant in respect thereof has not been posted’ have been replaced by the words ‘or claimed’. [Para 12] The effect of the amendment is that wherever dividend remains unpaid or unclaimed within 42 days from the date of declaration of the dividend then alone the said amount has to be transferred to the unpaid dividend account. The amendment is not retrospective. [Para 13] From a perusal of complaint, it was apparent that complaint related to balance-sheet of company as of 31-3-1981. [Para 14] Therefore, the petition was to be allowed and the impugned complaint was to be quashed. [Para 15]