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Issues: Whether, in the winding up of a company, a secured creditor having a power of sale under the mortgage deed and under the State Financial Corporations Act, 1951 can sell the secured assets without leave of the Company Court when the workmen have a pari passu charge under the proviso to Section 529 of the Companies Act, 1956.
Analysis: The statutory amendment introducing the proviso to Section 529 and Section 529A gives workmen a deemed pari passu charge over the security of a secured creditor in liquidation. The Official Liquidator represents that charge and is therefore a necessary participant in any realisation of the security. The right of a secured creditor to stand outside winding up and realise security is not destroyed, but it must be exercised consistently with the pari passu rights of workmen and the supervisory jurisdiction of the Company Court. Section 446 confers jurisdiction on the Company Court to regulate claims and priorities arising in winding up, and Section 537 applies where sale of company property after commencement of winding up is undertaken without leave. The Court treated the Official Liquidator as a co-interest holder in the security, so unilateral sale by the secured creditor was impermissible.
Conclusion: Leave of the Company Court is necessary where the security is subject to the workmen's pari passu charge, and the secured creditor cannot sell the property ignoring the Official Liquidator.
Final Conclusion: The appeal succeeded, the refusal to grant permission was set aside, and the secured creditor was permitted to sell the mortgaged assets only under court-supervised conditions with the Official Liquidator's involvement.
Ratio Decidendi: Where a company in winding up has secured assets burdened by the workmen's pari passu charge under the proviso to Section 529, a secured creditor's power of sale must be exercised with the Official Liquidator and under the control of the Company Court.
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