Interim dividend does not create an enforceable debt; only subsisting liabilities pass on bank acquisition.

A board resolution declaring interim dividend does not, by itself, create a debt or enforceable liability, because it remains capable of rescission before payment; unlike a final dividend declared in general meeting, it does not crystallise into a subsisting obligation. Under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, only liabilities and obligations actually subsisting on the date of vesting pass to the transferee. A declared but unpaid interim dividend was therefore not a liability within section 5(1), and section 10(7), which concerns future profits of the new bank, did not apply to pre-existing liabilities of the old undertaking.

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Issues: Whether a board resolution declaring interim dividend creates a liability or enforceable obligation, and whether such amount vested as a subsisting liability on acquisition under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970.

Analysis: Interim dividend declared by directors does not create a debt or enforceable liability because the resolution remains capable of rescission before actual payment. The legal position is different from a final dividend declared in general meeting, which gives rise to a debt. On the statutory question, section 5(1) carries to the transferee only those liabilities and obligations that were actually subsisting at the date of vesting. A mere declaration of intention to pay interim dividend, not yet paid and still subject to the directors' control, is not such a subsisting liability. Section 10(7), dealing with transfer of future profits of the corresponding new bank, does not govern pre-existing liabilities of the old undertaking.

Conclusion: The declared interim dividend was not a liability or obligation within section 5(1), and no enforceable claim lay against the Central Government.

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