Company in liquidation

You may find the attachments:

The stacking order of priorities in secured lending,

And

Supreme Court of India :Central Bank Of India vs State Of Kerala & Ors.

 Relevant and useful.

{A}  The stacking order of priorities in secured lending:

An analysis of Supreme Court ruling in

Central Bank of India vs. State of Kerala

Assuming the value of assets of an entity is Rs 10 crores, and the entity has the following outstandings:

•  Dues to banks, holding charges over the assets: Rs 15 crores

•  Excise dues: Rs.1 crore

•  Sales-tax dues Rs.1 crore

•  EPF dues Rs.1 crore

•  Workmen’s Compensation dues Rs.1 crore

•  Workmen’s dues Rs.3 crore

Assuming the company is under liquidation, the order of priorities will run as follows:

1.  EPF dues – Rs.1 crores

2.  Workmen’s Compensation Dues – Rs.1 crores

3.  Sales Tax Dues – Rs.1 crores

4.  Dues to Banks (pari passu with Workmen’s Dues) – Rs.5.83 crores

5.  Workmen’s Dues (pari passu with Bank Dues) – Rs.1.17 crores

{B} Supreme Court of India

Central Bank Of India vs State Of Kerala & Ors. on 27 February, 2009

“If the secured creditor of such company opts to realize its security instead of relinquishing the same and proving its debt under Section 529(1) of the Companies Act,then it can retain sale proceeds after depositing the workmen's

dues with the liquidator in accordance with Section 529A. The third proviso requires the liquidator to inform the secured creditor about the dues payable to the workmen in terms of Section 529A. If the amount payable to the workmen is not certain, then the liquidator has to intimate the estimated amount to the secured creditor. The fourth proviso lays down that in case the secured creditor deposits the estimated amount of the workmen's dues, then such creditor shall be liable to pay the balance of the workmen's dues or entitled to receive the excess amount, if any, deposited with the liquidator. In terms of fifth proviso, the secured creditor is required to give an undertaking to the liquidator to pay the balance of the workmen's dues, if any.”

“Companies Act, 1956:

"529A. Overriding preferential payments.-- Notwithstanding anything contained in any other provision of this Act or any other law for the time being in force, in the winding up of a company -(a) workmen's dues; and (b) debts due to secured creditors to the extent such debts rank under clause (c) of the proviso to sub-section (1) of section 529 pari passu with such dues, shall be paid in priority to all other debts.”

Valuable advice of learned experts/members is sought.

yes Mr kumar doab has explained very well 

Thank you very much Mr Kumar for a very detailed reply. but my querry on Workmen and Staff will be considered as same for salary payment purpose has not answered. If you do so i will be grateful.

with thanks

You have posted that:

“but my querry on Workmen and Staff will be considered as same for salary payment purpose has not answered.”

In the attached publications intelligent observations and comments have been made.

“Regrettably, the courts are having to do what the lawmakers must have done write a clear law on priorities.”

In the attached judgment learned Supreme Court has precisely done it by taking into account previous judgments to put speculations to rest.

In the judgment the learned courts has used the words “Workers’, ‘workmen”, and has given first priority to “EPF dues” which is applicable to both workmen and staff……….

With our limited understanding it would be inappropriate and out of bounds to interpret on our own to claim that it includes employees other than workmen or not!!!!!!!!!!!!

We would wish that all employees should be accounted for.

However once again it is reiterated that we are no one to interpret……….

Valuable advice of learned experts/members and seniors is sought.

Thanks a lot Sir. Your interpretation of PF dues clarify the doubts. I am unable to open the second attachments CBI Vs State of Kerala. Can you resend.

Thanks a lot Sir. Your interpretation of PF dues clarify the doubts. I am unable to open the second attachments CBI Vs State of Kerala. Can you resend.

Supreme Court of India

Central Bank Of India vs State Of Kerala & Ors. on 27 February, 2009

can also be downloaded  from the following link:

https://www.indiankanoon.org/doc/857240/

Please keep this interesting thread updated.

Attached again:

Supreme Court of India

Central Bank Of India vs State Of Kerala & Ors. on 27 February, 2009