K.V.REDDY Vs. L.BHUDEVI

JUDGEMENT

(1.) F.A. Nos. 621/1997 to 626/1997 are preferred against the separate orders of the Cuddapah District in O.P. Nos. 355/1996 to 360/1996 all dated 4.6.1997, by the opposite parties in those O.Ps., who are common. The complainants in the O.Ps. are the respondents in these appeals. The complainants approached the District Forum stating that they were share -holders of Nayagara Paper Products (India) Limited of which 1st appellant is the Managing Director and the 2nd appellant is a Director (hereinafter referred to as the ˜Company). They stated that the Company declared a dividend of 21% for the year 1994 -95 but they did not receive any dividend warrants in respect of their shares. They addressed letters to the Company but there was no response. They contended that there was deficiency in service on the part of the appellants in not sending them dividend warrants in respect of the dividend declared for the year 1994 -95 by the Company and approached the District Forum for directions to the appellants to pay to them dividend declared for the year 1994 -95 with interest at 18% per annum from 1.4.1995 till the date of payment. The appellants received notice and appeared before the District Forum and filed separate versions/counters. They contended that so far as payments of dividend were concerned, the share holders were not consumers within the meaning of that expression as defined in the Consumer Protection Act, 1986 ( the Act for short) because no hiring of services for consideration was involved. They also stated in their versions/counters that the complainants sold their shares in the year 1993 itself. The declaration of dividend at 21% for the year 1994 -95 was admitted by the appellants. The District Forum, without any discussion, held as follows : ...When the Company has declared dividend favouring the share holders it was obligatory upon it to pay the dividend amount to the complainant. Withholding of the same would amount to deficiency in service. The complainant is, therefore, entitled for the dividend amount with interest.  On that view, the District Forum allowed all the complaints and directed the appellants/opposite parties to pay the dividend amounts for the year 1994 -95 to the complainants together with interest at 18% per annum from 1.4.1995 till the date of payment.

(2.) We are of the view that no hiring of services of the Company for consideration was involved in respect of payment of dividend by the Company to its share holders. Dividend is declared in respect of any particular financial year at the general meeting usually at the annual general meeting '' and payment of the same is governed by the provisions of the Companies Act, 1956 ( ˜Companies Act for short). Until a dividend is declared by a Company in general meeting its share holders have no claim against it for a dividend - Bacha F. Guzdar v. CIT, AIR 1955 SC 74. Once dividend is declared by the Company, payment of the same to the share holders is mandated by the provisions of the Companies Act - Section 206, inter alia, provides thatNo dividend shall be paid by a Company in respect of any share, except (a) to the registered holders of such share or to his order or to his bankers ; Section 207 provides for penalty for failure to distribute dividend within 42 days from the date of the declaration; and Section 205 -A mandates the Company to transfer unpaid dividend to special dividend account within 7 days from the date of expiry of those 42 days. Section 205 -B provides for payment of unpaid or unclaimed dividend. In Hanuman Prasad v. Hiralal, AIR 1971 SC 206, the Supreme Court has held that Section 207 casts an obligation on a Company to pay the dividend declared to the share -holder entitled thereto within 42 days from its declaration and that a dividend once declared is a debt payable by a Company to its registered share holders and that cause of action for failure to pay the same would arise at the place where the dividend warrant is to be posted. There is no hiring of services for consideration involved in these matters. In Lal Chand Malhotra v. Raunaq Singh, I (1992) CPJ 283 (NC)=1992 (1) CPR 85, the National Commission has observed that the decision relating to the declaration of dividend must have been taken by the General Body of Shareholders of the Company and a share -holder has to be treated as a party to the said decision. In view of this position under the Companies Act as regards the relationship between a Company and its share -holders, the complainants cannot invoke the jurisdiction of the Tribunals under the Act for payment of dividend. It is open to them to seek such reliefs as are available under the Companies Act. The orders of the Distnct Forum impugned in these appeals are therefore without jurisdiction. In the result, the orders in O.P. Nos. 355/ 1996 to 360/1996 are set aside and the appeals, F.A. Nos. 621/1997 to 726/1997 are allowed. No costs.