The Cum-Dividend Transfer and the Late Unpaid Dividend Deposit
Aarohi Textiles Limited, an unlisted public company with paid-up capital of ₹15 crore and 1,150 members, declared an interim dividend of 12% on 10 June 2024 for the record date 20 June 2024. Meera, the registered holder of 500 shares, sold them to Dev on 15 June and Dev lodged the transfer deed with the company on 28 June; the board registered the transfer on 5 August. The dividend cheque for those shares was issued to Meera on 25 June. Dev now demands the dividend, arguing that he paid the price cum-dividend. Separately, the company's unpaid dividend for other shareholders, ₹2.4 lakh, was not moved into a separate unpaid dividend account until 20 July. Meera has also not encashed her cheque. The company secretary is asked to sort out the claims and the compliance position, and to advise whether Dev can be paid directly.
1. Who is entitled to the dividend on the 500 shares - Meera or Dev? Explain the record-date rule and whether the company can pay Dev directly.
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The company must pay the dividend to the person whose name appears in the register of members on the record date. On 20 June, Meera was the registered holder. Dev lodged the transfer on 28 June and was registered only on 5 August, after the record date. A transfer after the record date does not retrospectively shift the dividend; the company's obligation is determined by the register on the record date. Dev's claim, if any, is contractual against Meera for a cum-dividend sale, not against the company. The company should not pay Dev directly out of the dividend for those shares unless Meera validly assigns the dividend or a court order directs payment. The secretary should reply to Dev in writing, explaining the record-date rule and pointing to the transferor's liability, while preserving the dates of lodgement and registration. If Meera's cheque remains uncashed, it is an unpaid dividend and must be dealt with under Section 124, not reissued to Dev from the company's current account.
2. What are the company's obligations regarding the ₹2.4 lakh unpaid dividend and Meera's uncashed cheque? Analyse the timing and the consequences of the late deposit.
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Under Section 124(1), a company must deposit dividend that remains unpaid or unclaimed within seven days of declaration into a separate bank account called the Unpaid Dividend Account. The interim dividend was declared on 10 June, so the deposit was due by 17 June. Moving the ₹2.4 lakh only on 20 July was late by about a month, exposing the company and every officer in default to penalty. The seven-year period under Section 124(2) runs from the date of transfer to the unpaid dividend account, not from the declaration date, so the company must record the actual deposit date carefully. Meera's uncashed cheque must be reconciled and included in the unpaid dividend account; if it remains unclaimed for seven years, the amount must be transferred to the Investor Education and Protection Fund with the prescribed statement, and the company must comply with the IEPF rules on notices and website display. The secretary should document the reason for the delay, regularise the account, and ensure future declarations are deposited within the statutory seven days.