Zeeta Polymers (P) Ltd. has earned profits for the first two quarters of the financial year 01.04.2024 to 31.03.2025. The Company has calculated,…

As per section 123 (3) of the Companies Act, 2013, the Board of Directors of a company may declare an interim dividend at any time during the period from the closure of the financial year till the holding of the Annual General Meeting out of the surplus in the profit and loss account or out of profits of the financial year for which the interim dividend is sought to be declared or out of the profits generated in the financial year till the quarter preceding the date of declaration of the interim dividend, provided that in case the company has incurred loss during the current financial year up to the end of the quarter immediately preceding the date of declaration of the interim dividend, such interim dividend shall not be declared at a rate higher than the average dividends declared by the company during the immediately preceding three financial years. Further, as per the third proviso to section 123 (1) , the company shall not declare dividends unless the carried over previous losses and depreciation are set off against the profits of the current year. Accordingly, it may be inferred that while declaring the interim dividend, the company has complied with the provisions of section 123 and rules made thereunder for calculating the amount of interim dividend, then there is no contravention of the provisions of the Act, even if the company incurs losses in the succeeding quarters of its financial year leading to overall losses for the financial year. As the dividend includes interim dividend, it is essential under section 123 (2) of the Companies Act, 2013 for a company to provide depreciation for the whole of the year and not proportionately for any fraction of the year before declaring an interim dividend. This is because the provision for depreciation is a condition precedent for the declaration or payment of any dividend, and all provisions which apply to the payment of dividends shall also apply in the case of an interim dividend. Thus, the company has not erred.