Official liquidator's duty to protect company assets and workmen's pari passu rights in debt recovery proceedings upheld.

On winding up, the official liquidator has a statutory duty to take custody of the company's assets, institute or defend proceedings, and assist the court in protecting the estate. In debt recovery proceedings, the liquidator must participate to safeguard the interests of the company, secured creditors and workmen, whose dues require pari passu treatment under the Companies Act, 1956 and section 19(19) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. The objection to locus standi was treated as technical and did not defeat the request for directions. The liquidator was directed to effectively represent the company's interests in the pending proceedings.

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Issues: Whether the official liquidator was under a duty to participate in the debt recovery proceedings and represent the interests of the company, secured creditors and workmen, and whether the objection to the applicants' locus standi could defeat the request for such direction.

Analysis: On winding up, the official liquidator becomes the liquidator by virtue of office and is required to take custody and control of the company's property and actionable claims. The statutory scheme under the Companies Act, 1956 and the Companies (Court) Rules, 1959 confers power and casts a duty on the liquidator to institute or defend legal proceedings, assist in the winding up, and act under the supervision of the court. The proviso to section 529 and section 529A protect workmen's dues and require their pari passu treatment with secured creditors. In the context of proceedings before the Debt Recovery Tribunal, priorities among creditors are to be worked out consistently with section 19(19) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 read with section 529A of the Companies Act, 1956. The objection on locus standi was treated as technical because the core question was whether the liquidator had failed in the statutory duty to protect the estate and the workmen's interests.

Conclusion: The official liquidator was required to participate in the proceedings before the Debt Recovery Tribunal and to represent the interests of the company, secured creditors and workmen; the locus standi objection did not succeed.

Final Conclusion: The application was allowed and a direction issued to the official liquidator to effectively represent the company's interests in the pending debt recovery proceedings for proper distribution of sale proceeds.

Ratio Decidendi: A liquidator appointed on winding up has a statutory duty to safeguard the company's assets and to participate in proceedings affecting distribution of those assets, including proceedings where workmen's dues must be protected pari passu with secured creditors.

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