Secured creditors in liquidation cannot claim sale priority, while court-supervised sale committees may include workmen's representatives.

Where winding-up had already commenced and the official liquidator had taken possession, secured creditors invoking special recovery statutes could proceed with enforcement, but they could not claim a preferential right to sell the company's assets to the exclusion of other creditors. The saving clauses in the relevant statutes were treated as preventing any such priority once liquidation had begun. The company court could also regulate sale of the assets through a supervised sale committee under the Companies (Court) Rules, 1959, and inclusion of a workmen's representative on that committee was permitted because section 529(1) did not bar such participation in the sale process.

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Issues: (i) Whether secured creditors invoking section 30 of the Industrial Finance Corporation of India Act, 1948 and section 40 of the Industrial Reconstruction Bank of India Act, 1984 after commencement of winding up could claim a preferential right to sell the properties of the company in liquidation and exclude the other creditors from participation; (ii) Whether the properties of companies in liquidation could be sold through a court-constituted sale committee comprising the official liquidator, secured creditors and the representative of the workmen, and whether the workmen's representative could be included in such committee.

Issue (i): Whether secured creditors invoking section 30 of the Industrial Finance Corporation of India Act, 1948 and section 40 of the Industrial Reconstruction Bank of India Act, 1984 after commencement of winding up could claim a preferential right to sell the properties of the company in liquidation and exclude the other creditors from participation.

Analysis: The applications under the special statutes were filed after the respective winding-up orders and after the official liquidator had taken possession. The statutory saving clauses in section 30(12) of the Industrial Finance Corporation of India Act, 1948 and section 40(13) of the Industrial Reconstruction Bank of India Act, 1984 were treated as controlling in such situations, because they deny any preference to the Corporation or Reconstruction Bank over other creditors where liquidation proceedings have already commenced. The secured creditors could remain outside the winding-up proceedings and enforce their securities, but not on a footing that displaced the rights of other creditors once liquidation had begun.

Conclusion: The secured creditors' applications were maintainable, but they could not claim any preferential right over the other creditors of the companies in liquidation.

Issue (ii): Whether the properties of companies in liquidation could be sold through a court-constituted sale committee comprising the official liquidator, secured creditors and the representative of the workmen, and whether the workmen's representative could be included in such committee.

Analysis: Rule 273 of the Companies (Court) Rules, 1959 was treated as enabling the company court to direct sale by the official liquidator or by an approved agent, and the court regarded appointment of a sale committee as a permissible judicial arrangement to secure the best price and protect the interests of secured creditors, unsecured creditors and workmen. The objection that the workmen's representative could not sit on the committee merely because the official liquidator was also present was rejected. Section 529(1) of the Companies Act, 1956 was read as dealing with representation of workmen in the context of enforcing the pari passu charge, but not as disabling the court from including a workmen's representative in the sale committee for the conduct of the sale itself.

Conclusion: Sale through a court-supervised sale committee was upheld, and inclusion of the representative of the workmen in that committee was permitted.

Final Conclusion: The applications by the secured creditors were allowed to the extent that sale of the assets of the companies in liquidation could proceed through sale committees under the court's supervision, but without conferring any special priority over other creditors; the company applications seeking sale directions through the official liquidator alone were rejected where inconsistent with this arrangement.

Ratio Decidendi: Where liquidation proceedings have commenced before an application under a special recovery statute, the secured creditor cannot claim a statutory preference over other creditors, and the company court retains discretion to regulate sale of the assets through a supervised sale committee in the interests of all stakeholders.

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