CMA Final · Corporate and Economic Laws · Dividends
Dividend declared by Kaveri Textiles Ltd. was not paid or the warrant posted to shareholder Mr. Rao within thirty days of declaration. Which of the following is a situation in which no offence under Section 127 is deemed to be committed?
No offence is deemed committed where there is a dispute regarding the right to receive the dividend. Oversight, lack of cash or a small shareholding are not statutory exceptions, so the directors would remain exposed to liability in those cases.
- AThe company's directors forgot about the dividend payment
- BThe company was short of cash at the time
- CThere is a dispute regarding Mr. Rao's right to receive the dividendCorrect
- DMr. Rao is a small shareholder holding fewer than 100 shares
Explanation
The proviso to Section 127 lists situations where no offence is deemed committed, including a dispute regarding the right to receive the dividend. Forgetfulness, cash shortage or a small shareholding are not listed exceptions.
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