Section 207 - Penalty for failure to distribute dividends within thirty days. - Companies Act, 1956

Penalty for failure to distribute dividends within thirty days. [207. Where a dividend has been declared by a company but has not been paid, or the warrant in respect thereof has not been posted, within thirty days from the date of declaration, to any shareholder entitled to the payment of the [1][2] dividend, every director of the company shall, if he is knowingly a party to the default, be punishable with simple imprisonment for a term which may extend to three years and shall also be liable to a fine of one thousand rupees for every day during which such default continues and the company shall be liable to pay simple interest at the rate of eighteen per cent per annum during the period for which such default continues: Provided that no offence shall be deemed to have been committed within the meaning of the foregoing provisions in the following cases, namely: (a) where the dividend could not be paid by reason of the operation of any law; (b) where a shareholder has given directions to the company regarding the payment of the dividend and those directions cannot be complied with; (c) where there is a dispute regarding the right to receive the dividend; (d) where the dividend has been lawfully adjusted by the company against any sum due to it from the shareholder; or (e) where, for any other reason, the failure to pay the dividend or to post the warrant within the period aforesaid was not due to any default on the part of the company.] ----------------------------------- Notes:- [1] Substituted by the Companies (Amendment) Act, 2000, w.e.f. 13-12-2000. Prior to its substitution, section 207, was amended by the Companies (Amendment) Act, 1960. For the following: "207. Penalty for failure to distribute dividends within forty-two days. Where a dividend has been declared by a company but has not been paid, or the warrant in respect thereof has not been posted, within forty-two days from the date of the declaration, to any shareholders entitled to the payment of the dividend, every director of the company shall, if he is knowingly a party to the default, be punishable with simple imprisonment for a term which may extend to seven days and shall also be liable to fine: Provided that no offence shall be deemed to have been committed within the meaning of the foregoing provision in the following cases, namely: (a) where the dividend could not be paid by reason of the operation of any law; (b) where a shareholder has given directions to the company regarding the payment of the dividend and those directions cannot be complied with; (c) where there is a dispute regarding the right to receive the dividend; (d) where the dividend has been lawfully adjusted by the company against any sum due to it from the shareholder; or (e) where, for any other reason, the failure to pay the dividend or to post the warrants within the period aforesaid was not due to any default on the part of the company." [2] Prosecution powers delegated to DCA and SEBI officials vide Notification No. 727(E), dated 18-9-2000.