FINANCE, ACCOUNTS AND AUDITCentral

Section 28 of The Road Transport Corporations Act, 1950

Payment of interest and dividend.

(1)Where 1[the whole or part of the capital of a Corporation] is provided by the Central Government and the State Government under sub-section (1) of section 23, the Corporation shall pay interest on such capital at such rate as may, from time to time, be fixed by the State Government 2*** and such interest shall be deemed to be a part of the expenditure of the Corporation.
(2)Where the Corporation 3[raises the whole or any part of its capital] by issue of shares, it shall pay dividend on such shares at such rate as may, from time to time, be fixed by the Corporation, subject to any general limitations which may have been imposed by the State Government 2***, and such dividend shall be deemed to be a part of the expenditure of the Corporation.

Summary

The Corporation must pay interest on capital provided by the Central or State Governments.
The State Government sets the rate of this interest from time to time.
If capital is raised by selling shares, the Corporation must pay a dividend to those shareholders.
The Corporation sets the dividend rate, but it must follow any general limits set by the State Government.
Both interest and dividends are officially counted as expenditure, which means costs, for the Corporation.

Practical examples

1Since the State Government gave the Corporation 10 crore rupees to start, the Corporation pays back 50 lakh rupees every year as interest. This 50 lakh is recorded in the books as a business cost.

2A private investor holds shares in the Corporation. Even if the company wants to pay a huge 20 percent dividend, they can only pay 5 percent because the State Government has set a general limit on dividend payments this year.

FAQ

1. Who decides the interest rate on government-provided capital under Section 28 of The Road Transport Corporations Act, 1950?

Under Section 28 of the Road Transport Corporations Act, 1950, the State Government fixes the interest rate from time to time.

2. Is the dividend paid to shareholders considered a profit or an expense under Section 28 of The Road Transport Corporations Act, 1950?

Section 28 of the Road Transport Corporations Act, 1950 states that the dividend is deemed to be a part of the expenditure of the Corporation.

3. Can a Corporation pay any dividend rate it wants under Section 28 of The Road Transport Corporations Act, 1950?

No, according to Section 28 of the Road Transport Corporations Act, 1950, the dividend rate is subject to any general limitations imposed by the State Government.

Test yourself

1.Under Section 28 of The Road Transport Corporations Act, 1950, interest paid on government capital is treated as:

2.Who fixes the dividend rate on shares under Section 28 of The Road Transport Corporations Act, 1950?

3.Under Section 28 of The Road Transport Corporations Act, 1950, who fixes the interest rate for capital provided under Section 23(1)?

4.Does the guarantee in Section 25 of The Road Transport Corporations Act, 1950 relate to the dividend mentioned in Section 28?

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