The abstract of the balance sheet of Trucks and Pickups Limited, a listed company as on 31/03/2024 is given below: Item Amount (₹ in crores) Equity Shares Capital (FV 10 each) 30 10% Preference Share Capital 10 Reserves

i) According to Section 123(1) of Companies Act, 2013 read with Rule 3 of the Companies (Declaration and Payment of Dividend) Rules, 2014, in case of inadequacy or absence of in case of inadequacy or absence of profits in any financial year, if a company proposes to declare dividend out of accumulated profits earned by the company in previous years and transferred by it to free reserves, such declaration shall be made subject to the following conditions: a) The rate of dividend shall not exceed the average of the rates at which dividend was declared by it in the immediately preceding three years b) The total amount to be withdrawn from such accumulated profits shall not exceed one tenth of its paid-up capital and free reserves as appearing in the latest audited financial statement. c) The amount so withdrawn shall first be utilized to set off the losses and provide for the depreciation incurred in the financial year in which the dividend is proposed to be declared. d) The balance of reserves after such withdrawal shall not fall below 15% of its paid-up share capital as appearing in the latest audited financial statement. ii) Thus, the maximum dividend that can be declared by the company in FY 23-24 is Average of previous three years' dividend rates = (20%+10%+30%)/3 Average Rate = 60%/3 = 20% The maximum dividend rate that can be declared is 20%. The maximum amount that can be withdrawn from free reserves is Maximum amount to be withdrawn = 10% of (Paid-up Capital + Free Reserves) Maximum amount to be withdrawn = 10% of ₹125 (30+10+85) Crores = ₹12.5 Crores (iii) The current FY losses need to be first set-off. Hence, the balance available after setting off the current year losses and also preference dividend @ 10% on ₹10 crore of preference shares is (12.5 - 2 - 1) = ₹9.5 crore. The balance left in free reserve after such withdrawal (85-12.5 = 72.5) is more than the required (15% of (30+10) (equity share capital+ preference share capital) = ₹6 crore) Hence, the company can proceed with declaring 20% dividend on equity shares amounting to ₹6 Crore in spite of current year losses amounting to ₹6 crores only after payment of contracted preference dividend @ 10% amounting to ₹1 crore and also after setting-off current year losses of ₹2 crore.