Statutory defence to dividend non-payment under Companies Act proviso barred prosecution where default was not voluntary.

Non-payment of declared dividend within the 42-day statutory period was treated as protected where the default was not voluntary and arose from directions of financial institutions restricting dividend payment until loan overdues were cleared. On those facts, clause (e) of the proviso to section 207 of the Companies Act, 1956 was held to apply, barring prosecution for the omission. Continuation of the criminal proceedings was therefore regarded as an abuse of process, and the proceedings were quashed.

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Issues: Whether prosecution for non-payment of declared dividend within 42 days was unsustainable in view of clause (e) of the proviso to section 207 of the Companies Act, 1956, and whether the criminal proceedings amounted to an abuse of process of court.

Analysis: The company had declared dividend but did not pay it within the statutory period of 42 days. The non-payment was shown to have resulted from directions issued by financial institutions requiring the company not to declare or pay dividends until the loan overdues were cleared. On that basis, the failure was treated as not being a voluntary default by the company and as falling within the protection of clause (e) of the proviso to section 207.

Conclusion: The protection under clause (e) of the proviso to section 207 of the Companies Act, 1956 applied, and continuation of the prosecution was held to be an abuse of process of court.

Final Conclusion: The criminal proceedings were quashed as the statutory defence barred further prosecution on the facts found.

Ratio Decidendi: Where non-payment of dividend within the prescribed period is not attributable to the company's default and is covered by the statutory proviso, prosecution for the omission cannot be sustained.

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