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Case Study-1 [ 1 Marks each ]
Vignesh Fertilizers Limited (VFL) and Vivian Chemicals Private Limited (VCPL) were promoted
around 30 years back by Mr. Vicky Tripathi and his family members. Mr. Vicky Tripathi and his
younger brother Vinay Tripathi actively participate in the daily operations of both the
companies. VCPL is wholly owned by Tripathi family, while Tripathi family has a majority stake
of 65% in VFL.
Due to the poor economic conditions in the agriculture sector and shifting of the farmers’
focus to organic farming, the sales of Vignesh Fertilizers Limited is dipping and its bottom line
has been in the red for the last couple of years. The unabsorbed loss of VFL for the current
financial year is ₹ 9.8 crores. VFL didn’t pay any dividends during the last four years. VFL has
accumulated profit in the form of the free reserves of ₹ 180 crores whereas paid-up share
capital is 918 crores. Since pressure from shareholders of the free float is mounting,
management at VFL decided to pay a dividend this year out of accumulated profit. Finally, the
dividend was declared on 31st August 2020. Some of the dividend remained unpaid as on 30th
September 2020, on account of operation of law; this was transferred to Unpaid Dividend
Account and the list of such beneficiary owners along with contact details of the same were
hosted on the website of the company on 9th November 2020.
VCPL is a mid-sized unlisted entity, with few branches (retail drug store) abroad and is not
required to appoint a director under section 149(4). During the immediately preceding year,
net worth was 280 crores, turnover is 590 crores and net profit is 45.8 crores. The profits
and other information of the immediately preceding three years is given below:
Particulars Year ended Year ended Year ended
31.3.2020 31.3.2019 31.3.2018
(in crores) (in crores) (in crores)
Profit for the year 45.8 52.0 35.8
Profit from foreign branches 1.8 9.1 5.4
Non-operating Income 8.6 2.7 0.8
Dividend Income 4.2* 0.0 2.4
*Out of 4.2 Crores, the amount of 1.8 crores is dividend received from a foreign company.
The Board of Directors of VCPL is not clear whether they have to compulsorily form a CSR
committee. In order to avoid adverse legal consequences, VCPL constitutes a CSR committee
consisting of two (2) non-executive directors and one (1) executive director who was appointed
as chairperson of the committee.
1. In case of VFL, regarding the un-paid dividend which of the following statements
is correct?
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(a) VFL is guilty of non-payment of dividend, because some of the dividends remain
unpaid even after 30 days of declaration.
(b) VFL is guilty because the list of beneficiaries of un-paid dividend is hosted on
the website after 30 days from the date it falls in category of un-paid dividend
(c) VFL is guilty because the list of beneficiaries does not contain the latest known
address of beneficiaries and amount unpaid.
(d) VFL is not guilty because it has full-filled all the provisions of law pertaining to
un-paid dividend
2. During the current year, is VCPL required to constitute CSR committee under
section 135 of Companies Act 2013?
(a) No, because it is an unlisted private company
(b) No, because it is an unlisted company and it has net- worth less than ₹ 500
Crores
(c) Yes, because despite being unlisted company its turnover is above ₹ 500 cores
(d) Yes, because its net profit is above ₹ 5 crores
3. In the case of VFL, what can be the maximum amount of dividends payable out of
accumulated profits?
(a) 109.8 crores
(b) 100 crores
(c) 42.3 crores
(d) 32.5 crores
4. Considering the legal provisions regarding the constitution of CSR committee and
the one constituted by VCPL, state which of following the statements hold truth?
(a) Constitution of the committee is invalid because it doesn’t consist of an
independent director.
(b) Constitution of the committee is invalid because its chairperson is an executive
director.
(c) Constitution of the committee is valid because it depends purely upon the
discretion of management.
(d) Constitution of the committee is valid because company is not required to
appoint an independent director.
5. What is the minimum amount to be spent by VCPL on CSR activities?
(a) 89.06 Lakhs
(b) 78.20 Lakhs
(c) 75.00 Lakhs
(d) 73.80 Lakhs
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1 2 3 4 5
C D D D C
Case Study-2- [ 1 Marks each ]
Mr. Abhinav Gyan is a techie and one of the promoters of Doon Technology Limited (DTL). He
did his engineering from one of the prestigious IIT in Computer Science and then pursued his
Masters in management from IIM. He started DTL fifteen years back. DTL is famous for
advanced technologies such as artificial intelligence, block-chain solutions and many others.
The company went public a decade ago, but has not been listed yet. DTL is expanding its
operations in the wake of opportunities arising out of Industrial Revolution 4, therefore it
wishes to retain the profit for reinvesting in the growth of the company, But the shareholders
are seeking dividend based on the larger bottom line. The outbreak of COVID-19 was another
reason which had forced the directors to retain the earnings. After the closure of books of
account for the year, the directors proposed a dividend of 10% against the expectation of
20% by shareholders. But considering the extended lock- down which causes a delay in
delivering the projects (resulting in deferment of revenue and additional cost), directors wish
to revoke the dividend. The Shareholders seeks appointment of internal auditor for audit on a
concurrent basis, whereas management of DTL states it does not require appointing an internal
auditor under the law and that this will cause an unnecessary financial burden on the company.
The excerpts from financial statements of the preceding financial year are as under;
Particulars Amount in Crores
Paid-up share capital 45
Turnover 495
Outstanding loans or borrowings* 105
Outstanding deposits 22#
*Includes inter-corporate loan of ₹ 25 crores
# up-till 31st Jan the outstanding deposit was ₹ 30 crores
Mr. Gyan bought 40,000 shares of Time Consultancy Services (TCS) of face value 10 each out
of his savings. On such shares, the final call of 2 is due but unpaid by Mr. Gyan. In the
meantime, TCS declared dividend at a rate of 15%. Out of the total dividend of 8.4 crores
declared on 31st August 2020, 0.42 crores remain unpaid as on 30th September 2020. Out of
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such 0.42 crores, ₹ 12 lakhs are on account of the operation of law and ₹ 3 lakhs on account
legal disputes of right to receive dividend. The unpaid dividend of ₹ 0.42 lakhs was finally paid
on 12th December 2020 in full. Mr. Gyan comes from a humble background; hence as part of
his ethical commitment to uplift the society by promoting education to children of the
economically weak section, he decided to form section 8 companies named Gyan Foundation
around 2 years back with the support of a fellow professional, who later become a member of
such a company. Receipts are in excess of expenditure hence it was decided that Gyan
foundation will declare some dividend to its members.
1. Regarding un-paid call money by Mr. Gyan, in light of dividend due to him from TCS,
state which of following the statements is correct?
(a) Dividend cannot be adjusted against the unpaid call money
(b) The dividend of ₹ 48,000 can be adjusted against unpaid call money
(c) The dividend of ₹ 48,000 can be adjusted against unpaid call money, if consent
is given by Mr. Gyan.
(d) The dividend of ₹ 64,000 can be adjusted against unpaid call money, even if
consent is not given by Mr. Gyan.
2. Does DTL is required to appoint Internal Auditor U/S 138 of Companies Act 2013?
(a) No, because DTL is unlisted company
(b) No, because paid-up share capital is less than ₹ 50 crores
(c) Yes, because turnover is more than ₹ 200 crores
(d) Yes, because outstanding loan is above ₹ 100 crores
3. Considering the expectation of shareholders of DTL, choose the correct
statement expressing the established legal precedent and legal provision regarding
the declaration of dividend.
(a) The declaration of dividend is right of the shareholders, they can ask for it at a
general meeting
(b) The declaration can be declared only equal to what is proposed by directors
(c) The declaration can be declared at rate or amount more than proposed by the
director
(d) The declaration proposed or declared can be revoked back.
4. With reference to the declaration of dividend by Gyan Foundation, state
which of following statements hold truth?
(a) Gyan Foundation can declare dividend out of the capital as well
(b) Gyan Foundation can declare dividend either out of current years or previous
years’ profit, but need to transfer a certain % to reserve.
(c) Gyan Foundation can’t declare the dividend because three years has not been
elapsed since its incorporation.
(d) Gyan Foundation can’t declare the dividend in any case.
5. What will be the amount of penalty which TCS needs to pay under section 127?
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(a) Up-to ₹ 1000 per day till the default continues
(b) ₹ 64,800
(c) ₹ 97,200
(d) ₹ 1,08,000
1 2 3 4 5
B C D D C
Case Study-3- [ 1 Marks each ]
Tejas Infra Limited was incorporated by Tejasvi Singh and his wife Meenakshi along with
seven other family members in the year 2001 with an aim to undertake infrastructure
projects relating to transportation in the country. The company had successfully completed
construction of roads and canals in Delhi, UP and Chandigarh and rose to become one of the
prominent construction companies in India.
The Registered Office of the company is situated in Connaught Place, New Delhi with a
capital base of ` 100 crore divided into ten crore equity shares of
`10 each. The company has eight directors of which three are independent directors. In the
year 2019, the company got new projects from the State Government of Punjab to build four
flyovers and underpasses in different cities of Punjab.
In order to increase its capital base, Tejas Infra Limited decided to issue 1,00,000
preference shares of ` 100 each to the existing shareholders. For this, purpose it was
decided to increase the Authorised Capital by ` 500,00,000 divided into 5,00,000 shares of
` 100 each.
The projects went off well and the turnover rose to the tune of ` 3600 crore in the
immediately preceding financial year 2022-23. The net worth of the company stood at ` 550
crore.
As they crossed the threshold limit in the immediately preceding financial year 2022-23, a
Board level Committee headed by one of the independent directors, namely, Paritosh
was constituted to allocate budget, review the progress and provide guidance on various
Corporate Social Responsibility (CSR) and sustainability initiatives. It was decided to spend
the requisite amount towards skill development, vocational training, provision of safe drinking
water facility, etc. Lokesh, one of the directors, is also a member of this Corporate Social
Responsibility Committee. He is in favour of Janta Andolan Manch, a political party. This
party is quite prominent in undertaking social work. As per his advice, the Board by a
unanimous resolution resolved to contribute ` 5,00,000 to the said political party i.e. Janta
Andolan Manch and to treat such contribution as part of CSR activity.
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Multiple Choice Questions
1. From the case scenario, it is evident that Tejas Infra Limited decided to issue
1,00,000 preference shares of ` 100 each to the existing shareholders. From the options
given below choose the one which indicates the maximum period which is permitted to the
company for redemption of preference shares.
(a) Tejas Infra Limited being involved in infrastructural activities is permitted to specify
maximum period of thirty-five years for redemption of preference shares subject to the
condition that it shall redeem minimum 20% of preference shares per year commencing from
31st year onwards or earlier, on proportionate basis at the option of preference
shareholders.
(b) Tejas Infra Limited being involved in infrastructural activities is permitted to specify
maximum period of thirty-five years for redemption of preference shares subject to the
condition that it shall redeem minimum 10% of preference shares per year commencing from
26th year onwards or earlier, on proportionate basis at the option of preference
shareholders.
(c) Tejas Infra Limited being involved in infrastructural activities is permitted to specify
maximum period of thirty years for redemption of preference shares subject to the
condition that it shall redeem minimum 10% of preference shares per year commencing from
21st year onwards or earlier, on proportionate basis, at the option of preference
shareholders.
(d) Tejas Infra Limited being involved in infrastructural activities is permitted to specify
maximum period of thirty years for redemption of preference shares subject to the
condition that it shall redeem minimum 20% of preference shares per year commencing from
26th year onwards or earlier, on proportionate basis, at the option of preference
shareholders.
2. The case scenario states that the turnover of Tejas Infra Limited rose to the tune
of ` 3600 crore and net worth of the company stood at ` 550 crore in the immediately
preceding financial year 2022-23 which required formation of CSR Committee. What is the
third criterion which if crossed shall also require that a CSR Committee be formed. Choose
the correct option from those stated below:
(a) The third criterion which also requires formation of CSR Committee is that the
company has net profit of ` two crore or more in the immediately preceding financial year.
(b) The third criterion which also requires formation of CSR Committee is that the
company has net profit of ` three crore or more in the immediately preceding financial year.
(c) The third criterion which also requires formation of CSR Committee is that the
company has net profit of ` five crore or more in the immediately preceding financial year.
(d) The third criterion which also requires formation of CSR Committee is that the
company has net profit of ` six crore or more in the immediately preceding financial year.
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3. According to the legal provisions, it is mandatory to redeem preference shares at the
stipulated time. Keeping in view the above case scenario, which source is required to be used
by Tejas Infra Limited for the redemption of outstanding preference shares:
(a) Tejas Infra Limited is required to redeem preference shares out of the profits which
would otherwise be available for dividend.
(b) Tejas Infra Limited is required to redeem preference shares out of the proceeds of
a fresh issue of shares made for the purposes of such redemption.
(c) Both (a) and (b).
(d) Tejas Infra Limited is required to redeem preference shares out of its Capital
Redemption Reserve.
4. While constituting a CSR Committee, how many minimum directors are required to be
appointed by Tejas Infra Limited:
(a) CSR Committee formed by Tejas Infra Limited shall have minimum two directors.
(b) CSR Committee formed by Tejas Infra Limited shall have minimum three directors of
which at least one director shall be an independent director.
(c) CSR Committee formed by Tejas Infra Limited shall have minimum four directors of
which at least one director shall be an independent director.
(d) CSR Committee formed by Tejas Infra Limited shall have minimum four directors of
which at least two directors shall be independent director.
1 2 3 4
C C C B
DESCRIPTIVE QUESTIONS
Quest-1
Mr. Ambrish, holder of 1000 equity shares of ` 10 each of AB Ltd.
approached the Company in the last week of September, 2022 with a
[ 5 Marks]
claim for the payment of dividend of ` 2000 declared @ 20% by the
Company at its Annual General Meeting held on 31.08.2014 with respect
to the financial year 2013-14. The Company refused to accept the request
of R and informed him that his shares on which dividend has not been
claimed till date, have also been transferred to the Investor Education
and Protection Fund.
Examine, in the light of the provisions of the Companies Act, 2013, the
validity of the decision of the Company and suggest the remedy, if
available, to him for obtaining the unclaimed amount of dividend and re-
transfer of corresponding shares in his name.
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According to section 124 of the Companies Act, 2013:
Solution (1) Unpaid or Unclaimed Dividend to be transferred to the Unpaid
Dividend Account -
Where a dividend has been declared by a company but has not been paid
or claimed within 30 days from the date of declaration, the company shall,
within 7 days from the expiry of the said period of 30 days, transfer the
total amount of unpaid or unclaimed dividend to a special account called
the Unpaid Dividend Account.
This account shall be opened by the company in any scheduled bank.
(2) Transfer of Unclaimed Amount to Investor Education and Protection
Fund (IEPF) –
Any money transferred to the Unpaid Dividend Account which remains
unpaid or unclaimed for a period of 7 years from the date of such
transfer shall be transferred by the company along with interest accrued
thereon to the Investor Education and Protection Fund.
(3) Transfer of Shares to IEPF-
All shares in respect of which dividend has not been paid or claimed for
7 consecutive years or more shall be transferred by the company in the
name of Investor Education and Protection Fund along with a statement
containing the prescribed details.
(4) Right of Owner of ‘transferred shares’ to Reclaim –
Any claimant of shares so transferred to IEPF shall be entitled to reclaim
the ‘transferred shares’ from Investor Education and Protection Fund in
accordance with the prescribed procedure and on submission of
prescribed documents.
As per the provisions of sub-section (3) of section 125 of the Companies
Act, 2013, read with rule 7 of Investor Education and Protection Fund
Authority (Accounting, Audit, Transfer and Refund) Rules, 2016, any
person, whose unclaimed dividends have been transferred to the Fund, may
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apply for refund, to the Authority, by submitting an online application.
In the given question, Mr. Ambrish did not claim the payment of dividend
on his shares for a period of more than 7 years. As a result, his unclaimed
dividend (` 2,000) along with such shares (1,000 equity shares) must have
been transferred to Investor Education and Protection Fund Account.
Conclusion: - Therefore, the company is justified in refusing to accept the
request of Mr. Ambrish for the payment of dividend of ` 2,000.
Remedy available to Mr Ambrish
(i) If Mr. Ambrish wants to reclaim the transferred shares, he should apply
to IEPF authorities along with the necessary documents in accordance with
the prescribed procedure.
(ii) He is also entitled to get refund of the dividend amount, which was
transferred to the above fund; in accordance with the prescribed rules.
Quest-2
The balances extracted from the financial statement of Swastik Limited
are as below:
[ 3 Marks]
Sr. Particulars Balances as on 31-03-2023 as Balances as on 30-09- 2023
per Audited Financial Statement (Provisional ` in crore)
No.
(` in crore)
1. Net Worth 100.00 100.00
2. Turnover 500.00 1000.00
3. Net Profit 1.00 5.00
Explaining the provisions of the Companies Act, 2013, you are requested to
examine whether Swastik Limited is required to constitute 'Corporate
Social Responsibility Committee' (CSR Committee) during the second half
of the financial year 2023-24.
Solution
According to section 135(1) of the Companies Act, 2013
Every company having
• Net worth of rupees 500 crore or more, or
• Turnover of rupees 1000 crore or more or
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• Net profit of rupees 5 crore or more
during the immediately preceding financial year shall constitute a
Corporate Social Responsibility Committee of the Board consisting of
three or more directors, out of which at least one director shall be an
independent director.
In the given question, the company does not fulfil any of the given criteria
(net worth/ turnover/ net profit) for the immediately preceding financial
year (i.e., 1.4.2022 to 31.3.2023).
Conclusion: - Thus, Swastik Limited is not required to constitute
Corporate Social Responsibility Committee in the financial year 2023-24.
Quest-3 Richlook Limited declared dividend at its Annual General Meeting held on
31 -07-2023. The dividend warrant to Mr. A, a shareholder was posted on
[ 3 Marks] 22nd August, 2023. Due to postal delay Mr. A received the warrant on 5th
September, 2023 and encashed it subsequently. Can Mr. A initiate action
against the company for failure to distribute the dividend within 30 days
of declaration under the provisions of the Companies Act, 2013?
Solution This case study is based on Section 127 of the Companies Act, 2013
As per this section, the declared dividend must be paid to the entitled
shareholders within the prescribed time limit of 30 days from the date of
declaration of dividend.
In case dividend is paid by issuing dividend warrants, such warrants must
be posted at the registered addresses within the prescribed time. Once
posted, it is immaterial whether the same are received within 30 days by
the shareholders or not.
In the given question, the dividend was declared on 31.07.2023 and the
dividend warrant was posted within 30 days from date of declaration of
dividend (posted on 22nd August, 2023).
It is immaterial if Mr. A has received it on 5th September 2023 (i.e., post
30 days from 31.07.2023).
Conclusion: - Hence, Mr. A cannot initiate action against the company for
failure to distribute the dividend within 30 days of declaration.
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