1999 (12) TMI 757 - HC - Companies Law

Summary

Issues:
Petition to quash order summoning documents from the bank in a case involving non-payment of declared dividends by a company.

Analysis:
The case involved a petition under section 48 of the Code of Criminal Procedure seeking to quash an order passed by the Special Judge for Economic Offences. The complainant, a shareholder in a company, alleged non-payment of dividends for two accounting years despite declarations. The complainant filed petitions to summon documents and the bank manager to establish the case. The petitioners argued the documents were irrelevant, leading to a roving enquiry. The respondent contended that proving non-despatch of dividend amounts required examining bank documents and the branch manager.

The judgment delved into relevant sections of the Companies Act. Section 205 mandates dividends be paid from profits of the company for the year, with procedures outlined. Section 205A deals with unpaid dividends, requiring transfer to a special account and payment of interest for defaults. Failure to comply attracts fines. Section 205B allows claiming dividends even after transfer to the government account. Section 205(3) specifies dividends to be payable in cash, which includes payment by cheque or warrant.

Section 207 stipulates penalties if dividends are declared but not paid within 42 days. The court highlighted that companies must pay dividends within the stipulated period or despatch instruments to shareholders. Failure to do so makes the company and responsible persons liable for punishment. The judgment emphasized the importance of proving actual payment through company records, absolving liability if unpaid amounts are transferred to the special account.

The burden of proof lies with the company to show compliance with dividend payment procedures. The court noted that the complainant's attempt to summon bank documents was unnecessary, as proving negative facts was not their obligation. Even if the company did not open a special account at the mentioned bank, it could have done so elsewhere. The judgment concluded that summoning bank documents would be irrelevant and futile in establishing guilt.

In conclusion, the criminal petition was allowed, quashing the order to summon documents from the bank. The judgment clarified the legal obligations regarding dividend payments and the burden of proof on companies to demonstrate compliance with statutory requirements.