Case Law Details
Mukkaram Jan Vs SEBI (Karnataka High Court)
Karnataka High Court held that once the dividend is paid by the company, SEBI has no power to initiate any action against the company or its directors who have defaulted in payment of dividend as specified under Section 207 of the Companies Act, 1956.
Facts- The Company in its Annual General Board Meeting held on 29.09.2009 resolved to declare dividends to its shareholders. Since the Company did not pay the dividends as resolved in its meeting, the respondent (SEBI) issued several notices to the Company calling upon the Company to pay the dividends. It is only after issuance of the show cause notices, the Company in question paid the dividends to its shareholders from 27.04.2012 to 03.11.2013 with interest and fine for the delayed payment. The company having not paid dividend within 30 days as specified under Section 207 of the Act have committed offences. The Magistrate after perusal of the complaint took cognizance of the aforesaid offence and issued summons. Taking exception to the same, the Company as well as the Director are before the High Court.
Conclusion- Held that a combined reading of Section 55(A) and Section 207 clearly indicates that the SEBI is vested with power to safeguard the interests of the shareholders in the matter of non payment of dividends and the moment the dividends are paid, the SEBI has no power to initiate any action against the company or its directors who have defaulted in payment of dividend within 30 days as specified under Section 207 of the Act. Section 621 clearly specifies that the shareholder/registrar of companies/person authorized by a central government can only maintain a complaint for the offence punishable u/s 207 even though the dividends are paid, since criminality does not get absolved on payment of dividends after the stipulated time.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
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