Payment of dividend/return of share capital ‑ Cheques issued but not encashed within the period prescribed under the section ‑ Procedure to be followed - Companies Law - No. 25/73,

Circular : No. 25/73, dated 17 ‑ 9 ‑ 1973. Subject:- Payment of dividend/return of share capital ‑ Cheques issued but not encashed within the period prescribed under the section ‑ Procedure to be followed Advice was sought as to the procedure to be followed in the matter of cases wherein cheques had been issued towards payment of dividends/return of share capital but not encashed within the period, of 6 months of the date of declaration of such dividend/return of share capital. It has been reported that soon after the declaration of dividend/return of share capital, the official liquidator opens an account with the State Bank of India under rule 290 of the Companies (Court) Rules, 1959, and thereafter deposits the total amount of dividend/return of share capital payable, in the said account and cheques are issued to the parties as and when claims are made. At the end of the period of 6 months from the date of declaration of dividend, etc., the official liquidator ascertains the balance at credit from the Dividend Paid Register maintained in Form No. 142P of the Companies (Court) Rules, and remits the said balance amount into the Companies Liquidation Account with the Reserve Bank of India in terms of section 555, and simultaneously files a return with the Registrar of Companies. It is seen that at the end of the period of six months from the date of declaration of dividend/return of share capital, some cheques issued by the official liquidator remain which are not encashed by the parties before the date of transfer of funds into the Companies Liquidation Account with the Reserve Bank of India and, therefore, the balance as shown in the account with the State Bank of India and that as per Dividend Paid Register do not tally. The question arises as to how the amounts of such cheques can be withdrawn from the State Bank of India account and paid into the Companies Liquidation Account with the Reserve Bank of India and as to the period within which the withdrawal of the balance amount for transfer of the same to the Companies Liquidation account is to be made. The Department has examined this point and it is of the view that in such circumstances the official liquidator should keep a watch over the encashment of such cheques. He should wait for the expiry of the permissible period of encashment and obtain a statement of accounts from the State Bank regarding the amount lying with it in the concerned dividend account and, at the earlier practicable date, withdraw the balance and deposit it into the Companies Liquidation Account with the Reserve Bank of India. The official liquidator after withdrawing the amount remaining unclaimed in the State Bank of India account should make necessary entries in the Dividend Paid Register to the effect that certain cheques (No., date and account, etc., to be indicated) issued were not encashed by the parties and hence the amount involved in the said cheques is also deposited in the Companies Liquidation Account with the Reserve Bank of India. He should also file a supplementary statement with the Registrar concerned giving relevant details relating to such cheques. The withdrawal of amounts from the State Bank of India account and their remittance into the Companies Liquidation Account should be done within a period of 10 days from the expiry of the period of encashment of such cheques issued.