Pari passu ranking in winding up: secured creditors and workmen share as on the winding-up date, with later interest only from surplus.

In company winding up, secured creditors and workmen's dues are to be worked out pari passu as on the winding-up date under section 529A of the Companies Act, 1956, and later interest cannot erode the workmen's statutory share; future interest is payable only from any surplus remaining after those claims are met. The text also notes that, where a creditor has proceeded through court, post-decree interest is constrained by section 34 of the Code of Civil Procedure, 1908, and interest beyond the permitted rate is beyond the court's power, although a final decree may remain undisturbed in the proceedings discussed.

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Issues: (i) Whether, in winding up, a secured creditor could insist upon interest at the contractual or decretal rate beyond the limit permitted by section 34 of the Code of Civil Procedure, 1908, and whether the decree could be ignored to the extent it awarded interest at 12% per annum after the decree. (ii) Whether the claims of secured creditors and workmen had to be worked out as on the date of the winding-up order on a pari passu basis, with future interest payable only if a surplus remained after meeting workmen's dues.

Issue (i): Whether, in winding up, a secured creditor could insist upon interest at the contractual or decretal rate beyond the limit permitted by section 34 of the Code of Civil Procedure, 1908, and whether the decree could be ignored to the extent it awarded interest at 12% per annum after the decree.

Analysis: Once the creditor chose to proceed through the court, the claim was governed by the procedural limits applicable to decrees for money. Under the unamended section 34 of the Code of Civil Procedure, 1908, further interest after decree could not exceed 6% per annum. The decree in question therefore exceeded the court's authority to that extent. However, the decree had become final, no appeal had been filed against it, and the liquidator had already accepted the claim as decreed up to the winding-up order. In these circumstances, the decree was not interfered with in the present proceedings.

Conclusion: The award of post-decree interest at 12% was beyond the court's power, but the decree was not disturbed in these proceedings.

Issue (ii): Whether the claims of secured creditors and workmen had to be worked out as on the date of the winding-up order on a pari passu basis, with future interest payable only if a surplus remained after meeting workmen's dues.

Analysis: The statutory scheme under section 529A of the Companies Act, 1956, and the rules governing winding up required the workmen's dues and the secured creditor's claim to rank pari passu as at the date of winding up. Allowing a secured creditor to carry forward interest beyond that date before distribution would distort the equality intended by the amendment and would reduce the workmen's share despite their statutory priority. The proper course was to assess both claims at the date of winding up, distribute the security proceeds accordingly, and allow later interest only if a surplus remained after satisfying the pari passu claims.

Conclusion: The secured creditor's claim and the workmen's dues had to rank pari passu as on the winding-up date, and future interest was payable only out of any surplus remaining thereafter.

Final Conclusion: The appeal succeeded only to the extent that the matter was sent back for recalculation and distribution in accordance with the pari passu scheme, while the decretal interest issue was left undisturbed in the present proceedings.

Ratio Decidendi: In the winding up of an insolvent company, secured creditors and workmen must be treated pari passu as on the date of winding up, and a secured creditor's post-winding-up interest can be satisfied only from any surplus remaining after those claims are met.

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