Secured creditor status survives sale of secured assets, but recovery from proceeds remains subject to workmen's priority.

Sale proceeds of secured assets retained the character of security, so the bank did not lose its status as a secured creditor merely because the assets had been sold before the winding-up order. Proceedings and execution under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 could continue within the Tribunal's exclusive jurisdiction without leave of the company court. The bank's right to recover from the sale proceeds, however, remained subject to the statutory priority of workmen's dues under section 529A of the Companies Act, 1956.

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Issues: (i) whether the applicant-bank remained a secured creditor despite sale of the secured assets by PSIDC before the winding-up order; (ii) whether proceedings under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 could be continued and the recovery certificate executed without leave of the company court; and (iii) whether the bank's claim against the sale proceeds was subject to the workmen's dues under section 529A of the Companies Act, 1956.

Issue (i): whether the applicant-bank remained a secured creditor despite sale of the secured assets by PSIDC before the winding-up order.

Analysis: The security created in favour of the bank was not extinguished merely because the assets were sold by PSIDC. The sale proceeds represented the cash equivalent of the secured assets, and the winding-up order related back to the date of presentation of the winding-up petition. A secured creditor does not become an unsecured creditor merely because the secured property has been sold and the proceeds are held in place of the security.

Conclusion: The applicant-bank continued to be a secured creditor and was not relegated to the status of an unsecured creditor.

Issue (ii): whether proceedings under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 could be continued and the recovery certificate executed without leave of the company court.

Analysis: The governing rule is that adjudication and execution under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 lie within the exclusive jurisdiction of the Tribunal and the Recovery Officer. Leave of the company court is not required for such proceedings, and the company court cannot interdict the Tribunal in matters of adjudication or execution. Questions of priority in respect of monies realised are to be worked out in the manner contemplated by the special statutory scheme.

Conclusion: The applicant-bank was entitled to pursue execution under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 without fresh leave of the company court.

Issue (iii): whether the bank's claim against the sale proceeds was subject to the workmen's dues under section 529A of the Companies Act, 1956.

Analysis: A secured creditor who stands outside the winding up may enforce its security against the available sale proceeds, but the statutory priority of workmen's dues remains protected under section 529A of the Companies Act, 1956. Accordingly, the bank's entitlement could be worked out only after safeguarding the workmen's portion as adjudicated by the official liquidator.

Conclusion: The bank's right to recover was subject to the workmen's dues under section 529A of the Companies Act, 1956.

Final Conclusion: The application succeeded, and the bank was permitted to recover the adjudicated amount with interest from the available sale proceeds, subject to the statutory protection accorded to workmen's claims.

Ratio Decidendi: Sale proceeds of secured assets retain the character of security for the secured creditor, and execution under the special recovery statute proceeds within the Tribunal's exclusive jurisdiction, but subject to the overriding priority of workmen's dues in winding-up proceedings.

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