However, no offence shall be deemed to have been committed in the following cases: (1) Where the dividend could not be paid by reason of the operation of any law; (2) Where a shareholder has given directions to the company regarding the payment of the dividend and those directions cannot be complied with; (3) Where there is a dispute regarding the right to receive the dividend; (4) Where the dividend has been lawfully adjusted by the company against any sum due to it from the shareholder; or (5) Where, for any other reason, the failure to pay the dividend or post the warrant within the period aforesaid was not due to any default on the part of the company.

Unpaid dividend to be transferred to a special dividend account (Sees. 205-A):

Dividend remaining unpaid or unclaimed within 30 days of declaration is required to be transferred by the company within 7 days after expiry of 30 days from the date of declaration of dividend to a special dividend account. The account has to be opened in a scheduled bank and to be called “Unpaid Dividend Account of… Company Limited/Company (Private) Limited.” In case a company fails to deposit the unpaid or unclaimed dividend in a scheduled bank, as stated above, the company shall be liable to pay interest at the rate of 12% per annum from the date of default on the relevant amount. Such interest will be shared by the persons entitled to claim dividend in proportion to the amount remaining unpaid to them.

Transfer of unpaid dividend to Investor Education and Protection Fund [Sec. 205A (5)]:

Any money transferred to the unpaid dividend account of a company which remains unpaid or unclaimed for a period of 7 years from the date of such transfer shall be transferred by the company to the Investor Education and Protection Fund established by the Central Government under Section 205C. If a company fails to comply with any of the above requirements, the company and every officer of the company who is in default shall be punishable with fine which may extend to Rs. 5, 000 for every day during which the default continues.

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