Secured creditors' priority in company winding up prevails over State sales tax claims despite a statutory first charge.

Section 529-A of the Companies Act gives overriding priority in winding up to workmen's dues and debts due to secured creditors, and Section 530 is subordinate to that priority. Although Section 38C of the Bombay Sales-tax Act creates a first charge on a dealer's property, it operates only subject to a contrary first-charge provision in a Central enactment. The Maharashtra Land Revenue Code does not convert recoverable sales tax into arrears of land revenue so as to displace the Companies Act scheme. The secured creditors' statutory priority therefore prevails, and the State cannot claim pari passu payment for sales tax dues on the strength of those State law provisions.

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Issues: Whether the State Government's sales tax dues could claim priority as a first charge over the secured creditors' rights in the winding up of the company.

Analysis: Section 529-A of the Companies Act gives overriding priority to workmen's dues and debts due to secured creditors in winding up, and Section 530 is expressly made subject to Section 529-A. Section 38C of the Bombay Sales-tax Act creates a first charge on the dealer's property, but only subject to any contrary first-charge provision in a Central enactment. Where Section 529-A operates, the State legislation cannot displace that priority. The Maharashtra Land Revenue Code also does not convert recoverable sales tax into arrears of land revenue so as to create a paramount charge against property already governed by the Companies Act regime. The provisions relied on by the State therefore do not override the secured creditors' statutory priority.

Conclusion: The secured creditors' priority under Section 529-A prevails over the State Government's claim for sales tax dues, and the State cannot insist on pari passu payment on the strength of Section 38C of the Bombay Sales-tax Act or Section 169 of the Maharashtra Land Revenue Code.

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