Secured creditors granted right to participate at admission stage in company winding up, reversing earlier decision.

Secured creditors have the right to be heard at the admission stage of a Company Petition for winding up, as per section 557 of the Companies Act, 1956. The Delhi HC's decision, which denied creditors this right, was overturned. The applications for intervention by creditors, including a consortium of banks, were granted, allowing their participation at the admission stage. The SC precedent underscores the necessity of considering creditors' interests throughout the winding up process.

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Issues Involved:
Secured creditors asserting right to be heard at the stage of admission of Company Petition for winding up, challenged by the petitioner.

Summary:
The legal position, as per section 557 of the Companies Act, 1956, recognizes the right of creditors to appear and be heard at all stages relating to the winding up of a company, including the admission stage. The admission of a petition for winding up has significant consequences for a company's market position and credibility. The Supreme Court precedent establishes that both workers and creditors have the locus to appear and be heard in winding up petitions. The wishes of creditors are crucial in determining whether a winding up order should be made.

In a specific case, creditors opposing a winding up petition were allowed to intervene at the admission stage, emphasizing the importance of considering creditors' interests early on. The Court must have regard to the wishes of creditors and contributories in all matters related to the winding up of a company. The interests of creditors are not merely affected by the admission of a petition but must be considered even at the admission stage.

The judgment of a learned Single Judge of the Delhi High Court, which held that creditors opposing a petition are not entitled to be heard at the admission stage, was not accepted. The clear statutory principle under section 557 mandates the Court to consider creditors' wishes in all winding up matters. The interests of creditors, as demonstrated by a consortium of banks in the present case, are substantial and must be taken into account. The applications for intervention by creditors are allowed in line with the legal position.

The company applications by secured creditors are granted, permitting their intervention at the admission stage of the Company Petition for winding up.

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