2009 (5) TMI 531 - HC - Companies Law

Direction to petitioner pay dividend for the financial year 1996-97 - Held that - Both SEBI and Central Government have accepted the plea and contention of respondent No. 2, AITD, after referring to the relevant clauses of the scheme and upon interpretation of the same. They have also specifically referred to the letter dated 9th June, 1999. The impugned orders cannot be said to be perverse or bad for lack of application of mind to the relevant clauses of the scheme. The contentions of the parties have been considered and the relevant clauses interpreted. The orders and the interpretation given is plausible and reasonable. It takes into account the promise made, intention and spirit of the scheme. It appears that the petitioners have changed their stand inspite of their letter dated 9th June, 1999 admitting the position that the respondent No. 2, AITD, is entitled to dividend for the financial year 1996-97. As a writ court there is no justification and reason to set aside concurrent findings of both SEBI and the Central Government. Writ petition is dismissed. The petitioners will pay dividend along with simple interest @ 8 per cent p.a. from 31st March, 1998 till the dividend amount was deposited. Interest will be paid directly to the respondent No. 2, AITD, within two months. The interest accruing on the fixed deposit will be also paid to the respondent No. 2, AITD

Summary

Issues:
Challenge to orders directing payment of dividend for the financial year 1996-97 to a respondent under a scheme.

Analysis:
1. Challenge to Orders: The petitioners, Indian Bank Mutual Fund and Indian Bank, challenged the orders directing them to pay dividend for the financial year 1996-97 to a respondent under a scheme. The orders were passed by the Chairman of SEBI and the Central Government. The respondent, an NGO, had applied for and was issued units under the scheme promoted by the petitioners. The petitioners failed to pay the minimum assured return dividend for the year ending 31st March, 1997, citing insufficient capital balance and income.

2. Contentions Raised: The petitioners contended that only registered unit holders on the date when dividend was declared were entitled to dividend distribution, as per the scheme's rules and regulations. They also argued that the respondent had relinquished all claims while applying for repurchase of the units.

3. Interpretation of Scheme: The court found that the petitioners had promised assured returns under the scheme, which they failed to pay for the financial year 1996-97. The court held that the petitioners could not rely on a clause stating that only registered unit holders were entitled to dividend when they themselves did not fulfill their promise of assured return. The court also rejected the petitioners' argument based on a clause in the purchase form relinquishing all claims.

4. Acceptance of Liability: The petitioners, in a letter to SEBI, acknowledged that the scheme provided for assured minimum dividend and that they failed to declare dividend initially due to inadequate surplus. They agreed to pay the dividend for the financial year 1996-97 to the respondent, as the units were purchased after the end of that financial year.

5. Judicial Decision: Both SEBI and the Central Government accepted the respondent's plea based on the scheme's clauses and the petitioners' admission in their letter. The court upheld the orders directing the petitioners to pay the dividend for the financial year 1996-97 with simple interest. The court found no justification to set aside the concurrent findings of SEBI and the Central Government.

6. Conclusion: The court dismissed the writ petition, ordering the petitioners to pay the dividend with interest to the respondent within two months. The court emphasized the importance of honoring commitments made under the scheme and upheld the decisions of SEBI and the Central Government in favor of the respondent.