Liquidation priority rules clarified for secured creditors, government dues, and contractual subordination in insolvency distributions.

Section 53 is amended to clarify liquidation priority rules. A secured creditor whose relinquished security interest is worth less than the total debt is secured only to that extent, and unsecured for the balance. Government dues for the specified pre-liquidation period are given distribution priority under the stated sub-clause, with any remaining amount falling under the next priority category. Illustrations confirm that a contract subordinating workmen to secured creditors is disregarded, while a contract between secured creditors inter se is not disregarded.

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