SARFAESI sale proceeds must follow statutory distribution, with secured creditor dues and protected workmen's claims accounted for.

Sale proceeds realised by a secured creditor under the SARFAESI Act are not to be appropriated exclusively towards the bank's dues. The statutory scheme treats such proceeds as being held in trust and requires application first to costs and expenses, then to the secured creditor's dues, with any residue paid to the person entitled according to existing rights and interests. In the case of a company in liquidation or winding up, the provisos to section 13(9) preserve workmen's dues by linking distribution to section 529A of the Companies Act, 1956. The creditor must therefore distribute the proceeds strictly in accordance with the statutory scheme.

---

---

Issues: Whether the sale proceeds realised by the secured creditor under the SARFAESI Act could be appropriated only towards the bank's dues or had to be distributed in accordance with the statutory scheme, including workmen's dues.

Analysis: The statutory scheme under section 13 of the SARFAESI Act provides that sale proceeds received by the secured creditor are to be held in trust and applied first towards costs and expenses, then towards the dues of the secured creditor, with the residue paid to the person entitled thereto according to rights and interests. The provisos to section 13(9) further protect workmen's dues in the case of a company in liquidation or winding up by linking distribution to section 529A of the Companies Act, 1956. On that footing, the apprehension that the entire sale proceeds would go only to the bank was unfounded.

Conclusion: The sale proceeds cannot be appropriated exclusively for the bank, and the secured creditor must disburse the amount strictly in accordance with the statutory provisions governing distribution, including the protection afforded to workmen's dues.

---