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Issues: (i) Whether a sale of a company's secured assets by a secured creditor after presentation of a winding-up petition but before the winding-up order required leave of the Court and was subject to Sections 536(2) and 537 of the Companies Act, 1956. (ii) Whether, after the 1985 amendments, the workmen's pari passu charge under Sections 529 and 529A of the Companies Act, 1956 had to be protected while considering approval of such sale.
Issue (i): Whether a sale of a company's secured assets by a secured creditor after presentation of a winding-up petition but before the winding-up order required leave of the Court and was subject to Sections 536(2) and 537 of the Companies Act, 1956.
Analysis: The commencement of winding up relates back to the date of presentation of the petition under Section 441(2). A disposition or sale after that stage is not void ab initio, but is void unless the Court otherwise orders under Section 536(2). Section 537 likewise renders a sale without leave void. The secured creditor may realise security outside winding up, but where the transaction falls within the winding-up regime, the Court's approval is necessary and may be granted where the transaction is bona fide.
Conclusion: Yes. The sale was subject to the Court's approval and could not stand without confirmation under the Companies Act, 1956.
Issue (ii): Whether, after the 1985 amendments, the workmen's pari passu charge under Sections 529 and 529A of the Companies Act, 1956 had to be protected while considering approval of such sale.
Analysis: After the insertion of the proviso to Section 529(1) and Section 529A, the secured creditor's rights are no longer absolute, because the workmen acquire a pari passu charge in the secured assets. Any approval of a sale by a secured creditor must therefore preserve the workmen's claim and permit the Official Liquidator to secure and realise the workmen's portion from the sale proceeds. The Court can protect the bona fide purchaser while also imposing conditions to safeguard the workmen's dues.
Conclusion: Yes. The workers' pari passu charge had to be protected, and approval of the sale could be made conditional on undertakings securing their dues.
Final Conclusion: The sale in favour of the applicant was upheld, but only on conditions designed to protect the workmen's statutory priority and to ensure that the secured creditors would account for the amounts payable to them.
Ratio Decidendi: A sale of secured assets after presentation of a winding-up petition is not immune from scrutiny under the winding-up provisions, and after the 1985 amendments the Court may confirm such a sale only if the workmen's pari passu charge under the Companies Act is safeguarded.
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