Secured asset sales during winding up must respect workmen's priority and may require Court leave under company law.

A sale of a company's assets by a State Financial Corporation under section 29 of the State Financial Corporations Act, 1951, after commencement of winding up and without leave of the Court, is vulnerable to section 537 of the Companies Act, 1956. That statutory power must be read consistently with sections 529 and 529A, which protect workmen's dues and the pari passu charge over secured debts in winding up. Where those priorities may be affected, Court leave is required. On the facts noted, the sale was not disturbed because it had already been completed and no material showed existing workmen's dues, but the sale proceeds were to remain available for any such claims.

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Issues: Whether a sale of assets by a State Financial Corporation under section 29 of the State Financial Corporations Act, 1951, effected during the pendency of winding up proceedings and without leave of the Court, is void under the Companies Act, 1956, and whether the sale should be set aside or the sale proceeds retained for claims protected by sections 529 and 529A of the Companies Act, 1956.

Analysis: Section 537 renders void, after commencement of winding up, any sale of the company's property without leave of the Court. While section 29 of the State Financial Corporations Act, 1951 confers a special power on the Financial Corporation to realise secured assets without intervention of Court, that power must operate consistently with the statutory scheme introduced by sections 529 and 529A of the Companies Act, 1956, which give workmen's dues and the pari passu portion of secured debts overriding priority in winding up. The right of a Financial Corporation to sell without Court intervention is therefore circumscribed where workmen's dues exist or where the liquidator must protect the pari passu statutory charge. In the facts presented, there was no material on record establishing workmen's dues, and the sale had already been completed and possession delivered long before the application was decided.

Conclusion: The sale was not set aside, but the Financial Corporation was directed to keep the sale proceeds available to meet workmen's claims, if any, and the sale could not be brought about without leave of the Court once winding up proceedings had been initiated.

Ratio Decidendi: A secured sale by a Financial Corporation during winding up cannot defeat the statutory priority created by sections 529 and 529A of the Companies Act, 1956, and where that priority may be affected, leave of the Court is necessary and the sale is vulnerable to section 537.

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