Secured creditor enforcement may continue during liquidation, but sale proceeds remain subject to workmen's dues protection.

A secured creditor enforcing security under the securitisation law may retain possession of a company's secured assets and proceed with sale even after a winding-up order, because the statutory scheme gives the enforcement mechanism overriding effect. However, realization from the sale remains subject to the liquidation regime's protection of workmen's dues. The Official Liquidator must communicate the workmen's claim, or an estimated amount, and the secured creditor must deposit that amount and provide the required undertaking. Until such intimation is made, the sale proceeds are to be kept in a separate account, except for actual sale expenses.

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Issues: (i) Whether a secured creditor could retain possession of the company's assets and proceed with sale under the securitisation law despite a winding-up order and directions to the Official Liquidator; (ii) Whether the sale proceeds could be retained by the secured creditor subject to compliance with the workmen's dues requirements and intimation by the Official Liquidator.

Issue (i): Whether a secured creditor could retain possession of the company's assets and proceed with sale under the securitisation law despite a winding-up order and directions to the Official Liquidator?

Analysis: The Court read the scheme of the securitisation law as permitting a secured creditor, after issuance of notice and exercise of measures for enforcement of security interest, to take possession and effect sale of secured assets. It held that the statutory scheme gives overriding effect to the securitisation law, while still preserving the workmen's protected share in a liquidation. The Court found that the bank had already initiated action under the statute and had substantially complied with the procedural requirements.

Conclusion: Yes. The bank was entitled to retain possession and proceed with the sale.

Issue (ii): Whether the sale proceeds could be retained by the secured creditor subject to compliance with the workmen's dues requirements and intimation by the Official Liquidator?

Analysis: The Court held that the amount realised from sale of secured assets in a company under liquidation must be dealt with in accordance with the statutory protection for workmen under the Companies Act. It directed that the Official Liquidator must intimate the workmen's claim, or at least the estimated amount, and the secured creditor must deposit that amount and furnish the requisite undertaking. Until such intimation, the sale proceeds were to remain in a separate account, save for actual sale expenses.

Conclusion: Yes. Retention of the sale proceeds was permitted, but appropriation was confined to sale expenses until the workmen's dues were communicated and deposited.

Final Conclusion: The application was allowed, the bank's possession and sale actions were sustained, and the realization was permitted to stand subject to safeguarding the workmen's share under the liquidation regime.

Ratio Decidendi: A secured creditor enforcing security under the securitisation law may take possession and sell secured assets of a company in liquidation, but the realization remains subject to the statutory protection of workmen's dues and the procedure mandated by the liquidation framework.

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