Time gap of 30 days isn't intended between book closure date and record date for declaration of dividend, says SAT

As per clause 16 of 'Listing agreement' time gap of 30 days is intended to be between two book closures and two record dates and not between a book closure and a record date

Facts:

a)The appellant-company, listed on BSE and NSE (‘respondents’), had declared book closure date for the purpose of its AGM. The AGM was held and on the same day interim dividend was declared and the record date was fixed.

b)Thereafter, both the respondent's alleged that time gap between book closure date and record date was less than 30 days which was violative of clause 16 of the 'Listing Agreement'.

c)The SEBI held that appellant-company had violated clause 16 and, accordingly, called upon appellant to comply with it.

On appeal the Securities Appellate Tribunal held as under:

1)On perusal of clause 16 of ‘Listing Agreement’ it was seen that in a year there could be more than one book closure for the purpose of declaration of dividend or the rights issue or bonus shares, etc.

2)If more than one book closure was postulated under clause 16 of the listing agreement, then the time gap of 30 days under clause 16 would be referred to as the time gap between two book closure dates and it could not be inferred that time gap should be between book closure date and record date.

3)Where a company kept its transfer books closed during AGM as per clause 16 and also sought to declare dividend, then stipulating record date for such dividend after 30 days of book closure date as well as payment of dividend would be violative of section 205A of the Companies Act, 1956 – ORACLE FINANCIAL SERVICES SOFTWARE LTD. V. SECURITIES AND EXCHANGE BOARD OF INDIA [2014] 51 TAXMANN.COM 24 (SAT - MUMBAI)