Every secured creditor entitled to share liquidation balance; affidavits before the liquidator do not relinquish security rights.

The article addresses distribution of a liquidation account balance, concluding that statutory text requires inclusion of every secured creditor (not limited to first-charge holders) for distribution and that inter se adjustments among secured creditors remain a separate matter. It further concludes that filing affidavits or producing claim materials before the Official Liquidator does not constitute surrender or relinquishment of security and therefore does not disqualify a creditor from secured status. Finally, the Official Liquidator may disburse funds according to a Chartered Accountant's apportionment report, subject to retention and fixed-deposit investment of the sum attributable to one bank pending further orders.

---

---

Issues: (i) Whether distribution of the balance in the liquidation account between secured creditors and workers should include every secured creditor including those with charges other than first charge or be confined to secured creditors having first charge; (ii) Whether affidavits filed by secured creditors before the Official Liquidator operate as relinquishment of security rights so as to disentitle them from being treated as secured creditors for distribution; (iii) Whether the Official Liquidator may disburse the balance as per the Chartered Accountant's apportionment report and the conditions governing retention of the amount attributable to ICICI Bank.

Issue (i): Whether distribution should include every secured creditor or only those with first charge.

Analysis: The Court considered the language of the provisions and relevant precedents and concluded that the statutory wording contemplates "every secured creditor" for purposes of distribution under the Companies Act provisions cited; the Apex Court decision relied upon by the workers' union concerning inter se rights between first and second charge holders does not mandate exclusion of second-charge secured creditors from distribution vis-a-vis workmen dues at the stage of disbursement, though inter se adjustment between secured creditors may be dealt with under the Transfer of Property Act by an appropriate forum.

Conclusion: The distribution shall include every secured creditor and not be confined to secured creditors having first charge; this conclusion is against the workers' contention.

Issue (ii): Whether affidavits filed by secured creditors before the Official Liquidator amount to relinquishment of security rights.

Analysis: The Court examined the nature and purpose of the affidavits filed before the Official Liquidator and the materials produced pursuant to the Court's order, and found that production of evidentiary materials or affidavits to support claims does not amount to surrender or relinquishment of security rights.

Conclusion: Filing of affidavits/materials before the Official Liquidator does not constitute relinquishment of security and does not disqualify a creditor from being treated as a secured creditor for distribution; this conclusion is against the workers' contention.

Issue (iii): Whether the Official Liquidator may disburse the balance as per the Chartered Accountant's apportionment report and the treatment of the ICICI Bank share.

Analysis: The Court reviewed the Official Liquidator's report and the Chartered Accountant's apportionment (showing the proposed ratios between secured creditors and workers), addressed a typographical date issue for one bank's claim and found the apportionment to be based on claims up to the winding-up date. The Court directed disbursement according to the Chartered Accountant's final ratio, but required retention and investment of the amount attributable to ICICI Bank until further orders in view of prior directions concerning substitution of Standard Chartered Bank.

Conclusion: The Official Liquidator is permitted to disburse the balance in the liquidation account in accordance with the Chartered Accountant's apportionment report subject to retention and fixed deposit investment of the amount attributable to ICICI Bank; this conclusion is in favour of the applicant (lead secured creditor).

Final Conclusion: The Court allowed the application directing the Official Liquidator to disburse the liquidation balance according to the Chartered Accountant's proposed apportionment (including all secured creditors and workers) while preserving the ICICI Bank share by retention and fixed deposit investment until further orders, thereby permitting immediate distribution to the lead bank for onward inter se distribution among secured creditors on usual undertaking.

Ratio Decidendi: For distribution of liquidation balance under the Companies Act provisions cited, "every secured creditor" is to be treated as entitled for distribution (not limited to first-charge holders), and production of claim-supporting affidavits before the Official Liquidator does not operate as relinquishment of security.

---