Secured creditor possession before winding up may continue, but sale and compliance remain subject to court supervision and workmen's pari passu rights.

A secured financial corporation that had already taken possession of a company's assets before a winding-up order could retain possession and proceed under its special statutory powers, because the overriding clause in the State Financial Corporations Act prevailed over inconsistent Companies Act provisions. However, workmen's dues and pari passu treatment with secured creditors in winding up remained protected, so sale and distribution had to respect those rights. The company's records were required to be handed to the official liquidator to enable statutory compliance. To balance these interests, possession was continued with the corporation, but subject to court supervision through a committee overseeing management, sale, and legal compliance.

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Issues: Whether a secured financial corporation that had taken possession of a company's assets under the State Financial Corporations Act before the winding-up order could retain possession and proceed with sale, and whether the company's records had to be handed over to the official liquidator for discharge of statutory obligations, including the claims of workmen and other creditors.

Analysis: The non obstante clause in section 46B of the State Financial Corporations Act gives that enactment overriding effect over inconsistent provisions of the Companies Act, so a secured corporation that lawfully took possession before the winding-up order was not required to surrender the assets merely because winding-up proceedings had commenced. At the same time, sections 529 and 529A of the Companies Act protect workmen's dues and secure pari passu treatment between workmen and secured creditors in winding up. The Court also recognised that the official liquidator must be able to discharge statutory obligations under the Companies Act and other laws, which required custody of the company records. To balance these interests, the Court directed continuation of possession with the financial corporation, but required transfer of the records to the official liquidator and constitution of a supervising committee to manage the company and deal with sale and statutory compliances under the Court's directions.

Conclusion: The secured corporation was permitted to retain possession of the assets, but only under Court supervision and subject to the workmen's pari passu rights; the company records had to be handed over to the official liquidator, and a committee was to oversee management and statutory compliance.

Final Conclusion: The earlier order was modified to preserve the secured creditor's possession while ensuring supervision by the official liquidator and protection of workmen's dues and other statutory obligations.

Ratio Decidendi: Where a secured creditor has taken possession under the State Financial Corporations Act before a winding-up order, the special statutory power may continue notwithstanding the Companies Act, but the sale and management must remain subject to court supervision and the pari passu rights of workmen under section 529A of the Companies Act.

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