The document discusses a 1974 court case regarding a dividend declared by the Punjab National Bank in 1969. The court ruled that the bank's declaration of an interim dividend created a legal obligation to pay shareholders. While the bank was later nationalized, the obligation to pay the dividend was transferred accordingly. The court ordered the dividend to be paid, as compensation under the nationalization law is paid to banks, not individual shareholders entitled to declared dividends.

1. DIVIDENDS
AND ITS TYPES
Presented By:
Lalitha(GBS/011)
Ujwal(GBS/010)
From Guru Nanak Business
School,Hyderabad

2. DIVIDENDS
 Dividend is a portion of the company's earnings
to be distributed to its shareholders, based on
board of directors' decision.
 Dividends are quoted as Dividend Per Share
(DPS) or dividend yield.
 Most companies having stable and secure growth
offer dividends when their share prices become
stagnant.
 However several companies do not offer
dividends as all profits are reinvested to ensure
faster, better-than-average growth.

3.  The board of directors decides the percentage of the
profit to be distributed as dividends.
 Dividends are issued quarterly or annually.
 Dividends are declared by the board of directors
each time they are paid.
 There are three important Dividend Related dates.
 Declaration date, date of record and payment date.

4. BRIEF REFERENCE TO SECTIONS IN COMPANIES ACT
1956:
 Section 205: It stipulates no dividend shall be paid unless it is paid
out of current year’s profits or out of the previous year’s profits or both,
arrived at after providing depreciation as per section 350 and
mandates tat the minimum percentage of profits has to be transferred
to reserves as per rules if dividend paid exceeds 10%
 Section 205A: It stipulates that dividend (including Interim) declared
should be deposited within 5 days of declaration. Any unpaid or
unclaimed dividend should be transferred to a special account within 7
days from the date of expiry of said 30 days. It shall remain for 7 years
in the said account for any claim from the shareholders
 Section 205B: Payment of unpaid or unclaimed dividend. Any person
claiming to be entitled to any money transferred under sub- section (5)
of section 205A to the general revenue account of the Central
Government, may apply to the Central Government for an order for
payment of the money claimed; and the Central Government may, if
satisfied, whether on a certificate by the company or otherwise, that
such person is entitled to the whole or any part of the money claimed,
make an order for the payment to that person of the sum due to him
after taking such security from him as it may think fit

5.  Section 205C: Establishment of Investor Education and Protection
Fund. section 205C of the Companies Act, 1956, through Companies
(Amendment) Act, 1999, thereby making it compulsory to deposit
unpaid and unclaimed dividend lying with the companies for a period
of seven years to the Investor Education and Protection Fund (IEPF),
administered by the Central Government. This involves various
activities like educating investors about market operations
 Section 206: Dividend not to be paid except to registered shareholders
or to their order or to their bankers
 Section 206A: Right to dividend rights shares and bonus shares to be
held in abeyance pending registration of transfer of shares. Where any
instrument of transfer of shares has been delivered to any company for
registration and the transfer of such shares has not been registered by
the company, it shall, notwithstanding anything contained in any
other provision of this Act
 Section 207: Penalty for failure to distribute dividends within forty-
two days. Where a dividend has been declared by a company but has
not been paid, or the warrant in respect thereof has not been posted,
withinforty- two days from the date of the declaration, to any
shareholder entitled to the payment of the dividend, every director of
the company;

6.  its managing agent or secretaries and treasurers; and where the
managing agent is a firm or body corporate, every partner in the firm
and every director of the body corporate; every director thereof; shall,
if he is knowingly a party to the default, be punishable with simple
imprisonment for a term which may extend to seven days and shall
also be liable to fine: Provided that no offence shall be deemed to
have been committed within the meaning of the foregoing provision
in the following cases, namely:-
 where the dividend could not be paid by reason of the operation of
any law;
 where a shareholder has given directions to the company regarding
the payment of the dividend and those directions cannot be complied
with;
 where there is a dispute regarding the right to receive the dividend;
 where the dividend has been lawfully adjusted by the company
against any sum due to it from the shareholder

7. CASE STUDY ON
DIVIDEND
The Punjab National Bank Ltd. And ... vs The Union Of India
And Ors. on 4 October, 1974
Link-https://indiankanoon.org/doc/648590/
Case study was taken from www.kanoonindia.org

8. THE PUNJAB NATIONAL BANK LTD. AND
... VS THE UNION OF INDIA AND ORS. ON
4 OCTOBER, 1974
 Delhi High Court
 JUDGMENT Prakash Narain:- Article 226 of the
Constitution of India the Punjab National Bank
Ltd., New Delhi and three of its shareholders
pray for the issue of a writ, order or direction in
the nature of a mandamus to the Union of India,
the Reserve Bank of India and the Custodian,
Punjab National Bank, New Delhi, to discharge
their obligations(to release or allow to go) under
Section 5(1) of Act 5 of 1970 and pay the interim
dividend declared by and in the resolution dated
July 16. 1969 of the Board of Directors of the
Punjab National Bank Ltd.

9. THE PUNJAB NATIONAL BANK LTD. AND
... VS THE UNION OF INDIA AND ORS. ON
4 OCTOBER, 1974
 On July 16. 1969 the Board of Directors of the Punjab
National Bank Ltd passed a resolution declaring an
interim dividend for the half year ending on June 30,
1969 at the rate of Rs. 1 .20 gross per share.
 It was decided that the interim dividend declared by
the Board of Directors will be paid to those whose
names were entered in the Share Register of the said
bank as on August 23, 1969. This fact was notified by
sending information to the Bombay, Calcutta, Madras
and Delhi Stock Exchanges
 A notice was also published in the Press to this effect
in the newspapers of July 17 and July Is, 1969.

10. THE PUNJAB NATIONAL BANK LTD. AND
... VS THE UNION OF INDIA AND ORS. ON
4 OCTOBER, 1974
 On July 19, 1969 the President of India promulgated
an Ordinance taking over the undertaking of 14
Banks including that of petition No. 1.
 On August 9, 1969 the parliament enacted the
Banking Companies (Acquisition and Transfer of
Undertakings) Act 22 of 1969.
 He shareholders of Petitioner No. 1 moved
respondents for payment of the interim dividend
declared by the Board of Directors on July 16, 1969. It
was not paid.
 It is averred that the Central Government and the
Reserve Bank advised the third respondent not to pay
the interim dividend.

11. THE PUNJAB NATIONAL BANK LTD. AND
... VS THE UNION OF INDIA AND ORS. ON
4 OCTOBER, 1974
 On October 17, 1969 an extraordinary general
meeting of the members of petitioner No. 1 was
convened in which a resolution was passed asking for
payment of the aforesaid interim dividend.
 This was forwarded to the third respondent. By his
letter of February 6, 1970 the third respondent wrote
that the interim dividend was not payable.
 By its judgment dated February 10, 1970 the
Supreme Court held that Act 22 of 1969 was ultra
vires(beyond the powers or ) various provisions of the
Constitution.
 The interim dividend declared by the Board of
Directors on July 16, 1969 was an obligation of the
Punjab National Bank Ltd. which the shareholders
could enforce at law

12. THE PUNJAB NATIONAL BANK LTD. AND
... VS THE UNION OF INDIA AND ORS. ON
4 OCTOBER, 1974
 The transfer of the undertaking this obligation
was also transferred and must be deemed to have
been taken over and vested in the corresponding
new bank, the Punjab National Bank, by virtue
of Act No. 5 of 1970.
 According to the petitioner they were entitled to
recover from the Punjab National Bank Ltd. The
interim dividend declared by the Board of
Directors on July 16, 1969 and inasmuch as the
said interim dividend was a liability of the
Punjab National Bank Ltd.
 Section 3(1) Section 4 Section 5

13. THE PUNJAB NATIONAL BANK LTD. AND
... VS THE UNION OF INDIA AND ORS. ON
4 OCTOBER, 1974
 According to the Companies Act dividend to be
declared by a general meeting Clause 86 gives the
power to the Board of Directors to pay interim
dividend to shareholders from time to time as it may
appear to the Board to be justified by the profits of
the company.
 Section 207 of the Companies Act provides for a
penalty for failure to distribute dividends declared by
a company but not paid
 Board of Directors on July 16, 1969 to pay interim
dividend and this resolution was never rescinded the
resolution created an enforceable obligation on the
company to pay the interim dividend so declared.
Thus, it was a legal obligation which could be
enforced against the company.

14. THE PUNJAB NATIONAL BANK LTD. AND
... VS THE UNION OF INDIA AND ORS. ON
4 OCTOBER, 1974
 Coming now to the question regarding payment
of compensation and the contention that since
compensation is payable no dividend is to be
paid.
 Compensation under the Act is payable to the
banking company who alone could claim dividend
 They decided to take into account the assets and
the liabilities to pay the dividend to the
customers.