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Issues: Whether the workmen had an exclusive first charge over the sale proceeds of the company in liquidation and were entitled to priority over secured creditors; whether participation of secured creditors in the sale committee and sale proceedings amounted to relinquishment of their securities; and whether the distribution of realised assets had to be reworked after verification of the workmen's claims.
Analysis: The statutory scheme under sections 529 and 529A of the Companies Act, 1956 preserves the pari passu charge in favour of workmen and secured creditors only to the extent contemplated by the proviso to section 529(1). The participation of secured creditors in court-supervised sale proceedings or in the sale committee does not, by itself, amount to a surrender or relinquishment of security. Relinquishment requires a positive act, and where the secured creditors continue to stand outside winding up, their rights are not extinguished merely because the assets are sold under the court's supervision. At the same time, the workmen's claims require correct verification before final disbursement, particularly where objections have been raised to the computation of dues.
Conclusion: The claim of the workmen to exclusive priority over all secured creditors was rejected. The secured creditors were held not to have relinquished their security merely by participating in the sale process. The earlier ad hoc distribution was not treated as final, and the workmen's claims were directed to be reverified before final apportionment.
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