Valuable Ltd. declared dividend at its 10th Annual General Meeting. Mr. Strong holding only 19% equity share had informed the Company that his dividend be paid to Mr. Weak and gave the bank account details of Mr. Weak. W

Section 127 of the Companies Act, 2013 deals with punishment for failure to distribute dividend. It states that 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. Para (b) of the proviso to Section 127 provides that no offence under this Section shall be deemed to have been committed 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. In the instant case, the shareholder i.e. Mr. Strong has directed the company to pay dividend to Mr. Weak. The company tried to make electronic payment to Mr. Weak but due to his bank account being inoperative the dividend could not get credited to bank account. Therefore, it is not the fault of dividend paying company who duly acted on the direction of Strong. But the company did not communicated this fact to Mr. Strong. This is a non compliance on the part of the company. Therefore, Mr. Strong can sue the company for non - payment of dividend after one month and his action would be in order.