According to section 207, it is obligatory for a company to pay dividend within 30 days of its declaration.

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The term ‘to pay’ means posting of the dividend cheque or warrant. On default, every director who is knowingly a party to default is punishable with imprisonment which may extend to 3 years and with fine of Rs. 1,000 for every day if the default continues.

Default when excused:-

According to section 207, the default, is excused in the following cases:-

  1. Where dividend could not be paid due to operation of any law.
  2. Where the shareholder has given certain direction to the company regarding the payment of dividend which cannot be complied with.
  3. Where there is a dispute as to the recipient of dividend.
  4. Where the dividend has been lawfully adjusted against any sum due to the company.
  5. Where the failure to pay dividend or post the warrant within 30 days was not due to any default on the part of the company.
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