235-Day Delay in Unpaid Dividend Transfer Costs Company and Its Directors: ROC

The Registrar of Companies (ROC), Ernakulam, has imposed a penalty amounting to Rs 3.14 lakh on the company, Cochin Aircraft Maintenance Company Limited and its two directors for non-complying with Section 124(7) of the Companies Act, 2013.

According to the provisions of Section 124(1) of the Companies Act, 2013, if a dividend has been declared by a company but not been paid or claimed within the time limit of 30 days from the date of the declaration to any shareholder entitled to the payment of the dividend. In that case, the company must transfer the unpaid amount to a special bank account called the “Unpaid Dividend Account” within the next 7 days.

In the present case, the disputed company, i.e., Cochin Aircraft Maintenance Company Limited, had declared a dividend for the financial year 2021-22 in its AGM held on August 25, 2022. Hence, the company was required to transfer any unpaid dividends to the Unpaid Dividend Account on or before October 01, 2022.

The company had opened its Unpaid Dividend Account on September 28, 2022; however, it transferred the unpaid dividend to the said account on May 24, 2023, which was a total of 235 days late from the statutory time limit, and after that, it paid the concerned shareholder on February 18, 2025. This situation reflectss an explicit violation of the provisions of Section 124(1) of the Companies Act, 2013. Therefore, the company was liable for penal action under section 124(7) of the Act.

Considering the aforementioned findings, the adjudicating officer levied a penalty of Rs 2.17 lakh on the company, Cochin Aircraft Maintenance Company Limited and Rs 97,000 on its two directors, Pallikkavaliy Aveetil Mohamed Rasheed and Raveendran Erumbala (Rs 48,500 on each). They have been directed to pay the imposed penalty amount and rectify the default within 90 days of receiving the order.