Statutory priority in company liquidation gives secured creditors and workmen precedence over government dues from asset sale proceeds.

Section 529A of the Companies Act, 1956 gives overriding priority to workmen's dues and secured creditors over preferential dues under section 530. Sale proceeds of secured assets realised through the Debts Recovery Tribunal must first be applied to secured creditors and workmen under the statutory priority scheme, and only any surplus can be considered for State Government or other preferential claims. The Court also indicated that, pending adjudication of claims and absent a winding-up order, mining authorities should not take coercive steps such as stopping operations, while departmental claims may still be pursued in liquidation according to law.

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Issues: (i) Whether the dues of the State Government and the applicant could rank ahead of the claims of secured creditors and workmen from the sale proceeds realized by the Debts Recovery Tribunal in the context of company winding up; (ii) Whether the mining authorities could be restrained from taking coercive action against the applicant or its agent pending adjudication of claims.

Issue (i): Whether the dues of the State Government and the applicant could rank ahead of the claims of secured creditors and workmen from the sale proceeds realized by the Debts Recovery Tribunal in the context of company winding up.

Analysis: The statutory scheme gives overriding priority to workmen's dues and the debts due to secured creditors under section 529A of the Companies Act, 1956. Section 530, which deals with preferential payments such as government revenue, taxes, cesses and rates, operates subject to section 529A. The amount realized by sale of the secured assets before the Debts Recovery Tribunal therefore had to be applied first to the secured creditors and workmen in the manner contemplated by the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 read with the Companies Act, 1956. Only if any surplus remained could the State Government's dues or the applicant's dues be considered under section 530.

Conclusion: The claim for priority of government or applicant's dues over secured creditors and workmen was rejected.

Issue (ii): Whether the mining authorities could be restrained from taking coercive action against the applicant or its agent pending adjudication of claims.

Analysis: Since no winding up order had yet been passed and the applicant was permitted to lodge its claim before the Debts Recovery Tribunal or Recovery Officer, the Court directed that the mining authorities should not take coercive steps such as stopping mining operations against the applicant or its agent. At the same time, any departmental claim was left open to be pursued in the liquidation process in the manner known to law.

Conclusion: Protection against coercive action by the mining authorities was granted.

Final Conclusion: The sale proceeds were directed to be dealt with under the statutory priority scheme favoring secured creditors and workmen, while limited protection was extended against coercive interference in mining operations and the applicant was left to pursue its claim before the Debts Recovery Tribunal.

Ratio Decidendi: In matters involving sale proceeds of secured assets of a company, section 529A of the Companies Act, 1956 prevails over section 530, so that secured creditors and workmen must be satisfied first, and government dues rank only after those claims are met.

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