1999 (2) TMI 475 - Commission - Companies Law

Summary

Issues:
1. Whether the shareholders can approach the Consumer Forum for non-receipt of dividend warrants.
2. Whether the failure to pay dividend warrants amounts to deficiency in service.
3. Whether the shareholders are considered consumers under the Consumer Protection Act, 1986.

Analysis:
1. The complainants, who were shareholders of a company, approached the District Forum alleging non-receipt of dividend warrants for the year 1994-95. The company's managing director and director were appellants in the case. The District Forum held that withholding the dividend amount constituted deficiency in service and directed the appellants to pay the dividend amounts with interest. The appellants contended that shareholders were not consumers under the Consumer Protection Act as no hiring of services for consideration was involved, and some shareholders had sold their shares in 1993.

2. The District Forum's decision was based on the premise that the company was obligated to pay the declared dividend to the shareholders, and failure to do so amounted to deficiency in service. However, the Appellate Commission noted that the payment of dividend is governed by the Companies Act, and shareholders have no claim against the company for dividend until it is declared at a general meeting. The Companies Act mandates the payment of declared dividends to registered shareholders within a specified period, and failure to do so incurs penalties. The Commission emphasized that the relationship between a company and its shareholders regarding dividends is regulated by the Companies Act, not the Consumer Protection Act.

3. Citing legal precedents, the Commission clarified that the shareholders cannot invoke the jurisdiction of consumer tribunals under the Consumer Protection Act for payment of dividends. Shareholders are parties to the decision-making process regarding dividend declaration at general meetings, and any disputes related to dividends fall under the purview of the Companies Act. Therefore, the Commission held that the District Forum's orders were without jurisdiction and set them aside, allowing the appeals of the appellants. The shareholders were advised to seek remedies available under the Companies Act instead of approaching consumer forums for dividend-related issues.