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REGISTERED No. D-28

The Gazette of India

EXTRAORDINARY

PUBLISHED BY AUTHORITY

NEW DELHI, WEDNESDAY, APRIL 27, 1949

PART IV

Acts of the Dominion Legislature assented to by the Governor General

GOVERNMENT OF INDIA

MINISTRY OF LAW

New Delhi, the 21th April, 1949

The following Act of the Dominion Legislature received the assent of the Governor-General on the 26th April, 1949 and is hereby published for general information: —

ACT NO. XXX OF 1949

An Act to limit the dividends which may be paid by public companies.

WHEREAS it is expedient to limit the dividends which may be paid by public companies;

It is hereby enacted as follows:—

Preliminary

1, Short title, extent and duration.—(7) This Act may be called the Public Companies (Limitation of Dividends) Act, 1949.

(8) It extends to all the Provinces of India, And also to every Acceding State to the extent to which the Dominion Legislature has power to make laws for that State as respects the matters dealt with in this Act.

(3) It shall remain in force only up to the 31st day of March, 1950.

2. Definitions—In this Act, unless there is anything repugnant in the sub- ject or context,—

(a) "Companies Act" means the Indian Companies Act, 1918 (VII of 1913);

(b) "company" means a public company as defined in clause (13A) of section 2 of the Companies Act, and includes—

(i) the Imperial Bank of India constituted under the Imperial Bank of India Act, 1920 (XLVII of 1920);

(ii) any trading, banking, insurance or finance corporation consti- tuted by or under any other law in force in India, provided thai such

(135)

corporation, if it had been registered as a company under the Com- ptmies Act;, would not havo been a "private company" within the meaning of that Act; and

v

(Hi) any other Incorporated body which the Central Government may, by general or special order, deolare to be a public company for the purposes of this Act, but does not include

(t) a public company to which the provisions of sub-soetion (1) of section 28A of the Indian Income-tax Act, 1022 (XI of 1922) apply, or

(ii) a co-operative society registered or deemed to bo registered under the Co-operative Societies Act, 1912 (II of 1912), or any other' law relating to co-operative societies in force for the time being' in any part of India;

(o) "financial year" means the year commencing on the 1st day of April.

Limitation of dividend*

3. Dividends not to exceed certain limits.—No company shall, after the eommencement of this Act, distribute as dividend during any financial year, any sum which exceeds, or which, when taken with any sum already distrlbu- |ed as dividend during the same year whether before or after the commence- ment of this Act, will exceed—•

(a) six per cent, of tho paid-up capital of tho company as on the lust day of the period in respect of which the dividend is distributed, after deducting from such capital all amounts attributable to the capitalisation, on or after the 1st day of April, 1946, of one oi more of the following namely reserves, profits and appreciation of assets, or

(b) the average annual dividend of $he oompany, determined in the- manner specified in sections 6 to 7,

whichever is higher.

4. Limit oi six per cent, to be exclusive of Income-tax paid by company.— The limit of six per cent, specified in clause (a) of section 8 shall be applied to the amount of dividend distributed by the oompany among its shareholders, payments made by the oompfmy by way of income-tax being ignored.

6. Dividends and periods to be taken Into account for determining average annual dividend.—The average annual dividend referred to in clause (b) of seo- tion 8 shall be determined with reference to—

(a) the total of the dividends distributed by such oompany (otherwise than by way of bonus shares) during the period of two years commencing on the 1st day of April, 1946, and ending with the 81st day of March, 1948, and

(b) the total of the periods in tespeot of which each such dividend ha& been distributed, no period however being counted more them onoe:

Provided that where an interim dividend for any period has been dis- tributed before the 1st day of April, 1948, and a final dividend has been distributed in respect of the same period on or after that date but on or before the 81st day of March, 1948, such interim dividend shall be added to the total of the dividends referred to in clause (a):

Provided further that where an interim dividend for any period has been distributed on or after the 1st day of April, 1946 and on or before the

81st day of March, 1948, and a final dividend has beon or is distributed in respect of the same period after the latter date, then—

(i) if the final dividend was distributed before the 5th day of October, 1948, it shall be added to the total <>£ the dividends referred to in olause (a);

(ii) if the final dividend WBB or is distributed on or after the 5tM day of October, 1948, the interim dividend and the period in respect of which it -was distributed shall not bo taken into account for the pur- poses of this section; but it shall be open to the company to claim that the interim dividend (but not the final dividend) shall be added to th" total of the dividends referred to in clause (a), In which case the period in respect of which such interim dividend was distributed shall be taken into account for the purposes of clause (b).

6. Bate of distribution at dividend.—For the purposes of this Act, a divi- dend shall be deemed to have been distributed by a company on the date OD which the shareholders or their legal representatives have a right to receive it from the company, whether or not it has been actually paid.

7. Provision lor Increase or reduction in patd-up capital.—(1) (a) Where, sub- sequent to the distribution by a company of any dividend which has to be taken into account; for the purposes of clause (b) of Rection 8, its paid-up capital is increased by any amounts actually paid in cash, or

(b) where, before the distribution of any such dividend, the paid-up capital of a company is increased by any amounts actually pmd in caah, but the amounts so paid are not entitled to the benefit of such dividend,

such dividend, rmd overy prior dividend which has to be taken into account tot the purposes aforesaid, shall be deemed to have b&en augmented—

(t) pro rata, if the increase took place before the 29th dfiy of October, 1948; and

(ii) by a sum equal to six per ceut. per annum of all amounts paid in cash both by way of share capital and by way of promia, if the increase took place after the 29th day of October,'1948.

(2) (a) Where subsequent to the distribution by a company of any dividend which has to be taken into aocount for the purposes of clause (b) of section 8, its paid-up capital is reduced, or

(b) where, before the distribution of any such dividend, the paid-up capital of a company is reduced, but the whole of the capital as it stood before such reduction if? entitled to the benefit of such dividend,

ouch dividend, and every prior dividend which has to be taken into aeoount for •he" purposes aforesaid, shall be deemed to have been diminished pro rata.

Preference shares

8. Speoial provision lor preference shares—Nothing contained in this Act shall be deemed to limit In any way the dividend payable on preference shares issued and subscribed for before the 29th day of October, 1948.

9. Prohibition of issue ol preference shares at more than six per cent,—No company shall, after the 29th day of October, 1948, issue preference shares carrying a right to a dividend at n rate exceeding six per cent, per annum.

Miscellaneous

J6. Power to make rules.—(1) The Central Government may, by notification in the official GoEette, make rules to carry out the purposes of this Act.

(9) In particular and without prejudice to the generality ol the foregoing power, such rules may provide for—

(i) the adaptation of the provisions of this Act with a view to their application to all or any of thu bodies declared to be public companies under sub-olause (in) of clause (b) of section 2;

(it) the prevention of the evasion of the provisions oi thie Act, and the removal of difficulties in giving effect thereto.

11, Power to make exemptions, etc.—The Central Government may, by order, exempt any company or class of companies from all or any of the pro- visions of this Act, of make any modification in the application of the said provisions to any company or dass of companies.

12. Penalty,—Any director, managing agent, manager or other officer or em- ployee of a company who contravenes or attempts to contravene, or abets the contravention of or attempt to contravene, any of the provisions relating to the distribution of dividends, or the issue of preference shares, contained in this Acb or in any rule, notification or order issued thereunder, shall be punishable with imprisonment for a term which may extend to two years, or with fine, or with both.

18. Repeal of Ordinance XXIX of 1948.—(I) The Public Companies (Limi- tation of Dividends) Ordinance, 1948 (XXIX of 1948), is hereby repealed.

(2) Notwithstanding such repeal, any rules made, action taken or thing done in exercise of any power conferred by or under the said Ordinance shall tie deemed to have b^en made, taken or done in exercise of the powers conferred by or undor this Aot, as if this Act had come into force on the 29th day ot October, 1948.

K. V. K. SONDARAM,

Secy. IQ tkt Goof, of, India.