Workmen's dues rank pari passu with secured creditor claims in winding up, overriding inconsistent prior special legislation.

In a winding up, section 529A of the Companies Act, 1956 gives workmen's dues overriding priority and requires them to rank pari passu with the secured creditor's recoverable debt. Although the secured creditor was governed by the State Financial Corporations Act, 1951 and that Act contained its own non obstante clause, the later Companies Act amendment, enacted to protect workmen's dues, prevailed in the area of conflict. A secured creditor selling assets in winding up could not appropriate the entire sale proceeds to itself and had to preserve the workmen's statutory share in distribution.

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Issues: Whether, in a company winding up, the secured creditor governed by the State Financial Corporations Act, 1951 could appropriate the sale proceeds to the exclusion of workmen's dues, or whether section 529A of the Companies Act, 1956 required the workmen's dues to rank pari passu with the secured creditor's claim.

Analysis: The claim of the workmen arose in the course of winding up and the Companies Act, 1956, as amended in 1985, created a statutory pari passu charge in favour of workmen under section 529 and gave overriding priority to workmen's dues and the corresponding secured creditor's debt under section 529A. Although the State Financial Corporations Act, 1951 is a special enactment and contains its own non obstante clause, the later amendment in the Companies Act was enacted specifically to protect workmen's dues and therefore prevailed in the area of conflict. The secured creditor could not, after sale with the court's permission in winding up, exclude the workmen's statutory share or appropriate the entire sale proceeds to its own claim.

Conclusion: The workmen's dues had to be treated as pari passu with the secured creditor's dues, and the corporation could not appropriate the sale proceeds exclusively for itself.

Final Conclusion: The application succeeded and the official liquidator was entitled to protection of the workmen's statutory priority in the distribution of the sale proceeds.

Ratio Decidendi: In a winding up, section 529A of the Companies Act, 1956 overrides inconsistent provisions of a prior special statute and requires workmen's dues to rank pari passu with the secured creditor's recoverable debt.

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