10 Day Delay in Depositing Interim Dividend Breaches S.123(4): MCA Imposes Penalty on Company and Directors [Read Order]

The Ministry of Corporate Affairs has imposed a penalty of Rs 9,000 on a company and its directors for a 10-day delay in depositing the interim dividend as per section 123(4) of the Companies Act.

The adjudication order found that the company failed to deposit the declared interim dividend into a separate bank account within the statutory five‑day period, resulting in a nine‑day default.

The case arose from a suo moto application filed by the company Maltan Enterprises Private Limited, and its directors, Mr Rakesh Vinodrai Patel, Mr Kirti Vinubhai Patel, Mrs Tanuja Kirti Patel, and Mr Chandrakant Kantilal Patel

Section 123(4) of the Act states that: The amount of the dividend, including the interim dividend, shall be deposited in a scheduled bank in a separate account within five days from the date of declaration of such dividend.

The applicants stated that the Board of Directors, in their 3rd Board Meeting for the Financial Year 2023-24 held on 13.12.2023, declared an interim dividend of Rs. 3,36,61,386/-. The Company was required to deposit the said amount in a separate bank account within 5 days from the date of declaration in terms of the provisions of section 123 of the Act.

Thus, the due date for depositing the interim dividend in a separate bank account was 18.12.2023. However, the Company opened a separate account on 27.12.2023 and deposited the aforesaid amount on 28.12.2023, that is, after a delay of 10 days, in contravention of the

provisions of Section 123(4) of the Act.

A show-cause notice was issued to the company and its directors. In their reply, the noticees admitted the default but sought leniency. They argued that the contravention was unintentional, without malicious intent, and that the company qualified as a “small company” under Section 2(85) of the Act, thereby entitling them to concessional penalties under Section 446B.

The adjudicating officer noted that the company’s paid‑up capital for FY 2022-23 was ₹1.24 crore and turnover was nil, confirming its small company status. Taking this into account, and considering the absence of fraudulent intent, the MCA applied the concessional penalty provisions. And a penalty of Rs 9000 was imposed on both the company and its directors.

The amount was directed to be paid within 90 days of receipt of order.

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