Karnataka

HC declines to quash criminal case against company for not paying dividend to shareholders within stipulated period

The High Court of Karnataka has upheld the initiation of criminal prosecution of a private telecom company and its directors for not paying the declared dividends within the stipulated period as per the provisions of the Companies Act.

Though the company had said that it had paid the dividend along with penal interest to all its shareholders with some delay, the court said that the company cannot be exonerated from penal provision because of subsequent payment of dividend. “Otherwise, there is no meaning in mentioning the penal provision in the statute book,” the court observed.

Justice K. Natarajan passed the order while dismissing the petitions filed by city-based Kavvery Telecom Products Ltd., which is engaged in business of manufacture of wireless telecommunication products, and its managing director and other directors.

The petitioners had questioned the criminal prosecution launched by the Securities and Exchange Board of India (SEBI) against them before a trial court in 2016.

The SEBI had alleged that the company, in its annual general meeting held on September 29, 2012, had declared a total dividend of ₹3.01 crore. However, the company failed to deposit this amount in a separate bank account within five days and failed to transfer the dividend amount to its shareholders within 30 days as per the provisions of the Companies Act.

Though the company had admitted violation of the statutory provisions, it had claimed relief citing delay in lodging the complaint and changes in the provisions of the Companies Act subsequently. The company had claimed that prosecution cannot be continued as it had already paid all the divided, though with delay.

However, the court said that the company cannot be given relief from facing prosecution while pointing out that some of the payments were made even after filing of the complaint and there was delay of three years in payment of dividend.


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Printable version | Jun 17, 2022 9:40:38 pm | https://www.thehindu.com/news/national/karnataka/hc-declines-to-quash-criminal-case-against-company-for-not-paying-dividend-to-shareholders-within-stipulated-period/article65463961.ece