Secured creditor enforcement outside winding up remains intact, subject to protection of workmen's pari passu share.

A secured creditor enforcing security under section 29 of the State Financial Corporations Act can realise that security without leave of the company court after a winding-up order, because the creditor acts on its own security rather than against the company's general estate. The company's property being deemed in the custody of the court does not by itself extinguish that independent enforcement right. The amendments to sections 529 and 529A of the Companies Act preserve the secured creditor's ability to stand outside winding up, while requiring protection of the workmen's pari passu charge in the realised proceeds.

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Issues: (i) Whether a secured creditor could realise its security under section 29 of the State Financial Corporations Act, 1951 without leave of the company court after a winding-up order and despite the company's property being deemed to be in the custody of the court. (ii) Whether the amendments to sections 529 and 529A of the Companies Act, 1956 altered the settled position that a secured creditor may stand outside winding up and realise its security, subject to the workmen's pari passu charge.

Issue (i): Whether a secured creditor could realise its security under section 29 of the State Financial Corporations Act, 1951 without leave of the company court after a winding-up order and despite the company's property being deemed to be in the custody of the court.

Analysis: The relevant scheme was read by harmonising section 446 with section 456(2) of the Companies Act, 1956 and the corresponding insolvency principle in section 28(6) of the Provincial Insolvency Act, 1920. A secured creditor enforcing its own security was treated as acting on its own property and not as asserting a claim against the general assets of the company. The fact that the company's property is deemed to be in the custody of the court did not displace the secured creditor's independent right to realise the security where no court intervention was sought.

Conclusion: The secured creditor was not required to obtain leave of the company court merely to realise its security under section 29, and its action did not become invalid because the winding-up order had already been made.

Issue (ii): Whether the amendments to sections 529 and 529A of the Companies Act, 1956 altered the settled position that a secured creditor may stand outside winding up and realise its security, subject to the workmen's pari passu charge.

Analysis: The amended proviso to section 529(1) was held to create a pari passu charge in favour of workmen only when the secured creditor opts to realise the security without relinquishing it and without proving its debt in winding up. Section 529A was held to regulate priority in distribution of assets in winding up and not to prohibit a secured creditor from realising its security outside winding up. The workmen's charge was therefore treated as operating on the realisation made by the secured creditor, not as converting the workmen into secured creditors over the company's estate in a manner that displaced the secured creditor's option.

Conclusion: The amendments to sections 529 and 529A did not take away the secured creditor's right to stand outside winding up and realise the security, though the workmen's share in the realisation had to be protected.

Final Conclusion: The appeal succeeded because the secured creditor's independent right to enforce its security remained intact, while only the workmen's statutory share in the realised amount required protection and distribution in accordance with law.

Ratio Decidendi: A secured creditor who elects to realise its security without seeking court intervention remains outside winding-up proceedings, and the post-amendment workmen's pari passu charge operates only upon the proceeds of such realisation without extinguishing that right.

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