Section 243 — Directors not to withhold declared dividend

(1) When a
dividend has been declared, it shall not be lawful for the directors of the company
to withhold or defer its payment and the chief executive of the company shall be
responsible to make the payment in the manner provided in section 242.

Explanation.— Dividend shall be deemed to have been declared on the date
of the general meeting in case of a dividend declared or approved in the general
meeting and on the date of commencement of closing of share transfer for purposes
of determination of entitlement of dividend in the case of an interim dividend and
where register of members is not closed for such purpose, on the date on which
such dividend is approved by the board.
(2) Where a dividend has been declared by a company but is not paid
within the period specified under section 242, the chief executive of the company
shall be punishable with imprisonment for a term which may extend to two years
and with fine which may extend to five million rupees:

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; and

the Commission has, on an application of the company on the specified form made
within forty -five days from the date of declaration of the dividend, and after
providing an opportunity to the shareholder or person who may seem to be entitled
to receive the dividend of making representation against the proposed action,
permitted the company to withhold or def er payment as may be ordered by the
Commission.
(3) Notwithstanding anything contained in sub-section (2), a company
may withhold the payment of dividend of a member where the member has not
provided the complete information or documents as specified by the Commission.

(4) Chief executive convicted under sub-section (2) shall from the day
of the conviction cease to hold the office of chief executive of the company and
shall not, for a period of five years from that day, be eligible to be the chief
executive or a director of that company or any other company.