Punishment for failure to distribute dividends
Section 127 of the Companies Act, 2013 deals with punishment for failure to distribute dividends. Where a dividend has been declared by a company but has not been paid or the warrant in respect thereof has not been posted within thirty days from the date of declaration to any shareholder entitled to the payment of the dividend, every director of the company shall, if he is knowingly a party to t The Act came into force on 01 Apr 2014.
Where a dividend has been declared by a company but has not been paid or the warrant in respect thereof has not been posted within thirty days from the date of declaration to any shareholder entitled to the payment of the dividend, every director of the company shall, if he is knowingly a party to the default, be punishable with imprisonment which may extend to two years and with fine which shall not be less than one thousand rupees for every day during which such default continues and the company shall be liable to pay simple interest at the rate of eighteen per cent. per annum during the period for which such default continues:
Provided that no offence under this section shall be deemed to have been committed:--
(a) where the dividend could not be paid by reason of the operation of any law;
(b) where a shareholder has given directions to the company regarding the payment of the dividend and those directions cannot be complied with and the same has been communicated to him;
(c) where there is a dispute regarding the right to receive the dividend;
(d) where the dividend has been lawfully adjusted by the company against any sum due to it from the shareholder; or
(e) where, for any other reason, the failure to pay the dividend or to post the warrant within the period under this section was not due to any default on the part of the company.
Section 127, The Companies Act, 2013 (Act 18 of 2013).
Cross-references
Extracted from the operative text of the enactments themselves. Every destination below exists in our corpus.
Judgments citing this section
These may be obiter dicta or a precedent, for you to study. These are the judgments where this section is quoted.
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… It is only after the lock-in period expired and after submitting necessary papers, the amount was returned through bank only to the Unit Holder. During the currency of the Units, the Unit Holder would get 'dividend'. It is also submitted that Section 127 of the Companies Act deals with the punishment clause for failure to distribute the dividends. Therefore, predominantly if the dividend is not paid, it is an offence punishable under the Companies Act. Once it is an offence punishable under the Companies Act, the question arises as to who should try and award the …
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… The proviso is subsidiary to main section. It is not addendum to the main provision. 20. Thus, both the proviso and exception help the reader to understand the enactment as a whole. Sub-section (c) of Section 127 of the Companies Act is a part of the proviso which further provides deeming provision. While interpreting deeming provision in the proviso, the Court cannot overlook the internal aids, which are made available by the legislature, i.e. context and simple meaning of the word, therefore, the completeness of Section is …
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… The proviso is subsidiary to main section. It is not addendum to the main provision. 20. Thus, both the proviso and exception help the reader to understand the enactment as a whole. Sub-section (c) of Section 127 of the Companies Act is a part of the proviso which further provides deeming provision. While interpreting deeming provision in the proviso, the Court cannot overlook the internal aids, which are made available by the legislature, i.e. context and simple meaning of the word, therefore, the completeness of Section is …
Made under this section, and citing it
2 instruments name this provision in its title or its text without being made under it.
Questions about Section 127
What does Section 127 of the Companies Act deal with?
Section 127 of the Companies Act is headed "Punishment for failure to distribute dividends". Where a dividend has been declared by a company but has not been paid or the warrant in respect thereof has not been posted within thirty days from the date of declaration to any shareholder entitled to the payment of the dividend, every director of the company shall, if he is knowingly a party to t
How do I find court cases under Section 127 of the Companies Act?
In judgments and charge sheets this section is written several ways, and each form finds a different set of orders. These search the full text of every order eCourtsIndia holds, best matches first: Companies Act 127, section 127 Companies Act, section 127 of the Companies Act. People searching for it also type companies ordinance 127 and companies ordinance 127 3. Each opens the full list of orders on eCourtsIndia, where it can be narrowed by court, year and outcome.
What should I read with Section 127 of the Companies Act, and has it changed?
3 other provisions in this corpus refer back to it. 2 instruments name it without being made under it, most recently G.S.R. NO. 43(E) Companies share capital and debentures amendment rules 2023 dated 21.01.2023 (2023), then Notification under section 458 of Companies Act, 2013: Delegating of powers to RDs under section 208 of the said Act. (2015).
When did Section 127 of the Companies Act come into force?
Section 127 of the Companies Act, cited as Companies Act 127, came into force on 01 Apr 2014, having been enacted on 29 Aug 2013. It is in force as at the date shown on this page.
Other sections of this Act
- 2. Definitions5089 words
- 143. Powers and duties of auditors and auditing standards1867 words
- 230. Power to compromise or make arrangements with creditors and members1432 words
- 232. Merger and amalgamation of companies1416 words
- 149. Company to have Board of Directors1403 words
- 217. Procedure, powers, etc., of inspectors1390 words
Source and method. Compiled from the enactments of Parliament and of the State legislatures as published on India Code, and republished together with commentary and other original matter under section 52(1)(q)(ii) of the Copyright Act, 1957. Structured, cross-referenced and maintained by eCourtsIndia. Text as in force on 14 Oct 2026. This page is not a substitute for legal advice.